U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM l0-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2000
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition Period From_____________ to_____________
Commission File Number 0- 18974
Jordan American Holdings, Inc.
-----------------------------
(Exact name of registrant as specified in its charter)
Florida 65-0142815
------- ----------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
2155 Resort Drive, Suite 108, Steamboat Springs, CO 80487
---------------------------------------------------------
(Address of principal executive offices)
(970) 879-1189
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to filing requirements
for the past 90 days. Yes [X] No [ ]
As of June 30, 2000, 10,421,266 shares of the registrant's common stock were
issued and outstanding.
<PAGE>
JORDAN AMERICAN HOLDINGS, INC.
AND SUBSIDIARIES
TABLE OF CONTENTS
PART I
ITEM 1 FINANCIAL INFORMATION PAGE
Consolidated Balance Sheets....................................... 3
Consolidated Statements of Operations............................. 4
Consolidated Statements of Cash Flows............................. 5
Notes to Consolidated Financial Statements........................ 6
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS
Results of Operation.............................................. 10
Liquidity and Capital Resources................................... 12
Risk Factors, Trends & Uncertainties.............................. 12
2
<PAGE>
JORDAN AMERICAN HOLDINGS, INC.
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
A S S E T S 2000 1999
------------ ------------
CURRENT ASSETS
<S> <C> <C>
Cash & cash equivalents $ 1,304,971 $ 580,758
Marketable securities 697,676 607,882
Investment advisory fee receivable - net 271,934 846,907
Deposit with clearing broker 25,000 25,000
Notes receivable - officer 58,428 26,556
Prepaid expenses 54,994 50,678
Other receivable 83,569 108,625
------------ ------------
Total current assets 2,496,572 2,246,406
------------ ------------
FIXED ASSETS
Property and equipment, at cost, net of
accumulated depreciation and amortization
of $149,682 and $133,005 respectively 72,876 88,228
------------ ------------
OTHER ASSETS
Notes receivable 650,000 500,000
Strategic Options Limited Partnership -- 27,058
------------ ------------
Total other assets 650,000 527,058
------------ ------------
TOTAL ASSETS $ 3,219,448 $ 2,861,692
============ ============
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 199,353 $ 329,265
Deferred revenue 38,576 35,300
Software license payable 44,252 58,721
------------ ------------
Total current liabilities 282,181 423,286
------------ ------------
STOCKHOLDERS' EQUITY
8% cumulative, convertible, non-voting preferred stock
$0.01 par value, $1.00 liquidation value; authorized
5,000,000 shares 3,000,000 shares issued and
outstanding 30,000 30,000
Common Stock, $0.001 par value; authorized 20,000,000
shares; 10,421,266 shares issued and outstanding at
June 30, 2000 and December 31, 1999 10,421 10,421
Additional paid in capital 4,502,853 4,502,853
Accumulated deficit (1,606,007) (2,104,868)
------------ ------------
Total stockholders' equity 2,937,267 2,438,406
------------ ------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 3,219,448 $ 2,861,692
============ ============
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE>
JORDAN AMERICAN HOLDINGS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
FOR THE FOR THE
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------------- -----------------------------
2000 1999 2000 1999
------------ ------------ ------------ ------------
REVENUES
<S> <C> <C> <C> <C>
Commission income $ 10,767 $ 48,054 $ 141,245 $ 176,491
Investment advisory fees 500,966 232,743 1,629,095 503,376
Realized equity gain (loss) from investing
and trading (5,322) -- (5,322) 2,332
------------ ------------ ------------ ------------
Total Revenues 506,411 280,797 1,765,018 682,199
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 424,755 356,696 1,080,519 695,821
------------ ------------ ------------ ------------
Operating income (loss) 81,656 (75,899) 684,499 (13,622)
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSES):
Interest and dividend income 38,067 20,808 70,432 50,867
Other income 4,404 4,494 8,998 34,816
Unrealized equity gain (loss) from investing
and trading (476,292) 15,207 (251,102) 34,755
------------ ------------ ------------ ------------
Total Other Income(Expense), Net (433,821) 40,509 (171,672) 120,438
------------ ------------ ------------ ------------
NET INCOME (LOSS) BEFORE INCOME TAXES (352,165) (35,390) 512,827 106,816
Provision for income taxes 13,968 -- 13,968 --
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ (366,133) $ (35,390) $ 498,859 $ 106,816
============ ============ ============ ============
Basic earnings attributable to common stock
per common share $ (0.04) $ (0.01) $ 0.04 $ 0.00
============ ============ ============ ============
Diluted earnings attributable to common stock
per common share $ (0.04) $ (0.01) $ 0.04 $ 0.00
============ ============ ============ ============
Weighted-average number of common shares outstanding:
Basic 10,421,266 10,421,266 10,421,266 10,421,266
============ ============ ============ ============
Diluted 10,421,266 10,421,266 10,421,266 10,421,266
============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements
4
<PAGE>
JORDAN AMERICAN HOLDINGS, INC.
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS ENDED JUNE 30,
2000 1999
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income $ 498,859 $ 106,816
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 16,677 11,678
Unrealized (gain) loss from investing and trading 251,102 (34,756)
Realized (gain) loss from investing and trading 5,322 (2,332)
Changes in operating assets and liabilities:
Investment advisory fee receivable - net 574,973 (20,524)
Marketable securities (319,161) --
Prepaid expenses (4,315) (61,089)
Other receivable 25,057 (4,548)
Notes receivable - officers (31,872) (675)
Accounts payable and accrued expenses (129,911) 2,333
Deferred revenue 3,276 (8,222)
Software license payable (14,469) 56,688
------------ ------------
Net cash provided by operating activities 875,538 45,369
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in corporate stock - restricted -- (56,250)
Investment in Senior Yellow Pages, Inc. (150,000) --
Sale of IMPACT Management Growth Portfolio -- 57,092
Capital expenditures (1,325) (67,017)
------------ ------------
Net cash used in investing activities (151,325) (66,175)
------------ ------------
Net increase in cash and cash equivalents 724,213 (20,806)
Cash and cash equivalents, beginning of period 580,758 495,622
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,304,971 $ 474,816
============ ============
Supplemental disclosure of cash flow information:
Interest paid $ 2,097 $ 2,337
============ ============
</TABLE>
See accompanying notes to consolidated financial statements
5
<PAGE>
JORDAN AMERICAN HOLDINGS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - ORGANIZATION
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.
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.
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
Portfolio.
NOTE 3 - NOTES RECEIVABLE
The Company owns a $500,000 variable rate convertible subordinated debenture
from Boston Restaurant Associates, Inc. (BRAI). The principal balance of the
debenture is due and payable on December 31, 2011. The debenture has a
conversion price of $1.25 per share and bears interest at a rate of 14% for 2000
and 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
6
<PAGE>
JORDAN AMERICAN HOLDINGS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 3 - NOTES RECEIVABLE (CONTINUED)
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 June 30, 2000 and 1999. This determination was made considering
primarily the current value of the underlying common stock and the current
illiquidity of the warrants.
The Company provided "angel" financing through a convertible subordinated bridge
note to Senior Yellow Pages, Inc. and its affiliates (SYP), an internet based
eldercare infomediary. The principal balance of the note is due and payable upon
the earlier of (1) the receipt by SYP or any affiliate of aggregate gross
proceeds of at least $1,000,000 raised in an offering (the "First Round
Financing") of SYP's Series A Convertible Preferred Stock or (2) redemption in
cash on or prior to January 30, 2001.
As an inducement to the Company providing bridge financing to SYP, SYP agreed to
issue to the Company a 4% equity interest in SYP, on a fully diluted basis
through future rounds of private financing.
The note bears interest at a rate of 10% per annum.
NOTE 4 - STOCKHOLDERS' EQUITY
At June 30, 2000 and December 31, 1999, the Company had stock warrants
outstanding entitling the warrant holder to acquire 1,113,000 shares of common
stock with a current exercise price of $0.50 per share and a current expiration
date of June 5, 2010. The Company also has outstanding Underwriter Warrants
related to the initial public offering entitling the holder 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 $0.60 per share) of the
Company at a price of $2.58 per unit expiring at dates ranging from September
27, 2010 to January 8, 2011.
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 to a customer of EAM in a private placement offering. In
connection with this offering, 750,000
7
<PAGE>
JORDAN AMERICAN HOLDINGS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 4 - STOCKHOLDERS' EQUITY (CONTINUED)
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.
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. Semi-annual dividends in arrears on preferred
stock at June 30, 2000 amounted to $480,000.
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 the preferred stock is the direct beneficiary and will be redeemed at
the rate of $1.25 per share, in exchange for such shares.
NOTE 5 - RELATED PARTY TRANSACTIONS
The Company has a loan to an officer bearing interest at a rate of 10% per annum
in the amount of $58,428 and $26,556 at June 30, 2000 and December 31, 1999,
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 the first and
second quarters of 2000 and 1999.
NOTE 6 - 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.
8
<PAGE>
JORDAN AMERICAN HOLDINGS, INC.
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONTINUED)
NOTE 6 - FINANCIAL INSTRUMENTS, OFF-BALANCE SHEET RISK, UNCERTAINTIES AND
CONTINGENCIES (CONTINUED)
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 June 30, 2000.
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.
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 June 30, 2000 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.
These interim period consolidated financial statements, including the notes
thereto, are condensed and do not include all disclosures required by generally
accepted accounting principles. Such interim period consolidated financial
statements should be read in conjunction with the Company's audited consolidated
financial statements that are included in the Company's 1999 Form 10-KSB, which
is contained in the Company's 1999 Annual Report to shareholders and is
available without charge upon request to JAHI Investor Relations, 2155 Resort
Drive, Suite 108, Steamboat Springs, Colorado, 80487, (970) 879-1189; Fax: (970)
879-1272; E-mail: [email protected]
9
<PAGE>
PART 1, ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS
JORDAN AMERICAN HOLDINGS, INC.
AND SUBSIDIARIES
Safe Harbor for Forward-Looking Statements
Information found in this report contains forward-looking implications which may
differ materially from actual results due to the success, or lack thereof, of
JAHI's management decisions, marketing and sales effectiveness, investment
decisions, and the management of clients' stock portfolios and pooled
investments as influenced by market conditions, Federal Reserve Board policy,
economic trends, political developments, domestic and international events and
other factors. There can be no guarantee that any forward-looking implications
discussed and/or referenced in this report will have any impact, positive or
negative, upon the earnings, value and/or operations of the Company.
Results of Operations
JAHI's assets under management were $55.1 million as of June 30, 2000, compared
to $77.2 million under management on March 31, 2000. The net $22.1 million
change in assets under management during the quarter resulted from investment
losses of $21.6 million and negative cash flow of $0.5 million.
THREE MONTHS ENDED JUNE 30, 2000
COMPARED TO
THREE MONTHS ENDED JUNE 30, 1999
The Company had a net loss for the three months ended June 30, 2000, of
($366,133) or ($0.04) per common share compared to a net loss of ($35,390) or
($0.01) per common share for the same period in 1999. Basic and diluted earnings
per common share for the three months ended June 30, 2000 and 1999 includes
dividends in arrears on the Company's outstanding preferred stock of $60,000 for
each period.
The increase in net loss for this period compared to the same period last year
stems primarily from a substantial increase in unrealized equity losses during
this period. These losses stem primarily from significant changes in the market
value of two equity securities held within the Company's portfolio during this
period.
The Company had operating income of $81,656 for the three months ended June 30,
2000 compared to an operating loss of ($75,899) for the same period in 1999.
This increase is primarily due to total revenue being significantly higher
during this period when compared to the same quarter last year.
For the three months ended June 30, 2000, revenues totaled $506,411 compared to
revenues of $280,797 for the same period in 1999, an increase of approximately
81% due primarily to significantly increased revenues from investment advisory
fees.
10
<PAGE>
Advisory fee revenue increased for the three months ended June 30, 2000, to
$500,966 compared to $232,743 for the same period in 1999, an increase of
approximately 116% due primarily to increased revenues from performance fee
based managed accounts.
Commission income decreased for the three months ended June 30, 2000, to $10,767
compared to $48,054 for the same period in 1999, a decrease of approximately 78%
due primarily to fewer securities transactions resulting from the amount of
securities being purchased and sold in client accounts. These securities
transactions are incidental to management's investment advisory decisions based
on technical and fundamental considerations of individual securities, market
conditions and other factors.
Selling, general, and administrative ("SG&A") expenses of $424,755 were incurred
during the three month period ended June 30, 2000, compared to similar SG&A
expenses of $356,696 for the same period in 1999. This increase of approximately
19% was due primarily to higher selling expenses during this period resulting
from higher fees paid out to sales representatives.
Total other income (expenses) was ($433,821) for the three months ended June 30,
2000, compared to $40,509 for the same period in 1999. This change was primarily
due to significantly higher unrealized equity losses in the second quarter of
2000.
SIX MONTHS ENDED JUNE 30, 2000
COMPARED TO
SIX MONTHS ENDED JUNE 30, 1999
The Company had net income for the six months ended June 30, 2000, of $498,859
or $0.04 per common share compared to net income of $106,816 or $0.00 per common
share for the same period in 1999. Basic and diluted earnings per common share
for the six months ended June 30, 2000 and June 30, 1999 includes dividends in
arrears of $120,000 for each period. Total dividends in arrears on the Company's
outstanding preferred stock as of June 30, 2000 were $480,000 including
dividends in arrears of $360,000 as of December 31, 1999. There are currently no
projected annual payments for 2000.
The net income for this period compared to the net income for the same period
last year stems primarily from higher revenues from performance fee based
managed accounts.
The Company had operating income of $684,499 for the six months ended June 30,
2000 compared to an operating loss of ($13,622) for the same period in 1999.
This increase is primarily due to total revenue being significantly higher
during this period when compared to the same period last year.
For the six months ended June 30, 2000, revenues totaled $1,765,018 compared to
revenues of $682,199 for the same period in 1999, an increase of approximately
159%. The increase in revenue can be primarily attributed to an increase in
advisory fees.
Revenues from advisory fees for the six months ended June 30, 2000 totaled
$1,629,095 compared to revenues from the same source of $503,376 for the same
period in 1999, an increase of approximately 224% due primarily to increased
revenues from performance fee based managed accounts.
11
<PAGE>
Revenues from commissions decreased approximately 20% for the six months ended
June 30, 2000 compared to the same period in 1998 primarily due to less trading
activity.
SG&A expenses totaled $1,080,519 during the six months ended June 30, 2000
compared to $695,821 in selling, general and administrative expenses for the
same period in 1999. The net $384,698 increase in SG&A expenses primarily from
higher fees paid out to sales representatives during this period.
Total other income (expenses) was ($171,672) for the six months ended June 30,
2000 compared to $120,438 for the same period in 1999. This decrease was
primarily due to the higher unrealized equity losses in the second quarter of
2000.
Liquidity and Capital Resources
At June 30, 2000, the Company had cash and cash equivalents of $1,304,971 versus
$580,758 at December 31, 1999. This increase was due primarily to the net income
for the six months ended June 30, 2000 and changes in the investment advisory
fee receivable.
Accounts payable and accrued expenses were $199,353 at June 30, 2000, compared
to $329,265 at December 31, 1999. The decrease in accounts payable and accrued
expenses is primarily due to lower accruals for actual expenses incurred on fees
paid out to sales representatives for the quarter ended June 30, 2000 compared
to those fees accrued for the quarter ended December 31, 1999. Accruals are
based upon expenses incurred and/or as determined by management's best estimate
based upon the Company's annual budget.
Cash flows provided by operating activities for the six months ended June 30,
2000, were $875,538 compared to $45,369 for the same period in 1999 due
primarily to changes in net income for the six months ended June 30, 2000 and
the changes in the investment advisory fee receivable. Cash flows provided by
(used in) investing activities for the six months ended June 30, 2000, were
($151,325) compared to ($66,175) for the same period in 1999 due primarily to
the investment made in Senior Yellow Pages, Inc. in the first quarter of 2000.
Management of the Company believes short-term cash needs will continue to be met
through management fees, brokerage revenues, cash reserves and/or liquidation of
marketable securities.
Risk Factors, Trends & Uncertainties
Total assets under management and corporate earnings may substantially increase
or decrease due to (1) stock market conditions, including the onset of a
long-term declining, or bear market; (2) performance returns as influenced by
the Company's investment advisory decisions, operational expense and
effectiveness of marketing efforts; (3) competition from mutual funds, other
investment advisory companies and insurance companies; (4) interest rate changes
and other actions taken by the Federal Reserve Board; (5) domestic and
international economic and political conditions, high inflation and/or
recession; (6) trends in business and finance; (7) international events; (8)
acts of terrorism; and (9) other factors.
12
<PAGE>
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.
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.
13
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
JORDAN AMERICAN HOLDINGS, INC.
Dated: August 14, 2000 By: /s/ Wallace Neal Jordan
-------------------------
Wallace Neal Jordan
Chief Executive Officer
Dated: August 14, 2000 By: /s/ A.J. Elko
-------------
A.J. Elko
Chief Financial Officer
14
