UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20459
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For quarterly period ended September 30, 2002
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission File Number 1-8254
THACKERAY CORPORATION
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 04-2446697
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(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
509 Madison Ave., Suite 1714, New York, New York 10022
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(Address of principal executive offices) (Zip Code)
(212) 759-3695
--------------
(Registrant's telephone number,
including area code)
Unchanged
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(Former name, former address and former fiscal year,
if changed since last report)
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 period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 5,107,401 shares of common
stock, $.10 par value, as of November 11, 2002.
THACKERAY CORPORATION
INDEX
PAGE(S)
PART I. FINANCIAL INFORMATION:
Item 1 - Financial Statements:
Consolidated Balance Sheets as of September 30, 2002 (unaudited)
and December 31, 2001 3.
Consolidated Statements of Operations for the Three and Nine Months Ended
September 30, 2002 and 2001 (unaudited) 4.
Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 2002 and 2001 (unaudited) 5.
Notes to Interim Financial Statements 6.
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operation 8.
Item 3 - Quantitative and Qualitative Disclosures About Market Risk 9.
Item 4 - Controls and Procedures 9.
PART II. OTHER INFORMATION:
Item 6 - Exhibits and Reports on Form 8-K 10.
Signatures 11.
Certifications 12.
Exhibit Index 14.
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
THACKERAY CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2002 December 31, 2001
------------------ -----------------
(UNAUDITED)
- ASSETS -
ASSETS:
Cash and cash equivalents $ 2,085,000 $ 2,656,000
Investment in and advances to real estate partnership - 555,000
Investments in real estate 1,951,000 1,951,000
Other assets 91,000 21,000
----------------- -----------------
TOTAL ASSETS $ 4,127,000 $ 5,183,000
================= =================
- LIABILITIES AND STOCKHOLDERS' EQUITY -
LIABILITIES:
Accounts payable and accrued expenses $ 235,000 $ 257,000
Other liabilities 121,000 121,000
----------------- -----------------
TOTAL LIABILITIES 356,000 378,000
----------------- -----------------
STOCKHOLDERS' EQUITY:
Common stock, $.10 par value; 20,000,000 shares authorized;
5,107,401 shares issued and outstanding 511,000 511,000
Capital in excess of par value 43,542,000 43,542,000
Accumulated deficit (40,276,000) (39,095,000)
Accumulated other comprehensive (loss) (6,000) (153,000)
----------------- -----------------
TOTAL STOCKHOLDERS' EQUITY 3,771,000 4,805,000
----------------- -----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,127,000 $ 5,183,000
================= =================
See accompanying notes
Page 3
THACKERAY CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE THREE MONTHS ENDED For The Nine Months Ended
SEPTEMBER 30, September 30,
------------- -------------
2002 2001 2002 2001
---- ---- ---- ----
REVENUES $ - $ - $ - $ -
------------- -------------- ------------- --------------
EXPENSES:
Equity in net loss from real estate partnership - (480,000) (800,000) (2,327,000)
General and administrative expense (178,000) (159,000) (506,000) (442,000)
Interest income 8,000 32,000 27,000 151,000
------------- -------------- ------------- --------------
LOSS BEFORE INCOME TAXES (170,000) (607,000) (1,279,000) (2,618,000)
Income tax provision (benefit) - - (98,000) -
------------- -------------- ------------- --------------
NET LOSS $ (170,000) $ (607,000) $ (1,181,000) $ (2,618,000)
============= ============== ============= ==============
LOSS PER SHARE $ (0.03) $ (0.12) $ (0.23) $ (0.51)
============= ============== ============= ==============
NUMBER OF SHARES 5,107,401 5,107,401 5,107,401 5,107,401
============= ============== ============= ==============
COMPREHENSIVE INCOME (LOSS):
NET LOSS $ (170,000) $ (607,000) $ (1,181,000) $ (2,618,000)
Equity in other comprehensive income from real estate
partnership relating to cash flow hedges - - 245,000 -
Income tax provision - - 98,000 -
------------- -------------- ------------- --------------
Other comprehensive income, net of tax - - 147,000 -
------------- -------------- ------------- --------------
COMPREHENSIVE LOSS $ (170,000) $ (607,000) $ (1,034,000) $ (2,618,000)
============= ============== ============= ==============
See accompanying notes
Page 4
THACKERAY CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2002 September 30, 2001
------------------ ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
NET LOSS $ (1,181,000) $ (2,618,000)
Adjustments to reconcile net loss to net cash used in operating activities:
Deferred income tax benefit (98,000) -
Equity in net loss from real estate partnership 800,000 2,327,000
Changes in operating assets and liabilities:
Increase in other assets, net (70,000) (57,000)
(Decrease) in accounts payable and accrued liabilities (22,000) (24,000)
----------------- -----------------
NET CASH USED IN OPERATING ACTIVITIES (571,000) (239,000)
----------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Advances to real estate partnership - (3,000)
----------------- -----------------
NET CASH USED IN INVESTING ACTIVITIES - (3,000)
----------------- -----------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (571,000) (375,000)
Cash and cash equivalents - beginning of period 2,656,000 4,879,000
----------------- -----------------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 2,085,000 $ 4,504,000
================= =================
SUPPLEMENTAL INFORMATION:
Interest paid $ - $ -
Taxes paid - -
See accompanying notes
Page 5
THACKERAY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
1. BASIS OF PRESENTATION:
The significant accounting policies followed by the Company in the
preparation of these unaudited interim financial statements are
consistent with the accounting policies followed in the audited
annual financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included.
Certain information and footnote disclosures included in the audited
financial statements have been omitted. For additional information,
reference is made to the financial statements and notes thereto
included in the Company's Annual Report to Stockholders for the year
ended December 3l, 2001.
The net loss applicable to common stock for the three months and nine
months ended September 30, 2002 and 2001 was divided by the number of
shares outstanding during the period to determine per share data.
2. REAL ESTATE PARTNERSHIP:
In October 2001, the Company's Real Estate Partnership
("Partnership") with Belz Enterprises received equity and debt
funding in excess of $120 million for the Partnership's 925,000 sq.
ft. Festival Bay, Orlando, Florida retail/entertainment center, which
is under construction. Thackeray contributed $1,750,000 to the equity
portion of the funding.
In connection with the financing, the partnership agreement was
materially revised and amended to provide for certain adjustments in
the economic rights and obligations of the partners.
The Partnership has incurred net losses and negative operating cash
flows since inception of operations in 1999, as the project is still
being developed and has limited operating activity. Accordingly,
Thackeray's balance of its investment in and advances to the
Partnership was reduced to zero during the first six months of 2002
and therefore no further Partnership losses can be absorbed.
The following are the condensed statements of operations of the
Partnership (000's omitted) for the first nine months of 2002 and
2001:
2002 2001
---- ----
Rental revenue $ 1,947 $ 1,424
Operating expenses (1,695) (1,138)
Interest expense (1,903) (2,194)
Depreciation and amortization expense (1,815) (1,745)
----------- ----------
Net Loss $ (3,466) $ (3,653)
=========== ==========
Page 6
THACKERAY CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2002
2. REAL ESTATE PARTNERSHIP (CONTINUED):
The increase in rental revenue is largely attributable to percentage
rent collected in 2002 from the multiplex theatre tenant as well as
rent received from the skate park tenant, which opened in January
2002. Interest expense decreased primarily from higher interest
capitalization in the first nine months of 2002 versus the same
period in 2001 attributable to the increase in assets under
construction. The increase in depreciation and amortization is
attributable to the increase in assets placed in service for the nine
months ended September 30, 2002 versus the same period in 2001.
The credit agreement entered into in October 2001 and modified in
October 2002 by the Partnership, contains certain default provisions
which require, among others, that the construction of the project be
completed by April 3, 2003, and that a significant number of major
tenant spaces be fully leased, operating and paying full base rent by
that date and thereafter. Development efforts for the project are
on-going and based on the current status of the construction of the
project and anticipated construction progress going forward, the
partners believe that the April 3, 2003 construction deadline will be
achieved. Leasing efforts for the project are also on-going; however,
the project continues to experience sluggish leasing activity pending
an economic recovery and an increase in Orlando tourism levels.
There can be no assurance that the minimum lease requirement under
the loan agreement will be met. The Partnership's failure to meet the
required loan provisions would provide the lenders with the ability
to accelerate the Partnership's loan repayment, which would have a
material adverse effect on the Partnership and on the Company, and
would raise substantial doubt about the Partnership's and the
Company's ability to continue as a going concern.
The realization of the Company's real estate assets related to the
Partnership is dependent upon the Partnership meeting certain
required provisions under its construction loan agreement, the
availability of additional funding from the partners to fund any
construction cost overruns and any operating deficits and the
successful future development, leasing and operation of the real
estate project.
3. INCOME TAXES:
The Company anticipates it will generate a loss for the year ending
December 31, 2002, and therefore it expects that no Federal or State
income taxes will be payable for the year ending December 31, 2002.
For the year ended December 31, 2001, the Company also reported a
loss for income tax purposes. In addition, for both periods, given
the uncertainty over whether the Company will realize benefits from
such losses against future taxable income, no net deferred income tax
assets have been recorded. Accordingly, in the aggregate, taking into
consideration both results of operations and other comprehensive
income, no Federal or State income tax provisions or benefits have
been recorded for the three-month period ended September 30, 2002,
however, a deferred income tax provision and benefit in opposite
amounts have been separately reported in 2002 that are specifically
attributable to other comprehensive income and results of operations.
Page 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS:
(1) Forward Looking Information
This report contains "forward looking statements" within the meaning
of the Private Securities Litigation Reform Act of 1995. Such forward
looking statements are based upon management's expectations,
estimates, projections and assumptions. Words such as "expects",
"anticipates", "intends", "plans", "believes", "estimates", and
variations of such words and similar expressions are intended to
identify such forward looking statements which include, but are not
limited to, projections of capital expenditures, earnings, income
taxes payable, financing and capital infusions. These forward looking
statements are subject to risks and uncertainties which could cause
the Company's actual results or performance to differ materially from
those expressed or implied in such statements. These risks and
uncertainties include, but are not limited to the following: general
risks affecting the real estate industry, including the need to enter
into new leases or renew leases on favorable terms to generate rental
revenues, competition for tenants from other owners of retail
properties, competition from other retailers, successful operations
by and the financial condition of tenants, particularly major
tenants, adverse changes in Orlando, Florida and national economic
and market conditions, and access to and adequacy of financing to
complete the Company's Festival Bay project in Orlando, Florida.
(2) Material Changes in Financial Condition
The Company anticipates that its current cash and cash equivalent
balance will be sufficient to fund its requirements for at least the
next twelve month period.
The Company anticipates that the Partnership's real estate project,
Festival Bay, will continue to experience sluggish leasing activity
pending an economic recovery and an increase in Orlando tourism
levels. However, at this time there is no assurance of such a
recovery and that leasing activity will assure a level of
profitability for the Partnership. The Partnership's failure to meet
required loan provisions would provide the lenders with the ability
to accelerate the Partnership's loan repayment, which would have a
material adverse effect on the Partnership and on the Company, and
would raise substantial doubt about the Partnership's and the
Company's ability to continue as a going concern.
The Festival Bay construction budget was revised in July 2002 to
$132.4 million, which represents an increase of approximately $5
million over the most recent 2001 version. As a consequence,
additional preferential priority capital has been and is being
invested in the project by our partner, thereby negatively impacting
the prospective return to the Company on a future sale or disposition
of Festival Bay. There is also no assurance that actual construction
costs will not exceed the $132.4 million total, as change orders and
other events may act to further increase construction costs and
diminish potential returns to the Company.
At September 30, 2002 there were no commitments for capital
expenditures.
Page 8
(3) Material Changes in Results of Operations
The Company's share in the net losses of the Partnership was $800,000
in the first nine months of 2002 versus $2,327,000 for the same
period in 2001 as its investment in the Partnership was written down
to zero in 2002.
General and administrative expenses for the first nine months of 2002
were $64,000 higher than the amount incurred in the first nine months
of 2001, principally due to increased insurance expense.
Interest income for the nine months ended September 30, 2002 was
$27,000 versus $151,000 for the comparable period in 2001. The
decrease results from the Company's maintaining lower cash investment
balances as well as receiving lower interest rates on invested cash.
In addition, the Company's share of the other comprehensive income of
the Partnership in the first nine months of 2002 was $147,000, after
taxes, and related to the favorable changes in interest rates
impacting the value of the cash flow hedges at the Partnership level.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
(a) The Company maintains disclosure controls and
procedures that are designed to ensure that information
required to be disclosed in the Company's filings under
the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the periods
specified in the rules and forms of the Securities and
Exchange Commission. Such information is accumulated and
communicated to the Company's principal executive officer
and principal financial officer, as appropriate, to allow
timely decisions regarding required disclosure. The
Company's principal executive officer and principal
financial officer recognize that any set of controls and
procedures, no matter how well designed and operated, can
provide only reasonable assurance of achieving the desired
control objectives.
Within 90 days prior to the filing date of this quarterly
report on Form 10-Q, the Company has carried out an
evaluation, under the supervision and with the
participation of the Company's principal executive officer
and principal financial officer, of the effectiveness of
the design and operation of the Company's disclosure
controls and procedures. Based on such evaluation, the
Company's principal executive officer and principal
financial officer concluded that the Company's disclosure
controls and procedures are effective.
(b) There have been no significant changes in the Company's
internal controls or in other factors that could
significantly affect the internal controls subsequent to
the date of their evaluation in connection with the
preparation of this quarterly report on Form 10-Q.
Page 9
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
99.1 Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002
99.2 Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002
(b) Reports on Form 8-K
The Company filed a report on Form 8-K dated October 8,
2002 relating to actions being taken by the American Stock
Exchange to de-list its common stock.
Page 10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THACKERAY CORPORATION
By: /s/ Jules Ross
------------------------------------
Jules Ross
Vice President, Finance, Treasurer
and Chief Financial Officer
Date: November 12, 2002
Page 11
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Jules Ross, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Thackeray
Corporation.
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this quarterly
report;
4. The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation
of internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 12, 2002
/s/ Jules Ross
-----------------------------------
Jules Ross
Vice President, Finance, Treasurer
and Chief Financial Officer
Page 12
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Martin J. Rabinowitz, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Thackeray
Corporation.
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this quarterly
report;
4. The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to
ensure that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's
disclosure controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation
of internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 12, 2002
/s/ Martin J. Rabinowitz
--------------------------------------
Martin J. Rabinowitz
President and Chief Executive Officer
Page 13
EXHIBIT INDEX
TO
THACKERAY CORPORATION
QUARTERLY REPORT ON FORM 10-Q
FOR QUARTERLY PERIOD ENDED SEPTEMBER 30, 2002
Exhibit No. Description of Document
- ----------- -----------------------
99.1 Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002
99.2 Certification Pursuant to 18 U.S.C. Section 1350, as
Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002
Page 14