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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(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, 1998
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 1-7265
AMBASE CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 95-2962743
(State of incorporation) (I.R.S. Employer Identification No.)
51 Weaver Street, Building 2, Greenwich, CT 06831-5155
(Address of principal executive offices)
Registrant's telephone number, including area code (203) 532-2000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock ($0.01 par value) None
Rights to Purchase Common Stock None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, 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.
At January 29, 1999, there were 44,533,519 shares of registrant's Common Stock
outstanding. At January 29, 1999 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 $2.64 per share, was approximately $93 million. The Common Stock
constitutes registrant's only outstanding security.
Portions of the registrant's definitive Proxy Statement for its 1999 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 14, Page 34.
AmBase Corporation
Annual Report on Form 10-K
December 31, 1998
CROSS REFERENCE SHEET FOR
PARTS I, II, III and IV 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...............3
Executive Officers of the Registrant..............................3
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters.......................................4
Item 6. Selected Financial Data...........................................4
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations.....................5
Item 8. Financial Statements and Supplementary Data......................10
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure..............................33
PART III
Item 10. Directors and Executive Officers of the Registrant...............33
Item 11. Executive Compensation...........................................33
Item 12. Security Ownership of Certain Beneficial Owners and Management...33
Item 13. Certain Relationships and Related Transactions...................33
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K..34
PART I
ITEM 1. BUSINESS
Corporate Profile
AmBase Corporation (the "Company") was incorporated as a Delaware corporation in
1975 by the City Investing Company ("City") as the holding company for The Home
Insurance Company, a New Hampshire insurance corporation, and its affiliated
property and casualty insurance companies ("The Home"). In 1985, City, which
prior to that date 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 on February 13, 1991 to Home Holdings, Inc. ("Home Holdings").
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 approximate 6.3% equity interest in SDG, Inc. for
$1,250,000 and was granted the exclusive right to act as the investment
banker/financial advisor to SDG, Inc. and all of its subsidiaries and
affiliates.
SDG, Inc. is a development stage company which specializes in creating new
technology-specific companies that are dedicated to the clinical and commercial
development of proprietary, targeted liposomal delivery systems for
pharmaceutical therapies and consumer product ingredients. SDG, Inc.'s lipid
vesicles are protected by numerous U.S. and related foreign patents.
Also in December 1997, the Company purchased $100,000 of convertible preferred
stock in AMDG, Inc. ("AMDG"), a majority owned subsidiary of SDG, Inc. AMDG is a
development stage pharmaceutical company focused on the clinical development of
new therapies for the treatment of both Type I and Type II diabetes and has
received from SDG, Inc. a worldwide, exclusive, royalty-free license to certain
patented technology. AMDG raised $3.7 million of equity through a private
placement in December 1997.
In November 1993, the Company acquired 51% of the issued and outstanding common
stock of Augustine Asset Management, Inc. ("Augustine"), a Florida based
investment advisory firm. On October 4, 1996, the Company sold its entire
interest in Augustine, to Augustine. See Item 8 - Note 6 to the Company's
consolidated financial statements for further information.
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.
The Company's assets currently consist primarily of cash and cash equivalents
and investment securities.
The Company had 7 employees at December 31, 1998.
The Company's main source of non-operating revenue is interest income earned on
investment securities and cash equivalents. In order to maintain the principal
value of its assets, the Company has invested substantially all of its funds in
U.S. Treasury Bills and short-term money market funds. The Company continues to
evaluate a number of possible acquisitions, and is engaged in the management of
its remaining assets and liabilities, including the contingent and alleged tax
and litigation liabilities, as described in Item 8 - Notes 11 and 13 to the
Company's consolidated financial statements. The Company intends to aggressively
contest all pending and threatened litigation and contingencies, as well as
pursue all sources for contributions to settlements. In order to continue on a
long-term basis, the Company must both resolve its contingent and alleged
liabilities by prevailing upon or settling these claims for less than the
amounts claimed and generate profits by acquiring existing operations and/or by
developing new operations.
See Item 8 - Note 13 to the Company's consolidated financial statements for a
discussion of Supervisory Goodwill Litigation.
-1-
At December 31, 1998, the Company's liabilities, including reserves for
contingent and alleged liabilities, exceeded total recorded assets by
$25,000,000. The Company has significant alleged tax liabilities and is a
defendant in a number of lawsuits and governmental proceedings, the ultimate
outcome of which could have a material adverse effect on its financial condition
and results of operations. Because of the nature of the contingent and alleged
liabilities and the inherent difficulty in predicting the outcome of the
litigation and governmental proceedings, management is unable to predict whether
the Company's recorded reserves will be adequate or its resources sufficient to
satisfy its ultimate obligations. The accompanying consolidated financial
statements do not include any adjustments that might result from the outcome of
these uncertainties. For a discussion of the alleged tax liabilities, lawsuits
and proceedings, see Item 8 - Notes 11 and 13 to the Company's consolidated
financial statements. Although the basis for the calculation of the litigation
and contingency reserves and income tax reserves are regularly reviewed by the
Company's management and outside legal counsel, the assessment of these reserves
includes an exercise of judgment and is a matter of opinion.
Discontinued Operations
For a discussion of discontinued investment management operations, refer to Item
8 - Note 6 to the Company's consolidated financial statements.
ITEM 2. PROPERTIES
The Company leases approximately 4,800 square feet for use as its executive
office at 51 Weaver Street, Building 2, Greenwich, CT 06831-5155.
ITEM 3. LEGAL PROCEEDINGS
The Company has significant alleged tax liabilities and is a defendant in a
number of lawsuits and governmental proceedings, the ultimate outcome of which
could have a material adverse effect on its financial condition and results of
operations. Because of the nature of the contingent and alleged liabilities and
the inherent difficulty in predicting the outcome of the litigation and
governmental proceedings, management is unable to predict whether the Company's
recorded reserves will be adequate or its resources sufficient to satisfy its
ultimate obligations. The accompanying consolidated financial statements do not
include any adjustments that might result from the outcome of these
uncertainties. Although the basis for the calculation of the litigation and
contingency reserves and income tax reserves are regularly reviewed by the
Company's management and outside legal counsel, the assessment of these reserves
includes an exercise of judgment and is a matter of opinion. At December 31,
1998, the litigation and contingency reserves were $2,076,000. For a discussion
of alleged tax liabilities, lawsuits and proceedings, see Item 8 - Notes 11 and
13 to the Company's consolidated financial statements.
In addition to the litigation and contingency reserves, the Company had a
reserve for income taxes of $66,388,000 at December 31, 1998. For a further
discussion, see Item 8 - Note 11, Income Taxes and Note 13, Legal Proceedings,
Dispute with Internal Revenue Service, Withholding Taxes (Netherlands Antilles)
to the Company's consolidated financial statements.
See Item 8 - Note 13 to the Company's consolidated financial statements for a
discussion of Supervisory Goodwill Litigation.
-2-
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,
1998:
================================================================================
Name Age Present Title
================================================================================
Richard A. Bianco 51 Chairman, President and
Chief Executive Officer of
AmBase Corporation
John P. Ferrara 37 Vice President, Chief Financial
Officer and Controller of
AmBase Corporation
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.
-3-
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
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, mark-down or commission, and may not necessarily
represent actual transactions.
================================================================================
1998 1997
High Low High Low
================================================================================
First Quarter $4.06 $3.50 $2.92 $2.50
Second Quarter 4.06 2.80 2.96 2.49
Third Quarter 3.40 2.16 3.02 2.58
Fourth Quarter 2.86 1.65 3.96 2.90
================================================================================
As of January 29, 1999, there were approximately 21,000 beneficial owners of the
Company's Common Stock. No dividends were declared or paid on the Company's
Common Stock in 1998 or 1997. The Company does not intend to declare or pay
dividends in the foreseeable future.
For information concerning the Company's stockholder rights plan, see Item 8 -
Note 7 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 Item 8 of this Form 10-K. The
consolidated statements of operations, for the periods ended prior to the
October 4, 1996 sale of Augustine were retroactively reclassified to reflect
their operations as discontinued operations.
================================================================================
Years ended December 31
(in thousands, except
per share data) 1998 1997 1996 1995 1994
================================================================================
Interest income, net $ 2,430 $ 2,661 $ 2,641 $ 2,835 $ 2,092
Income (loss) from continuing
operations, before income taxes 423 (1,275) 6,636 6,005 6,246
Income tax (expense) benefit (242) 191 7,189 (1,997) (148)
Income (loss) from continuing
operations 181 (1,084) 13,825 4,008 6,098
Income from discontinued
investment management
operations, net of income
taxes - - 207 60 32
Net income (loss) 181 (1,084) 14,032 4,068 6,130
Earnings per common share
- basic
Income (loss) from continuing
operations $ - $ (0.02) $ 0.31 $ 0.09 $ 0.14
Income (loss) from discontinued
operations - - - - -
- --------------------------------------------------------------------------------
Net income (loss) $ - $ (0.02) $ 0.31 $ 0.09 $ 0.14
- --------------------------------------------------------------------------------
Earnings per common share
- assuming dilution
Income (loss) from continuing
operations $ - $ (0.02) $ 0.30 $ 0.09 $ 0.14
Income (loss) from discontinued
operations $ - - - - -
- --------------------------------------------------------------------------------
Net income (loss) $ - $ (0.02) $ 0.30 $ 0.09 $ 0.14
================================================================================
Dividends - - - - -
================================================================================
Total assets $ 51,638 $ 64,270 $66,229 $65,677 $70,113
Total stockholders' equity (25,000) (25,181) (24,097) (38,273) (42,204)
================================================================================
-4-
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 Item 8, herein. On October
4, 1996, the Company sold its entire interest in Augustine. Accordingly, the
operations of Augustine have been reclassified as discontinued investment
management operations in the accompanying consolidated financial statements.
CONTINUING OPERATIONS
Financial Condition
The Company's assets at December 31, 1998 aggregated $51,638,000, consisting
principally of cash and cash equivalents of $2,886,000 and investment securities
of $47,156,000. At December 31, 1998, the Company's liabilities, including
reserves for contingent and alleged liabilities, as further described in Item 8
- - Notes 11 and 13 to the Company's consolidated financial statements, exceeded
total recorded assets by $25,000,000.
In June 1998, the Company paid $12,700,000 to the IRS for tax and estimated
interest in full satisfaction of the Company's Fresh Start tax liability. This
amount was previously reserved for as part of the Company's income tax reserves
account. See Part II - Item 8 - Note 11 for a more complete discussion regarding
the Company's payment to the IRS in connection with the Fresh Start tax
proceeding and utilization of net operating loss carryforwards.
Pursuant to the Home Holdings Revised Third Amended and Restated Plan of
Reorganization (the "Revised Plan"), on July 30, 1998 the Company received
$15,200,000 in full satisfaction of all the Company's claims relating to Home
Holdings other than certain disputed claims. See Part II - Item 8 - Note 4 for
further information regarding the Company's receivable from Home Holdings and
the Company's continuing rights to pursue certain disputed claims against Home
Holdings pursuant to the Home Holdings bankruptcy case proceedings.
The cash needs of the Company in 1998 were principally satisfied by interest
income received on investment securities and cash equivalents, the Company's
current financial resources and the $15,200,000 received pursuant to the Home
Holdings Revised Plan. Management believes that the Company's cash resources are
sufficient to continue operations for 1999.
The cash needs of the Company for 1997 were principally satisfied by interest
income received on investment securities and cash equivalents, a $475,000 income
tax refund and the Company's cash resources.
The cash needs of the Company for 1996 were principally satisfied by the receipt
of a 1977 tax refund, collections of the receivable from Home Holdings and
interest income received on investment securities and cash equivalents.
Management believes that the Company's cash resources are sufficient to continue
operations for 1999. Because of the nature of the contingent and alleged
liabilities described in Item 8 - Notes 11 and 13 to the Company's consolidated
financial statements, the Company is unable to predict whether it will have the
ability to generate sufficient resources to satisfy its ultimate obligations.
For the year ended December 31, 1998, cash of $14,892,000 was used by operating
activities of continuing operations, including the payment of $12,700,000 to the
Internal Revenue Service ("IRS") for the Company's Fresh Start tax liability,
the payment of operating expenses and payments charged against the litigation
and contingency reserve partially offset by interest income, and the receipt of
amounts received pursuant to the Home Holdings Revised Plan.
For the year ended December 31, 1997, cash of $4,486,000 was used by operating
activities of continuing operations, including the payment of operating
expenses, and payments charged against litigation and contingency reserves
partially offset by the receipt of interest income, and a $475,000 income tax
refund.
For the year ended December 31, 1996, cash of $1,622,000 was used by operating
activities of continuing operations, including the payment of other liabilities,
payments charged against income tax reserves and litigation and contingency
reserves, and the payment of operating expenses, partially offset by the receipt
of a 1977 tax refund, and the receipt of interest income.
-5-
There were no material commitments for capital expenditures as of December 31,
1998. 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 remaining assets and liabilities, including the
contingent and alleged tax and litigation liabilities described in Item 8 -
Notes 11 and 13 to the Company's consolidated financial statements. Extensive
discussions and negotiations are ongoing with respect to certain of these
matters. The Company intends to aggressively contest all pending and threatened
litigation and contingencies, as well as pursue all sources for contributions to
settlements. In order to continue on a long-term basis, the Company must both
resolve its contingent and alleged liabilities by prevailing upon or settling
these claims for less than the amounts claimed, and generate profits by
acquiring existing operations and/or by developing new operations.
See Item 8 - Note 13 to the Company's consolidated financial statements for a
discussion of Supervisory Goodwill Litigation.
Management of the Company continually reviews the likelihood of liability and
associated costs of pending and threatened litigation. At December 31, 1998, the
litigation and contingency reserves were $2,076,000. For a discussion of alleged
tax liabilities and lawsuits, see Item 8 - Notes 11 and 13 to the Company's
consolidated financial statements.
In addition to the litigation and contingency reserves, the Company had a
reserve for income taxes of $66,388,000 at December 31, 1998. For a further
discussion, see Item 8 - Note 11, Income Taxes and Note 13, Legal Proceedings,
Dispute with Internal Revenue Service, Withholding Taxes (Netherlands Antilles)
to the Company's consolidated financial statements.
During 1996, the Company determined that there was a reduced probability of
incurring costs to defend and/or settle potential litigation with respect to
Carteret, see the Company's Annual Report on Form 10-K for the year ended
December 31, 1995, Item 8 - Note 11. As a result, the Company reduced its
litigation and contingency reserves by $8,000,000 and recorded such amount as
other income during 1996. In making such determination, management took into
consideration numerous factors, including the failure of the RTC to notify the
Company of any potential legal action prior to the expiration of a significant
statute of limitations deadline and the transfer of the investigative duties of
the RTC to the FDIC upon the expiration of the RTC's charter on December 31,
1995 pursuant to federal statute. Management also considered the July 1, 1996
decision by the U.S. Supreme Court in the consolidated supervisory goodwill
cases of Winstar, Glendale Federal and Statesman, which held the United States
liable for damages.
As noted above, the Company has significant alleged tax liabilities and is a
defendant in a number of lawsuits and governmental proceedings, the ultimate
outcome of which could have a material adverse effect on its financial condition
and results of operations. Because of the nature of the contingent and alleged
liabilities and the inherent difficulty in predicting the outcome of litigation
and governmental proceedings, management is unable to predict whether the
Company's recorded reserves will be adequate or its resources sufficient to
satisfy its ultimate obligations. The accompanying consolidated financial
statements do not include any adjustments that might result from the outcome of
these uncertainties. For a discussion of the alleged tax liabilities, lawsuits
and proceedings, see Item 8 - Notes 11 and 13 to the Company's consolidated
financial statements. Although the basis for the calculation of the litigation
and contingency reserves and income tax reserves are regularly reviewed by the
Company's management and outside legal counsel, the assessment of these reserves
includes an exercise of judgment and is a matter of opinion.
The Company contractually assumed the tax liabilities of City, which, prior to
September 1985, owned all the outstanding shares of Common Stock of the Company.
For all periods through 1992, the IRS and the Company do not agree with respect
to only one issue, withholding taxes in connection with a Netherlands Antilles
finance subsidiary of City.
During 1996, in connection with the completion by the IRS of the Company's 1985
to 1991 federal income tax audits (excluding Fresh Start), the Company made
payments to the IRS totaling $1,995,000. These amounts were previously reserved
for and charged against the income tax reserves account. During the first
quarter of 1997, $475,000 of income taxes were refunded as a result of an
overpayment to the IRS for 1988 through 1991 tax years. This amount was recorded
as an income tax benefit in the first quarter of 1997.
-6-
With respect to the withholding taxes in connection with a Netherlands Antilles
finance subsidiary of City, on May 11, 1995 the IRS issued a Notice of
Deficiency for withholding taxes on interest payments for the years 1979 through
1985. In the Notice of Deficiency, the IRS contends that City's wholly owned
Netherlands Antilles finance subsidiary should be disregarded for tax purposes.
The Company vigorously contested the IRS's position in accordance with the IRS's
internal appeals procedures. In January 1992, the National Office of the IRS
issued technical advice supporting the auditing agent's position. In October
1992, the Company appealed this technical advice to the National Office. The
National Office advised the Company that it expected to issue technical advice
supporting the auditing agent's position, whereupon, the Company advised the IRS
that it was withdrawing its technical advice request.
On June 30, 1995, the Company filed a petition in the United States Tax Court
("Tax Court") contesting the Notice of Deficiency. The IRS filed its answer on
August 23, 1995. The Company filed a motion for summary judgment in its favor on
February 13, 1996. On April 17, 1996, the IRS filed a Notice of Objection to the
Company's motion for summary judgment. The Tax Court requested, and the Company
filed, on July 3, 1996, a reply to the IRS's Notice of Objection. On September
19, 1996, the Tax Court denied the Company's motion for summary judgment without
prejudice. Based on the Tax Court's examination of the record and the status of
the discovery process, the Court concluded that summary adjudication at this
time was inappropriate. The Tax Court directed the parties to engage in full and
complete discovery as expeditiously as possible. A trial was held in this case
on March 24, 1997, after which the Judge asked the IRS and the Company to submit
post-trial briefs, which have subsequently been submitted to the Tax Court. If
the IRS were to prevail on this issue, the Company would be liable for taxes and
interest in excess of the Company's financial resources.
In a case dealing with a similar withholding tax issue, the Tax Court ruled in
favor of the taxpayer, Northern Indiana Public Service Co. ("Northern Indiana")
in November 1995. The Tax Court rejected the IRS's contention that interest paid
to Northern Indiana's foreign subsidiary was subject to United States tax
withholding. The IRS appealed this decision (Northern Indiana Public Service Co.
v. Commissioner, 105 T.C. No. 22) to the United States Court of Appeals for the
7th Circuit ("Appeals Court"). The Appeals Court affirmed the Tax Court's ruling
in favor of Northern Indiana. Although the Appeals Court decision in the
Northern Indiana case could be beneficial to the Company's case, it is not
necessarily indicative of the ultimate result of the final settlement of the
Netherlands Antilles issue between the Company and the IRS.
Based on an evaluation of the IRS's contention, counsel has advised the Company
that, although the outcome in litigation can by no means be assured, the Company
has a very strong case and should prevail. Notwithstanding counsel's opinion and
the Tax Court's ruling in the Northern Indiana case, it is not possible at this
time to determine the final disposition of this issue, when the issues will be
resolved, or their final financial effect. A final disposition of this issue in
the Company's favor would have a material, positive effect on the Company's
Statement of Operations and Financial Condition.
See Item 8 - Note 11, Income Taxes, and Note 13, Legal Proceedings, Dispute with
Internal Revenue Service, Withholding Taxes (Netherlands Antilles) to the
Company's consolidated financial statements, for additional details.
-7-
Results of Operations - Continuing Operations
Summarized financial information for the continuing operations of the Company
for the years ended December 31 is as follows:
================================================================================
(in thousands) 1998 1997 1996
================================================================================
Operating expenses:
Compensation and benefits $ 3,117 $ 3,116 $ 2,969
Professional and outside services 1,128 512 457
Insurance 82 120 177
Occupancy 86 87 89
Other operating 142 160 161
- --------------------------------------------------------------------------------
4,555 3,995 3,853
- --------------------------------------------------------------------------------
Operating loss (4,555) (3,995) (3,853)
- --------------------------------------------------------------------------------
Interest income 2,430 2,661 2,641
Other income 2,548 59 30
Other income - litigation and
contingency reserves reversal - - 8,000
Realized loss on sale of investment
securities - available for sale - - (182)
- --------------------------------------------------------------------------------
Income (loss) from continuing
operations before income taxes 423 (1,275) 6,636
- --------------------------------------------------------------------------------
Income tax (expense) benefit (242) 191 7,189
- --------------------------------------------------------------------------------
Income (loss) from continuing operations $ 181 $(1,084) $13,825
================================================================================
The Company's main source of non-operating revenue is interest income earned on
investment securities and cash equivalents. The Company's management expects
that operating cash needs in 1999 will be met principally by the Company's
current financial resources and the receipt of non-operating revenue consisting
of interest income earned on investment securities and cash equivalents.
The Company recorded income from continuing operations of $181,000 in the year
ended December 31, 1998. As further described in Financial Condition, above,
1998 includes $2,548,000 of non-recurring other income, principally attributable
to the receipt of $2,500,000 in connection with the Home Holdings Revised Plan
as further described in Part II - Item 8 Note 4. Excluding the non-recurring
other income, the Company would have recorded a loss from continuing operations
of $2,367,000 for the year ended December 31, 1998.
The Company recorded a loss from continuing operations of $1,084,000 in the year
ended December 31, 1997. As further described below, the 1997 period includes a
$475,000 income tax benefit. In addition, the 1997 period includes other income
of $59,000 attributable to the collection by an inactive subsidiary of a
receivable previously considered uncollectible. Excluding these non-recurring
income items, the loss from continuing operations would have been $1,618,000, or
$0.04 per share, for the year ended December 31, 1997.
The Company recorded income from continuing operations of $13,825,000 in the
year ended December 31, 1996. As further described below, the 1996 period
includes other income of $8,000,000, resulting from a reduction in the
litigation and contingency reserves, and an additional income tax benefit of
$7,613,000. Excluding these non-recurring items, the Company would have reported
a loss from continuing operations of $1,788,000, or $0.04 per share, for the
year ended December 31, 1996.
Compensation and benefits was $3,117,000 in 1998, $3,116,000 in 1997 and
$2,969,000 in 1996. The increase in 1997, compared with 1996, of $147,000 is
principally due to increased benefit related costs.
Professional and outside services increased to $1,128,000 in 1998, compared to
1997, and increased to $512,000 in 1997, from $457,000 in 1996. The increase in
1998, compared to 1997, of $616,000 was principally the result of legal fees
incurred attributable to the Home Holdings bankruptcy case. The increase in
1997, compared to 1996, was due to an increase in litigation expenses. Expenses
for professional and outside services in 1998, 1997, and 1996 do not include
costs associated with defending pending and threatened litigation which were
previously reserved for and charged against the litigation and contingency
reserves when paid.
-8-
Insurance expenses decreased in 1998, 1997 and 1996, due to management's
renegotiation of insurance programs.
Occupancy expenses decreased to $86,000 in 1998, from $87,000 in 1997 and
$89,000 in 1996. The decreases in 1998 and 1997 as compared to prior years is
the result of the continued reduction of occupancy related expenses, and the
relocation of the Company's executive office and the closing of an
administrative office during 1996.
Interest income was $2,430,000 in 1998, $2,661,000 in 1997 and $2,641,000 in
1996. The decrease in 1998, compared to the 1997 period, was attributable to a
decreased yield on cash equivalents and investment securities. The increase in
1997, compared to 1996, was attributable to an increased yield on cash
equivalents and investment securities.
Other income in 1998 of $2,548,000 is principally attributable to the receipt of
$2,500,000 received in connection with the Home Holdings Revised Plan.
Other income of $59,000 in 1997 is attributable to the collection by an inactive
subsidiary of a receivable previously considered uncollectible.
The Company realized a loss of $182,000 in 1996 on the sale of investment
securities - available for sale.
During 1996, the Company recorded as other income an $8,000,000 reduction in the
litigation and contingency reserves, as more fully described in Financial
Condition, above.
The 1998 income tax provision of $242,000 is principally attributable to state
and local taxes.
During 1997, the Company received a $475,000 income tax refund. This amount was
recognized as an income tax benefit in 1997. In addition, included in income tax
benefit is a state and local tax provision of $284,000 in 1997.
During 1996, the Company received a 1977 income tax refund of $7,613,000. This
amount was recognized as an income tax benefit in 1996, based on management's
continuing review of the overall tax liability position of the Company. In
addition, included in income tax benefit is a federal and state tax provision of
$424,000 in 1996.
A reconciliation between income taxes computed at the statutory federal rate and
the provision for income taxes is included in Item 8 - Note 11 to the Company's
consolidated financial statements.
Discontinued Investment Management Operations
See Item 8 - Note 6 to the Company's consolidated financial statements for
information.
Year 2000 Issue
The Company has completed its review of year 2000 issues and has determined it
will not have a material effect on the Company's business, results of operations
or financial condition.
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
40 Wall Street, 46th Floor
New York, NY 10005
Attention: Shareholder Services
(800) 937-5449 or (718) 921-8200
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 EDGAR Database over the World Wide Web at
www.sec.gov.
-9-
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of
AmBase Corporation
In our opinion, the accompanying consolidated Balance Sheets and the related
consolidated Statements of Operations, of Changes in Stockholders' Equity, and
of Cash Flows present fairly, in all material respects, the financial position
of AmBase Corporation and its subsidiaries (the "Company") at December 31, 1998
and 1997, and the results of their operations and their cash flows for each of
the three years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards 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 the opinion expressed above.
As discussed in Notes 11 and 13, the accompanying financial statements include
income tax reserves relating to a significant issue. Final resolution of this
issue is dependent upon future events, which may result in amounts more or less
than those presented. The ultimate outcome of this issue cannot presently be
determined.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, substantial operations of the Company have been
discontinued, and substantial contingencies exist against the Company in various
lawsuits and proceedings, which are discussed in Notes 11 and 13 to the
financial statements and the second paragraph of this report. The Company has a
net capital deficiency of approximately $25,000,000 at December 31, 1998. These
factors raise substantial doubt about the Company's ability to continue as a
going concern. It will be necessary for the Company to resolve the contingent
liabilities by prevailing upon or settling these claims at amounts less than the
claims and the amounts recorded and to generate, through acquisition or start
up, profitable operations to continue on a long-term basis. See Note 1 for
further discussion of management's plans. The financial statements do not
include any adjustments that might result from the outcome of these
uncertainties.
PricewaterhouseCoopers LLP
New York, New York
March 10, 1999
-10-
AMBASE CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
Years Ended December 31
================================================================================
(in thousands, except per share data) 1998 1997 1996
================================================================================
Operating expenses:
Compensation and benefits $ 3,117 $ 3,116 $ 2,969
Professional and outside services 1,128 512 457
Insurance 82 120 177
Occupancy 86 87 89
Other operating 142 160 161
- --------------------------------------------------------------------------------
4,555 3,995 3,853
- --------------------------------------------------------------------------------
Operating loss (4,555) (3,995) (3,853)
- --------------------------------------------------------------------------------
Interest income 2,430 2,661 2,641
Other income 2,548 59 30
Other income - litigation and
contingency reserves reversal - - 8,000
Realized loss on sale of investment
securities - available for sale - - (182)
- --------------------------------------------------------------------------------
Income (loss) from continuing operations
before income taxes 423 (1,275) 6,636
Income tax (expense) benefit (242) 191 7,189
- --------------------------------------------------------------------------------
Income (loss) from continuing operations 181 (1,084) 13,825
Income from discontinued investment
management operations, net of income taxes - - 207
- --------------------------------------------------------------------------------
Net income (loss) $ 181 $(1,084) $14,032
================================================================================
Earnings per common share - basic
Income (loss) from continuing operations $ - $ (0.02) $ 0.31
Income (loss) from discontinued operations - - -
- --------------------------------------------------------------------------------
Net income (loss) $ - $ (0.02) $ 0.31
================================================================================
Earnings per common share - assuming dilution
Income (loss) from continuing operations $ - $ (0.02) $ 0.30
Income (loss) from discontinued operations - - -
- --------------------------------------------------------------------------------
Net income (loss) $ - $ (0.02) $ 0.30
================================================================================
Dividends $ - $ - $ -
================================================================================
Average shares outstanding 44,534 44,534 44,534
================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
-11-
AMBASE CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
December 31
================================================================================
(in thousands) 1998 1997
================================================================================
Assets:
Cash and cash equivalents $ 2,886 $ 5,548
Investment securities - held to maturity
(market value $47,160 and $44,276, respectively) 47,156 44,310
Receivable from Home Holdings, Inc. - 12,736
Investment in SDG, Inc. at cost 1,250 1,250
Other assets 346 426
- --------------------------------------------------------------------------------
Total assets $ 51,638 $ 64,270
================================================================================
Liabilities and Stockholders' Equity
Liabilities:
Accounts payable and accrued liabilities $ 1,642 $ 1,550
Supplemental retirement plan 5,079 4,865
Postretirement welfare benefits 1,301 1,412
Other liabilities 152 196
Litigation and contingency reserves 2,076 2,340
Income tax reserves 66,388 79,088
- --------------------------------------------------------------------------------
Total liabilities 76,638 89,451
- --------------------------------------------------------------------------------
Commitments and contingencies - -
- --------------------------------------------------------------------------------
Stockholders' equity:
Common stock 447 447
Paid-in capital 547,712 547,712
Accumulated deficit (572,512) (572,693)
Treasury stock (647) (647)
- --------------------------------------------------------------------------------
Total stockholders' equity (25,000) (25,181)
- --------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 51,638 $ 64,270
================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
-12-
AMBASE CORPORATION AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
Years Ended December 31
================================================================================
Accumulated
Paid- Other
Common In Comprehensive Accumulated Treasury
(in thousands) Stock Capital Income (Loss) Deficit Stock Total
================================================================================
December 31, 1995 $447 $547,712 $(144) $(585,641) $(647) $(38,273)
Comprehensive
income:
Net income - - - 14,032 - 14,032
Reclassification
adjustment for
losses realized
in net income - - 144 - - 144
- --------------------------------------------------------------------------------
Comprehensive income - - - - - 14,176
- --------------------------------------------------------------------------------
December 31, 1996 447 547,712 - (571,609) (647) (24,097)
Net loss - - - (1,084) - (1,084)
- --------------------------------------------------------------------------------
December 31, 1997 447 547,712 - (572,693) (647) (25,181)
Net income - - - 181 - 181
- --------------------------------------------------------------------------------
December 31, 1998 $447 $547,712 $ - $(572,512) $(647) $(25,000)
================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
-13-
AMBASE CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years Ended December 31
================================================================================
(in thousands) 1998 1997 1996
================================================================================
Cash flows from operating activities:
Income (loss) from continuing operations $ 181 $(1,084) $13,825
Adjustments to reconcile income (loss)
from continuing operations to net cash
used by continuing operations:
Other assets 86 (128) 286
Accounts payable and accrued liabilities 92 122 692
Litigation and contingency reserves uses (264) (614) (1,195)
Litigation and contingency reserves
- (reserve reversal) - - (8,000)
Income tax reserves (12,700) - 5,619
Income tax refund - 1977 - - (7,613)
Accretion of discount
- investment securities (2,350) (2,419) (2,428)
Realized loss on sale of investment
securities - available for sale - - 182
Other, net 63 (363) (2,990)
- --------------------------------------------------------------------------------
Net cash used by operating activities
of continuing operations (14,892) (4,486) (1,622)
- --------------------------------------------------------------------------------
Cash used by discontinued investment
management operations - - (291)
- --------------------------------------------------------------------------------
Cash flows from investing activities:
Maturities of investment securities
- held to maturity 78,451 77,880 71,235
Purchases of investment securities
- held to maturity (78,947) (72,512) (76,011)
Purchases of investment securities
- available for sale - (100) -
Investment in SDG, Inc. - (1,250) -
Proceeds from sales of investment
securities - available for sale - - 31
Proceeds from Home Holdings, Inc.
receivable 12,708 450 3,997
Proceeds from sale of Augustine
Asset Management, Inc. - - 500
Other, net 18 (25) -
- --------------------------------------------------------------------------------
Net cash provided (used) by
investing activities 12,230 4,443 (248)
- --------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (2,662) (43) (2,161)
Cash and cash equivalents at beginning of year 5,548 5,591 7,752
- --------------------------------------------------------------------------------
Cash and cash equivalents at end of year $2,886 $5,548 $ 5,591
================================================================================
The accompanying notes are an integral part of these consolidated financial
statements.
-14-
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 a 6.3% ownership interest in SDG, Inc. The Company
previously held a majority ownership interest in Augustine Asset Management,
Inc. ("Augustine"), an investment advisor, and also previously owned a savings
bank and an insurance company, all of which have been designated as discontinued
operations, as further discussed below.
On October 4, 1996, the Company sold its entire interest in Augustine, to
Augustine. See Note 6 for a further discussion.
On December 4, 1992, Carteret Savings Bank, FA ("Carteret") was placed in
receivership by the Office of Thrift Supervision ("OTS").
On February 13, 1991, the Company sold its ownership interest in The Home
Insurance Company ("The Home") and its subsidiaries to Home Holdings, Inc.
("Home Holdings"). See Note 4 for a further discussion.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. Substantial contingent and
alleged liabilities exist against the Company through various lawsuits and
proceedings, as described in Notes 11 and 13. These factors raise substantial
doubt about the Company's ability to continue as a going concern. In order to
continue on a long-term basis, the Company must both resolve its contingent and
alleged liabilities by prevailing upon or settling these claims for less than
the amounts claimed, and generate profits by acquiring existing operations
and/or by developing new operations. The financial statements do not include
adjustments to the carrying value of assets and liabilities which might be
necessary should the Company not continue in operation. The Company continues to
evaluate a number of possible acquisitions, and is engaged in the management of
its remaining assets and liabilities, including the contingent and alleged tax
and litigation liabilities, as described in Notes 11 and 13. The Company intends
to aggressively contest all pending and threatened litigation and governmental
proceedings, as well as pursue all sources for contributions to settlements. The
Company's main source of non-operating revenue is interest earned on investment
securities and cash equivalents. The Company's management expects that operating
cash needs in 1999 will be met principally by the Company's current financial
resources and the receipt of non-operating revenue consisting of interest income
earned on investment securities and cash equivalents. Because of the nature of
the contingent and alleged liabilities and the inherent difficulty in predicting
the outcome of litigation and governmental proceedings, management is unable to
predict whether the Company's recorded reserves will be adequate or its
resources sufficient to satisfy its ultimate obligations. The accompanying
consolidated financial statements do not include any adjustments that might
result from the outcome of these uncertainties. For a discussion of the alleged
tax liabilities, lawsuits and governmental proceedings, see Notes 11 and 13.
Although the basis for the calculation of the litigation and contingency
reserves and income tax reserves are regularly reviewed by the Company's
management and outside legal counsel, the assessment of these reserves includes
an exercise of judgment and is a matter of opinion.
See Note 13 for a discussion of Supervisory Goodwill Litigation.
Note 2 - Summary of Significant Accounting Policies
The consolidated financial statements have been prepared in accordance with
generally accepted accounting principles ("GAAP"). Certain reclassifications
have been made to the 1997 and 1996 consolidated financial statements to conform
with the 1998 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.
-15-
AMBASE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
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. Investments in companies in
which ownership interest is less than 20% are accounted for using the cost
method.
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 deferred taxes.
Interest and dividends on investment securities are recognized in the Statement
of Operations when earned. Realized gains and losses on the sale of investment
securities - available for sale are calculated using the first-in/first-out
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.
Comprehensive Income:
During 1998, the Company adopted Statement of Financial Account Standards No.
130, "Reporting Comprehensive Income" ("Statement 130"). Statement 130
establishes the concept of comprehensive income and provides standards for
reporting comprehensive income. Comprehensive income has two major components;
net income as reported in the Consolidated Statements of Operations, and other
comprehensive income. The Company has changed the format of its Consolidated
Statements of Changes in Stockholders' Equity to present comprehensive income.
The adoption of Statement 130 had no impact on total stockholders' equity or net
income.
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, unless 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.
Earnings per share:
The Company presents earnings per share ("EPS") in accordance with Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
No. 128, "Earnings Per Share" ("Statement 128"). Statement 128 requires dual
presentation of basic and diluted EPS. Furthermore, a reconciliation of the
numerator and denominator of the basic EPS computation to the numerator and
denominator of the diluted EPS computation is required.
Stock-based compensation:
The Company adopted the disclosure requirements of Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("Statement 123") and continues to
account for stock compensation using APB Opinion 25, "Accounting for Stock
Issued to Employees" ("APB 25"), making proforma disclosures of net income and
earnings per share as if the fair value based method had been applied. For a
further discussion, see Note 10.
-16-
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 which are carried at amortized cost
based upon the Company's intent and ability to hold these investments to
maturity.
Investment securities at December 31 consist of the following:
================================================================================
1998 1997
------------------------------ ------------------------------
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 $47,156 $47,156 $47,160 $44,310 $44,310 $44,276
================================================================================
The gross unrealized gains and losses on investment securities at December 31,
consist of the following:
================================================================================
(in thousands) 1998 1997
================================================================================
Held to Maturity - Gross unrealized gains (losses) $ 4 $ (34)
================================================================================
Other investment securities at December 31, 1998 and 1997 consist of $100,000 of
convertible preferred stock in AMDG, Inc., that was purchased through a private
placement in December 1997, is classified as other assets and is carried at cost
which approximates market value. During 1996, investment securities - available
for sale were sold, resulting in proceeds of $31,000 and a realized loss of
$182,000.
-17-
AMBASE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
Note 4 - Receivable From Home Holdings
In 1991, the Company sold its entire interest in The Home Insurance Company
("Home Insurance") and its subsidiaries to Home Holdings, Inc. ("Home Holdings")
pursuant to an agreement between the Company, Home Insurance and Home Holdings
(then known as TVH Acquisition Corporation) dated as of September 28, 1990 (as
amended the "Stock Purchase Agreement"). As part of the sale proceeds, Home
Holdings agreed to pay $48 million to the Company over a period of years to meet
certain specified obligations of the Company, as incurred, relating to tax
issues, litigation and administrative expenses. The Company had collected the
portion of this receivable with respect to litigation and administrative
expenses. As of January 15, 1998, the Company believed that the remaining
receivable, related principally to tax issues, was at least $12,728,000.
On January 15, 1998, Home Holdings filed a voluntary petition for relief under
Chapter 11 of the United States Bankruptcy Code ("Chapter 11"). Home Holdings
scheduled the Company's outstanding receivable from Home Holdings as a
contingent general unsecured claim in the amount of $11,703,136. The Company
disagreed with Home Holdings' characterization of its receivable as contingent,
and also with the amount of the outstanding receivable. The Company filed, in
connection with the Home Holdings bankruptcy case, a proof of claim ("Proof of
Claim") for all damages, which was significantly in excess of $12,728,000.
On January 15, 1998, Home Holdings filed, along with its petition, a
pre-arranged plan of reorganization under Chapter 11 (the "Plan"). According to
Home Holdings' Plan and accompanying disclosure statement, general unsecured
creditors of Home Holdings, including the Company, were to receive a projected
future recovery of approximately 38.3% of the amounts owed to them.
The Company filed with the United States Bankruptcy Court ("Bankruptcy Court")
an objection to the Plan. Thereafter, Home Holdings filed a Second Amended Plan
(the "Amended Plan"). According to the Amended Plan, Home Holdings purported to
leave the Company's claim unimpaired, which means that the Company would retain
its rights to seek the full amount of its outstanding receivable from Home
Holdings after the Amended Plan was confirmed, and would not be limited to a
recovery of approximately 38.3%. The Company disagreed with the characterization
of its claim as unimpaired, and filed an objection to the Amended Plan.
Home Holdings then filed a number of amended plans, culminating in the Revised
Third Amended and Restated Plan of Reorganization (the "Revised Plan"), to which
the Company agreed. The Revised Plan was confirmed by order of the Bankruptcy
Court dated June 9, 1998, and was declared effective on July 29, 1998.
Pursuant to the Revised Plan, on July 30, 1998, the Company received $15,200,000
in full satisfaction of all of the Company's claims relating to Home Holdings
other than certain disputed claims relating to Section 7.4(c)(iii) of the Stock
Purchase Agreement (the "Disputed Claims"). The Company's rights against Home
Holdings in respect of the Disputed Claims are preserved and survive the
effective date of the Revised Plan, and the Company may pursue any such claims
in federal or state court. The Revised Plan further provides credit support for
any amounts due the Company on account of the Disputed Claims in the form of a
Keepwell Agreement provided by Zurich Reinsurance Centre Holdings. On the
effective date of the Revised Plan, the Company withdrew its Proof of Claim and
exchanged releases with Home Holdings and various other parties.
-18-
AMBASE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
Note 5 - Earnings Per Share
The calculation of basic earnings per share and dilutive earnings per share,
including the effect of dilutive securities, for the years ended December 31, is
as follows:
================================================================================
1998
----------------------------------------
Income Shares Per Share
(in thousands) (Numerator) (Denominator) Amount
================================================================================
Basic earnings per share:
Income from continuing operations $ 181 44,534 $ -
====== ======
Effect of Dilutive Securities:
Assumed stock option exercise - 1,697 -
-----
Diluted earnings per share:
Income from continuing operations
and assumed conversions $ 181 46,231 $ -
================================================================================
================================================================================
1997
----------------------------------------
Loss Shares Per Share
(in thousands) (Numerator) (Denominator) Amount
================================================================================
Basic earnings per share:
Loss from continuing operations $(1,084) 44,534 $ (0.02)
====== ======
Effect of Dilutive Securities:
Assumed stock option exercise - - -
------
Diluted earnings per share:
Loss from continuing operations
and assumed conversions $(1,084) 44,534 $ (0.02)
================================================================================
================================================================================
1996
----------------------------------------
Income Shares Per Share
(in thousands) (Numerator) (Denominator) Amount
================================================================================
Basic earnings per share:
Income from continuing operations $13,825 44,534 $ 0.31
====== ======
Effect of Dilutive Securities:
Assumed stock option exercise - 1,603 -
------
Diluted earnings per share:
Income from continuing operations
and assumed conversions $13,825 46,137 $ 0.30
================================================================================
-19-
AMBASE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
Note 6 - Discontinued Investment Management Operations
On October 4, 1996, the Company sold its entire ownership interest in Augustine
to Augustine, for $500,000 in cash. Accordingly, as of September 30, 1996, the
operations of Augustine were designated as discontinued operations, and the
consolidated statements of operations for the periods presented herein were
retroactively reclassified to report the income from discontinued operations
separately from the results of continuing operations by excluding the operating
revenues and expenses of discontinued operations from the respective statement
captions. The amount of income taxes allocated to discontinued operations
reflects the incremental effect on income taxes that resulted from such
operations.
Income from discontinued operations was $207,000 for 1996. This reflects the
unaudited results of Augustine's operations of $59,000 for the nine month period
ended September 30, 1996, and a gain of $148,000 from the sale.
Note 7 - 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.
At December 31, 1998, 1997 and 1996, there were 44,533,519 shares of the
Company's Common Stock outstanding, excluding 126,488 treasury shares carried at
average cost of $5.12 per share, aggregating approximately $647,000.
At December 31, 1998, there were 6,860,000 shares reserved for issuance under
the Company's stock option and other employee benefit plans.
Accumulated other comprehensive income (loss) shown in the Consolidated
Statements of Changes in Stockholders' Equity at December 31, 1995 is comprised
of the accumulated losses on investment securities available for sale. The
change in other comprehensive income (loss) during 1996 reflects a
reclassification adjustment of $144,000 for losses realized on the sale of
investment securities - available for sale.
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, 2001.
-20-
AMBASE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
Note 8 - 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) 1998 1997 1996
================================================================================
Service cost of current period $ 337 $ 306 $ 225
Interest cost on projected benefit obligation 337 335 336
- --------------------------------------------------------------------------------
$ 674 $ 641 $ 561
================================================================================
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) 1998 1997
================================================================================
Projected benefit obligation at beginning of year $ 5,045 $ 4,732
Service cost 337 306
Interest cost 337 335
Actuarial loss, including effect of change in assumptions 894 172
Benefits paid (460) (500)
- --------------------------------------------------------------------------------
Projected benefit obligation at end of year $ 6,153 $ 5,045
================================================================================
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) 1998 1997
================================================================================
Actuarial present value of benefit obligations:
Accumulated benefit obligations, fully vested $ 5,019 $4,513
================================================================================
Projected benefit obligation for service rendered to date $ 6,153 $5,045
Unrecognized net loss (1,074) (180)
- --------------------------------------------------------------------------------
Accrued pension costs $ 5,079 $4,865
================================================================================
Major assumptions:
Pre-retirement and postretirement discount rate 6.75% 7.0%
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
first 3% 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 $26,000, $18,000 and
$16,000 in 1998, 1997 and 1996, respectively. All contributions are subject to
maximum limitations contained in the Code.
-21-
AMBASE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
Note 9 - Postretirement Benefits Other Than Pensions
Pursuant to a 1985 agreement, the Company has assumed the obligation to provide
a portion of retiree medical and life insurance coverage to individuals who
retired from City Investing Company ("City"), which, prior to September 1985,
owned all the outstanding shares of Common Stock of the Company. The Company and
its subsidiaries do not provide postretirement benefits to employees currently
retiring.
Retiree insurance coverage is provided to participants through group medical and
life insurance contracts. Retiree medical coverage provides supplemental
Medicare coverage for retirees and their eligible spouses. Life insurance is
provided to retirees at 25% of the participant's pre-retirement amount, not to
exceed $50,000. All participants are required to contribute a portion, which may
be adjusted, of the cost of their postretirement benefit coverage. The Company
does not pre-fund these plans and retains the right to modify or terminate these
plans in the future.
The Company accounts for postretirement benefits other than pensions in
accordance with Statement of Financial Accounting Standards No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions". This statement
requires the costs of certain postretirement benefits to be recognized during
the period employees render service, with all such costs being recognized in
full by the eligibility date.
Net periodic postretirement benefit (income) expense for the years ended
December 31 was as follows:
================================================================================
(in thousands) 1998 1997 1996
================================================================================
Interest cost on accumulated
postretirement benefit obligation $ 22 $ 23 $ 32
Amortization of prior service liability (66) (66) (62)
Amortization of unrecognized gain (41) (45) (37)
- --------------------------------------------------------------------------------
Net periodic postretirement benefit
(income) expense $(85) $ (88) $ (67)
================================================================================
A reconciliation of the changes in the accumulated postretirement benefit
obligation from the beginning of the year to the end of the year is as follows:
================================================================================
(in thousands) 1998 1997
================================================================================
Accumulated postretirement benefit
obligation at beginning of year $323 $323
Interest cost 22 23
Amendments (87) -
Actuarial (gain) loss, including effect of assumption changes (13) 3
Plan participant contributions 52 50
Benefit premiums paid (78) (76)
- --------------------------------------------------------------------------------
Accumulated postretirement benefit obligation at end of year $219 $323
================================================================================
The accrued postretirement benefit liability at December 31 is summarized below:
================================================================================
(in thousands) 1998 1997
================================================================================
Accumulated postretirement benefit obligation:
Retirees $ 219 $ 323
- --------------------------------------------------------------------------------
Unrecognized net gains 450 478
Unrecognized prior service liability 632 611
- --------------------------------------------------------------------------------
Accrued postretirement benefit liability $1,301 $1,412
================================================================================
-22-
AMBASE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
The accumulated benefit obligation for 1998, 1997 and 1996 was determined using
the projected unit credit method and a discount rate of 6.75%, 7.0% and 7.5%,
respectively. The health care cost trend rates were assumed to be 8% in 1998, 9%
in 1997, and 10% in 1996, gradually declining to 5.5% in 2001 and remaining at
that level, thereafter.
Assumed health care cost trend rates have a significant effect on the amounts
reported. A 1% change in the assumed health care cost trend rates, while holding
all other assumptions constant, would have the following effects:
================================================================================
1% 1%
(in thousands) Increase Decrease
================================================================================
Effect on net periodic postretirement benefit income $ (1) $ 1
Effect on accumulated postretirement benefit obligation 13 (11)
================================================================================
Note 10 - 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"), beginning with the fiscal year ending on December 31, 1994.
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.
-23-
AMBASE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
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, resignation or absence for disability will not result in the
cancellation of any Options.
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 1998, the Board of Directors of the Company approved the award of
incentive stock options to certain employees to acquire 85,000 shares of AmBase
Common Stock at exercise prices between $3.65 and $4.02 per share, pursuant to
the 1993 Plan.
Under the Company's 1985 Stock Option Plan (the "1985 Plan"), options to
purchase shares of Common Stock could be granted to salaried employees. The 1985
Plan provided for the granting of up to 2,000,000 shares as incentive stock
options and/or nonqualified stock options through May 22, 1995. No additional
stock options can be awarded under the 1985 Plan. As of December 31, 1998,
1,750,000 shares are reserved for issuance under the 1985 Plan. The exercise
price of incentive stock options could not be less than 100% of the fair market
value of the Company's Common Stock on the date of grant, with a maximum life of
ten years, and may not be exercised to purchase stock until vesting requirements
have been met.
-24-
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, 1995 - $ - 1,763 $0.15
Granted 100 2.09 - -
- --------------------------------------------------------------------------------
Outstanding at December 31, 1996 100 2.09 1,763 0.15
Granted 5 2.84 - -
Cancelled - - (13) 0.21
- --------------------------------------------------------------------------------
Outstanding at December 31, 1997 105 2.13 1,750 0.15
Granted 85 3.85 - -
- --------------------------------------------------------------------------------
Outstanding at December 31, 1998 190 $2.90 1,750 $0.15
================================================================================
Options exercisable at:
December 31, 1996 - $ - 1,456 $ 0.13
December 31, 1997 50 2.09 1,750 0.15
December 31, 1998 103 2.11 1,750 0.15
================================================================================
================================================================================
1993 Stock 1985 Stock
Incentive Plan Option Plan
================================================================================
Weighted average fair value of
options granted during:
1996 $ 1.35 $ -
1997 1.81 -
1998 1.89 -
================================================================================
The following table summarizes information about the Company's stock options
outstanding and exercisable under the 1985 Plan and 1993 Plan at December 31,
1998, as follows:
================================================================================
(shares in thousands) Options Outstanding Options Exercisable
================================================================================
Weighted
Average Weighted Weighted
Range of Remaining Average Average
Exercise Contractual Exercise Exercise
Prices Shares Life Price Shares Price
================================================================================
$0.11 1,150 4 years $ 0.11 1,150 $ 0.11
$0.20 to 0.23 600 2 years 0.23 600 0.23
$2.09 100 8 years 2.09 100 2.09
$2.84 to 4.02 90 9 years 3.79 3 2.84
- --------------------------------------------------------------------------------
Total 1,940 1,853
================================================================================
-25-
AMBASE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
The details of the Company's incentive plans are summarized above. 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, was charged to earnings during 1998, 1997
and 1996. The fair value of stock options granted by the Company in 1998, 1997
and 1996 used to compute proforma net income and earnings per share disclosures
is the estimated fair value at date of grant, using the Black-Scholes option
pricing model with the following weighted average assumptions used for grants in
1998, 1997 and 1996, respectively: dividend yield 0% for all years, expected
historical volatility of 0.53, 0.84 and 0.84, risk-free interest rates of 4.65%,
5.84% and 6.15%, and weighted average expected life of the options of 4 to 6
years. If the Company had elected to recognize compensation cost for stock
options based on the fair value at date of grant for stock options under the
1993 Plan and the 1985 Plan, consistent with the method prescribed by Statement
123, net income (loss) and net income (loss) per share would have been changed
to the proforma amounts indicated below.
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 during
1998, 1997 and 1996, 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 purposes of proforma disclosures, the estimated fair value of the options is
amortized to expense over the options' vesting period. The Company's proforma
information for the years ended December 31 follows:
================================================================================
(in thousands, except per share data) 1998 1997 1996
================================================================================
Net income (loss)
As reported $ 181 $(1,084) $14,032
Proforma 61 (1,171) 13,959
================================================================================
Per share data
As reported $ - $ (0.02) $ 0.31
Proforma - (0.02) 0.31
================================================================================
-26-
AMBASE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
Note 11 - Income Taxes
The components of income tax (expense) benefit for the years ended December 31
are as follows:
================================================================================
(in thousands) 1998 1997 1996
================================================================================
Income tax (expense) benefit:
Continuing operations $ (242) $ 191 $7,189
Discontinued investment management operations - - (53)
================================================================================
The components of pretax income (loss) and the difference between income taxes
from continuing operations computed at the statutory federal rate of 35% in
1998, 1997 and 1996, and the provision for income taxes from continuing
operations for the years ended December 31 follows:
================================================================================
(in thousands) 1998 1997 1996
================================================================================
Income (loss) from continuing operations
before income taxes $ 423 $(1,275) $ 6,636
================================================================================
Tax (expense) benefit:
Tax at statutory federal rate $(148) $ 446 $(2,323)
Prior year tax refund - 475 7,613
Benefit of operating loss carryforwards - - 2,323
Accounting loss benefit not recognized - (446) -
Accounting loss benefit recognized 148 - -
Federal income taxes - - (76)
State income taxes (242) (284) (348)
- --------------------------------------------------------------------------------
$(242) $ 191 $ 7,189
================================================================================
The composition of income tax (expense) benefit from continuing operations for
the year ended December 31 is as follows:
================================================================================
(in thousands) 1998 1997 1996
================================================================================
Current:
Federal $ - $ - $ (76)
State (242) (284) (348)
- --------------------------------------------------------------------------------
(242) (284) (424)
- --------------------------------------------------------------------------------
Deferred (primarily federal):
Prior year tax refund - 475 7,613
- --------------------------------------------------------------------------------
- 475 7,613
- --------------------------------------------------------------------------------
$(242) $ 191 $ 7,189
================================================================================
The Company contractually assumed the tax liabilities of City, which, prior to
September 1985, owned all the outstanding shares of Common Stock of the Company.
For all periods through 1992, the Internal Revenue Service ("IRS") and the
Company disagree only with respect to withholding taxes in connection with a
Netherlands Antilles finance subsidiary of City. See Note 13, Legal Proceedings,
Disputes with Internal Revenue Service, Withholding Taxes (Netherlands
Antilles), for additional details. During 1996, the Company received a 1977
income tax refund of $7,613,000; as a result, City no longer remains open for
refunds. This amount was recognized as an income tax benefit in 1996, based on
management's continuing review of the overall tax liability position of the
Company.
-27-
AMBASE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
In June 1998, the Company paid $12,700,000 to the IRS for tax and estimated
interest in full satisfaction of the Company's Fresh Start tax liability, which
related to a 1987 tax dispute with the IRS. In connection with the Company's
payment to the IRS, the Company also utilized approximately $40 million of
NOL's. As a result, the Company has remaining NOL carryforwards of approximately
$14 million expiring beginning in 2008, and $145 million of additional NOL
carryforwards generated from the Company's tax basis in Carteret/Carteret FSB
expiring no earlier than 2007.
During 1996, in connection with the completion by the IRS of the Company's 1985
to 1991 federal income tax audits (excluding Fresh Start), the Company made
payments to the IRS totaling $1,995,000. These amounts were previously reserved
for and charged against the income tax reserves account. During the first
quarter of 1997, $475,000 of income taxes were refunded as the result of an
overpayment to the IRS for 1988 through 1991 tax years. This amount was recorded
as an income tax benefit in the first quarter of 1997. The Company's federal
income tax returns for years subsequent to 1992 have not been reviewed by the
IRS.
As a result of the OTS's December 4, 1992 placement of Carteret in receivership,
under the management of the Resolution Trust Corporation ("RTC")/Federal Deposit
Insurance Corporation ("FDIC"), and 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"), but this information has not yet been received.
Based on the Company not making the election decision, as described above, and
upon receipt of the requested information from the RTC/FDIC, the Company will
amend its consolidated federal income tax returns to include the federal income
tax effects of Carteret and Carteret FSB. Based on the information currently
available, the Company does not believe a material increase in the Company's tax
liabilities will result.
The Company anticipates that, as a result of filing a consolidated federal
income tax return with Carteret FSB, 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 $145
million are still available. The NOL carryforwards generated from the Company's
tax basis in Carteret/Carteret FSB would expire no earlier than 2007, and would
be available to offset future taxable income, in addition to the NOL
carryforwards as further detailed below.
Based upon the Company's federal income tax returns as filed from 1993 to 1997
(subject to IRS audit adjustments) (excluding the NOL carryforwards from the
Company's tax basis in Carteret/Carteret FSB, as noted above), at December 31,
1998 the Company has NOL carryforwards available to reduce future federal
taxable income, which expire if unused, as follows:
2008 $ 1,000,000
2009 7,000,000
2010 5,000,000
2012 1,000,000
-----------
$14,000,000
===========
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 alternative minimum tax credit carryforwards, which are not subject to
expiration.
Under Statement 109, the Company has calculated a net deferred tax asset of $25
million and $33 million as of December 31, 1998 and 1997, respectively, arising
primarily from NOL's, alternative minimum tax credits and the excess of book
over tax reserves (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.
-28-
AMBASE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
Note 12 - Commitments and Contingencies
Future minimum rental payments, principally for office space, under
noncancellable operating leases at December 31, 1998, are: 1999, $79,000; 2000,
$80,000; 2001, $20,000. Rent expense charged to earnings was $66,000, $67,000
and $46,000 for the years ended December 31, 1998, 1997 and 1996, respectively.
Note 13 - Legal Proceedings
(a) The Company is or has been a defendant in a number of lawsuits or
proceedings, including the following:
Rolo and Tenerelli v. City Investing Company Liquidating Trust, et al. This was
a purported class action filed in the United States District Court for the
District of New Jersey (the "District Court"). Plaintiffs asserted a variety of
Federal and state causes of action in connection with an alleged fraudulent
scheme involving the marketing and sale of homesites and houses by General
Development Corporation ("GDC"), a former subsidiary of City. Plaintiffs named
as defendants the Company and Carteret, as well as a number of directors and
other financial institutions that had business dealings with GDC. On December
27, 1993, the District Court entered an Order and Opinion dismissing the action
against all parties (amended on January 17, 1994, to include the dismissal of
Carteret Bancorp, Inc. and Carteret). Plaintiffs appealed the order to the
United States Court of Appeals for the Third Circuit (the "Appeals Court") which
affirmed the order and subsequently remanded the case for reconsideration in
light of an intervening decision. Upon remand, the District Court again
dismissed plaintiffs' complaint on August 24, 1995 and denied plaintiffs'
petition for reconsideration. Plaintiffs appealed the District Court's order to
the Appeals Court. On August 31, 1998, the Appeals Court affirmed dismissal of
this action by the District Court. On November 30, 1998, the time for Plaintiffs
to seek review of the decision of the Appeals Court expired. As a result, this
litigation has terminated without liability to the Company or any of the other
defendants and, therefore, this action is concluded.
In United States v. Brown, an action commenced in the United States District
Court for the Southern District of Florida, certain officers of GDC, none of
whom were officers of the Company, were convicted of violating the Federal Mail
Fraud Statute and certain other related statutes. This development led two of
GDC's insurers, National Union Fire Insurance Co. and Pacific Insurance Co., to
seek to terminate their directors and officers' insurance coverage in two
actions pending in the United States District Court for the Southern District of
Florida, Pacific Insurance Co. v. Brown, et al. and National Union Fire Ins. Co.
v. Brown, et al. During the fourth quarter of 1996, the U.S. Court of Appeals
for the 11th Circuit reversed the conviction of the officers of GDC. Although
the Company was not a party to these actions, certain individuals who were
directors of GDC and the Company were defendants. It was possible that if the
insurers were successful in terminating coverage of these former directors, the
Company may have been exposed to claims for indemnification. The parties to this
litigation had been engaged in settlement negotiations for a considerable period
of time. During the last quarter of 1998, this litigation was settled by the
parties thereto and no further claims are expected to be made. Therefore, this
action is concluded.
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 seeks 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"), arguing
that he served at such firm at the request of the Company. The Manley action is
pending in the United States District Court for the Southern District of New
York. The Company filed its answer on January 21, 1997, raising substantial
affirmative defenses which the Company intends to vigorously pursue. 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 in his
favor. 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 trial of this case has been adjourned by the Court until June 1999.
-29-
AMBASE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
Dispute with Internal Revenue Service. The Company contractually assumed the tax
liabilities of City, which, prior to September 1985, owned all the outstanding
shares of Common Stock of the Company. For all periods through 1992, the IRS and
the Company disagree only with respect to withholding taxes in connection with a
Netherlands Antilles finance subsidiary of City.
Withholding Taxes (Netherlands Antilles). On May 11, 1995, the IRS issued a
Notice of Deficiency for withholding taxes on interest payments for the
years 1979 through 1985. In the Notice of Deficiency, the IRS contends that
City's wholly owned Netherlands Antilles finance subsidiary should be
disregarded for tax purposes. The Company vigorously contested the IRS's
position in accordance with the IRS's internal appeals procedures. In
January 1992, the National Office of the IRS issued technical advice
supporting the auditing agent's position. In October 1992, the Company
appealed this technical advice to the National Office. The National Office
advised the Company that it expected to issue technical advice supporting
the auditing agent's position, whereupon, the Company advised the IRS that
it was withdrawing its technical advice request.
On June 30, 1995, the Company filed a petition in the United States Tax
Court contesting the Notice of Deficiency. The IRS filed its answer on
August 23, 1995. The Company filed a motion for summary judgment in its
favor on February 13, 1996. On April 17, 1996, the IRS filed a Notice of
Objection to the Company's motion for summary judgment. The Tax Court
requested, and the Company filed on July 3, 1996, a reply to the IRS's
Notice of Objection. On September 19, 1996, the Tax Court denied the
Company's motion for summary judgment without prejudice. Based on the Tax
Court's examination of the record and the status of the discovery process,
the Tax Court concluded that summary adjudication at this time was
inappropriate. The Tax Court directed the parties to engage in full and
complete discovery as expeditiously as possible. A trial was held in this
case on March 24, 1997, after which the Judge asked the IRS and the Company
to submit post-trial briefs, which have subsequently been submitted to the
Tax Court. If the IRS were to prevail on this issue, the Company would be
liable for taxes and interest in excess of the Company's financial
resources.
In a case dealing with a similar withholding tax issue, the Tax Court ruled
in favor of the taxpayer, Northern Indiana Public Service Co. ("Northern
Indiana") in November 1995. The Tax Court rejected the IRS's contention that
interest paid to Northern Indiana's foreign subsidiary was subject to United
States tax withholding. The IRS has appealed this decision (Northern Indiana
Public Service Co. v. Commissioner, 105 T.C. No. 22) to the United States
Court of Appeals for the 7th Circuit ("Appeals Court"). The Appeals Court
affirmed the Tax Court's ruling in favor of Northern Indiana. Although the
Appeals Court decision in the Northern Indiana case could be beneficial to
the Company's case, it is not necessarily indicative of the ultimate result
of the final settlement of the Netherlands Antilles issue between the
Company and the IRS.
Based on an evaluation of the IRS's contention, counsel has advised the
Company that, although the outcome in litigation can by no means be assured,
the Company has a very strong case and should prevail. Notwithstanding
counsel's opinion and the Tax Court's ruling in the Northern Indiana case,
it is not possible at this time to determine the final disposition of this
issue, when the issues will be resolved, or their final financial effect. A
final disposition of this issue in the Company's favor would have a
material, positive effect on the Company's Statement of Operations and
Financial Condition.
The actions against the Company, including those identified in (a) above, are in
various stages. Nevertheless, the allegations and claims are material and, if
successful, could result in substantial judgments against the Company. To the
extent the aggregate of any such judgments were to exceed the resources
available, these matters would have a material adverse effect on the Company's
financial condition and results of operations. Due to the nature of these
proceedings, the Company and its counsel are unable to express any opinion as to
their probable outcome.
-30-
AMBASE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
(b) 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"), based upon the impact of the Financial Institutions Reform, Recovery
and Enforcement Act of 1989 ("FIRREA") on the Company's investment in Carteret.
Approximately 120 other similar so-called "supervisory goodwill" cases,
commenced in recent years by other financial institutions and/or their
shareholders, are 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 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 December 22, 1997, the Court issued a
decision which addressed eleven "common issues" applicable to a number of the
Winstar-related cases, and rejected the government's arguments with respect to
each such issue. Although this decision is also beneficial to the Company's
case, it is not necessarily indicative of the ultimate outcome of the Company's
action. On March 20, 1998, the FDIC filed a motion for partial summary judgment
against the United States on certain liability issues, and the Company has filed
a memorandum in support of that motion. The FDIC's motion is currently under
submission to the court. Case-specific discovery in thirty Winstar-related
cases, including the Company's case, commenced in April 1998. Fact discovery is
currently scheduled to be completed by June 30, 1999. A trial date has not yet
been set in the Company's case. No assurance can be given regarding the ultimate
outcome of the litigation.
Note 14 - 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 are based on current market quotations. Other
investment securities are based upon the December 1998 and 1997 cost for these
privately placed shares. The carrying value of applicable other liabilities
approximates their fair value.
Note 15 - Supplemental Disclosure of Cash Flow Information
Additional information regarding cash flow for the years ended December 31 is as
follows:
================================================================================
(in thousands) 1998 1997 1996
================================================================================
Cash received (paid) during the period:
Income tax refunded (paid), net $(12,940) $ 244 $5,190
================================================================================
Income taxes refunded (paid), net in 1998 include $12,700,000 for tax and
estimated interest paid to the IRS in full satisfaction of the Company's Fresh
Start tax liability.
In 1997, income taxes refunded include $475,000 of taxes refunded as a result of
an overpayment to the IRS for 1988 through 1991 tax years. In 1996, income taxes
refunded (paid) include a 1977 tax refund of $7,613,000 and $1,995,000 of
payments to the IRS, principally for the 1985 through 1991 tax years.
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AMBASE CORPORATION AND SUBSIDIARIES
Note 16 - Quarterly Financial Information (unaudited)
Summarized quarterly financial information follows:
================================================================================
(in thousands, except First Second Third Fourth Full
per share data) Quarter Quarter Quarter Quarter Year
================================================================================
1998:
Operating expenses $ 871 $ 880 $ 676 $2,128 $4,555
- --------------------------------------------------------------------------------
Operating loss (871) (880) (676) (2,128) (4,555)
Interest income 632 593 595 610 2,430
Other income - - 2,500 48 2,548
- --------------------------------------------------------------------------------
Income (loss) from continuing
operations before income
taxes (239) (287) 2,419 (1,470) 423
Income tax (expense) benefit (64) (64) (59) (55) (242)
- --------------------------------------------------------------------------------
Income (loss) from
continuing operations (303) (351) 2,360 (1,525) 181
Income from discontinued
investment management
operations, net of
income taxes - - - - -
- --------------------------------------------------------------------------------
Net income (loss) $(303) $ (351) $2,360 $(1,525) $ 181
================================================================================
Earnings per common
share - basic:
Income (loss) from
continuing operations $(0.01) (0.01) $0.05 $(0.03) $ -
Income from discontinued
operations - - - - -
- --------------------------------------------------------------------------------
Net income (loss) $(0.01) $(0.01) $0.05 $(0.03) $ -
================================================================================
Earnings per common share
- assuming dilution:
Income (loss) from
continuing operations $(0.01) (0.01) $0.05 $(0.03) $ -
Income from discontinued
operations - - - - -
- --------------------------------------------------------------------------------
Net income (loss) $(0.01) $(0.01) $0.05 $(0.03) $ -
================================================================================
1997:
Operating expenses $ 672 $ 707 $ 618 $1,998 $3,995
- --------------------------------------------------------------------------------
Operating loss (672) (707) (618) (1,998) (3,995)
Interest income 689 663 656 653 2,661
Other income - - 55 4 59
- --------------------------------------------------------------------------------
Income (loss) from
continuing operations
before income taxes 17 (44) 93 (1,341) (1,275)
Income tax (expense) benefit 405 (70) (73) (71) 191
- --------------------------------------------------------------------------------
Income (loss) from
continuing operations 422 (114) 20 (1,412) (1,084)
Income from discontinued
investment management
operations, net of
income taxes - - - - -
- --------------------------------------------------------------------------------
Net income (loss) $ 422 $ (114) $ 20 $(1,412) $(1,084)
================================================================================
Earnings per common
share - basic:
Income (loss) from
continuing operations $0.01 $ - $ - $ (0.03) $ (0.02)
Income from discontinued
operations - - - - -
- --------------------------------------------------------------------------------
Net income (loss) $0.01 $ - $ - $ (0.03) $ (0.02)
================================================================================
Earnings per common share
- assuming dilution:
Income (loss) from
continuing operations $0.01 $ - $ - $ (0.03) $ (0.02)
Income from discontinued
operations - - - - -
- --------------------------------------------------------------------------------
Net income (loss) $0.01 $ - $ - $ (0.03) $ (0.02)
================================================================================
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AMBASE CORPORATION AND SUBSIDIARIES
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
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 14, 1999,
under the caption "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 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 14, 1999, under the caption "Executive
Compensation", 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 fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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 14, 1999, 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 fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
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 14, 1999, under the caption "Certain
Relationships and Related Transactions", 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 fiscal year.
-33-
AMBASE CORPORATION AND SUBSIDIARIES
PART IV
ITEM 14. 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 Accountants..................................10
Consolidated Statements of Operations..............................11
Consolidated Balance Sheets........................................12
Consolidated Statements of Changes in Stockholders' Equity.........13
Consolidated Statements of Cash Flows..............................14
Notes to Consolidated Financial Statements.........................15
2. Index to Financial Statements Schedules:
All schedules have been omitted because they are not applicable.
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 and
February 1, 1996) (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 and the Company's Annual Report on
Form 10-K for the year ended December 31, 1995).
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).
-34-
AMBASE CORPORATION AND SUBSIDIARIES
10G. Employment Agreement dated as of June 1, 1991 between Richard A.
Bianco and the Company, as amended dated as of 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), and 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).
10H. Stock Purchase Agreement among AmBase Corporation, The Home
Insurance Company and TVH Acquisition Corporation, dated as of
September 28, 1990 and amended as of December 12, 1990, as of
December 21, 1990 and as of February 4, 1991 (incorporated by
reference to Exhibit 10HH to the Company's Annual Report on Form
10-K for the year ended December 31, 1990).
10I. Indemnity Agreement dated as of February 13, 1991 among the Company,
The Home Insurance Company and TVH Acquisition Corporation
(incorporated by reference to Exhibit 10JJ to the Company's Annual
Report on Form 10-K for the year ended December 31, 1990).
10J. Consulting Agreement dated as of February 13, 1991 between the
Company and TVH Acquisition Corporation (incorporated by reference
to Exhibit 10KK to the Company's Annual Report on Form 10-K for the
year ended December 31, 1990).
22. Subsidiaries of the Registrant.
23. Consent of Independent Accountants.
27. Financial Data Schedule (only submitted to SEC in electronic format)
Exhibits, except as otherwise indicated above, are filed herewith.
(b) Form 8-K
The Company was not required to file a Current Report on Form 8-K during the
quarter ended December 31, 1998.
-35-
AMBASE CORPORATION AND SUBSIDIARIES
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, on the 22nd day of March
1999.
AMBASE CORPORATION
RICHARD A. BIANCO
Chairman, President and Chief Executive
Officer (Principal Executive Officer)
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 indicated, on the 22nd day of March 1999.
RICHARD A. BIANCO JOHN P. FERRARA
Chairman, President and Vice President, Chief Financial Officer
Chief Executive Officer and Controller
(Principal Financial and Accounting
Officer)
ROBERT E. LONG JOHN B. COSTELLO
Director Director
-36-
AMBASE CORPORATION AND SUBSIDIARIES
DIRECTORS AND OFFICERS
BOARD OF DIRECTORS:
Richard A. Bianco John B. Costello Robert E. Long
Chairman, President and Private Investor President and
Chief Executive Officer Chief Executive Officer
AmBase Corporation Business News Network, Inc.
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 1999 Annual Meeting is AmBase Corporation
currently scheduled to be held at 51 Weaver Street, Bldg. 2
9:00 a.m. Eastern Daylight Time, Greenwich, CT 06831-5155
on Friday, May 14, 1999, at: (203) 532-2000
Hyatt Regency Hotel
1800 East Putnam Avenue
Greenwich, CT 06870
STOCKHOLDER INQUIRIES
COMMON STOCK TRADING
Stockholder inquiries, including
AmBase stock is traded through one requests for the following:(i) change
or more market-makers with quotations of address; (ii) replacement of lost
made available in the "pink sheets" stock certificates; (iii) Common Stock
published by the National Quotation name registration changes; (iv)
Bureau, Inc. Quarterly Reports on Form 10-Q; (v)
Annual Reports on Form 10-K; (vi)
ISSUE ABBREVIATION TICKER SYMBOL proxy material; and (vii) information
regarding stockholdings, should be
Common AmBase ABCP directed to:
Stock
AMERICAN STOCK TRANSFER AND TRUST
TRANSFER AGENT AND REGISTRAR COMPANY
40 Wall Street - 46th Floor
AMERICAN STOCK TRANSFER AND TRUST New York, NY 10005
COMPANY Attention: Shareholder Services
40 Wall Street - 46th Floor (800) 937-5449 or (718) 921-8200
New York, NY 10005
Attention: Shareholder Services In addition, the Company's public
(800) 937-5449 or (718) 921-8200 reports, including Quarterly Reports on
Form 10-Q, Annual Reports on Form 10-K
INDEPENDENT ACCOUNTANTS and Proxy Statements, can be obtained
through the Securities and Exchange
PRICEWATERHOUSECOOPERS LLP Commission EDGAR Database over the
1177 Avenue of the Americas World Wide Web at www.sec.gov.
New York, NY 10036
NUMBER OF STOCKHOLDERS
As of January 29, 1999, there were
approximately 21,000 stockholders.
-37-
EXHIBITS ATTACHED WITH THIS FORM 10-K
Exhibit
No. Description
- ------- -----------
22 Subsidiaries of the Registrant
23 Consent of Independent Accountants
27 Financial Data Schedule
-38-