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 September 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 November 6, 2003.
THACKERAY CORPORATION AND SUBSIDIARY
- INDEX -
PAGE(S)
-------
PART I: FINANCIAL INFORMATION:
Item 1 - Consolidated Condensed Financial Statements:
Balance Sheets - September 30, 2003 (unaudited) and December 31,
2002 2 Statements of Operations - Three and Nine Months Ended
September 30, 2003 and 2002 (unaudited) 3
Statements of Cash Flows - Nine Months Ended September 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
-------------------------------------
SEPTEMBER 30, 2003 DECEMBER 31, 2002
------------------ -----------------
(UNAUDITED)
ASSETS:
Cash and cash equivalents $ 1,398,000 $ 1,983,000
Investment in land 1,951,000 1,951,000
Investment in real estate partnership - -
Other assets 145,000 44,000
------------------ -----------------
TOTAL ASSETS $ 3,494,000 $ 3,978,000
================== =================
LIABILITIES AND STOCKHOLDERS' EQUITY:
Accounts payable and accrued expenses $ 248,000 $ 248,000
Other liabilities 121,000 121,000
------------------ -----------------
TOTAL LIABILITIES 369,000 369,000
------------------ -----------------
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 (40,928,000) (40,444,000)
------------------ -----------------
TOTAL STOCKHOLDERS' EQUITY 3,125,000 3,609,000
------------------ -----------------
TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $ 3,494,000 $ 3,978,000
================== =================
See accompanying notes
2
THACKERAY CORPORATION AND SUBSIDIARY
------------------------------------
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
-----------------------------------------------
(UNAUDITED)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
---------------------------------- --------------------------------
2003 2002 2003 2002
-------------- -------------- -------------- --------------
REVENUES FROM REAL ESTATE $ - $ - $ - $ -
EXPENSES OF REAL ESTATE:
Equity in net loss from real estate partnership - - - 800,000
-------------- -------------- -------------- --------------
LOSS FROM REAL ESTATE - - - (800,000)
OTHER (EXPENSES) INCOME:
General and administrative expense (166,000) (178,000) (496,000) (506,000)
Interest income 2,000 8,000 12,000 27,000
-------------- -------------- -------------- --------------
LOSS BEFORE INCOME TAXES (164,000) (170,000) (484,000) (1,279,000)
Income tax benefit - - - 98,000
-------------- -------------- -------------- --------------
NET LOSS $ (164,000) $ (170,000) $ (484,000) $ (1,181,000)
============== ============== ============== ==============
LOSS PER SHARE $ (.03) $ (0.03) $ (.09) $ (0.23)
============== ============== ============== ==============
NUMBER OF SHARES 5,107,401 5,107,401 5,107,401 5,107,401
============== ============== ============== ==============
COMPREHENSIVE LOSS:
Net loss $ (164,000) $ (170,000) $ (484,000) $ (1,181,000)
-------------- -------------- -------------- --------------
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 $ (164,000) $ (170,000) $ (484,000) $ (1,034,000)
============== ============== ============== ==============
See accompanying notes
3
THACKERAY CORPORATION AND SUBSIDIARY
------------------------------------
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
-----------------------------------------------
(UNAUDITED)
For the Nine Months Ended September 30,
2003 2002
----------------- -----------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (484,000) $ (1,181,000)
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 (101,000) (70,000)
Increase (decrease) in accounts payable and accrued liabilities 8,000 (22,000)
----------------- -----------------
NET CASH USED IN OPERATING ACTIVITIES (585,000) (571,000)
----------------- -----------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (585,000) (571,000)
Cash and cash equivalents - beginning of period 1,983,000 2,656,000
----------------- -----------------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 1,398,000 $ 2,085,000
================= =================
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
----------------------------------------------------
SEPTEMBER, 2003 AND 2002
------------------------
(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.
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 nine months
ended September 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 has 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 were
reduced to zero by the third quarter of 2002.
The following are the condensed statements of operations of the
Partnership (000's omitted) for the first nine months of 2003 and
2002:
For the Nine Months Ended September 30,
---------------------------------------
2003 2002
---------------- ----------------
Rental revenue $ 2,796 $ 1,947
Operating expenses (3,789) (1,695)
Interest expense (3,900) (1,902)
Depreciation and amortization expense (3,599) (1,815)
---------------- ----------------
Net Loss $ (8,492) $ (3,465)
================ ================
The rental revenue increase in the first three quarters of 2003
versus 2002 is attributable to additional stores in operation during
the 2003 period versus that of 2002.
5
THACKERAY CORPORATION AND SUBSIDIARY
------------------------------------
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
----------------------------------------------------
SEPTEMBER, 2003 AND 2002
------------------------
(UNAUDITED)
NOTE 2. REAL ESTATE PARTNERSHIP (CONTINUED):
The increase in interest expense results primarily from higher debt
levels in the first nine months of 2003 versus the same period in
2002. The increase in operating expenses is attributable to the
increased level of operation in the first nine months of 2003 versus
the same period in 2002, i.e. the small store space opened in the
2003 period.
At September 30, 2003, approximately 400,000 sq. ft. of anchor space
and approximately 95,000 sq. ft. of small store space were open for
business, and leases for an additional approximately 8,000 sq. ft. of
small store space had been executed and are expected to open in the
fourth quarter of 2003. An additional approximately 35,000 sq.ft. of
small store space are scheduled for the first quarter of 2004.
Because approximately 430,000 sq. ft. of the originally planned
925,000 sq. ft. were not occupied at September 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 default provisions, which required
certain annualized operating income and small store lease levels be
achieved by October 2003. As expected, the Partnership failed to meet
these conditions. 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 lenders have agreed to a sixty day forebearence
period which expires on December 1, 2003. There can be no assurance
that the Partnership will be able to reach an agreement with its
lenders during the forebearance period.
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 in the Partnership is
dependent upon the Partnership's resolving its failure to satisfy the
above cited October 2003 provisions to its loan agreement. The
availability of additional funding from the partners to fund any
future operating deficits also is critical to the Company's
investment realization.
Pursuant to an August 2001 letter agreement between the Partners
concerning the future development by the partners 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 its contiguous (to Festival Bay) 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
----------------------------------------------------
SEPTEMBER, 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 nine-month
periods ended September 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, pending defaults under the Partnership's
credit agreement, 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 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 is noted above. In the absence of an agreement among the
lenders and the Partnership during the sixty day forebearance period
which ends December 1, 2003 the lenders would have 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 September 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 by 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 nine months
of 2002 totaled $800,000.
General and administrative expenses for the third quarter and the
first nine months of 2003 were relatively unchanged when compared to
the similar periods in 2002.
Interest income for the nine months ended September 30, 2003 was
$12,000 versus $27,000 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.
8
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
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 September
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 September 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 September 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 August
18, 2003, 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: November 7, 2003
10
EXHIBIT INDEX
-------------
TO
--
THACKERAY CORPORATION
---------------------
QUARTERLY REPORT ON FORM 10-Q
-----------------------------
FOR PERIOD ENDED SEPTEMBER 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