UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT FILED PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended February 28, 2003
[ ] 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 February 28, 2003
Transitional Small Business Disclosure Format (Check One):
Yes [ ] No [X]
PRINCETON AMERICAN CORPORATION
FORM 10-QSB
INDEX
Part I Financial Information Page
Item 1 - Financial statements (Unaudited)
Unaudited Condensed Balance Sheet - February 28, 2003 ......... 3
Unaudited Condensed Statements of Operations and
Comprehensive Income (Loss) - Three Months and
Nine Months ended February 28,
2003 and February 28, 2002 .................................... 4
Unaudited Condensed Statements of Cash Flows - Nine Months
Ended February 28, 2003 and February 28, 2002 ................. 5
Unaudited Notes to Financial Statements ....................... 6
Item 2 Management's Discussion and Analysis of Financial ............. 7
Condition and Results of Operations.
PART II Other Information
Item 5 Other information ............................................. 9
Item 6 Exhibits and Reports on Form 8-K. ............................. 10
Signatures ............................................................... 11
2
PRINCETON AMERICAN CORPORATION
UNAUDITED CONDENSED BALANCE SHEET
FEBRUARY 28, 2003
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 137,520
Accounts receivable 16,893
Investments in marketable securities 40,199
Prepaid expenses 35,595
-----------
Total current assets 230,207
-----------
PREPAID EXPENSES 66,412
INVESTMENT IN COMMISSION CONTRACT 211,599
PROPERTY AND EQUIPMENT, NET 1,347,992
LOAN COSTS, NET 44,875
-----------
$ 1,901,085
===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Notes payable - current portion $ 57,505
Notes payable, officers 66,969
Accounts payable 74,456
Bankruptcy claims 88,576
Accrued interest 54,072
Accrued real estate taxes 38,032
Payroll and sales taxes payable 41,685
Advance rental income and tenant security deposits 6,602
-----------
Total current liabilities 427,897
TENANT SECURITY DEPOSITS - LONG TERM 61,366
MORTGAGE NOTES PAYABLE, NET OF CURRENT PORTION 4,394,241
-----------
4,883,504
-----------
STOCKHOLDERS' DEFICIT:
Common stock
approximately 15,000,000 shares issued and outstanding 15,025
Additional paid-in-capital 2,460,350
Accumulated deficit (5,458,258)
-----------
(2,982,883)
Net unrealized gain on marketable securities 464
-----------
Total stockholders' deficit (2,982,419)
-----------
Total liabilities and stockholders' deficit $ 1,901,085
===========
See accompanying notes to financial statements
3
PRINCETON AMERICAN CORPORATION
Unaudited Condensed Statements of Operations and Comprehensive Loss
For the Three Months and Nine Months Ended February 28, 2003 and 2002
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
February 28, 2003 February 28, 2002 February 28, 2003 February 28, 2002
----------------- ----------------- ----------------- -----------------
REVENUES
Rental income $ 273,994 228,576 809,231 706,192
Parking and other 9,765 8,760 28,755 24,093
--------- --------- --------- ---------
283,759 237,336 837,986 730,285
--------- --------- --------- ---------
COSTS AND EXPENSES
Building operating costs 68,454 72,536 246,293 269,237
Professional fees 32,007 22,158 76,210 224,920
Payroll and payroll taxes 46,695 32,036 123,311 98,818
Ground lease 31,597 31,486 94,716 94,323
Depreciation and amortization 29,986 24,100 89,959 70,780
Consulting 39,000 7,500 84,800 14,662
Other 9,566 12,162 48,882 44,077
--------- --------- --------- ---------
Total costs and expenses 257,305 201,978 764,171 816,817
--------- --------- --------- ---------
INCOME (LOSS) FROM OPERATIONS 26,454 35,358 73,815 (86,532)
--------- --------- --------- ---------
OTHER INCOME (EXPENSE)
Interest and dividend income 5,327 4,611 14,988 14,017
Interest expense (94,209) (81,563) (290,496) (256,880)
Gain on settlement of lawsuit 10,363 -- 72,208 59,603
Other 351 -- 351 (16,029)
--------- --------- --------- ---------
(78,168) (76,952) (202,949) (199,289)
--------- --------- --------- ---------
NET LOSS BEFORE INCOME TAXES (51,714) (41,594) (129,134) (285,821)
INCOME TAXES -- -- 50 --
--------- --------- --------- ---------
NET LOSS $ (51,714) (41,594) (129,184) (285,821)
========= ========= ========= =========
NET LOSS PER COMMON SHARE, BASIC AND DILUTED $ (0.00) (0.00) (0.01) (0.02)
========= ========= ========= =========
NET LOSS $ (51,714) (41,594) (129,184) (285,821)
NET UNREALIZED GAIN (LOSS) ON MARKETABLE SECURITIES 10,453 (1,000) (5,061) (12,445)
--------- --------- --------- ---------
COMPREHENSIVE LOSS $ (41,261) (42,594) (134,245) (298,266)
========= ========= ========= =========
See accompanying notes to financial statements
4
PRINCETON AMERICAN CORPORATION
Unaudited Condensed Statements of Cash Flows
For the Nine Months Ended February 28, 2003 and 2002
2003 2002
---- ----
Cash flows from operating activities:
Net loss $(129,184) (285,821)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 89,959 70,780
Interest income on investment contract (14,051) (13,842)
Loss on sale of marketable security -- 8,804
Gain on settlement of lawsuit (81,172) (59,603)
Increase (decrease) in cash due to change in:
Accounts receivable 21,584 (11,418)
Prepaid expenses 13,346 17,645
Other receivables -- 4,808
Other assets 26,365 6,009
Accounts payable and accrued expenses 75,394 251,525
Accrued interest (35,308) 112,404
Rent deposits (23,668) (102,241)
--------- ---------
Net cash used in operating activities (56,735) (950)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from investment 502 --
Purchase of property and equipment (29,569) (56,111)
Payments on investment contract 11,813 11,437
--------- ---------
Net cash used in investing activities (17,254) (44,674)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from loan retention 224,605 --
Payments on notes payable -- (19,821)
Proceeds from bank loan -- 131,398
Proceeds from (payment on) loan from officers (22,031) (30,000)
Payments on mortgage notes payable (40,220) (20,100)
--------- ---------
Net cash provided by financing activities 162,354 61,477
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 88,365 15,853
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 49,155 2,541
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 137,520 18,394
========= =========
SUPPLEMENTARY DISCLOSURE OF CASH FLOW INFORMATION
CASH PAID DURING THE PERIOD FOR INTEREST $ 294,678 119,821
========= =========
CASH PAID DURING THE PERIOD FOR INCOME TAXES $ 50 --
========= =========
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
FEBRUARY 28, 2003 AND 2002
1. BASIS OF PRESENTATION
The accompanying financial statements have been prepared by the Company,
without audit, and reflect all adjustments that are, in the opinion
of management, necessary for a fair statement of the results for the
interim periods. The statements have been prepared in accordance
with accounting principles generally accepted in the United States
of America for interim financial reporting and Securities and
Exchange Commission regulations. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the
United States of America have been condensed or omitted pursuant to
such rules and regulations. In the opinion of management, the
financial statements reflect all adjustments (of a normal and
recurring nature) which are necessary for a fair presentation of the
financial position, results of operations and cash flows for the
interim periods. The results of operations for the nine months ended
February 28, 2003 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 required a payment of $25,000 and 25,000
shares of stock by February 25, 2003. The settlement of this claim
resulted in a gain on settlement of approximately $10,000 during the
three months ended February 28, 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 nine
months ended February 28, 2003, payments of $36,984 were made to
this firm. The Company also paid this related party $55,000 for
consulting services during the nine months ended February 28, 2003.
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
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
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;
- 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 November 30, 2002,
Management has focused on:
Concluding the litigation process with Onset Investments, Ltd.
A settlement was reached with the claimant Onset on December 27, 2002.
Under the agreement, on or before February 25, 2003, the Company paid Onset
Investments $25,000 in cash and approved the issuance to Onset 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, and November 30, 2000 orders. 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 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 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".
Managing and upgrading the companys building at 2222 East Camelback Road and
4808 North 22nd Street. Both buildings are fully leased.
Soliciting and evaluating potential business acquisitions and combinations for
Princeton.
8
THREE MONTHS ENDED FEBRUARY 28, 2003 COMPARED TO THREE MONTHS ENDED FEBRUARY 28,
2002.
We believe that our cash position of $ 137,520 as of February 28, 2003, 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. In March of 2003 the Board of Directors
appointed Mr. James Sell of Phoenix as its Chief Financial Officer and Mr. Scott
Bird as Vice President for Shareholder relations. There are no additional
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 senior
officers of the Company, management for the Company believes that this joint
conference of the officers to discuss the Companys material information and
disclosures represents 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
CERTIFICATION 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: April 14, 2003
/s/ William C. Taylor
---------------------
William C. Taylor
Chariman and Secretary
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: April 14, 2003
/s/ Roderick W. McKinnon
------------------------
Roderick W. McKinnon, CEO
11
Item 6 - Exhibits and Reports on Form 8-K
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: April 14, 2003
PRINCETON AMERICAN CORPORATION
/s/ Roderick W, McKinnon III
--------------------------------
Roderick W. McKinnon
President
/s/ William C. Taylor
--------------------------------
William C. Taylor
Corporate Secretary
11