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, 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 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 - November 30, 2001 3
Unaudited Condensed Statements of Operations and
Comprehensive Loss-Three Months and Six Months ended
November 30, 2001 and November 30, 2000 5
Unaudited Condensed Statements of Cash Flows-Six Months
ended November 30, 2001 and November 30, 2000 6
Unaudited Notes to Financial Statements 7
PART II Management's Discussion and Analysis of Financial
Condition and Results of Operations. 9
PART III Other Information
Item 5 Other information 11
Item 6 Exhibits and Reports on Form 8-K. 11
Signatures 12
Item 1 - Financial Statements (unaudited)
PRINCETON AMERICAN CORPORATION
UNAUDITED CONDENSED BALANCE SHEET
NOVEMBER 30, 2001
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 13,636
Accounts receivable 392
Investments in marketable securities 6,213
Prepaid expenses 22,925
Other receivables 29,770
----------
Total current assets 72,936
----------
PREPAID EXPENSES 49,567
INVESTMENT IN COMMISSION CONTRACT 207,789
PROPERTY AND EQUIPMENT, NET 1,358,358
----------
$1,688,650
==========
PRINCETON AMERICAN CORPORATION
UNAUDITED CONDENSED BALANCE SHEET
NOVEMBER 30, 2001
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Notes payable - current portion $ 32,719
Note payable - other 194,656
Notes payable, officers 130,000
Accounts payable 338,473
Bankruptcy claims 679,289
Liabilities settled 560,000
Accrued interest 267,274
Accrued real estate taxes 332,631
Payroll and sales taxes payable 19,761
Advance rental income and tenant security deposits 57,336
----------
Total current liabilities 2,612,139
TENANT SECURITY DEPOSITS - LONG TERM 47,782
MORTGAGE NOTES PAYABLE 1,727,650
----------
4,387,571
----------
STOCKHOLDERS' DEFICIT:
Common stock
approximately 15,000,000 shares issued and outstanding 15,000
Additional paid-in-capital 2,460,350
Accumulated deficit (4,751,079)
----------
(2,275,729)
Net unrealized loss on marketable securities (423,192)
----------
Total stockholders' deficit (2,698,921)
----------
Total liabilities and stockholders' deficit $1,688,650
==========
PRINCETON AMERICAN CORPORATION
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE THREE MONTHS AND SIX MONTHS ENDED NOVEMBER 30, 2001 AND 2000
THREE MONTHS THREE MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
NOVEMBER 30, 2001 NOVEMBER 30, 2000 NOVEMBER 30, 2001 NOVEMBER 30, 2000
----------------- ----------------- ----------------- -----------------
REVENUES
Rental income $ 237,676 182,975 477,616 407,453
Parking and other 7,890 2,765 15,333 80,010
--------- --------- --------- ---------
245,566 185,740 492,949 487,463
--------- --------- --------- ---------
COSTS AND EXPENSES
Building operating costs 85,187 87,026 196,701 175,538
Professional fees 113,197 55,596 202,762 115,874
Payroll and payroll taxes 30,870 34,684 66,782 69,757
Ground lease 31,553 31,451 62,837 62,486
Depreciation 23,340 32,588 46,680 65,176
Consulting 7,162 5,650 7,162 23,200
Other 19,795 11,869 31,915 23,330
--------- --------- --------- ---------
Total costs and expenses 311,104 258,864 614,839 535,361
--------- --------- --------- ---------
INCOME (LOSS) FROM OPERATIONS (65,538) (73,124) (121,890) (47,898)
--------- --------- --------- ---------
OTHER INCOME (EXPENSE)
Interest and dividend income 4,552 4,848 9,406 9,797
Interest expense (108,668) (56,214) (175,317) (110,975)
Gain on settlement of lawsuit 59,603 -- 59,603 --
Other (10,303) (4,080) (16,029) (7,374)
--------- --------- --------- ---------
(54,816) (55,446) (122,337) (108,552)
--------- --------- --------- ---------
NET LOSS BEFORE INCOME TAXES (120,354) (128,570) (244,227) (156,450)
INCOME TAXES -- -- -- --
--------- --------- --------- ---------
NET LOSS $(120,354) (128,570) (244,227) (156,450)
========= ========= ========= =========
NET LOSS PER COMMON SHARE, BASIC AND DILUTED $ (0.01) (0.01) (0.02) (0.01)
========= ========= ========= =========
NET LOSS $(120,354) (128,570) (244,227) (156,450)
NET UNREALIZED LOSS ON MARKETABLE SECURITIES (8,304) (9,602) (11,445) (33,578)
--------- --------- --------- ---------
COMPREHENSIVE LOSS $(128,658) (138,172) (255,672) (190,028)
========= ========= ========= =========
PRINCETON AMERICAN CORPORATION
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 2001 AND 2000
2001 2000
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (244,227) (156,450)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 46,680 65,176
Interest income on investment contract (9,253) (9,103)
Loss on sale of marketable security 8,804 --
Gain on settlement of lawsuit (59,603) --
Changes in:
Accounts receivable 5,676 --
Prepaid expenses 20,748 (42,004)
Other receivables 2,250 --
Other assets 11,009 --
Accounts payable and accrued expenses 192,479 69,169
Accrued interest 77,350 29,356
Rent deposits (69,215) 9,654
------------ ------------
Net cash used in operating activities (17,302) (34,202)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Payments on notes receivable -- 18,149
Purchase of property and equipment (25,895) (873)
Payments on investment contract 7,625 7,375
------------ ------------
Net cash provided by (used in) investing activities (18,270) 24,651
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on notes payable (19,821) --
Proceeds from bank loan 80,546 --
Proceeds from loan from officers -- 30,000
Payments on mortgage notes payable (14,058) (13,861)
------------ ------------
Net cash provided by financing activities 46,667 16,139
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 11,095 6,588
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 2,541 1,650
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 13,636 8,238
============ ============
SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION
-------------------------------------------------
CASH PAID DURING THE PERIOD FOR INTEREST $ 85,031 81,619
============ ============
CASH PAID DURING THE PERIOD FOR INCOME TAXES $ -- --
============ ============
NON-CASH INVESTING ACTIVITIES:
Transfer of marketable securities $ 44,020 --
============ ============
PRINCETON AMERICAN CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOVEMBER 30, 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
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 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's' 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 $45,000 has been accrued on the
claim at the rate of 10% per annum from February 9, 2001. 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 Weiss's' claim is secured by a third-position deed of
trust against the 4808 Property.
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.
PRINCETON AMERICAN CORPORATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOVEMBER 30, 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 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.
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 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 quarter ended August 31, 2001, Management
has focused on:
Finalizing 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 signed settlement documents and the Bankruptcy Court
approved the terms of the settlement and entered an order on November 20,
2001 establishing the amount and priority of the Weisses' claim.
Pursuant to the Court Order, 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 has
been secured by a third-position deed of trust against the 4808 Property.
Accordingly the Weisses have renounced and released their shareholder
interest in Princeton American Corporation and have returned their shares
in the Company for cancellation. The parties have also dismissed all
pending appeals relating to the Weisses ' claim and their motion to
convert the case from a Chapter 11 to a Chapter 7 proceeding.
The outcome of litigation in the matter of Testasecca, et al v. 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 cancelling all existing
shares and authorizing the issuance of new certificates to recognized
shareholders. This decision preserved the Company's position with respect
to the approximately 12,000,000 shares cancelled by that Order. The
Plaintiffs have appealed this decision to the Federal District Court for
the District of Arizona. No further proceedings have been scheduled as of
the date of this report.
The filing of a motion for Summary Judgment in the matter of Onset
Investment Limited and related court proceedings. Princeton's Motion for
Summary Judgment 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 any recovery should be limited to stock in Princeton.
Princeton anticipates its maximum exposure to be approximately $25,000 in
cash and 70,000 shares of its common stock
The Company continues to pursue its application to the NASD for
registration of the Company's shares for trading on the Over the Counter
Bulletin Board Market (OTC:BB). No date for action on the application has
been provided by the NASD 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.
On January 11, 2002 the Company received an oral commitment from the
Arizona State Compensation Fund for the refinancing of its two office
buildings. Proceeds of these loans should be sufficient to pay off the
Vanderford mortgage loan, to generate sufficient funds to satisfy all
creditors claims (including the Weiss claim) and to establish an operating
capital fund. While the Company anticipates that this loan will be funded
during the third quarter, there is no assurance that the loan will be made
and the necessary funds received to accomplish these objectives.
Continuing renovation of the office building at 2222 East Camelback Road.
The completion of this project is now in sight. Renovation of the bathroom
areas is nearly complete and the final task of painting and carpeting of
the common areas should be achieved during the next quarter. On December
1, 2001, United Title Agency leased the remaining space (Suite 108). This
building is now fully leased.
Leasing up of 4808 North 22nd Street. Lease proposals have been accepted
by Alliance Residential Company and WRG Design, Inc. to occupy Suite 100,
recently vacated by Smith, Shaeffer & Ankeney. WRG will move into this
suite upon completion of tenant improvements and Alliance will expand its
operation into Suite 150 currently occupied by WRG. Upon completion of
this transition (expected to occur in February, 2001), 4808 North 22nd
Street will be fully leased.
THREE MONTHS ENDED NOVEMBER 30, 2001 COMPARED TO THREE MONTHS ENDED
NOVEMBER 30, 2000
We believe that our cash position of $13,636 together with the revenues
produced by the continued lease-up of both office buildings will be
sufficient to continue operations pending receipt of the anticipated
funds from the State Compensation Fund. It is expected that the loans
from this agency will provide sufficient funds to the Company to allow
it to emerge from bankruptcy. It is anticipated that this process will
be completed by fiscal year end.
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 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 18, 2002
PRINCETON AMERICAN CORPORATION
/s/ William C. Taylor
________________________________
William C. Taylor
President
/s/ Roderick W. McKinnon III
________________________________
Roderick W. McKinnon III
Corporate Secretary