UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C., 20549



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FORM 10-KSB



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ANNUAL REPORT FILED PURSUANT TO SECTION 13 OR 15(d) OF
THESECURITIES ACT OF 1934

For the fiscal year ended May 31, 2003

Commission File No. 0-5141



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PRINCETON AMERICAN CORPORATION

(Name of small business issuer in its charter)



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

| | 2222EastCamelbackRoad,Suite105Phoenix,AZ(Address of principal office) |  | 85016(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, $.001 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 o

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 $ 1,120,681.

The aggregate market value of voting stock held by non-affiliates of the registrant is not determinable
  as of August 28, 2003. In October, 2002 the Company was elevated by the NASD to Bulletin Board status (OTC:BB symbol PAMC). There has been only one trade
  in the stock (5000 shares at $ .001) since.

The number of shares
outstanding of the issuer's common stock, as of the latest practicable date of
August 28, 2003 was 8,517,379.




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Princeton American
CorporationFORM 10-KSB

FOR THE FISCAL YEAR ENDED MAY 31, 2003

TABLE OF CONTENTS



|        |  |                                                                                                                                                                                                                                                                                                                 | Page
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----
|PARTI   |  |                                                                                                                                                                                                                                                                                                                 |     
|        |  |                                                                                                                                                                                                                                                                                                                 |     
|        |  | Item
          1
          -
          Description
          of
          Business                                                                                                                                                                                                                              | 2   
|        |  |                                                                                                                                                                                                                                                                                                                 |     
|        |  | Item
          2
          -
          Description
          of
          Property                                                                                                                                                                                                                              | 3   
|        |  |                                                                                                                                                                                                                                                                                                                 |     
|        |  | Item
          3
          -
          Legal
          Proceedings                                                                                                                                                                                                                                              | 5   
|        |  |                                                                                                                                                                                                                                                                                                                 |     
|        |  | Item
          4
          -
          Submission
          of
          Matters
          to
          a
          Vote
          of
          Security
          Holders                                                                                                                                      | 7   
|        |  |                                                                                                                                                                                                                                                                                                                 |     
|PARTII  |  |                                                                                                                                                                                                                                                                                                                 |     
|        |  | Item
          5
          -
          Market
          for
          Common
          Equity
          and
          Related
          Shareholder
          Matters                                                                                                                                           | 7   
|        |  |                                                                                                                                                                                                                                                                                                                 |     
|        |  | Item
          6
          -
          Management's
          Discussion
          and
          Analysis
          or
          Plan
          of
          Operation                                                                                                                                          | 8   
|        |  |                                                                                                                                                                                                                                                                                                                 |     
|        |  | Item
          7
          -
          Financial
          Statements                                                                                                                                                                                                                                           | 9   
|        |  |                                                                                                                                                                                                                                                                                                                 |     
|        |  | Item
          8
          -
          Changes
          in
          and
          Disagreements
          with
          Accountants
          on
          Accounting
          Financial
          Disclosure                                                                                               | 9   
|        |  |                                                                                                                                                                                                                                                                                                                 |     
|PARTIII |  |                                                                                                                                                                                                                                                                                                                 |     
|        |  | Item
          9
          -
          Directors
          and
          Executive
          Officers,
          Promoters
          and
          Control
          Persons;
          Compliance
          with
          Section
          16(a)
          of
          the
          Exchange
          Act | 9   
|        |  |                                                                                                                                                                                                                                                                                                                 |     
|        |  | Item
          10
          -
          Executive
          Compensation                                                                                                                                                                                                                                        | 10  
|        |  |                                                                                                                                                                                                                                                                                                                 |     
|        |  | Item
          11
          -
          Security
          Ownership
          of
          Certain
          Beneficial
          Owners
          and
          Management                                                                                                                                    | 11  
|        |  | Item
          12
          -
          Certain
          Relationships
          and
          Related
          Transactions                                                                                                                                                                                  | 11  
|        |  |                                                                                                                                                                                                                                                                                                                 |     
|        |  | Item
          13
          -
          Exhibits
          and
          Reports
          on
          Form
          8-K                                                                                                                                                                                      | 11  
|        |  |                                                                                                                                                                                                                                                                                                                 |     
|        |  | Item
          14
          -
          Controls
          and
          Procedures                                                                                                                                                                                                                             | 11  



|SIGNATURES           | 12 
|-------------------- | ---
|                     |    
|FINANCIAL STATEMENTS | F-1

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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 potential litigation referred to in this report;

-any change in tax laws which would change the Company's ability to
utilize its tax loss carry-forward or the inability under existing tax laws for
the full utilization of such tax loss carry-forward;

-certain operations of the Company, including the formation of alliances
with other entities, will temporarily 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. The Company does not promise to update
forward-looking information to reflect actual results or changes in assumptions
or other factors that could affect those statements.

PART
I

|ITEM 1. | DESCRIPTION OF BUSINESS
|------- | -----------------------

**HISTORICAL**

Princeton
  American Corporation
  was previously
  named Princeton
  Electronic
  Products and
  registered
  in New Jersey.
  The Company
  has been a
  registered
  Nevada corporation
  since September
  7, 1995, currently
  in good standing,
  and is registered
  and doing
  business in
  Arizona as
  a resident
  corporation.

CURRENT COMPANY BUSINESS.

As
  of May 31,
  2003, Princeton's
  primary business
  activity is
  the management
  of its assets
  including
  two office
  buildings
  totaling 50,000
  square feet
  in Phoenix,
  Arizona. The
  Company has
  4 employees.
  None of the
  Company's
  employees
  is represented
  by a labor
  union and
  we believe
  that employee
  relations
  are good.

See Item 2 for a detailed description of competitive conditions and properties.

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.

2

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| | 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 feet of office space. The property includes a banking facility
with a drive-in teller's window and a vault on the ground floor. The Company
paid approximately $296,000 cash for the building including closing costs and
commissions.

Princeton
  occupies 1497
  square feet
  (4.86%) of
  the total
  leasable space
  in this building.
  As of May
  31, 2003,
  the balance
  of the remaining
  leasable space
  was occupied
  by unaffiliated
  tenants, producing
  approximately
  $ 711,000
  of income
  annually.
  The realty
  taxes for
  2222 are approximately
  $ 80,000.
  Additional
  information
  about this
  property is
  included in
  the Property
  Information
  and Operating
  Data Table
  at the end
  of this Item
  2.

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.   The property has since been refinanced.   As of May 31, 2003 the building is 100% leased
and produces approximately $ 415,000 of income annually. The Realty Taxes are
approximately $51,000. Additional information about this property is included in
the Property Information and Operating Data Table at the end of this Item 2.

MESA TRAILER
PARK COMMISSION RECEIVABLE.

In March, 1994
Princeton acquired a real estate brokerage commission that provides for payments
equal to 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 runs from 1980 to 2031. The commission agreement presently
provides quarterly payments of $4062.50 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, 2003 approximately $124,000 had been paid
and $678,000 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 teller window and a bank
vault.

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



|Principal:     |  | $ | 2,784,567  |  
|-------------- |  | - | ---------- | -
|Interest rate: |  |   | 8.25       | %
|Payment:       |  | $ | 22,503.68  |  
|Maturity:      |  |   | April 2007 |  

(On April 15, 2002,
Southwest Bank of Phoenix, one of the prime tenants in the building, made two
loans to the Company aggregating $4,500,000. The loans are secured by first
deeds of trust on both of the Company's office buildings, in the amount of
$2,825,000 for the 2222 East Camelback Road building and $1,675,000 for the 4808
North 22nd Street facility.)

3.Lease Terms. The Building is subject to two 99 year net ground leases
that expire 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 during the 2004 fiscal
year.

3

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4.Renovation or Improvement Plans. In March, 2001, the Company commenced
remodeling of the common areas of the building including a renovated lobby,
hallways and four bathrooms. These improvements are essentially complete and
were paid for from the proceeds of a loan obtained from Southwest Bank which was
paid in full from the refinance proceeds of the first deed of trust mentioned
above.

5.Competitive Conditions. This property is located in an area known as the
"Camelback Corridor" which is comprised predominately of Class A office
buildings. The area is considered one of the most prestigious in the
metropolitan Phoenix. This building competes with both higher and lower priced
office space in the immediate vicinity.

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

7.General Information.

(i)Occupancy Rate - 100% - as of May 31, 2003.

(ii)Tenants - Rent Roll As of May 31, 2003.



|TENANT                               |  |       | RENTABLESQUARE
FEET |       | TENANTSHARE |  | MONTHSTOEXPIRATION |     | EFFECTIVERATE/YR/SQUAREFEET |       | CURRENTBASEPERMONTH |  
|------------------------------------ |  | ----- | ------------------- | ----- | ----------- |  | ------------------ | --- | --------------------------- | ----- | ------------------- | -
|                                     |  |       |                     |       |             |  |                    |     |                             |       |                     |  
|Princeton American Corp.             |  | 1,497 |                     | 4.86  | %           |  | N/A                |     |                             | N/A   |                     |  
|Eubanks Consulting                   |  | 325   |                     | 1.06  | %           |  | N/A                |     | $                           | 24.00 |                     | $
|Southwest Bank                       |  | 8,057 |                     | 26.17 | %           |  | 28                 | (1) | $                           | 24.84 |                     | $
|GBLS Commercial Real Estate Services |  | 3,301 |                     | 10.73 | %           |  |                    | (2) |                             | 24.00 |                     |  
|First Financial Title Agency         |  | 9,541 |                     | 31.00 | %           |  | 32                 |     | $                           | 23.19 |                     | $
|Nationwide Vision                    |  | 5,084 |                     | 16.52 | %           |  | 34                 |     | $                           | 23.00 |                     | $
|International Circuit Sales          |  | 2,973 |                     | 9.66  | %           |  | 50                 |     | $                           | 21.79 |                     | $

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

(2)Lessee had extended lease to December 1, 2002 with right to terminate
after May 1, 2002. This tenant is currently leasing on a month to month
basis.

(iii)Tenants principal business, occupations and professions -

Princeton American Corporation - owner and manager of building. Southwest
Bank - banking. GBLS Commercial Real Estate Services - real estate brokers.
First Financial Title Agency - title insurance and escrow services. Nationwide
Vision Centers - outpatient laser eye surgery. International Circuit Sales -
computer component sales- .Eubanks Consulting, Land Planners, Construction and
Development Managers

(iv)Average rental per square foot for the year ending 5/31/03, $22.18 (not
including parking and miscellaneous income)

(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 a life
  of 39 years,
  using the
  Modified Accelerated
  Cost Recovery
  Method for
  federal income
  tax purposes.

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:



4

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|Principal:     |  | $ | 1,650,154  |  
|-------------- |  | - | ---------- | -
|Interest rate: |  |   | 8.0        | %
|Payment:       |  | $ | 13,058.97  |  
|Maturity:      |  |   | April 2004 |  

3.Lease
  Terms. Subject
  to a ground
  lease which
  expires July
  31, 2031.
  The current
  rent rate
  is $2,499
  per month,
  subject to
  annual adjustment
  based on the
  Consumer Price
  Index.

4.Renovation or Improvement Plans. 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
$100,000 was contributed by the Company. During the months of January and
February, 2002, the Company leased Suite 150 previously occupied by
Shaeffer-Smith-Ankeney Insurance Agency to WRG Design, LLC. for a new three year
term. The cost of tenant improvements to the new WRG spaces of approximately
$26,500 was paid by the Princeton American Corporation. Alliance Investors, LLC
(the tenant in Suite 200) expanded its occupancy of the entire second floor of
this building to include the former WRG spaces and has made extensive
improvements to that suite at its own expense. This office building is now fully
leased.

5.Competitive Conditions.

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

7.General Information.

(i)Occupancy Rate: 100% - effective as of May 31, 2003.

(ii)Tenants - Rent Roll as of May 31, 2003.



|                        |        |                     |             |    |                     | EFFECTIVE RATE/YR/
|----------------------- | ------ | ------------------- | ----------- | -- | ------------------- | ------------------
|                        |        |                     |             |    |                     |                   
|TENANT                  |        | RENTABLESQUARE FEET | TENANTSHARE |    | MONTHS TOEXPIRATION |                   
|                        |        |                     |             |    |                     |                   
|Alliance Investors, LLC | 10,075 | 52.40               | %           | 31 |                     | $                 
|Alliance Investors, LLC | 3,302  | 17.17               |             | 8  |                     | $                 
|WRG Design              | 5,849  | 30.43               | %           | 21 |                     | $                 

(iii)Principal business, occupations and professions -

Alliance Investors, LLC - residential real estate. WRG Design -
CivilEngineers, Landscape Architecture

(iv)Average effective rental per square foot for year ending 5/31/03 - $21.04 (not
including parking and miscellaneous income)

(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 a life
  of 39 years,
  using the
  Modified Accelerated
  Cost Recovery
  Method for
  federal income
  tax purposes.

| | ITEM
      3. | LEGAL
      PROCEEDINGS
| | ------------- | -----------------------

CHAPTER 11 BANKRUPTCY LITIGATION.

ADMINISTRATIVE
CLAIMS.

Administrative
claims for professional and other services have been paid by the Company.

5

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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 had been litigated or settled, reducing the number of claims to 50 and the amount to $1,468,564, including principal
  and interest, at the end of the fiscal year 2001.

Payments of
$1,286,393 in principal and interest were made during the year ended May 31,
2002 in settlement of bankruptcy claims and litigation. Claims totaling $9,229
were determined to be invalid. A gain of $23,646 was recognized in connection
with the cancellations and settlements.

During the year ended May 31, 2003 additional claims and litigation were settled. Additionally
  the Company determined that certain administrative convenience claims were not valid. The Company recognized a gain of $72,208 in connection with the
  cancellations and settlements. Two of the claims, which had been paid during the year ended May 31, 2002, were recorded on the books again since the settlement
  checks had never been tendered for payment. As of May 31, 2003 there were nine unpaid claims totaling $137,333 and accrued interest at 8% of $38,561.

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 Court orders reducing such outstanding shares to approximately
10,923,918 shares. During the current reporting year, the outstanding shares
were further reduced to 8,517,379.

Unresolved Claims.
All proof of interest claims have been resolved by the Court.

RESOLVED
CREDITOR'S CLAIMS.

A proof of claim had been filed with the bankruptcy court by Harry and Irene Weiss in the amount
  of $812,707 which was objected to by the company and resulted in several lawsuits. (See note 9 to the financial statements) This issue was settled on
  February 9, 2001. The company agreed to pay the Weiss's $560,000 in cash plus 10% interest until paid. During the year ended May 31, 2002 the settlement
  amount of $560,000 lus accrued interest in the amount of $76,823 was paid in full settlement of this claim.

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 alleged that they should be
recognized as owners of an unspecified number of shares (approximately
2,000,000) that they purchased after the Bankruptcy Court proceedings began
without establishing that these shares were the subject of allowed interests
under the Plan of Reorganization. The Plaintiffs petitioned the Court to vacate
its September 15, 2001 order which canceled all outstanding Princeton American
share certificates and authorized the issuance of new certificates reflecting
the allowed interests of shareholders under the Plan of Reorganization. At least
three of the Plaintiffs (Larry Testasecca, Charles Crehore and Eugene Targosz)
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 Mr. Targosz and Mr. Testasseca.

On November 8, 2001,
the Court issued a Memorandum Decision and Order denying Plaintiffs petition.
Plaintiffs appealed this decision to the U.S. District Court for the District of
Arizona. On July 8, 2002, the District Court dismissed the appeal because of the
failure of the plaintiffs to pursue it. The remaining segment of the lawsuit was
resolved by a Motion for Summary Judgment filed by the Company and William C.
Taylor which was subsequently granted by the Court.

6

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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 with Princeton. During the current
fiscal year, settlement negotiations were concluded resulting in the payment to
Onset of $25,000 cash and 25,000 shares of stock in the company.

CURRENT LITIGATION:
None

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

The
  first Annual
  Meeting of
  Shareholders
  since September,
  1995 was held
  at the Phoenix
  Law Offices
  of Lewis &
  Roca on November
  27, 2002.
  The meeting
  was called
  to order by
  Board Chairman
  William C.
  Taylor at
  10:05 AM.
  Present were
  Joseph P.
  Evers, CPA,
  the Company's
  auditor. Shareholders
  representing
  62% of the
  then issued
  and outstanding
  shares were
  present at
  the meeting.
  Mr. Bird served
  as Secretary.

Mr. Bird noted that a quorum existed for the conduct of business at the meeting.

Election
  of Directors.
  Directors
  McKinnon,
  Bird and Taylor
  announced
  that they
  were candidates
  for reelection
  to the Board
  to serve until
  the next Annual
  Meeting of
  Shareholders.
  There were
  no other nominations
  for director
  and the slate
  was duly elected
  by the unanimous
  vote of the
  shareholders
  present.

Adoption
  of Stock Compensation
  Plan. Mr. Taylor
  presented
  and reviewed
  a stock compensation
  package which
  had been recommended
  by the Board
  of Directors.
  The Plan is
  designed to
  provide additional
  equity incentives
  to officers
  and directors
  as well as
  qualified
  non-affiliates
  of the Company.
  Mr. Taylor
  noted that
  there are
  no plans to
  activate the
  compensation
  package at
  this time.
  On motion
  duly made,
  the shareholders
  present unanimously
  approved and
  adopted the
  plan.

The Directors set
the next Annual Meeting of Shareholders to be held at approximately the same
date in 2003. There being no further business, the meeting was
adjourned.

Election of
Officers. Immediately following the Annual Meeting, the directors met and
elected officers as follows:

William C. Taylor,
Chairman and Treasurer

Roderick W. McKinnon, President, CEO and CFO

Scott E. Bird, Secretary and CFO

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:

(1) 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.

(2) Effective as of
October 9, 2000 the trading symbol "PELT" was cancelled by the NASD at the
Company's request. The Company had 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. On October 17, 2002 the Company was
notified by its sponsoring broker that the NASD has determined that Princeton
American Corporation is now eligible for trading on the OTC Bulletin Board. The
Company has been assigned the trading symbol: "PAMC".

7

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On June 11, 2002 the
Company requested entry of an order approving a procedure for handling
distributions to creditors and shareholders that the Company had been unable to
locate or who had not responded to the Company's inquiries (the "Nonresponsive
Claimants"). Specifically, Princeton requested that the Court:

| | (1) | authorize
      Princeton to place the monetary and stock distributions due to
      Nonresponsive Claimants in escrow;
| | --- | -----------------------------------------------------------------------------------------------------------------------

| | (2) | direct
      Princeton to conduct a national database search for addresses of
      Nonresponsive Claimants that it had been unable to locate as of that
      date;
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (3) | direct
      Princeton to send by U.S. Mail a notice of distribution to Nonresponsive
      Claimants to their last known addresses as updated by the nationwide
      database search;
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (4) | direct that
      distributions due to nonresponsive creditors who fail to claim their
      distributions within six months of notice be vested in the Company;
      and
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (5) | authorize
      Princeton to remove from its share register the names of all nonresponsive
      shareholders who do not claim their distributions within six months of
      notice.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Bankruptcy Court granted the motion on July 31, 2002. Pursuant to the Order, the Company
  followed the directives of the Court. Notices mailed to each of the Nonresponsive Claimants established May 13, 2003 as the last day for compliance. 60
  shareholders representing 1,056,478 shares responded by the deadline. No creditor's claims were received by the Company.

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 Registered
  Securities:
  In October,
  2002 the Company
  was elevated
  by the NASD
  to Bulletin
  Board status.
  Since that
  time there
  has only been
  one trade
  in the stock
  of 5,000 shares
  at less than
  $0.01 per
  share.

CONFIRMATION OF
SECURITIES HOLDINGS

The final
shareholder equity base established by Order of the Bankruptcy Court is set
forth below:



|Shares issued to William C. Taylor: (1) |  | 4,527,529 | 
|--------------------------------------- |  | --------- | 
|Share issued to others:                 |  | 3,989,850 | 
|TOTAL SHARES AS OF MAY 31, 2003 (2)     |  | 8,517,379 | 

(1) Represents fifty three and sixteen hundredths percent (53.16%) of the
total of all of Princeton's common stock which was outstanding as of May 31,
2003.

(2) Represents a downward adjustment in total shares from 14,148,047 as
set forth in the May 31, 2000 and 2001 10KSBs. This adjustment conforms with the
Final Order Allowing Shares, after taking into consideration certain shares for
which the 10:1 reverse split calculation had not been made as well as the July
31, 2002 Court Order relating to Nonresponsive Claimants. As of May 31, 2003
there are 405 shareholders of record. No additional shares have been authorized
for issuance.

|ITEM 6. | MANAGEMENT DISCUSSION AND ANALYSIS BACKGROUND:
|------- | ----------------------------------------------

During the past year
Princeton American management has 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.Payment
  of substantially
  all of the
  creditors
  claims, thereby
  moving Princeton
  closer to
  emergence
  from the bankruptcy
  proceedings.
  The proceeds
  resulting
  from the Southwest
  Bank loans
  were used
  to clear all
  of the company's
  prior debt
  including
  principal
  and interest
  to bankruptcy
  claimants.
  One claim
  is still on
  the company's
  books which
  management
  considers
  invalid. At
  such time
  as the validity
  of this claim
  is determined
  an additional
  adjustment
  will be made.

8

---

4.       The
  increase in
  this year's
  consulting
  fees was due
  to the full
  time compensation
  to Mr. Roderick
  W. McKinnon
  as President,
  CEO and CFO.
  The consulting
  costs will
  be reduced
  in fiscal
  year 2004
  by the resignation
  of Mr. McKinnon. 5.
         The
  resolution
  and settlement
  of a majority
  of all claims
  and legal
  actions in
  the prior
  year significantly
  reduced the
  professional
  fees in this
  year.
  6.        The favorable settlement of many of the outstanding monetary claims realized a gain in Other Income.
  7.        The
  company investment
  in marketable
  securities
  was written
  down to market
  in the prior
  year and was
  subject only
  to market
  change in
  this fiscal
  year.8.       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.

9.
         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
  five 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
  $680,000.
  As of May
  31, 2003 the
  2222 East
  Camelback
  Road building
  is 100% occupied.

10.       The
  office building
  at 4808 North
  22nd Street
  was leased
  to Alliance
  Investors,
  LLC. for a
  five year
  term commencing
  in February,
  2001 and WRG
  Design for
  a three year
  term commencing
  in February,
  2002. Now
  fully occupied,
  this building
  is currently
  producing
  approximately
  $400,000 in
  annual revenues.

11.       Management
  will require
  additional
  capital of
  at least $1,600,000
  during the
  next twelve
  months to
  payoff or
  refinance
  the 4808 North
  22nd
  Street office
  building,
  the mortgage
  on which is
  due in April
  2004. The
  Company expects
  to renew the
  three year
  Alliance Lease
  in that building
  which also
  expires during
  the current
  fiscal year.
  In the event
  that this
  does not occur,
  the Company
  will attempt
  to release
  this space.
  There is no
  assurance
  that the Company
  will be successful
  in this endeavor.

12.       Management
  believes that
  the completion
  of these "clean
  up" activities
  this and last
  fiscal year
  will put Princeton
  a major step
  closer to
  attracting
  potential
  investors
  and merger
  prospects
  (in particular
  those that
  can take advantage
  of the Company's
  $15,000,000
  tax loss carry
  forward).
  Armed with
  a fundamentally
  sound financial
  statement,
  management
  intends to
  pursue all
  available
  opportunities
  for strategic
  alliances
  and potential
  acquisitions,
  with a view
  toward enhancing
  shareholder
  value.

|ITEM 7. | FINANCIAL STATEMENTS
|------- | --------------------

The full text of the
Company's audited, consolidated financial statements for the fiscal years ended
May 31, 2003 and 2002 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.

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, 2002 were:



|NAME                                                      |  | AGE |  | POSITION                   |  | DATE ELECTED (*)       
|--------------------------------------------------------- |  | --- |  | -------------------------- |  | -----------------------
|                                                          |  |     |  |                            |  |                        
|William C.
      Taylor                                   |  | 71  |  | Chairman,
      & Director |  | November 27,
      2002
|                                                          |  |     |  |                            |  |                        
|Roderick
          W.
          McKinnon
          III(1) |  | 56  |  | President, CEO & Director  |  | November 27,
      2002
|                                                          |  |     |  |                            |  |                        
|Scott E.
      Bird                                       |  | 79  |  | CFO &
      Director       |  | November 27,
      2002

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

RESUMES

Scott E. Bird is the Managing Consultant of SASolutions, LLC, an integrated business and information
  technology consulting group and President of Pacific Aviation Services, an international aviation procurement and support company. Mr. Bird served
  as Director and Chief Financial Officer of the Company until his resignation as CFO in May, 2001. Mr. Bird was re-elected as Vice President - Shareholder
  relations in February, 2003 and as Chief Financial Officer in July, 2003.   His term as a director will expire on the date of the next Annual Shareholder's
  Meeting.

9

---



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.
  Mr. Taylor
  was elected
  Chairman,
  President
  and CEO of
  the reorganized
  Company in
  1998 and is
  serving as
  an Officer
  and Director
  of the Company
  to date. 
  His term of
  office will
  expire on
  the date of
  the next Annual
  Shareholders
  Meeting.

Roderick W. McKinnon III has been a Director and Secretary of the Company since 1997. He assumed
  the additional office of President and CEO on November 27, 2002. Since 1974, Mr. McKinnon has been President of R.W. McKinnon & Co., Inc., an
  investment banking and development service company. He graduated from Northern Arizona University with a degree in Political Science and serves on several
  boards of directors.

The Company has no audit committee or financial expert.

(1)On July 25, 2003 Mr. McKinnon resigned as an officer and director of Princeton
  American Corporation. He is no longer affiliated with the Company.

|ITEM 10. | EXECUTIVE COMPENSATION
|-------- | ----------------------

The following table
sets forth information concerning the compensation received for the fiscal year
ended May 31, 2003 for services rendered to the Company in all capacities by the
Company's Chief Executive Officer and other executive officers..

SUMMARY
COMPENSATION TABLE



|NAME AND
      PRINCIPAL POSITION          |  |   | ANNUAL CASHCOMPENSATION |  | OTHER (1) |      | SECURITIESOPTIONS |     | ALL OTHERCOMPENSATION |        
|------------------------------------------ |  | - | ----------------------- |  | --------- | ---- | ----------------- | --- | --------------------- | -------
|                                           |  |   |                         |  |           |      |                   |     |                       |        
|William C. Taylor                          |  | $ | 120,000                 |  | $         | 1000 |                   | -0- |                       | -0-    
|Chairman CEO and Director                  |  |   |                         |  |           |      |                   |     |                       |        
|                                           |  |   |                         |  |           |      |                   |     |                       |        
|Roderick
          W
          McKinnon(3) |  |   | -0-                     |  | $         | 1000 |                   |     |                       | 122,000
|Secretary Treasurer Director               |  |   |                         |  |           |      |                   |     |                       |        
|                                           |  |   |                         |  |           |      |                   |     |                       |        
|Scott E Bird (2)                           |  |   | -0-                     |  | $         | 1000 |                   | -0- |                       | 7,100  
|Director                                   |  |   |                         |  |           |      |                   |     |                       |        

(1)Directors are compensated at the rate of $200 for each formal meeting of
the Board of Directors. There were 5 meetings in fiscal year 2003.

(2)Mr. Bird is a shareholder of SASolutions, L.L.C. a financial
consulting firm which received approximately $7,100 through May 31, 2003 for
consulting services to the company.

(3)Mr. McKinnon is associated with a real estate brokerage company that
assisted Princeton with the leasing of several of its suites. In connection with
these services his firm has been paid $ 81,984 in real estate leasing
commissions during the last two fiscal years. In addition, Mr. McKinnon
received consulting fees of approximately $85,000 during the current fiscal
year.

| | 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.



|NAME                     |  |                | TITLE |           | COMMON SHARES |           | PERCENT OF CLASS | 
|------------------------ |  | -------------- | ----- | --------- | ------------- | --------- | ---------------- | 
|                         |  |                |       |           |               |           |                  | 
|William C. Taylor        |  | Chairman & CEO |       | 4,537,529 |               | (1) 53.16 | %               
|2222 East Camelback Road |  |                |       |           |               |           |                 
|Suite 105                |  |                |       |           |               |           |                 
|Phoenix, Arizona 85016   |  |                |       |           |               |           |                 

10

---



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

The above percentage
of ownership is based on 8,517,379 shares of the Company's common stock
outstanding as of May 31, 2003. 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."

Mr. William C. Taylor who had loaned the Company temporary operating funds, as reported in
  prior years, continues to receive interest and principal reduction payments as cash flow permits as reported in the financial statements, beginning at
  page F-1 of this report.

Certain Transactions with companies affiliated with Scott. E. Bird and Roderick W. McKinnon
  III are described in Item 10.

|ITEM 13. | EXHIBITS AND REPORTS ON FORM 8-K
|-------- | --------------------------------

(a)Exhibits

|Exhibit
      No.                                                                                                                                                                                                                                                                                                                                                   | Description
      and Method
      of Filings                                                                                                                                                                                                                                                                                                                                             
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|2.1                                                                                                                                                                                                                                                                                                                                                                 | Plan
      of Reorganization
      (i)                                                                                                                                                                                                                                                                                                                                                    
|3.1                                                                                                                                                                                                                                                                                                                                                                 | Articles
      of Incorporation,
      as amended
      (ii)                                                                                                                                                                                                                                                                                                                              
|3.2                                                                                                                                                                                                                                                                                                                                                                 | By-Laws,
      as amended(ii)                                                                                                                                                                                                                                                                                                                                                             
|4.1                                                                                                                                                                                                                                                                                                                                                                 | 8K dated June 18, 2002 regarding Princeton American’s motion to the Bankruptcy Court regarding non responsive claimants and
      shareholders. The motion asked for the court’s permission to cancel shares and claims of non responsive shareholder’s after the company
      made certain efforts to locate each of these people. This motion was granted by the Court on July 31, 2002
|4.2                                                                                                                                                                                                                                                                                                                                                                 | 8K dated October 24, 2002 regarding Princeton American Corporation listing on NASD OTC:BB                                                                                                                                                                                                                                                                                                 
|31.1                                                                                                                                                                                                                                                                                                                                                                | Certificate
      of Chief
      Executive
      Officer
      pursuant
      to Section
      302 of
      Sarbanes-Oxley
      Act of
      2002
      (filed
      herewith)                                                                                                                                                                                                           
|31.2                                                                                                                                                                                                                                                                                                                                                                | Certificate
      of Chief
      Financial
      Officer
      pursuant
      to Section
      302 of
      Sarbanes-Oxley
      Act of
      2002
      (filed
      herewith)                                                                                                                                                                                                           
|32.1                                                                                                                                                                                                                                                                                                                                                                | Certificate
      of Chief
      Executive
      Officer
      pursuant
      to Section
      906 of
      Sarbanes-Oxley
      Act of
      2002
      (filed
      herewith)                                                                                                                                                                                                           
|32.2                                                                                                                                                                                                                                                                                                                                                                | Certificate
      of Chief
      Financial
      Officer
      pursuant
      to Section
      906 of
      Sarbanes-Oxley
      Act of
      2002
      (filed
      herewith)                                                                                                                                                                                                           
|____________________(i) 
       Incorporated
      by reference
      to Exhibit
      1 of Current
      Report
      on Form
      8-K (file
      no. 000-05141)
      on January
      5, 1998.
      (ii) 
      Incorporated
      by reference
      to Exhibit
      3.1 of
      Form 10KSB
      (file
      no. 000-05141
      on August
      29, 2000



**ITEM 14.   CONTROLS AND PROCEDURES**

At
  the July 25,
  2003 Board
  meeting, after
  the resignation
  of Mr. McKinnon,
  Mr. William
  C. Taylor
  was elected
  President,
  Treasurer
  and Chief
  Executive
  Officer and
  Mr. Scott
  E. Bird continued
  as a Vice
  President
  and was elected
  as Secretary
  and Chief
  Financial
  Officer.

The
  Company has
  established
  disclosure
  controls and
  procedures,
  pursuant to
  which, all
  material information
  relating to
  the Company
  and disclosures
  contained
  within this
  Annual Report
  are jointly
  reviewed and
  discussed
  by both Mr.
  Taylor and
  Mr. Bird.
  Because there
  are no other
  senior officers
  of the Company,
  management
  for the Company
  believes that
  his joint
  conference
  of the officers
  to discuss
  the Company
  material information
  and disclosures
  represents
  a reasonably
  efficient
  method of
  disclosure
  controls and
  procedures
  to ensure
  that all material
  information
  of the Company
  is known to
  them.



11

---



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.



|PRINCETONAMERICANCORPORATION |                                                   | 
|---------------------------- | ------------------------------------------------- | 
|By:                          | /s/
      William C. Taylor                       | 
|                             |                                                   | 
|                             | William C.
      TaylorChairman, CEO and Director | 

Date:  September 30, 2003

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 Director  |  | September 30, 2003
|                               
|William C.
      Taylor        
|                                |  |                                   |  |                   
|By: /s/ Scott
      E. Bird     |  | Treasurer, CFO
      and Director |  | September 30, 2003
|                               
|Scott E.
      Bird            
|                                |  |                                   |  |                   



12

---





FINANCIAL STATEMENTS

For the Years Ended

May 31,
  2003 and 2002

F-1

---



INDEPENDENT AUDITORS' REPORT

The Board of
DirectorsPrinceton American Corporation

We have audited the accompanying balance sheets of Princeton American Corporation as of May
  31, 2003 and 2002, 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 auditing
  standards
  generally
  accepted in
  the United
  States of
  America. 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, 2003 and
  2002 and the
  results of
  its operations
  and its cash
  flows for
  the years
  then ended
  in conformity
  with accounting
  principles
  generally
  accepted in
  the United
  States of
  America.

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
  $3,076,216,
  has not generated
  net income
  since reorganization,
  and has a
  significant
  working capital
  deficit as
  of May 31,
  2003. The
  Company has
  also been
  involved in
  significant
  litigation
  by creditors
  and stockholders
  seeking ownership
  equity interests
  in the Company
  as discussed
  in notes 8
  and 9. As
  discussed
  in note 8,
  the Company
  is still 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 note 1.
  The financial
  statements
  do not include
  any adjustments
  that might
  result from
  the outcome
  of this uncertainty.

.

Evers & Company,
Ltd.Phoenix, ArizonaAugust
  28, 2003

F-2

---



PRINCETON AMERICAN CORPORATIONBALANCE SHEETSMAY 31, 2003 AND 2002



|                                                                                                          |  | 2003 |           | 2002 |          
|--------------------------------------------------------------------------------------------------------- |  | ---- | --------- | ---- | ---------
|                                                                                                          |  |      |           |      |          
|ASSETS                                                                                                    |  |      |           |      |          
|Current assets:                                                                                           |  |      |           |      |          
|Cash and cash equivalents                                                                                 |  | $    | 86,328    |      | 49,155   
|Loan retention account                                                                                    |  |      | —         |      | 224,605  
|Accounts receivable, less allowance for doubtful accounts of $30,293 at May 31, 2002                      |  |      | 22,161    |      | 38,477   
|Investments in marketable securities                                                                      |  |      | 40,952    |      | 45,762   
|Prepaid expenses                                                                                          |  |      | 35,112    |      | 59,377   
|Other assets                                                                                              |  |      | 25,284    |      | 26,365   
|                                                                                                          |  |      |           |      |          
|Total current assets                                                                                      |  |      | 209,837   |      | 443,741  
|                                                                                                          |  |      |           |      |          
|PREPAID EXPENSES                                                                                          |  |      | 54,708    |      | 55,976   
|INVESTMENT IN COMMISSION CONTRACT                                                                         |  |      | 212,336   |      | 209,361  
|PROPERTY AND EQUIPMENT, NET                                                                               |  |      | 1,331,634 |      | 1,394,239
|LOAN COSTS, net of accumulated amortization of $22,000 at May 31, 2003 and $3,143
        at May 31, 2002 |  |      | 40,161    |      | 59,018   
|                                                                                                          |  |      |           |      |          
|Total assets                                                                                              |  | $    | 1,848,676 |      | 2,162,335
|                                                                                                          |  |      |           |      |          
|                                                                                                          |  |      |           |      |          

See accompanying notes to financial statements

F-3

---



|                                                                                                                               |  |   |            |   |            |  
|------------------------------------------------------------------------------------------------------------------------------ |  | - | ---------- | - | ---------- | -
|LIABILITIES AND STOCKHOLDERS' DEFICIT                                                                                          |  |   |            |   |            |  
|CURRENT LIABILITIES:                                                                                                           |  |   |            |   |            |  
|                                                                                                                               |  |   | 2003       |   | 2002       |  
|                                                                                                                               |  |   |            |   |            |  
|Mortgage notes payable - current portion                                                                                       |  | $ | 1,685,792  |   | 53,990     |  
|Note payable, officers                                                                                                         |  |   | 63,406     |   | 89,000     |  
|Accounts payable and accrued liabilities                                                                                       |  |   | 36,526     |   | 21,762     |  
|Bankruptcy claims                                                                                                              |  |   | 137,333    |   | 169,773    |  
|Accrued interest                                                                                                               |  |   | 60,405     |   | 89,380     |  
|Accrued real estate taxes                                                                                                      |  |   | 51,247     |   | 43,941     |  
|Payroll and sales taxes payable                                                                                                |  |   | 73,286     |   | 13,076     |  
|Advance rental income and tenant security deposits                                                                             |  |   | 6,602      |   | 35,473     |  
|                                                                                                                               |  |   |            |   |            |  
|Total current liabilities                                                                                                      |  |   | 2,114,597  |   | 516,395    |  
|TENANT SECURITY DEPOSITS - LONG TERM                                                                                           |  |   | 61,366     |   | 56,163     |  
|MORTGAGE NOTES PAYABLE, NET OF CURRENT PORTION                                                                                 |  |   | 2,748,929  |   | 4,437,976  |  
|                                                                                                                               |  |   |            |   |            |  
|                                                                                                                               |  |   | 4,924,892  |   | 5,010,534  |  
|                                                                                                                               |  |   |            |   |            |  
|STOCKHOLDERS' DEFICIT:                                                                                                         |  |   |            |   |            |  
|Common stock, par value $.001, 200,000,000 shares authorized;
              see note 8 regarding shares issued and outstanding |  |   | 15,025     |   | 15,000     |  
|Additional paid-in-capital                                                                                                     |  |   | 2,460,350  |   | 2,460,350  |  
|Accumulated deficit                                                                                                            |  |   | (5,553,372 | ) | (5,329,074 | )
|                                                                                                                               |  |   |            |   |            |  
|                                                                                                                               |  |   | (3,077,997 | ) | (2,853,724 | )
|Net unrealized gain on marketable securities                                                                                   |  |   | 1,781      |   | 5,525      |  
|                                                                                                                               |  |   |            |   |            |  
|Total stockholders' deficit                                                                                                    |  |   | (3,076,216 | ) | (2,848,199 | )
|                                                                                                                               |  |   |            |   |            |  
|Total liabilities and stockholders' deficit                                                                                    |  | $ | 1,848,676  |   | 2,162,335  |  
|                                                                                                                               |  |   |            |   |            |  

See accompanying notes to financial statements

F-4

---



PRINCETON AMERICAN CORPORATIONSTATEMENTS
OF OPERATIONS AND COMPREHENSIVE LOSS**For
  the Years
  Ended May
  31, 2003 and
  2002**



|                                                 |  | 2003 |           | 2002 |          
|------------------------------------------------ |  | ---- | --------- | ---- | ---------
|                                                 |  |      |           |      |          
|                                                 |  |      |           |      |          
|**REVENUES**                                     |  |      |           |      |          
|Rental income                                    |  | $    | 1,082,161 |      | 983,716  
|Parking and other                                |  |      | 38,520    |      | 33,588   
|                                                 |  |      |           |      |          
|                                                 |  |      | 1,120,681 |      | 1,017,304
|                                                 |  |      |           |      |          
|**COSTS AND EXPENSES**                           |  |      |           |      |          
|Building operating costs                         |  |      | 319,881   |      | 337,082  
|Professional fees                                |  |      | 83,254    |      | 209,222  
|Payroll and payroll taxes                        |  |      | 172,501   |      | 131,053  
|Ground lease                                     |  |      | 126,312   |      | 125,809  
|Depreciation and amortization                    |  |      | 123,692   |      | 109,363  
|Consulting                                       |  |      | 130,875   |      | 29,256   
|Other                                            |  |      | 78,258    |      | 64,189   
|                                                 |  |      |           |      |          
|Total costs and expenses                         |  |      | 1,034,773 |      | 1,005,974
|                                                 |  |      |           |      |          
|**INCOME FROM OPERATIONS**                       |  |      | 85,908    |      | 11,330   
|                                                 |  |      |           |      |          
|OTHER INCOME (EXPENSE)                           |  |      |           |      |          
|Interest and dividend income                     |  |      | 20,035    |      | 18,904   
|Interest expense                                 |  |      | (387,930  | )    | (356,849 
|Gain (loss) on settlement of claims              |  |      | 72,208    |      | (44,562  
|Impairment of marketable securities              |  |      | —         |      | (441,800 
|Other                                            |  |      | (14,449   | )    | (9,195   
|                                                 |  |      |           |      |          
|                                                 |  |      | (310,136  | )    | (833,502 
|                                                 |  |      |           |      |          
|**NET LOSS BEFORE INCOME TAXES**                 |  |      | (224,298  | )    | (822,172 
|**INCOME TAXES**                                 |  |      | 70        |      | 50       
|****                                             |  |      |           |      |          
|**NET LOSS**                                     |  | $    | (224,298  | )    | (822,222 
|****                                             |  |      |           |      |          
|**NET LOSS PER COMMON SHARE, BASIC AND DILUTED** |  | $    | (0.03     | )    | (0.10    
|****                                             |  |      |           |      |          
|**NET LOSS**                                     |  | $    | (224,229  | )    | (822,222 
|**NET UNREALIZED LOSS ON MARKETABLE SECURITIES** |  |      | (3,744    | )    | (15,724  
|****                                             |  |      |           |      |          
|**COMPREHENSIVE LOSS**                           |  | $    | (228,042  | )    | (837,946 
|                                                 |  |      |           |      |          

See accompanying notes to financial statements

F-5

---



PRINCETON AMERICAN CORPORATION**Statement
  of Changes
  in Stockholders'
  Deficit****For
  the Years
  Ended May
  31, 2003 and
  2002**



|                                                                                                                         |  | CommonStock |        | AdditionalPaid-inCapital |           | AccumulatedDeficit |            | UnrealizedGain(Loss)onSecurities |         
|------------------------------------------------------------------------------------------------------------------------ |  | ----------- | ------ | ------------------------ | --------- | ------------------ | ---------- | -------------------------------- | --------
|                                                                                                                         |  |             |        |                          |           |                    |            |                                  |         
|Balance
          at
          May
          31,
          2001                                                          |  | $           | 15,000 |                          | 2,460,350 |                    | (4,506,852 | )                                | (420,551
|Net
          loss
          for
          the
          year
          ended
          May
          31,
          2002 |  |             | —      |                          | —         |                    | (822,222   | )                                | —       
|Impairment
          of
          marketable
          securities                                                        |  |             | —      |                          | —         |                    | —          |                                  | 441,800 
|Unrealized
          loss
          on
          marketable
          securities                                         |  |             | —      |                          | —         |                    | —          |                                  | (15,724 
|                                                                                                                         |  |             |        |                          |           |                    |            |                                  |         
|Balance at May 31, 2002                                                                                                  |  |             | 15,000 |                          | 2,460,350 |                    | (5,329,074 | )                                | 5,525   
|Net loss for the year ended May 31, 2003                                                                                 |  |             | —      |                          | —         |                    | (224,298   | )                                | —       
|Unrealized
          loss
          on
          marketable
          securities                                         |  |             | —      |                          | —         |                    | —          |                                  | (3,744  
|Issuance
          of
          stock
          in
          settlement
          of
          litigation                |  |             | 25     |                          | —         |                    | —          |                                  | —       
|                                                                                                                         |  |             |        |                          |           |                    |            |                                  |         
|Balance
          at
          May
          31,
          2003                                                          |  | $           | 15,025 |                          | 2,460,350 |                    | (5,553,372 | )                                | 1,781   
|                                                                                                                         |  |             |        |                          |           |                    |            |                                  |         

See accompanying notes to financial statements

F-6

---



PRINCETON AMERICAN CORPORATIONSTATEMENTS
OF CASH FLOWS**For
  the Years
  Ended May
  31, 2003 and
  2002**



|                                                                                                                                                          |  | 2003 |          | 2002 |           
|--------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | -------- | ---- | ----------
|                                                                                                                                                          |  |      |          |      |           
|**Cash flows from operating activities:**                                                                                                                 |  |      |          |      |           
|Net
          loss                                                                                                                                        |  | $    | (224,298 | )    | (822,222  
|Adjustments to reconcile net loss to net 
          cash used in operating activities:                                                                    |  |      |          |      |           
|Depreciation                                                                                                                                              |  |      | 123,692  |      | 109,363   
|Interest
          income
          on
          investment
          contract                                                                            |  |      | (18,725  | )    | (18,450   
|Rent
          income
          allowance
          in
          exchange
          for
          tenant
          payment
          of
          costs   |  |      | —        |      | (121,424  
|Impairment
          on
          marketable
          securities                                                                                         |  |      | —        |      | 441,800   
|Gain (loss) on settlement of claims                                                                                                                       |  |      | (72,208  | )    | 44,562    
|Issuance of stock in settlement of litigation                                                                                                             |  |      | 25       |      | —         
|Increase
          (decrease)
          in
          cash
          due
          to
          change
          in:                                       |  |      |          |      |           
|Accounts
          receivable                                                                                                                             |  |      | 16,316   |      | (32,409   
|Prepaid
          expenses                                                                                                                                |  |      | 25,533   |      | (9,618    
|Other
          assets                                                                                                                                    |  |      | 1,081    |      | (27,851   
|Accounts
          payable
          and
          accrued
          expenses                                                                             |  |      | 82,280   |      | (431,608  
|Bankruptcy
          claims                                                                                                                               |  |      | 8,642    |      | (1,045,869
|Accrued
          interest                                                                                                                                |  |      | 2,151    |      | (100,544  
|Rent
          deposits                                                                                                                                   |  |      | (23,668  | )    | 8,434     
|                                                                                                                                                          |  |      |          |      |           
|Net
          cash
          used
          in
          operating
          activities                                                                   |  |      | (79,179  | )    | (2,005,836
|                                                                                                                                                          |  |      |          |      |           
|CASH
          FLOWS
          FROM
          INVESTING
          ACTIVITIES:                                                                             |  |      |          |      |           
|Purchase of property and equipment                                                                                                                        |  |      | (42,230  | )    | (91,023   
|Payments on investment contract                                                                                                                           |  |      | 16,816   |      | 15,442    
|                                                                                                                                                          |  |      |          |      |           
|Net cash used in investing activities                                                                                                                     |  |      | (25,414  | )    | (75,581   
|                                                                                                                                                          |  |      |          |      |           
|CASH
          FLOWS
          FROM
          FINANCING
          ACTIVITIES:                                                                             |  |      |          |      |           
|Proceeds from loan retention                                                                                                                              |  |      | 224,605  |      | —         
|Payments on notes payable                                                                                                                                 |  |      | —        |      | (265,329  
|Repayment of loans from officers                                                                                                                          |  |      | (25,594  | )    | (41,000   
|Repayment of mortgage notes payable                                                                                                                       |  |      | (57,245  | )    | (1,910,272
|Payment of loan costs on mortgage notes payable                                                                                                           |  |      | —        |      | (62,161   
|Proceeds from mortgage notes payable, net of retention                                                                                                    |  |      | —        |      | 4,275,395 
|Proceeds from bank loans                                                                                                                                  |  |      |          |      | 131,398   
|                                                                                                                                                          |  |      |          |      |           
|Net cash provided by financing activities                                                                                                                 |  |      | 141,766  |      | 2,128,031 
|                                                                                                                                                          |  |      |          |      |           
|**NET
          INCREASE
          IN
          CASH
          AND
          CASH
          EQUIVALENTS**                                                 |  |      | 37,173   |      | 46,614    
|                                                                                                                                                          |  |      |          |      |           
|**CASH
          AND
          CASH
          EQUIVALENTS,
          BEGINNING
          OF
          YEAR**                                              |  |      | 49,155   |      | 2,541     
|                                                                                                                                                          |  |      |          |      |           
|**CASH AND CASH EQUIVALENTS, END OF YEAR**                                                                                                                |  | $    | 86,328   |      | 49,155    
|                                                                                                                                                          |  |      |          |      |           
|SUPPLEMENTARY
          DISCLOSURE
          OF
          CASH
          FLOW
          INFORMATION                                                       |  |      |          |      |           
|**CASH
          PAID
          DURING
          THE
          PERIOD
          FOR
          INTEREST**                                                  |  | $    | 385,756  |      | 538,478   
|                                                                                                                                                          |  |      |          |      |           
|**CASH
          PAID
          DURING
          THE
          PERIOD
          FOR
          INCOME
          TAXES**                                    |  | $    | 50       |      | 50        
|                                                                                                                                                          |  |      |          |      |           
|**NON-CASH
          INVESTING
          AND
          FINANCING
          ACTIVITIES:**                                                                  |  |      |          |      |           
|Issuance
          of
          rent
          credits
          for
          tenant
          improvements
          paid
          by
          tenant |  | $    | —        |      | 30,293    
|                                                                                                                                                          |  |      |          |      |           

See accompanying notes to financial statements

F-7

---



PRINCETON AMERICAN CORPORATIONNOTES TO
FINANCIAL STATEMENTSMAY 31, 2003 AND 2002

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
  accounting
  principles
  generally
  accepted in
  the United
  States of
  America 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 cannot
  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.

As of
  May 31, 2003
  the Company
  had a stockholders'
  deficit of
  $3,076,216.
  Additionally,
  the Company
  has not been
  able to generate
  net income
  since its
  reorganization
  and has a
  working capital
  deficit of
  $1,904,760
  due primarily
  to the current
  maturity of
  one of the
  mortgage notes
  payable. The
  Company is
  currently
  under the
  jurisdiction
  of the Bankruptcy
  Court, as
  described
  in Note 8.
  To address
  these uncertainties,
  management
  has taken
  the following
  actions.

| |  | Obtained
          financing
          for
          both
          of
          its
          commercial
          office
          buildings;
          although,
          the
          note
          on
          one
          of
          the
          buildings
          is
          due
          in
          April
          2004.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Implemented
      changes, which it believes will reduce the cost of operating the
      buildings.
| | - | ---------------------------------------------------------------------------------------------------

| |  | Settled
          all
          of
          the
          litigation,
          which
          reduced
          legal
          and
          professional
          fees
          during
          the
          year
          ending
          May
          31,
          2003.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

F-8

---



PRINCETON AMERICAN CORPORATIONNOTES TO FINANCIAL STATEMENTSMAY 31, 2003 AND 2002

| | **1.** | **SUMMARY
          OF
          SIGNIFICANT
          ACCOUNTING
          POLICIES,
          CONTINUED**
| | ------ | -----------------------------------------------------------------------------------------------------------

| | **a.** | **BASIS
          OF
          PRESENTATION,
          CONTINUED**
| | ------ | ------------------------------------------------------------------

| |  | Issued
          new
          share
          certificates
          to
          stockholders.
          See
          note
          8
          for
          procedures
          and
          assumptions
          used
          by
          management
          to
          issue
          these
          certificates.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Worked
          with
          the
          bankruptcy
          court
          and
          expects
          to
          be
          released
          from
          their
          supervision.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Obtained
          a
          new
          trading
          symbol
          in
          order
          to
          be
          eligible
          to
          trade
          on
          the
          OTC
          Bulletin
          Board.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                          
| |  | Explored
          and
          continues
          to
          explore
          the
          possibility
          of
          future
          mergers
          and/or
          acquisitions.                                                   
| |   |                                                                                                                                                                                                                                                          

| | **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
  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.** | **ACCOUNTS
          RECEIVABLE**
| | ------ | ---------------------------------

Accounts receivable represents rent and other amounts due. Most rent is billed in advance.  An allowance is provided on a specific identification
  basis for all balances which management estimates may not be fully collectible

F-9

---



PRINCETON AMERICAN CORPORATIONNOTES TO FINANCIAL STATEMENTSMAY 31, 2003 AND 2002



| | **1.** | **SUMMARY
          OF
          SIGNIFICANT
          ACCOUNTING
          POLICIES,
          CONTINUED**
| | ------ | -----------------------------------------------------------------------------------------------------------



| | **e.** | **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.

| | **f.** | **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.

| | **g.** | **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
  or exceeds
  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.

| | **h.** | **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 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.

F-10

---



PRINCETON
  AMERICAN CORPORATIONNOTES
  TO FINANCIAL
  STATEMENTSMAY 31, 2003 AND 2002

| | **1.** | **SUMMARY
          OF
          SIGNIFICANT
          ACCOUNTING
          POLICIES,
          CONTINUED**
| | ------ | -----------------------------------------------------------------------------------------------------------



| | **i.** | **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 8,517,379
  shares for
  the years
  ended May
  31, 2003 and
  2002. Please
  read note
  8 regarding
  the number
  of shares
  outstanding.

**2.****INVESTMENTS IN MARKETABLE SECURITIES AVAILABLE FOR SALE**

Marketable
  securities
  consist of
  the following
  investments
  in common
  stock at May
  31, 2003 and
  2002:



|                   |  | 2003 |        | 2002 |       
|------------------ |  | ---- | ------ | ---- | ------
|                   |  |      |        |      |       
|Exten Industries   |  | $    | 28,613 |      | 37,857
|Stratford American |  |      | 8,500  |      | 3,000 
|Other securities   |  |      | 3,839  |      | 4,905 
|                   |  |      |        |      |       
|                   |  | $    | 40,952 |      | 45,762
|                   |  |      |        |      |       

The total
  net unrealized
  gain at May
  31, 2003 and
  2002 was $1,781
  and $5,525,
  respectively.
  The net unrealized
  gain decreased
  by $3,744
  for the year
  ended May
  31, 2003 and
  the net unrealized
  loss increased
  by $15,724
  during the
  year ended
  May 31, 2002.



**3.****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, 2003 and
  2002, the
  commission
  contract was
  valued at
  $212,336 and
  $209,361,
  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.

F-11

---



PRINCETON
  AMERICAN CORPORATIONNOTES
  TO FINANCIAL
  STATEMENTSMAY 31, 2003 AND 2002

**4.****PROPERTY
  AND EQUIPMENT**

Property
  and equipment
  consist of
  the following
  at May 31,
  2003 and 2002:



|                                 |  | 2003 |           | 2002 |          
|-------------------------------- |  | ---- | --------- | ---- | ---------
|                                 |  |      |           |      |          
|Office buildings                 |  | $    | 1,296,786 |      | 1,296,786
|Leasehold improvements           |  |      | 739,397   |      | 697,167  
|Office furniture and equipment   |  |      | 6,240     |      | 6,240    
|                                 |  |      |           |      |          
|                                 |  |      | 2,042,423 |      | 2,000,193
|Less:   Accumulated depreciation |  |      | (710,789  | )    | (605,954 
|                                 |  |      |           |      |          
|                                 |  | $    | 1,331,634 |      | 1,394,239

**5.****PAYROLL
  TAX LIABILITIES**

The Company
  has not paid
  payroll taxes
  since May
  of 2002 or
  filed payroll
  tax returns
  since September
  of 2001. The
  May 31, 2003
  financial
  statements
  include a
  liability
  of approximately
  $38,500 for
  unpaid payroll
  taxes and
  approximately
  $19,500 for
  related interest
  and penalties.
  The Company
  is in the
  process of
  filing the
  delinquent
  returns and
  is requesting
  abatement
  of penalties
  associated
  with these
  delinquent
  filings.

**6.****NOTES
  PAYABLE**

During
  the year ended
  May 31, 2002
  the Company
  refinanced
  the Camelback
  Road office
  building for
  $2,825,000
  and the 22nd
  Street office
  building for
  $1,675,000.
  The proceeds
  from the refinancing
  were used
  to pay off
  the existing
  mortgage notes,
  pending legal
  claims and
  bankruptcy
  claims. An
  escrow account
  for property
  taxes was
  set up using
  funds from
  the notes
  and monthly
  payments equal
  to one-twelfth
  of the annual
  property taxes
  are to be
  made to this
  account. A
  portion of
  the proceeds
  to be used
  for settlement
  of the various
  claims was
  set aside
  in a loan
  retention
  account. The
  balance of
  these funds
  was advanced
  to the Company
  during the
  year ended
  May 31, 2003.
  The mortgage
  notes are
  secured by
  a first deed
  of trust and
  an assignment
  of the rents
  and related
  receivables
  of the respective
  office buildings.

The
  terms of the
  note that
  was paid off
  had been under
  dispute since
  the bankruptcy
  court modified
  the terms.
  The Company
  reached a
  settlement
  of $1,100,000
  to cover outstanding
  principal
  and interest.
  This settlement
  was $127,812
  in excess
  of what had
  been recorded
  by the Company
  as a liability
  and was recorded
  as a loss
  on settlement
  during the
  year ended
  May 31, 2002.

F-12

---



PRINCETON AMERICAN CORPORATIONNOTES TO
FINANCIAL STATEMENTSMAY 31, 2003 AND 2002

**6.****NOTES PAYABLE, CONTINUED**

Mortgage
  notes payable
  consist of
  the following
  at May 31,
  2003 and 2002:



|                                                                                                                                                                                                        |  | 2003 |            | 2002 |          
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ---------- | ---- | ---------
|                                                                                                                                                                                                        |  |      |            |      |          
|Mortgage note payable, secured by a first deed of trust on the building at 2222 E. Camelback Road, payable in monthly installments of $22,504
          including interest at 8.25%, through April 2007 |  | $    | 2,784,567  |      | 2,819,976
|Mortgage note payable, secured by a first deed of trust on the building at 4808 N. 22nd St., payable in monthly installments of $13,059 including
          interest at 8%, through April 2004          |  |      | 1,650,154  |      | 1,671,990
|                                                                                                                                                                                                        |  |      |            |      |          
|                                                                                                                                                                                                        |  |      | 4,434,721  |      | 4,491,966
|Less current portion                                                                                                                                                                                    |  |      | (1,685,792 | )    | (53,990  
|                                                                                                                                                                                                        |  |      |            |      |          
|Long-term debt, net of current portion                                                                                                                                                                  |  | $    | 2,748,929  |      | 4,437,976
|                                                                                                                                                                                                        |  |      |            |      |          

Maturities of long-term debt at May 31, 2002 are as follows:



|YEAR ENDED MAY 31, |  | AMOUNT |          
|------------------ |  | ------ | ---------
|                   |  |        |          
|2004               |  |        | 1,685,792
|2005               |  |        | 41,626   
|2006               |  |        | 45,245   
|2007               |  |        | 2,662,058
|                   |  |        |          
|                   |  | $      | 4,434,721
|                   |  |        |          

F-13

---



PRINCETON AMERICAN CORPORATIONNOTES TO
FINANCIAL STATEMENTSMAY
  31, 2003 AND
  2002

**7.****NOTES PAYABLE, OFFICERS AND RELATED PARTY TRANSACTIONS**

At May
  31, 2003,
  the Company
  owed an officer
  $63,406 in
  principal
  and $1,918
  in accrued
  interest under
  the terms
  of three 12%
  promissory
  notes that
  required payments
  of $5,000
  per month
  beginning
  January 2000.
  The Company
  has not complied
  with the repayment
  terms of these
  agreements.
  During the
  year ended
  May 31, 2003
  and 2002 the
  Company made
  principal
  payments of
  $25,594 and
  $41,000, respectively,
  in partial
  payment of
  the notes.
  Interest expense
  on the officers'
  notes totaled
  $8,355 and
  $14,870 for
  the years
  ended May
  31, 2003 and
  2002, respectively.

During
  the years
  ended May
  31, 2003 and
  2002 the Company
  paid consulting
  fees of $92,075
  and $3,150,
  respectively
  to two directors.

Commission
  fees equal
  to 4% of the
  gross lease
  amount on
  several leases
  in the office
  buildings
  are being
  paid to a
  real estate
  firm with
  which one
  of the directors
  of the Company
  is affiliated.
  During the
  years ended
  May 31, 2003
  and 2002 payments
  of approximately
  $37,000 and
  $45,000, respectively,
  were made
  to this firm.

The Company
  pays each
  of its three
  directors
  $200 for each
  board meeting
  attended.
  During the
  year ended
  May 31, 2003
  there were
  five meetings.
  Accrued directors'
  fees of $3,900
  are due for
  meetings in
  the current
  and prior
  years.

**8.****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
  and a commission
  contract.
  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
  were:

| | • | The
          Plan
          classified
          various
          secured,
          unsecured
          and
          non-priority
          unsecured
          claims.
          The
          Plan
          also
          classified
          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.
          The
          Company
          began
          making
          distributions
          during
          the
          year
          ended
          May
          31,
          2002.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | Preferred
      shareholders received common stock of the
Company.
| | - | ------------------------------------------------------------------

| |  | Approved
          common
          shareholders
          retained
          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)
          were
          allowed,
          unless
          an
          objection
          was
          filed
          and
          upheld.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | William
          Taylor
          received
          40%
          of
          the
          Company's
          outstanding
          stock,
          upon
          payment
          of
          substantially
          all
          unsecured
          claims.
          Taylor's
          interest
          was
          based
          upon
          his
          claim
          of
          $990,134
          for
          consulting
          fees
          and
          other
          costs.
          During
          the
          year
          ended
          May
          31,
          2003
          the
          Company
          reduced
          the
          number
          of
          shares
          outstanding
          as
          described
          above.
          As
          a
          result
          of
          the
          reduction
          in
          the
          number
          of
          total
          shares
          outstanding,
          Mr.
          Taylor
          currently
          owns
          approximately
          53%
          of
          the
          outstanding
          common
          stock.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | 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 9).

F-14

---



PRINCETON AMERICAN CORPORATIONNOTES TO FINANCIAL STATEMENTSMAY 31, 2003 AND 2002

**8.****BANKRUPTCY
  CLAIMS, CONTINUED**

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.
  The Court
  initially
  disallowed
  approximately
  12,000,000
  shares in
  this process
  primarily
  because the
  stockholders,
  including
  many 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.

In
  July 2002
  the Court
  granted a
  motion to
  allow the
  Company to
  remove from
  its shareholder
  list all shareholders
  who had not
  responded
  to the Company's
  repeated notices
  requesting
  the return
  of cancelled
  share certificates
  for replacement.
  The Company
  was authorized
  to conduct
  a national
  data base
  search for
  the current
  address of
  all non-responsive
  claimants
  and mail a
  final notice
  to each shareholder
  at their last
  known address
  informing
  them that
  their names
  would be deleted
  from the shareholder
  list if they
  did not respond
  within six
  months of
  the notice.
  These notices
  were mailed
  to the shareholders
  November 10,
  2002.

Princeton
  American has
  changed stock
  transfer agents
  and has implemented
  the Court's
  order. New
  share certificates
  were issued
  for the allowed
  interests
  of 8,517,371
  shares as
  of May 31,
  2003. Management
  believes that
  it has complied
  with all court
  orders and
  that these
  shares reflect
  all adjustments
  authorized
  by the court.
  However, the
  Company has
  been challenged
  on several
  occasions
  over the past
  few years
  and there
  can be no
  assurance
  that the Company
  will not be
  challenged
  by others
  seeking additional
  stock ownership
  in the Company.

In
  connection
  with the issuance
  of new certificates,
  Princeton
  American also
  initiated
  a process
  to change
  its trading
  symbol. Effective
  as of October
  9, 2000, the
  trading symbol,
  PELT, was
  officially
  cancelled.
  During October
  2002 the Company
  was assigned
  a new trading
  symbol, "PAMC"
  and is now
  eligible for
  trading on
  the OTC Bulletin
  Board.

In
  April of 2002
  the Company
  refinanced
  its office
  buildings
  and used a
  portion of
  the proceeds
  to begin settlement
  of the bankruptcy
  claims. During
  the year ended
  May 31, 2002
  payments of
  $1,033,104
  in principal
  and $253,289
  in accrued
  interest were
  paid toward
  the bankruptcy
  claims and
  the settlement
  of litigation
  (see note
  9). Management
  determined
  that $9,229
  of claims
  (including
  principal
  and accrued
  interest)
  was invalid.
  A gain of
  $23,646 was
  recognized
  in connection
  with the cancellations
  and settlements.

During
  the year ended
  May 31, 2003
  one of the
  remaining
  bankruptcy
  claims was
  settled for
  an amount
  less than
  the amount
  recorded on
  the Company
  books resulting
  in a gain
  on settlement
  of $5,336.
  Also during
  2003 the Company
  determined
  that certain
  administrative
  convenience
  claims were
  not valid
  claims. These
  claims and
  the related
  accrued interest
  were written
  off resulting
  in a gain
  of $56,509.
  Payments on
  two claims
  paid in 2002
  were reinstated
  as a liability
  of $48,758
  since the
  payments had
  never cleared
  the bank.
  At May 31,
  2003 the unpaid
  bankruptcy
  claims were
  $137,333 and
  accrued interest
  at 8% was
  $38,561.

**9.****LITIGATION AND LIABILITIES IN DISPUTE**

The Company
  has been 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
  and 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
  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.

F-15

---



PRINCETON AMERICAN CORPORATIONNOTES TO FINANCIAL STATEMENTSMAY 31, 2003 AND 2002

**9.****LITIGATION AND LIABILITIES IN DISPUTE, CONTINUED**

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.
  A gain of
  $59,603 was
  recognized
  in connection
  with the settlement.
  The claim
  of $560,000
  along with
  accrued interest
  of $76,823
  was paid during
  the year ended
  May 31, 2002.

Onset
  Investments
  had filed
  two proofs
  of claim for
  damages resulting
  from securities
  transactions
  prior to the
  bankruptcy
  filing. During
  the year ended
  May 31, 2003
  the Company
  reached a
  settlement
  with Onset
  Investment
  Limited, which
  required a
  payment of
  $25,000 and
  25,000 shares
  of stock.
  The settlement
  of this claim
  resulted in
  a gain on
  settlement
  of $10,363
  during the
  year.

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 asserted
  that the Company
  and its president
  failed to
  adequately
  notify them
  that the stock
  obtained might
  not be valid
  under the
  plan. On November
  8, 2001 the
  Bankruptcy
  Court entered
  an order denying
  the motion.
  The ruling
  was appealed
  and the District
  Court issued
  an order to
  show cause
  as to why
  the appeal
  should not
  be dismissed.
  The group
  of individuals
  also filed
  a separate
  Complaint
  asserting
  claims for
  equitable
  relief, securities
  fraud, breach
  of fiduciary
  duty and negligence.
  The appeal
  was dismissed
  on July 8,
  2002.

**10.****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:



|YEAR
          ENDED
          MAY
          31, |  | AMOUNT |          
|------------------------------------------------ |  | ------ | ---------
|                                                 |  |        |          
|2004                                             |  | $      | 994,693  
|2005                                             |  |        | 935,603  
|2006                                             |  |        | 514,021  
|2007                                             |  |        | 76,611   
|2008                                             |  |        | 12,854   
|                                                 |  |        |          
|                                                 |  | $      | 2,533,782
|                                                 |  |        |          

The office
  building located
  on 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.
  Rent expense
  on these two
  leases for
  the years
  ended May
  31, 2003 and
  2002 was $96,400
  for each year.

The office
  building located
  on 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, 2003
  was $2,499
  and is subject
  to an annual
  adjustment
  based on the
  Consumer Price
  Index. Rent
  expense on
  this lease
  for the years
  ended May
  31, 2003 and
  2002 was $29,912
  and $29,409,
  respectively.

The Company
  has a limited
  number of
  tenants in
  both buildings.
  As such, the
  loss of certain
  tenants of
  changes in
  market rental
  rates could
  adversely
  impact the
  Company. Additionally,
  accounts receivable
  are from a
  limited number
  of tenants.

The
  Company's
  future minimum
  lease obligations
  on the ground
  leases for
  the next five
  years are
  approximately
  $126,400 per
  year, based
  upon the current
  valuation.

F-16

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PRINCETON AMERICAN CORPORATIONNOTES TO FINANCIAL STATEMENTSMAY 31, 2003 AND 2002



**11.****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, 2003,
  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.

**12.****INCOME TAXES**

The components
  of net deferred
  tax assets
  at May 31,
  2003 and 2002,
  assuming a
  federal tax
  rate of 34%
  and a 7% state
  rate, are
  as follows:



|                                                                                                        |  | 2003 |            | 2002 |           
|------------------------------------------------------------------------------------------------------- |  | ---- | ---------- | ---- | ----------
|                                                                                                        |  |      |            |      |           
|Net
          operating
          and
          capital
          loss
          carryforwards          |  | $    | 5,284,000  |      | 5,230,000 
|Capital loss carryforward                                                                               |  |      | 157,000    |      | -         
|Difference
          in
          basis
          of
          property
          &
          equipment |  |      | 113,000    |      | 100,000   
|Accrued
          real
          estate
          taxes                                                 |  |      | 20,000     |      | 20,000    
|Less
          valuation
          allowance                                                            |  |      | (5,574,000 | )    | (5,350,000
|                                                                                                        |  |      |            |      |           
|Net deferred tax assets                                                                                 |  | $    | —          |      | —         
|                                                                                                        |  |      |            |      |           



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
  years ended
  May 31, 2003
  and 2002 the
  valuation
  allowance
  increased
  (decreased)
  by approximately
  $224,000 and
  ($150,000),
  respectively.

At May
  31, 2003,
  the Company
  has approximately
  $15,200,000
  in unused
  federal net
  operating
  loss carryforwards,
  which expire
  from 2004
  through 2023.
  The state
  net operating
  loss carryforwards,
  which approximate
  $2,500,000,
  expire from
  2004 through
  2008.

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-17

---



PRINCETON AMERICAN CORPORATIONNOTES TO FINANCIAL STATEMENTSMAY 31, 2003 AND 2002

**13.****STOCK OPTION PLAN**

During
  the year ended
  May 31, 2003
  the Board
  of Directors
  approved the
  Stock Compensation
  Program. The
  plan allows
  for the issuance
  of Incentive
  Stock Options,
  Nonqualified
  Stock Options
  and Restricted
  Shares. Under
  the terms
  of the plan,
  up to 3,000,000
  shares of
  common stock
  may be issued.
  No options
  have been
  granted under
  this plan.

**14.****SUBSEQUENT
  EVENT**

The
  Company has
  not filed
  its postconfirmation
  reports with
  the bankruptcy
  court since
  June of 2001
  or paid all
  of its required
  fees. In August
  2003, the
  United States
  Trustee filed
  a motion to
  dismiss the
  Company's
  Chapter 11
  case or convert
  it to Chapter
  7 due to these
  delinquencies.
  The United
  States Trustee
  has agreed
  to defer any
  action on
  the motion
  based on the
  Company's
  commitment
  to bring its
  postconfirmation
  reports and
  quarterly
  fees current
  by October
  2003. Accounts
  payable and
  accrued liabilities
  at May 31,
  2003 includes
  $14,000 accrued
  for these
  fees.



F-18



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