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 November 30, 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
incorporation or organization) Identification 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, (of which
7,460,893 have been issued) were outstanding at November 30, 2002
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) .............................. 2
Unaudited Condensed Balance Sheet - November 30, 2002 ......... 2
Unaudited Condensed Statements of Operations and
Comprehensive Income (Loss) - Three Months
and Six Months ended November 30, 2002 and November 30, 2001 .. 4
Unaudited Condensed Statements of Cash Flows - Six Months ... 5
ended November 30, 2002 and November 30, 2001
Unaudited Notes to Financial Statements ....................... 6
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations. .......................... 7
Item 3. Controls and Procedures ......................................... 10
PART II Other Information ............................................ 11
Item 5 Other information ............................................ 11
Item 6 Exhibits and Reports on Form 8-K.............................. 13
Signatures .............................................................. 13
-1-
PRINCETON AMERICAN CORPORATION
Unaudited Condensed Balance Sheet
November 30, 2002
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 18,849
Loan retention account 159,873
Accounts receivable 5,920
Investments in marketable securities 29,781
Prepaid expenses 35,763
----------
Total current assets 250,186
----------
PREPAID EXPENSES 75,390
INVESTMENT IN COMMISSION CONTRACT 210,878
PROPERTY AND EQUIPMENT, NET 1,364,296
LOAN COSTS, NET 49,589
----------
$1,950,339
==========
See accompanying notes to financial statements
- 2 -
PRINCETON AMERICAN CORPORATION
Unaudited Condensed Balance Sheet
November 30, 2002
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Mortgage notes payable - current portion $ 56,307
Notes payable, officers 66,969
Accounts payable 40,173
Bankruptcy claims 113,576
Accrued interest 68,249
Accrued real estate taxes 33,649
Payroll and sales taxes payable 35,505
Advance rental income and tenant security deposits 6,602
-----------
Total current liabilities 421,030
TENANT SECURITY DEPOSITS - LONG TERM 61,366
MORTGAGE NOTES PAYABLE, NET OF CURRENT PORTION 4,409,129
-----------
4,891,525
-----------
STOCKHOLDERS' DEFICIT:
Common stock
approximately 15,000,000 shares
issued and outstanding 15,000
Additional paid-in-capital 2,460,350
Accumulated deficit (5,406,547)
-----------
(2,931,197)
Net unrealized loss on marketable securities (9,989)
-----------
Total stockholders' deficit (2,941,186)
-----------
Total liabilities and stockholders' deficit $ 1,950,339
===========
See accompanying notes to financial statements
- 3 -
PRINCETON AMERICAN CORPORATION
Unaudited Condensed Statements of Operations and Comprehensive Loss
For the Three Months and Six Months Ended November 30, 2002 and 2001
Three Months Three Months Six Months Six Months
Ended Ended Ended Ended
November 30, 2002 November 30, 2001 November 30, 2002 November 30, 2001
----------------- ----------------- ----------------- -----------------
REVENUES
Rental income $ 269,519 237,676 535,237 477,616
Parking and other 9,495 7,890 18,990 15,333
--------- --------- --------- ---------
279,014 245,566 554,227 492,949
--------- --------- --------- ---------
COSTS AND EXPENSES
Building operating costs 90,880 85,187 177,840 196,701
Professional fees 17,558 113,197 44,203 202,762
Payroll and payroll taxes 38,910 30,870 76,617 66,782
Ground lease 31,633 31,553 63,119 62,837
Depreciation and amortization 29,987 23,340 59,973 46,680
Consulting 34,000 7,162 45,800 7,162
Other 25,533 19,795 39,316 31,915
--------- --------- --------- ---------
Total costs and expenses 268,501 311,104 506,868 614,839
--------- --------- --------- ---------
INCOME (LOSS) FROM OPERATIONS 10,513 (65,538) 47,359 (121,890)
--------- --------- --------- ---------
OTHER INCOME (EXPENSE)
Interest and dividend income 4,910 4,552 9,660 9,406
Interest expense (97,504) (108,668) (196,287) (175,317)
Gain on settlement 56,509 59,603 61,845 59,603
Other -- (10,303) -- (16,029)
--------- --------- --------- ---------
(36,085) (54,816) (124,782) (122,337)
--------- --------- --------- ---------
NET LOSS BEFORE INCOME TAXES (25,572) (120,354) (77,423) (244,227)
INCOME TAXES -- -- 50 --
--------- --------- --------- ---------
NET LOSS $ (25,572) (120,354) (77,473) (244,227)
========= ========= ========= =========
NET LOSS PER COMMON SHARE, BASIC AND DILUTED $ (0.00) (0.01) (0.01) (0.02)
========= ========= ========= =========
NET LOSS $ (25,572) (120,354) (77,473) (244,227)
NET UNREALIZED GAIN (LOSS) ON MARKETABLE SECURITIES 500 (8,304) (15,514) (11,445)
--------- --------- --------- ---------
COMPREHENSIVE LOSS $ (25,072) (128,658) (92,987) (255,672)
========= ========= ========= =========
See accompanying notes to financial statements
- 4 -
PRINCETON AMERICAN CORPORATION
Unaudited Condensed Statements of Cash Flows
For the Six Months Ended November 30, 2002 and 2001
2002 2001
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (77,473) (244,227)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 59,973 46,680
Interest income on investment contract (9,392) (9,253)
Loss on sale of marketable security -- 8,804
Gain on settlement (61,845) (59,603)
Increase (decrease) in cash due to change in:
Accounts receivable 32,557 5,676
Prepaid expenses 4,200 20,748
Other receivables -- 2,250
Other assets 26,365 11,009
Accounts payable and accrued expenses 30,547 192,479
Accrued interest (15,483) 77,350
Rent deposits (23,668) (69,215)
--------- ---------
Net cash used in operating activities (34,219) (17,302)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from investment 467 --
Purchase of property and equipment (20,600) (25,895)
Payments on investment contract 7,875 7,625
--------- ---------
Net cash used in investing activities (12,258) (18,270)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from loan retention 64,732 --
Payments on notes payable -- (19,821)
Proceeds from bank loan -- 80,546
Payments on loan from officers (22,031) --
Payments on mortgage notes payable (26,530) (14,058)
--------- ---------
Net cash provided by financing activities 16,171 46,667
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (30,306) 11,095
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 49,155 2,541
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 18,849 13,636
========= =========
SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION
CASH PAID DURING THE PERIOD FOR INTEREST $ 201,992 85,031
========= =========
CASH PAID DURING THE PERIOD FOR INCOME TAXES $ -- --
========= =========
NON-CASH INVESTING ACTIVITIES:
Transfer of marketable securities $ -- 44,020
========= =========
See accompanying notes to financial statements
- 5 -
PRINCETON AMERICAN CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOVEMBER 30, 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 six months ended November 30, 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, 2002.
2. LITIGATION
The Company reached a settlement with Onset Investment Limited on
December 27, 2002 which requires payment of $25,000 and 25,000 shares
of stock by February 25, 2003.
3. RELATED PARTY TRANSACTIONS
Commission fees equal to 4% of the gross lease amount on several
leases in the office buildings are being paid to a real estate firm
with which one of the directors of the company is affiliated. During
the six months ended November 30, 2002, payments of $36,984 were made
to this firm. The Company also paid this related party $25,000 for
consulting services during the three months ended November 30, 2002.
4. STOCK OPTION PLAN
During the second quarter, the Board of Directors approved the Stock
Compensation Program. The plan allows for the issuance of Incentive
Stock Options, Nonqualified Stock Options and Restricted Shares. Under
the terms of the plan, up to 3,000,000 shares of common stock may be
issued. No options have been granted under this plan.
-6-
5. BANKRUPTCY CLAIMS
The Company determined that approximately $41,000 of bankruptcy claims
that had been recorded as liabilities were invalid claims. These
claims were written off, along with related accrued interest of
approximately $15,000, and resulted in a gain of approximately $56,000
for the three months ended November 30, 2002.
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 final determination of creditor's claims
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 carryforward or the inability under
existing tax laws for the full utilization of such tax loss
carryforward;
- 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 (other than the real
estate market) 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.
-7-
RESULTS OF OPERATIONS:
Since the filing of the 10QSB for the fiscal quarter ended August 31, 2002,
Management has focused on:
Concluding the litigation process with Testasecca, et al and Onset
Investments, Ltd.
On July 8, 2002 The U.S. District Court for the State of Arizona dismissed
the appeal filed with it by Testasecca, et al for failure of the Plaintiffs
to follow the required procedures to establish the Courts jurisdiction. The
Company and individual defendant William C. Taylor filed a Motion to
Dismiss the remaining complaint filed with the Bankruptcy Court and
petitioned the Court for attorneys fees expended in defense of the
complaints in the amount of $167,000.
On December 16, 2002, the Court granted the Motion to Dismiss the Adversary
Proceeding but denied the requests for attorney's fees.
In the matter of Onset Investments, a settlement was reached with the
claimant on December 27, 2002.
Under the agreement, on or before February 25, 2003, the Company is
required to pay Onset Investments $25,000 in cash or readily available
funds and to issue to Onset or its nominee 25,000 shares of stock in
Princeton American Corporation in full payment of its Proofs of Claim
aggregating $200,713.95.
Contacting Princeton shareholders and issuing new certificates reflecting
the allowed interests of shareholders under the Plan of Reorganization for
Princeton American pursuant to the Bankruptcy Court's September 15, 2000
Order Approving Cancelation of Outstanding Share Certificates and Issuance
of New Certificates. This is an ongoing project by which the Company has
required shareholders to return their cancelled certificates to the Company
to be replaced by new certificates as authorized by that Order.
Finalizing the issuance of certificates to "Allowed Shareholders". In June,
2002, the Company filed a motion with the Bankruptcy Court for an Order
allowing the removal from its shareholder list of all shareholders who have
not responded to the Company's repeated notices requesting the return of
cancelled share certificates for replacement. The Court granted this motion
on July 31, 2002. As a result the Company was required to: (1) conduct a
national data base search for the current address of all shareholders whose
mail was returned as undeliverable or who had not responded to notices
received by them and (2) mail a final notice to each shareholder in these
categories informing them that their names will be deleted from its
shareholder list if they do not respond and claim their certificates no
later than May 12, 2003 (six (6) months from the date of the mailing of the
notice). Approximately 1800 shareholders are affected by this Order.
Conclusion of the application process with the NASD. In October 2000, the
Company applied to the NASD for registration of the Company's shares for
trading on the Over the Counter Bulletin Board Market (OTC:BB). On October
17, 2002, the Company was informed by its sponsoring securities broker,
Peacock, Hislop, Staley and Given, Inc., that Princeton American
Corporation is now eligible for trading on the OTC Bulletin Board. The
Company has been assigned the trading symbol: "PAMC".
-8-
Holding the First Annual Meeting of Shareholders of the Reorganized Princeton
American Corporation. On November 27, 2002, at 10:00 AM (MST), the Annual
Meeting of Shareholders of the Company was held in Phoenix, Arizona. Attending
the meeting were Directors Scott E. Bird, Roderick McKinnon and William C.
Taylor. Also in attendance were Joseph Evers of Evers and Company, Auditors for
Princeton and Gwen S. Taylor representing herself as co-owner with William C.
Taylor of 60.34 % of the issued shares of the Company. Mr. Taylor called the
meeting to order and stated that all shareholders had been mailed notice of the
meeting on or about November 11, 2002. Mr. Bird, acting as secretary of the
meeting, noted that the shares represented by the Taylors constituted a quorum
for the conduct of the business of the Annual Meeting. No other shares were
represented. Mr. Bird placed in nomination as directors, to serve until the next
Annual Meeting of Shareholders, himself, Mr. McKinnon and Mr. Taylor. There
being no objections to the nominations, a vote was called for by Mr. Bird. On
behalf of himself and Mrs. Taylor, William C. Taylor voted 4,502,529 shares for
the nominated directors. There were no votes against.
The remaining item before the meeting was Princeton American Corporation's Stock
Compensation Program which had been approved by the directors at their November
7, 2002 meeting, subject to approval of the shareholders of the Company. On
behalf of himself and Mrs. Taylor, William C. Taylor voted 4,502,529 shares in
favor of the Program. There were no votes against.
There being no further business, on the motion of Mr. McKinnon, seconded by Mr.
Bird, the meeting was adjourned at 10:20 AM.
Immediately following the Annual Meeting of Shareholders, a meeting of the
directors of the Company was held for the purpose of electing officers of the
Corporation. On motion by Mr. Bird the directors unanimously elected:
President and Chief Executive Officer: Roderick W. McKinnon III
Chairman and Secretary: William C. Taylor
-9-
- Leasing up of 2222 East Camelback Road. With the renewal of
International Circuit Sales' lease for an additional five years, this
building is fully leased. The Company's other office building at 4808
North 22nd Street is fully leased as well.
THREE MONTHS ENDED NOVEMBER 30, 2002 COMPARED TO THREE MONTHS ENDED NOVEMBER 3O,
2001.
We believe that our cash position of $ 18,849 as of November 30, 2002, coupled
with the increased revenues from the leases at 4808 North 22nd Street and 2222
East Camelback Road, will be sufficient to allow Princeton American Corporation
to continue operations for the next twelve months under bankruptcy court
supervision, if necessary.
ITEM 3. CONTROLS AND PROCEDURES
The Company is operated solely by Roderick W. McKinnon, CEO and William C.
Taylor, Chairman and Secretary. There are no additional officers or employees of
the Company. The Company has established disclosure controls and procedures,
pursuant to which, all material information relating to the Company and
disclosures contained within this Quarterly Report are jointly reviewed and
discussed by both Mr. Taylor and Mr. McKinnon. Because there are no other
employees of the Company, management for the Company believes that this joint
conference of the officers to discuss the Company's material information and
disclosures has been a reasonably efficient method of disclosure controls and
procedures to ensure that all material information of the Company is known to
them.
-10-
PART II - OTHER INFORMATION
Item 5 Other information
Certifications of Officers
CERTIFICATION:
I, William C. Taylor, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Princeton American
Corporation.
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrants' other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrants' other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls subsequent to the date of our most recent evaluation including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: January 14, 2003
/s/ William C. Taylor
---------------------
William C. Taylor
Chariman and Secretary
- 11 -
CERTIFICATION:
I, Roderick W. McKinnon, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of Princeton American
Corporation.
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness of
the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrants' other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
functions):
a) all significant deficiencies in the design or operation of internal controls
which could adversely affect the registrant's ability to record, process
summarize and report financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
6. The registrants' other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls subsequent to the date of our most recent evaluation including any
corrective actions with regard to significant deficiencies and material
weaknesses.
Date: January 14, 2003
/s/ Roderick W. McKinnon
------------------------
Roderick W. McKinnon, CEO
- 12 -
Item 6 - Exhibits and Reports on Form 8-K
8K dated October 24, 2002. NASD determination that Princeton American
Corporation is now eligible for trading on the OTB Bulletin Board. Symbol: PAMC.
SIGNATURES
Pursuant to 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.
Date: January 14, 2003
PRINCETON AMERICAN CORPORATION
/s/ Roderick W, McKinnon III
--------------------------------
Roderick W. McKinnon
President
/s/ William C. Taylor
--------------------------------
William C. Taylor
Corporate Secretary
-13-