UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT FILED PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended February 28, 2002
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file No.0-5141
Princeton American Corporation
(Exact name of small business issuer as specified in its Charter)
Nevada 22-1848644
(state or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
2222 East Camelback Road, Suite 105, Phoenix, AZ 85016
(Address of Principal Executive Offices, including Zip Code)
Issuer's telephone number, including area code: (602) 522-2444
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 periods
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
10,923,918 shares of Common Stock, par value $.001 per share, were
outstanding at November 30, 2001
Transitional Small Business Disclosure Format (Check One): Yes [ ] No [X]
PRINCETON AMERICAN CORPORATION
FORM 10-QSB
INDEX
PART I Financial Information Page
Item 1 - Financial statements (unaudited)
Unaudited Condensed Balance Sheet - February 28, 2002 3
Unaudited Condensed Statements of Operations and
Comprehensive Income (Loss) - Nine Months and three
Months ended February 28, 2002 and February 28, 2001 5
Unaudited Condensed Statements of Cash Flows -
Nine Months ended February 28, 2002 and February 28, 2001 6
Unaudited Notes to Financial Statements 7
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations. 9
PART II Other Information 11
Item 5 Other information 11
Item 6 Exhibits and Reports on Form 8-K. 11
Signatures
PRINCETON AMERICAN CORPORATION
UNAUDITED CONDENSED BALANCE SHEET
FEBRUARY 28, 2002
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 18,394
Accounts receivable 17,486
Investments in marketable securities 5,213
Prepaid expenses 31,143
Other receivables 27,212
Deposit 5,000
----------
Total current assets 104,448
----------
PREPAID EXPENSES 44,452
INVESTMENT IN COMMISSION CONTRACT 208,566
PROPERTY AND EQUIPMENT, NET 1,364,474
----------
$1,721,940
==========
PRINCETON AMERICAN CORPORATION
UNAUDITED CONDENSED BALANCE SHEET
FEBRUARY 28, 2002
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Notes payable - current portion $ 35,030
Note payable - other 245,508
Notes payable, officers 100,000
Accounts payable 347,614
Bankruptcy claims 679,289
Liabilities settled 560,000
Accrued interest 302,328
Accrued real estate taxes 372,358
Payroll and sales taxes payable 29,939
Advance rental income and tenant security deposits 20,631
-----------
Total current liabilities 2,692,697
TENANT SECURITY DEPOSITS - LONG TERM 51,461
MORTGAGE NOTES PAYABLE 1,719,297
-----------
4,463,455
-----------
STOCKHOLDERS' DEFICIT:
Common stock
approximately 15,000,000 shares issued and outstanding 15,000
Additional paid-in-capital 2,460,350
Accumulated deficit (4,792,673)
-----------
(2,317,323)
Net unrealized loss on marketable securities (424,192)
-----------
Total stockholders' deficit (2,741,515)
-----------
Total liabilities and stockholders' deficit $ 1,721,940
===========
PRINCETON AMERICAN CORPORATION
Unaudited Condensed Statements of Operations and Comprehensive Loss
For the Three Months and Nine Months Ended February 28, 2002 and 2001
THREE MONTHS THREE MONTHS NINE MONTHS NINE MONTHS
Ended Ended Ended Ended
February 28, February 28, February 28, February 28,
2002 2001 2002 2001
--------- --------- --------- ---------
REVENUES
Rental income $ 228,576 198,091 706,192 605,545
Parking and other 8,760 3,545 24,093 83,555
--------- --------- --------- ---------
237,336 201,636 730,285 689,100
--------- --------- --------- ---------
COSTS AND EXPENSES
Building operating costs 72,536 76,045 269,237 251,583
Professional fees 22,158 24,982 224,920 140,857
Payroll and payroll taxes 32,036 36,051 98,818 105,808
Ground lease 31,486 31,201 94,323 93,688
Depreciation 24,100 34,939 70,780 100,115
Consulting 7,500 17,900 14,662 41,100
Other 12,162 11,029 44,077 34,359
--------- --------- --------- ---------
Total costs and expenses 201,978 232,147 816,817 767,510
--------- --------- --------- ---------
INCOME (LOSS) FROM OPERATIONS 35,358 (30,511) (86,532) (78,410)
--------- --------- --------- ---------
OTHER INCOME (EXPENSE)
Interest and dividend income 4,611 5,101 14,017 14,899
Interest expense (81,563) (52,076) (256,880) (163,051)
Gain on settlement of lawsuit -- -- 59,603 --
Other -- -- (16,029) (7,374)
--------- --------- --------- ---------
(76,952) (46,975) (199,289) (155,526)
--------- --------- --------- ---------
NET LOSS BEFORE INCOME TAXES (41,594) (77,486) (285,821) (233,936)
INCOME TAXES -- -- -- --
--------- --------- --------- ---------
NET LOSS $ (41,594) (77,486) (285,821) (233,936)
========= ========= ========= =========
NET LOSS PER COMMON SHARE, $ (0.00) (0.01) (0.02) (0.02)
BASIC AND DILUTED ========= ========= ========= =========
NET LOSS $ (41,594) (77,486) (285,821) (233,936)
NET UNREALIZED LOSS ON MARKETABLE SECURITIES (1,000) (5,286) (12,445) (38,864)
--------- --------- --------- ---------
COMPREHENSIVE LOSS $ (42,594) (82,772) (298,266) (272,800)
========= ========= ========= =========
PRINCETON AMERICAN CORPORATION
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED FEBRUARY 28, 2002 AND 2001
2002 2001
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(285,821) (233,936)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 70,780 100,115
Interest income on investment contract (13,842) (13,620)
Rent abatement -- (7,052)
Loss on sale of marketable security 8,804 --
Gain on settlement of lawsuit (59,603)
Increase (decrease) in cash due to change in:
Accounts receivable (11,418) (21,833)
Prepaid expenses 17,645 (62,032)
Other receivables 4,808 --
Other assets 6,009 --
Accounts payable and accrued expenses 251,525 129,079
Accrued interest 112,404 44,484
Rent deposits (102,241) 35,836
--------- ---------
Net cash used in operating activities (950) (28,959)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments on notes receivable -- 18,149
Purchase of property and equipment (56,111) (5,567)
Payments on investment contract 11,437 11,063
--------- ---------
Net cash provided by (used in) investing activities (44,674) 23,645
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable (19,821) --
Proceeds from bank loan 131,398 --
Proceeds from (payment on) loan from officers (30,000) 30,000
Payments on mortgage notes payable (20,100) (20,131)
--------- ---------
Net cash provided by financing activities 61,477 9,869
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 15,853 4,555
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 2,541 1,650
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 18,394 6,205
========= =========
SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION
CASH PAID DURING THE PERIOD FOR INTEREST $ 119,821 105,426
========= =========
Cash paid during the period for income taxes $ -- --
========= =========
NON-CASH INVESTING ACTIVITIES:
Transfer of marketable securities $ 44,020 --
========= =========
Assets acquired in return for rent abatement $ -- 70,525
========= =========
PRINCETON AMERICAN CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
FEBRUARY 28, 2002 AND 2001
1. BASIS OF PRESENTATION
The accompanying financial statements have been prepared by the Company,
without audit, and reflect all adjustments that are, in the opinion of
management, necessary for a fair statement of the results for the interim
periods. The statements have been prepared in accordance with accounting
principles generally accepted in the United States of America for interim
financial reporting and Securities and Exchange Commission regulations.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with accounting principles generally
accepted in the United States of America have been condensed or omitted
pursuant to such rules and regulations. In the opinion of management, the
financial statements reflect all adjustments (of a normal and recurring
nature) which are necessary for a fair presentation of the financial
position, results of operations and cash flows for the interim periods. The
results of operations for the nine months ended February 28, 2002 are not
necessarily indicative of the results to be expected for the entire fiscal
year.
These financial statements should be read in conjunction with the financial
statements and notes thereto included in the Company's annual report on Form
10K-SB for the fiscal year ended May 31, 2001.
2. LITIGATION
Harry and Irene Weiss - On February 9, 2001, the Weiss's and the Company
concluded a two-day settlement conference before the Hon. Charles G. Case of
the United States Bankruptcy Court. The conference culminated in an agreement
between the parties to settle the various disputes among them, including the
Company's objection to the priority and amount of the Weiss' claim. The
parties have agreed on settlement documents and in November the Bankruptcy
Court approved the terms of the settlement and entered an order establishing
the amount and priority of the Weiss's' claim.
Under the agreement, Princeton recognized that the Weiss's have an allowed
claim of $560,000 as of February 9, 2001. The Company recognized a gain on
settlement of $59,603. Interest of approximately $59,000 has been accrued on
the claim at the rate of 10% per annum from February 9, 2001. The Company was
to have paid the claim on the earlier of the following events: (1) February
9, 2002; or (2) when the Company sells or refinances its office building at
4808 N. 22nd Street, Phoenix, Arizona (the "4808 Property"). The Weiss's'
claim is secured by a third-position deed of trust against the 4808 Property.
As of February 28, 2002, this claim was unpaid.
The Weiss's have renounced and released their shareholder interest in
Princeton American Corporation. The parties have provided mutual releases of
all claims relating to the Company's bankruptcy case and have dismissed all
pending appeals relating to the Weiss's' claim and their motion to convert
the case from a Chapter 11 to a Chapter 7 proceeding.
Effective with the entry of the court order on November 20, 2001 approving
this settlement, the Company has six months to pay unsecured creditors
pursuant to the Plan as modified.
2. LITIGATION, CONTINUED
11
PRINCETON AMERICAN CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
FEBRUARY 28, 2002 AND 2001
Testasecca, et al v. Princeton American Corporation and William C. Taylor -
On May 22, 2001 Lawrence Testasecca and others filed a complaint in an
adversary proceeding in the Bankruptcy Court. Among other things, the
Plaintiffs alleged that they should be recognized as owners of an unspecified
number of shares purchased by them after the Bankruptcy Court proceedings
began without establishing that these shares were the subject of allowed
interests under the Plan of Reorganization. The Plaintiffs asked the Court to
vacate its September 15, 2000 order canceling all outstanding Princeton share
certificates and issuing new certificates reflecting the allowed interests of
shareholders under the Plan of Reorganization for Princeton American and the
Court's prior orders. At least three of the Plaintiffs (Lawrence Testasecca,
Charles Crehore and Eugene Targosz) had received actual notice of the
bankruptcy, had filed Proofs of Interest pursuant to the July 1977 order of
the Court establishing a deadline for filing Proofs of Interest and had voted
in favor of the Plan. The remaining Plaintiffs are relatives of two of them.
The matter was heard by the Court commencing on May 31, 2001 with final
evidence and closing arguments on August 28, 2001. On November 8, 2001 the
Bankruptcy Court issued its Memorandum Decision and Order denying the
Plaintiffs claims. The Plaintiffs have appealed this decision to the Federal
District Court for the District of Arizona. The Company has offered to settle
the litigation if the Plaintiffs pay the Company's attorney's fees and costs.
Onset Investment Limited - The Company's request for a hearing with respect
to its motion for Summary Judgment has been denied. The Company has requested
a hearing with respect to the nature of the recovery. Princeton anticipates
its maximum exposure to be approximately $25,000 in cash and 70,000 shares of
its common stock.
3. RELATED PARTY TRANSACTIONS
The Company is paying a 4% leasing commission on certain leases to an
director of the Company. Related party commission expense for the nine months
ended February 28, 2002 was $9,319. Payments of $20,000 have been made,
resulting in prepaid commissions of $10,681.
4. SUBSEQUENT EVENT
The Company has received a loan commitment for $4,500,000 to refinance both
buildings. The Company intends to use these funds to pay off existing
obligations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Some of the statements contained in this report discuss future
expectations, contain projections of results of operations or financial
condition or state other "forward-looking" information. Those statements are
subject to known and unknown risks, uncertainties and other factors that could
cause the actual results to differ materially from those contemplated by the
statements. The forward-looking information is based on various factors and was
derived using numerous assumptions. Important factors that may cause actual
results to differ from forward-looking statements and projections include, for
example:
a downturn in the Phoenix, Arizona real estate market, particularly
one which would adversely affect commercial lease rates;
an adverse result in the Testasecca, et al, Onset or other
litigation referred to in this report;
any change in tax laws which would change the Company's ability to
utilize its tax loss carry-forward or the inability under existing
tax laws for the full utilization of such tax loss carry-forward;
an inability of the Company to regain listed or trading status on
the Over-the-Counter Bulletin Board, NASDAQ, the American Stock
Exchange, or some other recognized market or exchange;
certain operations of the Company, including the formation of
alliances with other entities, will remain under the jurisdiction of
and be subject to the confirmation and approval of the U.S.
Bankruptcy Court. The decisions of the Bankruptcy Court, with
respect to Company operations retained under its jurisdiction, could
affect the business of the Company;
the inability of the Company to secure renewals of existing leases
at commercially reasonable rates or to promptly replace tenants
following the expiration of existing leases;
the effect of changing economic conditions; and
other risks which may be described in our future filings with Securities
and Exchange Commission. We do not promise to update forward-looking
information to reflect actual results or changes in assumptions or other
factors that could affect those statements.
RESULTS OF OPERATIONS:
Since the filing of the 10QSB for the second quarter ended November 30, 2001,
management has focused on:
Continuing settlement negotiations in the matter of Testasecca, et al adv.
Princeton American Corporation and William C. Taylor. On November 8, 2001,
the Bankruptcy Court issued its Memorandum Decision and Order denying each
of the Plaintiffs' claims and allegations and denying their Petition for
an Order overturning its September 15, 2000 Order canceling all existing
shares and authorizing the issuance of new certificates to recognized
shareholders. This decision upheld the Company's position with respect to
the approximately 12,000,000 shares canceled by that Order. The Plaintiffs
have appealed this decision and order to The Federal District Court for
the District of Arizona. The Company has offered to settle this litigation
provided the Plaintiffs pay the Company's attorney's fees and costs and
move to dismiss with prejudice the complaint brought in a companion
proceeding as well as the appeal from the Bankruptcy Court's Decision and
Order denying the Petition. There is no certainty with respect to the
outcome of this litigation.
Pursuit of a settlement with Onset Investment Limited. Princeton's Motion
for Summary Judgment in the Onset Investment Limited claim was denied by
the court and the matter set for trial on limited fact issues. The Company
has requested a hearing with respect to its contention that Onset's claim
is subordinated to the claims of general creditors and that any recovery
should be limited to stock in Princeton. The Company estimates its maximum
exposure to be approximately $25,000 in cash and 70,000 shares of its
common stock.
Conclusion of the processing of its application to the NASD for
registration of its shares for trading on the Over the Counter Bulletin
Board Market (OTC:BB). The NASD is awaiting verification by the SEC that
the Company has complied with and is current with respect to the
Commission's reporting requirements. No date for action by the NASD has
been provided and there is no assurance that the application will be
successful. A new trading symbol will be issued by the NASD if Princeton's
application is approved.
Refinancing of Princeton's two office buildings. The Company has received
a loan commitment from Southwest Bank of Phoenix. Proceeds of these loans
should be sufficient to pay off the Vanderford mortgage loan, to generate
sufficient funds to satisfy allowed creditor's claims including the Weiss
settlement. While the Company anticipates that this loan will be finalized
during the fourth quarter, there is no assurance that the loan will be
made and the necessary amounts received to accomplish these objectives.
Final work on the common area improvements to the office building at 2222
East Camelback Road. Renovation of the four restrooms is now complete and
the painting, carpeting and wallpapering of the common areas should be
achieved during the next quarter. This office building is now fully
leased.
Leasing up of 4808 North 22nd Street. During this reporting quarter,
leases were executed with WRG Design, Inc. and Alliance Residential
Company. WRG has taken over the spaces formerly occupied by Shaefer,
Smith, Ankeney Insurance Agency on the first floor of the building for a
term of three years. Alliance Residential Company has expanded its five
year lease of the entire second floor to include the spaces vacated by
WRG. Extensive tenant improvements have been completed in both suites.
This office building is now fully leased.
THREE MONTHS ENDED FEBRUARY 28, 2001 COMPARED TO THREE MONTHS ENDED
FEBRUARY 28, 2001
We believe that our cash position of $18,394 together with the
increased revenues from the two fully leased office buildings will be
sufficient to continue operations pending receipt of the anticipated
loan funds from Southwest Bank. It is anticipated that the loans will
provide sufficient funds to the Company to allow it to emerge from
bankruptcy in due course.
PART II - OTHER INFORMATION
Item 5 Other information
NONE
Item 6 EXHIBITS AND REPORTS ON FORM 8K
NONE
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Date: April 15, 2002
PRINCETON AMERICAN CORPORATION
/s/ William C. Taylor
__________________________________
William C. Taylor, President
/s/ Roderick W. McKinnon III
__________________________________
Roderick W. McKinnon III
Corporate Secretary