-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GDm23OjB95MUPTlPL7KUZNMUQnlFQxy2ELpKeTZQsiIogds+uEhzubfK8OlqkOvM RzPJvpymgtxN6/zv109+QQ== 0000020639-04-000023.txt : 20040513 0000020639-04-000023.hdr.sgml : 20040513 20040513113116 ACCESSION NUMBER: 0000020639-04-000023 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20040331 FILED AS OF DATE: 20040513 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMBASE CORP CENTRAL INDEX KEY: 0000020639 STANDARD INDUSTRIAL CLASSIFICATION: INVESTMENT ADVICE [6282] IRS NUMBER: 952962743 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07265 FILM NUMBER: 04801531 BUSINESS ADDRESS: STREET 1: 100 PUTNAM GREEN CITY: GREENWICH STATE: CT ZIP: 06830 BUSINESS PHONE: 2035322000 MAIL ADDRESS: STREET 1: 100 PUTNAM GREEN STREET 2: 3RD FLOOR CITY: GREENWICH STATE: CT ZIP: 06830 FORMER COMPANY: FORMER CONFORMED NAME: HOME GROUP INC DATE OF NAME CHANGE: 19890608 FORMER COMPANY: FORMER CONFORMED NAME: CITYHOME CORP DATE OF NAME CHANGE: 19780917 10-Q 1 frm10q304txt.txt MARCH 31, 2004 FIRST QUARTER 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended March 31, 2004 or [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission file number 1-7265 AMBASE CORPORATION (Exact name of registrant as specified in its charter) Delaware 95-2962743 (State of incorporation) (I.R.S. Employer Identification No.) 100 PUTNAM GREEN, 3RD FLOOR GREENWICH, CONNECTICUT 06830 (Address of principal executive offices) (Zip Code) (203) 532-2000 (Registrant's telephone number, including area code) 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 whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YES NO X ------- ------------- At March 31, 2004, there were 46,233,519 shares outstanding of the registrant's common stock, $0.01 par value per share. AmBase Corporation Quarterly Report on Form 10-Q March 31, 2004
TABLE OF CONTENTS Page ------ PART I - FINANCIAL INFORMATION Item 1. Financial Statements.................................................................................1 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.................................................11 Item 3. Quantitative and Qualitative Disclosures About Market Risk..........................................13 Item 4. Controls and Procedures.............................................................................14 PART II - OTHER INFORMATION Item 1. Legal Proceedings...................................................................................15 Item 6. Exhibits and Reports on Form 8-K....................................................................15 Signatures.......................................................................................................16
PART I - FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS AMBASE CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets (Unaudited) (in thousands, except per share data)
March 31, December 31, 2004 2003 ======== ========= Assets: Cash and cash equivalents......................................................... $ 9,115 $ 2,785 Investment securities: Held to maturity (market value $8,505 and $17,331, respectively).............. 8,506 17,329 Available for sale, carried at fair value .................................... 3,310 1,774 -------- -------- Total investment securities....................................................... 11,816 19,103 -------- -------- Accounts receivable............................................................... - 21 Real estate owned: Land............................................................................ 6,954 6,954 Buildings and improvements...................................................... 12,810 12,810 -------- -------- 19,764 19,764 Less: accumulated depreciation................................................. (515) (433) -------- -------- Real estate owned, net............................................................ 19,249 19,331 Other assets...................................................................... 463 428 -------- -------- Total assets...................................................................... $ 40,643 $ 41,668 ===== ===== Liabilities and Stockholders' Equity: Liabilities: Accounts payable and accrued liabilities.......................................... $ 601 $ 1,376 Supplemental retirement plan...................................................... 9,733 9,292 Other liabilities................................................................. 1,601 1,633 -------- -------- Total liabilities................................................................. 11,935 12,301 -------- -------- Commitments and contingencies..................................................... - - -------- -------- Stockholders' equity: Common stock ($0.01 par value, 200,000,000 authorized, 46,410,007 and 46,335,007 issued, respectively)................................................ 464 463 Paid-in capital................................................................... 547,956 547,940 Accumulated other comprehensive income............................................ 138 84 Accumulated deficit............................................................... (519,165) (518,435) Treasury stock, at cost - 176,488 shares.......................................... (685) (685) -------- -------- Total stockholders' equity........................................................ 28,708 29,367 -------- -------- Total liabilities and stockholders' equity........................................ $ 40,643 $ 41,668 ===== =====
The accompanying notes are an integral part of these consolidated financial statements. AMBASE CORPORATION AND SUBSIDIARIES Consolidated Statements of Operations Three Months Ended March 31 (Unaudited) (in thousands, except per share data)
2004 2003 ==== ==== Revenues: Rental income........................................................................$ 535 $ 614 Operating expenses: Compensation and benefits............................................................ 1,083 1,051 Professional and outside services.................................................... 108 77 Property operating and maintenance................................................... 113 119 Depreciation......................................................................... 83 82 Insurance............................................................................ 23 20 Other operating...................................................................... 47 43 -------- -------- 1,457 1,392 -------- -------- Operating loss...................................................................... (922) (778) -------- -------- Interest income.................................................................... 115 85 Realized gains on sales of investment securities................................... 107 - -------- -------- Loss before income taxes.......................................................... (700) (693) Income tax expense................................................................ (30) (31) --------- -------- Net loss......................................................................... $ (730) $ (724) ===== ===== Net loss per common share: Net loss - basic.................................................................. $(0.02) $ (0.02) Net loss - assuming dilution...................................................... (0.02) (0.02) ===== ===== Weighted average common shares outstanding: Basic............................................................................. 46,200 46,209 ===== ===== Diluted.......................................................................... 46,200 46,209 ===== =====
The accompanying notes are an integral part of these consolidated financial statements. AMBASE CORPORATION AND SUBSIDIARIES Consolidated Statement of Comprehensive Income (Loss) Three Months Ended March 31 (Unaudited) (in thousands)
2004 2003 ===== ===== Net loss............................................................................ $ (730) $ (724) Unrealized holding gains (losses) on investment securities available for sale, net of tax effect of $0.................................... 138 (9) --------- --------- Comprehensive loss.................................................................. $ (592) $ (733) ========= =========
The accompanying notes are an integral part of these consolidated financial statements. AMBASE CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows Three Months Ended March 31 (Unaudited) (in thousands)
2004 2003 ==== ==== Cash flows from operating activities: Net loss.......................................................................... $ (730) $(724) Adjustments to reconcile net loss to net cash used by operations: Depreciation and amortization................................................. 82 82 Accretion of discount - investment securities................................. (31) (54) Realized gains on investment securities available for sale................... (18) - Changes in other assets and liabilities: Accounts receivable........................................................... 21 68 Other assets.................................................................. (35) (23) Accounts payable and accrued liabilities...................................... (775) (884) Other liabilities............................................................. 409 388 Other, net........................................................................ (1) - -------- -------- Net cash used by operating activities............................................. (1,078) (1,147) -------- -------- Cash flows from investing activities: Maturities of investment securities - held to maturity............................ 17,353 18,287 Purchases of investment securities - held to maturity............................. (8,499) (18,286) Purchases of investment securities - available for sale........................... (1,830) (546) Sales of investment securities - available for sale............................... 367 - -------- --------- Net cash provided (used) by investing activities.................................. 7,391 (545) -------- --------- Cash flows from financing activities: Stock options exercised........................................................... 17 - --------- -------- Net cash provided by financing activities......................................... 17 - --------- -------- Net increase (decrease) in cash and cash equivalents.............................. 6,330 (1,692) Cash and cash equivalents at beginning of period.................................. 2,785 4,918 --------- --------- Cash and cash equivalents at end of period........................................ $9,115 $3,226 ========= ========= Supplemental cash flow disclosures: Income taxes paid................................................................. $ 35 $ 41 ======= ========
The accompanying notes are an integral part of these consolidated financial statements. AMBASE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements Note 1 - Organization The accompanying consolidated financial statements of AmBase Corporation and subsidiaries (the "Company") are unaudited and subject to year-end adjustments. All material intercompany transactions and balances have been eliminated. In the opinion of management, the interim financial statements reflect all adjustments, consisting only of normal recurring adjustments unless otherwise disclosed, necessary for a fair statement of the Company's financial position and results of operations. Results for interim periods are not necessarily indicative of results for the full year. Certain reclassifications have been made to the prior year consolidated financial statements to conform with the current year presentation. The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions, that it deems reasonable, that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from such estimates and assumptions. The unaudited interim financial statements presented herein should be read in conjunction with the Company's consolidated financial statements filed in its Annual Report on Form 10-K for the year ended December 31, 2003. The Company's assets currently consist primarily of cash and cash equivalents, investment securities, and real estate owned. The Company's main source of operating revenue is rental income earned on real estate owned. The Company also earns non-operating revenue principally consisting of investment earnings on investment securities and cash equivalents. The Company continues to evaluate a number of possible acquisitions, and is engaged in the management of its assets and liabilities, including the contingent assets, as described in Part II - Item 1. The Company intends to aggressively contest all litigation and contingencies, as well as pursue all sources for contributions to settlements. The Company's management expects that operating cash needs for the remainder of 2004 will be met principally by rental income received, the receipt of non-operating revenue consisting of investment earnings on investment securities and cash equivalents, and the Company's current financial resources. Note 2 - Legal Proceedings For a discussion of the Company's legal proceedings, including a discussion of the Company's Supervisory Goodwill litigation, see Part II - Item 1 - Legal Proceedings. Note 3 - Cash and Cash Equivalents Highly liquid investments, consisting principally of funds held in short-term money market accounts, are classified as cash equivalents. AMBASE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements Note 4 - Investment Securities Investment securities - held to maturity consist of U.S. Treasury Bills with original maturities of one year or less and are carried at amortized cost based upon the Company's intent and ability to hold these investments to maturity. Investment securities - available for sale, consist of investments in equity securities held for an indefinite period and are carried at fair value with net unrealized gains and losses recorded directly in a separate component of stockholders' equity. Investment securities consist of the following:
March 31, 2004 December 31, 2003 ====================================== ====================================== 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 maturing within one year.................. $ 8,506 $ 8,506 $ 8,505 $ 17,329 $ 17,329 $ 17,331 Available for Sale: Equity Securities......... 3,310 3,172 3,310 1,774 1,690 1,774 --------- ---------- --------- ----------- ----------- ----------- $ 11,816 $ 11,678 $ 11,815 $ 19,103 $ 19,019 $ 19,105 ========= ========== ========= =========== =========== ===========
The gross unrealized gains (losses) on investment securities, at March 31, 2004 and December 31, 2003 consist of the following:
(in thousands) 2004 2003 ======= ====== Held to Maturity:. Gross unrealized gains (losses)................................................... $ (1) $ 2 ======= ====== Available for Sale: Gross unrealized gains............................................................ $ 138 $ 84 ======= ====== The realized gain on the sales of investment securities available for sale for the three months ended March 31, 2004, are as follows: (in thousands) Net sale proceeds.................................................................. $ 367 Cost basis......................................................................... (349) ----------- Realized gains..................................................................... $ 18 ===========
During the first quarter ended March 31, 2004 the Company purchased and sold a $7 million U.S. Treasury Note resulting in a gain of $89,000 which is included in realized gains on investment securities in the Consolidated Statement of Operations. No investment securities available for sale were sold in the first three months of 2003. AMBASE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements Note 5 - Income Taxes The Company and its 100% owned 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, greater than 50% probability exists that the tax benefits will actually be realized sometime in the future. The Company has calculated a net deferred tax asset of $34 million as of March 31, 2004 and December 31, 2003, arising primarily from net operating loss ("NOL") carryforwards, alternative minimum tax ("AMT") credits (not including the anticipated tax effects of NOL's expected to be generated from the Company's tax basis in Carteret Savings Bank, F.A. and subsidiaries ("Carteret"), resulting from the election decision, as more fully described below). 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. As a result of the Office of Thrift Supervision's December 4, 1992 placement of Carteret in receivership, under the management of the Resolution Trust Corporation ("RTC")/Federal Deposit Insurance Corporation ("FDIC"), and then proposed Treasury Reg. ss.1.597-4(g), the Company had previously filed its 1992 and subsequent federal income tax returns with Carteret disaffiliated from the Company's consolidated federal income tax return. Based upon the impact of Treasury Reg. ss.1.597-4(g), which was issued in final form on December 20, 1995, a continuing review of the Company's tax basis in Carteret, and the impact of prior year tax return adjustments on the Company's 1992 federal income tax return as filed, the Company decided not to make an election pursuant to final Treasury Reg. ss.1.597-4(g) to disaffiliate Carteret from the Company's consolidated federal income tax return effective as of December 4, 1992 (the "Election Decision"). The Company has made numerous requests to the RTC/FDIC for tax information pertaining to Carteret and the resulting successor institution, Carteret Federal Savings Bank ("Carteret FSB"); however, all of the information still has not been received. Based on the Company's Election Decision, as described above, and the receipt of some of the requested information from the RTC/FDIC, the Company has amended its 1992 consolidated federal income tax return to include the federal income tax effects of Carteret and Carteret FSB (the "1992 Amended Return"). The Company is still in the process of amending its consolidated federal income tax returns for 1993 and subsequent years. The Company anticipates that, as a result of filing a consolidated federal income tax return with Carteret FSB, a total of approximately $170 million of tax NOL carryforwards will be generated from the Company's tax basis in Carteret/Carteret FSB as tax losses are incurred by Carteret FSB of which $158 million are still available for future use. Based on the Company's filing of the 1992 Amended Return, approximately $56 million of NOL carryforwards are generated for tax year 1992 which expire in 2007, with the remaining approximately $102 million of NOL carryforwards to be generated, expiring no earlier than 2008. These NOL carryforwards would be available to offset future taxable income, in addition to the NOL carryforwards as further detailed below. The IRS is currently reviewing the Company's 1992 Amended Return in connection with several carryback claims filed by the Company, as further described below. The Company can give no assurances with regard to the 1992 Amended Return, or amended returns for subsequent years, or the final amount or expiration of NOL carryforwards ultimately generated from the Company's tax basis in Carteret. In March 2000, the Company filed several carryback claims and amendments to previously filed carryback claims with the IRS (the "Carryback Claims") seeking refunds from the IRS or alternative minimum tax and other federal income taxes paid by the Company in prior years plus applicable IRS interest, based on the filing of the 1992 Amended Return. The Carryback Claims and 1992 Amended Return are currently being reviewed by the IRS. In April 2003, IRS examiners issued a letter to the Company proposing to disallow the Carryback Claims. The Company has sought administrative review of the letter by protesting to the Appeals Division of the IRS. The Company has met with IRS Appeals Officials to discuss the Carryback Claims and the appeals process is ongoing. The Company can give no assurances that the Carryback Claims will be ultimately allowed by the IRS, the final amount of the refunds, if any, or when they might be received. Based upon the Company's federal income tax returns as filed from 1993 to 2002 (subject to IRS audit adjustments), and excluding the NOL carryforwards generated from the Company's tax basis in Carteret/Carteret FSB, as noted above, at March 31, 2004, the Company has NOL carryforwards, aggregating approximately $33.8 million, available to reduce future federal taxable income which expire if unused beginning in 2008. The Company's federal income tax returns for years subsequent to 1992 have not been reviewed by the IRS. AMBASE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements The utilization of certain carryforwards is subject to limitations under U.S. federal income tax laws. In addition, the Company has approximately $21 million of AMT credit carryforwards ("AMT Credits"), which are not subject to expiration. Based on the filing of the Carryback Claims, as further discussed above, the Company is seeking to realize approximately $8 million of the $21 million of AMT Credits. Note 6 - Comprehensive Income (Loss) Comprehensive income (loss) is composed of net income (loss) and other comprehensive income (loss) which includes the change in unrealized gains (losses) on investment securities available for sale, as follows:
(in thousands) Three Months Ended Three Months Ended March 31, 2004 March 31, 2003 ============================= =========================== Unrealized Accumulated Unrealized Accumulated Gains (Losses) Other Gains (Losses) Other on Investment Comprehensive on Investment Comprehensive Securities Income Securities Income ======== ======== ======== ======== Balance beginning of period................... $ 84 $ 84 $ 22 $ 22 Reclassification adjustment for gains realized in net income (loss)......... (19) (19) - - Change during the period....................... 73 73 (31) (31) -------- --------- --------- --------- Balance end of period........................... $ 138 $ 138 $ (9) $ (9) ======== ========= ========= =========
AMBASE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements Note 7 - Property Owned The Company owns two commercial office buildings in Greenwich, Connecticut that contain 14,500 and 38,000 square feet, respectively. The Company utilizes a small portion of the office space in the first building for its executive offices and leases the remaining square footage to unaffiliated third parties. The buildings and improvements are carried at cost, net of accumulated depreciation of $515,000 and $433,000 at March 31, 2004 and December 31, 2003, respectively. Depreciation expense is recorded on a straight-line basis over 39 years. Tenant security deposits of $280,000 and $308,000 at March 31, 2004 and December 31, 2003, respectively, are included in other liabilities. The Company earns rental income under operating leases with tenants. Minimum lease rentals are recognized on a straight-line basis over the terms of the leases. The cumulative difference between lease revenue recognized under this method and the contractual lease payment terms is recorded as deferred rent receivable and is included in other assets on the Consolidated Balance Sheets. Revenue from tenant reimbursement of common area maintenance, utilities and other operating expenses are recognized pursuant to the tenant's lease when earned and due from tenants. Included in property operating and maintenance are expenses for common area maintenance, utilities, real estate taxes and other reimbursable operating expenses, which have not been reduced by amounts reimbursable by tenants pursuant to applicable lease agreements. AMBASE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements Note 8 - Stock Based Compensation The Company has adopted the disclosure requirements of Financial Accounting Standards Board, Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("Statement 123"), but continues to account for stock compensation using APB Opinion 25, "Accounting for Stock Issued to Employees" ("APB 25"), making pro forma disclosures of net income (loss) and earnings per share as if the fair value based method had been applied. No compensation expense, attributable to stock incentive plans, has been charged to earnings. The Black-Scholes option pricing model was used to estimate the fair value of the options at date of grant based on various factors including dividend yield, stock price volatility, interest rates, and expected life of options. 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 changes in the price per share of the Company's Common Stock, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. If the Company had elected to recognize compensation cost for stock options based on the fair value at date of grant for stock options, consistent with the method prescribed by Statement 123, net loss and net loss per share, would have been changed to the pro forma amounts indicated below.
Three Months Ended ------------------------------- March 31, March 31, (in thousands, except per share data) 2004 2003 ========== ========== Net loss: As reported....................................................................... $ (730) $ (724) Deduct: pro forma stock based compensation expense for Stock options pursuant to Statement 123....................................... (19) (26) ---------- ---------- Pro forma......................................................................... $ (749) $ (750) ========== ========== Net loss per common share: Basic - as reported............................................................... $ (0.02) $ (0.02) Basic - pro forma................................................................. (0.02) (0.02) Assuming dilution - as reported................................................... (0.02) (0.02) Assuming dilution - pro forma..................................................... (0.02) (0.02) ========== ==========
Options to purchase 1,290,000 shares of common stock for the three months ended March 31, 2004, and 1,170,000 shares of common stock for the three months ended March 31, 2003, were excluded from the computation of diluted earnings per share because these options were antidilutive. AMBASE CORPORATION AND SUBSIDIARIES Notes to Consolidated Financial Statements Note 9 - 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 was as follows:
Three Months Ended ----------------------------------- March 31, March 31, (in thousand) 2004 2003 ======== ======= Service cost of current period................................ $ 230 $ 218 Interest cost on projected benefit obligation................. 172 161 Amortization of unrecognized losses........................... 39 51 -------- ------- $ 441 $ 430 ======== =======
The Company sponsors the AmBase 401(k) Savings Plan (the "Savings Plan"), which is a "Section 401(k) Plan" within the meaning of the Internal Revenue Code of 1986, as amended (the "Code"). The Savings Plan permits eligible employees to make contributions of up to 15% of salary, which are matched by the Company at a percentage determined annually. The employer match is currently 100% of the employee's salary eligible for deferral. Employee contributions to the Savings Plan are invested at the employee's discretion, in various investment funds. The Company's matching contributions are invested in the same manner as the salary reduction contributions. The Company's matching contributions to the Savings Plan, charged to expense, were $40,000 and $34,000 for the first three months ended March 31, 2004 and 2003, respectively. All contributions are subject to maximum limitations contained in the Code. Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Management's Discussion and Analysis of Financial Condition and Results of Operations, which follows, should be read in conjunction with the consolidated financial statements and related notes, which are contained in Part I - Item I, herein. FINANCIAL CONDITION The Company's assets at March 31, 2004 aggregated $40,643,000 consisting principally of cash and cash equivalents of $9,115,000, investment securities of $11,816,000 and real estate owned of $19,249,000. At March 31, 2004, the Company's liabilities aggregated $11,935,000. Total stockholders equity was $28,708,000. The liability for the supplemental retirement plan (the "Supplemental Plan"), which is accrued but not funded, increased to $9,733,000 at March 31, 2004 from $9,292,000 at December 31, 2003. The Supplemental Plan liability reflects the actuarially determined accrued pension costs in accordance with GAAP. The increased liability is the result of additional accrued service vesting and interest cost on the liability. The Supplemental Plan liability is further affected by changes in discount rates and experience which could be different from that assumed. For the three months ended March 31, 2004, cash of $1,078,000 was used by operations, including the payment of prior year accruals and operating expenses, partially offset by the receipt of rental income, interest income and investment earnings. The cash needs of the Company for the first three months of 2004 were satisfied by the receipt of rental income, interest income received on investment securities and cash equivalents, and to a lesser extent the Company's current financial resources. Management believes that the Company's cash resources are sufficient to continue operations for 2004. For the three months ended March 31, 2003, cash of $1,147,000 was used by operations, including the payment of prior year accruals and operating expenses partially offset by the receipt of interest and rental income. The Company continues to evaluate a number of possible acquisitions and is engaged in the management of its assets and liabilities, including the contingent assets. Discussions and negotiations are ongoing with respect to certain of these matters. The Company intends to aggressively contest all litigation and contingencies, as well as pursue all sources for contributions to settlements. For a discussion of lawsuits and proceedings, including the Supervisory Goodwill litigation see Part II - Item 1 - Legal Proceedings. The Company owns two commercial office buildings in Greenwich, Connecticut. One building is approximately 14,500 square feet and is substantially leased to unaffiliated third parties with approximately 3,500 square feet utilized by the Company for its executive offices. The second building is approximately 38,000 square feet and is leased to unaffiliated third parties. The Company made no purchases of common stock pursuant to its common stock repurchase plan during the first three months of 2004. There are no material commitments for capital expenditures as of March 31, 2004. Inflation has had no material impact on the business and operations of the Company. Results of Operations for the Three Months ended March 31, 2004 vs. the Three Months Ended March 31, 2003 The Company's main source of operating revenue is rental income earned on real estate owned. The Company also earns non-operating revenue consisting principally of investment earnings on investment securities and cash equivalents. The Company's management expects that operating cash needs for the remainder of 2004 will be met principally by rental income and the receipt of non-operating revenue consisting of interest income earned on investment securities and cash equivalents, and the Company's current financial resources. The Company recorded a net loss of $730,000 or $0.02 per share for the three months ended March 31, 2004 compared with a net loss of $724,000 or $0.02 per share for the three months ended March 31, 2003. For the three months ended March 31, 2004, the Company earned rental income from real estate owned of $535,000 as compared to $614,000 for the three months ended March 31, 2003. The decrease in the 2004 period reflects decreased rental income as a result of office vacancies as of January 2004. Compensation and benefits increased to $1,083,000 in the three months ended March 31, 2004 compared with $1,051,000 in the respective 2003 period. The increases were principally the result of a higher level of benefit costs and accruals. Included in compensation and benefits is an accrual for the Supplemental Retirement Plan of $441,000 for the three month period ended March 31, 2004 compared to $430,000 for the same 2003 period. Professional and outside services increased to $108,000 in the three months ended March 31, 2004, compared to $77,000 for the three months ended March 31, 2003. The increase in the 2004 three month period is due to increases in tax related fees principally relating to the Carryback Claims. Property operating and maintenance expenses decreased slightly to $113,000 for the three months ended March 31, 2004 compared to $119,000 in the respective 2003 period. Property operating and maintenance expenses have not been reduced by tenant reimbursements. Interest income in the three months ended March 31, 2004, increased to $115,000 from $85,000 in the respective 2003 period. The increase is principally due to an increased yield on the investment in higher yielding investments, classified as investments available for sale. The income tax provisions of $30,000 for the three months ended March 31, 2004, and $31,000 for the three months ended March 31, 2003, respectively, are primarily attributable to a provision for a minimum tax on capital to the state of Connecticut. Income taxes applicable to operating income (loss) are generally determined by applying the estimated effective annual income tax rates to pretax income (loss) for the year-to-date interim period. Income taxes applicable to unusual or infrequently occurring items are provided in the period in which such items occur. From time to time, the Company may publish "Forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Act"), and Section 21E of the Securities Exchange Act of 1934, as amended, or make oral statements that constitute forward-looking statements. The forward-looking statement may relate to such matters as anticipated financial performance, future revenues or earnings, business prospects, projected ventures, anticipated market performance, and similar matters. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. In order to comply with the terms of the safe harbor, the Company cautions readers that a variety of factors could cause the Company's actual results to differ materially from the anticipated results or other expectations expressed in the Company's forward-looking statements. These risks and uncertainties, many of which are beyond the Company's control, include, but are not limited to: (i) transaction volume in the securities markets; (ii) the volatility of the securities markets; (iii) fluctuations in interest rates; (iv) changes in occupancy rates or real estate value; (v) changes in regulatory requirements which could affect the cost of doing business; (vi) general economic conditions; (vii) changes in the rate of inflation and the related impact on the securities markets; (viii) changes in federal and state tax laws; and (ix) risks arising from unfavorable decisions in our current material litigation matters, or unfavorable decisions in other supervisory goodwill cases. The Company does not undertake any obligation to update or revise any forward-looking statements whether as a result of future events, new information or otherwise. Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company holds short-term investments as a source of liquidity. The Company's interest rate sensitive investments at March 31, 2004 and December 31, 2003 with maturity dates of less than one year consist of the following:
2004 2003 =================== =================== Carrying Fair Carrying Fair Value Value Value Value (in thousands) ------- ------- -------- -------- U.S. Treasury Bills......................... $ 8,506 $ 8,505 $ 17,329 $ 17,331 ======= ======= ======== ======== Weighted average interest rate.............. 0.97% 0.94% ======= ========
The Company's current policy is to minimize the interest rate risk of its short-term investments by investing in U.S. Treasury Bills with maturities of less than one year. There were no significant changes in market exposures or the manner in which interest rate risk is managed during the period. Item 4. CONTROLS AND PROCEDURES The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company's Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure based on the definition of "disclosure controls and procedures" in Rule 13a-15(e). In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Also, the Company has investments in certain unconsolidated entities. As the Company does not control or manage these entities, its controls and procedures with respect to such entities are necessarily substantially more limited than those it maintains with respect to its consolidated subsidiaries. The Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and the Company's Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures as of March 31, 2004. Based on the foregoing, the Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective. There have been no changes in the Company's internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect the internal controls over financial reporting during the quarter ended March 31, 2004. 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 stock holdings, should be directed to: American Stock Transfer and Trust Company 59 Maiden Lane New York, NY 10038 Attention: Shareholder Services (800) 937-5449 or (718) 921-8200 Ext. 6820 Copies of Quarterly reports on Form 10-Q, Annual Reports on Form 10-K and Proxy Statements can also be obtained directly from the Company free of charge by sending a request to the Company by mail as follows: AmBase Corporation 100 Putnam Green, 3rd Floor Greenwich, CT 06830 Attn: Shareholder Services In addition, the Company's public reports, including Quarterly Reports on Form 10-Q, Annual Reports on Form 10-K and Proxy Statements, can be obtained through the Securities and Exchange Commission EDGAR Database over the Internet at www.sec.gov. Materials filed with the SEC may also be read or copied by visiting the SEC's Public Reference Room, 450 Fifth Street, NW, Washington, DC 20549. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. PART II - OTHER INFORMATION Item 1. LEGAL PROCEEDINGS The information contained in Item 8 - Note 10 in AmBase's Annual Report on Form 10-K for the year ended December 31, 2003, is incorporated by reference herein and the defined terms set forth below have the same meaning ascribed to them in that report. There have been no material developments in such legal proceedings, except as set forth below. The Company is or has been a party in a number of lawsuits or proceedings, including the following: Supervisory Goodwill Litigation. In April 2004, the Company filed an amicus brief in support of a petition for certiorari filed by Bailey in the Supervisory Goodwill case Bailey v. United States, 341 F. 3d 1342 (Fed. Cir 2003). A decision as to whether or not the Supreme Court will hear the Bailey case is expected prior to the end of the Supreme Court's current term, which ends June 30, 2004. The Bailey decision, as well as other decisions in Winstar-related cases, are publicly available and may be relevant to the Company's claims, but are not necessarily indicative of the ultimate outcome of the Company's actions. No assurance can be given regarding the ultimate outcome of the litigation. Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit 31.1 Rule 13a-14(a) Certification of Chief Executive Officer Exhibit 31.2 Rule 13a-14(a) Certification of Chief Financial Officer Exhibit 32.1 Section 1350 Certification of Chief Executive Officer Exhibit 32.2 Section 1350 Certification of Chief Financial Officer (b) Form 8-K None. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AMBASE CORPORATION /s/ John P. Ferrara ------------------------------------------------------ By JOHN P. FERRARA Vice President, Chief Financial Officer and Controller (Duly Authorized Officer and Principal Financial and Accounting Officer) Date: May 13, 2004 EX-31 3 exhibit311rabtxt.txt EXHIBIT 31.1 RAB Exhibit 31.1 CERTIFICATION I, Richard A. Bianco, certify that: 1. I have reviewed this quarterly report on Form 10-Q of AmBase Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures, and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. /s/ Richard A. Bianco ---------------------- Date: May 13, 2004 Richard A. Bianco Chairman, President and Chief Executive Officer EX-31 4 exhibit312jpftxt.txt EXHIBIT 31.2 JPF Exhibit 31.2 CERTIFICATION I, John P. Ferrara, certify that: 1. I have reviewed this quarterly report on Form 10-Q of AmBase Corporation; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; (b) Evaluated the effectiveness of the registrant's disclosure controls and procedures, and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and (c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): (a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: May 13,2004 /s/ John P. Ferrara ------------------------------------ John P. Ferrara Vice President, Chief Financial Officer, and Controller EX-32 5 exhibit321rabtxt.txt EXHIBIT 32.1 RAB Exhibit 32.1 Certification of Periodic Financial Report Pursuant to 18 U.S.C. 1350, the undersigned, Richard A. Bianco, the Chief Executive Officer of AmBase Corporation (the "issuer"), hereby certifies that the report on Form 10-Q accompanying this certification (the "report") fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78 m or 78o(d)) and that information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the issuer. /s/ Richard A. Bianco Richard A. Bianco Chairman, President and Chief Executive Officer AmBase Corporation May 13, 2004 EX-32 6 exhibit322jpftxt.txt EXHIBIT 32.2 JPF Exhibit 32.2 Certification of Periodic Financial Report Pursuant to 18 U.S.C. 1350, the undersigned, John P. Ferrara , the Chief Financial Officer of AmBase Corporation (the "issuer"), hereby certifies that the report on Form 10-Q accompanying this certification (the "report") fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78 m or 78o(d)) and that information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the issuer. /s/ John P. Ferrara John P. Ferrara Vice President and Chief Financial Officer (Chief Financial Officer) AmBase Corporation May 13, 2004 -----END PRIVACY-ENHANCED MESSAGE-----