Annual Report — Small Business — [x] Reg. S-B Item 405 — Form 10-KSB
Filing Table of Contents
Document/Exhibit Description Pages Size
1: 10KSB40 Jordan American Holdings, Inc. - 10-Ksb 19 116K
2: EX-21 Subsidiaries 1 4K
3: EX-23.2 Consent of Spicer, Jeffries & Co. 1 5K
4: EX-27 Financial Data Schedule 1 6K
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, 1999
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Commission File Number 0-18974
Jordan American Holdings, Inc.
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Florida 65-0142815
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
2155 Resort Drive, Suite 108
Steamboat Springs, CO 80487
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (970) 879-1189
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
-----------------------------
Check whether the Company (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the Company was required to file such
reports), and (2) has been subject to filing requirements for the past 90 days.
Yes [X] No [ ]
Check if disclosure of delinquent filers pursuant to Item 405 of Regulation S-B
is not contained herein, and will not be contained, to the best of the Company'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.
[X]
The Company's revenues for fiscal year 1999 were $2,770,120. The aggregate
market value of the voting and non-voting common equity held by non-affiliates
of the Company is $1,546,317 based on the closing price of $0.28 as of February
24,2000, multiplied by 5,522,560 shares of common stock.
As of February 24,2000, the Company had a total of 10,421,266 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:
Portions of Proxy Statements for 2000 Annual Meeting - Part III
INDEX
PART 1 PAGE
Item 1. Business 3
Item 2. Properties 8
Item 3. Legal Proceedings 8
Item 4. Submission of Matters to a Vote of Security Holders 9
PART II
Item 5. Market for Common Equity and Related Stockholder Matters 9
Item 6. Management's Discussion and Analysis 10
Item 7. Financial Statements 13
Item 8. Changes In and Disagreements with Accountants on Accounting
and Financial Disclosure 13
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons:
Compliance with Section 16(a) of the Exchange Act 13
Item 10. Executive Compensation 13
Item 11. Security Ownership of Certain Beneficial Owners and Management 13
Item 12. Certain Relationships and Related Transactions 13
Item 13. Exhibits and Reports on Form 8-K 13
PART I
Item 1. Business
General
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Jordan American Holdings, Inc. ("JAHI" or "The Company"), is an investment
advisory firm that specializes in the management of equity securities of United
States public companies, the majority of which are held by semi-affluent
individual clients and billed on an incentive fee basis. The Company operates in
one business segment, as an investment advisor, managing investment portfolios
for individuals, trusts, corporate pension plans, other corporate accounts,
foundations and a mutual fund. JAHI intends to continue to grow its assets under
management for semi-affluent individuals and other qualified clients on an
incentive fee basis. JAHI plans to continue to diversify with respect to its
client base by gathering assets under management from individual stock and
mutual fund investors through its fixed advisory fee accounts and its mutual
fund product that produces revenue based on a percentage of the assets under
management. JAHI also plans to diversify with respect to its product line by
offering, if feasible, additional mutual fund products by the end of year 2000,
including a series for variable annuity products.
Incentive based advisory fees on assets under management for semi-affluent
investors provide the largest portion of the Company's revenues. A semi-affluent
investor generally has a total net worth greater than $1 million and less than
$10 million. The assets of these and other clients have recently been growing
primarily due to investment performance results achieved within the individual
accounts. For the year ended December 31, 1999, 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.
The investment objective of the individually held portfolios is significant
capital appreciation or growth. JAHI is compensated for its management of these
accounts through two primary methods. JAHI receives a fixed advisory fee based
on the value of assets under management or an incentive based advisory fee based
upon the account's annual performance results.
The Company develops prospective clients through seminars, its web site
(www.jahi.com), sales representatives, referrals from clients, securities
broker-dealers and other sources. The Company plans to expand its marketing and
distribution activities through additional seminars in targeted geographical
areas, additional strategic partnership relationships with securities
broker-dealers and the internet by engaging in online marketing with strategic
partners through web linking agreements.
In addition to providing investment advisory services, the Company, through
its wholly-owned subsidiaries, operates a registered broker/dealer and a mutual
fund servicing company, which are described more fully under "Operations."
Operations
----------
JAHI conducts its investment advisory business under the name Equity Assets
Management ("EAM"). Wallace Neal Jordan, Chief Investment Officer of JAHI,
founded Equity Assets Management, Inc., JAHI's predecessor, in 1972.
The Company managed 286 individual accounts with assets under management of
approximately $75 million at December 31, 1999. 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 the Company
normally receives 20% of the net realized and unrealized gains, including
dividends and interest, in the account following each year of management.
Exceptional management performance results in the incentive fee based
accounts may cause substantial revenues for the Company while poor performance
in the same accounts may yield little or no revenues for the Company.
Additionally, because incentive fee based 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.
Management believes the Company's long-term performance history for
individually managed accounts provides a basis for marketing the Company's
investment advisory services to a growing network of brokers, institutions, and
affluent and semi-affluent individuals. At December 31, 1999, the Company's
managed accounts, on average, have outperformed the S&P 500 Index on a one-year,
three-year, five-year, ten-year and fifteen-year average annual total return
basis. These average annual returns have been significantly impacted by the
average annual return for 1999 of 142.83%, net of fees. Although past
performance is not a guarantee of future results or of profitability of future
recommendations, performance history is a very relevant factor in the selection
of investment advisors.
The Company also manages the Impact Total Return Portfolio (the
"Portfolio"), a mutual fund with assets under management of approximately $7
million at December 31, 1999. The Company receives a management fee of 1.25% per
annum calculated on the Portfolio's average daily net assets. Of this amount,
the Company pays a sub-advisor .60% per annum of the Portfolio's average daily
net assets for selecting the securities for the Portfolio.
Management believes that the newly developed marketing strategy for this
product and the recent performance results in calendar year 1999 (where the fund
outperformed its index) provides a basis for marketing this product to a growing
network of broker-dealers despite the fact that its lifetime average annual
total return (the fund began operations in June 1997) underperformed a
comparable index.
The Company, through a privately held affiliate, manages the Jordan Index
Fund, L.P. (the "Fund"), a limited partnership with assets of approximately $3
million. In exchange for providing administrative services, the Company receives
100% of any net income resulting from the incentive and/or management fees
collected by the privately held affiliate. This fund invests in stock index
futures contracts and other securities and receives as its fee 20% of the
partnership's total profits. Management can not guarantee that the Fund will
continue to exist as a potential revenue source for the Company due to a
continuing trend of limited partner withdrawals from the fund and lackluster
performance results.
The Company 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"). Wallace Neal Jordan, Chief Executive
Officer of JAHI, founded IFNI in 1986.
Approximately 90% of JAHI's individually managed accounts maintain
brokerage accounts with IFNI for assets placed under JAHI'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 JAHI clients who choose to hold their
accounts with IFNI. Clients may decide to custody their accounts at another
brokerage institution of their own choosing.
IFNI also serves as the national distributor for the Portfolio. IFNI
receives a fee from the Portfolio in exchange for marketing and distributing the
Portfolio. The fee varies according to the class of shares distributed. It is
used to pay for marketing and distribution expenses related to the mutual fund,
including sales commissions.
Management believes that IFNI will continue to be a source of revenue for
the Company primarily through the commissions earned on securities transactions.
The Company operates a mutual fund servicing company, Impact Administrative
Services, Inc. ("IASI"), which is a wholly owned subsidiary of the Company and a
registered transfer agent with the Securities and Exchange Commission (the
"SEC") and a member of the Investment Company Institute. IASI provides
administrative, dividend disbursement and transfer agent services to the
Portfolio. The Company currently receives a fee of .35% per annum of the
Portfolio's average daily net assets to pay for costs associated with the
administration of the portfolio. The Company believes that IASI may become a
potential revenue source for the Company by providing similar services to other
small mutual fund families.
Total assets under management and corporate earnings may substantially
increase or decrease due to stock market conditions, including the onset of a
long-term declining, or bear market; performance returns as influenced by the
Company's investment advisory decisions; expense and related effectiveness of
marketing efforts; and competition from other investment advisory companies and
mutual funds. Other indirect influences, such as interest rate changes 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 corporate earnings.
The Industry
-------------
Revenues in the investment advisory business are determined primarily by
fees based on the value of assets under management and on investment performance
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 judgement, 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.
In general, assets under management in the investment advisory business in
the United States as a whole have increased steadily to approximately $14.5
trillion, according to The Directory of Registered Investment Advisors prepared
by Money Market Directories, Inc. This steady increase can be attributed to the
fact that Americans shifted household financial assets to securities in a trend
that started after World War II, but the trend increased particularly in the
last decade. According to the Securities Industry Association ("SIA"), in 1980,
53% of a household's liquid financial assets on average were held in bank
deposits, while only 32% were held in equities. Today, there has been a
substantial reversal: 44% are held in equities and 23% in bank deposits.
The expansion of equity ownership can be primarily attributed to declining
interest rates and the prolonged trend of rising stock prices which have
prompted many U.S. households to purchase and hold securities. The increase in
assets under management has resulted in increases in asset management fee
revenue. According to the SIA, that revenue reached approximately $115 billion
in revenue in 1999. Assets under management may continue to increase in general
because of the growth of the U.S. economy. Assets under management could
substantially decrease, however, due to changes in stock market conditions,
including the onset of a long-term declining or bear market. However, the
Company believes that a return to the historical pattern of cyclical market
movements would provide a competitive advantage for the Company due to its
experience with investing during volatile times.
Competition
-----------
The Company 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 performance results
achieved by investment advisory firms; (3) the stability of a firm's workforce,
especially of portfolio managers; (4) an effective marketing force and
distribution system; and (5) quality of client services.
The Company 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 JAHI and may offer
accounts insured by the Federal Deposit Insurance Corporation.
JAHI's investment strategy centers around understanding the general trend
of the market as assisted by certain proprietary analysis. That strategy,
coupled with its long-term track record and the experience of its portfolio
managers, make it a viable alternative to traditionally-managed mutual funds and
money managers who have less experience and thereby disregard general market
conditions as part of their investment strategy.
Regulation
----------
The Company is registered with and subject to regulation by the SEC under
the Investment Advisers Act of 1940 and, where applicable, under state advisory
laws. The Company is also subject to regulation by the SEC under the Investment
Company Act of 1940. The Company's affiliate broker-dealer is registered as a
broker-dealer with the SEC under the Securities Exchange Act of 1934 (the
"Exchange Act") and, where applicable, under state securities laws, and is
regulated by the SEC, state securities administrators and the NASD. IASI is
registered as a transfer agent under the Exchange Act and is regulated by the
SEC. The privately held affiliate that manages the Fund is regulated by the
Commodity Futures Trading Commission and the National Futures Association.
By law, investment advisors and broker-dealers are fiduciaries and are
required to serve their clients' interests with undivided loyalty. There is a
potential conflict of interest because of the affiliation between the Company
and IFNI. While the Company believes that its existing relationships are in
compliance with applicable law and regulations, because of this potential
conflict of interest, the SEC may closely examine these relationships.
Many aspects of the financial services industry involve substantial
liability risks, including exposure under federal and state securities laws in
connection with the distribution of securities and investment advisor
activities. Although the Company currently maintains errors and omission
insurance policies insuring against this risk, such insurance does not
necessarily protect the Company against loss in all events.
There can be no assurance that any changes to existing laws, regulations or
rulings promulgated by government entities having jurisdiction over the
Company's investment advisory, broker-dealer, investment company and commodities
trading business will not have an adverse effect upon the business of the
Company.
Employees
---------
At March 23, 2000, the Company employed seven full-time personnel, three of
whom are executive officers of the Company. The Company utilizes the services of
independent contractors to assist the employees in the operation of the
Company's business.
Item 2. Properties
The Company currently maintains its headquarters at 2155 Resort Drive,
Suite 108, Steamboat Springs, Colorado. The Company also currently has satellite
offices in Boston, Massachusetts and Pittsburgh, Pennsylvania. All current
properties are leased for a total of approximately $1,800 per month.
Item 3. Legal Proceedings
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 Company and the SEC are currently in settlement
negotiations regarding this matter. 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.
Other than the foregoing, the Company is not a party in 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
During the fourth quarter of the fiscal year covered by this report, no
matters were submitted to a vote of security holders through the solicitation of
proxies or otherwise.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
Market for Common Stock
-----------------------
The Company's common stock currently trades on the OTC Bulletin Board under
the symbol "JAHI." The following are the high and low sales prices for JAHI for
the two year period ended December 31, 1999. 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.
Common Stock Prices
Year Ended December 31, 1998 High Low
First Quarter $0.41 $0.31
Second Quarter $0.38 $0.31
Third Quarter $0.34 $0.19
Fourth Quarter $0.19 $0.07
Year Ended December 31, 1999 High Low
First Quarter $0.23 $0.08
Second Quarter $0.20 $0.11
Third Quarter $0.16 $0.06
Fourth Quarter $0.19 $0.05
On February 24, 2000, the closing price of the Company's common stock was
$0.28. As of February 24, 2000, approximately 813,000 shares of its common stock
were held in accounts of EAM clients, which represented approximately 8% of the
Company's outstanding shares of common stock as of December 31, 1999. Wallace
Neal Jordan owned approximately 33% of the Company's outstanding shares of
common stock at December 31, 1999.
Dividends
---------
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, 1999, 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.
From February 1993 until June 30, 1998, the Company made semi-annual cash
dividend payments on its cumulative convertible non-voting preferred stock at a
rate of 8% per annum. The Company did not make any dividend payments on this
stock in 1999. Dividends in arrears on this stock were $360,000 as of December
31, 1999. The terms of the preferred stock prohibit the payment by the Company
of any cash dividends on its common stock until all dividends in arrears on the
preferred stock are paid in full.
Shareholders
------------
At December 31, 1999, there were 10,421,266 outstanding shares of the
Company's common stock and 252 shareholders of record.
Item 6. Management's Discussion and Analysis
Safe Harbor for Forward-Looking Statements
------------------------------------------
Information found in this report contains forward-looking implications,
which may differ materially from actual results due to the success, or lack
thereof, of JAHI's management decisions, marketing and sales effectiveness,
investment decisions, and the management of clients' stock portfolios and pooled
investments as influenced by market conditions, Federal Reserve Board policy,
economic trends, political developments, domestic and international events, and
other factors. There can be no guarantee that any forward-looking implications
discussed and/or referenced in this report will have any impact, positive or
negative, upon the earnings, value and/or operations of the Company.
Results of Operations
---------------------
Net income for 1999 was $1,152,749 or $0.09 per common share and share
equivalent compared to a net loss of ($585,777) or ($0.08) per common share and
share equivalent for 1998. The increase in net income was primarily affected by
a significant increase in investment advisory fee revenue and gains on trading
securities during 1999.
Revenues from investment advisory fees for 1999 totaled $1,975,232 compared
to $664,710 for 1998, an increase of 197%. Gains on trading securities increased
for 1999 to $443,459, as compared to ($42,478) for 1998.
Commission revenues decreased for 1999 to $351,429, as compared to $426,447
for 1998, a decrease of approximately 18%. This decrease was primarily due to a
decrease in the volume of securities transactions for client accounts by the
Company based on its investment strategy, market conditions and other factors.
The decrease was also due in part to the Portfolio's switch to other
broker-dealers from IFNI for handling of the Portfolio's securities transactions
beginning May 1, 1999.
Selling, general, and administrative ("SG&A") expenses of $1,771,540 were
incurred during 1999, compared to SG&A expenses of $1,811,908 for 1998, a
decrease of approximately 2%. The decrease in SG&A expenses stems primarily from
a reduction in general and administrative expenses during 1999 despite an
increase in selling expenses related to fees paid to investment advisory sales
representatives.
Total other income was $154,169 for 1999, compared to a $177,452 for 1998.
The decrease in other income can be primarily attributed to lower interest and
dividend income as the Company shifted some of its assets from income producing
investment instruments to growth equity securities during 1999.
Liquidity and Capital Resources
-------------------------------
At December 31, 1999, the Company had cash and cash equivalents of $580,757
versus $495,622 at December 31, 1998, an increase of approximately 17%. This
increase is primarily due to the increase in net income for 1999.
Marketable securities were valued at $607,882 at December 31, 1999, as
compared to $163,010 at December 31, 1998, an increase of approximately 273%.
The increase in marketable securities can be primarily attributed to a
significant increase in the market value of one of the Company's holdings at
December 31, 1999 when compared to the previous year end value. Also, the
Company invested $60,000 into a restricted security on January 31, 1999 which
was valued at $185,625 on December 31, 1999 based on management's judgement on
various factors (see Note 1 of the accompanying Notes to Consolidated Financial
Statements).
Net investment advisory fees receivable were $846,907 at December 31, 1999,
as compared to $45,985 at December 31, 1998, an increase of approximately
1,742%. This increase can be primarily attributed to significant incentive-based
billings in the last two months of 1999 as a result of the investment
performance results within the individually managed accounts.
Accounts payable and accrued expenses were $387,986 at December 31, 1999,
as compared to $179,684 at December 31, 1998. The increase in accounts payable
and accrued expenses can be primarily attributed to accrued expenses for fees
due investment advisor sales representatives. Accruals are based upon actual
expenses incurred as well as unbilled expenses.
Net cash provided by (used in) operating activities for fiscal year 1999
was $155,353 compared to ($49,351) for the same period in 1998. This change was
due primarily to an increase to net income provided by operating activities.
Net cash provided by (used in) investing activities for fiscal 1999 was
($70,218) compared to $613,687 for 1998. This change was due primarily to the
principal received on the note receivable related to the Company's former
headquarters in Sarasota, Florida, and the sale of the Company's former
condominium during 1998.
Net cash provided by (used in) financing activities for fiscal 1999 was
$0.00 compared to ($120,000) for 1998. This change was due primarily to the
Board of Director's decision not to declare a Preferred Stock dividend during
1999.
Management of the Company believes short-term cash needs will continue to
be met through management fees, brokerage revenues and/or the liquidation of
marketable securities. At December 31, 1999, the Company had $1,188,639 in cash
and marketable securities.
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.
Item 8. Changes In and Disagreements with Accountants on Accounting and
Financial Disclosure
None
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16 (a) of the Exchange Act.
The response to this item will be included in a definitive proxy statement
filed within 120 days after the end of the Company's fiscal year, which response
is incorporated herein by reference.
Item 10. Executive Compensation
The response to this item will be included in a definitive proxy statement
filed within 120 days after the end of the Company's fiscal year, which response
is incorporated herein by reference.
Item 11. Security Ownership of Certain Beneficial Owners and Management
The response to this item will be included in a definitive proxy statement
filed within 120 days after the end of the Company's fiscal year, which response
is incorporated herein by reference.
Item 12. Certain Relationships and Related Transactions
The response to this item will be included in a definitive proxy statement
filed within 120 days after the end of the Company's fiscal year, which response
is incorporated herein by reference.
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits: See Exhibit Index.
(b) Reports on Form 8-K: None
Exhibit Index
Exhibit Description Page
Number
3.1 Articles of Incorporation, as amended (1)
3.2 Bylaws, as amended (1)
4.1 Specimen Certificate of Common Stock (1)
4.2 Specimen Warrant Certificate (1)
4.3 Form of Warrant Agreement, as amended (1)
4.4 Form of IPO Underwriter's Warrant (1)
4.5 Designation of 8% Cumulative Convertible Preferred Stock (3)
10.1 Employment Agreement between the Company and
Wallace Neal Jordan (2)
10.2 Non-Competition Agreement between the Company
and Wallace Neal Jordan (2)
21 Subsidiaries of the Company: -
23.1 Spicer Jeffries & Co., Consent
(1) 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.
(2) Incorporated herein from certain exhibits to the Company's Current Report
on Form 8-K dated August 15, 1991.
(3) Included in Exhibit 3.1.
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.
JORDAN AMERICAN HOLDINGS, INC.
(Registrant)
Dated March 25, 2000 By: /s/ Wallace Neal Jordan
---------------------------------
Wallace Neal Jordan,
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
Dated March 25, 2000 By: /s/ Wallace Neal Jordan
---------------------------------
Wallace Neal Jordan,
Director, Chairman of the Board,
Chief Executive Officer
Chief Investment Officer
Dated March 25, 2000 By: /s/ Charles R. Clark
---------------------------------
Charles R. Clark,
Director, Chief Market Analyst,
Senior Assistant Portfolio Manager
Dated March 25, 2000 By: /s/ A.J. Elko
---------------------------------
A.J. Elko,
Director, Chief Operating Officer,
Chief Financial Officer
Dated March 25, 2000 By: /s/ Terri Williams Abady
---------------------------------
Terri Williams Abady,
Director
Dated March 25, 2000 By: /s/ Herald Stout
---------------------------------
Herald Stout
Director
JORDAN AMERICAN HOLDINGS, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1999 AND 1998
TABLE OF CONTENTS
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Page
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Independent Auditors' Reports F-2
Consolidated Balance Sheets F-3
Consolidated Statements of Operations F-4
Consolidated Statements of Changes in Stockholders' Equity F-5
Consolidated Statements of Cash Flows F-6 - F-7
Notes to Consolidated Financial Statements F-8 - F- 15
F-1
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Jordan American Holdings, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Jordan American
Holdings, Inc. and Subsidiaries as of December 31, 1999 and 1998, 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 generally accepted auditing
standards. 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Jordan American
Holdings, Inc. and Subsidiaries as of December 31, 1999 and 1998, and the
results of their operations and their cash flows for the years then ended, in
conformity with generally accepted accounting principles.
SPICER, JEFFRIES & CO.
Denver, Colorado
March 8, 2000
F-2
JORDAN AMERICAN HOLDINGS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
ASSETS
[Enlarge/Download Table]
ASSETS: 1999 1998
Cash and cash equivalents $ 580,757 $ 495,622
Marketable securities 607,882 163,010
Investment advisory fees receivable, net of
allowance for doubtful accounts of $27,870
and $42,902, respectively 846,907 45,985
Receivable from clearing broker 5,435 103,888
Deposit with clearing broker 25,000 25,000
Other receivables 79,638 31,571
Other assets 101,288 50,115
Property and equipment, at cost, net of accumulated
depreciation and amortization of $133,005 and $86,163,
respectively 88,229 64,853
Receivable from officer (Note 5) 26,556 15,000
Notes receivable (Note 3) 500,000 500,000
------------ ------------
Total assets $ 2,861,692 $ 1,495,044
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
1999 1998
LIABILITIES:
Accounts payable and accrued expenses $ 387,986 $ 179,684
Deferred investment advisory fees 35,300 29,703
------------ ------------
Total liabilities 423,286 209,387
------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 8)
STOCKHOLDERS' EQUITY (Notes 1 and 4):
8% cumulative, convertible, non-voting preferred
stock, $0.01 par value; $1.00 liquidation value,
authorized 5,000,000 shares; issued and
outstanding 3,000,000 shares 30,000 30,000
Common stock, $0.001 par value; authorized 20,000,000
shares; issued and outstanding 10,421,266 shares 10,421 10,421
Additional paid-in capital 4,502,853 4 502,853
Deficit (2,104,868) (3,257,617)
------------ ------------
Total stockholders' equity 2,438,406 1,285,657
------------ ------------
$ 2,861,692 $ 1,495,044
============ ============
See accompanying notes to consolidated financial statements.
F-3
JORDAN AMERICAN HOLDINGS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
[Download Table]
Year ended December 31,
1999 1998
REVENUE:
Investment advisory fees $ 1,975,232 $ 664,710
Commission income 351,429 426,447
Gain (loss) on trading securities 443,459 (42,478)
------------ ------------
Total revenue 2,770,120 1,048,679
------------ ------------
Selling, general and administrative expenses (1,771,540) (1,811,908)
------------ ------------
Operating income (loss) 998,580 (763,229)
------------ ------------
OTHER INCOME (EXPENSE):
Interest and dividends 91,366 111,405
Gain on sale of assets, net -- 50,893
Other, net 62,803 15,154
------------ ------------
Total other income (expense), net 154,169 177,452
------------ ------------
Net income (loss) before income taxes 1,152,749 (585,777)
------------ ------------
Income taxes (Note 6) -- --
------------ ------------
Net income (loss) $ 1,152,749 $ (585,777)
============ ============
Basic and diluted earnings (loss) per common share $ .09 $ (.08)
============ ============
Basic and diluted weighted-average number of
common shares outstanding 10,421,266 10,421,266
============ ============
See accompanying notes to consolidated financial statements.
F-4
JORDAN AMERICAN HOLDINGS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1999 AND 1998
[Enlarge/Download Table]
Preferred Stock Common Stock Additional Total
$0.01 Par Value $0.001 Par Value Paid in Stockholders'
Shares Amount Shares Amount Capital Deficit Equity
----------- ----------- ----------- ----------- ----------- ----------- -----------
BALANCES, December 31, 1997 3,000,000 $ 30,000 10,408,876 $ 10,409 $ 4,622,853 $(2,671,840) $ 1,991,422
Adjustment to common stock -- -- 12,390 12 -- -- 12
Net Loss -- -- -- -- -- (585,777) (585,777)
Dividends on preferred stock -- -- -- -- (120,000) -- (120,000)
----------- ----------- ----------- ----------- ----------- ----------- -----------
BALANCES, December 31, 1998 3,000,000 30,000 10,421,266 10,421 4,502,853 (3,257,617) 1,285,657
Net Income -- -- -- -- -- 1,152,749 1,152,749
----------- ----------- ----------- ----------- ----------- ----------- -----------
BALANCES, December 31, 1999 3,000,000 $ 30,000 10,421,266 $ 10,421 $ 4,502,853 $(2,104,868) $ 2,438,406
=========== =========== =========== =========== =========== =========== ===========
See accompanying notes to consolidated financial statements.
F-5
JORDAN AMERICAN HOLDINGS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH
[Enlarge/Download Table]
Year ended December 31,
CASH FLOWS FROM OPERATING ACTIVITIES: 1999 1998
Net income (loss)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities: $ 1,152,749 $ (585,777)
Depreciation 46,842 27,928
Gain on sale of assets -- (50,893)
(Increase) decrease in receivable from clearing broker 98,453 (6,808)
Increase in other receivables (48,067) --
Issuance/adjustment of common stock -- 12
(Increase) decrease in investment advisory fees receivable (800,922) 53,193
(Increase) decrease in trading marketable securities (444,872) 620,490
(Increase) decrease in other assets (51,173) 15,949
Increase in receivable from officer (11,556) --
Increase in accounts payable and accrued expenses 208,302 324
Increase (decrease) in deferred investment advisory fees 5,597 (123,769)
------------ ------------
Net cash provided by (used in) operating activities 155,353 (49,351)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of assets -- 192,012
Capital expenditures, net (70,218) (13,325)
Principal received on notes receivable -- 435,000
------------ ------------
Net cash provided by (used in) investing activities (70,218) 613,687
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends on preferred stock -- (120,000)
------------ ------------
See accompanying notes to consolidated financial statements.
F-6
JORDAN AMERICAN HOLDINGS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH
(Concluded)
Year ended December 31,
1999 1998
NET INCREASE IN CASH AND CASH EQUIVALENTS 85,135 444,336
CASH AND CASH EQUIVALENTS, beginning of year 495,622 51,286
-------- --------
CASH AND CASH EQUIVALENTS, end of year $580,757 $495,622
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Interest paid $ 5,766 $ 9,070
======== ========
See accompanying notes to consolidated financial statements.
F-7
JORDAN AMERICAN HOLDINGS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
------------
Jordan American Holdings, Inc. (JAHI/the Company) was incorporated in Florida in
May 1989. The Company also does business under the name of Equity Assets
Management (EAM). The Company provides investment advisory and portfolio
management services to individual investors, pooled accounts and its mutual fund
with its customers located substantially in the United States. JAHI is
registered as an investment advisor under the Investment Advisor Act of 1940.
The Company owns 100% of the issued and outstanding common stock of IMPACT
Financial Network, Inc. (IFNI) and IMPACT Administrative Services, Inc. (IASI).
IASI provides operational and administrative support to Impact Management
Investment Trust (see Note 2). JAHI's customer investment transactions are
primarily brokered through IFNI, a registered broker-dealer in securities acting
as a non-clearing introducing broker.
The accompanying consolidated financial statements include the accounts of JAHI
and its subsidiaries; all significant intercompany transactions have been
eliminated during consolidation.
Significant Accounting Policies
-------------------------------
Investment advisory fees received in advance are deferred and amortized into
income over the period in which services are performed. Investment advisor 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 month end
following the contract anniversary date. Fees due sales representatives are
recognized when such fees are earned.
Certain investment advisory customer accounts contain common stock of the
Company. The Company, at its discretion, has elected not to bill certain
customers whose accounts: (i) contain Company common stock, (ii) have market
values that are in a state of decline and/or (iii) have appreciation rates below
which the Company believes billing is appropriate.
Commission income is recognized on a settlement date basis, which does not
differ materially from the trade date basis of accounting.
All highly liquid instruments with original maturities of three months or less
are considered cash equivalents.
Marketable securities consist principally of corporate stocks. These securities
are carried at market value, as determined by nationally recognized securities
exchanges. Restricted securities are valued based on the judgement of the
Company's management reflecting various factors as to the amount which the
Company might reasonably expect to receive upon disposition to a willing
purchaser. Consideration is given to factors such as earnings history, financial
condition, recent sales prices of the issuer's securities and the proportion of
securities owned. The cost of marketable securities was $272,703 and $255,448 at
December 31, 1999 and 1998 respectively.
F-8
JORDAN AMERICAN HOLDINGS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(continued)
The Company has entered into an agreement with a clearing broker which 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.
Furniture and equipment are carried at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the related assets of
five to seven years.
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes". Under the asset and
liability method of Statement 109, deferred tax assets and liabilities are
recognized for the estimated future tax consequences attributable to differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred tax assets and liabilities
are measured using enacted tax rates in effect for the year in which those
temporary differences are expected to be recovered or settled.
Earnings per share requires presentation of both basic earnings per common share
and diluted earnings per common share. Common stock equivalents are not included
in the weighted average calculation in 1998 since their effect would be
anti-dilutive. Net income (loss) per common share has been adjusted to reflect
preferred stock dividends paid or in arrears of $240,000 for each of the years
ending December 31, 1999 and 1998 (see Note 4).
The preparation of financial statements in conformity with generally accepted
accounting principles 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, and such
differences may be material to the consolidated financial statements.
Certain 1998 amounts have been reclassified to conform the current year
classification.
NOTE 2 - IMPACT MANAGEMENT INVESTMENT TRUST
The Company formed Impact Management Investment Trust (the trust), which is
registered under the Investment Company Act of 1940 as a diversified, open-end
management investment company (mutual fund). Impact Total Return Portfolio
(formerly Impact Management Growth Portfolio) (the Portfolio) is the initial
Series of the trust. JAHI is the investment advisor of the Trust and IFNI is the
primary distributor of the trust. IFNI executed the majority of the trust's
transactions through April 30, 1999.
F-9
JORDAN AMERICAN HOLDINGS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
NOTE 2 - IMPACT MANAGEMENT INVESTMENT TRUST (continued)
At December 31, 1999 and 1998, the market value of the Company's investment in
the Portfolio was $-0- and $54,761, respectively, which is included in
marketable securities in the accompanying consolidated balance sheets. As
investment advisor of the Portfolio, the Company receives an annual investment
advisory fee equal to 1.25% of the Portfolio's average daily net assets. Of this
amount, 60 basis points is paid to the sub advisor of the trust.
NOTE 3 - NOTES RECEIVABLE
In connection with the sale of the Company's former corporate headquarters a
three year promissory note was received from the purchaser in the amount of
$446,175. The entire principal balance of the note was due on January 12, 1999.
The note bore interest at a rate of 8% per annum and the Company received
monthly interest payments on the outstanding principal balance. The note was
secured by the related land and building. During 1998, the balance of the note
was repaid by the borrower.
The Company owns a $500,000 variable rate convertible subordinated debenture
from Boston Restaurant Associates, Inc. (BRAI). The principal balance of the
debenture is due and payable on December 31, 2011. The debenture has a
conversion price of $1.25 per share and bears interest at a rate of 10% for
1998, 12% for 1999 and 14% thereafter.
In connection with the purchase of the debenture, the Company also acquired, at
no cost, warrants to subscribe for the purchase from BRAI up to 500,000 fully
paid and nonassessable shares of BRAI's common stock. The purchase rights
represented by the warrants are exercisable by the Company, in whole or in part,
at any time through December 31, 2006, at an exercise price of $3.00 per share.
The carrying value of the above notes receivable approximates the fair market
value as estimated by management, after considering such factors as current
interest rates, liquidity, conversion terms and the credit worthiness of the
borrowers. The Company's management has estimated the value of the BRAI warrants
to be $-0- at December 31, 1999 and 1998. This determination was made
considering primarily the current value of the underlying common stock and the
current illiquidity of the warrants.
NOTE 4 - STOCKHOLDERS' EQUITY
At December 31, 1999 and 1998, the Company had stock warrants outstanding
entitling the warrant holder to acquire 1,113,000 shares of common stock at
$2.50 per share expiring June 5, 2000. The Company also has outstanding
Underwriter Warrants related to the initial public offering entitling the
Company's president to purchase 44,545 units (five shares of common stock and
five stock warrants; two warrants entitle the holder to purchase one share of
common stock for $3.00 per share) of the Company at a price of $12.90 per unit
expiring at dates ranging from September 27, 2000 to January 8, 2001.
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.
F-10
JORDAN AMERICAN HOLDINGS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
NOTE 4 - STOCKHOLDERS' EQUITY (continued)
The Company issued 3,000,000 shares of 8% cumulative, convertible, non-voting
preferred stock to a customer of EAM in a private placement offering. In
connection with this offering, 750,000 shares of common stock was given to the
Company to distribute to the preferred shareholders by three officers of the
Company for no additional consideration.
The preferred stock is convertible at the rate of one share of common stock for
each $3.50 in face amount ($1.00) of the preferred stock converted. If at any
time the closing bid price of the common stock for the period of thirty
consecutive trading days exceeds $5.25 per share, then, in such event, the
Company may, upon 30 days written notice, automatically convert the preferred
stock to common stock at the rate of $3.50 in face amount of the shares
converted. The preferred stock has a liquidation preference of $1.00 per share
plus accrued and unpaid dividends. Dividends in arrears on preferred stock at
December 31, 1999 amounted to $360,000.
In connection with the preferred stock offering, the Company obtained "key man"
life insurance on the Company's president, in the amount of $3,750,000. The
holder of Preferred Stock is the direct beneficiary and will be redeemed at the
rate of $1.25 per share, in exchange for such shares. In addition, the Company
maintains life insurance on certain officers aggregating $1,000,000, with the
Company as the primary beneficiary.
NOTE 5 - RELATED PARTY TRANSACTIONS
The Company has a loan to an officer bearing interest at a rate of 6% per annum
in the amount of $26,556 and $15,000 at December 31, 1999 and 1998,
respectively.
In 1994, the Company's president established the Jordan Index Fund, L.P. (the
"Fund"). The Fund engages in the speculative trading of stock index futures
contracts, and may occasionally trade in equity securities and stock options.
The Fund is administered by its general partner, Jordan Assets, Ltd. Jordan
Assets, Ltd. is not a subsidiary of JAHI, although JAHI is registered as a
principal of Jordan Assets, Ltd. with the Commodity Futures Trading Commission.
All trading decisions for the Fund are made by Jordan Assets, Ltd. Certain
administrative functions are provided to the Fund by JAHI in return for the fees
earned by Jordan Assets, Ltd. No such fees were earned during 1999 and 1998.
NOTE 6 - INCOME TAXES
For the year ended December 31, 1999, the Company utilized approximately
$730,000 of its net operating loss carryfoward to offset taxes currently
payable. The tax effect of temporary differences that give rise to significant
portions of deferred tax assets and deferred tax liabilities are primarily
attributable to net operating loss carryforwards for U.S. income tax purposes.
The difference between net income for financial statement purposes and net
income for income tax purposes is primarily due to unrealized gains of
approximately $420,000 recognized for financial reporting purposes and not for
income tax reporting purposes.
F-11
JORDAN AMERICAN HOLDINGS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
NOTE 6 - INCOME TAXES (continued)
As of December 31, 1999 and 1998, the Company had approximately $3,060,000 and
$3,790,000, respectively in pretax U.S. net operating loss carryforwards,
expiring through the year 2018. A portion of such net operating loss
carryforwards were incurred prior to the August 15, 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 Section 382
of the U.S. Internal Revenue Code.
The deferred tax assets that result from such operating loss carryforwards of
approximately $1,040,000 and $1,290,000 at December 31, 1999 and 1998,
respectively, have been fully reserved in the accompanying consolidated
financial statements. During the years ended December 31, 1999 and 1998, the
valuation allowance established against the net operating loss carryforwards
decreased and increased by $250,000 and $277,000, respectively.
As of December 31, 1999 and 1998, the Company also had U.S. net capital loss
carryforwards of approximately $277,000 and $282,000, respectively, which expire
on December 31, 2002. The deferred tax asset of approximately $94,000 in 1999
and $96,000 in 1998, that results from the capital loss carryforward, has been
fully reserved in the accompanying consolidated financial statements.
NOTE 7 - STOCK OPTIONS
In 1991, the Company adopted a stock option plan (the "Plan"). The aggregate
number of shares of common stock which may be granted by the Company will not
exceed a maximum of 1,000,000 shares during the period of the Plan. During 1998,
the Company's shareholders voted to increase the shares available for grant to
2,000,000 shares.
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 5 years from the date of 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-12
JORDAN AMERICAN HOLDINGS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
NOTE 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-Average
Incentive Other Exercise Exercise
Plan Options Total Price Range Price
---------- ---------- ---------- -------------- ----------
Balances at December 31, 1997 898,359 242,200 1,140,559 $ 0.57 - 2.00 $ 1.07
Granted 82,500 -- 82,500 $ 0.14 - 0.38 $ .31
Forfeited and reissued (25,000) 25,000 -- $ -- $ --
---------- ---------- ---------- -------------- ----------
Balances at December 31, 1998 955,859 267,200 1,223,059 $ 0.14 - 2.00 $ 1.02
Granted 1,041,482 20,000 1,061,482 $ 0.13 - 1.00 $ 0.21
Forfeited (411,859) -- (411,859) -- --
---------- ---------- ---------- -------------- ----------
Balances at December 31, 1999 1,585,482 287,200 1,872,682 $ 0.13 - 2.00 $ 0.56
========== ========== ========== ============== ==========
Number of options exercisable at
December 31, 1998 475,024 249,200 724,224 $ 0.14 - 2.00 $ 1.04
========== ========== ========== ============== ==========
Number of options exercisable at
December 31, 1999 1,272,082 255,700 1,527,782 $ 0.13 - 2.00 $ 0.55
========== ========== ========== ============== ==========
At December 31, 1999 and 1998 respectively, 414,518 and 1,044,141 share options
were available for future grant under the Plan.
The following table summarizes additional information regarding all stock
options outstanding at December 31, 1999.
[Enlarge/Download Table]
Options Outstanding
Number Weighted-Average Weighted-Average Number Weighted-Average
Outstanding at Remaining Exercise Exercisable at Exercise
Exercise Prices December 31, 1999 Contractual Life Price December 31, 1999 Price
--------------- ----------------- ---------------- ----- ----------------- -----
$0.13 - 0.38 1,043,982 6.4 years $ .15 866,982 $ .15
$0.57 - 1.00 470,200 5.9 years .89 362,300 .87
$1.02 - 1.50 283,000 6.2 years 1.17 223,000 1.19
$1.56 - 2.00 75,500 4.0 years 1.87 75,500 1.87
--------- ---------
1,872,682 1,527,782
The Financial Accounting Standards Board issued statement of Financial
Accounting Standards No. 123 ("SFAS 123"), "Accounting for Stock-based
Compensation" which recommends, but does not require, measuring compensation
cost for stock options based on the fair value of the options at the grant date.
The Company has elected not to adopt SFAS 123 but continues to apply Accounting
Principles Board Opinion No. 25 and related Interpretations in accounting for
the Plan and other stock option activity.
F-13
JORDAN AMERICAN HOLDINGS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(continued)
NOTE 7 - STOCK OPTIONS (continued)
Had the Company measured compensation cost based on the fair value of the
options at the grant date for 1999 and 1998 consistent with the method
prescribed by SFAS 123, the Company's net income (loss) and earnings per common
share would have been reduced to the pro forma amounts indicated below:
1999 1998
Net income (loss) As reported $ 1,152,749 $ (585,777)
Pro forma $ 1,060,032 $ (602,205)
Basic and diluted earnings (loss) As reported $ .09 $ (.08)
per common share Pro forma $ .08 $ (.08)
The fair value of each option grant was estimated at the date of the grant using
the Black-Scholes option pricing model with the following assumptions for 1999
and 1998: risk-free interest rate of 5.3% and 4.5%; no dividend yield; expected
life of 5 years; and volatility of 84% for 1999 and 75% for 1998.
During the initial phase-in period of applying SFAS 123 for pro forma disclosure
purposes, the results may not be representative of the effects on reported net
income for future years because options vest over several years and additional
grants generally are made each year.
NOTE 8 - FINANCIAL INSTRUMENTS, OFF-BALANCE SHEET RISK, UNCERTAINTIES
AND CONTINGENCIES
In the normal course of business, the Company's client activities through its
clearing broker involve the execution, settlement, and financing of various
client securities transactions. These activities may expose the Company to
off-balance sheet risk. In the event the client fails to satisfy its
obligations, the Company may be required to purchase or sell financial
instruments at prevailing market prices in order to fulfill the client's
obligations.
In the Company's investment activities, the Company purchases securities for its
own account and may incur losses if the market value of the securities decline
subsequent to December 31, 1999.
The Company's revenues are primarily derived from a percentage of the assets
under management and performance fees based on the appreciation of those assets.
Assets under management are impacted by both the extent to which the Company
attracts new, or loses existing clients and the appreciation or depreciation of
the U.S. and international equity and fixed income markets. A downturn in
general economic condition could cause investors to cease using the services of
the Company.
F-14
JORDAN AMERICAN HOLDINGS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(concluded)
NOTE 8 - FINANCIAL INSTRUMENTS, OFF-BALANCE SHEET RISK, UNCERTAINTIES
AND CONTINGENCIES (continued)
The Company's financial instruments, including cash receivables and deposits,
are carried at amounts which approximate fair value. The Company's marketable
securities are carried at the December 31, 1999 market value. Payables and other
liabilities are carried at amounts which approximate fair value.
The Company has a substantial portion of its assets on deposit with banks and
brokers. Assets deposited with banks and brokers are subject to credit risk. In
the event of a bank's or broker's insolvency, recovery of Company assets on
deposit may be limited to account insurance or other protection afforded such
deposits.
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 Company and the SEC are currently in settlement
negotiations regarding this matter. 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.
Other than the foregoing, the Company is not a party in any material litigation,
and management has no knowledge of any threatened material litigation against
the Company.
F-15
Dates Referenced Herein and Documents Incorporated by Reference
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