General
AmBase Corporation (the "Company"“Company” or "AmBase"“AmBase”) is a Delaware corporation that was incorporated in 1975. AmBase is a holding company.
At December 31, 2017,2023, the Company'sCompany’s assets consisted primarily of cash and cash equivalents, real estate owned and a deferred tax asset. On January 26, 2018, the Company sold its commercial office building in Greenwich, Connecticut, see Part II – Item 8 – Note 3 to the Company's consolidated financial statements for additional information. See Part II – Item 8 – Note 8 to the Company's consolidated financial statements for additional information regarding taxes.equivalents. The Company is engaged in the management of its assets and liabilities. The executive office of the Company is located at One South Ocean Boulevard, Suite 301, Boca Raton, Florida 33432.
In June 2013, the Company purchased an equity interest in a real estate development property through a joint venture agreement to purchase and develop real property located at 105 through 111 West 57th Street in New York, New York (the "111“111 West 57th Property"Property”). The Company is engaged in material disputes and litigation with regard to the sponsors111 West 57th Property. Despite ongoing litigation challenging the legitimacy of the joint venture (the "Sponsor")actions taken in connection with the “Strict Foreclosure”, (as defined and a mezzanine lender tofurther discussed herein), the joint venture ("Spruce"). The Company recorded an impairment for the full amount of its equity investment in the 111 West 57th Property in the full year period ended December 31, 2017. See Part II – Item 8 – Note 4 and Note 9Prior to the Company's consolidated financial statements for additional information regarding this impairment charge andStrict Foreclosure, the legal proceedings relating to the Company's investment in the 111 West 57th Property. The carrying value of the Company'sCompany’s equity investment in the 111 West 57th Property represented a substantial portion of the Company'sCompany’s assets and net equity value. The Company has
For additional information concerning the Company’s recording of an appeal pending onimpairment of its equity investment in the 111 West 57th Property in 2017 and the Company’s legal proceedings relating to the 111 West 57th Property, including the Company’s challenge to the strict foreclosure which has not yet been resolved. Strict Foreclosure, see Part II – Item 8 – Note 3 and Note 8 to the Company’s consolidated financial statements.
The executive office of the Company is located at 7857 West Sample Road, Suite 134, Coral Springs, Florida 33065. The Company had four (4) full-time and two (2) part-time employees at December 31, 2017.2023.
Background
In August 1988, the Company acquired Carteret Bancorp Inc., which through its principal wholly owned subsidiary Carteret Savings Bank, FA, was principally engaged in retail and consumer banking, and mortgage banking including mortgage servicing. On December 4, 1992, the Office of Thrift Supervision ("OTS") placed Carteret Savings Bank, FA was placed in receivership under the management of the Resolution Trust Corporation ("RTC") and a new institution, Carteret Federal Savings Bank was established to assume the assets and certain liabilities of Carteret Savings Bank, FA.
The Company was a plaintiff in a legal proceeding, commenced in 1993, seeking recovery of damages from the United States Government for the loss of the Company'sCompany’s wholly-owned subsidiary, Carteret Savings Bank, F.A. (the "Supervisory Goodwill"“Supervisory Goodwill” legal proceedings). Pursuant to a Settlement Agreement between the Company, the Federal Deposit Insurance Corporation-Receiver ("FDIC-R"(“FDIC-R”) and the Department of Justice ("DOJ"(“DOJ”) on behalf of the United States of America (the "United States"“United States”), (the "Settlement Agreement"“Settlement Agreement”) as approved by the United States Court of Federal Claims (the "Court“Court of Federal Claims"Claims”), in October 2012, the United States paid $180,650,000 directly to AmBase (the "Settlement Amount"“Settlement Amount”). As part ofOn August 6, 2013, Senior Judge Smith issued an opinion which addressed the relief sought by the Company. In summary, the court held that the Settlement Agreement inis a contract and that it entitles the Company's Supervisory Goodwill legal proceedings,Company to receive both “(1) the amount of the tax consequences resulting from taxation of the damages award plus (2) the tax consequences of receiving the first component.” But the Court of Federal Claims did not award an additional amount for the second component at that time given the remaining uncertainty surrounding the ultimate tax treatment of the settlement proceeds and the gross-up, as well as uncertainty relating to the Company’s future income. The Court of Federal Claims indicated that either the Company or the government is entitled to a tax gross-up in an amount to be determined ifseek further relief “if, and when, any federal taxes should be imposed on the Settlement Amount. In December 2014, the Internal Revenue Service ("IRS") completed their review of the examination of the Company's 2012 Federal Income Tax Return with no change to the tax return as filed.facts justify it.”
STOCKHOLDER INQUIRIESStockholder Inquiries
Stockholder inquiries, including requests for the following: (i) change of address; (ii) replacement of lost stock certificates; (iii) Common Stock name registration changes; (iv) Quarterly Reports on Form 10-Q; (v) Annual Reports on Form 10-K; (vi) Current Reports on Form 8-K; (vii) proxy material;materials; and (vii)(viii) information regarding stockholdings, should be directed to:
American Stock Transfer & Trust Company, LLC 6201 15th Avenue Brooklyn, NY 11219 Attention: Shareholder Services (800) 937-5449 or (718) 921-8200 Ext. 6820 | |
As theThe Company does not maintain a website, copieswebsite. Copies of Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Annual Reports on Form 10-K and Proxy Statements can also be obtained directly from the Company free of charge by sendingmailing a request to the Company by mail as follows:
AmBase Corporation 12 Lincoln Blvd., Suite 202 Emerson, NJ 07630 Attn: Shareholder Services | |
The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"“Exchange Act”). Accordingly, the Company'sCompany’s public reports, including Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, Annual Reports on Form 10-K and Proxy Statements, can be obtained through the Securities and Exchange Commission ("SEC"(“SEC”) EDGAR Database available on the SEC'sSEC’s website at www.sec.gov. Materials filed with the SEC may also be read or copied by visiting the SEC'sSEC’s Public Reference Room, 100 F Street, NE, Washington, DC 20549. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
The Company is subject to various risks, many of which are beyond the Company'sCompany’s control, which could have a negative effect on the Company and its financial condition. As a result of these and other factors, the Company may experience material fluctuations in future operating results on a quarterly or annual basis which could materially and adversely affect the Company'sCompany’s business, financial condition, operating results and stock price. An investment in the Company'sCompany’s stock involves various risks, including those mentioned below and elsewhere in this Annual Report on Form 10-K (this "Annual Report"“Annual Report”), and those that are detailed from time to time in the Company'sCompany’s other filings with the Securities and Exchange Commission. You should carefully consider the following risk factors, together with all of the other information included or incorporated by reference in this Annual Report, before you decide whether to purchase the Company'sCompany’s common stock.
Operating Risks
Going Concern
The Company has incurred operating losses and used cash for operating activities for the past several years. In June 2013, the Company purchased an equity interest in a real estate development property through a joint venture agreement to purchase and develop real property located at 105 through 111 West 57th Street in New York, New York (the "111 West 57th Property"). The Company has also made significant investments in the 111 West 57th Street Property in 2013, 2014 and 2015. The Company is engaged in material disputes and litigation with the sponsors of the joint venture (the "Sponsor") and a mezzanine lender to the joint venture ("Spruce"). The Company recorded an impairment of its equity investment in the 111 West 57th Property in the full year period ended December 31, 2017. See Part II – Item 8 – Note 4 and Note 9 to the Company's consolidated financial statements for additional information regarding this impairment charge and the legal proceedings relating to the Company's investment in the 111 West 57th Property. The carrying value of the Company's equity investment in the 111 West 57th Property represented a substantial portion of the Company's assets and net equity value. The Company has an appeal pending on its challenge to the strict foreclosure which has not yet been resolved. The Company has continued to keep operating expenses at a reduced level; however, there can be no assurance that the Company'sCompany’s current level of operating expenses will not increase or that other uses of cash will not be necessary. The Company believes that based on its current level of operating expenses, its currently availableexisting cash and financial resources, together with the net proceeds from the sale of its commercial office building Greenwich, Connecticut as further discussed in Part II – Item 8 – Note 3 to the Company's consolidated financial statements,cash equivalents may not be sufficient to cover operating cash needs through the twelve month period from the financial statement reporting date. Based on the above factors, management determined there is substantial doubt about the Company'sCompany’s ability to continue as a going concern within one year after the date that the financial statements are issued. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The financial statements do not include adjustments to the carrying value of assets and liabilities, which might be necessary should the Company not continue in operation.
Over the next several months,In order to continue as a going concern, the Company will seekmust take steps to manage its current level of cash and cash equivalents, through various ways, including but not limited to, reducing operating expenses, possible asset sales and/raising additional capital through the sale of equity or debt securities or long term borrowings, which may include additional borrowings from affiliates of the Company, although this cannot be assured. In order to continue on a long-term basis, the Company must raise additional capital through the sale of assets or long term borrowings.reducing operating expenses, and seeking recoveries from various sources. There can be no assurance that the Company will be able to sell any of its assetsadequately implement these cash management measures, in whole or attain suchin part or raise capital or obtain financing aton terms acceptable to the Company, if at all.
To provide the necessary cash resources to continue operations and continue the litigation related to the 111 West 57th Property, the Company has commenced a private placement offering (the “Equity Offering”) of 44,200,460 shares of the Company’s common stock (the “Shares”) to existing shareholders of the Company (the “Equity Offering”) in reliance on the exemption from registration under Rule 506(c) of the Securities Act of 1933, as amended (the “Securities Act”). The purchase price for one share of Common Stock in the Equity Offering is $0.20. The Company expects to receive gross proceeds of approximately $8.8 million in connection with the Equity Offering before deducting offering expenses. There are no limitations on the Company’s use of such proceeds when received, although it is anticipated that a substantial part of the proceeds will be applied to repayment of existing Company obligations. The Shares are not being registered under the Securities Act and will be “restricted securities” under the Securities Act and will generally be subject to a minimum holding period of six months under Rule 144 before the Shares may be resold. The Shares will be offered and sold only to existing stockholders of record of the Company as of February 28, 2024 (the “Record Date”).
Each qualifying stockholder will be permitted to purchase up to his, her or its pro rata share of the Shares in the Equity Offering, based on the amount of shares of Common Stock owned by such stockholder as of the Record Date, in an amount equal to up to one hundred and eight and one-half percent (108.5%) of the number of shares of Common Stock beneficially owned by such stockholder as of the Record Date. The Equity Offering commenced on or about February 28, 2024, and will remain open for a period of thirty (30) calendar days ending on March 29, 2024 (the “Subscription Deadline”). The Shares will be offered and sold pursuant to a Subscription Agreement (the “Subscription Agreement”) to be entered into by and between the Company and each subscribing stockholder. In connection with the Equity Offering, the Company has entered into a standby purchase agreement dated February 28, 2024 (the “SPA”) with BARC Investments, LLC (“BARC”), an affiliate of the Company owned and controlled by Company directors Alessandra F. Bianco and Richard A. Bianco, Jr. Under the terms of the SPA, BARC has agreed to act as standby a purchaser for all of the shares of common stock being offered in the Equity Offering that are not otherwise subscribed to by other stockholders prior to the Subscription Deadline. Additional information about the Equity Offering, including the material terms and conditions of the Equity Offering and information about how stockholders may subscribe for Shares in the Equity Offering, including the form of Subscription Agreement, are set forth in the Company’s Current Report on Form 8-K as filed with the SEC on February 28, 2024.
The Company’s Chairman, President and Chief Executive Office, Mr. Richard A. Bianco (“R.A. Bianco”) has indicated that, if and when needed, he would provide a working capital line of credit to the Company on an as needed basis, subject to customary and market terms and conditions to be agreed upon at such time, until such time as the Equity Offering has been completed. However, there can be no assurance that the Equity Offering will be completed within the timeframe contemplated or at all. As of December 31, 2023, Mr. R.A. Bianco provided loans to the Company in the amounts aggregating $3,198,000. In January, February, and March 2024, Mr. R.A. Bianco provided additional loan(s) to the Company. For additional information, see Part II – Item 8 – Note 10 to the Company’s consolidated financial statements.
For additional information with regard to the Company’s investment in the 111 West 57th Property and the legal proceedings related thereto see Part II – Item 8 – Note 3 and Note 8 to the Company’s consolidated financial statements.
The Company has incurred operating losses over the last several years and may not be able to achieve profitability.
We expect our operating expenses in 2024 will remain generally close to our most recent levels, although there can be no assurance that the Company’s current level of operating expenses will not increase or that other uses of cash will not be necessary, including increased costs related to the Company’s legal proceeding depending on a variety of factors including the status of legal proceedings, appeals, discovery expert fees, and other litigation related expenses. These losses, among other things, have had and will continue to have an adverse effect on our working capital, total assets and stockholders’ equity. Because of the numerous risks and uncertainties associated with property development and management, we are unable to predict if or when we may become profitable.
The Company is in a competitive business.
The real estate industry is highly competitive. In addition, the Company expects other major real estate investors, some with much greater resources than the Company has, may compete with the Company for attractive acquisition opportunities. These competitors include REITs, investment banking firms and private institutional investors. This competition has increased prices for commercial properties and may impair the Company’s ability to make suitable property acquisitions on favorable terms in the future.
We are a party to a legal proceedingproceedings relating to our equity interest in the joint real estate venture 111 West 57th Partners, and may become subject to additional litigation in the future, anyall of which couldcontinue to have an adverse effect on our financial condition, results of operations, cash flow and per share trading price of our common stock.
We are currently party to a lawsuitlawsuits relating to our equity interest in the joint real estate venture 111 West 57th Partners,Property, as further described in Part II – Item 8 – Note 98 to our consolidated financial statements. There can be no assurance that the Company will prevail with any of its claims with respect to its interests in the 111 West 57th Property or that any course of action will be successful in recovering value for the Company from this investment. If the Company is unable to recover all or most of the value of its investment in the 111 West 57th Property, there would be a material adverse effect on the Company'sCompany’s financial condition and future prospects. Most recently, our litigation expensesprospects, including the Company’s ability to date have been funded substantially by advances from Richard A. Bianco, our Chairman, President and Chief Executive Officer; however, Mr. Bianco is under no obligation to fund the Company's litigation expenses beyond the amounts committed to in his Litigation Funding Agreement with the Company and litigation expenses could exceed such amounts. For additional information with regard to the Litigation Funding Agreement see Part II – Item 8 – Note 10 to our consolidated financial statements.continue as a going concern. In addition, in the future we may become subject to additional litigation, including claims relating to our operations, assets, offerings, and otherwise in the ordinary course of business. Some of these claims may result in significant defense costs and potentially significant judgments against us, some of which are not, or cannot be insured against. An adverse determination with respect to any of these claims may result in our having to pay material judgments, or settlements, which could have a material adverse effect on our earnings and cash flows, thereby having a material adverse effect on our financial condition, results of operations, cash flow and per share trading price of our common stock. Certain litigation or the resolution of certain litigation may affect the availability or cost of some of our insurance coverage, which could adversely impact our results of operations and cash flows and potentially expose us to increased risks that would be uninsured.
The Company is in a competitive business.3
Illiquidity of real estate property ownerslimits our ability to act quickly.
Real estate investments are relatively illiquid. Such illiquidity may limit our ability to react quickly in response to changes in economic and other companiesconditions. If we want to sell an investment, we might not be able to dispose of that sublet properties. The Company's principal meansinvestment in the time period we desire, and the sales price of competition are rents charged in relation tothat investment might not recoup or exceed the income producing potentialamount of the location. In addition, the Company expects other major real estate investors, some with much greater resources than the Company has, may compete with the Company for attractive acquisition opportunities.our investment. These competitors include REITs, investment banking firms and private institutional investors. This competition has increased prices for commercial properties and may impair the Company'slimitations on our ability to make suitable property acquisitionssell properties or investments could have a material adverse effect on favorable terms in the future.our financial condition and results of operations.
Property ownership through equity investments and/or in joint ventures could subject us to the differing business objectives of our co-venturers.
The Company has entered into, and may continue in the future to enter into, equity investments and/or joint ventures (including limited liability companies and partnerships) in which the Company does not hold a direct or controlling interest in the assets underlying the entities in which it invests, including equity investments and/or joint ventures in which (i) the Company owns a direct interest in an entity which controls such assets, or (ii) the Company owns a direct interest in an entity which owns indirect interests, through one or more intermediaries, of such assets. These equity investments and/or joint ventures may include ventures through which the Company would own an indirect economic interest of less than 100 percent of a property owned directly by such joint ventures and may include equity investments and/or joint ventures that the Company does not control or manage. These investments involve risks that do not exist with properties in which the Company owns a controlling interest with respect to the underlying assets, including the possibility that (i) we may become subject to material, legal disputes with our joint venture partners, as is the case with respect to our investment in the 111 West 57th Property; (ii) our co-venturers or partners may, at any time, become insolvent or otherwise refuse to make capital contributions when due, (iii) we may be subject to additional capital calls for joint venture development or other expenses which we may be unable or unwilling to meet, possibly resulting in substantial dilution of our investment, (iv) we may become liable with respect to guarantees of payment or performance by the joint ventures, or (v) we may become subject to buy-sell arrangements which could cause us to sell our interests or acquire our co-venturer'sco-venturer’s or partner'spartner’s interests in a joint venture. Even where we have major decision rights or do not have major decision rights, because we lack a controlling interest, our co-venturers or partners may be in a position to take action contrary to our instructions or requests or contrary to our policies or objectives. While we seek protective rights against such contrary actions, there can be no assurance that we will be successful in procuring any such protective rights, or if procured, that the rights will be sufficient to fully protect us against contrary actions. Our organizational documents do not limit the amount of available funds that we may invest in equity investments and/or joint ventures and/or partnerships. If the objectives of our co-venturers or partners are inconsistent with ours, it may adversely affect our ability to make receive and distributions or payments to our investors.
We may be unable to identify suitable properties for equity investments and acquisitions and any new investments and acquisitions may fail to perform as expected and subject us to new risks, including risks created by geographic concentration.
The Company has incurred operating losses over the last several years and may not be able to achieve or maintain profitability.
The Company has incurred operating losses over the last several years. The Company has also made significantidentify suitable properties for equity investments in the 111 West 57th Street Property in 2013, 2014 and 2015. We expect our operating expenses in 2018 will remain relatively close to our most recent levels. These losses, among other things, have had and will continue to have an adverse effect on our working capital, total assets and stockholders' equity. Because of the numerous risks and uncertainties associated with property development and management,acquisitions. Even if we are unableable to predict if or whenidentify suitable properties for equity investments and acquisitions, we may become profitable, or if the Company's current financial resources will be adequate to fund operations over the next several years. Nonetheless the Company will seek to manage its current level of cash and cash equivalents through various sources, including but not limited to reducing operating expenses, possible asset sales and/or long term borrowings.
Illiquidity of real estate limits our ability to act quickly.
Real estate investments are relatively illiquid. Such illiquidity may limit our ability to react quickly in response to changes in economic and other conditions. If we want to sell an investment, we might not be able to disposecarry out such equity investments or acquisitions on favorable terms, or at all. Any new equity investments in properties or newly acquired properties may not perform as expected and may subject us to unknown liability with respect to liabilities relating to such properties for clean-up of that investmentundisclosed environmental contamination or claims by tenants, residents, vendors or other persons against the former owners of the properties. Inaccurate assumptions regarding future rental or occupancy rates, or fluctuations in the time period we desire,target market could result in overly optimistic estimates of future revenues. In addition, future operating expenses or the costs necessary to bring an acquired property up to standards established for its intended market position may be underestimated. The search for and the sales priceprocess of that investment might not recoup or exceed theacquiring such properties will also require a substantial amount of our investment. These limitations on our ability to sell our properties or investments could have a material adverse effect on our financial conditionmanagement’s time and results of operations.attention.
Fluctuations in the local market in which the Company's currentCompany’s equity investment in a development property is located may adversely impact the Company'sCompany’s financial condition and operating results.
The Company's current111 West 57th Property, which the Company purchased an equity investment in a development propertyduring 2013, is located in New York City. This geographic concentration could present risks if the New York City property market performance falls below expectations. The economic condition of this market could affect occupancy, property revenues, and expenses, from the property and its underlyingfuture asset value.
The financial resultsCompany may not be able to insure certain risks economically.
The Company may experience economic harm if any damage to the Company’s property or properties is not covered by insurance. The Company cannot be certain that the Company will be able to insure all risks that the Company desires to insure economically or that all of major local employers alsothe Company’s insurers will be financially viable if the Company makes a claim. The Company may impactsuffer losses that are not covered under the cash flow and valueCompany’s insurance policies. If an uninsured loss or a loss in excess of insured limits should occur, the Company could lose capital invested in a property. This could have a negative impact onproperty or properties, as well as any potential future revenue from the Company's financial condition and operating results, which could affect the Company's ability to receive distributions from its investment interest in the property.property or properties.
Development and redevelopment activities may be delayed, not completed, and/or not achieve expected results.
As the Company pursuesThe Company’s investments in and/or development and redevelopment projects, these projects generally require various governmental and other approvals, which have no assurance of being received. The Company's investment in development and redevelopment activities generally entail certain risks, including the following:
| - | funds may be expended, and management'smanagement’s time devoted to projects that may not be completed, |
| - | required approvals may not be obtained from governmental entities or other third parties, |
| - | construction costs of a project may exceed original estimates, possibly makingnegatively impacting the economic feasibility of the project, economically unfeasible, |
| - | projects may be delayed due to, without limitation, adverse weather conditions, labor or material shortages, |
| - | occupancy rates and rents at a completed project may be less than anticipated, and |
| - | expenses at completed development projects may be higher than anticipated. |
These risks may reduce the funds available for distribution to the Company and have a material adverse effect on the Company'sCompany’s financial condition and results of operations. Further, investment in and the development and redevelopment of real estate is also subject to the general risks associated with real estate investments. For further information regarding these risks, see the risk factor "“The Company is subject to risks inherent in owning, developing and leasing real estate."”
The Company is subject to risks inherent in owning, developing and leasing real estate.
The Company is subject to varying degrees of risk generally related to leasing and owning real estate, many of which are beyond the Company's control. In addition to general risks related to owning commercial real estate, the Company's risks include, among others:
- | deterioration in regional and local economic and real estate market conditions, |
- | failure to complete construction and lease-up on schedule or within budget may increase debt service expense and construction and other costs, |
- | increased operating costs, including insurance premiums, utilities and real estate taxes, due to inflation and other factors which may not necessarily be offset by increased rents, |
- | changes in interest rate levels and the availability of financing, |
- | fluctuations in tourism patterns, |
- | adverse changes in laws and regulations (including tax, environmental, zoning and building codes, landlord/tenant and other housing laws and regulations) and agency or court interpretations of such laws and regulations and the related costs of compliance,
|
- | potential changes in supply of, or demand for rental properties similar to the Company's, |
- | competition for tenants and changes in rental rates, |
- | concentration in a single real estate asset and class, |
- | needs for additional capital which may be required for needed development or repositioning of one or more real estate assets may exceed the Company's abilities or its desired minimum level of liquidity, |
- | difficulty in reletting properties on favorable terms or at all, |
- | impairments in the Company's ability to collect rent payments when due, |
- | the potential for uninsured casualty and other losses, |
- | the impact of present or future environmental legislation and compliance with environmental laws, |
- | changes in federal or state tax laws, and |
- | acts of terrorism and war. |
Each of these factors could have a material adverse effect on the Company's ability to receive distributions from its properties and investments and the Company's financial condition and results of operations. In addition, real estate investments are relatively illiquid, which means that the Company's ability to promptly sell the Company's property in response to changes in economic and other conditions may be limited.
Our insurance coverage on our property or properties may be inadequate or our insurance providers may default on their obligations to pay claims.
We currently carry comprehensive insurance on our property or properties, including insurance for liability, fire and flood. We cannot guarantee that the limits of our current policies will be sufficient in the event of a catastrophe to our property or properties. We cannot guarantee that we will be able to renew or duplicate our current insurance coverage in adequate amounts or at reasonable prices. In addition, while our current insurance policies insure us against loss from terrorist acts and toxic mold, in the future, insurance companies may no longer offer coverage against these types of losses, or, if offered, these types of insurance may be prohibitively expensive. If any or all of the foregoing should occur, we may not have insurance coverage against certain types of losses and/or there may be decreases in the limits of insurance available. Should an uninsured loss or a loss in excess of our insured limits occur, we could lose all or a portion of the capital we have invested in a property or properties, as well as the anticipated future revenue from the property or properties. We cannot guarantee that material losses in excess of insurance proceeds will not occur in the future. If any of our properties were to experience a catastrophic loss, it could seriously disrupt our operations, delay revenue and result in large expenses to repair or rebuild the property. Such events could adversely affect our financial condition and results of operations. If one or more of our insurance providers were to fail to pay a claim as a result of insolvency, bankruptcy or otherwise, the nonpayment of such claims could have an adverse effect on our financial condition and results of operations. In addition, if one or more of our insurance providers were to become subject to insolvency, bankruptcy or other proceedings and our insurance policies with the provider were terminated or canceled as a result of those proceedings, we cannot guarantee that we would be able to find alternative coverage in adequate amounts or at reasonable prices. In such case, we could experience a lapse in any or adequate insurance coverage with respect to one or more properties and be exposed to potential losses relating to any claims that may arise during such period of lapsed or inadequate coverage.
We are dependent on our key personnel whose continued service is not guaranteed and the loss of whose service could have a material adverse effect on our business.
Whether our business is successful will be dependent in part upon the leadership, strategic business direction and real estate experience of our executive officers, particularly Richard A.Mr. R.A. Bianco, our Chairman, President and Chief Executive Officer. Although we have entered into an employment agreement with Mr. R.A. Bianco, none of our executive officers or directors are subject to any covenants not to compete against the Company should they terminate their affiliation with the Company. While we believe that we could find replacements for these key personnel, loss of their services could adversely affect our operations. Although we carry some key man life insurance on Mr. Bianco, the amount of such coverage may not be sufficient to offset any adverse economic effects on our operations and weWe do not carry key man life insurance on any of our other executive officers or directors.
The Company may not be able to insure certain risks economically.
The Company may experience economic harm if any damage to the Company's property or properties is not covered by insurance. The Company cannot be certain that the Company will be able to insure all risks that the Company desires to insure economically or that all of the Company's insurers will be financially viable if the Company makes a claim. The Company may suffer losses that are not covered under the Company's insurance policies. If an uninsured loss or a loss in excess of insured limits should occur, the Company could lose capital invested in a property or properties, as well as any future revenue from the property or properties.
Changes in the composition of the Company'sCompany’s assets and liabilities through acquisitions, divestitures or corporate restructuring may affect the Company'sCompany’s results.
The Company may make future acquisitions or divestitures of assets or changes in how such assets are held. Any change in the composition of the Company'sCompany’s assets and liabilities or how such assets and liabilities are held could significantly affect the Company'sCompany’s financial position and the risks that the Company faces.
The Company may not be able to generate sufficient taxable income to fully realize the Company's deferred tax asset.
The Company has federal income tax net operating loss ("NOL") carryforwards and other tax attributes. If the Company is unable to generate sufficient taxable income, the Company may not be able to fully realize the benefit of the NOL carryforwards.
Changes in tax laws and uncertainties in the interpretation and application of the 2017 Tax Cuts and Job Act could materially affect our financial position, results of operations and cash flows.
In December 2017, the United States ("U.S.") government enacted comprehensive income tax legislation commonly referred to as the Tax Cuts and Jobs Act (the "2017 Tax Act"). The 2017 Tax Act makes broad and complex changes to the Internal Revenue Code of 1986, as amended (the "Code"), including, among other changes, significant changes to the U.S. corporate tax rate and certain other changes to the Code that impact the taxation of corporations. In certain instances the 2017 Tax Act requires complex computations to be performed that generally were not previously required by the Code and the regulations promulgated thereunder; significant judgments to be made in interpreting the provisions of the 2017 Tax Act significant estimates to be made in certain calculations; and the preparation and analysis of information generally not previously relevant or regularly produced. The U.S. Treasury Department, the Internal Revenue Service ("IRS"), and other standard-setting bodies could interpret or issue guidance on how provisions of the 2017 Tax Act will be applied or otherwise administered that differs from our interpretation. As we complete our analysis of the 2017 Tax Act, collect and prepare necessary data, and interpret any additional guidance, we may make adjustments to provisional amounts that we have recorded that may materially impact our provision for income taxes in the period in which the adjustments are made. Additionally, there is risk relating to assumptions regarding the outcome of tax matters, based in whole or in part upon consultation with outside advisors; risk relating to potential unfavorable decisions in tax proceedings; and risks regarding changes in, and/or interpretations of federal and state income tax laws. Additionally, the Company's tax advisors indicate that the IRS typically has broad discretion to examine taxpayer tax returns, even after refunds have been paid to taxpayers, which could result in adjustments to AMT Credit carryforward amounts claimed as refundable and/or AMT Credit carryforward amounts ultimately received.
Terrorist attacks and other acts of violence or war may affect the market, on which the Company'sCompany’s common stock trades, the markets in which the Company operates the Company'sCompany’s operations and the Company'sCompany’s results of operations.
Terrorist attacks or armed conflicts could affect the Company'sCompany’s business or the businesses of the Company'sCompany’s tenants. The consequences of armed conflicts are unpredictable, and the Company may not be able to foresee events that could have an adverse effect on the Company'sCompany’s business. More generally, any of these events could cause consumer confidence and spending to decrease or result in increased volatility in the U.S. and worldwide financial markets and economy. They also could be a factor resulting in, or a continuation of, an economic recession in the U.S. or abroad. Any of these occurrences could have a significant adverse impact on the Company'sCompany’s operating results and revenues and may result in volatility of the market price for the Company'sCompany’s common stock.
The Company is subject to risks inherent in owning, developing and leasing real estate.
The Company is subject to varying degrees of risk generally related to leasing and owning real estate, many of which are beyond the Company’s control. In addition to general risks related to owning commercial real estate, the Company’s risks include, among others:
| - | deterioration in regional and local economic and real estate market conditions, |
| - | failure to complete construction and lease-up on schedule or within budget may increase debt service expense and construction and other costs, |
| - | increased operating costs, including insurance premiums, utilities and real estate taxes, due to inflation and other factors which may not necessarily be offset by increased rents, |
| - | changes in interest rate levels, rates of inflation and the availability of financing, |
| - | fluctuations in tourism patterns, |
| - | adverse changes in laws and regulations (including tax, environmental, zoning and building codes, landlord/tenant and other housing laws and regulations) and agency or court interpretations of such laws and regulations and the related costs of compliance, |
| - | potential changes in supply of, or demand for rental properties similar to the Company’s, |
| - | competition for tenants and changes in rental rates, |
| - | concentration in a single real estate asset and class, |
| - | needs for additional capital which may be required for needed development or repositioning of one or more real estate assets may exceed the Company’s abilities or its desired minimum level of liquidity, |
| - | difficulty in reletting properties on favorable terms or at all, |
| - | impairments in the Company’s ability to collect rent payments when due, |
| - | the potential for uninsured casualty and other losses, |
| - | the impact of present or future environmental legislation and compliance with environmental laws, |
| - | changes in federal or state tax laws, |
| - | the effects of global pandemics such as COVID-19 and government responses thereto; and |
| - | acts of terrorism and war. |
Each of these factors could have a material adverse effect on the Company’s ability to receive distributions from its properties and investments and the Company’s financial condition and results of operations. In addition, real estate investments are relatively illiquid, which means that the Company’s ability to promptly sell the Company’s property in response to changes in economic and other conditions may be limited.
Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer.
In the ordinary course of our business, we collect and store sensitive data that may include intellectual property, our proprietary business information and that of our tenants and business partners, including personally identifiable information of our tenants and employees, on our networks. Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions. Any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, disrupt our operations, and damage our reputation, which could adversely affect our business.
The Company may not be able to generate sufficient taxable income to fully realize the Company’s deferred tax asset.
The Company has federal income tax net operating loss (“NOL”) carryforwards and other tax attributes. If the Company is unable to generate sufficient taxable income, the Company may not be able to fully realize the benefit of the NOL carryforwards.
Because the Company from time to time maintains a majority of its assets in cash and/or securities, the Company may in the future be deemed to be an investment company under the Investment Company Act of 1940 resulting in additional costs and regulatory burdens.
Currently, the Company believes that either it is not within the definition of "Investment Company"“Investment Company” as the term is defined under the Investment Company Act of 1940 (the "1940 Act"“1940 Act”) or, alternatively, may rely on one or more of the 1940 Act'sAct’s exemptions. The Company intends to continue to conduct its operations in a manner that will exempt the Company from the registration requirements of the 1940 Act. If the Company were to be deemed to be an investment company because of the Company'sCompany’s investments securities holdings, the Company would be required to register as an investment company under the 1940 Act. The 1940 Act places significant restrictions on the capital structure and corporate governance of a registered investment company, and materially restricts its ability to conduct transactions with affiliates. Compliance with the 1940 Act could also increase the Company'sCompany’s operating costs. Such changes could have a material adverse effect on the Company'sCompany’s business, results of operations and financial condition.
Anti-takeover Risks
Our amended and restated shareholder rights plan may delay or prevent an acquisition of us that shareholders may consider favorable or may prevent efforts by our shareholders to change our directors or our management, which could decrease the value of your common shares.
On March 27, 2019, the Company’s Board of Directors adopted the New Rights Plan which is designed to provide adequate time for our Board of Directors and shareholders to assess an unsolicited takeover bid for our company, to provide our Board of Directors with sufficient time to explore and develop alternatives for maximizing shareholder value if a takeover bid is made, and to provide shareholders with an equal opportunity to participate in a takeover bid and receive full and fair value for their common shares. The New Rights Plan is set to expire on March 27, 2029. The rights will become exercisable only when a person, including any party related to it, acquires or attempts to acquire 25% or more of our outstanding common stock. Should such an acquisition occur or be announced, each right would, upon exercise, entitle a rights holder, other than the acquiring person and related persons, to purchase common shares at a 50% discount to the market price at the time. The New Rights Plan may inhibit a change in control of the Company by a third party in a transaction not approved by the Company’s Board of Directors. If a change in control is inhibited or delayed in this manner, it may adversely affect the market price of the Company’s common stock.
Other Risks
Outbreaks of highly infectious or contagious diseases may, materially and adversely impact the business, income, cash flow, results of operations and financial condition of the Company, including the 111 West 57th Property.
The national and global impacts of a pandemic, such as the COVID-19 pandemic, may present material uncertainty and risk with respect to our financial condition, results of operations and cash flows. Moreover, many of the risk factors set forth in this Form 10-K could be interpreted as heightened risks as a result of the impact of a pandemic. Impacts from a pandemic may include the following:
State, local, and federal entities may impose restrictions, for varying times and to varying degrees, on our ability to enforce tenant’s contractual lease obligations, and this may affect our ability to enforce all our remedies (such as pursuing collections and seeking evictions) for the failure to pay rent.
Consumers whose income has declined, who are working remotely or who cannot freely access neighborhood amenities like restaurants, may decide to live in a location other than New York City.
Various state, local and federal rules may require us to waive late fees and certain other customary fees associated with tenant rent obligations. These requirements or practices may result in a loss of revenue.
A property may incur significant costs or losses related to shelter-in-place or stay-at-home orders, quarantines, infection, clean-up costs or other related factors.
There may be concerns related to the general economy about (i) supply chain constraints and (ii) inflation caused by both supply chain constraints and governmental fiscal and monetary policies. Supply chain constraints could cause delays in any construction and redevelopment activity, and inflation could cause any construction and operating costs to increase without a commensurate increase in our rental revenue.
The same factors as described immediately above may also impact our workforce. A disruption in the normal operations of our workforce, as well as the possibility of illness among our employees or a substantial portion of our workforce, could also adversely affect our operations.
We face possible risks associated with the physical effects of climate change.
We cannot predict with certainty whether climate change is occurring and, if so, at what rate. However, the physical effects of climate change could have a material adverse effect on our 111 West 57th Property, operations, and business. To the extent climate change causes changes in weather patterns or severity, our markets could experience increase in storm intensity (including floods, tornadoes, hurricanes, or snow and ice storms), rising sea-levels, and changes in precipitation, temperature, air quality, and quality and availability of water. Over time, these conditions could result in physical damage to, or declining demand for, our properties or our inability to operate the buildings efficiently or at all. Climate change may also indirectly affect our business by increasing the cost of (or making unavailable) property insurance on terms we find acceptable, increasing the cost of required resources, including energy, other fuel sources, water, and waste and snow removal services, and increasing the risk and severity of flood and earthquakes at our properties. Should the impact of climate change be severe or occur for lengthy periods of time, our financial condition or results of operations could be adversely impacted. In addition, compliance with new or more stringent laws or regulations or stricter interpretations of existing laws may require material expenditure by us. For example, various federal, state, and local laws and regulations have been implemented or are under consideration to mitigate the effects of climate change caused by greenhouse gas emissions. Among other things, “green” building codes may seek to reduce emissions through the imposition of standards for design, construction materials, water and energy usage and efficiency, and waste management. Such codes could require us to make improvements to our existing properties, increase the costs of maintaining or improving our existing properties or developing new properties, or increase taxes and fees assessed on us or our properties. Expenditures required for compliance with such codes may affect our cash flow and results of operations.
| ITEM 1B. | UNRESOLVED STAFF COMMENTS |
None.
The Company’s information technology, communication networks, system applications, accounting and financial reporting platforms and related systems are integral to the operation of the business. The Company utilizes these systems, among others, for financial analysis, management, and reporting, and for various other aspects of the business.
The Company’s cybersecurity strategy is focused on detection, protection, incident response, security risk management and mitigation, and resiliency of the cybersecurity infrastructure. The Company relies on third party service providers to operate and maintain its information technology infrastructure and systems and to evaluate, test and update various information security processes and to manage material risks from cybersecurity threats to the Company’s critical computer networks, third-party hosted services, communications systems, hardware and software, and critical data, including confidential information that is proprietary, strategic or competitive in nature, as well as any personally identifiable information related to any tenants’ and employees’ personal data.
The Company identifies and assesses risks from cybersecurity threats by monitoring and evaluating the cybersecurity threat environment and the Company’s risk profile. The Company is not currently aware of any risks from cybersecurity threats nor has the Company had a previously cybersecurity incident that in either case have materially affected or are reasonably likely to materially affect the Company, its business strategy, results of operations or financial condition.
The Company’s Audit Committee holds oversight responsibility over the Company’s cybersecurity strategy and risk management. The Audit Committee engages in regular discussions with executive management regarding the Company’s significant financial risk exposures and the measures implemented to monitor and control these risks, including those that may result from material cybersecurity threats.
ITEM 2.PROPERTIES
At December 31, 2017, the Company owned a commercial office building in Greenwich, Connecticut. The building was approximately 14,500 square feet with approximately 3,500 square feet utilized by the Company for office space. On January 26, 2018, the Company sold its commercial office building in Greenwich, Connecticut, see Part II – Item 8 – Note 3 to the Company's consolidated financial statements for additional information.
The Company leasesrents approximately 1,085150 square feet of office space for its executive office at One South Ocean Boulevard,7857 West Sample Road, Suite 301, Boca Raton, Florida 33432, with134, Coral Springs, FL 33065 on a lease expiration dateshort term basis. The Company also rents on a short term basis approximately 200 square feet of office space in March 2019.Emerson, NJ.
ITEM 3.LEGAL PROCEEDINGS
For a discussion of the Company'sCompany’s legal proceedings, see Part II - Item 8 - Note 9 8 to the Company'sCompany’s consolidated financial statements.
From time to time, the Company and its subsidiaries may be named as a defendant in various lawsuits or proceedings. At the current time, except as set forth in Part II - Item 8 - Note 9 8 to the Company'sCompany’s consolidated financial statements, the Company is unaware of any legal proceedings pending against the Company. The Company intends to aggressively contest all litigation and contingencies, as well as pursue all sources for contributions to settlements. However, there can be no assurance that the Company will prevail with respect to any of its claims.
| ITEM 4. | MINE SAFETY DISCLOSURES |
Not applicable.
PART II
| ITEM 5. | MARKET FOR REGISTRANT'SREGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES |
The Common Stock of the Company is quoted in the over-the-counter market under the symbol ABCP. The sales prices per share for the Company's Common Stock represent the range of the reported high and low bid quotations. Such prices reflect interdealer prices, without retail mark-up, markdown or commission, and may not necessarily represent actual transactions.
| | | 2017 | | | 2016 | |
| | | High | | | Low | | | High | | | Low | |
| First Quarter | | $ | 1.45 | | | $ | 0.82 | | | $ | 2.22 | | | $ | 1.62 | |
| Second Quarter | | | 1.27 | | | | 0.97 | | | | 1.78 | | | | 1.32 | |
| Third Quarter | | | 1.00 | | | | 0.17 | | | | 1.28 | | | | 1.04 | |
| Fourth Quarter | | | 0.38 | | | | 0.16 | | | | 1.10 | | | | 0.84 | |
As of February 28, 2018,15, 2024, there were approximately 8,2005,900 beneficial owners of the Company'sCompany’s Common Stock. No dividends were declared or paid on the Company's Common Stock in 2017 and 2016. The Company has no current plans to declare or pay dividends in the foreseeable future.
For information concerning the Company's stockholder rights plan, see Part II - Item 8 - Note 6 to the Company's consolidated financial statements.
Common Stock Repurchase Plan
The Company'sCompany’s common stock repurchase plan (the "Repurchase Plan"“Repurchase Plan”) allows for the repurchase by the Company of its common stock in the open market. The Repurchase Plan is conditioned upon favorable business conditions and acceptable prices for the common stock. Purchases under the Repurchase Plan may be made, from time to time, in the open market, through block trades or otherwise. Depending on market conditions and other factors, purchases may be commenced or suspended any time or from time to time without prior notice. No common stock repurchases have been made pursuant to the Repurchase Plan during 20172023 or 2016.2022. Due to the Company’s current financial condition and ongoing litigation proceedings, the Company does not anticipate that it will make any stock purchases pursuant to the Repurchase Plan in the next twelve months. For additional information see Part II - Item 8 - Note 5 to the Company’s consolidated financial statements.
ITEM 6.SELECTED FINANCIAL DATA
Not applicable.
| ITEM 7. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Management'sManagement’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the consolidated financial statements and related notes, which are contained in Part II - Item 8, herein.
BUSINESS OVERVIEW
AmBase Corporation (the "Company"“Company” or "AmBase"“AmBase”) is a Delaware corporation that was incorporated in 1975. AmBase is a holding company.
At December 31, 2017,2023, the Company'sCompany’s assets consisted primarily of cash and cash equivalents, real estate owned and a deferred tax asset. On January 26, 2018, the Company sold its commercial office building in Greenwich, Connecticut, see Part II – Item 8 – Note 3 to the Company's consolidated financial statements for additional information. See Part II – Item 8 – Note 8 to the Company's consolidated financial statements for additional information regarding taxes.equivalents. The Company is engaged in the management of its assets and liabilities.
In June 2013, the Company purchased an equity interest in a real estate development property through a joint venture agreement to purchase and develop real property located at 105 through 111 West 57th Street in New York, New York (the "111“111 West 57th Property"Property”). The Company is engaged in material disputes and litigation with regard to the sponsors111 West 57th Property. Despite ongoing litigation challenging the legitimacy of the joint venture (the "Sponsor")actions taken in connection with the “Strict Foreclosure”, (as defined and a mezzanine lender tofurther discussed herein), the joint venture ("Spruce"). The Company recorded an impairment for the full amount of its equity investment in the 111 West 57th Property in the full year period ended December 31, 2017. See Part II – Item 8 – Note 4 and Note 9Prior to the Company's consolidated financial statements for additional information regarding this impairment charge andStrict Foreclosure, the legal proceedings relating to the Company's investment in the 111 West 57th Property. The carrying value of the Company'sCompany’s equity investment in the 111 West 57th Property represented a substantial portion of the Company'sCompany’s assets and net equity value. The Company has
For additional information regarding the Company’s recording of an appeal pending onimpairment of its equity investment in the 111 West 57th Property in 2017 and the Company’s legal proceedings relating to the 111 West 57th Property, including the Company’s challenge to the strict foreclosure which has not yet been resolved.
FINANCIAL CONDITION AND LIQUIDITY
The Company's assets at December 31, 2017, aggregated $21,878,000, consisting principally of cash and cash equivalents of $70,000 and real estate owned, net of $1,632,000 and a deferred tax asset of $20,092,000. At December 31, 2017, the Company's liabilities aggregated $2,722,000. In addition, the Company has a litigation funding amount of $1,354,000 as further discussed in Part II – Item 8 – Note 10 of the Company's consolidated financial statements. Total stockholders' equity was $17,802,000.
At December 31, 2017, real estate owned consisted of a 14,500 square foot commercial office building in Greenwich, Connecticut, managed and operated by the Company. On January 26, 2018, the Company sold its commercial office building in Greenwich, Connecticut, to Maria USA, Inc. an unaffiliated third party. The sale price was $5,200,000, less normal real estate closing adjustments. A gain from the sale will be reflected in the Company's financial statements for the quarterly period ending March 31, 2018. The Company used the sale proceeds to repay the full amount of the working capital loan plus accrued interest aggregating $2,623,000, to Mr. Richard A. Banco, the Company's Chairman, President and Chief Executive Officer. The remaining proceeds will be used for working capital. See Strict Foreclosure, seePart II – Item 8 – Note 3 and Note 12 8to the Company'sCompany’s consolidated financial statements, for additional information.statements.
A fundamental principle of the preparation of financial statements in accordance with GAAP is the assumption that an entity will continue in existence as a going concern, which contemplates continuity of operations and the realization of assets and settlement of liabilities occurring in the ordinary course of business. In accordance with this requirement, the Company has prepared its accompanying consolidated financial statements assuming the Company will continue as a going concern.LIQUIDITY AND CAPITAL RESOURCES
The Company's deferred tax assetCompany’s assets at December 31, 2017, is due to a valuation allowance which2023, aggregated $78,000, consisting of cash and cash equivalents. At December 31, 2023, the Company’s liabilities aggregated $6,423,000. Total stockholders’ deficit was released in relation to the AMT Credit carryforwards which are projected to be refundable as part of the Tax Cuts and Jobs Act enacted in December 2017. See herein below and Part II – Item 8 – Note 8 to the Company's consolidated financial statements, for additional information.$6,345,000.
The Company has incurred operating losses and used cash for operating activities for the past several years. In June 2013, the Company purchased an equity interest in a real estate development property through a joint venture agreement to purchase and develop real property located at 105 through 111 West 57th Street in New York, New York (the "111 West 57th Property"). The Company has also made significant investments in the 111 West 57th Street Property in 2013, 2014 and 2015. The Company is engaged in material disputes and litigation with the sponsors of the joint venture (the "Sponsor") and a mezzanine lender to the joint venture ("Spruce"). The Company recorded an impairment of its equity investment in the 111 West 57th Property in the full year period ended December 31, 2017. See Part II – Item 8 – Note 4 and Note 9 to the Company's consolidated financial statements for additional information regarding this impairment charge and the legal proceedings relating to the Company's investment in the 111 West 57th Property. The carrying value of the Company's equity investment in the 111 West 57th Property represented a substantial portion of the Company's assets and net equity value. The Company has an appeal pending on its challenge to the strict foreclosure which has not yet been resolved. The Company has continued to keep operating expenses at a reduced level; however, there can be no assurance that the Company'sCompany’s current level of operating expenses will not increase or that other uses of cash will not be necessary. The Company believes that based on its current level of operating expenses, its currently availableexisting cash and financial resources, together with the net proceeds from the sale of its commercial office building in Greenwich, Connecticut as further discussed in Part II – Item 8 – Note 3 to the Company's consolidated financial statements,cash equivalents may not be sufficient to cover operating cash needs through the twelve month period from the financial statement reporting date. Based on the above factors, management determined there is substantial doubt about the Company'sCompany’s ability to continue as a going concern within one year after the date that the financial statements are issued. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The financial statements do not include adjustments to the carrying value of assets and liabilities, which might be necessary should the Company not continue in operation.
Over the next several months,In order to continue as a going concern, the Company will seekmust take steps to manage its current level of cash and cash equivalents, through various ways, including but not limited to, reducing operating expenses, possible asset sales and/raising additional capital through the sale of equity or long termdebt securities or long-term borrowings, which may include additional borrowings from affiliates of the Company, although this cannot be assured. In order to continue on a long-term basis, the Company must raise additional capital through the sale of assets or long term borrowings.reducing operating expenses, and seeking recoveries from various sources. There can be no assurance that the Company will be able to sell any of its assetsadequately implement these cash management measures, in whole or attain suchin part or raise capital or obtain financing aton terms acceptable to the Company, if at all.
In May 2016,June 2013, the Company and Mr. Richard A. Bianco, the Company's Chairman, President and Chief Executive Officer ("Mr. R. A. Bianco") entered intopurchased an agreement for Mr. R. A. Bianco to provide to the Company a secured working capital line of credit. Pursuant to this agreement, Mr. Bianco made several loans to the Company, aggregating $2,296,000 as of December 31, 2017, for use as working capital. The loans accrued interest at 5.25% per annum and were due on the earlier of the date the Company received funds from any source sufficient to pay all amounts due under the loans, including accrued interest thereon, or December 31, 2019. In January 2018, pursuant to the WC Agreement, Mr. R. A. Bianco made an additional loan of $250,000 to the Company for use as working capital in accordance with the same terms of the loans payable noted above. On January 26, 2018, in connection with the sale by the Company of its commercial office building in Greenwich, Connecticut, the Company repaid the full amount of the working capital loan, plus accrued interest aggregating $2,623,000 to Mr. R. A. Bianco, and the working capital line of credit agreement was terminated. For additional information, see Part II – Item 8 – Note 12 to the Company's consolidated financial statements.
In April 2016, the Company filed an action in New York State Supreme Court against the Sponsors, et al., pursuant to which the Company is seeking compensatory damages, as well as punitive damages, indemnification and equitable relief, including a declaration of the parties' rights, and an accounting. For additional information, see Part II – Item 8 – Note 4 and Note 9 to the Company's consolidated financial statements.
In July 2017, the Company initiated a second litigation in the NY Court, Index No. 655031/2017, (the "111 West 57th Spruce Action"). The defendants in the 111 West 57th Spruce action are 111 W57 Mezz Investor, LLC, Spruce Capital Partners LLC, 111 West 57th Sponsor LLC, Michael Z. Stern, and Kevin P. Maloney (collectively, "Defendants") and nominal defendants 111 West 57th Partners LLC and 111 West 57th Mezz 1 LLC. The junior mezzanine lender ("Spruce") had given notice to the junior mezzanine borrower that it proposed to accept the pledged collateral (including the joint venture members' collective interest in the property) in full satisfaction of the joint venture's indebtedness under the Junior Mezzanine Loan (i.e., a "Strict Foreclosure").
On August 30, 2017, Spruce issued a Notice of Retention of Pledged Collateral in Full Satisfaction of Indebtedness. By purporting to accept the pledged collateral, pursuant to a Strict Foreclosure process, Spruce claims to have completed the retention of the collateral pledged by the junior mezzanine borrower, and therefore, the Company'sequity interest in the 111 West 57th Street57th Property. The Company is engaged in material disputes and litigation with regard to the 111 West 57th Property. Despite ongoing litigation challenging the legitimacy of the actions taken in connection with the “Strict Foreclosure”, (as defined and further discussed herein), in accordance with GAAP, the Company recorded an impairment for the full amount of its equity investment in the 111 West 57th57th Property of $63,745,000 forin 2017. Prior to the full year period ended December 31, 2017. TheStrict Foreclosure, the carrying value of the Company'sCompany’s equity investment in the 111 West 57th Property represented a substantial portion of the Company'sCompany’s assets and net equity value.
As noted above, despite ongoing litigation challenging the legitimacy of the actions taken by the Sponsors and Spruce in connection with the Company's investment in the 111 West 57th Property as further discussed herein, in accordance with GAAP, the Company recorded an impairment of its equity investment in the 111 West 57th Property in the full year period ended December 31, 2017. The Company is and will continue to pursue the recovery of its asset value from various sources of recovery; however, there can be no assurance that the Company will prevail with respect to any of its claims. For additional information with regard to the Company's legal proceedings concerning the 111 West 57th Property, see Part II – Item 8 – Note 4 and Note 9 to the Company's consolidated financial statements.
The Company has an appeal pending on its challenge to the Strict Foreclosure, which has not yet been resolved. The Company is currently attempting to have the Appellate Division declare the Strict Foreclosure invalid and to enjoin the Strict Foreclosure. The Company moved for a stay or injunctive relief pending appeal, and that motion was denied by the appellate court on January 18, 2018. See Part II – Item 8 – Note 4 and Note 9 to the Company's consolidated financial statements for additional information concerning the Company's pending appeal of its challenge to the Strict Foreclosure and the Company'sCompany’s recording of an impairment of its equity investment in the 111 West 57th Property.
In SeptemberProperty in 2017 and the Company and Mr. R. A. Bianco entered into an agreement pursuantCompany’s legal proceedings relating to which Mr. R. A. Bianco will fund the Company's litigation expenses in connection with the 111 West 57th Property, (the "Litigation Funding Agreement"). For additional information including the terms ofCompany’s challenge to the Litigation Funding Agreement;Strict Foreclosure, see Part II – Item 8 – Note 103 and Note 8 to the Company'sCompany’s consolidated financial statements. The Company's consolidated balance sheet for December 31, 2017, includes $1,354,000 as a litigation funding amount which reflects the aggregate amounts funded pursuant to the Litigation Funding Agreement as of December 31, 2017.
With respect to its disputes and litigation relating to its interest in the 111 West 57th Property, the Company is continuingpursuing, and will continue to pursue, other options to realize the Company’s investment value, various legal courses of action to protect its legal rights, recovery of its asset value from various sources of recovery, as well as considering other possible economic strategies, including the possible sale of the Company'sCompany’s interest in and/or rights with respect to the 111 West 57th Property. The57th Property; however, there can be no assurance that the Company is continuingwill prevail with respect to pursue other options to realize the Company's investment value and/or protectany of its legal rights.claims.
The Company can give no assurances regarding the outcome of the matters described herein, including as to the effect of Spruce'sSpruce’s actions described herein, whether the Sponsors will perform their contractual commitments to the Company under the JV Agreement, as to what further action, if any, the lenders may take with respect to the project, as to the ultimate resolution of the ongoing litigation proceedings relating to the Company'sCompany’s investment interest in the 111 West 57th Property, as to the ultimate effect of the Sponsors'Sponsors’, the Company'sCompany’s or the lenders'lenders’ actions on the project, as to the completion or ultimate success of the project, or as to the value or ultimate realization of any portion of the Company'sCompany’s equity investment in the 111 West 57th Street Property. For additional information regarding the Company’s investment in the 111 West 57th Property and the legal proceedings related thereto see Part II – Item 8 – Note 3 and Note 8 to the Company’s consolidated financial statements.
While the Company'sCompany’s management is evaluating future courses of action to protect and/or recover the value of the Company'sCompany’s equity investment in the 111 West 57th Property, the adverse developments make it uncertain as to whether any such courses of action will be successful. Any such efforts are likely to require sustained effort over a period of time and require substantial additional financial resources. Inability to recover all or most of such value would, in all likelihood, have a material adverse effect on the Company'sCompany’s financial condition and future prospects. The Company can give no assurances with regard to if it will prevail with respect to any of its claims.
To provide the necessary cash resources to continue operations and continue the litigation related to the 111 West 57th Property, the Company has commenced a private placement offering (the “Equity Offering”) of 44,200,460 shares of the Company’s common stock (the “Shares”) to existing shareholders of the Company (the “Equity Offering”) in reliance on the exemption from registration under Rule 506(c) of the Securities Act of 1933, as amended (the “Securities Act”). The amounts noted hereinpurchase price for one share of Common Stock in the Equity Offering is $0.20. The Company expects to receive gross proceeds of approximately $8.8 million in connection with the Equity Offering before deducting offering expenses. There are no limitations on the Company’s use of such proceeds when received, although it is anticipated that a substantial part of the proceeds will be applied to repayment of existing Company obligations. The Shares are not being registered under the Securities Act and will be “restricted securities” under the Securities Act and will generally be subject to a minimum holding period of six months under Rule 144 before the Shares may be resold. The Shares will be offered and sold only to existing stockholders of record of the Company as of February 28, 2024 (the “Record Date”). Each qualifying stockholder will be permitted to purchase up to his, her or its pro rata share of the Shares in the Equity Offering, based on the amount of shares of Common Stock owned by such stockholder as of the Record Date, in an amount equal to up to one hundred and eight and one-half percent (108.5%) of the number of shares of Common Stock beneficially owned by such stockholder as of the Record Date. The Equity Offering commenced on or about February 28, 2024, and will remain open for a period of thirty (30) calendar days ending on March 29, 2024 (the “Subscription Deadline”). The Shares will be offered and sold pursuant to a Subscription Agreement (the “Subscription Agreement”) to be entered into by and between the WCCompany and each subscribing stockholder. In connection with the Equity Offering, the Company has entered into a standby purchase agreement dated February 28, 2024 (the “SPA”) with BARC Investments, LLC (“BARC”), an affiliate of the Company owned and controlled by Company directors Alessandra F. Bianco and Richard A. Bianco, Jr. Under the terms of the SPA, BARC has agreed to act as standby a purchaser for all of the shares of common stock being offered in the Equity Offering that are not otherwise subscribed to by other stockholders prior to the Subscription Deadline. Additional information about the Equity Offering, including the material terms and conditions of the Equity Offering and information about how stockholders may subscribe for Shares in the Equity Offering, including the form of Subscription Agreement, are distinct fromset forth in the Company’s Current Report on Form 8-K as filed with the SEC on February 28, 2024.
The Company’s Chairman, President and Chief Executive Office, Mr. Richard A. Bianco (“R.A. Bianco”) has indicated that, if and when needed, he would provide a working capital line of credit agreement for the 111 West 57th Property as noted herein and as discussed in Part II – Item 8 – Note 4to the Company's consolidated financial statementsCompany on an as needed basis, subject to customary and distinct frommarket terms and conditions to be agreed upon at such time, until such time as the Litigation Funding AgreementEquity Offering has been completed. However, there can be no assurance that the Equity Offering will be completed within the timeframe contemplated or at all. As of December 31, 2023, Mr. R.A. Bianco provided loans to the Company in the amounts as noted hereinaggregating $3,198,000. In January, February and as discussed in March 2024, Mr. R.A. Bianco provided additional loan(s) to the Company. For additional information, seePart II – Item 8 – Note 10 to the Company'sCompany’s consolidated financial statements.
In 2017, the Company entered into a Litigation Funding Agreement (the “LFA”) with Mr. R.A. Bianco. Pursuant to the LFA, Mr. R.A. Bianco agreed to provide litigation funding to the Company, to satisfy actual documented litigation costs and expenses of the Company, including attorneys’ fees, expert witness fees, consulting fees and disbursements in connection with the Company’s legal proceedings related to the Company’s equity investment in the 111 West 57th Property. In 2019, the Company and Mr. R.A. Bianco entered into an amendment to the LFA (the “Amendment). For additional information including the terms of the Litigation Funding Agreement, as amended by the Amendment, see Part II – Item 8 – Note 9 to the Company’s consolidated financial statements.
For the year ended December 31, 2017,2023, cash of $4,166,000$3,469,000 was used by operations for the payment of operating expenses. The cash needs of the Company in 2017 were satisfied by loans from Mr. R. A. Biancoexpenses and proceeds from Mr. R. A. Bianco pursuant to the Litigation Funding Agreement as noted above and the Company's financial resources.prior year accruals.
For the year ended December 31, 2016,2022, cash of $2,980,000$2,654,000 was used by operations for the payment of operating expenses. The cash needs of the Company in 2016 were principally satisfied by the Company's financial resources.expenses and prior year accruals.
In March 2017, the Company and Mr. R. A. Bianco, entered into an agreement for Mr. R. A. Bianco to provide to the Company a financial commitment in the form of a line of credit up to ten million dollars ($10,000,000) or additional amount(s) as may be necessary and agreed to enable AmBase to contribute capital to Investment LLC and/or other affiliated subsidiaries of the Company to meet capital calls for the of 111 West 57th Property if and when the case may be necessary on terms agreeable to/by the Company (as determined by the independent members of the Board of Directors) and R. A. Bianco at such time. The agreement provides that additional borrowings from Mr. R. A. Bianco pursuant to this line of credit shall be secured by the Company's commercial office building in Greenwich, Connecticut. As a result of the sale of the Company's commercial office building in Greenwich CT. in January 2018, any borrowings from Mr. R.A. Bianco under this line of credit would be unsecured. A copy of such agreement is filed as an exhibit to the Company's current and previously filed periodic filings.
Accounts payable and accrued liabilities as of December 31, 2017,2023, increased fromas compared to December 31, 2016,2022. The amounts in the respective years are principally as a result of current periodrelated to accruals for legal expenses in connection with the 111 West 57th Property legal proceeding, which were paid in 2018, including accrued interest expenseproceedings.
Loan(s) payable – related party was $3,198,000 as of December 31, 2023, compared to $0 as of December 31, 2022, relating to loans made to the loan payable Company from Mr. R.A. Bianco, for working capital. For additional information, see Part II – Item 8 – Note 10 to Mr. R. A. Bianco.the Company’s consolidated financial statements.
There are no material commitments for capital expenditures as of December 31, 2017.2023. Inflation has had no material impact on the business and operations of the Company.
RESULTS OF OPERATIONS
The Company recorded a net loss of $48,057,000$5,271,000 or $1.18$0.13 per share for the year ended December 31, 2017.2023. For the year ended December 31, 2016,2022, the Company recorded a net loss of $3,219,000$3,473,000 or $0.08$0.09 per share. The net loss for the full year period ended December 31, 2017 includes a $63,745,000 impairment of the Company's equity investment in the 111 West 57th Property as further discussed herein and in Part II – Item 8 – Note 4 and Note 9 to the Company's consolidated financial statements, offset by a net income tax benefit of $20,086,000 due to the recognition of a deferred tax asset resulting from the recognition of AMT Credit carryforwards potentially refundable as provided for in the 2017 Tax Cuts and Jobs Act as further discussed in Part II – Item 8 – Note 8 to the Company's consolidated financial statements.
Compensation and benefits decreased to $1,214,000$1,378,000 in 20172023 from $1,239,000$1,410,000 in 2016.2022. The decreased amountdecrease in 20172023 as compared to 20162022 is primarily due to a slight decrease in certain benefit expensescosts in 20172023 versus 2016. No stock based compensation expense was recorded for the years ended December 31, 2017 and 2016.2022.
Professional and outside services expenses increased to $2,628,000$3,298,000 in 20172023 from $1,123,000$1,668,000 in 2016.2022. The increase in 20172023 as compared to 20162022 is principally the result of a higher level of legal and professional fees incurred in 20172023 in connection with the Company'sCompany’s legal proceedings relating to the Company'sCompany’s investment in the 111 West 57th Property. Included in professional and outside services are legal expenses attributable to the Litigation Funding Agreement aggregating $1,510,000 for the full year period ended December 31, 2017; see Part II – Item 8 – Note 10 to the Company's consolidated financial statements forFor additional information including terms ofregarding the Litigation Funding Agreement.
Property operating and maintenance expenses decreased slightly to $117,000 in 2017 from $134,000 in 2016. The decrease is primarily due to a general decrease in costs and a lower level of repair and maintenance expenses in 2017 versus 2016. With the sale of the Company's commercial office building in Greenwich, Connecticut in January 2018, the Company anticipates that property operating and maintenance expenses will decrease in 2018 compared with prior years.
Insurance expenses decreased to $159,000 in 2017, compared with $170,000 in 2016. The decrease is primarily due to a decrease in insurance coverage levels and insurance premium costs.
Other operating expenses decreased to $140,000 in 2017 compared with $200,000 in 2016 due to decreased Delaware franchise taxes resulting from the lower authorized share base in 2017 versus 2016 and a general lower level of expenses in 2017 versus 2016.
Interest expense of $67,000 for the year ended December 31, 2017, represents accrued interest expense on the loan payable to Mr. R. A. Bianco which is included in accrued liabilities in the Company's consolidated balance sheet. See Part II – Item 8 – Note 12 to the Company's consolidated financial statements for further information.
Other income of $128,000 for the year ended December 31, 2016 is attributable to a gain on the sale of an interest in a real estate investment that was sold in July 2016.
Despite ongoing litigation challenging the legitimacy of the actions taken by the Sponsors and Spruce in connection with the Company'sCompany’s investment in the 111 West 57th Property as further discussed herein and in the legal proceedings related thereto, seePart II -– Item 8 – Note 43 and Note 9 8to the Company'sCompany’s consolidated financial statements,statements.
Property operating and maintenance expenses were $17,000 in accordance2023 and $17,000 in 2022.
Insurance expenses increased to $259,000 in 2023, compared with GAAP, the Company recorded$257,000 in 2022. The increase is primarily due to an impairmentincrease in insurance premium costs.
Other operating expenses increased slightly to $79,000 in 2023 compared with $72,000 in 2022 due to a general higher level of its equity investmentexpenses in the 111 West 57th Property of $63,745,000 for the full year period ended December 31, 2017.2023 versus 2022.
Interest income in 2023 decreased to $2,000 compared to $9,000 in 2022. The Company is and will continue to pursue the recovery of its asset value from various sources of recovery; however, there can be no assurance that the Company will prevail with respect to any of its claims.
Equitydecreased interest income (loss) - 111 West 57th Partners of $25,000 for the year ended December 31, 2017, represents the Company's share of the 111 West 57th Partners' loss for the year to date period ended June 30, 2017. Equity income (loss) - 111 West 57th Partners of $575,000 in 2016 represents the Company's share of the 111 West 57th Partners' loss for the year ended December 31, 2016. The equity loss for the years ended December 31, 2017 and 2016 is due to salesa lower levels of cash equivalents on hand in 2023 versus 2022.
Interest expense was $241,000 and marketing expenses incurred.$57,000 in 2023 and 2022, respectively. Interest expense for 2023 was attributable to interest expense to a professional firm for outstanding and unpaid professional fees and interest expense relating to the loans payable – related party. For additional information see Part II – Item 8 – Note 10 to the Company’s consolidated financial statements. Interest expense for 2022 is attributable to interest expense paid to a professional firm for outstanding and unpaid professional fees.
For the year ended December 31, 2017,2023, the Company recorded an income tax benefitexpense of $20,092,000, partially offset by a $6,000 state tax expense,$1,000 attributable to a provision for a tax on capital imposed by the state jurisdictions. The income tax benefit for the year ended December 31, 2017, is attributable to a release of a valuation allowance in relation to the AMT Credit carryforwards and resulting deferred tax asset due to recognition of AMT Credit carryforwards projected to be refundable as provided for in the 2017 Tax Cuts and Jobs Act as further discussed in For additional information see Part II – Item 8 – Note 8 7 to the Company'sCompany’s consolidated financial statements.
For the year ended December 31, 2016,2022, the Company recorded an income tax benefitexpense of $142,000. The income$1,000 attributable to a provision for a tax benefit foron capital imposed by the year ended December 31, 2016 is related state jurisdictions. For additional information, see Part II – Item 8 – Note 7 to current year and prior year state tax true-ups.the Company’s consolidated financial statements.
A reconciliation between income taxes computed at the statutory federal rate and the provision for income taxes is included in Part II - Item 8 – Note 87 to the Company'sCompany’s consolidated financial statements. For additional information including a discussion of income tax matters, see Part II – Item 8 – Note 87 to the Company'sCompany’s consolidated financial statements.
APPLICATION OF CRITICAL ACCOUNTING POLICIESESTIMATES
Our consolidated financial statements are based on the selection and application of accounting principles generally accepted in the United States of America, which require us to make estimates and assumptions about future events that affect the amounts reported in our financial statements and the accompanying notes. Future events and their effects cannot be determined with absolute certainty. The determination of estimates requires the exercise of judgment. Actual results could differ from those estimates, and any such differences may be material to the consolidated financial statements. We believe that the following accounting policies, which are important to our consolidated financial position and consolidated results of operations, require a higher degree of judgment and complexity in their application and represent the critical accounting policiesestimates used in the preparation of our consolidated financial statements. If different assumptions or conditions were to prevail, the results could be materially different from our reported results. For a summary of all our accounting policies, including the accounting policiesestimates discussed below, see Part II - Item 8 - Note 2 to the Company'sCompany’s consolidated financial statements.
Equity Method Investment: Investments and ownership interests are accounted for under the equity method of accounting if the Company has the ability to exercise significant influence, but not control (under GAAP), over the investment. Investments accounted for under the equity method are carried at cost, plus or minus the Company's equity in the increases and decreases in the net assets after the date of acquisition and certain other adjustments. The Company's share of income or loss for equity method investments is recorded in the consolidated statements of operations as equity income (loss). Dividends received, if any, would reduce the carrying amount of the Company's investment.
Legal Proceedings: From time to time the Company and its subsidiaries may be named as a defendant in various lawsuits or proceedings. At the current time, except as set forth in Part II - Item 8 - Note 9 to the Company's consolidated financial statements, the Company is unaware of any legal proceedings pending against the Company. Management of the Company, in consultation with outside legal counsel, continually reviews the likelihood of liability and associated costs of pending and threatened litigation including the basis for the calculation of any litigation reserves which may be necessary. The assessment of such reserves includes an exercise of judgment and is a matter of opinion. The Company intends to aggressively contest all threatened litigation and contingencies, as well as pursue all sources for contributions to settlements. For a discussion of lawsuits and proceedings, see Part II - Item 8 - Note 9 to the Company's consolidated financial statements.
Income Tax Audits: The Company's federal, state and local tax returns, from time to time, may be audited by the tax authorities, which could result in proposed assessments or a change in the net operating loss ("NOL") carryforwards and of alternative minimum tax ("AMT") Credits currently available. In connection with the Internal Revenue Service ("IRS") examination of the Company's 2012 federal income tax return, the IRS accepted the Company's federal NOL loss carryforward deductions from 1997 through 2006 which were utilized as part of the Company's 2012 federal income tax return to reduce the Company's 2012 federal taxable income. The Company has not been notified of any other potential tax audits by any federal, state or local tax authorities. As such, the Company believes the statutes of limitations for the assessment of additional federal and state tax liabilities are generally closed for tax years prior to 2014.
Deferred Tax Assets: As of December 31, 20172023, and 2016,2022, the Company had deferred tax assets arising primarily from net operating loss carryforwards available to offset taxable income in future periods and AMT Credit carryforwards. As of December 31, 2017 a valuation allowance was released in relation to the AMT Credit carryforwards which are projected to be refundable as part of the Tax Cuts and Jobs Act enacted in December 2017.periods. A valuation allowance remains on the remaining deferred tax asset amounts relating to the NOL carryforwards as management has no basis to conclude that realization is more likely than not. The valuation allowance was calculated in accordance with current standards, which places primary importance on a company'scompany’s cumulative operating results for the current and preceding years. We intend to maintain a valuation allowance for the deferred tax asset amount relating to the NOL carryforwards until sufficient positive evidence exists to support a reversal. See Part II - Item 8 - Note 8 7 to the Company'sCompany’s consolidated financial statements.
The 2017 Tax Cuts and Jobs Act (the "2017 Tax Act") was enacted in December 2017 and includes a broad range12
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (PCAOB ID 688)
To the Shareholders and Board of Directors of
AmBase Corporation and Subsidiaries
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of AmBase Corporation and Subsidiaries (the "Company"“Company”) as of December 31, 20172023 and 2016,2022, the related consolidated statements of operations,, changes in stockholders'stockholders’ equity (deficit) and cash flows for each of the two years in the period ended December 31, 2017,2023, and the related notes and financial statement schedule listed in the index at item 15(collectively(collectively referred to as the "financial statements"“financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20172023 and 2016,2022, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2017,2023, in conformity with accounting principles generally accepted in the United States of America.
Explanatory Paragraph – Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 1, the Company has a significant working capital deficiency, has incurred significant losses and needs to raise additional funds to meet its obligations and sustain its operations. These conditions raise substantial doubt about the Company'sCompany’s ability to continue as a going concern. Management'sManagement’s plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company'sCompany’s management. Our responsibility is to express an opinion on the Company'sCompany’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB"(“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company'sCompany’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
/s/ Marcum LLPllp
Marcum LLP
We have served as the Company'sCompany’s auditor since 2007, such date takes into account the acquisition of a portion of UHY LLP by Marcum LLP in April 2010.
New Haven, Connecticut
March 30, 2018
AMBASE CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
(in thousands, except per share data)
| | Years Ended December 31, |
| | 2017 | | 2016 |
| Operating expenses: | | | |
| Compensation and benefits | $ | 1,214 | | $ | 1,239 |
| Professional and outside services | | 2,628 | | | 1,123 |
| Property operating and maintenance | | 117 | | | 134 |
| Depreciation | | 48 | | | 48 |
| Insurance | | 159 | | | 170 |
| Other operating | | 140 | | | 200 |
| Total operating expenses | | 4,306 | | | 2,914 |
| Operating income (loss) | | (4,306) | | | (2,914) |
| | | | | | |
| Interest income | | - | | | - |
| Interest expense | | (67) | | | - |
| Other income | | - | | | 128 |
| Impairment of equity investment in 111 West 57th Partners LLC | | (63,745) | | | - |
Equity income (loss) – 111 West 57th Partners LLC | | (25) | | | (575) |
| Income (loss) before income taxes | | (68,143) | | | (3,361) |
| | | | | | |
| Income tax expense (benefit) | | (20,086) | | | (142) |
| Net income (loss) | | (48,057) | | | (3,219) |
| | | | | | |
| Net income (loss) per common share - basic | $ | (1.18) | | $ | (0.08) |
| | | | | | |
| | | | | | |
Weighted average common shares outstanding - basic | | 40,738 | | | 40,738 |
| | | Years Ended December 31, | |
| | | 2023
| | | 2022
| |
| Operating expenses: | | | | | | |
| Compensation and benefits | | $ | 1,378 | | | $ | 1,410 | |
| Professional and outside services | | | 3,298 | | | | 1,668 | |
| Property operating and maintenance | | | 17 | | | | 17 | |
| Insurance | | | 259 | | | | 257 | |
| Other operating | | | 79 | | | | 72 | |
| Total operating expenses | | | 5,031 | | | | 3,424 | |
| Operating income (loss) | | | (5,031 | ) | | | (3,424 | ) |
| | | | | | | | | |
| Interest income | | | 2 | | | | 9 | |
| Interest expense | | | (241 | ) | | | (57 | ) |
| Income (loss) before income taxes | | | (5,270 | ) | | | (3,472 | ) |
| | | | | | | | | |
| Income tax expense (benefit) | | | 1 | | | | 1 | |
| Net income (loss) | | $ | (5,271 | ) | | $ | (3,473 | ) |
| | | | | | | | | |
| Net income (loss) per common share - basic | | $ | (0.13 | ) | | $ | (0.09 | ) |
| | | | | | | | | |
Weighted average common shares outstanding - basic | | | 40,738 | | | | 40,738 | |
The accompanying notes are an integral part of these consolidated financial statements.
AMBASE CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands, except per share data)
| Assets: | | December 31, 2017 | | | December 31, 2016 | |
| Cash and cash equivalents | | $ | 70 | | | $ | 586 | |
| Real estate owned: | | | | | | | | |
| Land | | | 554 | | | | 554 | |
| Buildings | | | 1,900 | | | | 1,900 | |
| Real estate owned, gross | | | 2,454 | | | | 2,454 | |
| Less: accumulated depreciation | | | 822 | | | | 774 | |
| | | | | | | | | |
| Real estate owned, net | | | 1,632 | | | | 1,680 | |
| | | | | | | | | |
Investment in 111 West 57th Partners LLC | | | - | | | | 63,770 | |
| Deferred tax asset | | | 20,092 | | | | - | |
| Other assets | | | 84 | | | | 166 | |
| Total assets | | $ | 21,878 | | | $ | 66,202 | |
| | | | | | | | | |
| Liabilities and Stockholders' Equity: | | | | | | | | |
| Liabilities: | | | | | | | | |
| Accounts payable and accrued liabilities | | $ | 426 | | | $ | 343 | |
| Loans payable - related party | | | 2,296 | | | | - | |
| Other liabilities | | | - | | | | - | |
| | | | | | | | | |
| Total liabilities | | | 2,722 | | | | 343 | |
| | | | | | | | | |
| Litigation funding agreement (Note 10) | | | 1,354 | | | | - | |
| Commitments and contingencies (Note 11) | | | | | | | | |
| | | | | | | | | |
| Stockholders' equity: | | | | | | | | |
| Common stock ($0.01 par value, 85,000 authorized in 2017 and 85,000 authorized in 2016, 46,410 issued and 40,738 outstanding in 2017 and 46,410 issued and 40,738 outstanding in 2016) | | | 464 | | | | 464 | |
| Additional paid-in capital | | | 548,304 | | | | 548,304 | |
| Accumulated deficit | | | (525,798 | ) | | | (477,741 | ) |
| Treasury stock, at cost – 2017 - 5,672 shares; 2016 - 5,672 shares | | | (5,168 | ) | | | (5,168 | ) |
| Total stockholders' equity | | | 17,802 | | | | 65,859 | |
| Total liabilities and stockholders' equity | | $ | 21,878 | | | $ | 66,202 | |
| Assets: | | December 31, 2023
| | | December 31, 2022
| |
| Cash and cash equivalents | | $ | 78 | | | $ | 349 | |
| | | | | | | | | |
| Other assets | | | - | | | | 61 | |
| Total assets | | $ | 78 | | | $ | 410 | |
| | | | | | | | | |
Liabilities and Stockholders’ Equity (Deficit): | | | | | | | | |
| Liabilities: | | | | | | | | |
| Accounts payable and accrued liabilities | | $ | 3,225 | | | $ | 1,484 | |
Loan(s) payable – related party
| | | 3,198 | | | | -
| |
| | | | | | | | | |
| Total liabilities | | | 6,423 | | | | 1,484 | |
| Commitments and contingencies (Note 6) | | |
| | | | | |
| | | | | | | | | |
Stockholders’ equity (deficit): | | | | | | | | |
Common stock ($0.01 par value, 85,000 authorized in 2023 and 85,000 authorized in 2022, 46,410 issued and 40,738 outstanding in 2023 and 46,410 issued and 40,738 outstanding in 2022) | | | 464 | | | | 464 | |
| Additional paid-in capital | | | 548,304 | | | | 548,304 | |
| Accumulated deficit | | | (549,945 | ) | | | (544,674 | ) |
Treasury stock, at cost – 2023 - 5,672 shares; and 2022 - 5,672 shares | | | (5,168 | ) | | | (5,168 | ) |
Total stockholders’ equity (deficit) | | | (6,345 | ) | | | (1,074 | ) |
| | | | | | | | | |
Total liabilities and stockholders’ equity (deficit) | | | | | | | | |
The accompanying notes are an integral part of these consolidated financial statements.
AMBASE CORPORATION AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders'Stockholders’ Equity (Deficit)
Years Ended December 31, 20172023 and 20162022
| ($ in thousands, except per share data) | | Common stock | | | Additional paid-in capital | | | Accumulated deficit | | | Treasury stock | | | Total | |
| January 1, 2016 | | $ | 464 | | | $ | 548,304 | | | $ | (474,522 | ) | | $ | (5,168 | ) | | $ | 69,078 | |
| | | | | | | | | | | | | | | | | | | | | |
| Net income (loss) | | | - | | | | - | | | | (3,219 | ) | | | - | | | | (3,219 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| December 31, 2016 | | | 464 | | | | 548,304 | | | | (477,741 | ) | | | (5,168 | ) | | | 65,859 | |
| | | | | | | | | | | | | | | | | | | | | |
| Net income (loss) | | | - | | | | - | | | | (48,057 | ) | | | - | | | | (48,057 | ) |
| December 31, 2017 | | $ | 464 | | | $ | 548,304 | | | $ | (525,798 | ) | | $ | (5,168 | ) | | $ | 17,802 | |
| (in thousands) | | Common stock | | | Additional paid-in capital | | | Accumulated deficit | | | Treasury stock | | | Total | |
| | | | | | | | | | | | | | | | |
| January 1, 2022 | | $ | 464 | | | $ | 548,304 | | | $ | (541,201 | ) | | $ | (5,168 | ) | | $ | 2,399 | |
| Net income (loss) | | | - | | | | - | | | | (3,473 | ) | | | - | | | | (3,473 | ) |
| December 31, 2022 | | | 464 | | | | 548,304 | | | | (544,674 | ) | | | (5,168 | ) | | | (1,074 | ) |
| | | | | | | | | | | | | | | | | | | | | |
| Net income (loss) | | | - | | | | - | | | | (5,271 | ) | | | - | | | | (5,271 | ) |
| December 31, 2023 | | $ | 464 | | | $ | 548,304 | | | $ | (549,945 | ) | | $ | (5,168 | ) | | $ | (6,345 | ) |
The accompanying notes are an integral part of these consolidated financial statements.