UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549


FORM 10-Q



[X]☒ Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934



For the quarterly period ended September 30, 20172022


or

[ ]☐ Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934


Commission file number 1-7265



AMBASE CORPORATION


(Exact name of registrant as specified in its charter)


Delaware

95-2962743
(State of incorporation) 
95-2962743
(I.R.S. Employer Identification No.)
ONE SOUTH OCEAN BOULEVARD,
7857 WEST SAMPLE ROAD, SUITE 301134
BOCA RATON, FLORIDA 33432

CORAL SPRINGS, Florida  33065
(Address of principal executive offices)  (Zip Code)

(203) 532-2000

(201) 265-0169
(Registrant'sRegistrant’s telephone number, including area code)



Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered

None.

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

YES
X☒ 
NO
☐


Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).__X___ Yes_____ No.

☒ Yes

☐No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company or an emerging growth company.  See definition of "large“large accelerated filer," "accelerated” “accelerated filer,"” “smaller reporting company” and "smaller reporting company"“emerging growth company” in Rule 12b-2 of the Exchange Act.

(Check one):
Large Accelerated Filer
 ☐ 
Accelerated Filer
 ☐ 
Non-Accelerated Filer
 ☒ 
Smaller Reporting Company
X☒
            
 
Emerging Growth Company
 
☐
         


If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

YES
☐ 
NO
NO☐


Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES
☐
 
NO
NOX☒


At October 31, 2017,2022, there were 40,737,751 shares outstanding of the registrant'sregistrant’s common stock, $0.01 par value per share.
 

AmBase Corporation


Quarterly Report on Form 10-Q
September 30, 20172022


TABLE OF CONTENTS


PART I FINANCIAL INFORMATIONPage
    
Item 1. 
Condensed Consolidated Financial Statements (unaudited)
1
    
Item 2. Management's
Management’s Discussion and Analysis of Financial Condition and Results of Operations
2216
    
Item 4. 
Controls and Procedures
2620
    
PART II OTHER INFORMATION 
    
Item 1. 
Legal Proceedings
2720
    
Item 1A. 
Risk Factors
2720
    
Item 2. 
Unregistered Sales of Equity and Securities and Use of Proceeds
2720
    
Item 3. 
Defaults Upon Senior Securities
2720
    
Item 4. 
Mine Safety Disclosures
2720
    
Item 5. 
Other Information
2720
    
Item 6. 
Exhibits
2820
    
Signatures
  2921


Table of Contents
PART I - FINANCIAL INFORMATION
Item 1.CONDENSED CONSOLIDATED FINANCIAL STATEMENTS


AMBASE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(Unaudited)



(in thousands, except per share data)
 Three Months Ended September 30,  Nine Months Ended September 30,  
Three Months Ended
September 30,
  
Nine Months Ended
September 30,
 
 2017  2016  2017  2016  2022
  2021
  2022  2021 
Operating expenses:                      
Compensation and benefits $304  $382  $906  $1,212  
$
336
  
$
336
  $1,083  $1,098 
Professional and outside services  703   482   2,231   784   
289
   
836
   1,408   2,783 
Property operating and maintenance  34   31   105   93   
1
   
3
   16   14 
Depreciation  12   12   36   36 
Insurance  32   45   117   126   
63
   
68
   197   192 
Other operating  39   59   122   153   
32
   
21
   57   46 
Total operating expenses  1,124   1,011   3,517   2,404   
721
   
1,264
   2,761   4,133 
Operating income (loss)  (1,124)  (1,011)  (3,517)  (2,404)  (721)  (1,264)  (2,761)  (4,133)
                                
Interest income  -   -   -   -   
4
   
-
   5   1 
Interest expense  (20)  -   (38)  - 
Other income  -   128   -   128 
Impairment of equity investment in 111 West 57th Partners LLC
  (63,745)  -   (63,745)  - 
Equity income (loss) – 111 West 57th Partners LLC  -   (49)  (25)  (549)
Income (loss) before income taxes  (64,889)  (932)  (67,325)  (2,825)  (717)  (1,264)  (2,756)  (4,132)
                                
Income tax expense (benefit)  -   (220)  6   (150)  
-
   
-
  1   1
Net income (loss) $(64,889) $(712) $(67,331) $(2,675) $(717) $(1,264) $(2,757) $(4,133)
                                
Net income (loss) per common share - basic $(1.59) $(0.02) $(1.65) $(0.07) $(0.02) $(0.03) $(0.07) $(0.10)
Net income (loss) per common share - assuming dilution $(1.59) $(0.02) $(1.65) $(0.07)
                                
Weighted average common shares outstanding - basic  40,738   40,738   40,738   40,738   
40,738
   
40,738
   40,738   40,738 
Weighted average common shares outstanding - assuming dilution  40,738   40,738   40,738   40,738 
                


The accompanying notes are an integral part of these condensed consolidated financial statements.


1
AMBASE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited)


(in thousands, except per share data)


Assets: September 30, 2017  December 31, 2016 
Cash and cash equivalents $54  $586 
Real estate owned:        
  Land  554   554 
  Buildings  1,900   1,900 
Real estate owned, gross  2,454   2,454 
  Less:  accumulated depreciation  810   774 
         
Real estate owned, net  1,644   1,680 
         
Investment in 111 West 57th Partners LLC
  -   63,770 
Other assets  89   166 
Total assets $1,787  $66,202 
         
Liabilities and Stockholders' Equity:        
Liabilities:        
Accounts payable and accrued liabilities $1,109  $343 
Loan payable - related party  1,650   - 
Other liabilities  -   - 
         
Total liabilities  2,759   343 
         
Litigation funding agreement (Note 10)  500   - 
Commitments and contingencies (Note 9)        
         
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  (545,072)  (477,741)
Treasury stock, at cost – 2017 - 5,672 shares and 2016 – 5,672 shares  (5,168)  (5,168)
Total stockholders' equity  (deficit)  (1,472)  65,859 
         
Total liabilities and stockholders' equity (deficit) $1,787  $66,202 
Assets: 
September 30,
2022
  
December 31,
2021
 
Cash and cash equivalents 
$
938
  
$
3,003
 
         
Other assets  
91
   
80
 
Total assets 
$
1,029
  
$
3,083
 
         
Liabilities and Stockholders’ Equity (Deficit):
        
Liabilities:        
Accounts payable and accrued liabilities 
$
1,387
  
$
684
 
         
Total liabilities  
1,387
   
684
 
Commitments and contingencies (Note 6)  
   
 
         
Stockholders’ equity (deficit):
        
Common stock ($0.01 par value, 85,000 authorized in 2022 and 85,000 authorized in 2021, 46,410 issued and 40,738 outstanding in 2022 and 46,410 issued and 40,738 outstanding in 2021)
  
464
   
464
 
Additional paid-in capital  
548,304
   
548,304
 
Accumulated deficit  
(543,958
)
  
(541,201
)
Treasury stock, at cost – 2022 - 5,672 shares; and 2021 - 5,672 shares
  
(5,168
)
  
(5,168
)
Total stockholders’ equity (deficit)
  
(358
)
  
2,399
 
         
Total liabilities and stockholders’ equity (deficit) 
$
1,029
  
$
3,083
 


The accompanying notes are an integral part of these condensed consolidated financial statements.


2
AMBASE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash FlowsChanges in Stockholders’ Equity (Deficit)
(Unaudited)


(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)  
-
   
-
   
(1,057
)
  
-
   
(1,057
)
March 31, 2022
  
464
   
548,304
   
(542,258
)
  
(5,168
)
  
1,342
 
Net income (loss)  -   -   (983)  -   (983)
June 30, 2022  464   548,304   (543,241)  (5,168)  359 
Net income (loss)  -   -   (717)  -   (717)
September 30, 2022 $464  $548,304  $(543,958) $(5,168) $(358)

(in thousands) 
Common
stock
  
Additional
paid-in
capital
  
Accumulated
deficit
  
Treasury
stock
  Total 
                
January 1, 2021
 
$
464
  
$
548,304
  
$
(535,993
)
 
$
(5,168
)
 
$
7,607
 
Net income (loss)  
-
   
-
   
(1,635
)
  
-
   
(1,635
)
March 31, 2021
  
464
   
548,304
   
(537,628
)
  
(5,168
)
  
5,972
 
Net income (loss)  -   -   (1,234)  -   (1,234)
June 30, 2021 
464  
548,304  
(538,862) 
(5,168) 
4,738 
Net income (loss)  -   -   (1,264)  -   (1,264)
September 30, 2021 $464  $548,304  $(540,126) $(5,168) $3,474 


  Nine months ended September 30, 
(in thousands) 2017  2016 
       
Cash flows from operating activities:      
Net income (loss) $(67,331) $(2,675)
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities        
Depreciation  36   36 
Other income  -   (128)
Impairment of equity investment in 111 West 57th Partners LLC
  63,745   - 
Equity (income) loss - 111 West 57th Partners LLC  25   549 
Changes in operating assets and liabilities:        
Other assets  77   (306)
Accounts payable and accrued liabilities  766   60 
Other liabilities  -   - 
Net cash provided (used) by operating activities  (2,682)  (2,464)
         
Cash flows from financing activities:        
Proceeds from loan payable  1,650   - 
Proceeds from litigation funding agreement  500   - 
Proceeds from (investment in) real estate limited partnership  -   263 
Net cash provided (used) by financing activities  2,150   263 
         
         
Net change in cash and cash equivalents  (532)  (2,201)
Cash and cash equivalents at beginning of period  586   3,303 
Cash and cash equivalents at end of period $54  $1,102 
Supplemental cash flow disclosure:        
Income taxes paid $16  $103 

The accompanying notes are an integral part of these condensed consolidated financial statements.


3
AMBASE CORPORATION AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(Unaudited)

  
Nine months ended
September 30,
 
(in thousands) 2022
  2021
 
       
Cash flows from operating activities:      
Net income (loss) 
$
(2,757
)
 
$
(4,133
)
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities        
Changes in operating assets and liabilities:        
Other assets  
(11
)
  
(55
)
Accounts payable and accrued liabilities  
703
   
306
 
Net cash provided (used) by operating activities  
(2,065
)
  
(3,882
)
         
Net change in cash and cash equivalents  
(2,065
)
  
(3,882
)
Cash and cash equivalents at beginning of period  
3,003
   
7,925
 
         
Cash and cash equivalents at end of period 
$
938
  
$
4,043
 
Supplemental cash flow disclosure:        
Income taxes refunded (paid) 
$
-
  
$
-
 

The accompanying notes are an integral part of these condensed consolidated financial statements.

4
AMBASE CORPORATION AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements


Note 1 – The Company and Basis of Presentation and Going Concern


The accompanying condensed consolidated financial statements of AmBase Corporation and subsidiaries ("AmBase"(“AmBase” or the "Company"“Company”) are unaudited and subject to year-end adjustments. All material intercompany transactions and balances have been eliminated. In the opinion of management, these financial statements reflect all adjustments, consisting only of normal recurring adjustments unless otherwise disclosed, necessary for a fair presentation of the Company'sCompany’s consolidated financial position, results of operations and cash flows. Results for interim periods are not necessarily indicative of results for the full year. The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"(“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 8 of Regulation S-X. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that it deems reasonable, that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from such estimates and assumptions. The unaudited interim condensed consolidated financial statements presented herein are condensed and should be read in conjunction with the Company'sCompany’s consolidated financial statements filed in its Annual Report on Form 10-K10‑K for the year ended December 31, 2016.2021.

The Company's assets currently consist primarily of cash and cash equivalents and real estate owned.  The Company is otherwise 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 57th57th Street in New York, New York (the "111“111 West 57th Property"57th Property”). The Company is engaged in material disputes and litigation with the sponsor of the joint venture and a mezzanine lenderregard to the joint venture. In August 2017, the junior mezzanine lender ("Spruce") issued a Notice of Retention of Pledged Collateral in Full Satisfaction of Indebtedness in which Spruce claims to have retained the collateral securing the junior mezzanine loan (the "Strict Foreclosure")

111 West 57th Property. Despite ongoing litigation challenging the legitimacy of the actions taken by the Sponsors and Spruce in connection with the Company's“Strict Foreclosure”, (as defined and further discussed herein), the Company recorded an impairment for the full amount of its equity investment in the 111 West 57th57th Property as further discussed herein, in accordance with GAAP,2017. Prior to the Company recordedStrict Foreclosure, 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.

For additional information concerning the Company’s recording of an impairment of its equity investment in the 111 West 57th57th Property in 2017 and the third quarter ended September 30, 2017. The carryingCompany’s legal proceedings relating to the 111 West 57th Property, including the Company’s challenge to the Strict Foreclosure, see Note 3 and Note 6.

While the Company’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 57th57th Property, represented substantiallythe 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 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's assetsCompany’s financial condition and net equity value.future prospects. The Company has an appeal pending on its challengecan give no assurances with regard if it will prevail with respect to the Strict Foreclosure which has not yet been resolved. The Company is and will continue to vigorously pursue the recoveryany of its asset value from all sources of recovery. For additional information see Note 4 and Note 9.claims.


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 unaudited condensed consolidated financial statements assuming the Company will continue as a going concern.


The Company has incurred operating losses and used cash for operating activities for the past several years.  The Company has made significant investments in the 111 West 57th Street Property since 2013.  As further discussed below and in Note 4 and Note 9 herein, in the third quarter ended September 30, 2017, the Company recorded an impairment of its equity investment in the 111 West 57th Property. The carrying value of the Company's equity investment in the 111 West 57th Property represented substantially all 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 borrowings and line of credit from Mr. Richard A. Bianco, the Company's Chairman, President and Chief Executive Officer ("Mr. R. A. Bianco") as further discussed in Note 11 herein,cash equivalents may not be sufficient to cover operating cash needs through the twelve-monthtwelve 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 unaudited condensed 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,5
AMBASE CORPORATION AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements

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/or long-term borrowings, although this cannot be assured. In order to continue on a long-term basis, the Company must raiseraising additional capital through the sale of assets or long-term borrowings.long term borrowings, which may include additional borrowings from affiliates of the Company, reducing operating expenses, and seeking recoveries from various sources.  There can be no assurance that the Company will be able to attain such financing atadequately implement these cash management measures, in whole or in part, or sell any of its assets or raise capital on terms acceptable to the Company, if at all.

In September 2017, the Company and Mr. R. A. Bianco entered into an agreement pursuant 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 of the Litigation Funding Agreement, see Note 10 herein.

With respect to its disputes and litigation relating to its interest in the 111 West 57th Property, the Company is continuing to pursue various legal courses of action, as well as considering other possible economic strategies, including the possible sale of the Company's interest in and/or rights with respect to the 111 West 57th Property. The Company is continuing to pursue other options to realize the Company's investment value and/or protect its legal rights.

The Company can give no assurances regarding the outcome of the matters described herein, including as to the effect of Spruce'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's investment interest in the 111 West 57th Property, as to the ultimate effect of the Sponsors', the Company's or the lenders' actions on the project, as to the completion or ultimate success of the project, or the value or ultimate realization of any portion of the Company's equity investment in the 111 West 57th Street Property.  For additional information on the Company's investment in the 111 West 57th Property and the Company's legal actions related thereto, see Note 4 and Note 9.

While the Company's management is evaluating future courses of action to recover the value of the Company'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 in recovering value for the Company. 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's financial condition and future prospects.

Note 2 – Summary of Significant Accounting Policies


New accounting pronouncements


There are no new accounting pronouncements that would likely materially affect the Company'sCompany’s unaudited condensed consolidated financial statements.


Note 3 – Real Estate Owned

Real estate owned consists of a commercial office building in Greenwich, Connecticut that is managed and operated by the Company.  A portion of the building is utilized by the Company for office space; the remaining space is currently unoccupied and available for lease. Depreciation expense for the building is calculated on a straight-line basis.

Information relating to the Company's real estate owned in Greenwich, Connecticut is as follows:

September 30, 2017
Area of building in square feet14,500
Square feet utilized by Company3,500
Number of years depreciation is based upon39


Although the portion of the building not being utilized by the Company is currently unoccupied and available for lease, based on the Company's analysis, the Company believes the property's fair value exceeds the property's current carrying value.  The Company's impairment analysis includes a comprehensive range of factors including but not limited to:  the location of the property; property condition; current market conditions; comparable sales; current market rents in the area; new building zoning restrictions; raw land values; new building construction costs; building operating costs; leasing values; and cap rates for comparable buildings in the area.  Varying degrees of weight are given to each factor.  Based on the Company's analysis these factors, taken together and/or considered individually, form the basis for the Company's analysis that no impairment condition exists.

The Company performs impairment tests on a regular basis and if events or circumstances indicate that the property's carrying value may not be recoverable.  Based on the Company's analysis, the Company believes the carrying value of the real estate owned as of September 30, 2017, has not been impaired; and therefore, the carrying value of the asset is fully recoverable by the Company.  The building is carried at cost, net of accumulated depreciation.


Note 4 – Investment in 111 West 57th57th Partners LLC


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 throughthe 111 West 57th Street in New York (the "111 West 57th Property").57th Property.  The Company is engaged in material disputes and litigation with the sponsor of the joint venture and a mezzanine lenderregard to the joint venture. In August 2017, the junior mezzanine lender ("Spruce") issued a Notice of Retention of Pledged Collateral in Full Satisfaction of Indebtedness, in which Spruce claims to have retained the collateral securing the junior mezzanine loan (the "Strict Foreclosure").

111 West 57th Property. 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“Strict Foreclosure” (as defined below and as further discussed herein,herein), in accordance with GAAP, the Company recorded an impairment for the full amount of its equity investment in the 111 West 57th Property in 2017.

For additional information regarding the Company’s 111 West 57th Property equity investment, events leading up to the Strict Foreclosure, the Company’s recording of an impairment of its equity investment in the 111 West 57th57th Property of $63,745,000 inand the third quarter ended September 30, 2017. The carrying value of the Company's equity investment inCompany’s legal proceedings relating to the 111 West 57th57th Property, represented substantially all ofincluding the Company's assets and net equity value.

The Company has an appeal pending on itsCompany’s challenge to the Strict Foreclosure, which has not yet been resolved. The Company issee herein below and will continue to vigorously pursue the recovery of its asset value from all sources of recovery. See Note 9 for further information.6.

See below for additional information with regard to background information regarding the Company's 111 West 57th Property equity investment in the 111 West 57th Property and events leading up to the Strict Foreclosure, as follows:

In June 2013, 111 West 57th57th Investment LLC ("(“Investment LLC"LLC”), a then newly formed subsidiary of the Company, entered into a joint venture agreement (as amended, the "JV Agreement"“JV Agreement”) with 111 West 57th57th Sponsor LLC (the "Sponsors"“Sponsor”), pursuant to which Investment LLC invested (the "Investment"“Investment”) in a real estate development property to purchase and develop the 111 West 57th Street Property (the "111 West 57th Property").57th Property.  In consideration for making the Investment, Investment LLC was granted a membership interest in 111 West 57th57th Partners LLC ("(“111 West 57th Partners"57th Partners”), which indirectly acquired the 111 West 57th57th Property on June 28, 2013 (the "Joint“Joint Venture,"” and such date, the "Closing Date"“Closing Date”).  The Company also indirectly contributed an additional amount to the Joint Venture in exchange for an additional indirect interest in the Joint Venture.  Other members and the Sponsor contributed additional cash and/or property to the Joint Venture. The Company recorded its investment in 111 West 57th Partners utilizing the equity method of accounting. The Joint Venture plans were to redevelop the 111 West 57th57th Property into a luxury residential tower and retail project.


Amounts relating to the Company'sCompany’s initial June 2013 investment and other information relating to the 111 West 57th57th Property are as follows:follow:

 
($ in thousands)
   
Company's aggregate initial investment $57,250 
Company's aggregate initial membership interest %  60.3%
Other members and Sponsor initial investment $37,750 
Approximate gross square feet of project  346,000 



($ in thousands)   
Company’s aggregate initial investment $57,250 
Company’s aggregate initial membership interest %  60.3%
Other members and Sponsor initial investment $37,750 

The JV Agreement and related operating agreements generally provide that all distributable cash shall be distributed as follows: (i) first, 100% to the members in proportion to their percentage interests until Investment LLC has received distributions yielding a 20% internal rate of return as calculated; (ii) second, 100% to the Sponsor as a return of (but not a return on) any additional capital contributions made by the Sponsor on account of manager overruns; and (iii) thereafter, (a) 50% to the members in proportion to their respective percentage interests at the time of such distribution, and (b) 50% to the Sponsor.

Additionally, the JV Agreement provides that (i) Mr. Richard A. Bianco (the Company's current Chairman, President and Chief Executive Officer) ("Mr. R. A. Bianco"), his immediate family, and/or any limited liability company wholly-owned thereby, and/or a trust in which Mr. R. A. Bianco and/or his immediate family is the beneficiary, shall at all times own, in the aggregate, not less than 20%
6

AMBASE CORPORATION AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements


In March 2014, the Company entered into an amended and restated operating agreement for Investment LLC (the "Amended“Amended and Restated Investment Operating Agreement"Agreement”) to grant a 10% subordinated participation interest in Investment LLC to Mr. R. A. Bianco as a contingent future incentive for Mr. R. A. Bianco'sBianco’s past, current and anticipated ongoing role to develop and commercialize the Company'sCompany’s equity investment in the 111 West 57th57th Property.  Pursuant to the terms of the Amended and Restated Investment Operating Agreement, Mr. R.A. Bianco has no voting rights with respect to his interest in Investment LLC, and his entitlement to receive 10% of the distributions from Investment LLC is subject to the Company first receiving distributions equal to 150% of the Company'sCompany’s initial aggregate investment in Investment LLC and the Joint Venture, plus any additional investments by the Company,, and only with respect to any distributions thereafter. At the current time, the Company has not expensed nor accrued any amounts relating to this subordinated participation interest, as no amount or range of amounts can be reasonably estimated or assured.


During 2014, in connection with the funding of additional capital calls under the JV Agreement for required borrowing and development costs for the 111 West 57th57th Property, the Company'sCompany’s management and its Board of Directors concluded that, given the continuing development risks of the 111 West 57th57th Property and the Company'sCompany’s financial position, the Company should not at that time increase its already significant concentration and risk exposure to the 111 West 57th Property.  Nonetheless, the Company sought to limit dilution of its interest in the Joint Venture resulting from any failure to fund the capital call requirements, but at the same time wished to avoid the time, expense and financial return requirements (with attendant dilution and possible loss of voting rights) that obtaining a replacement third-party investor would require. The Company, therefore, entered into a second amended and restated operating agreement for Investment LLC ("(“Second Amended and Restated Investment Operating Agreement"Agreement”) pursuant to which Capital LLC was admitted as a member of Investment LLC. In exchange for Capital LLC contributing toward Investment LLC capital calls in respect of the 111 West 57th 57th Property, available cash of Investment LLC will be distributed first to Capital LLC until it has received a 20% internal rate of return (calculated as provided for in the JV Agreement as noted above), second to the Company until it has received 150% of its capital, and;and, thereafter, available cash is split 10/90, with 10% going to Mr. R.A.R. A. Bianco as the subordinated participation interest noted above and 90% going to Capital LLC and the Company pari-passu, with Capital LLC receiving one-half of its pro-rata share based on capital contributed and the Company receiving the balance. No other material changes were made to the Amended and Restated Investment Operating Agreement, and neither Mr. R. A. Bianco nor Capital LLC has any voting rights with respect to their interest and investment in Investment LLC.


In accordance with the JV Agreement, Shortfall Capital Contributionsshortfall capital contributions may be treated either as a member loan or as a dilutive capital contribution byas set forth in the funding party valued at one and one-half times the amount actually contributed.JV Agreement. The SponsorsSponsor deemed the Shortfall Capital Contributionsshortfall capital contributions as dilutive capital contributions to the Company.  The Company disagrees with the Sponsors'Sponsor’s investment percentage calculations. The Sponsors haveSponsor has taken the position that the Capital Contribution Requests,capital contribution requests, if taken together, would have caused the Company'sCompany’s combined ownership percentage to be diluted to approximately 48%.below the Company’s initial membership interest percentage. The parties have a dispute with regard to the calculation of the revised investment percentages resulting from the Capital Contribution Requests,capital contribution requests, along with the treatment and allocation of these Shortfall Capital Contributionshortfall capital contribution amounts.


On June 30, 2015, 111 West 57th57th Partners obtained financing for the 111 West 57th 57th Property.  The financing was obtained in two parts: (i) a first mortgage construction loan with AIG Asset Management (US), LLC (along with its affiliates "AIG"“AIG”); and (ii) a mezzanine loan with Apollo Commercial Real Estate Finance, Inc. (along with its affiliates "Apollo"“Apollo”), as detailed herein below.herein.  Both loans have a four-yearinitially had certain repayment term dates with a one-year extension optionoption(s) subject to satisfying certain conditions.  The loan agreements (the "Loan Agreements"“Loan Agreements”) also include customary events of default and other customary terms and conditions.  Simultaneously with the closing of the AIG and the Apollo financing, 111 West 57th57th Partners repaid all outstanding liabilities and obligations to Annaly CRE, LLC under the initial mortgage and acquisition loan agreement, dated June 28, 2013, between the joint venture entities and Annaly CRE, LLC.  The remaining loan proceeds were to be drawn down and used as necessary for construction and related costs, loan interest escrow and other related project expenses for development of the 111 West 57th57th Property.

Information relating to the June 30, 2015 financing for 111 West 57th Partners is as follows:

(in thousands)   
Financing obtained by 111 West 57th Partners - AIG
 $400,000 
Financing obtained by 111 West 57th Partners - Apollo
 $325,000 
Annaly CRE LLC initial mortgage and acquisition loan repaid $230,000 

In April 2016, AmBasethe Company initiated a litigation in the New York State Supreme Court for New York County (the "NY Court"“NY Court”), Index No. No. 652301/2016, ("(“AmBase v. 111 West 57th57th Sponsor LLC, et al."”) (the "111“111 West 57th Action"57th Action”).  The defendants in that litigation areinclude 111 West 57th Sponsor LLC, 111 West 57th JDS LLC, PMG West 57th Street LLC, 111 West 57th Control LLC, 111 West 57th Developer LLC, Elliot Joseph, 111 West 57th KM Equity LLC, 111 West 57th KM Group LLC, Kevin Maloney, Matthew Phillips, Michael Stern, Ned White and Franklin R. Kaimanvarious members and affiliates, Liberty Mutual Insurance Company, and Liberty Mutual Fire Insurance Company (collectively, "Defendants"“Defendants”) and nominal defendantdefendants 111 West 57th Partners LLC.  AmBase alleges in that action, among other claims, that the Defendants engaged in an unlawful scheme to dilute AmBase's equity interest in the joint real estate ventureLLC and 111 West 57th Partners, and to keep for themselves certain financing opportunities in breach of Defendants' contractual and fiduciary duties. The complaint also alleges that defendants have failed to honor the exercise of AmBase's contractual "equity put right" as set forth in the JV Agreement (the "Equity Put Right"). AmBase is seeking compensatory damages, as well as punitive damages, indemnification and equitable relief including a declaration of the parties' rights, an accounting and a constructive trust over distributions received by the Defendants.  The complaint in this action has been filed, a motion to dismiss is pending and discovery is ongoing. The Company has also demanded from the Sponsors access57th Mezz 1 LLC.  For additional information with regard to the books and records forCompany’s legal proceedings relating to the 111 West 57th57th Property, whichsee Note 6.

7
AMBASE CORPORATION AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements


In December 2016, the Sponsors have refused, claiming they have provided all books and records as required. For additional information, see Note 9.

The SponsorsSponsor proposed for approval a "proposed budget"“proposed budget” (the "Proposed Budget"“Proposed Budget”), which the Sponsors claim representedSponsor claims reflected an increase to the aggregate of hard cost line items of an amount slightly below the Equity Put Right threshold amount and a further increase in other costs thus resulting in the need for additional funding in order to complete the project. The Company disputes, among other items, the calculation of the percentage increase of hard costs shown in the Proposed Budget. The Company believes the aggregate projected hard costs in the Proposed Budget exceed a contractually stipulated limit as a percentage of the hard costs set forth in the prior approved budget, thus allowing Investment LLC the option to exercise its Equityequity put right, as set forth in the JV Agreement (the “Equity Put Right.Right”). Consequently, subsequent to the Sponsors'Sponsor’s presentation of the Proposed Budget, Investment LLC notified the SponsorsSponsor that it was exercising its Equity Put Right pursuant to the JV Agreement. The Sponsors haveSponsor refused to honor the exercise of Investment LLC'sLLC’s Equity Put Right. The Sponsors claim,Sponsor claims, among other things, that the conditions precedent were not met inbecause it claims that the increase in aggregate hard costs in the Proposed Budget does not exceed the contractually stipulated limit that would allow the exercise of the Equity Put Right.


The Company further contends that a portion of the Proposed Budget increases should beare manager overruns (as defined in the JV Agreement) and thus should be paid for by the Sponsors.Sponsor. The Sponsors denySponsor denies that the Proposed Budget increases were manager overruns. The Company continues to challenge the nature and substance of the Proposed Budget increases and how they should be treated pursuant to the JV Agreement.

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 Mr. 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 projected Proposed Budget increase, the SponsorsSponsor claimed that additional borrowings of $60 million to $100 million were needed to complete the project. In addition,Shortly thereafter, the Company had beenSponsor informed by the Sponsors,Company that Apollo had indicated that due to budget increases, it believed the current loan had been "outwas “out of balance"balance” (meaning, according to Apollo, the projected budget exceeds the original budget approved in connection with the loan); and thus 111 West 57th Partners LLC, ("111 West 57th Partners"), or its subsidiaries would need additional funding in order to bring the loan back into balance. The Company considered approving the additional financing but informed the SponsorsSponsor that it had concerns about the Proposed Budget and the implications of the Proposed Budget, as well as other questions which needed to be addressed first.

Around this time, Apollo had previously provided loan forbearances to the borrowers and guarantors in order to allow the SponsorsSponsor time (while the building continued to be built) to raise the additional financing that itSponsor claimed would be needed in order to complete the 111 West 57th project. This forbearance period ended on June 29, 2017. Around this date, the Company was advised that Apollo sold $25 milliona portion of the mezzanine loan—broken off as a junior mezzanine loan—to an affiliate of Spruce Capital Partners LLC, ("Spruce"111 W57 Mezz Investor, LLC (“Spruce”) (the "Junior“Junior Mezzanine Loan"Loan”).


On June 30, 2017, Spruce declared an event of default under the Junior Mezzanine Loan and demanded immediate payment of the full outstanding balance of the Junior Mezzanine Loan.  Spruce then gave notice to the junior mezzanine borrower that it proposed to accept the pledged collateral (including the joint venture members'members’ collective interest in the property) in full satisfaction of the joint venture'sventure’s indebtedness under the Junior Mezzanine Loan (i.e., a "Strict Foreclosure"“Strict Foreclosure”).


On July 25, 2017, the Company filed a complaint against Spruce and the SponsorsSponsor and requested injunctive relief halting the Strict Foreclosure from the New York State Supreme Court for New York County, (the "NY Court"“NY Court”) Index No. 655031/2017,, (the "111 (the “111 West 57th57th Spruce Action"Action”). The defendants in the 111 West 57th57th Spruce action arewere 111 W57 Mezz Investor, LLC, Spruce Capital Partners LLC, 111 West 57th Sponsor LLC, Michael Z. Stern, and Kevin P. Maloney (collectively, "Defendants"“Defendants”) and nominal defendants 111 West 57th Partners LLC and 111 West 57th57th Mezz 1 LLC.

Pursuant The Company has since voluntarily discontinued its claims against Sponsor, Stern, and Maloney, without prejudice to reinstating them in the 111 West 57th Spruce Action or any other action. For additional information with regard to the Spruce Action, see Note 6.

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'sCompany’s interest in the 111 West 57th Street Property.  That investment represents substantially all of the Company's assets and net equity value.  The Company's motion for a stay or injunctive relief pending appeal has not yet been resolved. 111 W57 Mezz Investor, LLC and Spruce Capital Partners LLC filed an opposition to that motion and the Company filed its reply brief. For additional information see Note 9Property (the “Strict Foreclosure”).

As noted above, despite 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,Strict Foreclosure, in accordance with GAAP, the Company recorded an impairment for the full amount of its equity investment in the 111 West 57th57th Property in 2017. Prior to the third quarter ended September 30, 2017.Strict Foreclosure, 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.

8
AMBASE CORPORATION AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements


In June 2018, the Company initiated another litigation in the NY Court, Index No. 655031/2017, (the “Apollo Action”). The defendants in the Apollo Action are ACREFI Mortgage Lending, LLC, Apollo Credit Opportunity Fund III AIV I LP, AGRE Debt 1 – 111 W 57, LLC, and Apollo Commercial Real Estate Finance, Inc. (collectively, the “Apollo Defendants”). In the Apollo Action, the Company isalleges that the Apollo Defendants aided and will continueabetted the Sponsor, Stern, and Maloney in breaching their fiduciary duties to vigorously pursue the recovery of its asset value from all sources of recovery.Company in connection with the 111 West 57th Property and tortiously interfered with the JV Agreement. For additional information with regard to the Company'sApollo Action, see Note 6.

For information concerning additional legal proceedings relatedrelating to the 111 West 57th57th Property, see Note 96.

For information relating to the Litigation Funding Agreement entered into between the Company and Mr. Richard A. Bianco, the Company's President and Chief Executive Officer, see Note 10.

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. TheProperty; 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 SponsorsSponsor 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 57th57th Property, as to the ultimate effect of the Sponsors',Sponsor’s, the Company'sCompany’s or the lenders'lenders’ actions on the project, or 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 57th57th Street Property. For additional information with regard to the Company’s legal proceedings relating to the 111 West 57th Property, see Note 6.


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 57th57th Property, the adverse developments make it uncertain as to whether any such courses of action will be successful in recovering value for the Company.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 recorded its investment in 111 West 57th Partners utilizing the equity method of accounting. Despite ongoing litigation challenging the legitimacy of the actions taken by the Sponsors and Spruce in connectioncan give no assurances with the Company's investment in the 111 West 57th Property as further discussed herein, in accordanceregard to if it will prevail with GAAP, the Company recorded an impairmentrespect to any of its equity investment in the 111 West 57th Property in the third quarter ended September 30, 2017. As a result, the operations of 111 West 57th only through June 30, 2017 are included in the Company's condensed consolidated operations for the year to date period ended September 30, 2017.claims.
As a result of the matters described herein, the following tables present summarized financial information for 111 West 57th Partners solely for the periods indicated.  The amounts shown represent 100% of the financial position and results of operations of 111 West 57th Partners for the dates indicated below.

(in thousands)
Assets: December 31, 2016 
Real estate held for development, net $563,133 
Escrow deposits  9,000 
Other assets  6,908 
Total assets $579,041 
Liabilities:    
Loans payable $441,749 
Other liabilities  16,788 
Total liabilities  458,537 
Equity:    
Total members' equity  120,504 
Total liabilities and members' equity $579,041 


  Three Months Ended  Nine Months Ended 
(in thousands) September 30, 2016  September 30, 2016 
       
Rental income $-  $- 
Expenses  81   910 
Net income (loss) $(81) $(910)

Note 5 –4 - Savings Plan


The Company sponsors the AmBase 401(k) Savings Plan (the "Savings Plan"“Savings Plan”), which is a "Section“Section 401(k) Plan"Plan” within the meaning of the Internal Revenue Code of 1986, as amended (the "Code"“Code”). The Savings Plan permits eligible employees to make contributions of up to a percentage of their compensation, which are matched by the Company at a percentage of the employees'employees’ elected deferral. Employee contributions to the Savings Plan are invested at the employee'semployee’s discretion in various investment funds. The Company'sCompany’s matching contributions are invested in the same manner as the compensation reduction contributions.  All contributions are subject to maximum limitations contained in the Code.

 
The Company'sCompany’s matching contributions to the Savings Plan, charged to expense, were as follows:


($ in thousands)
 Three Months Ended  Nine Months Ended  Three Months Ended
  Nine Months Ended
 
 September 30, 2017  September 30, 2016  September 30, 2017  September 30, 2016  
September 30,
2022
  
September 30,
2021
  
September 30,
2022
  
September 30,
2021
 
Company matching contributions $3  $-  $15  $25  $9  $10  $81  $78 
Employer match %  33%  33%  33%  33%  100%
  100%
  100%
  100%
 
9
AMBASE CORPORATION AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements

Note 6 – Common Stock Repurchase Plan

The Company's common stock repurchase plan (the "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.  Pursuant to the Repurchase Plan the Company repurchased shares of common stock from unaffiliated parties at various dates at market prices at their time of purchase, including broker commissions.

Information relating to the Repurchase Plan is as follows:

(in thousands)
Nine months ended
September 30, 2017
Common shares repurchased to treasury during period5 -
Aggregate cost of shares repurchased during period$-

 (in thousands)September 30, 2017
Total number of common shares authorized for repurchase10,000
Total number of common shares repurchased to date6,226
Total number of shares that may yet be repurchased3,774

Note 7 – Incentive Plans

Under the Company's 1993 Stock Incentive Plan (the "1993 Plan"), the Company may grant to officers and employees of the Company and its subsidiaries, stock options ("Options"), stock appreciation rights ("SARs"), restricted stock awards ("Restricted Stock"), merit awards ("Merit Awards") and performance share awards ("Performance Shares") through May 28, 2018.  A pre-determined number of shares of the Company's Common Stock are reserved for issuance under the 1993 Plan (upon the exercise of Options and Stock Appreciation Rights, and awards of Restricted Stock and Performance Shares); however, only a portion of such shares are available for the issuance of Restricted Stock Awards and Merit Awards. Such shares shall be authorized but unissued shares of Common Stock. Options may be granted as incentive stock options ("ISOs") intended to qualify for favorable tax treatment under Federal tax law or as nonqualified stock options ("NQSOs"). SARs may be granted with respect to any Options granted under the 1993 Plan and may be exercised only when the underlying Option is exercisable. The 1993 Plan requires that the exercise price of all Options and SARs be equal to or greater than the fair value of the Company's Common Stock on the date of grant of that Option. The term of any NQSO, ISO or related SAR cannot exceed terms under federal tax law and/or as prescribed in the 1993 Plan. Subject to the terms of the 1993 Plan and any additional restrictions imposed at the time of grant, Options and any related SARs ordinarily will become exercisable pursuant to a vesting period prescribed at the time of grant.  In the case of a "Change of Control" of the Company (as defined in the 1993 Plan), Options granted pursuant to the 1993 Plan may become fully exercisable as to all optioned shares from and after the date of such Change in Control in the discretion of the Committee or as may otherwise be provided in the grantee's Option agreement. Death, retirement, or absence for disability will not result in the cancellation of any Options.

The fair values of option awards are estimated on the date of grant using the Black-Scholes-Merton option valuation model ("Black-Scholes") that uses certain assumptions at the time of valuation. Expected volatilities are based on historical volatility of the Company's stock. The Company uses historical data to estimate option exercises and employee terminations within the valuation model. The expected term of options granted is estimated based on the contractual lives of option grants, option vesting period and historical data and represents the period of time that options granted are expected to be outstanding. The risk-free interest rate for periods within the contractual life of the option is based on the U.S. Treasury bond yield in effect at the time of grant.

The Black-Scholes option valuation model requires the input of highly subjective assumptions, including the expected life of the stock-based award and stock price volatility. The assumptions utilized represent management's best estimates, but these estimates involve inherent uncertainties and the application of management's judgment. As a result, if other assumptions had been used, our recorded stock-based compensation expense could have been materially different from the amounts previously recorded. In addition, the Company is required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. If our actual forfeiture rate is materially different from our estimate, the share-based compensation expense could be materially different.  The Company believes that the use of the Black-Scholes model meets the fair value measurement objectives of accounting principles generally accepted in the United States of America and reflects all substantive characteristics of the instruments being valued.

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, including the expected stock price volatility. Because the Company's employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, and given the substantial changes in the price per share of the Company's Common Stock, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options.

Information relating to the Company's 1993 Plan is as follows:

Period Ending
(in thousands)
September 30, 2017December 31, 2016
Stock option grants--
Stock options exercisable--
Stock options outstanding--

Common stock reserved for issuance under the Company's 1993 Stock Incentive Plan and other non-related employee benefit plans is as follows:

(in thousands)September 30, 2017
1993 Stock Incentive Plan4,320
Other employee benefit plan110
Total common shares reserved for issuance4,430

Note 8 – Income Taxes


The Company and its domestic subsidiaries file a consolidated federal income tax return. The Company recognizes both the current and deferred tax consequences of all transactions that have been recognized in the unaudited condensed consolidated financial statements, calculated based on the provisions of enacted tax laws, including the tax rates in effect for current and future years. Net deferred tax assets are recognized immediately when a more likely than not criterion is met; that is, a greater than 50% probability exists that the tax benefits will actually be realized sometime in the future.

The components of income tax expense (benefit) are as follows:


(in thousands) Three Months Ended September 30,  Nine Months Ended September 30, 
  2017  2016  2017  2016 
Federal – current $-  $-  $-  $- 
State – current  -   (220)  6   (150)
Total current  -   (220)  6   (150)
                 
Federal – deferred  -   -   -   - 
State - deferred  -   -   -   - 
Total deferred  -   -   -   - 
                 
Income tax expense (benefit) $-  $(220) $6  $(150)

A reconciliation of the United States federal statutory rate to the Company's effective income tax rate is as follows:

  Three Months Ended September 30,  Nine Months Ended September 30, 
  2017  2016  2017  2016 
Tax at statutory federal rate  35.0%  35.0%  35.0%  35.0%
State income taxes  -   (23.6)  -   (5.3)
Permanent differences  -   -   -   - 
Other  -   -   -   - 
Change in valuation allowance  (35.0)  (35.0)  (35.0)  (35.0)
Effective income tax rate  -%  (23.6)%  -%  (5.3)%

The Company has not been notified of any 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 2013.  Interest and/or penalties related to underpayments of income taxes, or on uncertain tax positions, if applicable, would be included as a component of income tax expense (benefit).  The accompanying financial statements do not include any amounts for penalties.


State income tax amounts for the three months and nine months ended September 30, 2017,2022, and the three and nine months ended September 30, 2016,2021, reflect a provision for a tax on capital imposed by the state jurisdictions.

The utilization of certain carryforwardsCompany’s management is continuing to work closely with outside advisors on the Company’s various federal tax return matters for the numerous interrelated tax years.  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 refunded. The AMT credit carryforward amounts from prior tax years and carrybacks isrelated refund(s) received could potentially be subject to limitations under U.S.IRS or other tax authority audits. The Company cannot predict whether or not the IRS and/or other tax authorities will review the Company’s tax returns filed, to be filed and/or as filed in prior years, and/or if they will seek repayment from the Company of any amounts already refunded as a result of an IRS review, if any.  Moreover, applicable provisions of the Code and IRS regulations permit the IRS to challenge Company tax positions and filed returns and seek recovery of refunded amounts or of additional taxes for an extended period of time after such returns are filed.

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. Based onThe Company can give no assurances as to the Company's federal tax returns as filed,final outcome of any IRS review, if any, of the Company estimates it has federal NOL carryforwards and federal alternative minimum taxAMT credit carryforwards ("AMT Credits"), available to reduce future federal taxable income which would expire if unused, as indicated below.carryforward refunds received.

The federal NOL carryforwards as of December 31, 2016, are as follows:

Tax Year Originating Tax Year Expiring Amount 
      
      
2006 2026 $500,000 
2007 2027  12,700,000 
2008 2028  4,600,000 
2009 2029  2,400,000 
2010 2030  1,900,000 
2011 2031  1,900,000 
2013 2033  3,700,000 
2014 2034  4,900,000 
2015 2035  4,200,000 
2016 2036  3,400,000 
     $40,200,000 

AMT Credits available which are not subject to expiration are as follows:

  Amount 
AMT Credits $21,000,000 

Based on the Company's state tax returns as filed, the Company estimates that it has state NOL carryforwards available to reduce future state taxable income, which would expire if unused, as indicated below.

The state NOL carryforwards as of December 31, 2016,are as follows:

Tax Year Originating Tax Year Expiring Amount 
      
2011 2031 $1,800,000 
2013 2033  2,700,000 
2014 2034  4,200,000 
2015 2035  4,100,000 
2016 2036  3,200,000 
     $16,000,000 

The Company has calculated a deferred tax asset arising primarily from NOL carryforwards and AMT credits as follows:

  September 30, 2017  December 31, 2016 
Deferred tax asset $63,300,000  $36,400,000 
Valuation allowance  (63,300,000)  (36,400,000)
Net deferred tax asset recognized $-  $- 

Acarryforwards. The Company has a full valuation allowance has been established foron the entire deferred tax asset amounts, as management has no basis to conclude that realization is more likely than not. Management does not believe that any significant changes in unrecognized income tax benefits are expected to occur over the next year.


The Company was a plaintiff in a legal proceeding seeking recovery of damages from the United States Government for the loss of the Company’s wholly-owned subsidiary, Carteret Savings Bank, F.A. (the “SGW Legal Proceedings”).  A settlement agreement in the SGW Legal Proceedings between the Company, the Federal Deposit Insurance Corporation-Receiver (“FDIC-R”) and the Department of Justice (“DOJ”) on behalf of the United States of America (the “United States”), was executed (the “SGW 2012 Settlement Agreement”) which was approved by the United States Court of Federal Claims (the “Court of Federal Claims”) in October 2012. On August 6, 2013, Senior Judge Smith issued an opinion which addressed the relief sought by AmBase. In summary, the court held that the Settlement Agreement is a contract and that it entitles the 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 seek further relief “if, and when, the facts justify it.”

10
AMBASE CORPORATION AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements


As part of the SGW 2012 Settlement Agreement, the Company is entitled to a tax gross-up when any federal taxes are imposed on the settlement amount.  Based on the Company’s 2012 federal income tax return as filed, in March 2013, the Company paid approximately $501,000 of federal income taxes attributable to AMT rate calculations (the “2012 Tax Amount”) resulting from the SGW 2012 Settlement Agreement. In September 2013, the Company received reimbursement for the 2012 Tax Amount. In 2019, the Company received a letter from the Federal Deposit Insurance Corporation (“FDIC”), requesting the Company reimburse the FDIC for the 2012 Tax Amount that the FDIC had previously reimbursed the Company. The Company is currently reviewing the FDIC request, along with the SGW 2012 Settlement Agreement and Court of Federal Claims August 2013 ruling, with its outside legal and tax advisors. The Company is unable to predict at this time whether the 2012 Tax Amount is refundable back to the FDIC in current and/or future years.

Note 96 - 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 below, 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.


The Company is a party to a lawsuitmaterial legal proceedings as follows:


AmBase Corp., et al. v. 111 West 57th Sponsor LLC, et al. In April 2016, AmBase and certain of its subsidiaries and affiliates (collectively, the “Plaintiffs”) initiated a litigation in the New York State Supreme Court for New York County (the "NY Court"“NY Court”), Index No. 652301/2016, ("(“AmBase v. 111 West 57th57th Sponsor LLC, et al."”) (the "111“111 West 57th Action"57th Action”).  The defendants in that litigation areinclude 111 West 57th Sponsor LLC 111 West 57th JDS LLC, PMG West 57th Street LLC, 111 West 57th Control LLC, 111 West 57th Developer LLC, Elliot Joseph, 111 West 57th KM Equity LLC, 111 West 57th KM Group LLC,(the Sponsor”), Kevin Maloney, Matthew Phillips, Michael Stern, Ned White and Franklin R. Kaimanvarious members and affiliates, Liberty Mutual Insurance Company, and Liberty Mutual Fire Insurance Company (collectively, "Defendants"“Defendants”) and nominal defendantdefendants 111 West 57th Partners LLC and 111 West 57th Mezz 1 LLC. In the current version of the complaint, AmBase alleges in that action, among other claims, that the Defendants engaged in an unlawful scheme to dilute AmBase's equity interestviolated multiple provisions in the joint real estate venture 111 West 57th Partners, and to keep for themselves certain financing opportunities in breach of Defendants' contractual and fiduciary duties. The complaint also alleges that defendants have failedJV Agreement, including by failing to honor the exercise of AmBase'sAmBase’s contractual "equity“equity put right"right” as set forth in the JV Agreement (the "Equity“Equity Put Right"Right”)., and committed numerous acts of fraud and breaches of fiduciary duty. AmBase is seeking compensatory damages, as well as punitive damages, indemnification and equitable relief, including a declaration of the parties'parties’ rights, and an accounting and a constructive trust over distributions received by the Defendants.  The complaint in this action has been filed, a motion to dismiss is pending and discovery is ongoing.accounting. The Company has also demanded from the SponsorsSponsor access to the books and records for the 111 West 57th57th Property which the Sponsors haveSponsor refused, claiming they have provided all books and records as required.

The Defendants filed a motion to dismiss an earlier complaint, and on January 12, 2018, the NY Court issued an opinion allowing some of AmBase’s claims to go forward and dismissing others (“2018 Order”). Among other claims that the NY Court declined to dismiss was AmBase’s claim that the Defendants violated the implied covenant of good faith and fair dealing by frustrating AmBase’s Equity Put Right. Claims that the NY Court dismissed included AmBase’s claim that the Defendants breached their contract with AmBase by financing capital contributions for the project through funds obtained from third parties. On January 16, 2018, some of the Defendants wrote to the NY Court suggesting that the opinion contained certain clerical errors and was missing a page. On January 18, 2018, the NY Court removed its previous opinion from the docket and on January 29, 2018, posted a revised opinion. On April 13, 2018, AmBase filed a notice of appeal of the 2018 Order to the New York Supreme Court Appellate Division, First Judicial Department (the “Appellate Division”). On January 22, 2020, the Company filed a motion with the Appellate Division seeking to enlarge the time to perfect the Company’s appeal of the 2018 Order, in light of an intervening removal to and remand from federal court. On July 2, 2020, the Appellate Division granted AmBase’s motion and enlarged the time to perfect the Company’s appeal to the October 2020 Term of the Appellate Division. On April 29, 2021, the Appellate Division affirmed Justice Bransten’s dismissal of the claims on appeal, while the claims that were not previously dismissed remain pending in the trial court.

On April 27, 2018, the Company filed a third amended complaint adding federal RICO claims, and new claims for declaratory judgment, breach of contract, fraud, and breach of fiduciary duty, based on information discovered during the course of discovery and events that have transpired since the Company filed its previous complaint in the 111 West 57th Action. On June 18, 2018, Defendants removed the complaint to the U.S. District Court for the Southern District of New York (the “Federal Court”), where it was docketed as case number 18-cv-5482-AT.

On October 25, 2018, the Federal Court issued an order granting Defendants’ motion to dismiss the Company’s RICO claims and declined to exercise supplemental jurisdiction over the Company’s state-law claims, dismissing the latter claims without prejudice. On August 30, 2019, the U.S. Court of Appeals for the Second Circuit affirmed the Federal Court’s dismissal of the federal RICO claims, vacated the Federal Court’s dismissal of the state-law claims, and remanded with instructions for the Federal Court to remand those claims to the NY Court. On September 25, 2019, the Federal Court remanded the case to the NY Court, where it was assigned to the Honorable O. Peter Sherwood.
11
AMBASE CORPORATION AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements

On June 11, 2020, Defendants filed a motion with the NY Court to dismiss some of the state law claims asserted by the Company in the third amended complaint. On July 28, 2020, Plaintiffs filed a motion for leave to amend the third amended complaint, which Defendants opposed. The proposed complaint adds, among other things, claims arising from certain defendants’ role in the 2017 foreclosure of the junior mezzanine loan on the project.On July 22, 2021, the NY Court granted Plaintiffs leave to amend and denied the motion to dismiss without prejudice as moot in light of the Court’s decision granting Plaintiffs leave to amend.


On July 29, 2021, Plaintiffs filed their fourth amended complaint. On September 3, 2021, Defendants submitted a motion to dismiss the fourth amended complaint in part, which Plaintiffs opposed.  On May 9, 2022, the NY Court issued an opinion allowing some of AmBase’s claims to go forward and dismissing others (“May 9, 2022 Order”).  The NY Court declined to dismiss AmBase’s claims that the Defendants breached their contracts with AmBase by permitting transfers or encumbrances upon 111 West 57th Control LLC’s membership interests in connection with third-party financing without seeking or obtaining prior written approval.  The Court also declined to dismiss AmBase’s claim that Defendants breached their obligations under the Development Agreement by, among other things, failing to use “commercially reasonable efforts” to plan, design, develop, construct, and obtain permits for the Property in a timely manner and failing to devote sufficient time and attention to its obligations under the Development Agreement.



Claims that the NY Court dismissed included AmBase’s claims that Defendants breached their contract with AmBase by making capital contributions to Sponsor from third parties; consenting to the strict foreclosure without obtaining AmBase’s prior written approval in violation of the “Major Decisions” provision; refusing to cooperate and share information with AmBase’s construction consultant; and engaging in fraud and intentional misconduct in violation of Joint Venture Agreement section 8.5. The NY Court also dismissed AmBase’s claim that Defendants made fraudulent misrepresentations or omissions (as duplicative of the breach of contract claims) and three claims whose dismissal was compelled by a prior decision of the First Department, namely, AmBase’s claims that Sponsor, Stern, and Maloney breached their fiduciary duties of loyalty; to impose a constructive trust on the insurance loss fund; and to impose a constructive trust on Stern’s, Maloney’s, JDS’s, PMG’s, and the construction manager’s construction management fees and Stern’s and Maloney’s equity interest in the Project.  Finally, the Court dismissed AmBase’s current allegations that piercing certain of Defendants’ corporate veils is warranted. AmBase may appeal the dismissal of some or all of the claims dismissed by the May 9, 2022 order, either on an interlocutory basis or at the end of the case.


On September 30, 2021, the Liberty Mutual defendants answered the fourth amended complaint and filed a counterclaim against the Company’s subsidiaries for specific performance of a pledge agreement securing certain insurance policies issued for the Project. Plaintiffs replied to those counterclaims on October 20, 2021. For additional information with regard to the Company'sCompany’s investment in the 111 West 57th Property, including the foreclosure, see Note 43.


AmBase Corp., et al. v. Spruce Capital Partners, et al.In July 2017, the Company initiated a second litigation in the NY Court, Index No. 655031/2017,, (the "111 (the “111 West 57th57th Spruce Action"Action”). The defendants in the 111 West 57th57th Spruce action arewere 111 W57 Mezz Investor, LLC (“Spruce”), 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 57th57th Mezz 1 LLC. The Company has since voluntarily discontinued its claims against Sponsor, Stern, and Maloney, without prejudice to reinstating them in the 111 West 57th Spruce Action or any other action.


Spruce had given notice to the junior mezzanine borrower that it proposed to accept the pledged collateral (including the joint venture members'members’ collective interest in the property) in full satisfaction of the joint venture'sventure’s indebtedness under the Junior Mezzanine Loan (i.e., a "Strict Foreclosure"“Strict Foreclosure”). After the SponsorsSponsor refused to object to Spruce'sSpruce’s proposal on behalf of the junior mezzanine borrower, and Spruce refused to commit to honor Investment LLC'sLLC’s objection on its own behalf, the Company initiated this litigationthe 111 West 57th Spruce Action to obtain injunctive relief halting the Strict Foreclosure. For additional information on the events leading to this litigation see Note 43.


On July 26, 2017, the NY Court issued a temporary restraining order barring Spruce from accepting the collateral, pending a preliminary injunction hearing scheduled for August 14, 2017. Spruce and the SponsorsSponsor subsequently filed papers in opposition to the request for a preliminary injunction and cross-motions to dismiss and quash subpoenas. On August 14, 2017, the NY Court postponed the hearing until August 28, 2017, keeping the temporary restraining order preventing a Strict Foreclosure in effect until the August 28, 2017 hearing. Subsequently, the Company filed a response briefsbrief in support of their request for injunctive relief halting the Strict Foreclosure process and briefs in opposition to the motions to quash the subpoenas.

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AMBASE CORPORATION AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements

On August 28, 2017, the NY Court held a preliminary injunction hearing, lifted the temporary restraining order, denied Plaintiffs'Plaintiffs’ request for a preliminary injunction, and granted Defendants'Defendants’ cross-motions. In order to prevent the Strict Foreclosure process from going forward, the Company immediately obtained an interim stay from the New York Supreme Court Appellate Division, First Judicial Department ("(“Appellate Division"Division”). That stay remained in place until four (4) P.M. August 29, 2017, permitting the Company to obtain an appealable order, notice an appeal, and move for a longer-term stay or injunctive relief pending appeal. The Appellate Division held a hearing on August 29, 2017, to consider the Company'sCompany’s motion for an interim stay or injunctive relief pending appeal, both of which it denied, thus allowing the purported Strict Foreclosure to move forward.

In January 2019, the Appellate Division issued a decision that resolves the Company’s appeal from the order denying a preliminary injunction and dismissing its claims. The Appellate Division affirmed the decision below in part and otherwise dismissed the appeal. It noted that the Company will continueshould be allowed to challengemove for leave to amend to state claims for damages and/or the validityimposition of a constructive trust, as the dismissal of the actions that ledCompany’s claims was without prejudice.

On May 3, 2019, the Company’s subsidiary, Investment LLC, entered into a stipulation with Spruce to this purported transfer of title, including appeal.

On August 30, 2017, Spruce issued a Notice of Retention of Pledged Collateral in Full Satisfaction of Indebtedness. By acceptingamend 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's interestcomplaint in the 111 West 57th Street Property.  That investment represented substantially allSpruce Action to state claims against Spruce for breaches of the Company's assetsUniform Commercial Code and net equity value.

Pledge Agreement and various torts. The Company's motion foramended complaint sought the entry of a stay ordeclaratory judgment, the impression of a constructive trust, permanent injunctive relief pending appeal hasrestraining Spruce from disposing of or encumbering the 111 West 57th Property, and damages, including punitive damages. The amended complaint did not yet been resolved. 111 W57 Mezz Investor, LLC andname the Company as a plaintiff or Spruce Capital Partners as a defendant. On May 31, 2019, Spruce filed a motion to dismiss the amended complaint. On January 29, 2020, the Court entered a decision and order granting in part and denying in part Spruce’s motion to dismiss the amended complaint. On February 26, 2020, Spruce filed a notice of appeal to the Appellate Division seeking the appeal of the January 29, 2020 order. On March 4, 2020, Investment LLC filed ana notice of cross-appeal to the Appellate Division, seeking to appeal the January 29, 2020 order to the extent the NY Court dismissed some of Investment LLC’s claims. On March 30, 2021, the Appellate Division issued a decision and order revising the January 29, 2020, order by reinstating Investment LLC’s derivative claim for breach of the covenant of good faith and fair dealing and dismissing the remaining claims.

While the appeal was pending, the parties to the 111 West 57th Spruce Action conducted discovery. On April 13, 2021, Investment LLC moved for leave to file a Second Amended Complaint to (1) bolster its factual allegations against the existing Defendant, (2) add claims against Spruce Capital Partners, Joshua Crane, Robert Schwartz, Arthur Becker and his affiliates, Apollo and its affiliates, and AIG and its affiliates. On September 30, 2021, the Court granted the motion, and Investment LLC filed its Second Amended Complaint on the same day. On November 22, 2021, the various defendants filed separate motions to dismiss the claims against them. On December 13, 2021, Investment LLC filed a combined opposition to the motions. The defendants filed their replies on January 7, 2022.

On May 17, 2022, Plaintiffs in the 111 West 57th Spruce Action filed a motion requesting that the court hold oral argument on the pending motions to dismiss. The court granted the motion and heard argument on September 15, 2017,July 22, 2022. During argument, counsel for Plaintiffs made an oral motion to amend the complaint to add an express allegation that Defendants committed the tort of interference with contractual relations by procuring Sponsor’s breach of the implied covenant of good faith and fair dealing in the CompanyJV Agreement. The court called for supplemental briefs on the issue, which were filed its reply brief on September 22, 2017.August 5, 2022. The motions to dismiss remain pending.


Since the Company is not a party to the Loan Agreements, it does not have access to communications with the lenders, except for those individual communications that the Sponsors haveSponsor has elected to share.share or that have been produced in the ongoing litigation. The Company has continued to demand access to such information, including access to the books and records for the 111 West 57th57th Property both under the JV Agreement and as part of the 111 West 57th57th Action and the 111 West 57th57th Spruce Action.

For additional information with regard to the Company'sCompany’s investment in the 111 West 57th Property and the Company’s recording of an impairment of its equity investment in the 111 West 57th Property; 57th Property in 2017, see Note 4.3.

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AMBASE CORPORATION AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements

AmBase Corp., et al. v. ACREFI Mortgage Lending LLC, et al. In June 2018, the Company initiated another litigation in the NY Court, Index No. 655031/2017, (the “Apollo Action”). The carrying valuedefendants in the Apollo Action are ACREFI Mortgage Lending, LLC, Apollo Credit Opportunity Fund III AIV I LP, AGRE Debt 1 – 111 W 57, LLC, and Apollo Commercial Real Estate Finance, Inc. (collectively, the “Apollo Defendants”). In the Apollo Action, the Company alleged that the Apollo Defendants aided and abetted the Sponsor, Stern, and Maloney in breaching their fiduciary duties to the Company in connection with the 111 West 57th Property and tortiously interfered with the JV Agreement. The Company sought damages as well as punitive damages for tortious interference with the JV Agreement and aiding and abetting the Sponsor’s breaches of their fiduciary duties to the joint venture. The Apollo Defendants filed a motion to dismiss on August 17, 2018. On October 22, 2019, the NY Court entered an order dismissing the Company’s complaint in the Apollo Action in its entirety. On November 8, 2019, the NY Court entered judgment (the “Apollo Dismissal”) dismissing the Apollo Action in favor of the Company's equityApollo Defendants. On December 10, 2019, the Company filed a notice of appeal seeking the appeal of the Apollo Dismissal. On August 7, 2020, the Company perfected its appeal of the Apollo Dismissal. After Investment LLC filed its motion to amend the complaint in the 111 West 57th Spruce Action to add claims against Apollo, the parties to the Apollo Action filed a stipulation to withdraw the appeal in the Apollo Action. For additional information with regard to the Company’s investment in the 111 West 57th57th Property, represented substantially allsee Note 3.

AmBase Corp., et al. v. Custom House Risk Advisors, Inc., et al. On April 2, 2020, the Company initiated litigation in the United States District Court for the Southern District of New York, Case No. 1:20-cv-02763-VSB (the “Custom House Action”). The defendants in the Custom House Action were Custom House Risk Advisors, Inc. and Elizabeth Lowe (collectively, the “Custom House Defendants”). In the Custom House Action, the Company alleged that the Custom House Defendants (a) aided and abetted Sponsor, Stern, and Maloney in breaching their fiduciary duties to the Company by structuring an insurance policy to the personal benefit of Sponsor, Stern and Maloney and the detriment of the Company's assets111 West 57th Project and net equity value.

For information relating toconcealing the Litigation Funding Agreement entered into betweenstructure and ownership of the insurance policy from the Company and Mr. Richard A. Bianco,(b) committed fraud by making material misrepresentations about the Company's Presidentterms of the policy to the Company, inducing the Company to contribute additional capital to the 111 West 57th Project to cover the costs of the insurance policy. The Company sought damages as well as disgorgement of profits the Custom House Defendants earned from their wrongful conduct. On April 10, 2020, the Custom House Defendants waived service of process. In an agreement dated July 31, 2020, the Company and Chief Executive Officer,the Custom House Defendants agreed to certain terms for a settlement and entered into a settlement agreement which requires that the Custom House Defendants satisfy certain conditions prior to any dismissal of the Custom House Action. On December 6, 2021, the Court approved a stipulation dismissing the Company’s claims and agreed to retain jurisdiction to enforce the settlement agreement. For additional information with regard to the Company’s investment in the 111 West 57th Property, see Note 103.


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. TheProperty; 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 SponsorsSponsor will perform theirits 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 57th57th Property, as to the ultimate effect of the Sponsors',Sponsor’s, the Company'sCompany’s or the lenders'lenders’ actions on the project, or 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 57th57th Street Property. For additional information with regard to the Company’s investment in the 111 West 57th Property, see Note 3.


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 in recovering value for the Company.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.

14
AMBASE CORPORATION AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
Note 107 – Litigation Funding Agreement


In September 2017, the Company's executive officers and its Board of Directors concluded that it was inCompany entered into a Litigation Funding Agreement (the “LFA”) with Mr. R. A. Bianco. Pursuant to the Company's interestLFA, Mr. R. A. Bianco agreed to obtain aprovide litigation funding commitment to finance litigation with respect to the ongoing disputesCompany 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 Sponsors and the lenders in the 111 West 57th Street Property project, and to seek to recover value for the Company with respect to its equity investment in 111 West 57th Street Property, whether by direct recovery or from asserting claims against the Sponsors, their principals and/or certain of the lenders (collectively, "Future Recovery Litigation").

As a result of developments in theCompany’s legal proceedings concerningrelating to the Company'sCompany’s equity investment in the 111 West 57th57th Property, (the “Litigation Fund Amount”).

After receiving substantial AMT credit carryforward refunds in March 2019, in light of the Company's interest to obtain a litigation funding commitment to finance litigation with respect toCompany’s improved liquidity, in April 2019 the ongoing disputes with the Sponsors and the lenders in the 111 West 57th Street Property project, and the Company's efforts to seek to recover value for the Company with respect to its equity investment in the 111 West 57th Property, the Company'sCompany’s Board of Directors negotiated(the “Board”) authorized the establishment of a Special Committee of the Board (the “Special Committee”) to evaluate and accepted an offernegotiate possible changes to the LFA. The Special Committee was comprised exclusively of the independent directors on the Board.

In 2019, after receiving approval from Mr. Richard Bianco, its long-time chief executive officer, to provide a litigation fund of seven million dollars ($7,000,000) (along with additional amounts as may be necessary from time to time as agreed to bythe Special Committee, the Company and Mr. Bianco)R. A. Bianco entered into an amendment to the LFA (the “Amendment”) which provides for the following: (i) the repayment of $3,672,000 in funds previously provided to the Company by Mr. R. A. Bianco pursuant to the LFA (the “Advanced Amount”), to fund(ii) the Company's litigation expenses in connection with Future Recoveryrelease of Mr. R. A. Bianco from all further funding obligations under the LFA, and (iii) a modification of the relative distribution between Mr. R. A. Bianco and the Company of any Litigation (the "Litigation Funding Agreement").Proceeds received by the Company from the 111 West 57th Litigation, as described below.

In consideration of such financial commitment, the Litigation Funding Agreement
The Amendment provides that, in the event that the Company receives any financial recovery inLitigation Proceeds from the 111 West 57th Litigation, such Future Recovery Litigation Proceeds shall be distributed as follows:


i.
(i)
first, 100% to reimburse Mr. Bianco on a dollar-for-dollar basis for anythe Company in an amount equal to the lesser of (a) the amount of actual litigation expenses and/incurred by the Company with respect to the Company’s 111 West 57th Litigation (including the Advanced Amount); or other unpaid amounts advanced by him in connection with Future Recovery Litigation;(b) $7,500,000; and

ii.
(ii)thereafter, a percentage of the recoveryany additional amounts shall be distributed (a) 75% to the Company and a(b) 25% to the Mr. R. A. Bianco (a reduction of Mr. R.A. Bianco’s percentage, which under the terms of the recoveryoriginal LFA prior to Mr. Bianco, respectively, (the "Recovery Sharing Ratio"); with the ratio and percentages ofAmendment would have been 30% to 45% dependingbased on the length of time to obtain recovery.of any recovery).


The payment of the amounts pursuant to the Litigation Funding Agreement could become payable by the Company in the future based on the recovery by the Company of amounts relating to the 111 West 57th Property.  The recovery, by the Company, of any amounts are not within the control of the Company and cannot be predicted at this time, and therefore, the aggregate amounts funded pursuant to the Litigation Funding Agreement are presented in a temporary equity classification below total liabilities in the Company's condensed consolidated balance sheets for the periods presented, until such time that the legal proceedings or the Litigation Funding Agreement are concluded. The Company shall not be obligated to repay such funded amounts except as described herein.

Legal expenses incurred attributable to the Litigation Funding Agreement for the quarterly and year-to-date periods ended are included in the Company's condensed consolidated statement of operations as part of professional and outside services.
Included in professional and outside services are legal expenses attributable to the Litigation Funding Agreement as follows:

(in thousands)
 Three Months Ended  Nine Months Ended 
  September 30, 2017  September 30, 2016  September 30, 2017  September 30, 2016 
Legal expenses attributable to the Litigation Funding Agreement $1,169   -  $1,169  $- 

In October 2017, Mr. R. A. Bianco funded an additional $700,000 of legal expenses pursuant to the Litigation Funding Agreement.
Note 11 – Loans Payable

In May 2016, the Company and Mr. Richard A. Bianco, the Company's Chairman, President and Chief Executive Officer ("Mr. R. A. Bianco") entered into an agreement for Mr. R. A. Bianco to provide to the Company a secured working capital line of credit of up to one million dollars ($1,000,000) or additional amount(s) as may be necessary and agreed to on an as needed basis, if and when necessary, subject to customary and market terms and conditions to be agreed upon at such time (the "WC Agreement").

Pursuant to the WC Agreement, Mr. R. A. Bianco made loans to the Company for use as working capital.  The loans are due on the earlier of the date the Company receives funds from any source sufficient to pay all amounts due under the loans, including accrued interest thereon, or the due date noted below.  Accrued interest payable associated with the loans are included in accounts payable and accrued liabilities in the Company's condensed consolidated balance sheet.

Information regarding the loans payable is as follows:

Date of Loan Rate Due Date September 30, 2017  December 31, 2016 
Loan payableJanuary 2017  5.25%December 31, 2019 $500,000  $- 
Loan payableApril 2017  5.25%December 31, 2019  500,000  $- 
Loan payableJune 2017  5.25%December 31, 2019  500,000  $- 
Loan payableSeptember 2017  5.25%December 31, 2019  150,000     
           $1,650,000  $- 

Information regarding accrued interest expense on the loans payable is as follows:

 
(in thousands)
 September 30, 2017  December 31, 2016 
Accrued interest expense $38  $- 

The amounts noted above pursuant to the WC Agreement are distinct from the line of credit agreement for the 111 West 57th Property as discussed in Note 4 herein and distinct from the Litigation Funding Agreement amounts as discussed in Note 10 herein.

In October 2017, pursuant to the WC Agreement, Mr. R.A. Bianco made an additional loan of $300,000 to the Company for use as working capital in accordance with the same terms of the loans payable noted above.


Note 128 - Subsequent Events


The Company has performed a review of events subsequent to the balance sheet dated September 30, 2017,2022, through the report issuance date.filing of these interim financial statements.

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Item 2.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


Cautionary Statement for Forward-Looking Information


This quarterly report together with other statements and information publicly disseminated by the Company may contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Act"“Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"“Exchange Act”), or make oral statements that constitute forward lookingforward-looking statements. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are inherently subject to risks and uncertainties, many of which cannot be predicted or quantified. The forward-looking statements may relate to such matters as anticipated financial performance, future revenues or earnings, business prospects, projected ventures, anticipated market performance, anticipated litigation results or the timing of pending litigation, and similar matters. When used in this Quarterly Report, the words "estimates," "expects," "anticipates," "believes," "plans," "intends"“estimates,” “expects,” “anticipates,” “believes,” “plans,” “intends” and variations of such words and similar expressions are intended to identify forward-looking statements that involve risks and uncertainties.  The Company cautions readers that a variety of factors could cause the Company'sCompany’s actual results to differ materially from the anticipated results or other expectations expressed in the Company'sCompany’s forward-looking statements.  These risks and uncertainties, many of which are beyond the Company'sCompany’s control, include, but are not limited to those set forth in "Item“Item 1A, Risk Factors"Factors” and elsewhere in the Company'sCompany’s Annual Report on Form 10-K and in the Company'sCompany’s other public filings with the Securities and Exchange Commission including, but not limited to: (i) risks with regard to the ability of the Company to continue as a going concern; (ii) assumptions regarding the outcome of legal and/or tax matters, based in whole or in part upon consultation with outside advisors; (iii) risks arising from unfavorable decisions in tax, legal and/or other proceedings; (iv) transaction volume in the securities markets; (v) the volatility of the securities markets; (vi) fluctuations in interest rates; (vii) risks inherent in the real estate business, including, but not limited to, insurance risks, tenant defaults, risks associated with real estate development activities, changes in occupancy rates or real estate values; (viii) changes in regulatory requirements which could affect the cost of doing business; (ix) general economic conditions; (x) risks with regard to whether or not the Company'sCompany’s current financial resources will be adequate to fund operations over the next twelve months from financial statement issuance date and/or continue operations; (xi) changes in the rate of inflation and the related impact on the securities markets; and xii(xii) changes in federal and state tax laws and (xiii) 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; risks regarding changes in, and/or interpretations of federal and state income tax laws; and risk of IRS and/or state tax authority assessment of additional tax plus interest. These are not the only risks that we face. There may be additional risks that we do not presently know of or that we currently believe are immaterial which could also impair our business and/orand financial position.


Undue reliance should not be placed on these forward-looking statements, which are applicable only as of the date hereof. The Company undertakes no obligation to revise or update these forward-looking statements to reflect events or circumstances that arise after the date of this Quarterly Report or to reflect the occurrence of unanticipated events. Accordingly, there is no assurance that the Company'sCompany’s expectations will be realized.


Management'sManagement’s Discussion and Analysis of Financial Condition and Results of Operations, which follows, should be read in conjunction with the consolidated financial statements and related notes, which are contained in Part I - Item 1, herein and in Part II – Item 8in the Company'sCompany’s Annual Report on Form 10-K for the year ended December 31, 2016.2021.


BUSINESS OVERVIEW


AmBase Corporation ("AmBase"(the “Company” or the "Company"“AmBase”) is a Delaware corporation that was incorporated in 1975.  AmBase is a holding company which owns a commercial office building in Greenwich, Connecticut. The Company'scompany.  At September 30, 2022, the Company’s assets currently consistconsisted primarily of cash and cash equivalents and real estate owned.equivalents. The Company is otherwise engaged in the management of its assets and liabilities.


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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”). As further discussed herein below and in Part I – Item 1 - Note 4 and Note 9 to the Company's condensed consolidated financial statements, theThe Company is engaged in material disputes and litigation with regard to the sponsor111 West 57th Property. Despite ongoing litigation challenging the legitimacy of the joint ventureactions taken in connection with the “Strict Foreclosure”, (as defined and a mezzanine lenderfurther discussed herein), the Company recorded an impairment for the full amount of its equity investment in the 111 West 57th Property in 2017. Prior to the joint venture. As further discussed below,Strict Foreclosure, the Company recordedcarrying 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.

For additional information concerning the Company’s recording of an impairment of its equity investment in the 111 West 57th Property of $63,745,000, in 2017 and the third quarter ended September 30, 2017. The carrying value of the Company's equity investment inCompany’s legal proceedings relating to the 111 West 57th Property, represented substantially all ofincluding the Company's assets and net equity value.

LIQUIDITY AND CAPITAL RESOURCES

The Company's assets at September 30, 2017, aggregated $1,787,000 consisting principally of cash and cash equivalents of $54,000, and real estate owned, net of $1,644,000.  At September 30, 2017,Company’s challenge to the Company's liabilities aggregated $2,759,000.  In addition, the Company has a litigation funding amount of $500,000 as further discussed in Strict Foreclosure, seePart I – Item 1 – Note 10 of3 and Note 6 to the Company'sCompany’s unaudited condensed consolidated financial statements.

FINANCIAL CONDITION AND LIQUIDITY

The Company’s assets at September 30, 2022, aggregated $1,029,000, consisting of cash and cash equivalents of $938,000.  At September 30, 2022, the Company’s liabilities aggregated $1,387,000.  Total stockholders' equitystockholders’ deficit was negative $1,472,000.$358,000.


In 2019, the Company received a letter from the Federal Deposit Insurance Corporation (“FDIC”), requesting the Company reimburse the FDIC for 2012 federal taxes of approximately $501,000 that the FDIC had previously reimbursed the Company, pursuant to a 2012 settlement agreement which was approved by the United States Court of Federal Claims (the “Court of Federal Claims”) in October 2012 (the “2012 Tax Amount”).  The Company is currently reviewing the FDIC request, along with the SGW 2012 Settlement Agreement and Court of Federal Claims August 2013 ruling, with its outside legal and tax advisors.  The Company is unable to predict at this time whether the 2012 Tax Amount is refundable back to the FDIC in current and/or future years. For additional information, see Part I – Item 1 – Note 5 to the Company’s unaudited condensed consolidated financial 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 unaudited condensed consolidated financial statements assuming the Company will continue as a going concern.


The Company has incurred operating losses and used cash for operating activities for the past several years. The Company made significant investments in the 111 West 57th Street Property since 2013.  As further discussed herein, the Company recorded an impairment of its equity investment in the 111 West 57th Property in the third quarter ended September 30, 2017.

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 borrowings and the line of credit from Mr. Richard A. Bianco, the Company's Chairman, President and Chief Executive Officer ("Mr. R. A. Bianco") as noted herein,cash equivalents may not be sufficient to cover operating cash needs through the twelve-monthtwelve 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 unaudited condensed 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/or long-term borrowings, although this cannot be assured. In order to continue on a long-term basis, the Company must raiseraising additional capital through the sale of assets or long-term borrowings.long term borrowings, which may include additional borrowings from affiliates of the Company, reducing operating expenses, and seeking recoveries from various sources.  There can be no assurance that the Company will be able to attain such financing atadequately implement these cash management measures, in whole or in part, or sell any of its assets or raise capital on terms acceptable to the Company, if at all.


In May 2016,
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As noted herein, in June 2013, the Company purchased an equity interest in the 111 West 57th Property. The Company is engaged in material disputes and Mr. Richard A. Bianco, the Company's Chairman, President and Chief Executive Officer ("Mr. R. A. Bianco") entered into an agreement for Mr. R. A. Bianco to providelitigation 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 a secured working capital linerecorded an impairment for the full amount of creditits equity investment in the 111 West 57th Property of up to one million dollars ($1,000,000) or additional amount(s) as may be necessary and agreed to on an as needed basis, if and when necessary, subject to customary and market terms and conditions to be agreed upon at such time (the "WC Agreement").  Pursuant$63,745,000 in 2017. Prior to the WC Agreement, Mr. R. A. Bianco madeStrict Foreclosure, 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 several loanslegal proceedings pending against various parties with regard to the Company aggregating $1,650,000 as of September 30, 2017 for use as working capital.  The loans accrue interest at 5.25% per annum and are due on the earlier of the date the Company receives funds from any source sufficient to pay all amounts due under the loans, including accrued interest thereon, or December 31, 2019.  Copies of such agreements are filed as exhibits to the Company's current and previously filed periodic filings.111 West 57th Street Property. For additional information see Part I – Item 1 – Note 11 to the Company's condensed consolidated financial statements.

In October 2017, pursuant to the WC Agreement, Mr. R.A. Bianco made an additional loan of $300,000 to the Company for use as working capital in accordance with the same terms of the loan payable noted above.  A copy of the loan agreement is filed as Exhibit 10.2 to the Company's Form 10-Q for the quarterly period ended September 30, 2017.

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, an accounting, and a constructive trust over distributions received by the Defendants.  For additional information, see Part I – Item 1 – Note 4 and Note 9 to the Company's condensed consolidated financial statements.

For additional information with regard to, among other items, developments concerning the junior mezzanine lender ("Spruce") issuance of a Notice of Retention of Pledged Collateral in Full Satisfaction of Indebtedness pursuant to a Strict Foreclosure process, Spruce's claims to have completed the retention of the collateral pledged by the junior mezzanine borrower, 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 and the Company’s legal proceedings relating to the 111 West 57th Property, see Part I – Item 1 – Note 43 and Note 96 to the Company'sCompany’s unaudited condensed consolidated financial statements. The collateral Spruce purports

In 2017, the Company entered into a Litigation Funding Agreement (the “LFA”) with Mr. R. A. Bianco. Pursuant to have retained includes the Company'sLFA, 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 Street Property. The carrying value of the Company's equity investment in the 111 West 57th Property represented substantially all of the Company's assets and net equity value.

In September 2017,2019, the Company and Mr. R. A. Bianco entered into an agreement pursuantamendment to which Mr. R. A. Bianco will fund the Company's litigation expenses in connection with the 111 West 57th PropertyLFA (the "Litigation Funding Agreement")“Amendment). For additional information including the terms of the Litigation Funding Agreement;Agreement, as amended by the Amendment, seePart I – Item 1 – Note 10 herein.7 to the Company’s unaudited condensed consolidated financial statements.


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.  57th Property; however, there can be no assurance that the Company will prevail with respect to any of its claims.

The Company is continuing to pursue other options to realizecan give no assurances regarding the Company's investment value and/or protect its legal rights.

The Company's condensed consolidated balance sheet for September 30, 2017, includes $500,000outcome of the matters described herein, including as a litigation funding amount which reflects the aggregate amounts funded pursuant to the Litigation Funding Agreement foreffect of Spruce’s actions described herein, whether the periods presented.

The amounts noted above pursuantSponsors will perform their contractual commitments to the WCCompany under the JV Agreement, are distinct fromas to what further action, if any, the linelenders may take with respect to the project, as to the ultimate resolution of credit agreement forthe ongoing litigation proceedings relating to the Company’s investment interest in the 111 West 57th Property, as noted belowto the ultimate effect of the Sponsors’, the Company’s or the 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’s equity investment in the 111 West 57th Street. For additional information with regard to the Company’s investment in the 111 West 57th Property and as discussed in the legal proceedings related thereto, seePart I – Item 1 – Note 43 and Note 6 to the Company's condensed consolidated financial statements and distinct from the Litigation Funding Agreement amounts as noted below and as discussed in Part I – Item I – Note 10 to the Company'sCompany’s unaudited condensed consolidated financial statements.


While the Company’s management is evaluating future courses of action to protect and/or recover the value of the Company’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 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’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.

For the nine months ended September 30, 2017,2022, cash of $2,682,000$2,065,000 was used by operations foras a result of the payment of operating expenses and prior year accruals.  The cash needs of the Company for the nine months ended September 30, 2017, were satisfied by the loans from Mr. R.A. Bianco as noted above and the Company's financial resources.


For the nine months ended September 30, 2016,2021, cash of $2,464,000$3,882,000 was used by operations foras a result of the payment of operating expenses and prior year accruals.  The cash needs of the Company for the nine months ended September 30, 2016, were principally satisfied by the Company's financial resources.

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 Mr. 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.  A copy of such agreement was filed as an exhibit to the Company's current and previously filed periodic filings.

Real estate owned consists of a commercial office building in Greenwich, Connecticut that is managed and operated by the Company.  The building is approximately 14,500 square feet with approximately 3,500 square feet utilized by the Company for its offices; the remaining space is currently unoccupied and available for lease.  Although the portion of the building not being utilized by the Company is currently unoccupied and available for lease, based on the Company's analysis, including but not limited to current market rents in the area, leasing values, and comparable property sales, the Company believes the property's fair value exceeds the property's current carrying value.  Therefore, the Company believes the carrying value of the property as of September 30, 2017, has not been impaired.


Accounts payable and accrued liabilities as of September 30, 2017,2022 increased from December 31, 2016,2021, principally as a result ofrelating to an increase in current period accruals for legal expenses in connection with the 111 West 57th Property litigation which were paid in October 2017, including accrued interest expense relating to the loan payable to Mr. R. A. Bianco.litigations.


There are no other material commitments for capital expenditures as of September 30, 2017.2022.  Inflation has had no material impact on the business and operations of the Company.


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Results of Operations for the Three Months and Nine Months Ended September 30, 20172022 vs. the Three Months and Nine Months Ended September 30, 20162021


The Company recorded a net loss of $64,889,000$717,000 or $1.59$0.02 per share and $67,331,000$2,757,000 or $1.65$0.07 per share in the three months and nine months ended September 30, 20172022, respectively, compared to a net loss of $712,000$1,264,000 or $0.02$0.03 per share and $2,675,000$4,133,000 or $0.07$0.10 per share in the respective 20162021 periods.  As further discussed herein, and in Part I – Item 1 – Note 4 and Note 9 to the Company's condensed consolidated financial statements, the net loss for the third quarter and nine month periods ended September 30, 2017 includes a $63,745,000 impairment of the Company's equity investment in the 111 West 57th Property.


Compensation and benefits were $304,000was $336,000 and $906,000$1,083,000 in the three months and nine months ended September 30, 2017,2022, respectively, compared to $382,000$336,000 and $1,212,000$1,098,000 in the respective 20162021 periods.  No stock based compensation expense was recorded in the nine months ended September 30, 2017 or September 30, 2016.  The decrease in the 2017 three-month and nine-month periods2022 nine month period is due to a decrease in incentive compensation accrualsrelated expenses in the 2017 periodsrespective 2022 period versus the comparable 2016 periods.2021 period.


Professional and outside services increaseddecreased to $703,000$289,000 and $2,231,000$1,408,000 in the three months and nine months ended September 30, 2017,2022, respectively, compared to $482,000$836,000 and $784,000$2,783,000 in the respective 20162021 periods.  The increasedecrease in the 20172022 periods as compared to the 20162021 periods is principally the result of a higherlower level of legal and professional fees incurred in 2017the 2022 periods 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 attributableProperty. For additional information with regard to the Litigation Funding Agreement aggregating $1,169,000Company’s investment in the three-month111 West 57th Property and nine month periods ended September 30, 2017; the legal proceedings related thereto, see Part I – Item 1 – Note 103 and Note 6 to the Company'sCompany’s unaudited condensed consolidated financial statements herein for additional information including terms of the Litigation Funding Agreement.statements.


Property operating and maintenance expenses were $34,000$1,000 and $105,000$16,000 for the three months and nine months ended September 30, 2017,2022, respectively, compared to $31,000$3,000 and $93,000$14,000 in the respective 20162021 periods.  The increased expense in the nine months ended September 30, 2017 compared to the respective 2016 period is due to anslight increase in the overall level of repairs and maintenance expenses.2022 nine month period versus the respective 2021 period is primarily due to a general increase in costs.


Insurance expenses decreased to $32,000were $63,000 and $117,000$197,000 in the three months and nine months ended September 30, 2017,2022, respectively, compared to $45,000$68,000 and $126,000$192,000 in the respective 20162021 periods.  The decreaseincrease in the nine month period ended September 30, 2022, compared to the respective 2021 period is generally due to a decreaseslight increase in insurance coverage levels and insurance premium costscosts.


Other operating expenses were $39,000$32,000 and $122,000 in the three and nine months ended September 30, 2017, respectively, compared with $59,000 and $153,000 in the respective 2016 periods.  The decrease in the September 30, 2017 nine-month period is due to a general lower level of related expenses including decreased Delaware franchise tax expenses in the 2017 period.

Interest expense of $20,000 and $38,000$57,000 in the three months and nine months ended September 30, 2017, represents accrued interest expense on the loan payable to Mr. R. A. Bianco which is included in accrued liabilities2022, respectively, compared with $21,000 and $46,000 in the Company's condensed consolidated balance sheet.  See Part I – Item 1 - Note 11respective 2021 periods.  The slight increase in the September 30, 2022, three month and nine month periods compared to the Company's condensed consolidated financial statements for further information.

Despite ongoing litigation challenging the legitimacySeptember 30, 2021, periods is due to a generally higher level of the actions taken by the Sponsors and Spruce in connection with the Company's investmentrelated expenses in the 111 West 57th Property as further discussed herein, in accordance with GAAP, the Company recorded an impairment of its equity investmentrespective 2022 periods.

Interest income in the 111 West 57th Property of $63,745,000 in the third quarter ended September 30, 2017. The Company isthree months and will continue to vigorously pursue the recovery of its asset value from all sources of recovery.

Equity income (loss) - 111 West 57th Partners of $25,000 for the nine months ended September 30, 2017,2022, was $4,000 and $5,000, respectively, representscompared with $- and $1,000 in the Company's share ofrespective 2021 periods.  The increased interest income in the 111 West 57th Partners' loss for the year to date period ended June 30, 2017, versus $49,000 for the three months ended September 30, 2016,2022, three month and $549,000 for the nine months ended September 30, 2016.  The equity loss in the 2017 and 2016month periods is due to salesa higher interest rate yield on cash and marketing expenses incurred.cash equivalents in the 2022 periods versus the respective 2021 periods.


The Company recognizedrecorded an income tax provisionsexpense of $0$- and $6,000$1,000 for the three months and nine months ended September 30, 2017,2022, respectively, as compared with an income tax benefitsexpense of $220,000$- and $150,000$1,000 for the three months and nine months ended September 30, 2016,2021, respectively. TheState income tax provisionsamounts for the 2017 periods are attributable tonine months ended September 30, 2022, and the nine months ended September 30, 2021, reflect a provision for a tax on capital imposed by the state jurisdictions.  The income tax benefit for the 2016 periods are related to current year and prior year state tax true-ups.


Income taxes applicable to operating income (loss) are generally determined by applying the estimated effective annual income tax rates to pretax income (loss) for the year-to-date interim period.  Income taxes applicable to unusual or infrequently occurring items are provided in the period in which such items occur.

A reconciliation between For additional information including a discussion of income taxes computed at the statutory federal rate and the provision for income taxes is included intax matters, see Part I -– Item 1 – Note 85 to the Company'sCompany’s unaudited condensed consolidated financial statements.


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Item 4.CONTROLS AND PROCEDURES
Item 4. CONTROLS AND PROCEDURES


Our disclosure controls and procedures include our controls and other procedures to ensure that information required to be disclosed in this and other reports under the Securities Exchange Act of 1934, as amended (the "Exchange Act"“Exchange Act”), is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure and to ensure that such information is recorded, processed, summarized and reported within the time periods.


Our Chief Executive Officer and Chief Financial Officer have conducted an evaluation of our disclosure controls and procedures as of September 30, 2017.2022.  Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) promulgated under the Exchange Act) are effective to ensure that the information required to be disclosed by us in the reports we file under the Exchange Act is recorded, processed, summarized and reported with adequate timeliness.


There have been no changes during the most recent fiscal quarter in our internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


PART II - OTHER INFORMATION


Item 1.LEGAL PROCEEDINGS


For a discussion of the Company'sCompany’s legal proceedings, see Part I - Item 1-1 - Note 9 – Legal Proceedings.6 to the Company’s unaudited condensed consolidated financial statements.



Item 1A.RISK FACTORS


There have been no material changes to the risk factors previously disclosed in the Company'sCompany’s Annual Report on Form 10-K for the year ended December 31, 20162021, in response to Item 1A of Part I of Form 10-K.


Item 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
 
a. Not applicable
 
b. Not applicable
 a. Not applicable
b. Not applicable
c. None


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 up to 10 million shares 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 the year to date 20172022 period.


Item 3.DEFAULTS UPON SENIOR SECURITIES
Not Applicable.

Item 4.MINE SAFETY DISCLOSURES
Not applicable.Applicable.



Item 5.OTHER INFORMATION
In September 2017, pursuant to the WC Agreement, Mr. R. A. Bianco made an additional loan of $150,000 to the Company for use as working capital in accordance with the same terms of the January 2017 loan payable agreement.  A copy of the loan agreement is filed as Exhibit 10.1 to the Company's Form 10-Q for the quarterly period ending September 30, 2017, in lieu of under Items 1.01 and 9.01 of Form 8-K.
In October 2017, pursuant to the WC Agreement, Mr. R. A. Bianco made an additional loan of $300,000 to the Company for use as working capital in accordance with the same terms of the previous loan payable agreements.  A copy of the loan agreement is filed as Exhibit 10.2 to the Company's Form 10-Q for the quarterly period ending September 30, 2017, in lieu of under Items 1.01 and 9.01 of Form 8-K.
In September 2017, the Company and Mr. R. A. Bianco entered into a Litigation Funding Agreement.  A copy of the Litigation Funding Agreement was filed as Exhibit 10.1 to the Company's current report on Form 8-K dated September 26, 2017 and is filed herewith as Exhibit 10.3.

None.


Item 6.EXHIBITS
10.1*
Loan Agreement dated September 2017, between Mr. Richard A. Bianco, the Company's Chairman, President and Chief Executive Officer ("Mr. R. A. Bianco") and the Company.
10.2*
Loan Agreement dated October 2017, between Mr. Richard A. Bianco, the Company's Chairman, President and Chief Executive Officer ("Mr. R. A. Bianco") and the Company.
10.3*
Litigation Funding Agreement dated September 2017, between Mr. Richard A. Bianco, the Company's Chairman, President and Chief Executive Officer ("Mr. R. A. Bianco") and the Company (filed as Exhibit 10.1 to the Company's current report on Form 8-K dated September 26, 2017) and is filed herewith.
Rule 13a-14(a) Certification of Chief Executive Officer
Rule 13a-14(a) Certification of Chief Financial Officer
Section 1350 Certification of Chief Executive Officer
Section 1350 Certification of Chief Financial Officer
101.1*
The following financial statements from AmBase Corporation'sCorporation’s quarterly report on Form 10-Q for the quarter ended September 30, 20172022 formatted in XBRL: (i) Condensed Consolidated StatementStatements of Operations (unaudited); (ii) Condensed Consolidated Balance Sheets (unaudited); (iii) Condensed Consolidated Statements of Cash Flow (unaudited); (iv) Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) (unaudited); and (iv)(v) Notes to Condensed Consolidated Financial Statements (unaudited).
104.1*The Cover Page from this Quarterly Report on Form 10-Q, formatted in Inline XBRL.

 _______________
*
*
filed herewith
 


SIGNATURES

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

AMBASE CORPORATION




AMBASE CORPORATION
/s/ John Ferrara 
/s/ John Ferrara
By
JOHN FERRARA
Vice President, Chief Financial Officer and Controller
(Duly Authorized Officer and Principal Financial and
Accounting Officer)
 Accounting Officer)
  
Date:
November 14, 2017
3, 2022



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