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, 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, were
outstanding at August 31, 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 - August 31, 2002 ........... 2
Unaudited Condensed Statements of Operations and
Comprehensive Income (Loss) - Three Months ended August 31,
2002 and August 31, 2001 ...................................... 4
Unaudited Condensed Statements of Cash Flows - Three Months
ended August 31, 2002 and August 31 ,2001 .................... 5
Unaudited Notes to Financial Statements ....................... 6
Item 2 Management's Discussion and Analysis of Financial ............. 7
Condition and Results of Operations.
Item 3. Controls and Procedures ....................................... 9
PART II Other Information ............................................. 10
Item 5 Other information ............................................. 10
Item 6 Exhibits and Reports on Form 8-K. ................................ 10
Signatures ............................................................... 13
- 1 -
PRINCETON AMERICAN CORPORATION
Unaudited Condensed Balance Sheet
August 31, 2002
ASSETS
Current assets
Cash and cash equivalents $ 12,707
Loan retention account 184,605
Accounts receivable 23,123
Investments in marketable securities 29,316
Prepaid expenses 36,561
Other assets 52,730
------------
Total current assets 339,042
------------
Prepaid expenses 76,705
Investment in commission contract 210,173
Property and equipment, net 1,377,756
Loan costs, net 54,303
------------
$ 2,057,979
============
See accompanying notes to financial statements
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LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Mortgage notes payable - current portion 55,135
Notes payable, officers 66,969
Accounts payable 31,161
Bankruptcy claims 154,658
Accrued interest 79,458
Accrued real estate taxes 70,306
Payroll and sales taxes payable 24,736
Advance rental income and tenant security deposits 6,602
-----------
Total current liabilities 489,025
Tenant security deposits - long term 61,366
Mortgage notes payable, net of current portion 4,423,702
-----------
4,974,093
-----------
Stockholders' deficit
Common stock
approximately 11,000,000 shares issued and outstanding 15,000
Additional paid-in-capital 2,460,350
Accumulated deficit (5,380,975)
-----------
(2,905,625)
Net unrealized loss on marketable securities (10,489)
-----------
Total stockholders' deficit (2,916,114)
-----------
Total liabilities and stockholders' deficit $ 2,057,979
===========
See accompanying notes to financial statements
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PRINCETON AMERICAN CORPORATION
Unaudited Condensed Statements of Operations and Comprehensive Loss
For the Three Months Ended August 31, 2002 and 2001
Three Months Three Months
Ended Ended
August 31, 2002 August 31, 2001
--------------- ---------------
Revenues
Rental income $ 265,718 239,940
Parking and other 9,495 7,443
--------- ---------
275,213 247,383
--------- ---------
Costs and expenses
Building operating costs 86,960 111,309
Professional fees 26,645 89,565
Payroll and payroll taxes 37,707 35,912
Ground lease 31,486 31,285
Depreciation and amortization 29,986 23,340
Consulting 11,800 --
Other 13,783 12,324
--------- ---------
Total costs and expenses 238,367 303,735
--------- ---------
Income (loss) from operations 36,846 (56,352)
--------- ---------
Other income (expense)
Interest and dividend income 4,750 4,854
Interest expense (98,783) (66,650)
Gain on settlement of lawsuit 5,336 --
Other -- (5,725)
--------- ---------
(88,697) (67,521)
--------- ---------
Net loss before income taxes (51,851) (123,873)
Income taxes 50 --
--------- ---------
Net loss $ (51,901) (123,873)
========= =========
Net loss per common share, basic and diluted $ (0.00) (0.01)
========= =========
Net loss $ (51,901) (123,873)
Net unrealized loss on marketable securities (16,014) (3,141)
--------- ---------
Comprehensive loss $ (67,915) (127,014)
========= =========
See accompanying notes to financial statements
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PRINCETON AMERICAN CORPORATION
Unaudited Condensed Statements of Cash Flows
For the Three Months Ended August 31, 2002 and 2001
2002 2001
---- ----
Cash flows from operating activities:
Net loss $ (51,901) (123,873)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation 29,986 23,340
Interest income on investment contract (4,750) (4,854)
Gain on settlement of lawsuit (5,336) --
Increase (decrease) in cash due to change in:
Accounts receivable 15,354 6,068
Prepaid expenses 2,087 6,646
Other assets (26,365) 11,009
Accounts payable and accrued expenses 47,424 120,110
Accrued interest (4,586) 17,731
Bankruptcy claims (15,115) --
Rent deposits (23,668) (37,429)
--------- ---------
Net cash provided by (used in) operating activities (36,870) 18,748
--------- ---------
Cash flows from investing activities:
Proceeds from investment 432 --
Purchase of property and equipment (8,788) (20,972)
Payments on investment contract 3,938 3,987
--------- ---------
Net cash used in investing activities (4,418) (16,985)
--------- ---------
Cash flows from financing activities:
Proceeds from loan retention 40,000 --
Proceeds from bank loan -- 5,000
Payment on loan from officers (22,031) --
Payments on mortgage notes payable (13,129) (7,412)
--------- ---------
Net cash provided by (used in) financing activities 4,840 (2,412)
--------- ---------
Net decrease in cash and cash equivalents (36,448) (649)
Cash and cash equivalents, beginning of year 49,155 2,541
--------- ---------
Cash and cash equivalents, end of period $ 12,707 1,892
========= =========
Supplementary Disclosure of Cash Flow Information
Cash paid during the period for interest $ 108,706 38,813
========= =========
Cash paid during the period for income taxes $ -- --
========= =========
See accompanying notes to financial statements
- 5 -
PRINCETON AMERICAN CORPORATION
Notes to Condensed Financial Statements
August 31, 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 three months ended August 31, 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
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
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 three
months ended August 31, 2002, payments of $30,000 were made to this
firm.
- 6 -
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 Onset Investments, Inc. claim 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
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- 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, 2002, Management
has focused on:
Concluding the litigation process with Testasecca, et al and Onset
Investments.
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 intend to file a Motion
to Dismiss the remaining complaint filed with the Bankruptcy Court.
In the matter of Onset Investments, the Bankruptcy Court has set the
hearing for October 31, 2002. Negotiations for settlement are proceeding at
this time; however the Company feels that its maximum liability will be
approximately $25,000 cash and 70,000 shares of stock.
-
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, and
November 30, 2000 orders. This is an ongoing project by which the Company
has
- requested shareholders to return their cancelled certificates to the
COmpany to be replaced by new certificates as authorized by the November
30, 2000 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 is required to: (1) conduct a
national data base search for the current address of all shareholders whose
mail was returned as undeliverable or who have 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 within
six (6) months of the date of the mailing of the notice. Approximately 1800
shareholders are affected by this Order.
Continuation of the application process with the NASD. 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. However there can be no assurance that this application will
be successful.
- Completion of the renovation of the office building at 2222 East
Camelback Road. The bathrooms have been completed and the common areas were
upgraded with new carpeting and wallpaper during this quarter
- 8 -
- 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
continues to be fully leased as well.
THREE MONTHS ENDED AUGUST 31, 2002 COMPARED TO THREE MONTHS ENDED AUGUST
31, 2001.
We believe that our cash position of $12,707 as of August 31, 2002, coupled
with the increased revenues resulting from the continued lease-up of 4808
North 22nd Street and renewal of the ICS lease at 2222 East Camelback Road,
will be sufficient to allow Princeton American Corporation to continue
operations for the next twelve months (if necessary) under bankruptcy court
supervision.
ITEM 3. CONTROLS AND PROCEDURES
The Company is operated solely by William C. Taylor, CEO and Roderick W.
McKinnon, CFO. There are no additional employees or officers 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.
- 9 -
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: October 14, 2002
/s/ William C. Taylor
---------------------
William C. Taylor
President and CEO
- 10 -
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: October 14, 2002
/s/ Roderick W. McKinnon
------------------------
Roderick W. McKinnon, CFO
- 11 -
Item 6 - Exhibits and Reports on Form 8-K
NONE
- 12 -
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 14, 2002
PRINCETON AMERICAN CORPORATION
/s/ William C. Taylor
--------------------------------
William C. Taylor
President and CEO
/s/ Roderick W. McKinnon III
--------------------------------
Roderick W. McKinnon III
Corporate Secretary and CFO
- 13 -