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 August 31, 2001
[ ] 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, were
outstanding at August 31, 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 - August 31, 2001 5
Unaudited Condensed Statements of Operations and 7
Comprehensive Income (Loss) - Three Months ended August 31,
2001 and August 31, 2000
Unaudited Condensed Statements of Cash Flows - Three Months 8
ended August 31, 2001 and August 31 ,2000
Unaudited Notes to Financial Statements 9
Item 2 Management's Discussion and Analysis of Financial 11
Condition and Results of Operations.
PART II Other Information
Item 5 Other information 15
Item 6 Exhibits and Reports on Form 8-K. 15
Signatures 16
PRINCETON AMERICAN CORPORATION
FINANCIAL STATEMENTS
August 31, 2001
The Board of Directors
Princeton American Corporation:
The accompanying unaudited condensed balance sheet of Princeton American
Corporation as of August 31, 2001, and the related unaudited condensed
statements of operations and comprehensive loss, and cash flows for the three
months then ended, were not audited by us and, accordingly, we do not express an
opinion on them.
Phoenix, Arizona
September 28, 2001
PRINCETON AMERICAN CORPORATION
Unaudited Condensed Balance Sheet
August 31, 2001
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,892
Investments in marketable securities 58,537
Prepaid expenses 31,911
-----------
Total current assets 92,340
-----------
PREPAID EXPENSES 54,683
INVESTMENT IN COMMISSION CONTRACT 207,028
PROPERTY AND EQUIPMENT, NET 1,376,775
-----------
$ 1,730,826
===========
See accompanying notes to financial statements
PRINCETON AMERICAN CORPORATION
Unaudited Condensed Balance Sheet
August 31, 2001
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Mortgage notes payable -- current $ 31,174
Note payable -- other 138,931
Notes payable, officers 130,000
Accounts payable 271,069
Bankruptcy claims 679,289
Liabilities in dispute 619,603
Accrued interest 207,655
Accrued real estate taxes 343,977
Payroll and sales taxes payable 15,450
Deferred rental income and tenant security deposits 94,091
-------------
Total current liabilities 2,531,239
TENANT SECURITY DEPOSITS -- LONG TERM 42,813
MORTGAGE NOTES PAYABLE 1,735,841
-------------
4,309,893
-------------
STOCKHOLDERS' DEFICIT
Common stock
approximately 15,000,000 shares issued and outstanding 15,000
Additional paid-in-capital 2,460,350
Accumulated deficit (4,630,725)
-------------
(2,155,375)
Net unrealized loss on marketable securities (423,692)
-------------
Total stockholders' deficit (2,579,067)
-------------
Total liabilities and stockholders' deficit $ 1,730,826
=============
See accompanying notes to financial statements
PRINCETON AMERICAN CORPORATION
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE THREE MONTHS ENDED AUGUST 31, 2001 AND 2000
2001 2000
---- ----
REVENUES
Rental income $ 239,940 224,478
Parking and other 7,443 77,245
----------------- -----------------
247,383 301,723
----------------- -----------------
COSTS AND EXPENSES
Building operating costs 111,309 88,512
Professional fees 89,565 60,278
Payroll and payroll taxes 35,912 35,073
Ground lease 31,285 31,035
Depreciation 23,340 32,588
Consulting -- 17,550
Other 12,324 11,461
----------------- -----------------
Total costs and expenses 303,735 276,497
----------------- -----------------
INCOME (LOSS) FROM OPERATIONS (56,352) 25,226
----------------- -----------------
OTHER INCOME (EXPENSE)
Interest and dividend income 4,854 4,949
Interest expense (66,650) (54,761)
Other (5,725) (3,294)
----------------- -----------------
(67,521) (53,106)
----------------- -----------------
NET LOSS BEFORE INCOME TAX (123,873) (27,880)
INCOME TAXES -- --
----------------- -----------------
NET LOSS $ (123,873) (27,880)
================= =================
NET LOSS PER COMMON SHARE, BASIC AND DILUTED $ (0.01) (0.00)
================= =================
NET LOSS $ (123,873) (27,880)
NET UNREALIZED GAIN (LOSS) ON MARKETABLE SECURITIES (3,141) (23,976)
----------------- -----------------
COMPREHENSIVE LOSS $ (127,014) (51,856)
================= =================
See accompanying notes to financial statements
PRINCETON AMERICAN CORPORATION
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED AUGUST 31, 2001 AND 2000
2001 2000
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (123,873) (27,880)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation 23,340 32,588
Interest income on investment contract (4,854) (4,604)
Decrease in receivables 6,068 --
Decrease (increase) in prepaid expenses 6,646 (17,555)
Decrease in other assets 11,009 --
Increase (decrease) in accounts payable and accrued expense 120,110 (10,026)
Increase in accrued interest 17,731 14,228
Increase (decrease) in rent deposits (37,429) 9,654
-------------- ------------
Net cash provided by (used in) operating activities 18,748 (3,595)
-------------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments on notes receivable -- 152
Purchase of property and equipment (20,972) (873)
Payments on investment contract 3,987 3,688
-------------- ------------
Net cash provided by investing activities (16,985) 2,967
-------------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from bank loan 5,000 --
Proceeds from loan from officers -- 30,000
Payments on mortgage notes payable (7,412) (6,861)
-------------- ------------
Net cash provided by financing activities (2,412) 23,139
-------------- ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS (649) 22,511
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 2,541 1,650
-------------- ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,892 24,161
=============== ============
SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION
CASH PAID DURING THE PERIOD FOR INTEREST $ 38,813 40,533
=============== ============
CASH PAID DURING THE PERIOD FOR INCOME TAXES $ -- --
=============== ============
See accompanying notes to financial statements
PRINCETON AMERICAN CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
AUGUST 31, 2001 AND 2000
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
generally accepted accounting principles for interim financial
reporting and Securities and Exchange Commission regulations. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles 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 three months ended August 31, 2001 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 Weisses 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 Weisses' claim. The parties have agreed on settlement
documents and will ask the Bankruptcy Court to approve the terms of the
settlement and enter an order establishing the amount and priority of
the Weisses' claim. This settlement is contingent on Bankruptcy Court
Approval.
Under the agreement, Princeton will recognize that the Weisses have an
allowed claim of $560,000 as of February 9, 2001. Interest will accrue
on the claim at the rate of 10% per annum from February 9, 2001 until
paid. The Company must pay 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 Weisses' claim will be secured by a
third-position deed of trust against the 4808 Property.
The Weisses will renounce and release their shareholder interest in
Princeton American Corporation. The parties will provide mutual
releases of all claims relating to the Company's bankruptcy case and
will dismiss all pending appeals relating to the Weisses' claim and
their motion to convert the case from a Chapter 11 to a Chapter 7
proceeding.
As part of the settlement with the Weisses, the Company will petition the
Court for an order establishing the amount and priority of the Weisses'
claim according to the settlement. Upon entry of this order and,
assuming it is not stayed or appealed, the Company will have six months
from entry of the order to pay unsecured creditors pursuant to the Plan
as modified.
PRINCETON AMERICAN CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
AUGUST 31, 2001 AND 2000
2. LITIGATION, CONTINUED
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 allege 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. The Court has not issued its ruling as of the date of
this report.
Onset Investment Limited - The company has requested a hearing with respect
to its motion for Summary Judgment. Princeton anticipates its maximum
exposure to be approximately $25,000 in cash and 70,000 shares of its
common stock.
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 Weiss, Testasecca, et al 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;
- 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 10KSB for the fiscal year ended May 31, 2001, Management
has focused on:
- Continuing settlement negotiations with Harry and Irene Weiss with respect
to their claim. On February 9, 2001, the Weisses 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 Weisses' claim.
The parties have agreed on settlement documents and will ask the Bankruptcy
Court to approve the terms of the settlement and enter an order
establishing the amount and priority of the Weisses' claim. This settlement
is contingent on Bankruptcy Court Approval.
Under the agreement, Princeton will recognize that the Weisses have an
allowed claim of $560,000 as of February 9, 2001. Interest will accrue on
the claim at the rate of 10% per annum from February 9, 2001 until paid.
The Company must pay 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 Weisses' claim will be secured by a third-position deed of trust
against the 4808 Property.
The Weisses will renounce and release their shareholder interest in
Princeton American Corp. The parties will provide mutual releases of all
claims relating to the Company's bankruptcy case and will dismiss all
pending appeals relating to the Weisses' claim and their motion to convert
the case from a Chapter 11 to a Chapter 7 proceeding.
As part of the settlement with the Weisses, the Company has petitioned the
Court for an order establishing the amount and priority of the Weisses'
claim according to the settlement. Upon entry of this order and, assuming
it is not stayed or appealed, the Company will have six months from entry
of the order to pay unsecured creditors pursuant to the Plan as modified. A
COPY OF THE ORDER APPEARS AS PART II, ITEM 5 OF THIS REPORT.
- The outcome of litigation in the matter of 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 report. Among other things, the Plaintiffs allege 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 Mr. Testasecca and Mr. Targosz. The matter was
heard by the Court commencing on May 31, 2001 with final evidence and
closing arguments on August 28, 2001. The Court has not issued its ruling
as of the date of this report.
- The filing of a motion for Summary Judgement in the matter of Onset
Investment Limited and related court proceedings. The company has requested
a hearing with respect to its motion for Summary Judgement. Princeton
anticipates its maximum exposure to be approximately $25,000 in cash and
70,000 shares of its common stock.
- In anticipation of a settlement of the Weiss claim, the Company has
submitted an application to a financial institution for the refinancing of
its two office buildings in order to pay off the Vanderford mortgage loan
and to generate sufficient funds to satisfy creditors claims aggregating
$679,289 plus accrued interest (but not including the Weiss claim), and to
establish an operating capital fund. There is no assurance that the Company
will be able to raise the necessary funds to accomplish these objectives.
- Implementing the adjustments of outstanding shares and shareholders. On
September 15, 2000, The Bankruptcy Court entered its Order: (1) Approving
Cancellation of Outstanding Share Certificates and Issuance Of New
Certificates, and (2) Barring Claims. A copy of the Order is contained in
the Form 8-K set forth in Item 6 of the November 30, 2000 Form 10QSB.
Pursuant to the Order, American Stock Transfer & Trust was directed to
cancel all outstanding shares of the Company. As of October 9, 2000,
Princeton's trading symbol "PELT" was officially cancelled by NASD. No
further trades will be made under that symbol and no additional shares of
stock will be issued until trading is allowed to resume pursuant to the
Order. On November 10, 2000, notice was mailed to those shareholders
possessing an allowed interest, requesting that the cancelled share
certificates be returned to the Company to be replaced by new certificates
as authorized by the Order. Once this process is completed, Princeton will
have 10,923,918 shares issued and outstanding. The Company has applied to
the NASD for registration of the Company's shares for trading on the Over
the Counter Bulletin Board Market (OTC:BB). It is anticipated that a new
trading symbol will be issued by the NASD if Princeton's application is
approved.
- Continuing renovation of the office building at 2222 East Camelback Road.
The completion of this project had been disrupted by unresolved issues with
Phoenix City Planning authorities due to ADA considerations with respect to
upgrading of bathroom access. Now
that the company is in compliance with these requirements, it is expected
that the improvements will be completed by calendar year end.
- Leasing up of 2222 East Camelback Road. United Title Agency has leased
Suite 260 and has committed to occupy Suite 108 commencing on November 1,
2001, at which point this office building will be fully leased. The
Company's other office building at 4808 North 22nd Street continues to be
fully leased as well.
THREE MONTHS ENDED AUGUST 31, 2001 COMPARED TO THREE MONTHS ENDED AUGUST
31, 2000.
We believe that our cash position of $1,892 as of August 31, 2001, coupled
with the increased revenues resulting from the continued lease-up of 4808
North 22nd Street, and the leasing to United Title and Nationwide Vision
Centers of the spaces at 2222 East Camelback Road will be sufficient to
continue operations for the next twelve months (if necessary) under
bankruptcy court supervision.
The increase in net loss in 2001 was due to two factors: (1) a one-time fee
of $75,000 which was earned in 2000 and (2) increased costs related to the
Weiss and Testasecca litigation.
The Company is required to pay all unsecured and administrative claims
(aggregating $679,289 plus accrued interest, but not including the Weiss
claim) in order to emerge from bankruptcy proceedings. In order to raise
the capital necessary to accomplish this, the Company plans to either: (1)
sell 4808 North 22nd Street or (2) refinance both office buildings. Either
of these alternatives (or a combination thereof) should produce sufficient
funds to discharge these obligations. Efforts are ongoing to sell the 4808
building. We have a tentative commitment from a lender to refinance both
buildings.
PART II - OTHER INFORMATION
Item 5 Other information
ORDER AND NOTICE OF HEARING ON MOTION TO APPROVE
SETTLEMENT AND FIX PRIORITY AND AMOUNT OF WEISS CLAIM.
(Lewis and Roca Letterhead)
IN THE UNITED STATES BANKRUPTCY COURT
DISTRICT OF ARIZONA
In Re: ) Chapter 11
)
PRINCETON AMERICAN ) Case No. 96-13675-PHX-JMM
CORPORATION, )
) ORDER AND NOTICE OF
Debtor, ) HEARING ON MOTION TO
) APPROVE SETTLEMENT AND
EID: 22-1848644 ) FIX PRIORITY AND AMOUNT OF
) WEISS CLAIM
)
________________________________________)
IT IS ORDERED AND NOTICE IS GIVEN that a hearing will be held at the
United States Bankruptcy Court, 2929 N. Central Avenue, Phoenix, Arizona, 11th
Floor, Courtroom 1 on the 15th day of November at 1:30 o'clock p.m. to consider
and act upon:
Motion filed by Princeton American Corporation, the
reorganized debtor, to approve a settlement of the claim filed
by Harry and Irene Weiss and to fix the priority and amount of
the Weiss claim. Princeton and the Weisses have entered into
a settlement whereby the Weisses will be deemed to have a
creditor's claim in the amount of $560,000 bearing interest at
the rate of 10 percent per annum from February 9, 2001. The
claim (1) will be secured by a junior deed of trust against
Princeton's property at 4808 N. 22nd Street, Phoenix, Arizona,
and (2) must be paid (i) by February 9, 2002 or (ii) upon a sale
or refinancing of the 4808 Property, whichever occurs sooner.
IT IS FURTHER ORDERED that the debtor is directed to provide notice of
this hearing by mail to all creditors and to notify stockholders by including
the text of this Order and Notice in a 10Q report that Princeton will be filing
with the SEC no later than October 15, 2001.
For further information, consult the motion on file in the office of the
Clerk of the United States Bankruptcy Court. Any objection must be made in
writing and filed five(5) business days prior to the hearing with the Clerk of
the Bankruptcy Court, 2929 N. Central Avenue, Phoenix, Arizona, or file by
mailing to:
Clerk of the U.S. Bankruptcy Court
P.O. Box 34151
Phoenix, Arizona 85067-4151
with a copies served upon the attorneys for Princeton American Corporation and
the Weisses at:
Henk Taylor
Lewis and Roca, LLP
40 N. Central Avenue
Phoenix, Arizona 85004-4429
Attorneys for Princeton American Corporation
Richard M. Lorenzen
BROWN & BAIN, P.A.
2901 North Central Avenue
Phoenix, Arizona 85001-0400
Attorneys for Harry & Irene Weiss
DATED this 10th day of October, 2001.
UNITED STATES BANKRUPTCY COURT
/S/ James M. Marlar
-------------------
HONORABLE JAMES M. MARLAR
United States Bankruptcy Judge
Item 6 Exhibits and Reports on Form 8-K
Testasecca, et al v. Princeton American Corporation, et al. Filed
June 27, 2001.
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: October 22, 2001
PRINCETON AMERICAN CORPORATION
/s/ William C. Taylor
________________________________
William C. Taylor
President
/s/ Roderick W. McKinnon III
________________________________
Roderick W. McKinnon III
Corporate Secretary