<PAGE>   1

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C., 20549
                                   FORM 10-KSB
           ANNUAL REPORT FILED PURSUANT TO SECTION 13 OR 15(d) OF THE
                             SECURITIES ACT OF 1934
                     For the fiscal year ended May 31, 2001
                           Commission file No. 0-5141
                         PRINCETON AMERICAN CORPORATION
                 (Name of small business issuer in its charter)

          Nevada                                       22-1848644
(state or other jurisdiction of          (I.R.S. Employer Identification Number)
incorporation or organization)

2222 East Camelback Road, Suite 105
Phoenix, AZ 85016
(Address of principal office) (Zip code)
Issuer's telephone number, including area code: (602) 522-2444
Securities registered pursuant to Section 12(b) of the Act:  None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, no par value

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]

Issuer's revenues for its most recent fiscal year were $927,445.

The aggregate market value of voting stock held by non-affiliates of the
registrant is not determinable as of August 31, 2001 as the trading was halted
on October 9, 2000.

The number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date of August 28, 2001 was 10,923,918.
<PAGE>   2
Princeton American Corporation
FORM 10-KSB
                     FOR THE FISCAL YEAR ENDED MAY 31, 2001

  TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                             (Check page numbers)
<S>                                                                              <C>
PART I........................................................................    1
      Item 1 - Description of Business........................................    1
      Item 2 - Description of Property........................................    1
      Item 3 - Legal Proceedings..............................................    7
      Item 4 - Submission of Matters to a Vote of Security Holders............    8

PART II.......................................................................    9
      Item 5 - Market for Common Equity and Related Shareholder Matters.......    9
      Item 6 - Management's Discussion and Analysis or Plan of Operation......   10
      Item 7 - Financial Statements and Supplementary Data....................   11
      Item 8 - Changes in and Disagreements with Accountants on Accounting
               Financial Disclosure...........................................   11

PART III......................................................................   12
      Item 9 - Directors and Executive Officers, Promoters and
      Control Persons; Compliance with Section 16(a) of the Exchange Act......   12
      Item 10 - Executive Compensation........................................   13
      Item 11 - Security Ownership of Certain Beneficial Owners and
      Management..............................................................   13
      Item 12 - Certain Relationships and Related Transactions................   14
      Item 13 - Exhibits and Reports on Form 8-K..............................   14

SIGNATURES....................................................................   15

FINANCIAL STATEMENTS..........................................................  F-1
</TABLE>
<PAGE>   3
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 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 a 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 indefinitely remain under the jurisdiction of and
     be subject to the confirmation and approval of the U.S. Bankruptcy Court.
     Disagreements between the Bankruptcy Court and the Company regarding
     business decisions could adversely affect 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 the
     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.
<PAGE>   4
PART I

ITEM 1.  DESCRIPTION OF BUSINESS

CURRENT COMPANY BUSINESS.

As of May 31, 2001, Princeton's primary business activity is the management of
its two office buildings totaling 50,000 square feet in Phoenix, Arizona. The
Company has 2 employees. None of the Company's employees is represented by a
labor union and we believe that employee relations are good.

BANKRUPTCY FILING; APPOINTMENT OF A TRUSTEE.

On December 11, 1996 the Company filed for protection under Chapter 11 of the
U.S. Bankruptcy code. (Case number 96-13675 PHX JMM) On January 21, 1977, the
then existing management of Princeton submitted a Plan of Reorganization. The
Plan was challenged by William C. Taylor, a former principal and creditor of the
Company, who petitioned the Court for the appointment of a trustee.

The case was tried and on February 4, 1997, the Court issued its order
appointing Roger W. Brown as Trustee. Shortly thereafter, the Trustee terminated
the then existing management of Princeton and assumed day to day management of
the Company.

CONFIRMATION OF JOINT PLAN OF REORGANIZATION.

After Roger W. Brown was appointed Trustee in February 1997, William C. Taylor
submitted his proposed Plan of Reorganization of Princeton on May 30, 1997.
During the course of extensive litigation among competing plan proponents, other
concerned parties and creditors, on August 28, 1997, Trustee Brown and Mr.
Taylor filed a joint Plan of Reorganization. Their Joint Plan was confirmed by
the Court on November 19, 1997 and was published in its entirety in a current
Report on Form 8K which was filed with the Securities and Exchange Commission
(the "Commission") on December 20, 1997, the Effective Date of the Plan.



ITEM 2.  DESCRIPTION OF  PROPERTY

2222 EAST CAMELBACK ROAD, PHOENIX, ARIZONA.

On March 12, 1992 Princeton acquired this two story building which contains
approximately 30,778 rentable square foot of office space. The property includes
a banking facility with a drive-in window and a vault on the ground floor. The
Company paid approximately $296,000 cash for the building including closing
costs and commissions.


                                       1
<PAGE>   5
Princeton occupies 1497 square feet (4.89%) of the total leasable space in this
building. As of May 31, 2001, 86.09% of the remaining leasable space was
occupied by unaffiliated tenants, producing $591,000 of income annually. The
remaining space has since been leased or committed to existing tenants.
Additional information about this property is included in the Property
Information and Operating Data Table at the end of this Item 2. The property tax
for 2000 was approximately $65,000.

4808 NORTH 22ND STREET, PHOENIX, ARIZONA.

On December 1, 1994, Princeton acquired this 19,226 rentable sq. ft. two story
office building. The Company paid $1,000,000 for the building, of which $900,000
was borrowed from the seller at 8% annual interest. As of May 31, 2001 the
building is 100% leased and produces $397,214 of income annually. Additional
information about this property is included in the Property Information and
Operating Data Table at the end of this Item 2. The property tax for 2000 was
approximately $40,000.

MESA TRAILER PARK COMMISSION RECEIVABLE.

In March, 1994 Princeton acquired a long term real estate brokerage commission
of 5% of the total lease payments generated from a 55 year ground lease of a
55-acre mobile home park in Mesa, Arizona. The Company purchased the commission
for $60,000 cash and 174,400 shares of restricted Princeton common stock. The
lease was executed in 1980, runs through 2031, and provides revenue equal to 5%
of each lease payment. The commission agreement presently provides quarterly
payments of $3,687.50 which are made through an escrow at Security Title
Company. The quarterly payments escalate annually to $7,437 per quarter at year
2030. Through May 31, 2001 approximately $92,750 had been paid and approximately
$702,000 of additional commission will be paid to Princeton through year 2031
pursuant to the agreement. While there can be no assurance that Princeton will
receive any or all of these assigned brokerage fees in the future, as of the
date of this report all payments have been received on time.


PROPERTY INFORMATION AND OPERATING DATA

2222 East Camelback Road
Phoenix, Arizona

1.    Character and Location.  Two story office building; 30,778 rentable
      square feet; includes a  banking facility with a drive-in window and a
      bank vault.

2.    Title to Property.  Building is subject to a First Deed of Trust:

      Principal:         $677,320.70
      Interest rate:              8%
      Payment:             $5,136.60
      Maturity:        December 2004


                                       2
<PAGE>   6
The original terms of this loan (interest rate of 15% and maturity in 1999) were
adjusted by the Bankruptcy Court, and the revised terms are currently being
contested by the lender. The deed of Trust on this property and the second deed
of trust on the 4808 Building are held by the same lender and evidenced by one
note. The original loan was for $1,000,000 with 70% being secured by the 2222
building and 30% by the 4808 Building.

3.    Lease Terms. Subject to two net ground leases with terms of 99 years,
expiring in 2073 and 2076. Rent adjusts each 10 years based upon 8% of the fair
market value of the ground, excluding improvements. The first lease has a
monthly base payment of $4,933, and will next adjust in 2009. The second lease
has a monthly payment of $3,100 and will next adjust in 2002.

4.    Renovation or Improvement Plans. In March, 2001, the Company commenced
remodeling of the common areas of the building including a renovated lobby and
four bathrooms. When completed the cost of these improvements is estimated to be
$120,000. Interim financing for this project was obtained from Southwest Bank,
one of the Company's tenants in the 2222 East Camelback Building.

5.    Competitive Conditions.  This property is located in an area known as
the "Camelback Corridor" which is comprised predominately of office
buildings.  This building competes with both higher and lower priced office
space in the immediate vicinity.  The current market is strong, with high
renewals.

6.    Insurance.  Management believes that the property is adequately covered
by insurance.

7.    General Information.

      (i)   Occupancy Rate - 86.09% - as of May 31, 2001. The building was 100%
            as of August 31,2001

      (ii)  Tenants - Rent Roll As of May 31, 2001

<TABLE>
<CAPTION>
                                                                Effective       Current
                        Rentable      Tenant      Months to     Rate/YR/         Base
      Tenant           Square Feet    Share      Expiration    Square Feet     Per Month
      ------           -----------    -----      ----------    -----------     ---------
<S>                    <C>            <C>        <C>           <C>             <C>
Princeton American        1,497        4.86%         N/A           N/A            N/A
Corp. &
Eubanks Consulting          325        1.06%         N/A         $24.00         $650(1)


VACANT                    1,840        5.98%         N/A           N/A            N/A



Southwest
Commercial Bank           8,057       26.17%          52         $24.81         $15,410

Vacant                    2,419        7.86%         N/A           N/A            N/A

GBLS Commercial
Real Estate
Services                  3,301       10.73%          15         $24.00         $6,602

United Title Agency       5,282       17.16%          56(4)      $23.00         $9,684

Nationwide Vision         5,084       16.52%          57         $23.00         $9,744

International
Circuit Sales             2,973        9.66%          14         $21.00         $5,203
</TABLE>


                                       3
<PAGE>   7
(1) Sublease, month to month.

(2) Lessee has two (2) five-year options to renew

(3) Lessee has extended lease to December 1, 2002 with right to terminate after
May 1, 2002.

(4) Lessee has leased 2,419 sq ft and committed to lease 1,840 sq. Ft all
co-terminus with the original space

      (iii)   Tenants principal business, occupations and professions  -

              Princeton American Corporation - owner and manager of building
              Southwest Commercial Bank - banking
              GBLS Commercial Real Estate Services - real estate brokers
              United Title Agency - title insurance and escrow services
              Nationwide Vision Centers - outpatient laser eye surgery
              International Circuit Sales  -  computer component sales


      (iv)    Average rental per square foot for the year ending 12/31/01 -
              $20.09

      (v)     Lease Expirations: All leases will expire no later than five years
              from the date of this filing unless renewed or extended by the
              lessee.

      (vi)    Depreciation Components: The Company depreciates the buildings
              primarily over lives of 39 years, using the Modified Accelerated
              Cost Recovery Method for federal income tax purposes. The tax
              basis in this property is approximately $500,000 at May 31, 2001.


PROPERTY INFORMATION AND OPERATING DATA

4808 North 22nd Street
Phoenix, Arizona

1.    Character and Location.  Two story office building; 19,226 square feet;
      located at 4808 North 22nd Street, Phoenix, Arizona.

2.    Title to Property.  Building is subject to

      (a)   First Deed of Trust:

            Principal:          $806,826
            Interest rate:            8%
            Payment:              $6,946
            Maturity:       January 2020


                                        4
<PAGE>   8
      (b)   Second Deed of Trust:

            Principal:          $290,280.30
            Interest rate:               8%
            Payment:                 $2,201
            Maturity:         December 2004

3.    Lease Terms.
      Subject to a ground lease which expires July 31, 2031. The current rent
      rate is $2,395, subject to annual adjustment based on the Consumer Price
      Index.

4.    Renovation or Improvement Plans. None, other than normal maintenance. On
      December 5, 2000, the Company leased the second floor (comprised of 10,075
      square feet) to Alliance Investors, LLC. for a period of five years. As a
      condition of this lease, the Tenant completely renovated this space at a
      cost in excess of $200,000 of which approximately $70,000 was contributed
      by the Company.






5.    Competitive Conditions.

      This property is located in an area known as the "Camelback Corridor,"
      which is comprised predominantly of office buildings. This building
      competes with both higher and lower priced office space in the immediate
      vicinity. Current market conditions are strong, with high renewals.

6.    Insurance. Management believes that the property is adequately covered by
      insurance.

7.    General Information.

      (i)   Occupancy Rate: 100% - effective as of May 31, 2001.


                                        5
<PAGE>   9
      (ii)  Tenants - Rent Roll as of May 31, 2001.

<TABLE>
<CAPTION>
                                                              Effective
                                                              Rate/YR/
                         Rentable      Tenant    Months to     Square     Current
      Tenant            Square Feet    Share    Expiration      Feet        Base
      ------            -----------    -----    ----------      ----        ----
<S>                     <C>            <C>      <C>           <C>         <C>
Alliance Investors,       10,075       52.40%       55         $20.44     $16,581
LLC

Schafer-Smith Ankeny       5,820       30.28%        5         $19.62      $9,758

WRG Design                 3,331       17.32%       26         $20.75      $5,759
</TABLE>



      (iii) Principal business, occupations and professions -

            Alliance Investors, LLC - residential real estate
            Schafer-Smith-Ankeny  -  insurance agency
            WRG Design  -  architects

      (iv)  Average effective rental per square foot for year ending 12/31/01 -
            $20.66

      (v)   Lease Expirations:  All leases will expire no later than five
            years from the date of this filing unless renewed or extended by
            lessee.

      (vi)  Depreciation Components: The Company depreciates the buildings
            primarily over lives of 39 years, using the Modified Accelerated
            Cost Recovery Method for federal income tax purposes. The tax basis
            in this property is approximately $1,150,000 at May 31, 2001.


                                        6
<PAGE>   10
ITEM 3.  LEGAL PROCEEDINGS

CHAPTER 11 BANKRUPTCY LITIGATION.

ADMINISTRATIVE CLAIMS.

Administrative claims for professional and other fees have either been paid or
will be paid by the Company.

UNSECURED CREDITOR CLAIMS.

During the initial stage of the bankruptcy proceedings, creditors filed 65
proofs of claim aggregating $5,001,503. These proofs of claim have been
litigated or settled, reducing the number of claims to 20 and the amount to
$733,632, including principal and interest as of May 31, 2001.

SHAREHOLDER CLAIMS.

As reported in the May 31,2000 10KSB, equity shareholders filed approximately
900 proof of interest claims, allegedly representing 14,840,000 shares. These
claims were reviewed by management and litigated or settled by agreements which
were confirmed by a Court orders reducing such outstanding shares to
approximately 8,488,828 shares. During the current reporting year, the
outstanding shares were further reduced to 6,554,351 by taking into
consideration the 10 to 1 reverse split which occurred in December 1995 and
which had not been calculated with respect to some of the shareholder's
interests.

Unresolved Claims.  All proof of interest claims have been resolved by the
Court with the exception of the following three matters:

Onset Investment Limited. Onset filed a claim for damages in the amount of
      $200,713 based on an alleged breach of a stock purchase agreement by
      Princeton. The Company has objected to this claim and the matter is
      awaiting determination by the Court. Settlement negotiations are pending,
      and Princeton anticipates its maximum exposure to be approximately $25,000
      cash and 70,000 shares of common stock. If the Onset claim is allowed in
      whole or in part, the Company intends to seek a ruling by the Bankruptcy
      Court subordinating the Onset claim from that of a creditor to that of an
      equity holder.

Harry and Irene Weiss. On February 9, 2001, the Weisses and the Company engaged
      in a settlement conference before the Hon. Charles G. Case of the United
      States Bankruptcy Court for the District of Arizona which culminated in an
      agreement which is contingent on Bankruptcy Court Approval. Under the
      agreement, the Company will recognize that the Weisses have an allowed
      claim of $560,000 with interest accruing at ten percent per annum from
      February 9, 2001 until paid. The Company must pay the claim when it sells
      or refinances the office building at 4808 North 22nd Street in Phoenix
      and, in any event, no later than February 9, 2002. The Weisses, in turn
      will renounce and release their shareholder interest in the Company. Both
      parties will dismiss all pending appeals relating to the Weisses' claim.


                                        7
<PAGE>   11
CURRENT LITIGATION:

      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 pleading 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, 2001 order canceling all
      outstanding Princeton American 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 (Larry Testasecca, Charles
      Crehore and Eugene Targosz) had received actual notice of the bankruptcy,
      had filed Proofs of Interest pursuant to the July 1997 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 them.

      Princeton American believes that all allegations of the Plaintiffs are
      without merit and is vigorously defending all claims.






ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      No matters have been submitted to a vote of security holders since the
      annual meeting on September 14, 1995, when shareholders voted to (i)
      change the name of the Company from Princeton Electronic Products, Inc. to
      Princeton American Corporation, and (ii) to change the domicile of the
      Company from New Jersey to the State of Nevada.


                                        8
<PAGE>   12
                                     PART II
ITEM 5.   MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER
MATTERS

Princeton's Common Stock had traded on the over-the-counter market "pink
sheets"since the Company was delisted from the NASDAQ (Small Capital) Market in
November 1996, until the following events took place:

On September 15, 2000, the Bankruptcy Court ordered Princeton American and its
transfer agent to cancel all outstanding share certificates and issue new
certificates reflecting the allowed interests under the Plan of Reorganization
and the Court's prior orders. The Court further ordered that Princeton and its
transfer agent are not subject to any claim based upon the cancellation of
outstanding share certificates and the issuance of new certificates in
accordance with the Court's orders.

Effective as of October 9, 2000 the trading symbol "PELT" was cancelled by the
NASD and no further trades will be made under that symbol. After new
certificates have been issued to a majority of those shareholders possessing an
allowed interest, a new trading symbol will be issued to Princeton American
Corporation. The Company is currently processing exchanges of cancelled share
certificates for new certificates.

The Company has applied to the NASD through the sponsoring brokerage firm of
Peacock, Hislop, Staley and Given, Inc. to be listed on the Over the Counter
Bulletin Board (OTCBB) with a view toward establishing a broader market for
Princeton Shares.

Princeton has never paid any cash dividends on any equity securities, and no
change of this policy is under consideration by the Board of Directors.

Recent Sales of Unregistered Securities.  None.

CONFIRMATION OF SECURITIES HOLDINGS

The final shareholder equity base established by Order of the Bankruptcy
Court is set forth below:
Shares recognized as of May 31, 2001.                                6,554,351
Shares recognized for issuance to William C. Taylor.(1)              4,369,567
      TOTAL SHARES(2)                                               10,923,918

(1) Represents forty percent (40%) of the total of all of Princeton's common
    stock which was outstanding as of the Final Order Allowing Shares. In the
    event that the Onset claim is subordinated to Class 12 Claims pursuant to
    Section 510(b) of the Bankruptcy Code, Taylor's shares will be increased in
    order to maintain his 40% ownership of the stock of Princeton American Corp.
    This could result in a dilution in the value of shares held by other
    shareholders."

(2) Represents a downward adjustment in total shares from 14,148,047 as set
    forth in the May 31, 2000 10KSB in conformity with the Final Order Allowing
    Shares, after taking into consideration certain shares for which the 10:1
    reverse split calculation had not been made.


                                        9
<PAGE>   13
ITEM 6 MANAGEMENT DISCUSSION AND ANALYSIS
BACKGROUND:

During the past year we have focused on:
1.    Upgrading the Company's two office buildings and solving the problems
      resulting from the "deferred maintenance" policies of prior management;
2.    Completing the task of establishing a final shareholder base and
      revitalizing the market for Princeton's shares;
3.    Returning the Company to financial stability; and
4.    Moving Princeton closer to emergence from the bankruptcy proceedings.

Only one of 65 Unsecured Creditor's Claims against the Company has not been
authenticated or litigated and resolved. The shareholder base has been carefully
analyzed and significantly modified by Court Orders. All old share certificates
have been cancelled, and new share certificates issued to shareholders who have
tendered their old shares. This procedure has had the effect of validating all
the shares that were legitimately acquired. The legal, accounting and consulting
expenses incurred to achieve these results are in excess of $ 450,000 of which $
65,000 has been incurred in the last year.

The Company also focused its attention on the rehabilitation and marketing of
its two office buildings, which have benefited from the increase in demand for
office space in the Phoenix market over the past four years. Several tenant
leases have matured and have either been rolled over at higher prices, or the
tenants have moved elsewhere allowing the Company to replace them with higher
rent paying tenants. The office building at 2222 East Camelback Road is fully
occupied with annual gross revenues exceeding $591,000. It is now known as the
"Southwest Bank Building" in acknowledgement of that financial institution's
lease of the west half of the ground floor including the banking facilities
formerly occupied by Wells Fargo Bank. The lease runs for five years with two
five year renewal options. Southwest Bank has completely refurbished this 8,057
square foot space.

Princeton has signed five year leases with two new tenants, United Title Agency
and Nationwide Vision Centers. As of 5-31-01 the 2222 East Camelback Road
building was 86.09% occupied. The remaining two suites have been taken by United
Title; 2419 square feet was occupied in August 2001 and 1840 square feet will be
delivered in October 2001.


                                       10
<PAGE>   14
The second floor of the office building at 4808 North 22nd Street was leased to
Alliance Investors, LLC. for a five year term commencing in February, 2001. Now
fully occupied, this building is currently producing approximately $400,000 in
annual revenues. Management believes that the completion of these "clean up"
activities this year will put Princeton one year closer to attracting potential
investors and merger prospects (in particular those that can take advantage of
the Company's $14,000,000 tax loss carry forward). Armed with a fundamentally
sound financial statement, management intends to pursue all available
opportunities for strategic alliances, with a view toward enhancing shareholder
value. While there can be no assurance that the Company will be successful in
doing so, Princeton has applied to the NASD to have its securities qualify for
trading on the OTC Bulletin Board.

ITEM 7.  FINANCIAL STATEMENTS

The full text of the Company's audited, consolidated financial statements for
the fiscal years ended May 31, 2001 and 2000 begins on page F-1 of this Report
and is incorporated herein by reference.

ITEM 8.  CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE

None.


                                       11
<PAGE>   15
                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

The Directors and Executive Officers of the Company as of May 31, 2001 were:


<TABLE>
<CAPTION>
Name                        Age            Position              Date Elected (*)
----                        ---            --------              ----------------

<S>                         <C>      <C>                        <C>
William C. Taylor            69         Chairman, CEO &         December 20, 1997
                                          Director

Roderick W. McKinnon III     55      Secretary, Treasurer       December 20, 1997
                                         & Director

Scott E. Bird                77            Director             December 20, 1997
</TABLE>

(*) Pursuant to Article III Section 3.9 of the Plan of Reorganization, the
Directors took office on the "Effective Date" of the Plan.

On May 1, 2001 Mr. Bird resigned as Treasurer and CFO of the Company.  Mr.
McKinnon assumed that office on the same date.

                                     RESUMES
Scott E. Bird is the Managing Consultant of SASolutions, LLC, an integrated
business and information technology consulting group. He is the Vice President
and General Manager of Uservco, Inc., a national receivables recovery company
and Pacific Aviation Services, an international aviation procurement and support
company. Mr. Bird has served as Director and Chief Financial Officer of the
Company since its reorganization. His term of office will expire on the date of
the next Annual Shareholder's Meeting, the date of which has not been set.

William C. Taylor served the Company as Executive Vice-President from July 1991
to April 1995 and as a Director from August 1994 to April 1995. Mr. Taylor is a
member (inactive) of the State Bar of Arizona and is a licensed realtor. He is a
managing partner in several real estate development companies. Mr. Taylor has
served as Chairman and Chief Executive Officer of the Company since its
reorganization. His term of office will expire on the date of the next Annual
Shareholders Meeting, the date of which has not been set.

Roderick W. McKinnon III has been a Director and Secretary of the Company
since 1998.  Since 1974  Mr. McKinnon has been  President of R.W. McKinnon &
Co., Inc., an investment banking and development service company.  He holds
Bachelor of Science Degree from Northern Arizona University and serves on
several boards of directors.


                                       12
<PAGE>   16
ITEM 10.  EXECUTIVE COMPENSATION

The following table sets forth information concerning the compensation received
for the fiscal year ended May 31, 2001 for services rendered to the Company in
all capacities by the Company's Chief Executive Officer and other executive
officers.


SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
Name and Principal       Annual Cash                  Securities   All Other
Position                 Compensation    Other (1)    Options      Compensation

<S>                      <C>             <C>          <C>          <C>
William C. Taylor          $96,000        $1,200        -0-            -0-
Chairman CEO and
Director

Roderick W McKinnon        -0-            $1,200        -0-            -0-
Secretary Treasurer
Director

Scott E Bird (2)
Director                   -0-            $1,200        -0-            -0-
</TABLE>


      (1)   Directors are compensated at the rate of @200 for each formal
            meeting of the Board of Directors. There were six meetings in fiscal
            year 2001. These fees are unpaid as of May 31, 2001

      (2)   Mr. Bird is a shareholder of SASolutions, L.L.C. a financial
            consulting firm which received approximately $49,650 through May 31,
            2001 for consulting services to the company.






ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information as to shares of common stock
owned by (i) each person known to beneficially own more than 5% of the
outstanding common stock , (ii) each director and named executive officer of the
Company, and (iii) all executive officers and directors of the Company as a
group.

<TABLE>
<CAPTION>
Name                                 Title            Common Shares    Percent of Class
<S>                              <C>                  <C>              <C>
William C. Taylor                Chairman & CEO         4,502,529        (1) 41.22%
2222 East Camelback Road
Suite 105
Phoenix, Arizona 85016

Laurence J. and Diane K.
Testasecca                       Shareholder              800,000         (2) 7.32%
5669 Walnut Ridge Circle
West Bloomfield, MI 48322
</TABLE>



                                       13
<PAGE>   17
      (1)   Includes 132,962 shares which Mr. Taylor owned prior to the
            Effective Date of the Plan of Reorganization.

      (2)   Based solely upon information contained in a Form 13G filed with the
            Commission on October 18, 1999. Mr. and Mrs. Testasecca are among
            the Plaintiffs who are seeking to have the Bankruptcy Court overturn
            its September 15, 2000 Order Canceling Certificates. The Company's
            records indicate that the Testaseccas have been issued new
            certificates evidencing ownership of 50,000 shares only with respect
            to shares claimed by them in the Proof of Interest filed by them in
            1997.

      The above percentages of ownership are based on 10,923,918 shares of the
Company's common stock outstanding based upon the Bankruptcy Court Order dated
February 3, 2000. Beneficial ownership has been determined in accordance with
rule 13d-3 of the Securities and Exchange Act of 1934. Pursuant to the rules of
the securities and Exchange Commission, shares of common stock that each named
person and group has the right to acquire within 60 days pursuant to options,
warrants, conversion privileges or other rights are deemed outstanding for
purposes of computing shares beneficially owned by and the percentage of
ownership of each such person and group. However, such shares are not deemed
outstanding for purposes of computing the shares beneficially owned by, or
percentage of ownership of, any other person or group.


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information regarding Princeton's transactions with related parties since
November 1996 is included above in: Item 1 "Description of Business - Sales and
Transfers Prior to Bankruptcy, and Sales and Transfers of Assets"; Item 3 -
"Legal Proceedings"; and Item 5 - "Market for the Registrant's Common Stock and
Related Shareholders Matters - Adjustments of Outstanding Shares and
Shareholders."

ITEM 13.  EXHIBITS AND REPORTS ON FORM 8-K

(a)   Exhibits

            8K    Dated September 15, 2000 Order (1) Approving Cancellation
      of Outstanding Shares and Issuance of New Certificates and (2) Barring
      Claims


            8K     Dated June 27, 2001 Regarding Testasecca, et al v.
      Princeton American and William C. Taylor


                                       14
<PAGE>   18
                                   SIGNATURES

        In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

PRINCETON AMERICAN CORPORATION

By:    /s/ William C. Taylor
       --------------------------
       William C. Taylor
       Chairman, CEO and Director

Date:  8/28/00
       -------------------------

        In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the registrant and in the capacities and
on the dates indicated.

        Signature                           Title                       Date
        ---------                           -----                       ----

By: /s/ William C. Taylor           Chairman, CEO and                   8/28/00
    -----------------------------   Director                            -------
        William C. Taylor

By: /s/ Scott E. Bird               Treasurer, CFO and                  8/28/00
    -----------------------------   Director                            -------
        Scott E. Bird

By: /s/ Roderick W. McKinnon III    Secretary and Director              8/28/00
    -----------------------------                                       -------
        Roderick W. McKinnon III




                                       15
<PAGE>   19
                         PRINCETON AMERICAN CORPORATION

                              FINANCIAL STATEMENTS

                               For the Years Ended
                              May 31, 2001 and 2000




                          Independent Auditors' Report


The Board of Directors
Princeton American Corporation

We have audited the accompanying balance sheets of Princeton American
Corporation as of May 31, 2001 and 2000, and the related statements of
operations and comprehensive loss, changes in stockholders' deficit, and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Princeton American Corporation
as of May 31, 2001 and 2000, the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in note 1 to the
financial statements, the Company has a stockholders' deficit of $2,452,053 and
a working capital deficit of $2,305,270. As discussed in notes 9 and 10, the
Company also is involved in litigation and is operating under a Joint Plan of
Reorganization following a bankruptcy filing in December 1996. These items raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans with regard to these matters are discussed in Notes 9 and 10.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.

The Plan of Reorganization will not be substantially consummated until payment
of unsecured creditors. Prior to that time, the Company is under the supervision
of the Bankruptcy Court. The Company is involved in litigation, which is being
overseen by the Bankruptcy Court. The Bankruptcy Court may exert significant
influence over the operations of the Company, which may result in changes to the
estimates described in the accompanying financial statements. Please read notes
1, 9 and 10; they describe certain uncertainties regarding the Company's
operations, litigation and the bankruptcy filing.


/s/ Evers & Company Ltd.

Phoenix, Arizona
July 3, 2001


                                      F-1
<PAGE>   20
                         PRINCETON AMERICAN CORPORATION
                                 BALANCE SHEETS
                              MAY 31, 2001 AND 2000


<TABLE>
<CAPTION>
                                                                              2001              2000
                                                                              ----              ----
<S>                                                                    <C>                 <C>
                                     ASSETS
Current assets:
     Cash and cash equivalents                                          $     2,541             1,650
     Notes receivable, current portion                                           --               947
     Accounts receivable - trade                                              6,068                --
     Investments in marketable securities                                    61,678           107,265
     Prepaid expenses                                                        33,442            20,167
     Other assets                                                            11,009                --
                                                                        -----------        ----------
        Total current assets                                                114,738           130,029
                                                                        -----------        ----------
Notes receivable, net of current portion                                         --            17,202
Prepaid expenses                                                             59,798                --
Investment in commission contract                                           206,161           202,756
Property and equipment, net                                               1,379,143         1,283,735
                                                                        -----------        ----------
                                                                        $ 1,759,840         1,633,722
                                                                        ===========        ==========
                      LIABILITIES AND STOCKHOLDERS' DEFICIT

Current liabilities:
     Mortgage notes payable - current                                   $    30,558            28,284
     Notes payable - other                                                  133,931                --
     Notes payable, officers                                                130,000           100,000
     Accounts payable                                                       184,678           161,152
     Bankruptcy claims                                                      679,289           679,289
     Liabilities in dispute                                                 619,603           619,603
     Accrued interest                                                       189,924           122,163
     Accrued real estate taxes                                              310,221           222,690
     Payroll and sales taxes payable                                         15,487            13,172
     Deferred rental income and tenant security deposits                    126,317            30,773
                                                                        -----------        ----------
        Total current liabilities                                         2,420,008         1,977,126

Tenant security deposits - long term                                         48,016            26,616
Mortgage notes payable                                                    1,743,869         1,773,541
                                                                        -----------        ----------
                                                                          4,211,893         3,777,283
                                                                        -----------        ----------
Commitments, contingencies and subsequent events (see notes)

Stockholders' deficit:
     Common stock, par value $.001, 100,000,000 shares authorized
        see note 9 regarding shares issued and outstanding                   15,000            15,000
     Additional paid-in-capital                                           2,460,350         2,460,350
     Accumulated deficit                                                 (4,506,852)       (4,243,720)
                                                                        -----------        ----------
                                                                         (2,031,502)       (1,768,370)
     Net unrealized loss on marketable securities                          (420,551)         (375,191)
                                                                        -----------        ----------
        Total stockholders' deficit                                      (2,452,053)       (2,143,561)
                                                                        -----------        ----------
        Total liabilities and stockholders' deficit                     $ 1,759,840         1,633,722
                                                                        ===========        ==========
</TABLE>


                 See accompanying notes to financial statements

                                      F-2
<PAGE>   21
                         PRINCETON AMERICAN CORPORATION
                 STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
                    FOR THE YEARS ENDED MAY 31, 2001 AND 2000


<TABLE>
<CAPTION>
                                                              2001             2000
                                                              ----             ----
<S>                                                       <C>               <C>
Revenues
    Rental income                                         $ 837,326           842,565
    Parking and other                                        90,119             6,710
                                                          ---------         ---------
                                                            927,445           849,275
                                                          ---------         ---------
Costs and expenses
    Building operating costs                                334,956           354,723
    Professional fees                                       166,993           176,794
    Payroll and payroll taxes                               140,986           135,425
    Ground lease                                            124,972           123,088
    Depreciation                                             93,472           107,046
    Consulting                                               49,650            83,115
    Other                                                    50,912            99,108
                                                          ---------         ---------
       Total costs and expenses                             961,941         1,079,299
                                                          ---------         ---------

Loss from operations                                        (34,496)         (230,024)
                                                          ---------         ---------
Other income (expense)
    Interest and dividend income                             19,766            21,836
    Interest expense                                       (235,928)         (227,796)
    Gain on settlement of lawsuits                               --           183,225
    Other                                                   (12,424)            5,534
                                                          ---------         ---------
                                                           (228,586)          (17,201)
                                                          ---------         ---------
Net loss before income taxes                               (263,082)         (247,225)

Income taxes                                                     50               100
                                                          ---------         ---------
Net loss                                                  $(263,132)         (247,325)
                                                          =========         =========

Net loss per common share, basic and diluted              $   (0.02)            (0.02)
                                                          =========         =========


Net loss                                                  $(263,132)         (247,325)

Net unrealized gain (loss) on marketable securities         (45,360)           77,527
                                                          ---------         ---------
Comprehensive loss                                        $(308,492)         (169,798)
                                                          =========         =========
</TABLE>


                 See accompanying notes to financial statements

                                      F-3
<PAGE>   22
                         PRINCETON AMERICAN CORPORATION
                  STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
                    FOR THE YEARS ENDED MAY 31, 2001 AND 2000


<TABLE>
<CAPTION>
                                                                                Unrealized
                                               Additional                       Gain (Loss)
                                  Common        Paid-in        Accumulated           on
                                  Stock         Capital          Deficit         Securities
                                  -----         -------          -------         ----------
<S>                              <C>           <C>             <C>              <C>
Balance at May 31, 1999          $15,000       2,460,350       (3,996,395)       (452,718)

Net loss for the year
     ended May 31, 2000               --              --         (247,325)             --

Unrealized gain on
     marketable securities            --              --               --          77,527
                                 -------       ---------       ----------        --------
Balance at May 31, 2000           15,000       2,460,350       (4,243,720)       (375,191)

Net loss for the year
     ended May 31, 2001               --              --         (263,132)             --

Unrealized loss on
     marketable securities            --              --               --         (45,360)
                                 -------       ---------       ----------        --------
Balance at May 31, 2001          $15,000       2,460,350       (4,506,852)       (420,551)
                                 =======       =========       ==========        ========
</TABLE>


                 See accompanying notes to financial statements

                                      F-4
<PAGE>   23
                         PRINCETON AMERICAN CORPORATION
                            STATEMENTS OF CASH FLOWS
                    FOR THE YEARS ENDED MAY 31, 2001 AND 2000


<TABLE>
<CAPTION>
                                                                                 2001             2000
                                                                                 ----             ----
<S>                                                                           <C>              <C>
Cash flows from operating activities:
     Net loss                                                                 $(263,132)       (247,325)
     Adjustments to reconcile net loss to net
        cash used in operating activities:
        Depreciation                                                             93,472         107,046
        Interest income on investment contract                                  (18,155)        (17,844)
        Rental income allowance in exchange for tenant payment of costs         (33,634)             --
        Loss on disposition of assets                                             1,248              --
        Gain on investment                                                           --          (2,440)
        Gain on sale of real estate                                                  --          (8,481)
        Non-cash gain on settlement of claim                                         --         (62,524)
        Change in:
           Receivables                                                           (6,068)            448
           Prepaid expenses                                                     (73,073)         21,073
           Other assets                                                         (11,009)             --
           Accounts payable and accrued expenses                                113,372         185,442
           Accrued interest                                                      67,761          50,912
           Rent deposits                                                         43,353         (58,452)
                                                                              ---------        --------
            Net cash used in operating activities                               (85,865)        (32,145)
                                                                              ---------        --------
Cash flows from investing activities:
     Payments on notes receivable                                                18,149          25,304
     Purchase of property and equipment                                         (82,903)        (46,373)
     Payments on investments                                                     14,977          14,250
                                                                              ---------        --------
        Net cash used in investing activities                                   (49,777)         (6,819)
                                                                              ---------        --------
Cash flows from financing activities:
     Refund of deposit                                                               --           9,930
     Proceeds from sale of real estate                                               --          20,981
     Repayment of notes payable to officers                                          --         (20,000)
     Conversion of account payable to note payable                               19,821
     Proceeds from loan from officers                                            30,000          50,000
     Payments on mortgage notes payable                                         (27,398)        (26,117)
     Proceeds from bank loan                                                    114,110
                                                                              ---------        --------
        Net cash provided by financing activities                               136,533          34,794
                                                                              ---------        --------
Net decrease in cash and cash equivalents                                           891          (4,170)

Cash and cash equivalents, beginning of year                                      1,650           5,820
                                                                              ---------        --------
Cash and cash equivalents, end of year                                        $   2,541           1,650
                                                                              =========        ========
Supplementary Disclosure of Cash Flow Information
Cash paid during the year for interest                                        $ 153,443         176,884
                                                                              =========        ========
Cash paid during the year for income taxes                                    $      50             100
                                                                              =========        ========
Non-cash investing activities:
     Issuance of rent credits for tenant improvements paid by tenant          $ 107,225              --
                                                                              =========        ========
</TABLE>


                 See accompanying notes to financial statements

                                       F-5
<PAGE>   24
      1. Summary of Significant Accounting Policies

      a. Basis of Presentation

      The following is a summary of the significant accounting policies followed
      by Princeton American Corporation (the Company). The policies conform with
      generally accepted accounting principles and require management to make
      estimates and assumptions that affect the reported amounts of assets,
      liabilities, revenues and expenses as well as disclosures of contingent
      assets and liabilities in the financial statements. Actual results could
      differ from those estimates.

      During the years ended May 31, 1998 and 1997, the Company did not have
      access to adequate records to file audited financial statements, as
      required by the Securities and Exchange Commission. The Company requested
      a waiver of its filing requirements for the years ended May 31, 1997 and
      1998 and its quarterly filings through February 28, 2000. The Company can
      not obtain a waiver; however, the Securities and Exchange Commission has
      indicated that action is unlikely for failure to file missing reports
      prior to May 31, 2000. The Company included in their February 28, 2001
      10Q, reissued May 31, 2000 financial statements, which included an audited
      balance sheet as of May 31, 1998.

      The financial statements of the Company are presented on a historical cost
      basis. The estimated fair market value of the Company's assets at the time
      of reorganization exceeded the Company's post-petition liabilities and
      allowed claims. Consequently, assets and liabilities were not restated to
      fair market value as provided by SOP 90-7.

      At May 31, 2001, the Company had a stockholders' deficit of $2,452,053 and
      a working capital deficit of $2,305,270. Additionally, the Company has
      been unable to generate net income from operations since its
      reorganization. The Company is currently under the jurisdiction of the
      Bankruptcy Court and is involved in litigation, as described in Notes 9
      and 10 to these financial statements. Management's plans with regard to
      these matters are also discussed in Note 9. These financial statements
      have been prepared assuming the Company will be able to continue
      operations and do not include any adjustments that might result from the
      outcome of these uncertainties.

      b. Organization and Operations

      Princeton American Corporation is organized under the laws of the State of
      Nevada and currently owns two office buildings in Phoenix, Arizona. The
      Company was previously engaged in both the real estate and hair care
      products industries. The Company filed for bankruptcy in December 1996 and
      subsequently disposed of substantially all its assets

                                      F-6
<PAGE>   25
      1. Summary of Significant Accounting Policies, continued

      during the years ended May 31, 1997 and 1998, except for the two
      commercial buildings and certain investments. The trustee combined
      substantially all the Company's operating subsidiaries into Princeton
      American Corporation. The Court approved the Plan of Reorganization for
      the Company in November 1997.

      c. Cash Equivalents

      Cash equivalents include highly liquid debt instruments and other
      short-term investments with an original maturity of three months or less.


      d. Marketable Securities, Available for Sale

      Marketable securities available for sale are recorded at their quoted
      market prices. Unrealized gains and losses on these securities are
      included as a separate component of comprehensive income and shareholders'
      equity until realized. Realized gains and losses on securities available
      for sale are computed based upon the average cost of the investment.

      e. Property and Equipment

      Property and equipment are recorded at cost and are being depreciated
      principally on the straight-line method over the estimated useful lives of
      the assets, which range from three to forty years.

      f. Stock Options

      The Company has elected to follow Accounting Principles Board Opinion No.
      25 "Accounting for Stock Issued to Employees" (APB25) and related
      interpretations in accounting for its employee stock options and awards.
      Under APB 25, no compensation expense is recognized when the exercise
      price of the options equals the fair value (market price) of the
      underlying stock on the date of grant. The Company has adopted the
      disclosure provisions of Statement of Financial Accounting Standards No.
      123 Accounting for Stock-Based Compensation.

                                       F-7
<PAGE>   26
      g. Income Taxes

      Income taxes are accounted for under the asset and liability method.
      Deferred tax assets and liabilities are recognized for the future tax
      consequence attributable to differences between the financial statement
      carrying amount of existing assets and liabilities; and their respective
      tax bases, including operating loss and tax credit carryforwards. Deferred
      tax assets and liabilities are measured using enacted tax rates expected
      to apply to taxable income in the years in which those temporary
      differences are expected to be recovered or


      1. Summary of Significant Accounting Policies, continued

      settled. The effect in deferred tax assets and liabilities of a change in
      tax rates is recognized in income in the period that includes the
      enactment date. Valuation allowances are established when necessary to
      reduce deferred tax assets to the amount expected to be realized.

      h. Earnings Per Share

      The Company has adopted Statement of Financial Accounting Standards No.
      128 "Earnings Per Share". The standard simplifies the standards of
      computing earnings per share and requires presentation of two new amounts,
      basic and diluted earnings per share. Net loss per share is computed by
      dividing the loss attributable to common shareholders by the weighted
      average number of shares outstanding during the period, which was assumed
      to be approximately 15,000,000 for the years ended May 31, 2001 and 2000.
      There is uncertainty regarding the number of shares outstanding. Please
      read note 9.

      2. Notes Receivable

      Notes receivable consist of the following at May 31, 2000. The note was
      paid off during the year ended May 31, 2001.


<TABLE>
<Caption>
                                                                         2000
                                                                        -------
<S>                                                                     <C>
      Note receivable, secured by a first deed of trust on              $18,149
      real property, payable in monthly installments of
      $219 including interest at 9.5%, remaining principal
      and interest due August 2001

      Less current portion                                                 (947)
                                                                        -------
      Notes receivable, net of current portion                          $17,202
</TABLE>


                                      F-8
<PAGE>   27
      3. Investments in Marketable Securities Available for Sale

      Marketable securities consist of the following investments in common stock
      at May 31, 2001 and 2000:

<TABLE>
<CAPTION>
                                                        2001              2000
                                                        ----              ----
<S>                                                    <C>              <C>
      Exten Industries                                 $55,465           90,241
      Stratford American                                 4,000           14,584
      Other securities                                   2,213            2,440
                                                       -------          -------
                                                       $61,678          107,265
</TABLE>


      Total net unrealized losses at May 31, 2001 and 2000 were $420,551 and
      $375,191, respectively. The net unrealized loss increased by $45,360
      during the year ended May 31, 2001 and decreased by $77,527 during the
      year ended May 31, 2000.

      The Company also has an investment in Sgarlato Laboratories, a
      privately-held company, which management estimates has minimal value at
      year-end. As such, the investment has been written down to zero.

      4. Investment in Commission Contract

      In March 1994, the Company acquired the rights to the commission on a
      ground lease for a mobile home park in Mesa, Arizona. The commission is
      based upon a fifty-five (55) year ground lease. Annual payments ranged
      from $11,750 in 1994 to $27,000 in 2031. For the years ended May 31, 2001
      and 2000, the commission contract was valued at $206,161 and $202,756,
      respectively. The valuation is determined by calculating the net present
      value of the quarterly payments at an imputed interest rate of twelve
      percent (12%). The Company recognizes any fluctuation in the investment as
      interest income or expense in the year of fluctuation.

      5.   Property and Equipment

            Property and equipment consist of the following at May 31, 2001 and
      2000:

<TABLE>
<CAPTION>
                                                      2001              2000
                                                      ----              ----
<S>                                               <C>               <C>
      Office buildings                            $1,296,786         1,296,786
      Leasehold improvements                         577,950           515,686
      Office furniture and equipment                   4,140             4,139
                                                  ----------        ----------
                                                   1,878,876         1,816,611
      Less:  Accumulated depreciation               (499,733)         (532,876)
                                                  ----------        ----------
                                                  $1,379,143        $1,283,735
</TABLE>


                                      F-9
<PAGE>   28
      6. Investment in Real Estate

      At May 31, 1999 the Company owned a parcel of undeveloped land with a cost
      of $12,500. The property was sold during the year ended May 31, 2000 for
      $20,981 resulting in a gain of $8,481 after selling expenses.

      7. Notes Payable

      Mortgage notes payable consist of the following at May 31, 2001 and 2000:


<TABLE>
<CAPTION>
                                                            2001          2000
                                                            ----          ----
<S>                                                     <C>            <C>
      Mortgage note payable, secured by a first         $  806,826      824,846
      deed of trust on the building at 4808 N.
      22nd St., payable in monthly installments of
      $6,946 including interest at 8% through
      January 2020

      Mortgage note payable, Vanderford, secured           967,601      976,979
      by a first deed of trust on the building at
      2222 E. Camelback and a second deed of trust
      on the building at 4808 N. 22nd St., payable
      in monthly installments of $7,338 including
      interest at 8%, remaining principal and
      interest due December 2004
                                                        ----------    ---------
                                                         1,774,427    1,801,825

      Less current portion                                 (30,558)     (28,284)
                                                        ----------    ---------

      Long-term debt, net of current portion            $1,743,869    1,773,541
</TABLE>


      The terms of the Vanderford mortgage note payable are being disputed. The
      original loan, which was made shortly before the bankruptcy filing, called
      for an interest rate of 15%, with a maturity date of December 1999. The
      terms of the note were revised by the court to the current terms. The
      Company and the lender have reached a verbal agreement to modify the
      terms; however, the Company must obtain the approval of the Bankruptcy
      Court.


                                      F-10
<PAGE>   29
      7. Notes Payable, continued

      Notes payable - other consist of the following at May 31, 2001:

<TABLE>
<S>                                                                    <C>
      Line of credit loan of $200,000, interest                        $114,110
      accrues at prime plus 2%, interest and
      principal due August 16, 2001, extended to
      November 16, 2001

      Note due in monthly installments of $3,500                         19,821
      with a balloon payment of $12,821 in August
      2001, secured by investment in Exten stock
                                                                       --------
                                                                       $133,931
</TABLE>

      Maturities of long-term debt at May 31, 2001 are as follows:


<TABLE>
<CAPTION>
      Year ended May 31,                                    Amount
      ------------------                                    ------
<S>                                                      <C>
      2002                                               $   30,558
      2003                                                   33,095
      2004                                                   35,842
      2005                                                  956,437
      2006                                                   26,847
      Thereafter                                            691,648
                                                         ----------
                                                         $1,774,427
</TABLE>


      8. Notes Payable, Officers and Related Party Transactions

      At May 31, 2000, Notes Payable, Officers included two $25,000 notes, with
      an interest rate of 12% that were due and payable on or before May 1,
      2001. One of the Company's officers also paid a $50,000 administrative
      claim directly for the Company. The Company is obligated to repay the
      officer under the terms of a 12% promissory note that required payments of
      $5,000 per month beginning January 2000. An officer of the Company
      advanced an additional $30,000 during the year ended May 31, 2001. This
      note also earns interest at 12% and was due May 1, 2001. The Company has
      not complied with the repayment terms of these agreements. Accrued
      interest of $7,700 was paid to one of the officers during the year ended
      May 31, 2001. Interest expense on the notes totaled $14,700 in 2001 and
      $9,876 in 2000.

      During the years ended May 31, 2001 and 2000 the Company paid a director
      consulting fees of $49,650 and $82,115, respectively.


                                      F-11
<PAGE>   30
      9. Bankruptcy Claims

      The Company filed for bankruptcy on December 11, 1996 and is currently
      operating as a reorganized debtor under a Joint Plan of Reorganization
      confirmed by the United States Bankruptcy Court for the District of
      Arizona on November 19, 1997.

      Subsequent to the Company's filing in December 1996 and prior to the
      reorganization in December 1997, the Company was operated by a
      court-appointed trustee. During that time, the trustee liquidated various
      assets of the Company other than certain real estate holdings in Phoenix,
      Arizona and certain investments in marketable securities. William Taylor
      and the Trustee filed a Joint Plan of Reorganization in November 1997,
      which was approved in December 1997. Some of the key provisions of the
      Plan are:

      - The Plan classifies various secured, unsecured and non-priority
      unsecured claims. The Plan also classifies post petition administrative
      claims. As confirmed, the Plan called for the reorganized debtor to make
      distributions to unsecured creditors within one year of the Plan's
      effective date, December 20, 1998. Once distributions were made to
      unsecured creditors, the Plan would be substantially consummated within
      the meaning of the Bankruptcy Code.

      - Preferred shareholders received common stock of the Company.

      - Approved common shareholders will retain their interest in the Company.
      The interest of shareholders with 10,000 shares or less (as listed on the
      records of American Stock Transfer only) shall be allowed, unless an
      objection was filed and upheld.

      - William Taylor is to receive 40% of the Company's outstanding stock,
      upon payment of all unsecured claims. Prior to payment, Taylor's stock is
      to be held in escrow. Taylor's interest is based upon his claim of
      $990,134 for consulting fees and other costs.

      - The Company's wholly-owned subsidiaries, 88 Redevelopment and 4808
      Corporation, were merged into Princeton American Corporation.

      The Plan was subsequently modified in January 1999 to extend certain
      deadlines of the Plan, including the deadline for making distributions to
      unsecured creditors. These deadlines were extended to 180 days following
      the entry of a final, non-appealable order resolving the claim of Harry
      and Irene Weiss (Note 10).

      The deadline for filing proof of ownership interest was also extended
      several times in an effort to give stockholders ample opportunity to file
      their proofs of interest. The Company and the Court compiled a final
      listing of valid proofs of interest. Initially, management estimated that
      there were approximately 15,000,000 shares of common stock (including
      Taylor's 40%


                                      F-12
<PAGE>   31
      Bankruptcy Claims, continued

      interest), which were established by this process. Management currently
      believes that the number of shares to be issued may be reduced to
      approximately 11,000,000 shares. In May 2001 there was new litigation
      (described in Note 10) regarding the shares outstanding. Because of this
      new litigation there is still uncertainty as to the exact number of shares
      that will ultimately be issued. The Court initially disallowed
      approximately 12,000,000 shares in this process primarily because the
      stockholders, including many of those held by brokers, failed to file
      proofs of interest. Upon completion of this process, stockholders' equity
      was restated effective to the year ended May 31, 1997 to reflect total
      capitalization of $2,475,350. Capitalization was computed based upon
      Taylor's ownership interest of 40% of all common stock in settlement of
      his claim for $990,134.

      On September 15, 2000, the Bankruptcy Court ordered Princeton American and
      its transfer agent, American Stock Transfer & Trust ("AST") to cancel all
      outstanding Princeton American share certificates and issue new share
      certificates reflecting the allowed interest of shareholders under the
      Plan of Reorganization for Princeton American and the Court's prior
      orders. The Court further ordered that Princeton American and AST are not
      subject to any claim based upon the cancellation of outstanding share
      certificates and the issuance of new certificates in accordance with the
      Court's orders. The final order became final and non-appealable on
      September 29, 2000.

      Princeton American is in the process of implementing the Court's order,
      and new share certificates will be issued for the allowed interests as
      soon as reasonably practicable. As of May 31, 2001, 2,286,430 shares had
      been issued.

      In connection with the issuance of new certificates, Princeton American
      has also initiated a process to change its trading symbol. Effective as of
      October 9, 2000, the trading symbol, PELT, has been officially cancelled,
      and no further trades will be made under that symbol. After new
      certificates have been issued to a majority of those shareholders
      possessing an allowed interest, a new trading symbol will be issued to
      Princeton American.

      During the year ended May 31, 2000 a settlement was reached with Hyman
      Center, the Company's former president, for a claim related to
      compensation due for services rendered prior to the bankruptcy. The
      settlement called for a cash payment of $4,300 and an unsecured claim of
      $100,000. The claim is to bear interest from January 1, 2000 until paid in
      full. A gain of $58,225 was recorded from this settlement.

      The Company has accrued interest at 8% on all unpaid bankruptcy claims
      since December 1997, with the exception of the Center claim.

      Upon resolution of the Weiss claim, management intends to explore the
      possibility of refinancing the buildings or the viability of merger
      candidates.


                                      F-13
<PAGE>   32
      10. Litigation and Liabilities in Dispute

      The Company is involved in litigation, arising from actions of the Company
      prior to the bankruptcy filing.

      In September 1993, the Company acquired residential real estate from Harry
      & Irene Weiss in exchange for 600,000 shares of the Company's restricted
      common stock, with an agreed upon value of $1.00 per share. As part of the
      agreement, the Company agreed that it would not sell or offer its stock
      for two years at a price less than $1.00 per share. However, the Company
      subsequently violated that agreement.

      Weiss filed a proof of claim with the Bankruptcy Court for an unsecured,
      pre-petition claim of $812,707. The Company objected to both the priority
      and amount of the claim. The Bankruptcy Court initially upheld the
      Company's objection and found that the Weiss claim was subordinated to the
      level of a shareholder claim, rather than an unsecured claim. The Court
      determined the amount of the claim to be $619,603. The District Court
      subsequently reversed the Bankruptcy Court and found that the Weiss's were
      entitled to assert an unsecured non-priority claim in the same amount. The
      Company has appealed this decision.

      The Weiss's also applied for an award of attorney's fees, which was
      denied. They also sought to convert the bankruptcy proceedings to Chapter
      7, which would require liquidation of the Company's assets. The Bankruptcy
      Court denied their motion.

      As the result of mediation proceedings, on February 9, 2001 the Company
      and Weiss agreed to settle their dispute for $560,000 in cash, plus
      interest at 10%, payable on the earlier of February 9, 2002 or the sale or
      refinancing of the 4808 Building. The Company is currently negotiating
      certain wording in the settlement agreement. The claim will be secured by
      a third position deed of trust on the 4808 Building. The Weiss's will also
      release all shareholder interest in the Company. The Company will have six
      months from the date of the order to settle all bankruptcy claims.

      Onset Investments has filed two proofs of claim, totaling $200,713 for
      damages resulting from securities transactions prior to the bankruptcy
      filing. The Company has objected to the validity, priority and amount of
      these claims and intends to defend these claims vigorously. To date, the
      Company and Onset have been unable to settle the dispute and therefore the
      claim is currently unresolved and scheduled for a hearing.

      Legal counsel is unable to determine the outcome and amount of potential
      loss from these claims. However, the Company has recorded a liability for
      the amount of the Weiss claim originally approved by the Court. The
      liability will be adjusted to the amount of the settlement once the Order
      Approving Settlement has been issued.

                                      F-14
<PAGE>   33
      10. Litigation and Liabilities in Dispute, continued

      During the year ended May 31, 2000, the Company reached a settlement with
      a former officer and director, which required him to pay the Company
      $125,000 in exchange for certain promissory notes, assets received upon
      his termination from the Company and other claims filed by the Company.

      The terms of the mortgage note described in Note 7 are also being
      contested.

      In May 2001 a group of individuals filed a motion to set aside the Court
      Order which canceled all outstanding share certificates and ordered the
      issuance of new shares. The group of individuals obtained stock in the
      Company after confirmation of the Plan in November 1997 and they assert
      that the Company and its president failed to adequately notify them that
      the stock obtained might not be valid under the plan. They have also filed
      a separate Complaint asserting claims for equitable relief, securities
      fraud, breach of fiduciary duty and negligence. The Company believes the
      Motion and the Complaint are without merit and has vigorously defended
      against them. Several hearings have been held in the Bankruptcy Court and
      the Company is awaiting the Judge's decision.

      Legal counsel is unable to reasonably evaluate the Company's potential
      loss if the Court grants the group of individuals their requested relief.
      If the Order is set aside, the Company will be currently unable to pursue
      its application with the NASD to obtain OTC Bulletin Board status for
      trading in its shares.

      11. Accrued Real Estate Taxes

      The Company was delinquent on its real estate tax obligations during the
      years ended May 31, 2001 and 2000, which resulted in tax liens being
      placed on both its commercial properties. Interest incurred on real estate
      tax obligations was approximately $20,000 in 2001 and $30,000 in 2000.

      12. Lease Commitments

      The Company leases office space in its commercial buildings located at
      2222 E Camelback and 4808 North 22nd Street in Phoenix, Arizona. Future
      minimum lease payments required under these leases are as follows:

<TABLE>
<CAPTION>
      Year ended May 31,                                               Amount
      ------------------                                               ------
<S>                                                                <C>
      2002                                                         $  910,558
      2003                                                            801,230
      2004                                                            748,763
      2005                                                            748,631
      2006                                                            435,751
                                                                   ----------
                                                                   $3,644,933
</TABLE>


                                      F-15
<PAGE>   34
      12. Lease Commitments, continued

      Effective April 30, 2000, the Company and a former tenant entered into a
      Lease Termination and Release Agreement, whereby the Company was required
      to pay the tenant $50,000 in five equal monthly payments beginning July 1,
      2000. In connection with the new five-year lease, the tenant paid a
      $75,000 fee to obtain the right to lease the space.

      The office building located at 2222 E. Camelback Road is subject to two
      ground leases. The first lease was entered into on November 1, 1974. The
      second lease was entered into on August 1, 1977. Both leases are net
      leases, with terms of 99 years. On the 15th anniversary and for each
      succeeding ten-year term, the rent is to be adjusted to an annual rate
      equal to 8% of the fair market value of the leased premises, excluding
      improvements. The rate on the first lease was adjusted on November 1, 1999
      to a monthly rate of $4,933. The second lease was adjusted to a monthly
      rate of $3,100 on the 15th anniversary of the lease and will be adjusted
      in 2002. Rent expense on these two leases for the years ended May 31, 2001
      and 2000 was $96,400 and $95,444, respectively.

      The office building located at 4808 N. 22nd Street is subject to a ground
      lease, the term of which extends through July 31, 2031. The lease is a net
      lease. The rental rate as of May 31, 2001 was $2,395 and is subject to an
      annual adjustment based on the Consumer Price Index. Rent expense on this
      lease for the years ended May 31, 2001 and 2000 was $28,572 and $27,644,
      respectively.

      The Company has a limited number of tenants in both buildings. As such,
      the loss of certain tenants could adversely impact the Company.

      The Company's future minimum lease obligations on the ground leases for
      the next five years are approximately $125,000 per year, based upon the
      current valuation.

      13. Deferred Rental Income

      During the year ended May 31, 2001, the Company negotiated two leases that
      provided for a tenant improvement allowance and lease commission to be
      paid by the tenants and then deducted from the rent due during the 3rd
      through 12th months of the leases. The total amounts of the tenant
      improvements of $107,225 and the leasing commission of $17,540 were
      capitalized and are being amortized over the life of the lease. The
      deferred rental income is being amortized straight-line over ten months.
      Deferred rental income of $33,634 was recognized during the year ended May
      31, 2001 leaving a balance of $91,131 at May 31, 2001.

                                      F-16
<PAGE>   35
      14. Disclosures about Fair Value of Financial Instruments

      Statement of Financial Accounting Standards No. 107, "Disclosures about
      Fair Value of Financial Instruments", requires that the Company disclose
      estimated fair values for its financial instruments. The following summary
      presents a description of the methodologies and assumptions used to
      determine such amounts.

      Fair value estimates are made at a specific point in time and are based on
      relevant market information and information about the financial
      instrument; they are subjective in nature and involve uncertainties,
      matters of judgment and, therefore, cannot be determined with precision.
      These estimates do not reflect any premium or discount that could result
      from offering for sale at one time the Company's entire holdings of a
      particular instrument. Changes in assumptions could significantly affect
      the estimates.

      Since the fair value is estimated as of May 31, 2001, the amounts that
      will actually be realized or paid at settlement of the instruments could
      be significantly different.

      The carrying amount of cash and cash equivalents is assumed to be the fair
      value because of the liquidity of these instruments. The recorded amount
      of the investment in marketable securities approximates market based upon
      quoted market values. The investment in the commission contract has been
      discounted to its estimated present value using market rates of interest.
      Accounts payable and accrued expenses approximate fair value because of
      the short maturity of these instruments. The recorded balance of notes
      payable and bankruptcy claims are assumed to be the fair value, since the
      rates specified approximate current market rates.

      15. Income Taxes

      The components of net deferred tax assets at May 31, 2001 and 2000,
      assuming an effective tax rate of 40%, are as follows:

<TABLE>
<CAPTION>
                                                            2001          2000
                                                            ----          ----
<S>                                                      <C>         <C>
      Net operating loss carryforward                    5,780,000   $5,730,000
      Depreciation of marketable securities                170,000      150,000
      Difference in basis of property & equipment          110,000      170,000
      Accrued real estate taxes                            120,000       90,000
      Less valuation allowance                          (6,180,000)  (6,140,000)
      Net deferred tax assets                                    -            -
</TABLE>

      The expected tax benefit from the net loss before income taxes was offset
      by a valuation allowance, since the Company has not yet developed a
      history of profitable operations. During the periods ended May 31, 2001
      the valuation allowance increased by approximately $40,000. For 2000, it
      decreased by approximately $40,000.

                                      F-17
<PAGE>   36
      15. Income Taxes, continued

      At May 31, 2000, the Company has approximately $14,000,000 in unused
      federal net operating loss carryforwards, which expire from 2002 through
      2021. The state net operating loss carryforwards, which approximate
      $4,800,000 expire from 2002 through 2006.

      Due to significant changes in ownership in prior years and changes in the
      Company's operations, the amount of operating losses available to offset
      future income taxes may be significantly limited. The Company has not yet
      completed an evaluation of the amount of losses that are available for
      utilization by the Company or a prospective merger candidate.


                                      F-18