Theaters and the City Cinemas chain. Reading amortizes its option fees and acquisition costs over 10 years and its beneficial lease over 20 years. At March 31, 2002 and at December 31, 2001, the accumulated amortization on the Company’s intangible assets was approximately $570,300 and $215,300, respectively.

     The reconciliation of reported net loss and loss per share to adjusted net loss and loss per share for the three months ended March 31, 2002 and 2001 is as follows (dollars in thousands, except for per share data):

     The goodwill amortization expense for the three months ended March 31, 2001 was recorded as operating expense of the cinema/live theater segment and as of January 1, 2002, the Company stopped amortizing its goodwill in accordance with SFAS 142. The Company’s intangible assets were determined to have finite useful lives and as a result, the Company amortizes its options fees and acquisition costs over 10 years and its beneficial lease over 20 years.

Note 6 — Income Tax

     The income tax benefit for the three months ended March 31, 2002 amounted to a net $135,000, representing a federal tax refund of $322,000 and a foreign withholding tax provision of $187,000 related to accrued interest from loans to foreign subsidiaries.

Note 7 — Minority Interest

     The minority interest is principally derived from the Company’s holdings in AFC. The Company owns, in aggregate, 50% of the membership interest in AFC, with a subsidiary of National Auto Credit, Inc. (“NAC”) holding the other 50% membership interest. The minority interest in the Australian cinemas represents a 25% minority interest ownership in Australian County Cinemas and a 33.3% interest in the Elsternwick joint venture. The minority interest in Big 4 Farming represents the 20% minority membership interest by Cecelia. The components of minority interest are as follows (dollars in thousands):

Note 8 — Business Segments

     The table below sets forth certain information concerning the Company’s theater and rental real estate operations for the three months ended March 31, 2002 and 2001 (dollars in thousands).

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Reading International, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
March 31, 2002

     The cinema/live theater results shown above include revenue and operating expense directly linked to Reading’s cinema and theater assets. The rental real estate results include rental income from properties owned by Reading offset by operating expense, including mortgage payments and interest. Corporate results include interest income earned with respect to the Company’s cash balances, and other income (expense).

Note 9 — Comprehensive Income (Loss)

     Generally accepted accounting principles require Reading to classify unrealized gains and/or losses on available-for-sale (“AFS”) securities and the effect of the foreign currency translation adjustments as comprehensive income. The following table sets forth Reading’s comprehensive income for the periods indicated (in thousands):

Note 10 — Other Expense (Income)

     Other expense (income) is comprised of the following (dollars in thousands):

Note 11 — Subsequent Event

     On May 7, 2002, the Company entered into a long-term operating lease (subject to approval by the Board of Directors) for an 8-screen cinema to be built in Christchurch, New Zealand. The planned fit-out is scheduled for completion in May 2003.

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Item 2 — Management’s Discussion and Analysis of Financial Condition and Results of Operations

     Reading International, Inc. (“RII”), the surviving entity following the consolidation of Reading Entertainment, Inc. (“Old Reading”), Craig Corporation (“Craig”) and Citadel Holding Corporation (“Citadel”) on December 31, 2001, is now the owner of the consolidated businesses and assets of Old Reading, Craig, and Citadel. These businesses consist primarily of:

     We consider ourselves to be essentially a cinema and live theater exhibition company with a focus on real estate oriented assets. Consequently, our business plan is to continue to identify, develop and acquire cinema and live theater properties, focusing on those opportunities where we can acquire either the fee interest underlying such operating assets, or long term leases, which provide flexibility with respect to the usage of such leasehold estates. We intend to dispose of our interests in Puerto Rico, all of our agricultural interests and assets, as well as our investment in Gish Biomedical, Inc. securities. From time to time we may dispose of, or put to alternative use some or all of our interests in various operating assets, in order to realize the real estate values of such assets.

     As further described in our Annual Report on Form 10-K which contains the audited financial statements and notes thereto, for the year end December 31, 2001, we completed a series of transactions in 2001 that caused reported results for the three months period ended March 31, 2002 (“2002 Quarter”) and three month periods ended March 31, 2001 (“2001 Quarter”) to lack comparability. To recap:

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     The unaudited pro forma operating results for the three months ended March 31, 2001 for the Consolidated Company, assuming that the Consolidation had occurred on January 1, 2001, are presented in Note 2 to the Condensed Consolidated Financial statements.

Results of Operations

     The tables below summarize the results of operations for each of our principal business segments for the 2002 Quarter and the 2001 Quarter (dollars in thousands). Expenses include costs associated with the day-to-day management of the theaters and rental property, depreciation and amortization as well as general and administrative expenses.

Cinema and Live Theaters

     The $963,000 increase in the 2002 Quarter theater net income from the 2001 Quarter period reflects increase of our theater revenue base from eight cinemas with 44 screens and four live theaters to twenty-eight cinemas with 169 screens and four live theaters (operating results of CineVista’s seven cinemas with 52 screens are not included in these numbers and are presented as part of “Other expense”,

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as the circuit is held for sale). Despite the overall increase in theater net income from prior year, our domestic cinemas have experienced a decline in per-screen cinema attendance during the 2002 Quarter as compared with the 2001 Quarter. For the cinemas located in Manhattan — New York City, this decline in attendance and revenue is primarily due to increased competition from new, state-of-the-art cinemas that opened in competing locations. This decline was partly offset by an increase of theater income in Australia and New Zealand attributable to the addition of three cinemas in May and June 2001 and in March 2002. As in the United States, our Australian and New Zealand cinema operations suffered due to the absence of a blockbuster film. The Wellington cinema complex which opened on March 21, 2002 reported strong operating results in its opening week and we anticipate that the addition of the Wellington cinema will have a positive effect on our cinema income in the upcoming months.

     Although the Royal George Theatre’s main stage went dark in early March and its Cabaret stage was dark during all of the 2002 Quarter, our live theaters’ operating income was comparable to that of the 2001 quarter as the decrease in theater revenue was mostly offset by a corresponding decrease in operating expenses and by an increase in ancillary rental income. We are currently negotiating for productions to fill our dark stages.

Real Estate

     For the 2001 Quarter, our domestic real estate earnings consisted of rental income from (1) one rental property, an office building located in Glendale, California, (2) the retail tenants of Village East cinema, and (3) the Royal George leasing out its excess office space. The 2002 Quarter real estate earnings includes, in addition to those discussed above, the operating results of our real estate holdings which were acquired through the Consolidation.

     Our rental real estate holdings in Australia and New Zealand are mostly comprised of three entertainment centers that we constructed on land we own. The first entertainment center in Perth, Australia was opened in December 1999, the second entertainment center opened in Auburn, Australia, in September 2000, and the third entertainment center in Wellington, New Zealand, opened in March 2002. The leasing of the ancillary retail space at our Perth and Auburn entertainment centers has proven more difficult than originally anticipated and at the present time, we have leased approximately 56% of the total available retail space as of March 31, 2002. The rental space in the Wellington Center is approximately 71% leased. In addition to the entertainment centers, we hold certain domestic railroad-related properties that we are endeavoring to sell, a fifty acre property assemblage located in the greater Melbourne, Australia area, and several other properties that are held for future development.

     The $415,000 decrease in the 2002 Quarter real estate net income is primarily due to our real estate holdings in Australia and New Zealand which have been added into the real estate segment in the 2002 Quarter. They have not yet developed to their full income potential and are currently operating at a loss. The 2001 Quarter only included fully developed properties as discussed above.

Corporate

     Our corporate revenue is entirely comprised of fees earned for our agricultural activities. Corporate other income is comprised of interest income/expense, dividend income, gain/loss on sale of assets, and equity income (loss).

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     Corporate expenses include general and administrative expenses that are not directly attributable to other operating segments. Beneficial lease payments made to Sutton Hill under the City Cinemas agreement of $817,780 in the 2002 Quarter are recorded as general and administrative expense of the Theater segment. The increase in corporate expenses is primarily due to increased general and administrative expense reflecting the Consolidation.

     The movement in corporate other expense from $52,000 to $81,000 is primarily due to $932,000 decrease in equity loss and loan reserve relating to our agricultural activities partially offset by (1) $396,000 increase in interest expense, (2) $210,000 of operating loss from the CineVista circuit, (3) $113,750 decrease in dividend income due to the Consolidation, (4) $118,000 increase in minority interest, and (4) decrease in equity investment earnings due to the Consolidation.

Business Plan, Capital Resources and Liquidity

Business Plan

     Our business plan is to continue to identify, develop and acquire cinema and live theater properties, focusing on those opportunities where we can acquire either the fee interest underlying such operating assets, or long term leases, which provide flexibility with respect to the usage of such leasehold estates. We intend to focus on acquisitions and development activities in Australia and New Zealand as we believe that there are currently better opportunities in these markets than domestically and that the currencies of Australia and New Zealand are attractively priced. We intend to dispose of our interest in Puerto Rico, all of our agricultural interests and assets, and our investment in Gish securities. From time to time we may dispose of, or put to alternative use, our interest in various operating assets, in order to realize the real estate values of such assets.

Liquidity and Capital Resources

     Our ability to generate sufficient cash flows from operating activities in order to meet our obligations and commitments drives our liquidity position. This is further affected by our ability to obtain adequate, reasonable financing and/or to convert non-performing or non-strategic assets into cash. We cannot separate liquidity from capital resources that are made up of potentially available funds for use in achieving our long-term goals and to meet our debt servicing requirements.

     Currently, our liquidity needs arise mainly from:

Operating Activities

     Cash used in operations was $379,000 in the 2002 Quarter compared with cash used in operations of $243,000 in the 2001 Quarter. The change of $136,000 is primarily due to increase in other current assets.

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Investing Activities

     Cash used in investing activities during the 2002 Quarter was $5,436,000 compared to $9,358,000 during the 2001 Quarter. The change of $3,922,000 is primarily due to $4,544,000 fewer capital assets purchased in the 2002 Quarter. Major investing activities in the 2001 Quarter included the purchase of the Union Square building and four domestic cinemas.

Financing Activities

     Cash provided by financing activities was $1,820,000 in the 2002 Quarter compared to $1,669,000 in the 2001 Quarter. The increase of $151,000 is primarily due to increased bank borrowings in Australia and New Zealand.

Summary

     Our cash position at March 31, 2002 was $17,164,000. During 2001 and the first quarter of 2002, we put in place several measures that are expected to have a positive effect on our overall liquidity, namely:

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     Potential uses for funds during 2002 that would reduce our liquidity, other than those relating to working capital needs and debt service requirements include:

     Based upon the current levels of the newly consolidated operations, anticipated cost savings and future growth, we believe our cash flow from operations, together with both the existing and the anticipated line-of-credit and other sources of liquidity (including potential asset sales) will be adequate to meet our anticipated requirements for interest payments and other debt service obligations, working capital, capital expenditures and other operating needs. There can be no assurance, however, that the business will continue to generate cash flow at or above current levels or that estimated cost savings or growth can be achieved. Future operating performance and our ability to service or refinance existing indebtedness, will be subject to future economic conditions and to financial and other factors, many of which are beyond our control.

Forward-Looking Statements

     This quarterly report contains forward-looking statements regarding, among other items:

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     These forward-looking statements are based on our expectations and are subject to a number of risks and uncertainties, some of which are beyond our control. These risks and uncertainties include, but are not limited to: