FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20459
[X] QUARTERLY REPORTUNDER SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For quarterly period ended March 31, 2003
or
[ ] 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
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THACKERAY CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 04-2446697
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
350 Fifth Avenue, Suite 2723
New York, New York 10118
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(Address of principal executive offices) (Zip Code)
(212) 564-3393
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(Registrant's telephone number, including area code)
Unchanged
(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 by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [ X]
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 May 13, 2003.
THACKERAY CORPORATION AND SUBSIDIARY
- INDEX -
PAGE(S)
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PART I: FINANCIAL INFORMATION:
Item 1 - Consolidated Financial Statements
Condensed Balance Sheets - March 31, 2003 (unaudited) and December 31, 2002 2
Condensed Statements of Operations - Three Months Ended March 31, 2003
and 2002 (unaudited) 3
Condensed Statements of Cash Flows - Three Months Ended March 31, 2003
and 2002 (unaudited) 4
Notes to Interim Condensed Financial Statements 5 - 6
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations 7
Item 3 - Quantitative and Qualitative Disclosures About Market Risk 8
Item 4 - Controls and Procedures 8
PART II. OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders 9
Item 6 - Exhibits and Reports on Form 8-K 9
SIGNATURES 10
CERTIFICATIONS 11 - 12
EXHIBIT INDEX 13
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
THACKERAY CORPORATION AND SUBSIDIARY
------------------------------------
CONSOLIDATED CONDENSED BALANCE SHEETS
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MARCH 31, 2003 DECEMBER 31, 2002
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(UNAUDITED)
ASSETS:
Cash and cash equivalents $ 1,872,000 $ 1,983,000
Investment in land 1,951,000 1,951,000
Investment in real estate partnership - -
Other assets 8,000 44,000
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TOTAL ASSETS $ 3,831,000 $ 3,978,000
================== =================
LIABILITIES AND STOCKHOLDERS' EQUITY:
Accounts payable and accrued expenses $ 235,000 $ 248,000
Other liabilities 121,000 121,000
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TOTAL LIABILITIES 356,000 369,000
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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 (40,578,000) (40,444,000)
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TOTAL STOCKHOLDERS' EQUITY 3,475,000 3,609,000
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TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 3,831,000 $ 3,978,000
================== =================
See accompanying notes
2
THACKERAY CORPORATION AND SUBSIDIARY
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CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
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(UNAUDITED)
For the Three Months
----------------------------------------
Ended March 31,
2003 2002
REVENUES FROM REAL ESTATE $ - $ -
EXPENSES OF REAL ESTATE:
Equity in net loss from real estate partnership - (638,000)
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LOSS FROM REAL ESTATE - (638,000)
OTHER (EXPENSES) INCOME:
General and administrative expense (139,000) (139,000)
Interest income 5,000 9,000
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LOSS BEFORE INCOME TAXES (134,000) (768,000)
Income tax benefit - 98,000
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NET LOSS $ (134,000) $ (670,000)
================== ==================
LOSS PER SHARE $ (.03) $ (0.13)
================== ==================
NUMBER OF SHARES 5,107,401 5,107,401
================== ==================
COMPREHENSIVE (LOSS):
Net loss $ (134,000) $ (670,000)
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Equity in other comprehensive income from real estate partnership
relating to cash flow hedges - 245,000
Income tax provision - (98,000)
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OTHER COMPREHENSIVE INCOME, NET OF TAX - 147,000
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COMPREHENSIVE LOSS $ (134,000) $ (523,000)
================== ==================
See accompanying notes
3
THACKERAY CORPORATION AND SUBSIDIARY
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CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
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FOR THE THREE MONTHS ENDED MARCH 31, 2003 AND 2002
(UNAUDITED)
2003 2002
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (134,000) $ (670,000)
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 - 638,000
Changes in operating assets and liabilities:
Increase (decrease) in accounts payable and accrued liabilities (13,000) 11,000
Decrease (increase) in other assets, net 36,000 (135,000)
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NET CASH USED IN OPERATING ACTIVITIES (111,000) (254,000)
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NET DECREASE IN CASH AND CASH EQUIVALENTS (111,000) (254,000)
Cash and cash equivalents - beginning of period 1,983,000 2,656,000
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CASH AND CASH EQUIVALENTS - END OF PERIOD $ 1,872,000 $ 2,402,000
================= =================
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ - $ -
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Taxes $ - $ -
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See accompanying notes
4
THACKERAY CORPORATION AND SUBSIDIARY
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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
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MARCH 31, 2003 AND 2002
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(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION:
The significant accounting policies followed by the Company in the
preparation of these unaudited interim condensed 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, 2002.
The net loss applicable to common stock for the three months ended
March 31, 2003 and 2002 was divided by the number of shares
outstanding during the period to determine per share data.
NOTE 2. REAL ESTATE PARTNERSHIP:
In October 2001, the Company's real estate partnership (the
"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. 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 incurred net losses and negative operating cash flows
since inception of operation in 1999, as the project was being
developed and had limited operating activity. Because of its share of
the cumulative losses of the Partnership, Thackeray's balances in its
investment in and advances to the Partnership was reduced to zero in
the third quarter of 2002.
The following are the condensed statements of operations of the
Partnership (000's omitted) for the first quarter of 2003 and 2002:
For the Three Months Ended March 31,
2003 2002
Rental revenue $ 490 $ 757
Operating expenses (510) (336)
Interest expense (391) (762)
Depreciation and amortization expense (617) (670)
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Net Loss $ (1,028) $ (1,011)
================ ================
Rental revenue decrease in the first quarter of 2003 versus 2002 is
largely attributable to percentage rent which was received in 2002
from the multiplex theater tenant relating to the year 2001 but which
was collected and booked in 2002 (and which was not accrued in 2001).
Such revenue relating to 2002 was accrued in 2002, although not
received until 2003.
5
THACKERAY CORPORATION AND SUBSIDIARY
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NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
----------------------------------------------------
MARCH 31, 2003 AND 2002
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(UNAUDITED)
NOTE 2. REAL ESTATE PARTNERSHIP (CONTINUED):
The decrease in interest expense results primarily from higher
interest capitalization in the first three months of 2003 versus the
same period in 2002, as there was an increase in assets under
construction in the first quarter of 2003.
Operating expenses increase is attributable to the increased level of
operation in the first quarter 2003 versus the same period in 2002.
The credit agreement entered into in October 2001 by the Partnership
(and amended thereafter) contains a default provision which requires
that six major tenant spaces be fully rented operating and paying full
base rent by April 2003 and thereafter. The Partnership was in default
of this provision as only five of the requisite six major tenants were
open and operating by that date. The Partnership has received a
default waiver from the lender in the form of a 60 day cure period.
Additionally, the credit agreement contains default provisions, not
expected to be satisfied, which require certain annualized operating
income and small store lease levels be achieved by October 2003. The
failure to meet these conditions could accelerate the Partnership's
loan repayment and could have a substantial adverse effect on the
Partnership and on the viability of the project. The Partnership has
commenced preliminary appropriate discussions with its lenders. The
principal topic under discussion is determining a new date for
satisfying these requirements. There can be no assurance that the
Partnership will be able to reach an agreement with its lenders.
Leasing efforts for the project are ongoing. However, the project
continues to experience sluggish leasing activity pending an economic
recovery and an increase in Orlando tourism levels.
The realization of the Company's investment related to the Partnership
is dependant upon the Partnership's satisfying the above cited October
2003 provision to its loan agreement as well as the availability of
additional funding from the partners to fund any future operating
deficits.
NOTE 3. INCOME TAXES:
The Company anticipates it will generate a taxable loss for the year
ending December 31, 2003, and therefore it expects that no Federal or
State income taxes will be payable for the year ending December 31,
2003. For the year ended December 31, 2002 the Company reported a
taxable loss. 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 periods ended March 31, 2003 and
2002.
6
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 unfavorable 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' Festival Bay project in Orlando, Florida. Any further
terrorist attacks or armed conflicts may directly impact the Company's
properties or such attacks or conflicts may cause consumer spending to
decrease or result in increased volatility in the United States
financial markets. Any of these occurrences could have a material
adverse impact on the Company.
(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 the
foreseeable future.
The Company anticipates that the Partnership's real estate project
will continue to experience sluggish leasing activity pending an
economic recovery and an increase in Orlando tourism levels. The
Partnership's failure to meet the required October 2003 loan default
provisions noted above 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.
At March 31, 2003 there were no commitments for capital expenditures.
(3) Material Changes in Results of Operations
-----------------------------------------
Since the Company's investment in and advances to the Partnership was
written down to zero in the third quarter of 2002, there is no
recognition by the Company of any share of the Partnership's first
quarter 2003 losses. The Company's share of such losses in the first
quarter 2002 totaled $638,000.
General and administrative expenses for the first quarter 2003 were
unchanged when compared to the similar period in 2002.
Interest income for the three months ended March 31, 2003 was $5,000
versus $9,000 for the comparable period in 2002. The decrease results
from the Company's maintaining lower cash investment balances as well
as receiving lower interest rates on invested cash.
7
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.
8
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Annual Meeting of Stockholders of the Company was held on May 1,
2003.
(b) Martin J. Rabinowitz, Jules Ross, Ronald D. Rothberg and Moses Rothman
were elected directors of the Company at the meeting.
(c) The following table shows the results of the voting taken at the
meeting:
Nominee Votes for Votes Withheld
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Martin J. Rabinowitz 4,324,498 343,733
Jules Ross 4,324,498 343,733
Ronald D. Rothberg 4,324,583 343,648
Moses Rothman 4,324,583 343,648
There were no abstentions or broker non-votes with respect to any of
the directors.
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 did not file any Current Reports on Form 8-K during the
quarter ended March 31, 2003.
9
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,
(Principal Financial Officer)
Date: May 13, 2003
10
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 officer 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 officer 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 officer 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: May 13, 2003
/s/ Jules Ross
------------------------------------
Jules Ross
Vice President, Finance, Treasurer
and Chief Financial Officer
11
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 officer 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 officer 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 officer 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: May 13, 2003
/s/ Martin J. Rabinowitz
-------------------------------------
Martin J. Rabinowitz
President and Chief Executive Officer
12
EXHIBIT INDEX
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TO
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THACKERAY CORPORATION
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QUARTERLY REPORT ON FORM 10-Q
-----------------------------
FOR PERIOD ENDED MARCH 31, 2003
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Exhibit No. Description of Document
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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.