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, 20172023


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, 2017,2023, 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, 20172023


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
2217
    
Item 4. 
Controls and Procedures
2622
    
PART II OTHER INFORMATION 
    
Item 1. 
Legal Proceedings
2722
    
Item 1A. 
Risk Factors
2722
    
Item 2. 
Unregistered Sales of Equity and Securities and Use of Proceeds
2722
    
Item 3. 
Defaults Upon Senior Securities
2722
    
Item 4. 
Mine Safety Disclosures
2722
    
Item 5. 
Other Information
2723
    
Item 6. 
Exhibits
2823
    
Signatures
  2923


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  2023
  2022
  2023  2022 
Operating expenses:                        
Compensation and benefits $304  $382  $906  $1,212  
$
323
  
$
336
  $1,055  $1,083 
Professional and outside services  703   482   2,231   784   
858
   
289
   2,399   1,408 
Property operating and maintenance  34   31   105   93   
7
   
1
   17   16 
Depreciation  12   12   36   36 
Insurance  32   45   117   126   
95
   
63
   210   197 
Other operating  39   59   122   153   
18
   
32
   59   57 
Total operating expenses  1,124   1,011   3,517   2,404   
1,301
   
721
   3,740   2,761 
Operating income (loss)  (1,124)  (1,011)  (3,517)  (2,404)  (1,301)  (721)  (3,740)  (2,761)
                                
Interest income  -   -   -   -   
1
   
4
   2   5 
Interest expense  (20)  -   (38)  -   99  -   150
   - 
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)  (1,399)  (717)  (3,888)  (2,756)
                                
Income tax expense (benefit)  -   (220)  6   (150)  
-
   
-
   -   1 
Net income (loss) $(64,889) $(712) $(67,331) $(2,675) $(1,399) $(717) $(3,888) $(2,757)
                                
Net income (loss) per common share - basic $(1.59) $(0.02) $(1.65) $(0.07) $(0.03) $(0.02) $(0.10) $(0.07)
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
Table of Contents

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,
2023
  
December 31,
2022
 
Cash and cash equivalents 
$
23
  
$
349
 
         
Other assets  
-
   
61
 
Total assets 
$
23
  
$
410
 
         
Liabilities and Stockholders’ Equity (Deficit):
        
Liabilities:        
Accounts payable and accrued liabilities 
$
3,137
  
$
1,484
 
Loan(s) payable – related party
  1,848   - 
         
Total liabilities  
4,985
   
1,484
 
Commitments and contingencies (Note 6)      
         
Stockholders’ equity (deficit):
        
Common stock ($0.01 par value, 85,000 authorized in 2023 and 85,000 authorized in 2022, 46,410 issued and 40,738 outstanding in 2023 and 46,410 issued and 40,738 outstanding in 2022)
  
464
   
464
 
Additional paid-in capital  
548,304
   
548,304
 
Accumulated deficit  
(548,562
)
  
(544,674
)
Treasury stock, at cost – 2023 - 5,672 shares; and 2022 - 5,672 shares
  
(5,168
)
  
(5,168
)
Total stockholders’ equity (deficit)
  
(4,962
)
  
(1,074
)
         
Total liabilities and stockholders’ equity (deficit) 
$
23
  
$
410
 


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


2
Table of Contents
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, 2023
 
$
464
  
$
548,304
  
$
(544,674
)
 
$
(5,168
)
 
$
(1,074
)
Net income (loss)  
-
   
-
   
(1,220
)
  
-
   
(1,220
)
March 31, 2023
  
464
   
548,304
   
(545,894
)
  
(5,168
)
  
(2,294
)
Net income (loss)  -   -   (1,269)  -   (1,269)
June 30, 2023 
464  
548,304  
(547,163) 
(5,168) 
(3,563)
Net income (loss)
  -   -   (1,399)  -   (1,399)
September 30, 2023 $
464  $548,304  $
(548,562) $
(5,168) $
(4,962)

(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)


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

  
Nine months ended
September 30,
 
(in thousands) 2023
  2022
 
       
Cash flows from operating activities:      
Net income (loss) 
$
(3,888
)
 
$
(2,757
)
Adjustments to reconcile net income (loss) to net cash provided (used) by operating activities        
Changes in operating assets and liabilities:        
Other assets  
61
   
(11
)
Accounts payable and accrued liabilities  
1,653
   
703
 
Net cash provided (used) by operating activities  
(2,174
)
  
(2,065
)
         
Cash flows from financing activities:        
Proceeds from loan(s) payable – related party  1,848   - 
Net cash provided (used) by financing activities  1,848   - 
         
Net change in cash and cash equivalents  
(326
)
  
(2,065
)
Cash and cash equivalents at beginning of period  
349
   
3,003
 
         
Cash and cash equivalents at end of period 
$
23
  
$
938
 
Supplemental cash flow disclosure:        
Income taxes refunded (paid) $-  $- 
Interest expense paid on accounts payable
 
$
-
  
$
-
 

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

4
Table of Contents
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, 2016.2022.

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 57th Street in New York (the "111 West 57th Property").  The Company is engaged in material disputes and litigation with the sponsor of the joint venture and a mezzanine lender 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")

Despite ongoing litigation challenging the legitimacy of the actions taken by the Sponsors and Spruce in connection with the Company's investment in the 111 West 57th Property as further discussed herein, in accordance with GAAP, the Company recorded an impairment of its equity investment in the 111 West 57th Property in the third quarter ended September 30, 2017. 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 is and will continue to vigorously pursue the recovery of its asset value from all sources of recovery. For additional information see Note 4 and Note 9.

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 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,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 assetsequity or long-term borrowings.debt securities or 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 suchadequately implement these cash management measures, in whole or in part or raise capital or obtain financing aton terms acceptable to the Company, if at all.


In September 2017,June 2013, the Company purchased an equity interest in a real estate development property through a joint venture agreement to purchase and Mr. R. A. Bianco entered into an agreement pursuantdevelop real property located at 105 through 111 West 57th Street in New York, New York (the “111 West 57th Property”). The Company is engaged in material disputes and litigation with regard 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 includingProperty.  Despite ongoing litigation challenging the termslegitimacy of the Litigation Funding Agreement, see Note 10 herein.

With respect to its disputesactions taken in connection with the “Strict Foreclosure”, (as defined and litigation relating to its interest in the 111 West 57th Property,as further discussed herein), the Company is continuing to pursue various legal coursesrecorded an impairment for the full amount 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 onProperty in 2017. Prior to the Company'sStrict 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 regarding the Company’s recording of an impairment of its equity investment in the 111 West 57th Property in 2017 and the Company'sCompany’s legal actions related thereto,proceedings relating to the 111 West 57th Property, including the Company’s challenge to the Strict Foreclosure, see Note 4 3andNote 9.6.


5
Table of Contents
AMBASE CORPORATION AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
While the Company'sCompany’s management is evaluating future courses of action to protect and/or recover the value of the Company'sCompany’s equity investment in the 111 West 57th Property, the adverse developments make it uncertain as to whether any such courses of action will be successful 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 if it will prevail with respect to any of its claims.


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

For additional information regarding the Company recordedCompany’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 57th 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 57th 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 57th 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 57th 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").Property.  In consideration for making the Investment, Investment LLC was granted a membership interest in 111 West 57th Partners LLC ("(“111 West 57th Partners"Partners”), which indirectly acquired the 111 West 57th 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 57th 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 57th 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 

6
Table of Contents
AMBASE CORPORATION AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements

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% of the outstanding shares of AmBase; and (ii) Mr. R. A. Bianco shall remain the Chairman of the Board of Directors of AmBase for the duration of the JV Agreement.

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 the Company’s Chairman, President and Chief Executive Office, Mr. R.Richard A. Bianco (“Mr. R.A. Bianco”), as a contingent future incentive for Mr. R. A. Bianco'sR.A. Bianco’s past, current and anticipated ongoing role to develop and commercialize the Company'sCompany’s equity investment in the 111 West 57th 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 57th Property, the Company'sCompany’s management and its Board of Directors concluded that, given the continuing development risks of the 111 West 57th 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 57th57th 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 57thProperty, 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. 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.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 57th Partners obtained financing for the 111 West 57thProperty.  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 57th 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 57th Property.


Information relating
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AMBASE CORPORATION AND SUBSIDIARIES
Notes to the June 30, 2015 financing for 111 West 57th Partners is as follows:Unaudited Condensed Consolidated Financial Statements

(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 57th Sponsor LLC, et al."”) (the "111 West 57th Action"“Sponsor 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 Sponsor 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 57th57th 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 access Mezz 1 LLC.  For additional information with regard to the books and records forCompany’s legal proceedings relating to the 111 West 57th Property, whichsee Note 6.

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 57th57th 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 57th57th 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"(“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 West 57th Spruce Action" (the “Lender Action”). The defendants in the 111 West 57th Spruce action areLender Action were 111 W57 Mezz Investor, LLC, Spruce Capital Partners LLC, 111 West 57th57th Sponsor LLC, Michael Z. Stern, and Kevin P. Maloney (collectively, "Defendants"“Defendants”) and nominal defendants 111 West 57th57th Partners LLC and 111 West 57th Mezz 1 LLC.

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

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AMBASE CORPORATION AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
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 957th Property (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, in accordance with GAAP,Strict Foreclosure, the Company recorded an impairment for the full amount of its equity investment in the 111 West 57th Property in 2017. Prior to the third quarter ended September 30, 2017. The Company isStrict 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 will continue to vigorously pursue the recovery of its asset value from all sources of recovery. net equity value.

For additional information with regard toregarding the Company'sCompany’s legal proceedings relatedrelating to the 111 West 57th Property, see Note 9.

For information relatingincluding the Company’s challenge to the Litigation Funding Agreement entered into between the Company and Mr. Richard A. Bianco, the Company's President and Chief Executive Officer,Strict Foreclosure, see Note 10.6.

With respect to its disputes and litigation relating to its interest in the 111 West 57th57th Property, the Company is continuingpursuing, and will continue to pursue, other options to realize the Company’s investment value, various legal courses of action to protect its legal rights, recovery of its asset value from various sources of recovery, as well as considering other possible economic strategies, including the possible sale of the Company'sCompany’s interest in and/or rights with respect to the 111 West 57th Property. The57th Property; however, there can be no assurance that the Company is continuingwill prevail with respect to pursue other options to realize the Company's investment value and/or protectany of its legal rights.claims.


The Company can give no assurances regarding the outcome of the matters described herein, including as to the effect of Spruce'sSpruce’s actions described herein, whether the 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 57th 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 57th Street Property.


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 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 the 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,
2023
  
September 30,
2022
  
September 30,
2023
  
September 30,
2022
 
Company matching contributions $3  $-  $15  $25  $9  $9  $88  $81 
Employer match %  33%  33%  33%  33%  100%
  100%
  100%
  100%
 
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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, and the three and nine months ended September 30, 2016,2022, reflect a provision for a tax on capital imposed by the state jurisdictions.

The utilization of certain carryforwards and carrybacks is subject to limitations under U.S. federal income tax laws. Based on the Company's federal tax returns as filed, the Company estimates it has federal NOL carryforwards and federal alternative minimum tax credit carryforwards ("AMT Credits"), available to reduce future federal taxable income which would expire if unused, as indicated below.


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’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 related refund(s) received could potentially be subject to 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. The Company can give no assurances as to the final outcome of any IRS review, if any, of the AMT credit carryforward refunds received.

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.”

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AMBASE CORPORATION AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
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. However, there can be no assurance that the Company will prevail with respect to any of its claims.


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 57th Sponsor LLC, et al."”) (the "111 West 57th Action"“Sponsor Action”).  The defendants in that litigation areinclude 111 West 57th57th 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 57th57th 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 57th 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 Sponsor 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.


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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 added, 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 a Decision and Order on Defendants’ motion to dismiss, 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 other 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. On January 18, 2023, the Company filed a notice of appeal appealing the May 9, 2022 Order with regard to all defendants in the Sponsor Action and perfected the appeal on July 10, 2023. Oral argument before the First Department took place on October 31, 2023.


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.



On January 30, 2023, Sponsor, Stern, Maloney, and various defendant members and affiliates filed their answer and asserted counterclaims against the Company’s subsidiaries for breach of the Joint Venture Agreement in connection with a proposed refinancing of the Project in 2016. Plaintiffs replied to those counterclaims on February 21, 2023. Discovery in the case is currently ongoing.



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 West 57th Spruce Action" (the “Lender Action”). The defendants in the 111 West 57th Spruce action arewere 111 W57 Mezz Investor, LLC (“Spruce”), Spruce Capital Partners LLC, 111 West 57th57th Sponsor LLC, Michael Z. Stern, and Kevin P. Maloney (collectively, "Defendants") and nominal defendants 111 West 57th57th Partners LLC and 111 West 57th 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.



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


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,amend the complaint in the Lender Action to state claims against Spruce issued a Notice of Retention of Pledged Collateral in Full Satisfaction of Indebtedness. By accepting the pledged collateral, pursuant to a Strict Foreclosure process, Spruce claims to have completed the retentionfor breaches of the collateral pledged byUniform Commercial Code and Pledge Agreement and various torts. The amended complaint seeks the junior mezzanine borrower, and therefore,entry of a declaratory judgment, the Company's interest inimpression of a constructive trust, permanent injunctive relief restraining Spruce from disposing of or encumbering the 111 West 57th Street Property.  That investment represented substantially all57th Property, and damages, including punitive damages. The amended complaint did not name 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 Company's assetsJanuary 29, 2020 order. On March 4, 2020, Investment LLC filed a 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 net equity value.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 Lender 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, and Robert Schwartz (“Spruce Defendants”), Arthur Becker and his affiliates (“Atlantic Defendants”), Apollo and its affiliates (“Apollo Defendants”), and AIG and its affiliates (“AIG Defendants”). 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.


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AMBASE CORPORATION AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
On May 17, 2022, Plaintiffs in the Lender Action filed a motion requesting that the court hold oral argument on the pending motions to dismiss. The Company'scourt granted the motion and heard argument on 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 JV Agreement. The court called for supplemental briefs on the issue, which were filed on August 5, 2022.

On December 15, 2022, the NY Court issued a staydecision and order granting in part and denying in part the motions to dismiss (“December 15, 2022 Order”). Specifically, the NY Court declined to dismiss Plaintiffs’ claims against Spruce and ACREFI Mortgage Lending, LLC, Apollo Credit Opportunity Fund III AIV I LP, and AGRE Debt 1 – 111 W 57, LLC (“Apollo Lenders”) for breach of the Pledge Agreement in connection with the strict foreclosure. The NY Court dismissed Plaintiffs’ claims for tortious interference with contract against the Spruce Defendants, AIG Defendants, and Apollo Defendants, and Plaintiffs’ claim for unjust enrichment against the Atlantic Defendants.

On January 3, 2023, the Apollo Lenders filed a notice of appeal to the Appellate Division seeking appeal of the December 15, 2022 Order. On January 18, 2023, the Company filed notices of appeal and cross-appeal appealing the December 15, 2022, Order with regard to all Defendants. On August 9, 2023, pursuant to mutual agreement with the Company and the AIG Defendants, the Company filed a stipulation to withdraw its appeal against the AIG Defendants.  Following briefing and oral argument, the Appellate Division First Department issued its decision on October 5, 2023.  The First Department modified the NY Court’s decision to dismiss Plaintiffs’ claim against the Apollo Lenders for breach of the Pledge Agreement in connection with the strict foreclosure, and otherwise affirmed the NY Court’s decision.  On November 3, 2023, Plaintiffs filed motions for leave to appeal the First Department’s decision to the Court of Appeals in both the First Department and the Court of Appeals.

On January 13, 2023, the Apollo Lenders filed their answer and affirmative defenses to the Company’s Second Amended Complaint together with crossclaims against 111 W57th Mezz Investor LLC, Spruce Capital Partners LLC, Joshua Crane, Robert Schwartz, Michael Stern, Kevin Maloney, 111 West 57th Sponsor LLC, 111 West 57th Control LLC, and 111 West 57th Manager LLC (the “Crossclaim Defendants”). The crossclaims are for (1) contribution against all Crossclaim Defendants; (2) indemnification against 111 W57th Mezz Investor LLC, Spruce Capital, Crane, and Schwartz; and (3) a declaratory judgment that 111 W57th Mezz Investor LLC, through Spruce Capital, Crane, and Schwartz, has indemnified the Apollo Lenders against any and all loss that the Apollo Lenders have incurred or injunctive relief pending appeal has not yet been resolved.may incur in defending against this case. On January 23, 2023, the Apollo Lenders filed a notice of voluntary discontinuance without prejudice, voluntarily discontinuing their first crossclaim for contribution only as it is brought against Stern, Maloney, Sponsor, 111 West 57th Control LLC, and 111 West 57th Manager LLC.

On January 30, 2023, Defendant 111 W57 Mezz Investor LLC and Spruce Capital Partners LLC filed an opposition to that motion on September 15, 2017, and the Company filed its reply brief on September 22, 2017.answer to Plaintiff’s Second Amended Complaint. Because the Court has resolved the motions to dismiss, discovery has recommenced, and Plaintiffs are actively seeking the production of documents.


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 57th Property both under the JV Agreement and as part of the 111 West 57thSponsor Action and the 111 West 57th SpruceLender 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; Property in 2017, see Note 4.3.

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 were 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 was seeking 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 Lender 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 57th Property, represented substantially allsee Note 3.


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AMBASE CORPORATION AND SUBSIDIARIES
Notes to Unaudited Condensed Consolidated Financial Statements
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 are Custom House Risk Advisors, Inc. and Elizabeth Lowe (collectively, the “Custom House Defendants”). In the Custom House Action, the Company alleges 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 is seeking 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. The Custom House Defendants were required to respond to the complaint by June 8, 2020. The Custom House Defendants have not responded to the Company’s complaint. 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 57th57th Property, the Company is continuingpursuing, and will continue to pursue, other options to realize the Company’s investment value, various legal courses of action to protect its legal rights, recovery of its asset value from various sources of recovery, as well as considering other possible economic strategies, including the possible sale of the Company'sCompany’s interest in and/or rights with respect to the 111 West 57th Property. The57th Property; however, there can be no assurance that the Company is continuingwill prevail with respect to pursue other options to realize the Company's investment value and/or protectany of its legal rights.claims.


The Company can give no assurances regarding the outcome of the matters described herein, including as to the effect of Spruce'sSpruce’s actions described herein, whether the 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 57th 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 57th 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.


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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 in the Company's interestCompany entered into a Litigation Funding Agreement (the “2017 LFA”) with Mr. R.A. Bianco, to obtain aprovide litigation funding commitment to finance litigation with respect to the ongoing disputesCompany for litigation costs 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 57th Property,Property.

In 2019, after receiving approval from the Company's interest to obtain a litigation funding commitment to finance litigation with respectSpecial Committee, the Company and Mr. R.A. Bianco entered into an amendment to the ongoing disputes with2017 LFA (the “2019 LFA Amendment”). In summary the Sponsors2019 LFA Amendment provided for the release of Mr. R.A. Bianco from all further funding obligations under the 2017 LFA and that, in the lenders inevent the Company receives any litigation proceeds from 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's Board of Directors negotiated and accepted an offer from Mr. Richard Bianco, its long-time chief executive officer, to provide aLitigation, such litigation fund of seven million dollars ($7,000,000) (along with additional amounts as may be necessary from time to time as agreed to by the Company and Mr. Bianco), to fund the Company's litigation expenses in connection with Future Recovery Litigation, (the "Litigation Funding Agreement").

In consideration of such financial commitment, the Litigation Funding Agreement provides that any financial recovery in such Future Recovery Litigationproceeds shall be distributed as follows:


i.
(i)first, 100% to the Company in an amount equal $7,500,000; and


(ii)
first, to reimburse Mr. Bianco on a dollar-for-dollar basis forthereafter, any Company litigation expenses and/or other unpaidadditional amounts advanced by him in connection with Future Recovery Litigation; and
ii.thereafter, a percentage of the recoveryshall be distributed (a) 75% to the Company and a percentage of the recovery(b) 25% to Mr. Bianco, respectively, (the "Recovery Sharing Ratio"); with the ratio and percentages of 30% to 45% depending on the length of time to obtain recovery.R.A. Bianco.


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 118 – LoansLoan(s) Payable – Related Party


In May 2016, the

The Company and Mr. Richard A.R.A. Bianco the Company's Chairman, President and Chief Executive Officer ("Mr. R. A. Bianco") entered into an agreementagreement(s) for Mr. R. A.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 loanssenior loan(s) to the Company for use as working capital. The loansloan(s) are due on the earlier of the date the Company receives funds from any source, (excluding funds received by the Company by any litigation funding entity to fund any of the 111 West 57th legal proceedings), sufficient to pay all amounts due under the loans,loan(s), including all accrued interest thereon, including without limitation, from a settlement of the 111 West 57th legal proceedings or (b) the date(s) indicated herein.



The Company and Mr. R.A. Bianco further agreed that amounts due date noted below.  Accruedpursuant to the loan(s) plus interest payable associatedcan be converted by Mr. R.A. Bianco, at his option, into a litigation funding agreement pari-pasu with any litigation funding agreement entered into by the loans are included in accounts payable and accrued liabilities in the Company's condensed consolidated balance sheet.Company with a litigation funding entity.




Information regarding the loansloan(s) payable is as follows:($ in thousands)


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  $- 


 Date of loan(s) Rate  Due Date 
September 30,
2023
  
December 31,
2022
 
February 2023
  6.50%February 28, 2025
 $300  $- 
April 2023  6.50%April 30, 2025  325   - 
May 2023  6.50%May 31, 2025  310   - 
June 2023  7.00%June 30, 2025  330   - 
July 2023  7.00%July 31, 2025
  333   - 
August 2023  7.00%August 31, 2025
  250   - 
                     $1,848
  $- 



Information regarding accrued interest expense on the loansloan(s) 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 thousands)
 
September 30,
2023
  
December 31,
2022
 
Accrued interest expense $44  $- 



In October 2017,2023, the Company and Mr. R.A. Bianco entered into an additional agreement pursuant to the WC Agreement,which Mr. R.A. Bianco made an additional loan of $300,000 to the Company of $300,000 for use as working capital in accordance with the samesimilar terms of the loansloan(s) payable noted above.herein.





For additional information regarding the Company’s litigation funding effort, see Note 1. For additional information regarding the Company’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.

Note 129 - Subsequent Events


The Company has performed a review of events subsequent to the balance sheet dated September 30, 2017,2023, through the report issuance date.filing of these interim financial statements. Other than as discussed herein, the Company has no events, subsequent to September 30, 2023, and through the date these condensed consolidated financial statements were issued.


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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, 2016.2022.


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, 2023, 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 assetsCompany’s challenge to the Strict Foreclosure, see Part I – Item 1 – Note 3 and net equity value.Note 6 to the Company’s unaudited condensed consolidated financial statements.


LIQUIDITYFINANCIAL CONDITION AND CAPITAL RESOURCESLIQUIDITY


The Company'sCompany’s assets at September 30, 2017,2023, aggregated $1,787,000$23,000, consisting principally of cash and cash equivalents of $54,000, and real estate owned, net of $1,644,000.$23,000.  At September 30, 2017,2023, the Company'sCompany’s liabilities aggregated $2,759,000.  In addition, the Company has a litigation funding amount of $500,000 as further discussed in Part I – Item 1 – Note 10 of the Company's condensed consolidated financial statements.$4,985,000.  Total stockholders' equitystockholders’ deficit was negative $1,472,000.$4,962,000.


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 assetsequity or long-term borrowings.debt securities or 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 suchadequately implement these cash management measures, in whole or in part or raise capital or obtain financing aton terms acceptable to the Company, if at all.


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In May 2016,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 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 to111 West 57th Property. Despite ongoing litigation challenging the WC Agreement, Mr. R. A. Bianco made several loans 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 earlierlegitimacy of the dateactions taken in connection with 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“Strict Foreclosure”, (as defined and previously filed periodic filings.  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 capitalfurther discussed herein), in accordance with GAAP, the same termsCompany recorded an impairment for the full amount of its equity investment in the 111 West 57th Property of $63,745,000 in 2017. Prior to the Strict Foreclosure, the carrying value of the loan payable noted above.  A copyCompany’s equity investment in the 111 West 57th Property represented a substantial portion 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.Company’s assets and net equity value.

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, including the Company’s challenge to the Strict Foreclosure, see Part I – Item 1 – Note 43 and Note 96 to the Company'sCompany’s unaudited condensed consolidated financial statements. The collateral Spruce purports to have retained includes the Company's 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.

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 Part I – Item 1 – Note 10 herein.


With respect to its disputes and litigation relating to its interest in the 111 West 57th57th 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'sCompany’s unaudited condensed consolidated financial statementsstatements.

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 distinctsubstantial 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.

To provide the necessary cash resources to continue operations and continue the litigation related to the 111 West 57th Property, the Company is currently considering and evaluating various strategic funding and/or financing alternatives in order to raise approximately $7 million in funding. Such funding may be provided by a variety of sources, including but not limited to third parties, existing shareholders of the Company and/or Company management, and may take in the form of litigation funding agreements, equity or debt securities, loans, or any combination thereof. Any sale of securities by the Company may not be offered or sold absent registration under the Securities Act of 1933, as amended (the “Act”), or an applicable exemption from such registration, which may include exemptions pursuant to Rules 506(b) or 506(c) of Regulation D under the Act.

The terms and conditions of any such funding and/or financing agreements are expected to take several months to negotiate and finalize. Depending on the timing of any such agreements, the Company’s Chairman, President and Chief Executive Office, Mr. Richard A. Bianco (“Mr. R.A. Bianco”) has indicated that, if and when needed, he would provide a working capital line of credit to the Company on an as needed basis, subject to customary and market terms and conditions to be agreed upon at such time. However, there can be no assurance that the Company will be able to secure any such funding and/or financing arrangements on acceptable terms or at all. As of September 2023, Mr. R.A. Bianco provided loans to the Company in the amounts aggregating $1,848,000. For additional information, see Part I – Item 1 – Note 8 to the Company’s unaudited condensed consolidated financial statements.

In 2017, the Company entered into a Litigation Funding Agreement (the “LFA”) with Mr. R.A. Bianco. Pursuant to the LFA, Mr. R.A. Bianco agreed to provide litigation funding to the Company, to satisfy actual documented litigation costs and expenses of the Company, including attorneys’ fees, expert witness fees, consulting fees and disbursements in connection with the Company’s legal proceedings related to the Company’s equity investment in the 111 West 57th Property. In 2019, the Company and Mr. R.A. Bianco entered into an amendment to the LFA (the “Amendment). For additional information including the terms of the Litigation Funding Agreement, amounts as noted below and as discussed in amended by the Amendment, see Part I – Item I1 – Note 107 to the Company'sCompany’s unaudited condensed consolidated financial statements.


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For the nine months ended September 30, 2017,2023, cash of $2,682,000$2,174,000 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, 2016,2022, cash of $2,464,000$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, 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, 2017,2023, increased from December 31, 2016,2022, principally as a resultrelating to the timing of payments and 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 expenselitigations.

Loan(s) payable – related party was $1,848,000 as of September 30, 2023, compared to $0 as of December 31, 2022, relating to loans made to the loan payable toCompany from Mr. R. A. Bianco.R.A. Bianco, for working capital.


There are no other material commitments for capital expenditures as of September 30, 2017.2023.  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, 20172023 vs. the Three Months and Nine Months Ended September 30, 20162022


The Company recorded a net loss of $64,889,000$1,399,000 or $1.59$0.03 per share and $67,331,000$3,888,000 or $1.65$0.10 per share in the three months and nine months ended September 30, 20172023, respectively, compared to a net loss of $712,000$717,000 or $0.02 per share and $2,675,000$2,757,000 or $0.07 per share in the respective 20162022 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 $304,000$323,000 and $906,000$1,055,000 in the three months and nine months ended September 30, 2017,2023, respectively, compared to $382,000$336,000 and $1,212,000$1,083,000 in the respective 20162022 periods.  No stock based compensation expense was recordedThe changes in the 2023 three month and nine months ended September 30, 2017 or September 30, 2016.  The decrease in the 2017 three-month and nine-monthmonth periods is generally due to a decrease in incentive compensation accrualscertain benefit related expenses in the 2017 periods versus the comparable 2016respective periods.


Professional and outside services increased to $703,000$858,000 and $2,231,000$2,399,000 in the three months and nine months ended September 30, 2017,2023, respectively, compared to $482,000$289,000 and $784,000$1,408,000 in the respective 20162022 periods.  The increase in the 20172023 periods as compared to the 20162022 periods is principally the result of a higher level of legal and professional fees incurred in 2017the 2023 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$7,000 and $105,000$17,000 for the three months and nine months ended September 30, 2017,2023, respectively, compared to $31,000$1,000 and $93,000$16,000 in the respective 20162022 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.2023 periods versus the 2022 periods is primarily due to a general increase in costs.


Insurance expenses decreased to $32,000were $95,000 and $117,000$210,000 in the three months and nine months ended September 30, 2017,2023, respectively, compared to $45,000$63,000 and $126,000$197,000 in the respective 20162022 periods.  The decrease is generally due to a decrease in insurance coverage levels and insurance premium costs

Other operating expenses were $39,000 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 $38,000increase in the three months and nine months ended September 30, 2017, represents accrued2023, compared to the respective 2022 periods is generally due to an increase in insurance premium costs.

Other operating expenses were $18,000 and $59,000 in the three and nine months ended September 30, 2023, respectively, compared with $32,000 and $57,000 in the respective 2022 periods.  The changes in the September 30, 2023, three and nine month periods compared to the September 30, 2022, three and nine month periods is generally due to the timing of expenses and a slight increase in certain related expenses.

Interest income in the three months and nine months ended September 30, 2023, was $1,000 and $2,000, respectively, compared with $4,000 and $5,000 in the respective 2022 periods.  The decreased interest income in the September 30, 2023, three and nine month periods is due to a lower level of cash and cash equivalents in the 2023 period versus the respective 2022 period.

Interest expense in the three months and nine months ended September 30, 2023, was $99,000 and $150,000, respectively, compared with $- and $- in the respective 2022 periods.  Interest expense for the 2023 periods is attributable to interest expense onfor a professional firm related to outstanding and unpaid professional fees as well as interest expense relating to the loanloans payable to Mr. R. A. Bianco which is included in accrued liabilities in the Company's condensed consolidated balance sheet.  See – related party.  For additional information see Part I – Item 1 -– Note 118 to the Company'sCompany’s unaudited condensed consolidated financial statements for further information.statements.


Despite ongoing litigation challenging the legitimacy of the actions taken by the Sponsors and Spruce in connection with the Company's investment in the 111 West 57th Property as further discussed herein, in accordance with GAAP, theThe Company recorded an impairment of its equity investment in the 111 West 57th Property of $63,745,000 in the third quarter ended September 30, 2017. The Company is 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, respectively represents the Company's share of 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, and $549,000 for the nine months ended September 30, 2016.  The equity loss in the 2017 and 2016 periods is due to sales and marketing expenses incurred.

The Company recognized income tax provisionsexpense of $0$- and $6,000$- for the three months and nine months ended September 30, 2017,2023, 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, 2016,2022, respectively. TheState income tax provisionsamounts for the 2017 periods are attributable tothree and nine months ended September 30, 2022, 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, 2017.2023.  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, 20162022, 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
c. None

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 20172023 period.


Item 3.DEFAULTS UPON SENIOR SECURITIES
Not Applicable.

Item 4.MINE SAFETY DISCLOSURES
Not applicable.Applicable.



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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 2017,10.1
Senior Promissory Note for $333,000, between Mr. Richard A. Bianco, the Company's Chairman,Company’s President, and Chief Executive Officer ("(“Mr. R. A. Bianco"R.A. Bianco”) and the Company.Company (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K as filed with the SEC on July 20, 2023, and incorporated herein by reference).
10.2
10.2*
Loan Agreement dated October 2017,Senior Promissory Note for $250,000, between Mr. Richard A. Bianco, the Company's Chairman,Company’s President, and Chief Executive Officer ("(“Mr. R. A. Bianco"R.A. Bianco”) and the Company.
Company (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K as filed with the SEC on August 15, 2023, and incorporated herein by reference).
10.3
10.3*
Litigation Funding Agreement dated September 2017,Senior Promissory Note for $300,000, between Mr. Richard A. Bianco, the Company's Chairman,Company’s President, and Chief Executive Officer ("(“Mr. R. A. Bianco"R.A. Bianco”) and the Company (filed as Exhibit 10.1 to the Company's current reportCompany’s Current Report on Form 8-K dated September 26, 2017)as filed with the SEC on October 10, 2023, and is filed herewith.
incorporated herein by reference).
31.131.1**
Rule 13a-14(a) Certification of Chief Executive Officer
31.231.2**
Rule 13a-14(a) Certification of Chief Financial Officer
32.132.1**
Section 1350 Certification of Chief Executive Officer
32.232.2**
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, 20172023 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*_______________
* filed herewithThe Cover Page from this Quarterly Report on Form 10-Q, formatted in Inline XBRL.


SIGNATURES

*
filed herewith

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





/s/ John Ferrara
By
JOHN FERRARA

Vice President, Chief Financial Officer and Controller

(Duly Authorized Officer and Principal Financial and
Accounting Officer)


Date:
November 14, 2017
9, 2023



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