Back to GetFilings.com
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT
TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANAGE ACT OF 1934
(Mark One)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2003
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission file number 1-07265
AMBASE CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 95-2962743
(State of incorporation) (I.R.S. Employer Identification No.)
100 Putnam Green, 3rd Floor, Greenwich, CT 06830-6027
(Address of principal executive offices)
Registrant's telephone number, including area code: (203) 532-2000
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
Common Stock ($0.01 par value)
Rights to Purchase Common Stock
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, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to the
Form 10-K. X
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).
Yes ______ No ___X___
At February 27, 2004, there were 46,233,519 shares of registrant's Common
Stock outstanding. At June 30, 2003 the aggregate market value of registrant's
voting securities (consisting of its Common Stock) held by nonaffiliates of the
registrant, based on the average bid and asking price on such date of the Common
Stock of $0.87 per share, was approximately $31 million. The Common Stock
constitutes registrant's only outstanding class of security.
Portions of the registrant's definitive Proxy Statement for its 2004 Annual
Meeting of Stockholders, which Proxy Statement registrant intends to file with
the Securities and Exchange Commission not later than 120 days after the close
of its fiscal year, is incorporated by reference with respect to certain
information contained therein, in Part III of this Annual Report.
The Exhibit Index is located in Part IV, Item 15, Page 32.
AmBase Corporation
Annual Report on Form 10-K
December 31, 2003
TABLE OF CONTENTS Page
- ---------------------------------------------- ------
PART I
Item 1. Business............................................................................................1
Item 2. Properties..........................................................................................2
Item 3. Legal Proceedings...................................................................................2
Item 4. Submission of Matters to a Vote of Security Holders.................................................2
Executive Officers of the Registrant................................................................2
PART II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities.................................................................................3
Item 6. Selected Financial Data.............................................................................3
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations...............4
Item 7A. Quantitative and Qualitative Disclosures About Market Risk..........................................8
Item 8. Financial Statements and Supplementary Data.........................................................9
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...............30
Item 9A. Controls and Procedures............................................................................30
PART III
Item 10. Directors and Executive Officers of the Registrant.................................................30
Item 11. Executive Compensation.............................................................................30
Item 12. Security Ownership of Certain Beneficial Owners & Management & Related Stockholder Matters.........31
Item 13. Certain Relationships and Related Transactions.....................................................31
Item 14. Principal Accountant Fees and Services.............................................................31
PART IV
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K...................................32
PART I
ITEM 1. BUSINESS
AmBase Corporation (the "Company" or "AmBase") is a Delaware corporation
that was incorporated in 1975 by City Investing Company ("City"). AmBase is a
holding company that, through a wholly owned subsidiary, owns two commercial
office buildings in Greenwich, Connecticut that are managed and operated by the
Company. One building is approximately 14,500 square feet and is substantially
leased to unaffiliated third parties with approximately 3,500 square feet
utilized by the Company for its executive offices. The other building is
approximately 38,000 square feet and is leased to unaffiliated third parties.
The Company's assets currently consist primarily of cash and cash
equivalents, investment securities, and real estate owned. The Company's main
source of operating revenue is rental income received from real estate owned.
The Company also earns non-operating revenue principally consisting of interest
income earned on investment securities and cash equivalents. The Company
continues to evaluate a number of possible acquisitions, and is engaged in the
management of its assets and liabilities, including the contingent assets, as
described in Part II - Item 8 - Note 10 to the Company's consolidated financial
statements. The Company intends to aggressively contest all litigation and
contingencies, as well as pursue all sources for contributions to settlements.
The Company had 5 employees at December 31, 2003.
Background
City originally incorporated AmBase as the holding company for The Home
Insurance Company, and its affiliated property and casualty insurance companies
("The Home"). In 1985, City, which owned all the outstanding shares of the
Common Stock of the Company, distributed the Company's shares to City's common
stockholders. The Home was sold in February 1991.
In August 1988, the Company acquired Carteret Bancorp Inc. Carteret Bancorp
Inc., through its principal wholly owned subsidiary, Carteret Savings Bank, FA
("Carteret"), was principally engaged in retail and consumer banking, and
mortgage banking including mortgage servicing. On December 4, 1992, the Office
of Thrift Supervision ("OTS") placed Carteret in receivership under the
management of the Resolution Trust Corporation ("RTC") and a new institution,
Carteret Federal Savings Bank, was established to assume the assets and certain
liabilities of Carteret. Following the seizure of Carteret, the Company was
deregistered as a savings and loan holding company by the OTS, although the OTS
retains jurisdiction for any regulatory violations prior to deregistration. See
Part II - Item 8 - Note 10 to the Company's consolidated financial statements
for a discussion of Supervisory Goodwill litigation relating to Carteret.
In December 1997, the Company formed a new wholly owned subsidiary, SDG
Financial Corp. ("SDG Financial"), to pursue merchant banking activities. SDG
Financial purchased an equity interest in SDG, Inc. ("SDG") and was granted the
exclusive right to act as the investment banking/financial advisor to SDG, Inc.
and all of its subsidiaries and affiliates. The Company also purchased
convertible preferred and common stock in AMDG, Inc. ("AMDG"), a majority owned
subsidiary of SDG. SDG and AMDG are development stage pharmaceutical companies.
In 2002 the Company recorded a write down of its investments in SDG and AMDG,
see Part II - Item 7 - Results of Operations, for further information.
STOCKHOLDER INQUIRIES
Stockholder inquiries, including requests for the following: (i) change of
address; (ii) replacement of lost stock certificates; (iii) Common Stock name
registration changes; (iv) Quarterly Reports on Form 10-Q; (v) Annual Reports on
Form 10-K; (vi) proxy material; and (vii) information regarding stockholdings,
should be directed to:
American Stock Transfer and Trust Company
59 Maiden Lane
New York, NY 10038
Attention: Shareholder Services
(800) 937-5449 or (718) 921-8200 Ext. 6820
Copies of Quarterly Reports on Form 10-Q, Annual Reports on Form 10-K and
Proxy Statements can also be obtained directly from the Company free of charge
by sending a request to the Company by mail as follows:
AmBase Corporation
100 Putnam Green, 3rd Floor
Greenwich, CT 06830
Attn: Shareholder Services
In addition, the Company's public reports, including Quarterly Reports on
Form 10-Q, Annual Reports on Form 10-K and Proxy Statements, can be obtained
through the Securities and Exchange Commission ("SEC") EDGAR Database over the
World Wide Web at www.sec.gov. Materials filed with the SEC may also be read or
copied by visiting the SEC's Public Reference Room, 450 Fifth Street, NW,
Washington, DC 20549. Information on the operation of the Public Reference Room
may be obtained by calling 1-800-SEC-0330.
ITEM 2. PROPERTIES
The Company owns two commercial office buildings in Greenwich, Connecticut.
One building is approximately 14,500 square feet and is substantially leased to
unaffiliated third parties with approximately 3,500 square feet utilized by the
Company for its executive offices. The second building is approximately 38,000
square feet and is leased to unaffiliated third parties.
ITEM 3. LEGAL PROCEEDINGS
For a discussion of the Company's legal proceedings, including the
Company's Supervisory Goodwill litigation, see Part II - Item 8 - Note 10 to the
Company's consolidated financial statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
Executive Officers of the Registrant
Each executive officer is elected to serve in the executive officer
capacity set forth opposite his respective name until the next Annual Meeting of
Stockholders. The Company is not aware of any family relationships between any
of the executive officers or directors of the Company.
Set forth below is a list of executive officers of the Company at December
31, 2003:
Name Age Title
==== === ==========
Richard A. Bianco 56 Chairman, President and
Chief Executive Officer
John P. Ferrara 42 Vice President, Chief Financial Officer
and Controller
Mr. Bianco was elected a director of the Company in January 1991, and has
served as President and Chief Executive Officer of the Company since May 1991.
On January 26, 1993, Mr. Bianco was elected Chairman of the Board of Directors
of the Company. He served as Chairman, President and Chief Executive Officer of
Carteret, then a subsidiary of the Company, from May 1991 to December 1992.
Mr. Ferrara was elected to the position of Vice President, Chief Financial
Officer and Controller of the Company in December 1995, having previously served
as Acting Chief Financial Officer, Treasurer and Assistant Vice President and
Controller since January 1995; as Assistant Vice President and Controller from
January 1992 to January 1995; and as Manager of Financial Reporting from
December 1988 to January 1992.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS,
AND ISSUER PURCHASES OF EQUITY SECURITIES
The Common Stock of the Company trades through one or more market makers,
with quotations made available in the "pink sheets" published by the National
Quotation Bureau, Inc. ("Pink Sheets"), under the symbol ABCP. The sales prices
per share for the Company's Common Stock represent the range of the reported
high and low bid quotations as indicated in the Pink Sheets or as communicated
orally to the Company by market makers. Such prices reflect interdealer prices,
without retail mark-up, markdown or commission, and may not necessarily
represent actual transactions.
2003 2002
===================== =====================
High Low High Low
==== === ==== ===
First Quarter....................... $ 0.90 $ 0.70 $ 1.60 $ 1.11
Second Quarter...................... 0.90 0.71 1.44 0.95
Third Quarter....................... 1.11 0.68 1.10 0.91
Fourth Quarter...................... 0.85 0.64 0.97 0.88
As of January 30, 2004, there were approximately 16,000 beneficial owners
of the Company's Common Stock. No dividends were declared or paid on the
Company's Common Stock in 2003 or 2002. The Company does not intend to declare
or pay dividends in the foreseeable future.
For information concerning the Company's stockholder rights plan and common
stock repurchase plan, see Part II - Item 8 - Note 5 to the Company's
consolidated financial statements.
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data should be read in conjunction with the
Company's consolidated financial statements included in Part II - Item 8 of this
Form 10-K.
Years ended December 31
==========================================================
(in thousands, except per share data) 2003 2002(a) 2001(b) 2000 1999
==== ======= ======= ==== ====
Operating revenue................... $2,578 $ 477 $ 179 $ - $ -
Interest income.................... 334 705 2,099 2,795 2,166
Net income (loss)................... (3,559) (5,133) 62,110 5,174 (4,515)
======= ======== ======= ====== =======
Net income (loss) per common share
Basic............................... $(0.08) $ (0.11) $ 1.34 $ 0.11 $(0.10)
Assuming dilution................... (0.08) (0.11) 1.34 0.11 (0.10)
======= ======== ======= ====== =======
Dividends........................... - - - - -
======= ======== ======= ====== =======
Total assets........................ $41,668 $43,656 $50,445 $53,102 $47,678
Total stockholders' equity.......... 29,367 32,902 38,013 (24,097) (29,424)
======= ======= ======= ======= =======
(a) Net loss in 2002 includes a $1,600,000 charge to reflect a write down
of the Company's investments in SDG and AMDG. See Part II - Item 7 - Results of
Operations, for further information.
(b) Net income in 2001 includes a $66,388,000 withholding obligation
reserve reversal which was reflected as other income in the Consolidated
Statement of Operations. See Part II - Item 7 - Results of Operations, for
further information.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations should be read in conjunction with the consolidated financial
statements and related notes, which are contained in Part II - Item 8, herein.
Financial Condition and Liquidity
The Company's assets at December 31, 2003, aggregated $41,668,000,
consisting principally of cash and cash equivalents of $2,785,000, investment
securities of $19,103,000 and real estate owned of $19,331,000. At December 31,
2003, the Company's liabilities aggregated $12,301,000. Total stockholders
equity was $29,367,000.
The liability for the supplemental retirement plan (the" Supplemental
Plan"), which is accrued but not funded, increased to $9,292,000 at December 31,
2003 from $7,608,000 at December 31, 2002. The Supplemental Plan liability
reflects the actuarially determined Accrued Pension Costs in accordance with
accounting principles generally accepted in the United States of America
("GAAP"). The increased liability is the result of an additional year of accrued
service and interest cost on the liability. The Supplemental Plan liability is
further affected by changes in discount rates and experience which could be
different from that assumed. See Part II - Item 8 - Note 7 for further details.
For the year ended December 31, 2003, cash of $2,158,000 was used by
operations, including the payment of operating expenses and prior year accruals,
partially offset by the receipt of rental income, interest income and investment
earnings. The cash needs of the Company for 2003 were principally satisfied by
rental income and interest income received on investment securities and cash
equivalents and to a lesser extent, the Company's financial resources.
Management believes that the Company's cash resources are sufficient to continue
operations for 2004.
For the year ended December 31, 2002, cash of $5,936,000 was used by
operations, including the payment of operating expenses and prior year accruals,
partially offset by the receipt of interest income. The cash needs of the
Company for 2002 were principally satisfied by interest income received on
investment securities and cash equivalents, the Company's financial resources
and rental income.
For the year ended December 31, 2001, cash of $4,640,000 was used by
operations, including the payment of prior year accruals and operating expenses,
partially offset by the receipt of interest income. The cash needs of the
Company for 2001 were principally satisfied by interest income received on
investment securities and cash equivalents, and the Company's financial
resources.
Real estate owned, consists of two commercial office buildings in
Greenwich, Connecticut which the Company owns and manages. One building is
approximately 14,500 square feet, is substantially leased to unaffiliated third
parties with approximately 3,500 square feet utilized by the Company for its
executive offices. The other building is approximately 38,000 square feet and is
leased to unaffiliated third parties.
During June 2003, the Company repurchased 50,000 shares of common stock at
a purchase price of $0.75 per share pursuant to its common stock repurchase
plan. There are no additional material commitments for capital expenditures as
of December 31, 2003. Inflation has had no material impact on the business and
operations of the Company.
The Company continues to evaluate a number of possible acquisitions, and is
engaged in the management of its assets and liabilities, including the
contingent assets. Discussions and negotiations are ongoing with respect to
certain of these matters. The Company intends to aggressively contest all
litigation and contingencies, as well as pursue all sources for contributions to
settlements. As of December 31, 2003, the residual balance of the litigation
reserves of $1,267,000 was reclassified to other liabilities for the payment of
previously reserved for legal fees. Prior year amounts have been reclassified
for comparison purposes. For a discussion of lawsuits and proceedings, including
a discussion of the Supervisory Goodwill litigation, see Part II - Item 8 - Note
10 to the Company's consolidated financial statements.
Results of Operations
Summarized financial information for the operations of the Company for the
years ended December 31 is as follows:
(in thousands) 2003 2002 2001
===== ===== =====
Revenues:
Rental income $ 2,578 $ 477 $ 179
-------- -------- --------
Operating expenses:
Compensation and benefits..................................... 3,852 3,515 5,021
Professional and outside services............................. 1,476 1,641 1,020
Property operating & maintenance.............................. 491 130 117
Depreciation ................................................. 329 74 57
Insurance..................................................... 100 73 65
Other operating............................................... 188 161 186
-------- -------- --------
6,436 5,594 6,466
-------- -------- --------
Operating loss................................................ (3,858) (5,117) (6,287)
-------- -------- --------
Interest income............................................... 334 705 2,099
Realized gains on sales of investment securities
available for sale ....................................... 64 - -
Other income.................................................. 26 215 75
Other income - termination of postretirement welfare plans.... - 788 -
Reversal of withholding obligation reserve.................... - - 66,388
Write down of investments..................................... - (1,600) -
-------- -------- --------
Income (loss) before income taxes............................. (3,434) (5,009) 62,275
Income tax expense............................................ (125) (124) (165)
-------- -------- --------
Net income (loss)............................................. $ (3,559) $ (5,133) $62,110
========= ========= =======
The Company's main source of operating revenue is rental income earned on
real estate owned. The Company also earns non-operating revenue consisting
principally of interest income on investment securities and cash equivalents.
The Company's management expects that operating cash needs in 2004 will be met
principally by rental income, the receipt of non-operating revenue consisting of
interest income earned on investment securities and cash equivalents, and the
Company's current financial resources.
For the year ended December 31, 2003, the Company recorded a net loss of
$3,559,000 or $0.08 per share.
The Company recorded a net loss of $5,133,000 or $0.11 per share, for the
year ended December 31, 2002. As further described below, 2002 results include
non-recurring other income of $788,000 representing the termination of
postretirement benefit plans and $215,000 of additional other income. The year
ended December 31, 2002 also includes a charge of $1,600,000 to reflect a write
down of the Company's investments in SDG and AMDG, as further described below.
For the year ended December 31, 2001, the Company recorded net income of
$62,110,000 or $1.34 per share. As further described below, 2001 results include
non-recurring other income representing the reversal of the Withholding
Obligation reserve.
Rental income of $2,578,000 in 2003, compared to $477,000 in 2002, and
$179,000 in 2001, reflects a full year of rental income for the 38,000 square
foot commercial office building purchased in December 2002. The increased
amounts of $477,000 in 2002, compared to $179,000 in 2001, is the result of the
2001 period only reflected eight months of rental income for a 14,500 square
foot building acquired in April 2001.
Compensation and benefits were $3,852,000 in 2003, $3,515,000 in 2002 and
$5,021,000 in 2001. The increase in 2003 compared to 2002 is primarily due to an
increase in supplemental retirement plan accruals. The increased amount in 2001
compared to 2002 is primarily due to an increase in 2001 incentive compensation
paid as a result of the successful resolution of the withholding obligation
issue as further described below.
Professional and outside services decreased to $1,476,000 in 2003 from
$1,641,000 in 2002, and rose from $1,020,000 in 2001. The decrease in 2003
compared to 2002 is the result of legal fees incurred in 2002 relating to the
Zurich arbitration proceedings which were not incurred in 2003, partially offset
by increased legal fees incurred for the Supervisory Goodwill litigation as a
result of the court decision and subsequent filings during 2003. The increase
for the year 2002 compared with the year 2001 is primarily due to legal expenses
incurred in connection with the Zurich Arbitration proceedings. Expenses for
professional and outside services in 2003, 2002 and 2001 do not include costs
associated with defending pending and threatened litigation, which were
previously reserved for and were charged against the litigation reserves when
paid.
Property operating and maintenance expenses were $491,000 in 2003, $130,000
in 2002 and $117,000 in 2001. The 2003 period includes expenses relating to both
of the Company's owned commercial office buildings for a full year. The 2002
period includes expenses relating to a 14,500 square foot building for a full
year, plus expenses for a 38,000 square foot building for December 2002. The
lower expense in 2001 compared to 2002 is due to the fact that the 2001 period
reflects property ownership expenses for a 14,500 square foot building for only
8 months, offset to some extent by office relocation costs incurred in 2001.
Property operating and maintenance expenses have not been reduced by tenant
reimbursements.
Interest income was $334,000 in 2003, $705,000 in 2002, $2,099,000 in 2001.
The decrease in 2003 compared to the 2002 period, was primarily attributable to
a lower average level of investment securities held as a result of the building
purchased in December 2002, and to a lesser extent, a lower yield on cash
equivalents and investment securities. These decreases were partially offset by
interest income received on higher yielding investment securities available for
sale. The decrease in 2002 compared to the 2001 period, was primarily
attributable to a lower yield on cash equivalents and investment securities, and
to a lesser extent, a lower average level of investment securities. Interest
rates on investments in treasury bills decreased throughout 2003 compared to
2002 and 2001. During 2003 interest rates on investments in treasury bills
ranged from approximately 1.4% down to 0.9% compared to approximately 1.9% down
to 1.2% in 2002 and approximately 6.0% down to 3.5% in 2001.
In the year ended December 31, 2003, other income represents a federal
income tax refund for the tax year 1996. Other income of $215,000 in 2002 is
principally attributable to the collection on an investment previously written
off. Other income of $75,000 for the year ended December 31, 2001 is
attributable to the collection of a receivable previously considered
uncollectable.
In 2002, additional other income of $788,000, is the result of the full
termination of the retiree medical and life insurance plans in accordance with
generally accepted accounting principles. The Company has no future liability
for any of these medical or life insurance plans. The Company and its
subsidiaries do not provide postretirement welfare benefits to current
employees.
The 2001 results include a $66,388,000 Withholding Obligation reserve
reversal which is reflected as other income in the Consolidated Statement of
Operations as a result of a May 2001 United States Tax Court ruling in favor of
City Investing Company ("City"), holding that City was not liable for the
payment of withholding taxes. The IRS had contended that the withholding of tax
on interest payments were due by City in connection with City's Netherlands
Antilles finance subsidiary for the years 1979 through 1985.
Write down of investments in 2002 reflects the Company's write down of its
investments in SDG and AMDG of $1,250,000 and $350,000, respectively. The
Company recorded the write down in September 2002, in connection with the
ongoing evaluation of its investments, and the determination that the value of
its investments in SDG and AMDG had been other than temporarily impaired. Under
GAAP, if an investment is other than temporarily impaired, the Company is
required to reflect an adjustment in its Financial Statements.
Factors considered in the Company's decision to write down these
investments included, in part, the general inactive status of SDG's and AMDG's
clinical testing, as well as SDG's and AMDG's current financial condition. The
Company is not selling or disposing of its investments in SDG or AMDG and
remains hopeful that it will be able to fully realize its investment value. In
September 2000, the Company filed a lawsuit against SDG, and certain of its
officers and directors, to pursue claims against the parties, including but not
limited to SDG's failure to honor a contract which granted the Company the right
to act as the exclusive investment banking/financial advisor to SDG, and all of
its subsidiaries and affiliates. See Part II - Item 8, Note 10 to the Company's
consolidated financial statements, for further information. The Company will
continue to monitor the status of its SDG and AMDG investments and vigorously
pursue recovery of its legal claims. However, there can be no assurance that the
Company will be able to recover all or any part of its investment in these
companies or that its legal actions will be successful.
The 2003, 2002 and 2001 income tax provisions of $125,000, $124,000 and
$165,000, respectively, are principally attributable to state and local taxes.
A reconciliation between income taxes computed at the statutory federal
rate and the provision for income taxes is included in Part II - Item 8 - Note 9
to the Company's consolidated financial statements.
From time to time, the Company may publish "Forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Act"), and Section 21E of the Securities Exchange Act of 1934, or make oral
statements that constitute forward-looking statements. These forward-looking
statements may relate to such matters as anticipated financial performance,
future revenues or earnings, business prospects, projected ventures, anticipated
market performance, and similar matters. The Private Securities Litigation
Reform Act of 1995 provides a safe harbor for forward-looking statements. In
order to comply with the terms of the safe harbor, the Company cautions readers
that a variety of factors could cause the Company's actual results to differ
materially from the anticipated results or other expectations expressed in the
Company's forward-looking statements. These risks and uncertainties, many of
which are beyond the Company's control, include, but are not limited to: (i)
transaction volume in the securities markets, (ii) the volatility of the
securities markets, (iii) fluctuations in interest rates, (iv) changes in
occupancy rates or real estate values, (v) changes in regulatory requirements
which could affect the cost of doing business, (vi) general economic conditions,
(vii) changes in the rate of inflation and the related impact on the securities
markets, (viii) changes in federal and state tax laws, and (ix) risks arising
from unfavorable decisions in the Company's current material litigation matters,
or unfavorable decisions in other supervisory goodwill cases. The Company does
not undertake any obligation to update or revise any forward-looking statements
whether as a result of future events, new information or otherwise.
Application of Critical Accounting Policies
Our consolidated financial statements are based on the selection and
application of accounting principles generally accepted in the United States of
America, which require us to make estimates and assumptions about future events
that affect the amounts reported in our financial statements and the
accompanying notes. Future events and their effects cannot be determined with
absolute certainty. The determination of estimates requires the exercise of
judgment. Actual results could differ from those estimates, and any such
differences may be material to the financial statements. We believe that the
following accounting policies, which are important to our financial position and
results of operations, require a higher degree of judgment and complexity in
their application and represent the critical accounting policies used in the
preparation of our financial statements. If different assumptions or conditions
were to prevail, the results could be materially different from our reported
results. For a summary of all our accounting policies, including the accounting
policies discussed below, see Part II - Item 8 - Note 2.
Supplemental Retirement Plan: Our supplemental pension plan (the
"Supplemental Plan") accrued liability and benefit costs are developed from
actuarial valuations. Inherent in these valuations are key assumptions including
discount rates, and projected future earnings, which are updated on an annual
basis at the beginning of each year. We are required to consider current market
conditions, including changes in interest rates, in making these assumptions.
Material changes in our accrued Supplemental Plan liability and annual costs may
occur in the future due to changes in assumptions or experience different than
that assumed. The Supplemental Plan liability is not funded and is net of
unrecognized losses of $1,730,000.
The key assumptions used in developing the 2003 Supplemental Plan benefit
costs and accrued liability were a 6.25% discount rate, a 6.0% rate of
compensation increase, and the amortization of unrecognized losses over the
average remaining lives of active participants. These assumptions were
consistent with prior year assumptions except that the discount rate was reduced
by one-half of a percent due to current market conditions.
Legal Proceedings: From time to time the Company and its subsidiaries may
be named as a defendant in various lawsuits or proceedings. Based on the
favorable resolution during 2003, of litigation pending, the Company presently
is not aware of any pending or threatened litigation which could have a material
adverse effect on the consolidated financial statements presented herein.
Management of the Company in consultation with outside legal counsel continually
reviews the likelihood of liability and associated costs of pending and
threatened litigation including the basis for the calculation of any litigation
reserves. The assessment of these reserves includes an exercise of judgment and
is a matter of opinion. As of December 31, 2003, the residual balance of the
litigation reserves of $1,267,000 was reclassified to other liabilities for the
payment of previously reserved for legal fees. Prior year amounts have been
reclassified for comparison purposes. The Company intends to aggressively
contest all threatened litigation and contingencies, as well as pursue all
sources for contributions to settlements. For a discussion of lawsuits and
proceedings, see Part II - Item 8 - Note 10.
Income Tax Audits: The Company's federal, state and local tax returns, from
time to time, may be audited by the tax authorities, which could result in
proposed assessments or a change in the net operating loss ("NOL") carryforwards
currently available. The Company's federal income tax returns for the years
subsequent to 1992 have not been reviewed by the Internal Revenue Service. The
accrued amounts for income taxes reflects management's best judgment as to the
amounts payable for all open tax years.
Deferred Tax Assets: As of December 31, 2003, the Company had deferred tax
assets arising primarily from net operating loss carryforwards and alternative
minimum tax credits available to offset taxable income in future periods. A
valuation allowance has been established for the entire net deferred tax asset
of $34 million, as management, at the current time, has no basis to conclude
that realization is more likely than not. The valuation allowance was calculated
in accordance with the provisions of Financial Accounting Standards Board
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes" ("SFAS 109"), which places primary importance on a company's cumulative
operating results for the current and preceding years. We intend to maintain a
valuation allowance for the entire deferred tax asset until sufficient positive
evidence exists to support a reversal. See Part II - Item 8 - Note 9.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company holds short-term investments as a source of liquidity. The
Company's interest rate sensitive investments at December 31, 2003 and 2002,
with maturity dates of less than one year consist of the following:
2003 2002
(in thousands) ========================== =========================
Carrying Fair Carrying Fair
Value Value Value Value
----------- ----------- ------------ ----------
U.S. Treasury Bills..................................... $17,329 $17,331 $18,259 $18,260
======= ======= ======= =======
Weighted average interest rate.......................... 0.94% 1.24%
======= =======
The Company's current policy is to minimize the interest rate risk of its
short-term investments by investing in U.S. Treasury Bills with maturities of
less than one year. There were no significant changes in market exposures or the
manner in which interest rate risk is managed during the year.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors
and Stockholders of
AmBase Corporation
In our opinion, the consolidated financial statements listed in the index
appearing under Item 15(a) (1) present fairly, in all material respects, the
financial position of AmBase Corporation and its subsidiaries at December 31,
2003 and 2002, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 2003 in conformity with
accounting principles generally accepted in the United States of America. In
addition, in our opinion, the financial statement schedule listed in the index
appearing under Item 15(a) (2) presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements. These financial statements and financial
statement schedule are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits. We conducted our audits of
these statements in accordance with auditing standards generally accepted in the
United States of America, which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers, LLP
New York, New York
March 15, 2004
AMBASE CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
Years Ended December 31
(in thousands, except per share data) 2003 2002 2001
==== ==== ====
Revenues:
Rental income $ 2,578 $ 477 $ 179
-------- -------- --------
Operating expenses:
Compensation and benefits..................................... 3,852 3,515 5,021
Professional and outside services............................. 1,476 1,641 1,020
Property operating and maintenance ........................... 491 130 117
Depreciation ................................................. 329 74 57
Insurance..................................................... 100 73 65
Other operating............................................... 188 161 186
-------- -------- --------
6,436 5,594 6,466
-------- -------- --------
Operating loss................................................ (3,858) (5,117) (6,287)
-------- -------- --------
Interest income............................................... 334 705 2,099
Realized gains of the sales of investment
securities available for sale............................. 64 - -
Other income.................................................. 26 215 75
Other income - termination of postretirement welfare plans.... - 788 -
Reversal of withholding obligation reserve.................... - - 66,388
Write down of investments..................................... - (1,600) -
-------- -------- --------
Income (loss) before income taxes............................. (3,434) (5,009) 62,275
Income tax expense ........................................... (125) (124) (165)
-------- -------- --------
Net income (loss)............................................. $ (3,559) $ (5,133) $ 62,110
======== ======== ========
Net income (loss) per common share:
Basic......................................................... $ (0.08) $(0.11) $ 1.34
Assuming dilution ............................................ (0.08) (0.11) 1.34
======== ======= =======
Weighted average common shares outstanding:
Basic......................................................... 46,182 46,209 46,209
======== ======== =======
Assuming dilution............................................. 46,182 46,209 46,314
======== ======== =======
The accompanying notes are an integral part of these consolidated financial
statements.
AMBASE CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets December 31
(in thousands, except for share amounts) 2003 2002
==== ====
Assets:
Cash and cash equivalents....................................................... $ 2,785 $ 4,918
Investment securities:
Held to maturity (market value $17,331 and $18,260, respectively)........... 17,329 18,259
Available for sale, carried at fair value................................... 1,774 621
--------- ----------
Total investment securities..................................................... 19,103 18,880
Accounts receivable ............................................................ 21 109
Real estate owned:
Land....................................................................... 6,954 6,954
Buildings.................................................................. 12,810 12,772
--------- ----------
19,764 19,726
Less: accumulated depreciation ............................................ (433) (104)
--------- ----------
Real estate owned, net.......................................................... 19,331 19,622
--------- ----------
Other assets.................................................................... 428 127
--------- ----------
Total assets.................................................................... $ 41,668 $ 43,656
========= ==========
Liabilities and Stockholders' Equity:
Liabilities:
Accounts payable and accrued liabilities........................................ $ 1,376 $ 1,563
Supplemental retirement plan.................................................... 9,292 7,608
Other liabilities............................................................... 1,633 1,583
--------- ----------
Total liabilities............................................................... 12,301 10,754
--------- ----------
Commitments and contingencies................................................... - -
--------- ----------
Stockholders' equity:
Common stock ($0.01 par value, 200,000,000 authorized,
46,335,007 issued)........................................................... 463 463
Paid-in capital................................................................. 547,940 547,940
Accumulated other comprehensive income.......................................... 84 22
Accumulated deficit............................................................. (518,435) (514,876)
Treasury stock, at cost - 176,488 and 126,488 shares, respectively.............. (685) (647)
--------- ----------
Total stockholders' equity...................................................... 29,367 32,902
--------- ----------
Total liabilities and stockholders' equity...................................... $ 41,668 $ 43,656
========= ==========
The accompanying notes are an integral part of these consolidated financial
statements.
AMBASE CORPORATION AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
Accumulated other
(in thousands) Common Paid-in comprehensive Accumulated Treasury
stock capital income (loss) deficit stock Total
======= ======== ================== ================ ======== =====
December 31, 2000............. $ 463 $547,940 $ - $ (571,853) $ (647) $(24,097)
Net income.................... - - - 62,110 - 62,110
------- -------- ----------------- ---------------- ------- --------
December 31, 2001............. 463 547,940 - (509,743) (647) 38,013
Net loss...................... - - - (5,133) - (5,133)
Other comprehensive
income ................. - - 22 - - 22
------- -------- ------------------ ---------------- ------- --------
December 31, 2002............. 463 547,940 22 (514,876) (647) 32,902
Net loss...................... - - - (3,559) - (3,559)
Common stock repurchased...... - - - - (38) (38)
Other comprehensive
income.................. - - 62 - - 62
------- -------- ----------------- ---------------- ------- --------
December 31, 2003............. $ 463 $ 547,940 $ 84 $ (518,435) $ (685) $ 29,367
======= ========== ================= ================ ======= ========
The accompanying notes are an integral part of these consolidated finacial
statements.
AMBASE CORPORATION AND SUBSIDIARIES
Consolidated Statements of Comprehensive Income (Loss)
Years Ended December 31
(in thousands)
2003 2002 2001
====== ====== ======
Net income (loss) ............................................ $(3,559) $(5,133) $ 62,110
Unrealized holding gains on investment securities -
available for sale, net of tax effect of $0.............. 84 22 -
------- ------- --------
Comprehensive income (loss)................................... $(3,475) $(5,111) $62,110
======= ======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
AMBASE CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years Ended December 31
(in thousands) 2003 2002 2001
==== ==== ====
Cash flows from operating activities:
Net income (loss)........................................................ $ (3,559) $ (5,133) $ 62,110
Adjustments to reconcile net income (loss) to net cash used
by operating activities:
Accretion of discount - investment securities........................ (198) (631) (2,037)
Depreciation and amortization........................................ 329 74 57
Realized gains on investment securities available for sale........... (64) - -
Termination of postretirement welfare plans ........................ - (788) -
Reversal of withholding obligation reserve........................... - - (66,388)
Changes in other assets and liabilities:
Accounts receivable ................................................. 88 (103) -
Write down of investments ........................................... - 1,600 -
Other assets......................................................... (301) (85) (3)
Accounts payable and accrued liabilities............................. (187) (1,704) 1,378
Other liabilities.................................................... 1,734 813 243
Other, net............................................................... - 21 -
-------- . -------- --------
Net cash used by operating activities.................................... (2,158) (5,936) (4,640)
-------- -------- --------
Cash flows from investing activities:
Maturities of investment securities - held to maturity................... 50,001 128,715 102,765
Purchases of investment securities - held to maturity.................... (48,873) (106,111) ( 94,413)
Purchases of investment securities - available for sale.................. (1,668) (599) -
Sales of investment securities - available for sale...................... 641 - -
Building improvements.................................................... (38) - -
Purchase of real estate.................................................. - (17,291) (2,435)
Other, net............................................................... - 10 9
-------- -------- --------
Net cash provided by investing activities................................ 63 4,724 5,926
-------- . -------- --------
Cash flows from financing activities:
Common stock repurchased................................................. (38) - -
-------- -------- --------
Net cash used by financing activities.................................... (38) - -
-------- -------- --------
Net increase (decrease) in cash and cash equivalents..................... (2,133) (1,212) 1,286
Cash and cash equivalents at beginning of year........................... 4,918 6,130 4,844
-------- -------- --------
Cash and cash equivalents at end of year................................. $ 2,785 $ 4,918 $ 6,130
======== ======== ========
Supplemental cash flow disclosure:
Income taxes paid........................................................ $ 135 $ 156 $ 179
========= ======== ========
The accompanying notes are an integral part of these consolidated financial
statements.
AMBASE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 1 - Organization
AmBase Corporation (the "Company") is a holding company which, through a
wholly owned subsidiary, owns two commercial office buildings in Greenwich,
Connecticut and a 6.3% ownership interest in SDG, Inc. ("SDG"), a development
stage pharmaceutical company. The Company previously held a majority ownership
interest in Augustine Asset Management, Inc. ("Augustine"), an investment
advisor, and also previously owned an insurance company and a savings bank.
In February 1991, the Company sold its ownership interest in The Home
Insurance Company ("The Home") and its subsidiaries. On December 4, 1992,
Carteret Savings Bank, FA ("Carteret") was placed in receivership by the Office
of Thrift Supervision ("OTS").
The Company's main source of operating revenue is rental income earned on
real estate owned. The Company also earns non-operating revenue principally
consisting of interest earned on investment securities and cash equivalents. The
Company continues to evaluate a number of possible acquisitions, and is engaged
in the management of its assets and liabilities, including the contingent
assets, as described in Note 10.
Note 2 - Summary of Significant Accounting Policies
The consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States of America
("GAAP"). Certain reclassifications have been made to the prior year
consolidated financial statements to conform to the 2003 presentation.
Use of estimates in the preparation of financial statements:
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.
Principles of consolidation:
The consolidated financial statements are comprised of the accounts of the
Company and its majority owned subsidiaries. All material intercompany
transactions and balances have been eliminated. The Company continually reviews
its investments to determine whether a decline in fair value below the cost
basis is other than temporary. If the decline in fair value is judged to be
other than temporary, the cost basis of the security is written down to fair
market value and the amount of the write down is included in the Consolidated
Statement of Operations.
Cash and cash equivalents:
Highly liquid investments, consisting principally of funds held in
short-term money market accounts, are classified as cash equivalents.
Investment securities:
Securities that the Company has both the positive intent and ability to
hold to maturity are classified as investment securities - held to maturity and
are carried at amortized cost. Investment securities - available for sale, which
are those securities that may be sold prior to maturity, are carried at fair
value, with any net unrealized gains or losses reported in a separate component
of stockholders' equity, net of taxes.
Interest and dividends on investment securities are recognized in the
Consolidated Statement of Operations when earned. Realized gains and losses on
the sale of investment securities - available for sale are calculated using an
average cost basis for determining the cost basis of the securities. The fair
value of publicly traded investment securities is determined by reference to
current market quotations.
AMBASE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
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 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. At the present time, management has no basis to
conclude that realization is more likely than not and a valuation reserve has
been recorded against net deferred tax assets.
Earnings per share:
Basic earnings per share ("EPS") excludes dilution and is computed by
dividing net income (loss) by the weighted average number of common shares
outstanding for the period. Diluted EPS reflects the potential dilution of EPS
that could occur if options to issue common stock were exercised.
Stock-based compensation:
The Company adopted the disclosure requirements of the Financial Accounting
Standards Board, Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123") and continues to account
for stock compensation using APB Opinion 25, "Accounting for Stock Issued to
Employees" ("APB 25"), making pro forma disclosures of net income (loss) and
earnings per share as if the fair value based method had been applied. No
compensation expense, attributable to stock incentive plans, has been charged to
earnings. For a further discussion and a summary of assumptions used, see Note
8.
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. If the Company
had elected to recognize compensation cost for stock options based on the fair
value at the date of grant for stock options, consistent with the method
prescribed by Statement 123, net income (loss) and net income (loss) per share
for the year ended December 31, would have been changed to the pro forma amounts
indicated below.
(in thousands, except per share data) 2003 2002 2001
===== ===== =====
Net income (loss):
As reported..................................................... $ (3,559) $ (5,133) $ 62,110
Deduct: pro forma stock based compensation expense for
stock options pursuant to Statement 123..................... (104) (216) (42)
---------- --------- --------
Pro forma....................................................... $ (3,663) $ (5,349) $ 62,068
========== ========== =========
Net income (loss) per common share:
Basic - as reported............................................. $ (0.08) $ (0.11) $ 1.34
Basic - pro forma............................................... (0.08) (0.11) 1.34
Assuming dilution - as reported................................. (0.08) (0.11) 1.34
Assuming dilution - pro forma .................................. (0.08) (0.11) 1.34
========== ========== ========
Deferred rent receivable and revenue recognition:
The Company earns rental income under operating leases with tenants.
Minimum lease rentals are recognized on a straight-line basis over the term of
the leases. The cumulative difference between lease revenue recognized under
this method and the contractual lease payment terms is recorded as deferred rent
receivable and is included in other assets on the Consolidated Balance Sheets.
Revenue from tenant reimbursement of common area maintenance, utilities and
other operating expenses are recognized pursuant to the tenant's lease when
earned and due from tenants.
AMBASE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
Property operating and maintenance:
Included in property operating and maintenance are expenses for common area
maintenance, utilities, real estate taxes and other reimbursable operating
expenses, which have not been reduced by amounts reimbursable by tenants
pursuant to lease agreements. Depreciation:
Depreciation expense for buildings is calculated on a straight-line basis
over 39 years. Tenant improvements are typically depreciated over the remaining
life of the tenants lease.
New Accounting Pronouncements:
In July 2001, the FASB issued Statement of Financial Accounting Standards
No. 141, "Business Combination" (SFAS 141") and Statement of Financial
Accounting Standards No. 142, "Goodwill and Other Intangible Assets" ("SFAS
142"). SFAS 141 requires the purchase method of accounting to be used for all
business combinations initiated after June 30, 2001, and addresses the initial
recognition and measurement of goodwill and other intangible assets acquired.
SFAS 142 requires that goodwill not be amortized but instead be measured for
impairment. The Company adopted SFAS 141 and SFAS 142 effective July 1, 2001.
In November 2002, the FASB issued FASB Interpretation No. 45, "Guarantor's
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others" ("FIN 45"). FIN 45 requires that upon
issuance of a guarantee, the guarantor must recognize a liability for the fair
value of the obligation it assumes under that guarantee regardless if the
guarantor receives separate identifiable consideration.
In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation
of Variable Interest Entities" ("FIN 46"). FIN 46 provides guidance on
identifying entities for which control is achieved through means other than
through voting rights and how to determine if the entity should be consolidated.
In addition, FIN 46 requires all enterprises with a significant interest in the
entity to make additional disclosures.
The adoption of SFAS 141, SFAS 142, FIN 46 and FIN 46 have not had a
significant effect, individually or in the aggregate, on the Company's
consolidated financial position or consolidated results of operations.
AMBASE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
Note 3 - Investment Securities
Investment securities - held to maturity consist of U.S. Treasury Bills
with original maturities of one year or less and are carried at amortized cost
based upon the Company's intent and ability to hold these investments to
maturity.
Investment securities - available for sale, consist of investments in
equity securities held for an indefinite period and are carried at fair value
with net unrealized gains and losses recorded directly in a separate component
of stockholders' equity.
Investment securities at December 31 consist of the following:
2003 2002
======================================== =========================================
Cost or Cost or
Carrying Amortized Fair Carrying Amortized Fair
(in thousands) Value Cost Value Value Cost Value
====== ======== ===== ====== ======== =====
Held to Maturity:
U.S. Treasury Bills... $ 17,329 $ 17,329 $ 17,331 $ 18,259 $ 18,259 $ 18,260
Available for Sale:
Equity Securities.... 1,774 1,690 1,774 621 599 621
--------- --------- --------- --------- --------- ---------
$ 19,103 $ 19,019 $ 19,105 $ 18,880 $ 18,858 $ 18,881
========= ========= ========= ========= ========= =========
The gross unrealized gains on investment securities at December 31, consist
of the following:
(in thousands) 2003 2002
==== ====
Held to Maturity - Gross unrealized gains........................................... $ 2 $ 1
==== ====
Available for Sale - Gross unrealized gains......................................... $ 84 $ 22
==== ====
The realized gain on the sale of investment securities available for sale
for the years ended December 31, 2003 and 2002, is as follows:
(in thousands) 2003 2002
==== ====
Net sale proceeds................................................................... $ 641 $ -
Cost basis.......................................................................... (577) -
---- ----
Realized gain....................................................................... $ 64 $ -
==== ====
In 2002, in connection with the ongoing evaluation of its investments, the
Company determined the value of its investments in SDG and AMDG, Inc. ("AMDG")
had been other than temporarily impaired. Under GAAP, if an investment is other
than temporarily impaired, the Company is required to reflect an adjustment in
its Financial Statements. Accordingly, the Company recorded a write down, during
2002, of its investments in SDG and AMDG of $1,250,000 and $350,000,
respectively. See Note 10 - Legal Proceedings - Litigation with SDG, Inc. for
further information. The Company retains ownership of these investment
securities consisting of convertible preferred stock and common stock in AMDG,
which were purchased through private placements. These investments are carried
at a written down value of $0 at December 31, 2003 and 2002.
AMBASE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
Note 4 - Earnings Per Share
The calculation of basic and diluted earnings per share, including the
effect of dilutive securities, for the years ended December 31, is as follows:
(in thousands, except per share data) 2003 2002 2001
===== ===== =====
Net income (loss)............................................. $ (3,559) $ (5,133) $62,110
===== ===== =====
Weighted average common shares outstanding ................... 46,182 46,209 46,209
Effect of Dilutive Securities:
Assumed stock option exercise................................. - - 105
----- ----- -----
Weighted average common shares outstanding assuming dilution.. 46,182 46,209 46,314
===== ===== =====
Net income (loss) per common share:
Basic......................................................... $ (0.08) $ (0.11) $ 1.34
Assuming dilution ............................................ (0.08) (0.11) 1.34
===== ===== =====
Options to purchase common stock of 1,125,000 shares in 2003, 1,170,000
shares in 2002 and 175,000 shares in 2001 were excluded from the computation of
diluted earnings per share because these options were antidilutive.
Note 5 - Stockholders' Equity
Authorized capital stock consists of 50,000,000 shares of cumulative
preferred stock, $0.01 par value, and 200,000,000 shares of Common Stock, $0.01
par value.
Changes in the outstanding shares of Common Stock of the Company are as
follows:
2003 2002 2001
============== ============== ===============
Balance at beginning of year.......................... 46,208,519 46,208,519 46,208,519
Common shares repurchased............................. (50,000) - -
-------------- -------------- ---------------
Balance at end of year................................ 46,158,519 46,208,519 46,208,519
============== ============== ===============
During June 2003, the Company repurchased 50,000 shares of common stock at
a purchase price of $0.75 per share pursuant to its common stock repurchase
plan.
AMBASE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
At December 31, 2003, Common Stock balances exclude 176,488 treasury shares
carried at an average cost of $3.88 per share, aggregating approximately
$685,000. At December 31, 2002 and 2001, Common Stock balances exclude 126,488
treasury shares carried at an average of $5.12 per share aggregating
approximately $647,000.
At December 31, 2003, there were 5,185,000 common shares reserved for
issuance under the Company's stock option and other employee benefit plans.
The Company issued 75,000 previously authorized common shares during
February 2004, in connection with the exercise of an employee stock option at
the exercise price of $0.21 per share.
Stockholder Rights Plan:
On January 29, 1986, the Company's Board of Directors declared a dividend
distribution of one right for each outstanding share of Common Stock of the
Company. The rights, as amended, which entitle the holder to purchase from the
Company a common share at a price of $75.00, are not exercisable until either a
person or group of affiliated persons acquires 25% or more of the Company's
outstanding common shares or upon the commencement or disclosure of an intention
to commence a tender offer or exchange offer for 20% or more of the common
shares. The rights are redeemable by the Company at $0.05 per right at any time
until the earlier of the tenth day following an accumulation of 20% or more of
the Company's shares by a single acquirer or group, or the occurrence of certain
Triggering Events (as defined in the Stockholder Rights Plan). In the event the
rights become exercisable and thereafter, the Company is acquired in a merger or
other business combination, or in certain other circumstances, each right will
entitle the holder to purchase from the surviving corporation, for the exercise
price, Common Stock having a market value of twice the exercise price of the
right. The rights are subject to adjustment to prevent dilution and expire on
February 10, 2006.
Common Stock Repurchase Plan:
The Company's Board of Directors has approved and authorized management to
establish and implement a common stock repurchase plan (the "Repurchase Plan").
The Repurchase Plan is dependent upon favorable business conditions and
acceptable purchase prices for the common stock and allows for the repurchase of
up to 10 million shares of the Company's common stock in the open market. During
June 2003, the Company repurchased 50,000 shares of common stock at a purchase
price of $0.75 per share pursuant to the Repurchase Plan.
Note 6 - Comprehensive Income
Comprehensive income (loss), for the year ended December 31 is composed of
net income (loss) and other comprehensive income (loss) which includes the
change in unrealized gains on investment securities available for sale, as
follows:
(in thousands) 2003 2002
=============================== ==========================
Unrealized Accumulated Unrealized Accumulated
Gains on Other Gains on Other
Investment Comprehensive Investment Comprehensive
Securities Income Securities Income
========== ============= ========== =============
Balance beginning of period.................. $ 22 $ 22 $ - $ -
Change during the period..................... 62 62 22 22
.............................................. ---------- ------------- ---------- -------------
Balance end of period........................ $ 84 $ 84 $ 22 $ 22
========== ============= ========== =============
There were no components of other comprehensive income (loss) during 2001.
AMBASE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
Note 7 - Pension and Savings Plans
The Company sponsors a non-qualified supplemental retirement plan
("Supplemental Plan") under which only one current executive officer and certain
former officers of the Company are participants. The cost of the Supplemental
Plan is actuarially determined and is accrued but not funded.
Pension expense for the Supplemental Plan for the years ended December 31
was as follows:
(in thousands) 2003 2002 2001
==== ==== ====
Service cost of current period................................ $ 870 $ 756 $ 537
Interest cost on projected benefit obligation................. 646 549 521
Amortization of unrecognized losses........................... 206 82 51
----------- ------------ -----------
$ 1,722 $ 1,387 $ 1,109
=========== ============ ===========
A reconciliation of the changes in the projected benefit obligation from
the beginning of the year to the end of the year is as follows:
(in thousands) 2003 2002
==== ====
Projected benefit obligation at beginning of year............................... $ 9,601 $ 8,077
Service cost.................................................................... 869 756
Interest cost................................................................... 646 549
Actuarial (gain) loss, including effect of change in assumptions................ (56) 679
Benefits paid................................................................... (38) (460)
--------- -------------
Projected benefit obligation at end of year..................................... $ 11,022 $ 9,601
========= =============
Accrued pension costs for the Supplemental Plan at December 31, and the
major assumptions used to determine these amounts, are summarized below:
(dollars in thousands) 2003 2002
==== ====
Actuarial present value of benefit obligations:
Accumulated benefit obligations, fully vested................................... $ 9,238 $ 7,521
========= =============
Projected benefit obligation for service rendered to date....................... $ 11,022 $ 9,601
Unrecognized net loss........................................................... (1,730) (1,993)
--------- -------------
Accrued pension costs........................................................... $ 9,292 $ 7,608
========= =============
Major assumptions:
Discount rate................................................................... 6.25% 6.75%
Rate of increase in future compensation......................................... 6.0% 6.0%
========= =============
The Company sponsors the AmBase 401(k) Savings Plan (the "Savings
Plan")which is a "Section 401(k) Plan" within the meaning of the Internal
Revenue Code of 1986, as amended (the "Code"). The Savings Plan permits eligible
employees to make contributions of up to 15% of salary, which are matched by the
Company at a percentage determined annually. The employer match is currently
100% of the employee's salary eligible for deferral. Employee contributions to
the Savings Plan are invested at the employee's discretion, in various
investment funds. The Company's matching contributions are invested in the same
manner as the salary reduction contributions. The Company's matching
contributions to the Savings Plan, charged to expense, were $36,000, $24,000 and
$14,000 in 2003, 2002 and 2000, respectively. All contributions are subject to
maximum limitations contained in the Code.
AMBASE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
Note 8- Incentive Plans
Under the Company's 1994 Senior Management Incentive Compensation Plan (the
"1994 Plan"), an executive officer of the Company whose compensation is required
to be reported to stockholders under the Securities Exchange Act of 1934 (the
"Participants") and who is serving as such at any time during the fiscal year as
to which an award is granted, may receive an award of a cash bonus ("Bonus"), in
an amount determined by the Personnel Committee of the Company's Board of
Directors (the "Committee") and payable from an annual bonus fund (the "Annual
Bonus Pool"). The Committee may award Bonuses under the 1994 Plan to
Participants not later than 120 days after the end of each fiscal year (the
"Reference Year").
If the Committee grants a Bonus under the 1994 Plan, the amount of the
Annual Bonus Pool will be an amount equal to the sum of (i) plus (ii), where:
(i) is ten percent (10%) of the amount by which the Company's Total
Stockholders' Equity, as defined, on the last day of a Reference Year increased
over the Company's Total Stockholders' Equity, as defined, on the last day of
the immediately preceding Reference Year; and
(ii) is five percent (5%) of the amount by which the Company's market
value, as defined, on the last day of the Reference Year increased over the
Company's market value on the last day of the immediately preceding Reference
Year.
Notwithstanding the foregoing, the 1994 Plan provides that in the event of
a decrease in either or both of items (i) and/or (ii) above, the Annual Bonus
Pool is determined by reference to the last Reference Year in which there was an
increase in such item. If the Committee determines within the 120-day time
period to award a Bonus, the share of the Annual Bonus Pool to be allocated to
each Participant shall be as follows: 45% of the Annual Bonus Pool shall be
allocated to the Company's Chief Executive Officer, and 55% of the Annual Bonus
Pool shall be allocated pro rata to each of the Company's Participants as
determined by the Committee. The Committee in its discretion may reduce the
percentage of the Annual Bonus Pool to any Participant for any Reference Year,
and such reduction shall not increase the share of any other Participant. The
1994 Plan is not the exclusive plan under which the Executive Officers may
receive cash or other incentive compensation or bonuses. No Bonuses were paid
attributable to the 1994 Plan for 2003.
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, 2008. An aggregate of 5,000,000
shares of the Company's Common Stock are reserved for issuance under the 1993
Plan (upon the exercise of Options and Stock Appreciation Rights, upon awards of
Restricted Stock and Performance Shares); however, of such shares, only
2,500,000 shares in the aggregate shall be available for issuance for 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 market value of the
Company's Common Stock on the date of grant of that Option. The term of any ISO
or related SAR cannot exceed ten years from the date of grant, and the term of
any NQSO cannot exceed ten years and one month from the date of grant. 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
commencing one year after the date 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.
AMBASE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
As a condition to any award of Restricted Stock or Merit Award under the
1993 Plan, the Committee may require a participant to pay an amount equal to, or
in excess of, the par value of the shares of Restricted Stock or Common Stock
awarded to him or her. Restricted Stock may not be sold, assigned, transferred,
pledged or otherwise encumbered during a "Restricted Period", which in the case
of grants to employees shall not be less than one year from the date of grant.
The Restricted Period with respect to any outstanding shares of Restricted Stock
awarded to employees may be reduced by the Committee at any time, but in no
event shall the Restricted Period be less than one year. Except for such
restrictions, the employee as the owner of such stock shall have all of the
rights of a stockholder including, but not limited to, the right to vote such
stock and to receive dividends thereon as and when paid. In the event that an
employee's employment is terminated for any reason, an employee's Restricted
Stock will be forfeited; provided, however, that the Committee may limit such
forfeiture in its sole discretion. At the end of the Restricted Period, all
shares of Restricted Stock shall be transferred free and clear of all
restrictions to the employee. In the case of a Change in Control of the Company
(as defined in the 1993 Plan), an employee may receive his or her Restricted
Stock free and clear of all restrictions in the discretion of the Committee, or
as may otherwise be provided pursuant to the employee's Restricted Stock award.
Performance Share awards of Common Stock under the 1993 Plan shall be
earned on the basis of the Company's performance in relation to established
performance measures for a specific performance period. Such measures may
include, but shall not be limited to, return on investment, earnings per share,
return on stockholder's equity, or return to stockholders. Performance Shares
may not be sold, assigned, transferred, pledged or otherwise encumbered during
the relevant performance period. Performance Shares may be paid in cash, shares
of Common Stock or shares of Restricted Stock in such portions as the Committee
may determine. An employee must be employed at the end of the performance period
to receive payments of Performance Shares; provided, however, in the event that
an employee's employment is terminated by reason of death, disability,
retirement or other reason approved by the Committee, the Committee may limit
such forfeiture in its sole discretion. In the case of a Change in Control of
the Company (as defined in the 1993 Plan), an employee may receive his or her
Performance Shares in the discretion of the Committee, or as may otherwise be
provided in the employee's Performance Share award.
During January 2004, the Board of Directors of the Company approved the
award of incentive and non-qualified stock options to certain employees to
acquire 240,000 shares of AmBase Common Stock at exercise prices $0.66 per
share, pursuant to the 1993 Plan.
The Company's 1985 Stock Option Plan (the "1985 Plan"), provided for the
granting of up to 2,000,000 shares of stock options for the purchase of Common
Stock to salaried employees, through May 22, 1995. No additional stock options
can be awarded under the 1985 Plan. As of December 31, 2003, 75,000 shares were
reserved for issuance under the 1985 Plan. These shares were issued in February
2004, pursuant to the exercise of an employee stock option.
AMBASE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
Incentive plan activity is summarized as follows:
1993 Stock 1985 Stock
(shares in thousands) Incentive Plan Option Plan
========================= =============================
Weighted Weighted
Shares Average Shares Average
Under Exercise Under Exercise
Option Price Option Price
===== ======= ===== =======
Outstanding at December 31, 2000................... 370 $ 2.38 75 $0.21
Granted............................................ 280 0.64 - -
Forfeited.......................................... (255) 1.86 - -
-------- ========= ----- =======
Outstanding at December 31, 2001................... 395 $ 1.49 75 $0.21
Granted............................................ 700 1.14 - -
-------- ========= ----- =======
Outstanding at December 31, 2002................... 1,095 $ 1.27 75 $0.21
Expired............................................ (45) 4.02 - -
Exercised.......................................... - - - -
-------- ---------- ----- -------
Outstanding at December 31, 2003.................. 1,050 $ 1.15 75 $0.21
======== ========== ===== =======
Options exercisable at:
December 31, 2003............................. 614 $ 1.14 75 $0.21
December 31, 2002............................. 285 1.81 75 0.21
December 31, 2001............................. 145 2.85 75 0.21
======== ========== ===== =======
The following table summarizes information about the Company's stock
options outstanding and exercisable under the 1985 Plan and 1993 Plan at
December 31, 2003, as follows:
(shares in thousands) Options Outstanding Options Exercisable
============================== ===================================
Weighted
Average
Remaining Weighted Weighted
Range of Contractual Average Average
Exercise Life Exercise Exercise
Prices Shares (in years) Price Shares Price
====== ===== ======== ======= ===== =======
$0.21 75 1 $ 0.21 75 $ 0.21
$0.60 to $0.66 220 2 0.66 220 0.66
$0.95 to $1.05 60 2 1.03 60 1.03
$1.09 to $1.19 700 5 1.14 264 1.10
$2.56 to $3.65 70 2 2.88 70 2.88
-------- ===== ===== -------- =======
Total 1,125 689
======== =====
The Company has adopted the disclosure only provisions of Statement 123,
but continues to apply APB 25 in accounting for employee stock options. No
compensation expense, attributable to stock incentive plans, has been charged to
earnings. The fair value of stock options granted by the Company in 2002 and
2001 used to compute pro forma net income (loss) and earnings per share
disclosures is the estimated fair value at date of grant. No employee stock
options were granted in 2003.
AMBASE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
The Black-Scholes option pricing model was used to estimate the fair value
of the options at grant date based on factors as follows:
2002 2001
===== ====
Dividend yield..................................... 0% 0%
Volatility......................................... 0.56 0.51
Risk free interest rate.......................... 5.04% 5.04%
Expected life in years............................. 5-6 4-6
Weighted average fair value at grant date.......... $0.59 $0.25
===== ======
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. For a summary of the pro forma amounts calculated in accordance
with SFAS 123, see Note 2.
Note 9 - Income Taxes
The components of income tax expense for the years ended December 31 are as
follows:
(in thousands) 2003 2002 2001
==== ==== ====
Income tax expense - current state and local.................. $(125) $(124) $(165)
===== ===== ======
The components of pretax income (loss) and the difference between income
taxes computed at the statutory federal rate of 35% in 2002, 2001 and 2000, and
the provision for income taxes for the years ended December 31 follows:
(in thousands) 2003 2002 2001
==== ==== ====
Income (loss) before income taxes............................... $ (3,434) $ (5,009) $ 62,275
========= ========= ==========
Tax (expense) benefit:
Tax at statutory federal rate................................... $ 1,202 $ 1,753 $ (21,796)
Reversal of Withholding Obligation reserve...................... - - 23,236
Accounting loss benefit not recognized.......................... (1,202) (1,753) (1,440)
State income taxes.............................................. (125) (124) (165)
---------- -------- -----------
Income tax expense.............................................. $ (125) $ (124) $ (165)
========== ======== ===========
State income tax amounts for 2003, 2002 and 2001, respectively, primarily
consist of a minimum tax on capital to the state of Connecticut.
AMBASE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
As a result of the Office of Thrift Supervision's December 4, 1992 placement of
Carteret in receivership, under the management of the Resolution Trust
Corporation ("RTC")/Federal Deposit Insurance Corporation ("FDIC"), and then
proposed Treasury Reg. ss.1.597-4(g), the Company had previously filed its 1992
and subsequent federal income tax returns with Carteret disaffiliated from the
Company's consolidated federal income tax return. Based upon the impact of
Treasury Reg. ss.1.597-4(g), which was issued in final form on December 20,
1995, a continuing review of the Company's tax basis in Carteret, and the impact
of prior year tax return adjustments on the Company's 1992 federal income tax
return as filed, the Company decided not to make an election pursuant to final
Treasury Reg. ss.1.597-4(g) to disaffiliate Carteret from the Company's
consolidated federal income tax return effective as of December 4, 1992 (the
"Election Decision").
The Company has made numerous requests to the RTC/FDIC for tax information
pertaining to Carteret and the resulting successor institution, Carteret Federal
Savings Bank ("Carteret FSB"); however all of the information still has not been
received. Based on the Company's Election Decision, described above, and the
receipt of some of the requested information from the RTC/FDIC, the Company has
amended its 1992 consolidated federal income tax return to include the federal
income tax effects of Carteret and Carteret FSB (the "1992 Amended Return"). The
Company is still in the process of amending its consolidated federal income tax
returns for 1993 and subsequent years.
The Company anticipates that, as a result of filing a consolidated federal
income tax return with Carteret FSB, a total of approximately $170 million of
tax NOL carryforwards will be generated from the Company's tax basis in
Carteret/Carteret FSB as tax losses are incurred by Carteret FSB of which $158
million are still available for future use. Based on the Company's filing of the
1992 Amended Return (the "1992 Amended Return"), approximately $56 million of
NOL carryforwards are generated for tax year 1992 which expire in 2007, with the
remaining approximately $102 million of NOL carryforwards to be generated,
expiring no earlier than 2008. These NOL carryforwards would be available to
offset future taxable income, in addition to the NOL carryforwards as further
detailed below. The IRS is currently reviewing the Company's 1992 Amended Return
in connection with several carryback claims filed by the Company, as further
described below. The Company can give no assurances with regard to the 1992
Amended Return or amended returns for subsequent years, or the final amount or
expiration of NOL carryforwards ultimately generated from the Company's tax
basis in Carteret.
In March 2000, the Company filed several carryback claims and amendments to
previously filed carryback claims with the IRS (the "Carryback Claims") seeking
refunds from the IRS of alternative minimum tax and other federal income taxes
paid by the Company in prior years plus applicable IRS interest, based on the
filing of the 1992 Amended Return. The Carryback Claims and 1992 Amended Return
are currently being reviewed by the IRS. In April 2003, IRS examiners issued a
letter to the Company proposing to disallow the Carryback Claims. The Company
has sought administrative review of the letter by protesting to the Appeals
Division of the IRS. The Company has met with IRS Appeals Officials to discuss
the Carryback Claims and the appeals process is ongoing. The Company can give no
assurances that the Carryback Claims will be ultimately allowed by the IRS, the
final amount of the refunds, if any, or when they might be received.
Based upon the Company's federal income tax returns as filed from 1993 to 2002
(subject to IRS audit adjustments), and excluding the NOL carryforwards
generated from the Company's tax basis in Carteret/Carteret FSB, as noted above,
at December 31, 2003, the Company has NOL carryforwards available to reduce
future federal taxable income, which expire if unused, as follows:
2008 $1,300,000
2009 6,900,000
2010 5,300,000
2012 1,100,000
2018 5,400,000
2019 4,000,000
2020 2,600,000
2021 4,000,000
2022 3,200,000
-------------
$33,800,000
=============
AMBASE CORPORATION AND SUBSIDIAIRES
Notes to Consolidated Financial Statements (continued)
The Company's federal income tax returns for the years subsequent to 1992 have
not been reviewed by the IRS. The utilization of certain carryforwards is
subject to limitations under U.S. federal income tax laws. In addition, the
Company has approximately $21 million of AMT credit carryforwards ("AMT
Credits"), which are not subject to expiration. Based on the filing of the
Carryback Claims, as further discussed above, the Company is seeking to realize
approximately $8 million of the $21 million of AMT Credits.
The Company has calculated a net deferred tax asset of $34 million and $31
million as of December 31, 2003 and 2002, respectively, arising primarily from
NOL's and alternative minimum tax credits (not including the anticipated tax
effects of the NOL's expected to be generated from the Company's tax basis in
Carteret, resulting from the Election Decision, as more fully described above).
A valuation allowance has been established for the entire net deferred tax
asset, as management, at the current time, has no basis to conclude that
realization is more likely than not.
Note 10 - Legal Proceedings
The Company is or has been a party in a number of lawsuits or proceedings,
including the following:
(a) Marshall Manley v. AmBase Corporation. On November 14, 1996, Marshall Manley
("Manley"), a former President, Chief Executive Officer and Director of the
Company, commenced an action against the Company, seeking indemnification from
the Company pursuant to a May 27, 1993 employment settlement agreement between
Manley and the Company. Manley sought reimbursement of certain alleged payments
he made to the Trustee in the bankruptcy proceedings of the law firm of Finley,
Kumble, Wagner, Heine, Underberg, Manley & Casey (the "Manley action"), of
approximately $2.4 million plus interest, arguing that he served at such firm at
the request of the Company. The Company filed its answer on January 21, 1997,
raising substantial affirmative defenses which the Company vigorously pursued.
On October 30, 1997, AmBase amended its Answer and Counterclaims to include a
claim of fraud against Manley. In December 1997, Manley moved for summary
judgment. The Company raised substantial opposition to the motion and moved to
strike certain of Manley's affirmative defenses which Manley raised in
connection with the Company's fraud claim against Manley. Oral argument on
Manley's Motion for Summary Judgment and the Company's motion to strike Manley's
affirmative defenses was held on May 15, 1998. The court denied both motions.
The jury trial of the plaintiff's breach of contract claims took place in May
2000 in the United States District Court for the Southern District of New York,
and resulted in a verdict against the Company. The Company's counterclaims for
fraud and reformation were tried to the Court immediately following the jury's
verdict. In December 2000, the Court, in response to the Company's motion for
judgment as a matter of law and/or for a new trial, vacated the jury's earlier
verdict (thereby nullifying it) and ordered a new trial. Subsequent to the
Court's vacatur of the jury's verdict in January 2001, the Court dismissed the
Company's counterclaims for fraud and reformation. A second jury trial was held
in November 2001, which resulted in a verdict in favor of the Company. Manley
then filed a Notice of Appeal and a Fed. R. Civ. P. 59 motion seeking to set
aside this second verdict. In March 2002, the Court denied Manley's Fed. R. Civ.
P. 59 motion. In April 2002, Manley filed an amended Notice of Appeal. Oral
argument on the amended Notice of Appeal was heard in January 2003. In July
2003, the Second Circuit issued a written decision denying all of Manley's
claims in his Notice of Appeal. On August 19, 2003, the Second Circuit issued
its mandate rejecting the appeal. Manley did not petition the Second Circuit for
rehearing nor petition the United States Supreme Court for a Writ of Certiorari
to review the Second Circuit's decision. This matter is, therefore, concluded.
(b) Litigation with SDG, Inc. In September 2000, the Company filed a lawsuit in
the United States District Court for the District of Connecticut (Case No.
3:00CV1694 (DJS)) (the "Court") against SDG Inc. ("SDG"), and certain of its
officers and directors to pursue various claims against such parties, including,
but not limited to, the claims that SDG failed to honor a binding contract which
granted the Company the right to act as the exclusive investment
banking/financial advisor to SDG, and its subsidiaries and affiliates. SDG filed
various counterclaims which the Company believes are without merit. A trial in
this matter was completed during May 2003, and all parties submitted post trial
briefs during August 2003. The Court has not yet made a ruling. The Company will
continue to monitor the status of SDG and its subsidiary, AMDG, Inc., and
vigorously pursue the matter.
AMBASE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(c) Supervisory Goodwill Litigation. During the third quarter of 1993, the
Company filed a claim against the United States, in the United States Court of
Federal Claims (the "Court of Federal Claims" or the "Court"), based upon the
impact of the Financial Institutions Reform, Recovery and Enforcement Act of
1989 ("FIRREA") on the Company's investment in Carteret Savings Bank
("Carteret"). Approximately 120 other similar so-called "supervisory goodwill"
cases, were commenced by other financial institutions and/or their shareholders,
many are still pending in the Court of Federal Claims. Three of these cases,
Winstar Corp. v. United States, Glendale Federal Bank, FSB v. United States, and
Statesman Savings Holding Corp. v. United States (the "Consolidated Cases"),
which involve many of the same issues raised in the Company's suit, were
appealed to the United States Supreme Court (the "Supreme Court"). On July 1,
1996, the Supreme Court issued a decision in the Consolidated Cases. The Supreme
Court's decision affirmed the lower Court's grant of summary judgment in favor
of the plaintiffs on the issue of liability and remanded the cases for a
determination of damages. Although the decision in the Consolidated Cases is
beneficial to the Company's case, it is not necessarily indicative of the
ultimate outcome of the Company's action.
On September 18, 1996, the Court of Federal Claims entered an Omnibus Case
Management Order that will govern further proceedings in the Company's action
and most of the other so-called "Winstar-related" cases. On March 14, 1997, the
Court entered an order permitting the Federal Deposit Insurance Company ("FDIC")
to intervene as an additional plaintiff in forty-three cases, including the
Company's case, but not allowing the FDIC to be substituted as the sole
plaintiff in those cases.
On March 20, 1998, the FDIC filed a motion for partial summary judgment against
the United States on certain liability issues, and the Company filed a
memorandum in support of that motion. Fact discovery for the Company was
completed November 30,1999 pursuant to an extension of time granted by the
Court. On September 9, 1999, the Company filed a Motion For Partial Summary
Judgment On Liability under a Fifth Amendment Takings claim theory of recovery.
On November 24, 1999, the FDIC, as successor to the rights of Carteret and as
Plaintiff-Intervenor in the case, filed a response brief opposing the Company's
Motion. On December 6, 1999, the Department of Justice (the "DOJ") (on behalf of
the United States) filed a brief opposing the Company's Motion For Partial
Summary Judgment On Liability and Cross-Moved for Summary Judgment On the
Company's Takings claim. On January 25, 2000, the Company responded to the DOJ's
brief and the FDIC's brief by filing a Brief (i) In Reply To Defendant's
Opposition To Plaintiffs' Motion For Partial Summary Judgment, (ii) In
Opposition To Defendant's Cross-Motion For Summary Judgment, and (iii) In Reply
To FDIC's Response To Plaintiffs' Motion For Partial Summary Judgment. On
February 22, 2000 the DOJ filed a brief in Reply To Plaintiffs' Opposition To
Defendant's Cross-Motion For Summary Judgment.
On October 2, 2000, Senior Judge Loren Smith of the Court of Federal Claims
heard oral arguments in the Company's Supervisory Goodwill case against the
United States government. The Court heard arguments both as to the contractual
liability of the United States to Carteret Savings Bank, and as to the Company's
claim against the United States under the Takings Clause of the Fifth Amendment.
On August 25, 2003, the Court of Federal Claims issued a decision in which it
(i) ruled that the Government had entered into and breached its supervisory
goodwill contracts with the Company's wholly-owned subsidiary, Carteret; (ii)
rejected the Company's claim that it was entitled to recover damages directly
from the Government under the Takings Clause for the loss of Carteret; and (iii)
rejected the Company's claim that the Government had "illegally exacted" $62.5
million that the Company paid into Carteret subsequent to the Government's
breach of the Goodwill contracts. Specifically, the Court held that the Company
could not recover damages under the Takings Clause because it could be restored
to the position it was in before the breach through Carteret's breach of
contract action.
On September 17, 2003, the Company filed a Motion to Dismiss The FDIC and to
Define The Appropriate Measure of Carteret's Contract Damages. On September 30,
2003, the FDIC, as plaintiff-intervenor in the case, and the United States, as
defendant in the case, each filed a separate response to the Company's motion.
On October 1, 2003, the Court held a telephonic status conference pursuant to an
order set forth in the August 25, 2003 opinion.
AMBASE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statement (continued)
Pursuant to that status conference, the Court ordered that through their
additional briefing on the Company's Motion to Dismiss the FDIC and to define
the appropriate measure of Carteret's contract damages (i.e., through the
Company's reply brief and the surreply brief granted to the FDIC and the United
States), the parties should address the question of, "whether the Court has the
power to review the amount of the receivership deficit as administered by the
FDIC." In an order dated October 16, 2003, the Court modified the briefing
schedule such that the Company filed its reply brief as required on October 31,
2003, and the surreply brief of the FDIC and the United States were filed as
required in November, 2003. The Court held oral argument on this issue on
November 20, 2003. The Company is currently awaiting a ruling. No assurance can
be given regarding the ultimate outcome of the litigation.
Both the Court of Federal Claims and the Court of Appeals for the Federal
Circuit have issued numerous decisions in cases that involve claims against the
United States based upon its breach of its contracts with savings and loan
institutions through its 1989 enactment of FIRREA. In particular, the Federal
Circuit has issued decisions rejecting Takings Clause claims advanced by
shareholders of failed thrifts. Castle v. United States, 301F.3d 1328 (Fed. Cir.
2002); Bailey v. United States, 341 F.3d 1342 (Fed. Cir 2003), petition for
certiorari filed January 26, 2004, currently pending. These decisions, as well
as other decision in Winstar-related cases, are publicly available and may be
relevant to the Company's claims, but are not necessarily indicative of the
ultimate outcome of the Company's actions.
(d) Other
AmBase Corporation v. City Investing Company Liquidating Trust, et al. - New
York Court Action. On January 31, 2001, the Company filed a Complaint in the
United States District Court for the Southern District of New York (the "NY
Court") seeking determination that City Investing Company Liquidating Trust (the
"Trust"), as successor to City Investing Company ("City"), should be primarily
liable for amounts, if any, owed to the IRS in connection with a Netherlands
Antilles withholding tax issue of City. The IRS had contended that the
withholding of tax on interest payments were due by City in connection with
City's Netherlands Antilles finance subsidiary for the years 1979 through 1985.
The Company was also seeking other relief and certain other damages from the
Trust and its Trustees. On February 23, 2001, the Trust filed a Motion to
Dismiss the Company's Complaint in this action. On March 9, 2001 the Company
filed its opposition to the Trust's Motion to Dismiss. On March 19, 2001 the
Trust filed its reply to the Company's opposition. On May 30, 2001, the Company
submitted a letter to Judge Stanton, before whom the case was docketed,
acknowledging that the Tax Court had ruled against the IRS on the issue of
whether or not any withholding obligation was due, and that this decision, would
render the declaratory judgment portion of the Company's action against the
Trust moot. On October 26, 2001, a pre-trial conference was held before Judge
Stanton, during which he authorized the Company to supplement its prior
opposition to the pending motion to dismiss. Those supplemental memoranda and
affidavits were filed in November 2001. Thereafter, the Trust filed its reply.
On January 11, 2002, the NY Court dismissed the Company's Complaint. The Company
timely filed a Fed. R. Civ. P. Rule 59 motion ("Rule 59 Motion") seeking to set
aside the NY Court's decision to dismiss the Complaint that was subsequently
responded to by the Trust. In February 2002 the NY Court denied the Company's
Rule 59 Motion. The Company subsequently filed an appeal of the NY Court
decision, to the Second Circuit Court of Appeals. Oral argument on the appeal
was held in November 2002. On April 3, 2003, a panel of the Second Circuit
issued a decision affirming the dismissal of the Company's complaint. The
Company filed a petition for rehearing to the Second Circuit and on June 12,
2003, the Second Circuit panel that issued the April 3, 2003, decision denied
the petition for rehearing and the Second Circuit denied the petition for
rehearing in banc. On September 10, 2003, the Company petitioned the United
States Supreme Court for a Writ of Certiorari seeking review of the Second
Circuit's decision. On October 15, 2003, the Trust filed its opposition to the
Company's petition. On October 27, 2003, the Company filed its reply to the
Trust's opposition. In November 2003, the United State Supreme Court denied the
Company's Writ of Certiorari. This matter, therefore, is concluded.
Note 11 - Fair Value of Financial Instruments
The carrying amounts reported in the balance sheet for cash and cash
equivalents, and accounts payable and accrued liabilities approximate fair value
due to the short-term nature of these instruments. The fair value of investment
securities - held to maturity and investment securities available for sale are
based on current market quotations. During 2002, other investment securities
were written down to their net realizable value as further described in Note 3.
The carrying value of applicable other liabilities approximates their fair
value.
AMBASE CORPORATION AND SUBSIDIAIRES
Notes to Consolidated Financial Statement (continued)
Note 12 - Property Owned
The Company owns two commercial office buildings in Greenwich, Connecticut that
contain 14,500 and 38,000 square feet, respectively. The Company utilizes a
small portion of the office space in the first building for its executive
offices and leases the remaining square footage to unaffiliated third parties.
The buildings are carried at cost, net of accumulated depreciation of $433,000
and $104,000 at December 31, 2003 and 2002, respectively. Depreciation expense
is recorded on a straight-line basis over 39 years. Tenant security deposits of
$308,000 and $226,000 at December 31, 2003 and 2002, respectively, are included
in other liabilities.
The property is leased to tenants under operating leases with varying terms.
Future minimum rentals receivable from tenants under non-cancelable operating
leases, excluding tenant reimbursements of operating expenses and real estate
tax escalations, are approximately as follows:
December 31
------------------
2004............................................... $ 1,790,000
2005 ............................................ 1,818,000
2006............................................... 1,635,000
2007............................................... 1,441,000
2008............................................... 937,000
Thereafter......................................... 814,000
Rent expense charged to earnings, for office space previously leased, was
$43,000 for the year ended December 31, 2001.
Note 13 - Quarterly Financial Information (unaudited)
Summarized quarterly financial information follows:
First Second Third Fourth Full
(in thousands, except per share data) Quarter Quarter Quarter Quarter Year
===== ===== ===== ===== =====
2003:
Revenues................................ $ 614 $ 617 $ 615 $ 732 $ 2,578
Operating expenses...................... 1,392 1,857 1,573 1,614 6,436
Operating loss.......................... (778) (1,240) (958) (882) (3,858)
Loss before income taxes................ (693) (1,102) (875) (764) (3,434)
Net loss................................ (724) (1,133) (907) (795) (3,559)
======== ========== ======== ======== ========
Net loss per common share:
Basic................................... $ (0.02) $ (0.02) (0.02) (0.02) (0.08)
Assuming dilution....................... (0.02) (0.02) (0.02) (0.02) (0.08)
======== ========= ======= ======== ========
2002:
Revenues................................ $ 74 $ 71 $ 83 $ 249 $ 477
Operating expenses...................... 1,147 1,288 1,411 1,748 5,594
Operating loss.......................... (1,073) (1,217) (1,328) (1,499) (5,117)
Loss before income taxes................ (675) (1,029) (2,739) (566) (5,009)
Net loss................................ (706) (1,060) (2,770) (597) (5,133)
======== ========= ======= ======== ========
Net loss per common share:
Basic .................................. $ (0.02) $ (0.02) $ (0.06) $ (0.01) $ (0.11)
Assuming dilution....................... (0.02) (0.02) (0.06) (0.01) (0.11)
========= ========= ======= ======== ========
ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
None.
ITEM 9A. CONTROLS AND PROCEDURES
The Company maintains disclosure controls and procedures that are designed to
ensure that information required to be disclosed in the Company's Exchange Act
reports is recorded, processed, summarized and reported within the time periods
specified in the SEC's rules and forms, and that such information is accumulated
and communicated to the Company's management, including its Chief Executive
Officer and Chief Financial Officer, as appropriate, to allow timely decisions
regarding required disclosure based on the definition of "disclosure controls
and procedures" in Rule 13a-15. In designing and evaluating the disclosure
controls and procedures, management recognized that any controls and procedures,
no matter how well designed and operated, can provide only reasonable assurance
of achieving the desired control objectives, and management necessarily was
required to apply its judgment in evaluating the cost-benefit relationship of
possible controls and procedures. Also, the Company has investments in certain
unconsolidated entities. As the Company does not control or manage these
entities, its controls and procedures with respect to such entities are
necessarily substantially more limited than those it maintains with respect to
its consolidated subsidiaries.
As of December 31, 2003, the Company carried out an evaluation, under the
supervision and with the participation of the Company's management, including
the Company's Chief Executive Officer and the Company's Chief Financial Officer,
of the effectiveness of the design and operation of the Company's disclosure
controls and procedures. Based on the foregoing, the Company's Chief Executive
Officer and Chief Financial Officer concluded that the Company's disclosure
controls and procedures were effective.
There have been no significant changes in the Company's internal controls or in
other factors that could significantly affect the internal controls subsequent
to the date the Company completed its evaluation.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information concerning executive officers required by this item is set forth
following Item 4 of Part I of this report under the caption "Executive Officers
of the Registrant", pursuant to General Instruction G to Form 10-K. For the
information required to be set forth by the Company in response to this item
concerning directors of the Company, see the Company's definitive Proxy
Statement for its Annual Meeting of Shareholders to be held on May 21, 2004,
under the captions "Proposal No. 1 - Election of Director" and "Information
Concerning the Board and its Committees", which is incorporated herein by
reference, which the Company intends to file with the Securities and Exchange
Commission not later than 120 days after the close of its 2003 fiscal year.
ITEM 11. EXECUTIVE COMPENSATION
For the information required to be set forth by the Company in response to this
item, see the Company's definitive Proxy Statement for its Annual Meeting of
Shareholders to be held on May 21, 2004, under the captions "Executive
Compensation" and "Employment Contracts", which are incorporated herein by
reference, which the Company intends to file with the Securities and Exchange
Commission not later than 120 days after the close of its 2003 fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.
The following table summarizes information about securities authorized for
issuance under equity compensation plans of the Company at December 31, 2003 as
follows:
Shares to be issued Weighted average
upon exercise of exercise price of Shares available for
outstanding options outstanding options future issuance
============ ============= =============
Equity Compensation
Plans approved
by stockholders 1,125,000 $ 1.07 3,950,000
============
Equity Compensation
Plan not approved
by stockholders - 110,000
-------------- ------------
Total 1,125,000 $ 1.07 4,060,000
============= ============= ============
Plan not approved by stockholders
The Company has 110,000 shares of common stock reserved for issuance under
the AmBase Corporation Stock Bonus Plan (the "Stock Bonus Plan"), which was
approved by the Board of Directors of the Company in 1989. The purpose of the
Stock Bonus Plan is to encourage individual performance and to reward eligible
employees whose performance, special achievements, longevity of service to the
Company or suggestions make a significant improvement or contribution to the
growth and profitability of the Company. The Stock Bonus Plan is administered by
the Personnel Committee of the Board of Directors. Members of the Personnel
Committee are not eligible for an award pursuant to the Stock Bonus Plan. The
Company's President may also designate eligible employees to receive awards,
which are not to be in excess of 100 shares of Common Stock. No fees or expenses
of any kind are to be charged to a participant. Any employee of the Company,
except for certain officers or directors of the Company, are eligible to receive
shares under the Stock Bonus Plan. Distributions of shares may be made from
authorized but unissued shares, treasury shares or shares purchased on the open
market.
For other information required to be set forth by the Company in response
to this item, see the Company's definitive Proxy Statement for its Annual
Meeting of Shareholders to be held on May 21, 2004, under the caption "Stock
Ownership", which is incorporated herein by reference, which the Company intends
to file with the Securities and Exchange Commission not later than 120 days
after the close of its 2003 fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information concerning Principal Accountant Fees and Services is set
forth by the Company under the heading "Proposal 2 - Appointment of Accountants"
in the Company's definitive Proxy Statement for its Annual Meeting of
Shareholders to be held on May 21, 2004, which is incorporated herein by
reference, which the Company intends to file with the Securities and Exchange
Commission not later than 120 days after the close of its 2003 fiscal year.
PART IV
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents filed as a part of this report:
1. Index to Financial Statements: Page
AmBase Corporation and Subsidiaries:
Report of Independent Auditors.....................................................................9
Consolidated Statements of Operations.............................................................10
Consolidated Balance Sheets.......................................................................11
Consolidated Statements of Changes in Stockholders' Equity........................................12
Consolidated Statements of Comprehensive Income (Loss) ...........................................12
Consolidated Statements of Cash Flows.............................................................13
Notes to Consolidated Financial Statements........................................................14
2. Index to Financial Statements Schedules:
Schedule III - Real Estate and Accumulated Depreciation
3. Exhibits: 3A. Restated Certificate of Incorporation of AmBase
Corporation (as amended through February 12, 1991) (incorporated by reference to
Exhibit 3A to the Company's Annual Report on Form 10-K for the year ended
December 31, 1990).
3B. By-Laws of AmBase Corporation (as amended through March 15, 1996),
(incorporated by reference to Exhibit 3B to the Company's Annual Report on Form
10-K for the year ended December 31, 1995).
4. Rights Agreement dated as of February 10, 1986 between the Company and
American Stock Transfer and Trust Co. (as amended March 24, 1989, November 20,
1990, February 12, 1991, October 15, 1993, February 1, 1996 and November 1,
2000) (incorporated by reference to Exhibit 4 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1990, the Company's Quarterly Report
on Form 10-Q for the quarterly period ended September 30, 1993, the Company's
Annual Report on Form 10-K for the year ended December 31, 1995 and the
Company's Quarterly Report on Form 10-Q for the Quarterly period ended September
30, 2000, respectively).
10A. 1985 Stock Option Plan for Key Employees of AmBase and its
Subsidiaries (incorporated by reference to Exhibit 10B to the Company's Annual
Report on Form 10-K for the year ended December 31, 1989).
10B. 1993 Stock Incentive Plan as amended (incorporated by reference to
Exhibit A to the Company's Proxy Statement for the Annual Meeting of
Stockholders held on May 28, 1998).
10C. 1994 Senior Management Incentive Compensation Plan (incorporated by
reference to Exhibit A to the Company's Proxy Statement for the Annual Meeting
of Stockholders held on May 27, 1994).
10D. AmBase Officers and Key Employees Stock Purchase and Loan Plan
(incorporated by reference to Exhibit 10E to the Company's Annual Report on Form
10-K for the year ended December 31, 1989).
10E. AmBase Supplemental Retirement Plan (incorporated by reference to
Exhibit 10C to the Company's Annual Report on Form 10-K for the year ended
December 31, 1989).
10F. Assignment and Assumption Agreement dated as of August 30, 1985,
between the Company and City (incorporated by reference to Exhibit 28 to the
Company's Current Report on Form 8-K dated September 12, 1985).
10G. Employment Agreement dated as of June 1, 1991 between Richard A.
Bianco and the Company, as amended December 30, 1992 (incorporated by reference
to Exhibit 10G to the Company's Annual Report on Form 10-K for the year ended
December 31, 1992), as amended February 24, 1997 (incorporated by reference to
Exhibit 10G to the Company's Annual Report on Form 10-K for the year ended
December 31, 1996), as amended March 6, 2001 (incorporated by reference to
Exhibit 10G to the Company's Annual Report on Form 10-K for the year ended
December 31, 2000) and as amended December 16, 2001 (incorporated by reference
to Exhibit 10G to the Company's Annual Report on Form 10-K for the year ending
December 31, 2001.
14. AmBase Corporation - Code of Ethics as adopted by Board of Directors.
21. Subsidiaries of the Registrant.
23. Consent of Independent Accountants.
31.1 Rule 13a-14(a) Certification of Chief Executive Officer Pursuant to
Rule 13a-14.
31.2 Rule 13a-14(a) Certification of Chief Financial Officer Pursuant to
Rule 13a-14.
32.1 Section 1350 Certification of Chief Executive Officer pursuant to Rule
18 U.S.C. Section 1350.
32.2 Section 1350 Certification of Chief Financial Officer pursuant to Rule
18 U.S.C. Section 1350.
Exhibits, except as otherwise indicated above, are filed herewith.
(b) Reports on Form 8-K.
The Company did not file any Current Reports on Form 8-K during the quarter
ended December 31, 2003.
Signatures
Pursuant to the requirements of Section 13 or 15(d) 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/ RICHARD A. BIANCO
Chairman, President and Chief Executive Officer
Principal Executive Officer)
Date: March 25, 2004
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities on the dates indicated.
/s/ RICHARD A. BIANCO /s/ JOHN P. FERRARA
Chairman, President, Vice President, Chief Financial
Chief Executive Officer Officer and Controller
and Director (Principal Financial and Accounting
Date: March 25, 2004 Officer)
Date: March 25, 2004
/s/ JOHN B. COSTELLO /s/ ROBERT E. LONG
Director Director
Date: March 25, 2004 Date: March 25, 2004
/s/ MICHAEL L. QUINN
Director
Date: March 25, 2004
AMBASE CORPORATION AND SUBSIDIARIES
SCHEDULE III. REAL ESTATE AND ACCUMULATED DEPRECIATION
December 31, 2003
(dollars in thousands)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ----------- ------------------ --------------------- ------------------- -----------------------------------------
Cost Capitalized
Subsequent to Gross Amount at which Carried at
Initial Cost to Company Acquisition the Close of the Period
======================= =================== =========================================
Building & Building &
Description Encumbrances Land Improvements Improvements Land Improvements Total
=========== ================== ====== ============ =================== ======= ============= =========
Office Building:
Greenwich, CT...$ - $ 554 $ 1,880 $ 20 $ 554 $ 1,900 $ 2,454
Greenwich, CT...$ - 6,400 10,892 18 6,400 10,910 17,310
------------------ ------ ------------ ------------------- ------- ------------- ---------
Total...........$ - $6,954 $ 12,772 $ 38 $ 6,954 $ 12,810 $ 19,764
================== ====== ============ =================== ======== ============= =========
[Additional columns below]
[Continued from above table, first column(s) repeated]
COLUMN A COLUMN F COLUMN G COLUMN H COLUMN I
- ----------- ------------------ --------------------- ------------------- -----------------------------------------
Accumulated Life on Which Depreciated
Description Depreciation Date Constructed Date Acquired Latest Income Statement
=========== ================== ===================== =================== =========================================
Office Building:
Greenwich, CT...$ 130 1970 Apr.-01 39 years
Greenwich, CT... 303 1977 Dec.-02 39 years
------------------ ============= =========== =========================================
Total...........$ 433
================
[a] Reconciliation of total real estate carrying value is as follows:
Year Ended Year Ended Year Ended
December 31, 2003 December 31, 2002 December 31, 2001
================= ================= =================
Balance at beginning of year......$ 19,726 $ 2,435 $ -
Improvements...................... 38 - -
Acquisitions.. ................... - 17,291 2,435
----------------- ----------------- -----------------
Balance at end of year............$ 19,764 $ 19,726 $ 2,435
================= ================ =================
Total cost for federal tax
purposes at end of each year......$ 19,764 $ 19,726 $ 2,435
================= ================ =================
[b] Reconciliation of accumulated depreciation as follows:
Balance at beginning of year......$ 104 $ 42 $ -
Depreciation expense.............. 329 62 42
----------------- ---------------- -----------------
Balance at end of year........... $ 433 $ 104 $ 42
================= ================ =================
DIRECTORS AND OFFICERS
Board of Directors
Richard A. Bian John B. Costello Robert E. Long
Chairman, President and Private Investor Managing Director
Chief Executive Officer Goodwyn, Long & Black
AmBase Corporation
Michael Quinn
Private Investor
AmBase Officers
Richard A. Bianco John P. Ferrara
Chairman, President and Vice President, Chief Financial Officer
Chief Executive Officer and Controller
INVESTOR INFORMATION
Annual Meeting of Stockholders Corporate Headquarters
The 2004 Annual Meeting is currently scheduled to be held AmBase Corporation
at 9:00 a.m. Eastern Time, on Friday, May 21, 2004, at: 100 Putnam Green, 3rd Floor
Greenwich, CT 06830-6027
Hyatt Regency Hotel (203) 532-2000
1800 East Putnam Avenue
Greenwich, CT 06870
Stockholder Inquiries
Common Stock Trading Stockholder inquiries, including requests for the
====================
following: (i) change of address; (ii) replacement
AmBase stock is traded through one or more market-makers of lost stock
certificates;(iii) Common Stock name with quotations made available in the
"pink sheets" registration changes; (iv) Quarterly Reports on published by the
National Quotation Bureau, Inc. Form 10-Q; (v) Annual Reports on Form 10-K;
(vi)
proxy material; and (vii) information regarding
Issue Abbreviation Ticker Symbol stockholdings, should be directed to:
Common Stock AmBase ABCP American Stock Transfer and Trust Company
59 Maiden Lane
New York, NY 10038
Transfer Agent and Registrar Attention: Shareholder Services
============================
(800) 937-5449 or (718) 921-8200 Ext. 6820
American Stock Transfer and Trust
Company In addition, the Company's public reports,
59 Maiden Lane including Quarterly Reports on Form 10-Q, Annual
New York, NY 10038 Reports on Form 10-K and Proxy Statements, can be
Attention: Shareholder Services obtained through the Securities and Exchange
(800) 937-5449 or (718) 921-8200 Ext. 6820 Commission EDGAR Database over the World Wide Web
at www.sec.gov.
Independent Auditors Number of Stockholders
PricewaterhouseCoopers LLP As of January 30, 2004, there were
1177 Avenue of the Americas approximately 16,000 stockholders.
New York, NY 10036