UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or
15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 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
THACKERAY CORPORATION
---------------------
(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
------------------ -----
(Address of principal executive offices) (Zip Code)
(212) 564-3393
--------------
(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 August 13, 2003.
THACKERAY CORPORATION AND SUBSIDIARY
- INDEX -
PAGE(S)
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PART I: FINANCIAL INFORMATION:
Item 1 - Consolidated Condensed Financial Statements:
Balance Sheets - June 30, 2003 (unaudited) and December 31, 2002 2
Statements of Operations - Three and Six Months Ended June 30, 2003
and 2002 (unaudited) 3
Statements of Cash Flows - Six Months Ended June 30, 2003
and 2002 (unaudited) 4
Notes to Interim Condensed Financial Statements 5 - 7
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
of Operations 8
Item 3 - Quantitative and Qualitative Disclosures About Market Risk 8
Item 4 - Controls and Procedures 9
PART II: OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K 10
SIGNATURES 10
EXHIBIT INDEX 11
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
THACKERAY CORPORATION AND SUBSIDIARY
------------------------------------
CONSOLIDATED CONDENSED BALANCE SHEETS
-------------------------------------
JUNE 30, 2003 DECEMBER 31, 2002
------------------ -----------------
(UNAUDITED)
ASSETS:
Cash and cash equivalents $ 1,524,000 $ 1,983,000
Investment in land 1,951,000 1,951,000
Investment in real estate partnership - -
Other assets 191,000 44,000
------------------- ------------------
TOTAL ASSETS $ 3,666,000 $ 3,978,000
=================== ==================
LIABILITIES AND STOCKHOLDERS' EQUITY:
Accounts payable and accrued expenses $ 256,000 $ 248,000
Other liabilities 121,000 121,000
------------------- ------------------
TOTAL LIABILITIES 377,000 369,000
------------------- ------------------
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 (40,764,000) (40,444,000)
------------------- ------------------
TOTAL STOCKHOLDERS' EQUITY 3,289,000 3,609,000
------------------- ------------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 3,666,000 $ 3,978,000
=================== ==================
See accompanying notes
2
THACKERAY CORPORATION AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
--------------------------------- ---------------------------------
2003 2002 2003 2002
----------------- --------------- --------------- ----------------
REVENUES FROM REAL ESTATE $ - $ - $ - $ -
EXPENSES OF REAL ESTATE:
Equity in net loss from real estate partnership - 162,000 - 800,000
----------------- --------------- --------------- ----------------
LOSS FROM REAL ESTATE - (162,000) - (800,000)
OTHER (EXPENSES) INCOME:
General and administrative expense (191,000) (189,000) (330,000) (328,000)
Interest income 5,000 10,000 10,000 19,000
----------------- --------------- --------------- ----------------
LOSS BEFORE INCOME TAXES (186,000) (341,000) (320,000) (1,109,000)
Income tax benefit - - - 98,000
----------------- --------------- --------------- ----------------
NET LOSS $ (186,000) $ (341,000) $ (320,000) $ (1,011,000)
================= =============== =============== ================
LOSS PER SHARE $ (.04) $ (0.07) $ (.06) $ (0.20)
================= =============== =============== ================
NUMBER OF SHARES 5,107,401 5,107,401 5,107,401 5,107,401
================= =============== =============== ================
COMPREHENSIVE LOSS:
Net loss $ (186,000) $ (341,000) $ (320,000) $ (1,011,000)
----------------- --------------- --------------- ----------------
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 $ (186,000) $ (341,000) $ (320,000) $ (864,000)
================= =============== =============== ================
See accompanying notes
3
THACKERAY CORPORATION AND SUBSIDIARY
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the Six Months Ended June 30,
2003 2002
----------------- ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (320,000) $ (1,011,000)
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
Changes in operating assets and liabilities:
(Increase) in other assets, net (147,000) (153,000)
Increase (decrease) in accounts payable and accrued liabilities 8,000 (14,000)
------------------ ------------------
NET CASH USED IN OPERATING ACTIVITIES (459,000) (476,000)
------------------ ------------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (459,000) (476,000)
Cash and cash equivalents - beginning of period 1,983,000 2,656,000
------------------ ------------------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 1,524,000 $ 2,180,000
================== ==================
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ - $ -
------------------ -----------------
Taxes $ - $ -
------------------ -----------------
See accompanying notes
4
THACKERAY CORPORATION AND SUBSIDIARY
------------------------------------
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
----------------------------------------------------
JUNE 30, 2003 AND 2002
----------------------
(UNAUDITED)
10
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.
In accordance with the rules for a Form 10-Q, 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 and six months
ended June 30, 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 the inception of operations 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 six months of 2003 and 2002:
For the Six Months Ended
June 30,
------------------------------
2003 2002
-------------- --------------
Rental revenue $ 1,384 $ 1,250
Operating expenses (1,866) (1,101)
Interest expense (1,972) (1,369)
Depreciation and amortization expense (1,888) (1,237)
-------------- --------------
Net Loss $ (4,342) $ (2,457)
============== ==============
The rental revenue increase in the first half of 2003
versus 2002 is attributable to additional stores in
operation during the first half of 2003 versus 2002.
5
THACKERAY CORPORATION AND SUBSIDIARY
------------------------------------
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
----------------------------------------------------
JUNE 30, 2003 AND 2002
----------------------
(UNAUDITED)
NOTE 2. REAL ESTATE PARTNERSHIP (CONTINUED):
The increase in interest expense results primarily from higher debt
levels in the first half of 2003 versus the same period in 2002. The
increase in operating expenses is attributable to the increased level
of operation in the first half of 2003 versus the same period in 2002,
i.e. the small store space opened in the 2003 period.
At June 30, 2003, 400,000 sq. ft. of anchor space and 63,500 sq. ft.
of small store space were open for business, and leases for an
additional 57,000 sq. ft. of small store space had been executed and
are expected to open in the third quarter of 2003. Because
approximately 460,000 sq. ft. of the originally planned 925,000 sq.
ft. were not occupied at June 30, 2003, the partnership has had to
absorb a disproportionate amount of common area cost; i.e. HVAC, real
estate taxes, property maintenance, etc., which ordinarily are
chargeable to tenants who are on a "net net lease" basis.
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 received a default
waiver from the lender in the form of a 60 day cure period. The
default has been cured.
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.
A reappraisal of the property is currently underway as part of the
lender's final review of the Partnership's request for an extension of
the October 2003 date.
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 dependent 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.
Pursuant to an August 2001 letter agreement between the Partners
concerning the future development of the approximately 78 acres
contiguous to the 140 Festival Bay acres, the parties were to agree
upon conceptual construction plans, an overall development plan and a
development budget for the 78 acres on or before June 30, 2003. In the
absence of such an agreement between the parties, the August 2001
letter agreement automatically terminates. June 30, 2003 passed
without such a mutual understanding.
The Company pledged the contiguous 78 acres as additional collateral
to secure the Partnership's loan. In the event that the Partnership
defaults on the loan, there can be no assurance that the lenders will
not foreclose upon the 78 acres.
6
THACKERAY CORPORATION AND SUBSIDIARY
------------------------------------
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
----------------------------------------------------
JUNE 30, 2003 AND 2002
----------------------
(UNAUDITED)
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 asset has
been recorded. Accordingly, no Federal or State income tax provisions
or benefits have been recorded for the three-month and six-month
periods ended June 30, 2003 and 2002.
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 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 June 30, 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 2003
losses. The Company's share of such losses in the first six months of
2002 totaled $800,000.
General and administrative expenses for the second quarter and the
first six months of 2003 were relatively unchanged when compared to
the similar periods in 2002.
Interest income for the six months ended June 30, 2003 was $10,000
versus $19,000 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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
8
ITEM 4. CONTROLS AND PROCEDURES
(a) The Company's management evaluated, with the participation of the
Company's principal executive and principal financial officers,
the effectiveness of the Company's disclosure controls and
procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the
Securities Exchange Act of 1934, as amended (the "Exchange
Act")), as of June 30, 2003. Based on their evaluation, the
Company's principal executive and principal financial officers
concluded that the Company's disclosure controls and procedures
were effective as of June 30, 2003.
(b) There has been no change in the Company's internal control over
financial reporting (as defined in Rules 13a-15(f) and 15d-15(f)
under the Exchange Act) that occurred during the Company's fiscal
quarter ended June 30, 2003, that has materially affected, or is
reasonably likely to materially affect, the Company's internal
control over financial reporting.
9
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
31.1 Certification of Chief Executive Officer Pursuant to Section 302
of the Sarbanes - Oxley Act of 2002
31.2 Certification of Chief Financial Officer Pursuant to Section 302
of the Sarbanes - Oxley Act of 2002
32.1 Certification Pursuant to 18 U.S.C. Section 1350 as Adopted
Pursuant to Section 906 of the Sarbanes - Oxley Act of 2002.
32.2 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 Current Report on Form 8-K on April 1, 2003
and May 15, 2003, both of which reported an event under Item 12
relating to the issuance of its earnings press release.
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: August 14, 2003
10
EXHIBIT INDEX
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TO
--
THACKERAY CORPORATION
---------------------
QUARTERLY REPORT ON FORM 10-Q
-----------------------------
FOR PERIOD ENDED JUNE 30, 2003
------------------------------
Exhibit No. Description of Document
- ----------- -----------------------
31.1 Certification of Chief Executive Officer Pursuant to Section
302 of the Sarbanes - Oxley Act of 2002
31.2 Certification of Chief Financial Officer Pursuant to Section
302 of the Sarbanes - Oxley Act of 2002
32.1 Certification Pursuant to 18 U.S.C. Section 1350 as Adopted
Pursuant to Section 906 of the Sarbanes - Oxley Act of 2002.
32.2 Certification Pursuant to 18 U.S.C. Section 1350 as Adopted
Pursuant to Section 906 of the Sarbanes - Oxley Act of 2002.
11