Attached files

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EX-21 - SUBSIDIARY LISTING - AMBASE CORPsublist.htm
EX-23 - UHY CONSENT - AMBASE CORPconsent.htm
EX-32 - RAB EXHIBIT 32.1 - AMBASE CORPrabexh321.htm
EX-31 - RAB EXHIBIT 31.1 - AMBASE CORPrabexh311.htm
EX-31 - JPF EXHIBIT 31.2 - AMBASE CORPjpfexh312.htm
EX-32 - JPF EXHIBIT 32.2 - AMBASE CORPjpfexh322.htm

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

FOR ANNUAL AND TRANSITION REPORTS PURSUANT

TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

(Mark One)

x

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended December 31, 2009

 

OR

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from ________ to ________

 

Commission file number 1-07265

 

AMBASE CORPORATION

(Exact name of registrant as specified in its charter)

 

 

DELAWARE

95-2962743

 

(State of incorporation)

(I.R.S. Employer Identification No.)

 

100 Putnam Green, 3rd Floor, Greenwich, CT 06830-6027

(Address of principal executive offices)

 

Registrant’s telephone number, including area code: (203) 532-2000

 

Securities registered pursuant to Section 12(g) of the Act:

 

Title of each class                                      

Common Stock ($0.01 par value)

 

Rights to Purchase Common Stock

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Yes

No

X

.  

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Yes

No

X

.  

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes X No ___

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to the Form 10-K. X                   

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “accelerated filer”, “large accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer

Accelerated Filer

Non-Accelerated Filer

X

Smaller Reporting Company

 

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

Yes

No

X

.  

 


At February 26, 2010, there were 43,075,410 shares of registrant’s Common Stock outstanding. At June 30, 2009, the aggregate market value of registrant’s voting securities (consisting of its Common Stock) held by nonaffiliates of the registrant, based on the average bid and asking price on such date of the Common Stock of $0.10 per share was approximately $4 million. The Common Stock constitutes registrant’s only outstanding class of security.

 

Portions of the registrant’s definitive Proxy Statement for its 2010 Annual Meeting of Stockholders, which Proxy Statement the registrant intends to file with the Securities and Exchange Commission not later than 120 days after the close of its fiscal year, is incorporated by reference with respect to certain information contained therein, in Part III of this Annual Report.

 

The Exhibit Index is located in Part IV, Item 15, Page 42.

 


AmBase Corporation

Annual Report on Form 10-K

December 31, 2009

 

TABLE OF CONTENTS

 

PART I

 

 

Page

Item 1.

 

Business

1

Item 1A.

 

Risk Factors

2

Item 1B.

 

Unresolved Staff Comments

5

Item 2.

 

Properties

5

Item 3.

 

Legal Proceedings

5

Item 4.

 

Submission of Matters to a Vote of Security Holders

5

 

 

Executive Officers of the Registrant

5

PART II

 

 

 

Item 5.

 

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

6

 

 

 

 

 

 

Performance Graph

7

Item 6.

 

Selected Financial Data

8

Item 7.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

8

Item 7A.

 

Quantitative and Qualitative Disclosures About Market Risk

13

Item 8.

 

Financial Statements and Supplementary Data

14

Item 9.

 

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

38

Item 9A(T).

 

Controls and Procedures

39

Item 9B.

 

Other Information

39

PART III

 

 

 

Item 10.

 

Directors, Executive Officers and Corporate Governance

40

Item 11.

 

Executive Compensation

40

Item 12.

 

Security Ownership of Certain Beneficial Owners & Management and Related Stockholder Matters

40

 

Item 13.

 

Certain Relationships and Related Transactions and Director Independence

41

Item 14.

 

Principal Accounting Fees and Services

41

PART IV

 

 

 

Item 15.

 

Exhibits and Financial Statement Schedules

42

 


PART I

 

ITEM 1.

BUSINESS

 

AmBase Corporation (the “Company” or “AmBase”) is a Delaware corporation that was incorporated in 1975 by City Investing Company (“City”). AmBase is a holding company that, through a wholly owned subsidiary, owns one commercial office building in Greenwich, Connecticut that is managed and operated by the Company. The building is approximately 14,500 square feet; with approximately 3,500 square feet utilized by the Company for its executive offices; the remaining space is currently unoccupied and available for lease. The executive office of the Company is located at 100 Putnam Green, Third Floor, Greenwich, Connecticut 06830.

 

The Company’s assets currently consist primarily of cash and cash equivalents, investment securities, and real estate. The Company 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 associated with its legal claims, as described in Part II - Item 8 - Notes 9 and 10 to the Company’s consolidated financial statements. Discussions and negotiations are ongoing with respect to certain of these matters. From time to time, the Company and its subsidiaries may be named as a defendant in various lawsuits or proceedings. The Company intends to aggressively contest all litigation and contingencies, as well as pursue all sources for contributions to settlements. The Company had 6 employees at December 31, 2009.

 

In July 2005, the Company sold its 38,000 square foot office building at Two Soundview Drive in Greenwich, Connecticut (“Two Soundview”). Accordingly, the results of operations of Two Soundview were retroactively reclassified as discontinued operations in accordance with Financial Account Standards Board, Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS144”). In connection with the sale, the Company recorded a gain of $10,290,000 in 2005.

 

Background

 

City originally incorporated AmBase as the holding company for The Home Insurance Company, and its affiliated property and casualty insurance companies (“The Home”). In 1985, City, which owned all the outstanding shares of the Common Stock of the Company, distributed the Company’s shares to City’s common stockholders. The Home was sold in February 1991.

 

In August 1988, the Company acquired Carteret Bancorp Inc. Carteret Bancorp Inc., through its principal wholly owned subsidiary, Carteret Savings Bank, FA (“Carteret”), which was principally engaged in retail and consumer banking, and mortgage banking including mortgage servicing. On December 4, 1992, the Office of Thrift Supervision (“OTS”) placed Carteret in receivership under the management of the Resolution Trust Corporation (“RTC”) and a new institution, Carteret Federal Savings Bank, was established to assume the assets and certain liabilities of Carteret. Following the seizure of Carteret, the Company was deregistered as a savings and loan holding company by the OTS, although the OTS retains jurisdiction for any regulatory violations prior to deregistration. See Part II - Item 8 - Note 10 to the Company’s consolidated financial statements for a discussion of Supervisory Goodwill litigation relating to Carteret.

 

In December 1997, the Company formed a new wholly owned subsidiary, SDG Financial Corp. (“SDG Financial”), to pursue merchant banking activities. SDG Financial purchased an equity interest in SDG, Inc. (“SDG”) and was granted the exclusive right to act as the investment banking/financial advisor to SDG, Inc. and all of its subsidiaries and affiliates. The Company also purchased convertible preferred and common stock in AMDG, Inc. (“AMDG”), a majority owned subsidiary of SDG. SDG and AMDG are development stage pharmaceutical companies. In connection with a litigation settlement with SDG and AMDG, the Company received $72,000 in April 2006. The Company remains a shareholder in SDG and AMDG and will continue to monitor the status of SDG and its subsidiary, AMDG, Inc. These investments have no current carrying value, as the Company’s original cost basis was previously written off.

 

1

 

 


STOCKHOLDER INQUIRIES

 

Stockholder inquiries, including requests for the following: (i) change of address; (ii) replacement of lost stock certificates; (iii) Common Stock name registration changes; (iv) Quarterly Reports on Form 10-Q; (v) Annual Reports on Form 10-K; (vi) proxy material; and (vii) information regarding stockholdings, should be directed to:

 

American Stock Transfer and Trust Company

59 Maiden Lane

New York, NY 10038

Attention: Shareholder Services

(800) 937-5449 or (718) 921-8200 Ext. 6820

 

As the Company does not maintain a website, 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

 

The Company is subject to the informational requirements of the Securities Exchange Act of 1934 (the “Exchange Act”). Accordingly, the Company’s public reports, including Quarterly Reports on Form 10-Q, Annual Reports on Form 10-K and Proxy Statements, can be obtained through the Securities and Exchange Commission (“SEC”) EDGAR Database available on the SEC’s website at www.sec.gov. Materials filed with the SEC may also be read or copied by visiting the SEC’s Public Reference Room, 100 F Street, NE, Washington, DC 20549. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

 

ITEM 1A.

RISK FACTORS

 

The Company is subject to various risks, many of which are beyond the Company’s control, which could have a negative effect on the Company and its financial condition. As a result of these and other factors, the Company may experience material fluctuations in future operating results on a quarterly or annual basis which could materially and adversely affect the Company’s business, financial condition, operating results and stock price. An investment in the Company’s stock involves various risks, including those mentioned below and elsewhere in this Annual Report on Form 10-K (this “Annual Report”), and those that are detailed from time to time in the Company’s other filings with the Securities and Exchange Commission. You should carefully consider the following risk factors, together with all of the other information included or incorporated by reference in this Annual Report, before you decide whether to purchase the Company’s common stock.

 

The Company is a plaintiff in a legal proceeding seeking recovery of damages for the loss of the Company’s investment in Carteret. There can be no assurance of a favorable outcome for the Company in this legal proceeding.

 

The Company is a plaintiff in a legal proceeding seeking recovery of damages from the United States Government for the loss of the Company’s wholly owned subsidiary, Carteret Savings Bank, F.A. This legal proceeding was commenced in 1993 and will likely continue for several more years. There have been and may continue to be rulings in other “supervisory goodwill” cases which have had and/or may have adverse affects on the Company’s Supervisory Goodwill proceeding. In addition, due to the extended length of time that proceedings, rulings, trial decisions and possible appeals in this matter may take, it is not possible for the Company to predict when this matter will be resolved or the likelihood of a favorable outcome.

 

2

 

 


The Company is subject to risks inherent in owning and leasing real estate.

 

The Company is subject to varying degrees of risk generally related to leasing and owning real estate, many of which are beyond the Company’s control. In addition to general risks related to owning commercial real estate, the Company’s risks include, among others:

 

 

Deterioration in regional and local economic and real estate market conditions,

 

potential changes in supply of, or demand for rental properties similar to the Company’s,

 

competition for tenants and changes in rental rates,

 

concentration in a single real estate asset and class,

 

difficulty in reletting properties on favorable terms or at all,

 

impairments in the Company’s ability to collect rent payments when due,

 

the potential for uninsured casualty and other losses,

 

the impact of present or future environmental legislation and compliance with environmental laws,

 

adverse changes in zoning laws and other regulations,

 

changes in federal or state tax laws, and

 

acts of terrorism and war.

 

Each of these factors could cause a material adverse effect on the Company’s financial condition and results of operations. In addition, real estate investments are relatively illiquid, which means that the Company’s ability to promptly sell the Company’s property in response to changes in economic and other conditions may be limited.

 

Property taxes on the Company’s property may increase without notice.

The property the Company owns is subject to real property taxes. The real property taxes on the Company’s property and any other properties that the Company acquires in the future may increase as property tax rates change and as those properties are assessed or reassessed by tax authorities. To the extent that the Company’s available rental space remains unoccupied or future tenants are unable or unwilling to pay such increase in accordance with their leases, the Company’s net operating expenses may increase.

 

The Company’s business is concentrated in Southern Connecticut, and adverse conditions in the region could negatively impact the Company’s operations.

The Company’s current operations are concentrated in Southern Connecticut, specifically in the Greenwich area. As a result, the value of the Company’s real estate is dependent on the economic strength of that region. Because of the Company’s geographic concentration and its single property, the Company’s operations are more vulnerable to adverse changes in the Greenwich economy than those of larger, more diversified companies. Should the Company experience softening in the Company’s market and not be able to offset the potential negative market influences on price and volume, the Company’s financial results could be negatively impacted.

 

The Company is in a competitive business.

The real estate industry is highly competitive. The Company competes for tenants for its unoccupied rental space with a large number of real estate property owners and other companies that sublet properties. The Company’s principal means of competition are rents charged in relation to the income producing potential of the location. In addition, the Company expects other major real estate investors, some with much greater resources than the Company has, may compete with the Company for attractive acquisition opportunities. These competitors include REITs, investment banking firms and private institutional investors. This competition has increased prices for commercial properties and may impair the Company’s ability to make suitable property acquisitions on favorable terms in the future.

 

3

 

 


The Company’s future cash flow is dependent on renewal of leases and reletting of the Company’s space.

 

The Company is subject to risks that its presently available rental space may not be successfully rented, that financial distress of the Company’s tenants may lead to vacancies at the Company’s property, that leases may not be renewed, that locations may not be relet or that the terms of renewal or reletting (including the cost of required renovations) may be less favorable than current lease terms. In addition, numerous properties compete with the Company’s property in attracting tenants to lease space. The number of competitive properties in a particular area could have a material adverse effect on the Company’s ability to lease the Company’s property or newly acquired properties and on the rents charged. If the Company were unable to promptly relet or renew the leases for all or a substantial portion of this location, or if the rental rates upon such renewal or reletting were significantly lower than expected, the Company’s cash flow could be adversely affected and the resale value of the Company’s property could decline.

 

The Company may not be able to insure certain risks economically.

The Company may experience economic harm if any damage to the Company’s property is not covered by insurance. The Company cannot be certain that the Company will be able to insure all risks that the Company desires to insure economically or that all of the Company’s insurers will be financially viable if the Company makes a claim. The Company may suffer losses that are not covered under the Company’s insurance policies. If an uninsured loss or a loss in excess of insured limits should occur, the Company could lose capital invested in a property, as well as any future revenue from the property.

 

Changes in the composition of the Company’s assets and liabilities through acquisitions, divestitures or corporate restructuring may affect the Company’s results.

The Company may make future acquisitions or divestitures of assets or changes in how such assets are held. Any change in the composition of the Company’s assets and liabilities or how such assets and liabilities are held could significantly affect the Company’s financial position and the risks that the Company faces.

 

The Company may not be able to generate sufficient taxable income to fully realize the Company’s deferred tax asset.

The Company has federal income tax net operating loss (“NOL”) carryforwards and other tax attributes. If the Company is unable to generate sufficient taxable income, the Company may not be able to fully realize the benefit of the NOL carryforwards.

 

Because the Company from time to time maintains a majority of its assets in securities, the Company may in the future be deemed to be an investment company under the Investment Company Act of 1940 resulting in additional costs and regulatory burdens.

 

Currently, the Company believes that either it is not within the definition of “Investment Company” as the term is defined under the Investment Company Act of 1940 (the “1940 Act”) or, alternatively, may rely on one or more of the 1940 Act’s exemptions. The Company intends to continue to conduct its operations in a manner that will exempt the Company from the registration requirements of the 1940 Act. If the Company were to be deemed to be an investment company because of the Company’s investments securities holdings, the Company would be required to register as an investment company under the 1940 Act. The 1940 Act places significant restrictions on the capital structure and corporate governance of a registered investment company, and materially restricts its ability to conduct transactions with affiliates. Compliance with the 1940 Act could also increase the Company’s operating costs. Such changes could have a material adverse affect on the Company’s business, results of operations and financial condition.

 

Terrorist attacks and other acts of violence or war may affect the market on which the Company’s common stock trades, the markets in which the Company operate, the Company’s operations and the Company’s results of operations.

 

Terrorist attacks or armed conflicts could affect the Company’s business or the businesses of the Company’s tenants. The consequences of armed conflicts are unpredictable, and the Company may not be able to foresee events that could have an adverse effect on the Company’s business. More generally, any of these events could cause consumer confidence and spending to decrease or result in increased volatility in the U.S. and worldwide financial markets and economy. They also could be a factor resulting in, or a continuation of, an economic recession in the U.S. or abroad. Any of these occurrences could have a significant adverse impact on the Company’s operating results and revenues and may result in volatility of the market price for the Company’s common stock.

 

4

 

 


ITEM 1B.         UNRESOLVED STAFF COMMENTS

 

None.

 

ITEM 2.

PROPERTIES

 

The Company, through a wholly owned subsidiary, owns one commercial office building in Greenwich, Connecticut. The building is approximately 14,500 square feet and is available for lease to unaffiliated third parties with approximately 3,500 square feet utilized by the Company for its executive offices.

 

ITEM 3.

LEGAL PROCEEDINGS

 

For a discussion of the Company’s legal proceedings, including the Company’s Supervisory Goodwill litigation, see Part II - Item 8 - Note 10 to the Company’s consolidated financial statements.

 

ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

 

None.

 

Executive Officers of the Registrant

 

Each executive officer is elected to serve in the executive officer capacity set forth opposite his respective name until the next Annual Meeting of Stockholders. Other than those noted below, 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, 2009:

 

Name

 

Age

 

Title

 

 

 

 

 

Richard A. Bianco

 

62

 

Chairman, President and Chief Executive Officer

 

 

 

 

 

John P. Ferrara

 

48

 

Vice President, Chief Financial Officer and Controller

 

 

 

 

 

Joseph R. Bianco

 

65

 

Treasurer

 

 

 

 

 


 

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.

 

Mr. J. Bianco was elected to the position of Treasurer of the Company in January 1998. He has dedicated his career to the financial services and investment industry. Prior to his employment with the Company in 1996, he worked for Merrill Lynch & Co. (“Merrill”) as Vice President, responsible for Sales and Marketing in the Merrill Global Securities Clearing from 1983 to 1996. Mr. Joseph R. Bianco and Mr. Richard A. Bianco are related.

 

5

 

 


PART II

 

ITEM 5.

MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS, AND ISSUER PURCHASES OF EQUITY SECURITIES

 

The Common Stock of the Company trades through one or more market makers, with quotations made available in the “pink sheets” published by the National Quotation Bureau, Inc. (“Pink Sheets”), under the symbol ABCP. The sales prices per share for the Company’s Common Stock represent the range of the reported high and low bid quotations as indicated in the Pink Sheets or as communicated orally to the Company by market makers. Such prices reflect interdealer prices, without retail mark-up, markdown or commission, and may not necessarily represent actual transactions.

 

 

 

 

2009

 

2008

 

 

 

 

High

Low

 

High

 

Low

 

First Quarter

 

$

0.19

 

$

0.11

 

$

0.44

 

$

0.38

 

 

Second Quarter

 

 

0.11

 

 

0.09

 

 

0.47

 

 

0.36

 

 

Third Quarter

 

 

0.20

 

 

0.10

 

 

0.44

 

 

0.35

 

 

Fourth Quarter

 

 

0.18

 

 

0.13

 

 

0.37

 

 

0.16

 

 

 

As of February 26, 2010, there were approximately 13,700 beneficial owners of the Company’s Common Stock. No dividends were declared or paid on the Company’s Common Stock in 2009 or 2008. The Company does not intend to declare or pay dividends in the foreseeable future.

 

For information concerning the Company’s stockholder rights plan, see Part II - Item 8 - Note 5 to the Company’s consolidated financial statements.

 

Common Stock Repurchase Plan

 

In January 2002, the Company announced a common stock repurchase plan (the “Repurchase Plan”) which allows for the repurchase by the Company of up to 10 million shares of its common stock in the open market.

 

The Repurchase Plan is conditioned upon favorable business conditions and acceptable prices for the common stock. Purchases under the Repurchase Plan may be made, from time to time, in the open market, through block trades or otherwise. Depending on market conditions and other factors, purchases may be commenced or suspended any time or from time to time without prior notice.

 

 

 

Total Number of Shares Purchased

 

Average Price Paid per Share (including Broker Commissions)

 

Total Number Shares Purchased as Part of Publicly Announced Plans

 

Maximum Number Shares that may yet be Purchased under the Plan

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance January 1, 2009

 

 

-

 

 

-

 

 

3,068,055

 

 

6,931,945

 

January 1, 2009 - January 31, 2009

 

 

-

 

 

-

 

 

3,068,055

 

 

6,931,945

 

February 1, 2009 - February 28, 2009

 

 

-

 

 

-

 

 

3,068,055

 

 

6,931,945

 

March 1, 2009 - March 31, 2009

 

 

-

 

 

-

 

 

3,068,055

 

 

6,931,945

 

April 1, 2009 - April 30, 2009

 

 

50,000

 

 

0.10

 

 

3,118,055

 

 

6,881,945

 

May 1, 2009 - May 31, 2009

 

 

-

 

 

-

 

 

3,118,055

 

 

6,881,945

 

June 1, 2009 - June 30, 2009

 

 

10,000

 

 

0.10

 

 

3,128,055

 

 

6,871,945

 

July 1, 2009 - July 31, 2009

 

 

27,000

 

 

0.10

 

 

3,155,055

 

 

6,844,945

 

August 1, 2009 - August 31, 2009

 

 

1,075

 

 

0.10

 

 

3,156,130

 

 

6,843,870

 

September 1, 2009 - September 30, 2009

 

 

-

 

 

-

 

 

3,156,130

 

 

6,843,870

 

October 1, 2009 - October 31, 2009

 

 

50,000

 

 

0.14

 

 

3,206,130

 

 

6,793,870

 

November 1, 2009 - November 30, 2009

 

 

1,979

 

 

0.14

 

 

3,208,109

 

 

6,791,891

 

December 1, 2009 - December 31, 2009

 

 

-

 

 

-

 

 

3,208,109

 

 

6,791,891

 

Total

 

 

140,054

 

 

 

 

 

 

 

 

 

 

 

 

6

 

 


STOCK PERFORMANCE GRAPH

 

The following graph compares the cumulative total shareholder return on the Company’s Common Stock for the past five years with the performance of the Standard & Poor’s 500 Financials Index (S&P 500 Financials) and the Standard & Poor’s 500 Stock Index (S&P 500) for that period. The graph assumes that a $100 investment was made in the Company’s Common Stock and each of the indices at the earliest date shown, and the dividends, if any, were reinvested. No dividends have been paid by the Company over the past five (5) years. The stock price performance shown in the graph below should not be considered indicative of potential future stock price performance.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31

 

Company/Index

 

2004

 

2005

 

2006

 

2007

 

2008

 

2009

 

AmBase Corporation

 

100.00

 

68.18

 

64.94

 

51.95

 

20.78

 

18.18

 

S&P 500 Index

 

100.00

 

104.91

 

121.48

 

128.16

 

80.74

 

102.11

 

S&P 500 Financial Index

 

100.00

 

106.48

 

126.91

 

103.27

 

46.15

 

54.09

 

 

7

 

 


ITEM 6.

SELECTED FINANCIAL DATA

 

The selected financial data should be read in conjunction with the Company’s consolidated financial statements included in Part II - Item 8 of this Form 10-K. The consolidated statements of operations for the periods ended prior to the July 2005 sale of Two Soundview were retroactively reclassified to reflect the operations as discontinued operations.

 

(in thousands, except per share data)

 

Years ended December 31,

 

 

 

 

2009

 

 

2008

 

 

2007

 

 

2006

 

 

2005

(a)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating revenue

 

$

-

 

$

-

 

$

-

 

$

92

 

$

170

 

Interest income

 

 

50

 

 

353

 

 

1,305

 

 

1,846

 

 

1,034

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from continuing operations

 

$

(2,411

)

$

(4,431

)

$

(3,936

)

$

(5,463

)

$

(5,519

)

Income from discontinued operations

 

 

-

 

 

-

 

 

-

 

 

-

 

 

10,647

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

(2,411

)

$

(4,431

)

$

(3,936

)

$

(5,463

)

$

5,128

 

Per share data:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss from continuing operations - Basic

 

$

(0.06

)

$

(0.10

)

$

(0.09

)

$

(0.12

)

$

(0.12

)

Income from discontinued operations - Basic

 

 

-

 

 

-

 

 

-

 

 

-

 

 

0.23

 

Net income (loss) - Basic

 

$

(0.06

)

$

(0.10

)

$

(0.09

)

$

(0.12

)

$

0.11

 

Dividends

 

 

-

 

 

-

 

 

-

 

 

-

 

 

-

 

Total assets

 

$

13,801

 

$

16,241

 

$

21,559

 

$

42,148

 

$

45,883

 

Total stockholders’ equity

 

 

13,500

 

 

15,928

 

 

20,578

 

 

24,667

 

 

29,682

 

(a)

Net income in 2005 includes a $10,298,000 gain from the sale of Two Soundview.

 

ITEM 7.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the consolidated financial statements and related notes, which are contained in Part II - Item 8, herein.

 

BUSINESS OVERVIEW

 

AmBase is a holding company which, through a wholly-owned subsidiary, owns a commercial office building in Greenwich, Connecticut. The Company previously owned an insurance company and a savings bank.

 

In February 1991, the Company sold its ownership interest in The Home Insurance Company and its subsidiaries. On December 4, 1992, Carteret Savings Bank, FA (“Carteret”) was placed in receivership by the Office of Thrift Supervision (“OTS”).

 

The Company’s assets currently consist primarily of cash and cash equivalents, investment securities, and real estate owned. The Company 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 associated with its legal claims, as described in Part I – Item 1. Discussions and negotiations are ongoing with respect to certain of these matters. From time to time, the Company and its subsidiaries may be named as a defendant in various lawsuits or proceedings. The Company intends to aggressively contest all litigation and contingencies, as well as pursue all sources for contributions to settlements.

 

8

 

 


FINANCIAL CONDITION AND LIQUIDITY

 

The Company’s assets at December 31, 2009, aggregated $13,801,000, consisting principally of cash and cash equivalents of $1,715,000, investment securities of $9,996,000 and real estate owned of $2,018,000. At December 31, 2009, the Company’s liabilities aggregated $301,000. Total stockholders’ equity was $13,500,000.

 

For the year ended December 31, 2009, cash of $2,349,000 was used by operations, including the payment of legal expenses relating to the Supervisory Goodwill proceedings, the payment of operating expenses and prior year accruals; partially offset by the receipt of interest income and investment earnings. The cash needs of the Company for 2009 were principally satisfied by the Company’s financial resources and to a lesser extent the receipt of investment earnings on investment securities and cash equivalents. Management believes that the Company’s liquid assets are sufficient to continue operations for the next twelve months.

 

For the year ended December 31, 2008, cash of $4,781,000 was used by operations, including the payment of operating expenses and prior year accruals; partially offset by the receipt of interest income and investment earnings. The cash needs of the Company for 2008 were principally satisfied by the Company’s financial resources and to a lesser extent the receipt of investment earnings on investment securities and cash equivalents.

 

For the year ended December 31, 2007, cash of $19,116,000 was used by operations, primarily due to the payment of the Supplemental Plan lump-sum benefit payment of $16,676,115, and to a lesser extent the payment of operating expenses and prior year accruals, partially offset by the receipt of interest income and investment earnings. The cash needs of the Company for 2007 were principally satisfied by the Company’s financial resources and the receipt of investment earnings on investment securities and cash equivalents.

 

Real estate owned consists of a commercial office building in Greenwich, Connecticut which the Company owns and manages. The building is approximately 14,500 square feet; approximately 3,500 square feet is utilized by the Company for its executive offices; the remaining space is currently unoccupied and available for lease.

 

Although the portion of the building not being utilized by the Company is currently unoccupied and available for lease, based on the Company’s analysis, including but not limited to current market rents in the area, leasing values, and comparable property sales, the Company believes the property’s fair market value exceeds the property’s current carrying value. Therefore, the Company believes the carrying value of the property as of December 31, 2009, has not been impaired. For additional information see Part II – Item 8 – Note 12 to the Company’s consolidated financial statements.

 

Pursuant to the Company’s Repurchase Plan, the Company repurchased, from unaffiliated parties, an aggregate of 140,054 shares of common stock during the year ended December 31, 2009, at various dates, at market prices at their time of purchase for an aggregate cost of $17,000. See Part II - Item 8 - Note 5 for further details with regard to the Company’s purchases of common stock pursuant to its common stock repurchase plan. There are no material commitments for capital expenditures as of December 31, 2009. Inflation has had no material impact on the business and operations of the Company.

 

The Company continues to evaluate a number of possible acquisitions, and is engaged in the management of its assets and liabilities, including the contingent assets associated with its legal claims as described in Part I – Item 1. Discussions and negotiations are ongoing with respect to certain of these matters. From time to time, the Company and its subsidiaries may be named as a defendant in various lawsuits or proceedings. 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 a discussion of the Supervisory Goodwill litigation, see Part II - Item 8 - Note 10 to the Company’s consolidated financial statements.

 

9

 

 


RESULTS OF OPERATIONS

 

Continuing Operations

 

In 2009, the Company earned non-operating revenue consisting principally of investment earnings on investment securities and cash equivalents; the Company had no operating revenue in 2009, 2008 or 2007. The Company’s management believes that operating cash needs for the next twelve months will be met principally by the Company’s current financial resources and to a lesser extent, the receipt of investment earnings on investment securities and cash equivalents.

 

The Company recorded a net loss of $2,411,000 or $0.06 per share for the year ended December 31, 2009, and $4,431,000 or $0.10 per share for the year ended December 31, 2008, and $3,936,000 or $0.09 per share for the year ended December 31, 2007.

 

Compensation and benefits decreased to $1,508,000 in 2009 from $1,533,000 in 2008, and from $2,911,000 in 2007. The decrease in compensation and benefits in 2009 compared to 2008 is primarily due to a lower level of benefit costs in 2009. The decrease in compensation and benefits in 2008 compared to 2007 is due to no Supplemental Plan expense being recognized in 2008, as a result of the Supplemental Plan termination as of May 31, 2007, as further described below and a lower level of incentive compensation accruals in 2008. Included in compensation and benefits is an accrual for the Supplemental Plan of $868,000 for 2007. Incentive compensation accruals remained unchanged at $179,000 in 2009 and 2008, a decrease from $443,000 in 2007.

 

The Company previously sponsored a non tax-qualified supplemental retirement plan, initially adopted by the Company in 1985, and as amended and restated (the “Supplemental Plan”), under which only one current executive officer of the Company was the sole participant. The cost of the Supplemental Plan was previously accrued but not funded. In accordance with an amendment to the Supplemental Plan, as previously adopted in March 2006, the liability for the Supplemental Plan was fully satisfied on May 31, 2007, by the lump-sum benefit payment of $16,676,115 (to Mr. Bianco, the Company’s Chairman, President and Chief Executive Officer), and immediately thereafter, the Supplemental Plan automatically terminated. The lump-sum Supplemental Plan benefit payment to Mr. Bianco was paid from the Company’s available financial resources. As a result of the termination of the Supplemental Plan, after May 31, 2007, no further Supplemental Plan expense was required to be recognized by the Company. For a further discussion of the Supplemental Plan termination and Mr. Bianco’s 2007 Employment Agreement, see Part II – Item 8 – Note 7 to the Company’s consolidated financial statements.

 

For the year ended December 31, 2007, the Supplemental Plan expense reflects recognition of an expense of $394,000 recorded to increase the Supplemental Plan liability to the present value of the May 31, 2007 lump-sum payment amount of $16,676,115, utilizing a 5.75% discount rate factor based on the 2007 Employment Agreement between the Company and Mr. Bianco and the amendment of the Supplemental Plan. An additional Supplemental Plan expense of $474,000 in the year ended December 31, 2007, was recorded to amortize the Supplemental Plan minimum pension liability adjustment. The amortization of the additional minimum pension liability in the 2007 period, although recorded as a component of compensation expense in the Company’s consolidated statement of operations, did not result in a decrease in total stockholders’ equity, as its recognition results in an increase in one component and a corresponding decrease in another component of stockholders’ equity. See Part II - Item 8 - Notes 6 and 7 to the Company’s consolidated financial statements for further information.

 

No stock based compensation expense was recorded for the years ended December 31, 2009, 2008 and 2007, as all previously granted outstanding options vested as of January 2, 2007. No stock option awards have been granted since January 2005.

 

10

 

 


Professional and outside services decreased to $627,000 in 2009 from $3,286,000 in 2008. The decrease in 2009 as compared to 2008 is principally the result of a lower level of legal and professional fees relating to the Supervisory Goodwill litigation in 2009 versus 2008 and to a lesser extent, a lower level of other corporate professional fees. The Supervisory Goodwill litigation expenses in 2009 included expenses incurred in connection with post trial arguments and post trial brief preparation which were concluded in May 2009. The Supervisory Goodwill litigation expenses for 2008 includes expenses relating to the preparation for the trial and actual trial expenses incurred during 2008. The increase to $3,286,000 in 2008 from $2,195,000 in 2007 is principally the result of higher legal expenses relating to the Supervisory Goodwill litigation as a result of trial preparation, legal and expert trial costs and post trial brief preparation. During 2007, Supervisory Goodwill fees were principally attributable to expert report preparation costs, expert depositions of the Company’s and the Government’s witnesses and overall trial preparations costs in anticipation of the February 2008 Supervisory Goodwill trial. See Part II - Item 8 - Note 10 to the Company’s consolidated financial statements for a discussion of the Supervisory Goodwill litigation proceedings.

 

Property operating and maintenance expenses were $106,000 in 2009, $116,000 in 2008, and $122,000 in 2007. Although the 2008 property operating and maintenance expenses includes increased utility costs, the overall expense amount decreased slightly from 2007 as a result of overall cost reduction measures.

 

Interest income was $50,000 in 2009, $353,000 in 2008, and $1,305,000 in 2007. The decrease in 2009 compared to 2008 is principally due to a decreased yield on investments due to decreasing interest rates and a lower level of cash equivalents and investment securities. The decrease in 2008 compared to 2007 is due to a decreased yield on investments due to decreasing interest rates and a lower aggregate amount of cash equivalents and investment securities invested for the full year of 2008, compared with a higher average level of cash equivalents and investment securities in the first five months of 2007. See Item 3 - Quantitative and Qualitative Disclosure about Market Risk for information concerning the Company’s weighted average interest rate yield on investment securities.

 

During 2007 realized gains on sales of investment securities available for sale were $310,000. The gains in 2007 are the result of a higher level of investment securities available for sale and realization of gains on sales due to market appreciation.

 

Other income of $50,000 for the year ended December 31, 2009, is attributable to reimbursement received by the Company in March 2009, for expenses relating to a proposed real estate transaction which was terminated in 2008. Other income of $247,000 in 2008 is attributable to an IRS interest refund, received by the Company in June 2008. The IRS refund in 2008 resulted from the Company’s pursuit of interest refund claims for several prior tax years under a tax code provision which allowed for the retroactive recovery of the interest differential where a taxpayer had a tax underpayment (subject to higher interest payment rates) for one tax year and a simultaneous tax overpayment (subject to lower interest refund rates) for another tax year.

 

For the year ended December 31, 2009 and December 31, 2007, the Company recorded income tax provisions of $56,000 and $50,000, respectively. The Company recorded an income tax benefit of $160,000 in 2008 due to the reversal of prior year estimated tax accruals. The 2009 and 2007 income tax provisions were attributable to a provision for a minimum tax on capital imposed by the state of Connecticut.

 

A reconciliation between income taxes computed at the statutory federal rate and the provision for income taxes is included inPart II - Item 8 - Note 9 to the Company’s consolidated financial statements.

 

TABULAR DISCLOSURE OF CONTRACTUAL OBLIGATIONS

 

(in thousands)

 

Payments Due by Period

 

 

 

 

Total

 

 

Less Than One Year

 

 

One to Three Years

 

 

Three to Five Years

 

 

More than Five Years

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating leases

 

$

13

 

$

13

 

$

-

 

$

-

 

$

-

 

Total

 

$

13

 

$

13

 

$

-

 

$

-

 

$

-

 

 

 

11

 

 


APPLICATION OF CRITICAL ACCOUNTING POLICIES

 

Our consolidated financial statements are based on the selection and application of accounting principles generally accepted in the United States of America, which require us to make estimates and assumptions about future events that affect the amounts reported in our financial statements and the accompanying notes. Future events and their effects cannot be determined with absolute certainty. The determination of estimates requires the exercise of judgment. Actual results could differ from those estimates, and any such differences may be material to the financial statements. We believe that the following accounting policies, which are important to our financial position and results of operations, require a higher degree of judgment and complexity in their application and represent the critical accounting policies used in the preparation of our financial statements. If different assumptions or conditions were to prevail, the results could be materially different from our reported results. For a summary of all our accounting policies, including the accounting policies discussed below, see Part II - Item 8 - Note 2 to the Company’s consolidated financial statements.

 

Legal Proceedings: From time to time the Company and its subsidiaries may be named as a defendant in various lawsuits or proceedings. The Company presently is not aware of any pending or threatened litigation which could have a material adverse effect on the consolidated financial statements presented herein. Management of the Company in consultation with outside legal counsel continually reviews the likelihood of liability and associated costs of pending and threatened litigation including the basis for the calculation of any litigation reserves which may be necessary. The assessment of such reserves includes an exercise of judgment and is a matter of opinion. The Company intends to aggressively contest all threatened litigation and contingencies, as well as pursue all sources for contributions to settlements. For a discussion of lawsuits and proceedings, see Part II - Item 8 - Note 10.

 

Income Tax Audits: The Company’s federal, state and local tax returns, from time to time, may be audited by the tax authorities, which could result in proposed assessments or a change in the net operating loss (“NOL”) carryforwards currently available. The Company’s federal income tax returns for the years subsequent to 1992 have not been reviewed by the Internal Revenue Service or state authorities. In October 2009, the Company received notification from the IRS that they would be reviewing the Company’s 2007 federal income tax return, which review is currently ongoing. The accrued amounts for income taxes reflect management’s best judgment as to the amounts payable for all open tax years.

 

Deferred Tax Assets: As of December 31, 2009, the Company had deferred tax assets arising primarily from net operating loss carryforwards and alternative minimum tax credits available to offset taxable income in future periods. A valuation allowance has been established for the entire net deferred tax asset of $41 million, as management, at the current time, has no basis to conclude that realization is more likely than not. The valuation allowance was calculated in accordance with the provisions of Financial Accounting Standards Board Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes” (“SFAS 109”), which places primary importance on a company’s cumulative operating results for the current and preceding years. We intend to maintain a valuation allowance for the entire deferred tax asset until sufficient positive evidence exists to support a reversal. See Part II - Item 8 - Note 9.

 

New Accounting Pronouncements

 

In June 2009, the Financial Accounting Standards Board (“FASB”) issued FASB Accounting Standards Codification (“ASC”) 105, Generally Accepted Accounting Principles, which established the FASB Accounting Standards Codification as the sole source of authoritative generally accepted accounting principles. Pursuant to the provisions of FASB ASC 105, the Company has updated references to GAAP in its financial statements issued for the period ended September 30, 2009. The adoption of FASB ASC 105 did not impact the Company’s financial positions or results of operations.

 

There are no new accounting pronouncements that would materially affect the Company’s financial statements or results of operations for the periods reported herein.

 

12

 

 


Cautionary Statement for Forward-Looking Information

 

This Annual Report together with other statements and information publicly disseminated by the Company may contain certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Forward-looking statements are inherently subject to risks and uncertainties, many of which cannot be predicted or quantified. The forward-looking statements may relate to such matters as anticipated financial performance, future revenues or earning, business prospects, projected ventures, anticipated market performance, anticipated litigation results or the timing of pending litigation, and similar matters. When used in this Annual Report, the words “estimates,” “expects,” “anticipates,” “believes,” “plans,” “intends” and variations of such words and similar expressions are intended to identify forward-looking statements that involve risks and uncertainties. These risks and uncertainties, many of which are beyond the Company’s control, include, but are not limited to those set forth in “Item 1A, Risk Factors” and elsewhere in this Annual Report and in the Company’s other public filings with the Securities and Exchange Commission including, but not limited to: (i) transaction volume in the securities markets, (ii) the volatility of the securities markets, (iii) fluctuations in interest rates, (iv) risks inherent in the real estate business, including, but not limited to, tenant defaults, changes in occupancy rates or real estate values, (v) changes in regulatory requirements which could affect the cost of doing business, (vi) general economic conditions, (vii) changes in the rate of inflation and the related impact on the securities markets, (viii) changes in federal and state tax laws, and (ix) risks arising from unfavorable decisions in the Company’s current material litigation matters, or unfavorable decisions in other supervisory goodwill cases. These are not the only risks that we face. There may be additional risks that we do not presently know of or that we currently believe are immaterial which could also impair our business and financial position.

 

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

 

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

The Company holds short-term investments as a source of liquidity. The Company’s interest rate sensitive investments at December 31, 2009 and 2008, with maturity dates of less than one year consist of the following:

 

($ in thousands)

 

2009

 

2008

 

 

 

Carrying Value

 

Fair Value

 

Carrying Value

 

Fair Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury Bills

 

$

9,996

 

$

10,000

 

$

11,400

 

$

11,400

 

Weighted average interest rate

 

 

0.27

%

 

 

 

 

-

 

 

 

 

 

The Company’s current policy is to minimize the interest rate risk of its short-term investments by investing in U.S. Treasury Bills with maturities of less than one year. There were no significant changes in market exposures or the manner in which interest rate risk is managed during the year.

 

Due to current market factors, the Company has maintained its available cash resources in U.S. Treasury Bills, which are currently providing a nominal investment yield.

 

13

 

 


ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

REPORT OF

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Stockholders of

AmBase Corporation

 

We have audited the accompanying consolidated balance sheets of AmBase Corporation and subsidiaries as of December 31, 2009 and 2008, and the related consolidated statements of operations, changes in stockholders’ equity, comprehensive (loss) income, and cash flows for the years then ended. Our audits also included the financial statement schedule. The Company’s management is responsible for these financial statements and schedule. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits 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. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of AmBase Corporation and subsidiaries as of December 31, 2009, 2008 and 2007 and the consolidated results of their operations and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the related financial statement schedule for 2009, 2008 and 2007, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

 

We were not engaged to examine management’s assertion about the effectiveness of the Company’s internal control over financial reporting as of December 31, 2009 included under Item 9A(T) under the caption “Management’s Annual Report on Internal Control Over Financial Reporting” and accordingly we do not express an opinion thereon.

 

 

 

New Haven, CT

March 29, 2010

 

14

 

 


 

AMBASE CORPORATION AND SUBSIDIARIES

 

Consolidated Statements of Operations

 

Years Ended December 31

 

(in thousands, except per share data)

 

 

 

2009

 

2008

 

2007

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

$

1,508

 

$

1,533

 

$

2,911

 

Professional and outside services

 

 

627

 

 

3,286

 

 

2,195

 

Property operating and maintenance

 

 

106

 

 

116

 

 

122

 

Depreciation

 

 

51

 

 

51

 

 

51

 

Insurance

 

 

59

 

 

73

 

 

79

 

Other operating

 

 

104

 

 

132

 

 

143

 

 

 

 

2,455

 

 

5,191

 

 

5,501

 

Operating loss

 

 

(2,455

)

 

(5,191

)

 

(5,501

)

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

50

 

 

353

 

 

1,305

 

Realized gains on sales of investment securities, net

 

 

-

 

 

-

 

 

310

 

Other income

 

 

50

 

 

247

 

 

-

 

Loss before income taxes

 

 

(2,355

)

 

(4,591

)

 

(3,886

)

 

 

 

 

 

 

 

 

 

 

 

Income tax (expense) benefit

 

 

(56

)

 

160

 

 

(50

)

Net loss

 

$

(2,411

)

$

(4,431

)

$

(3,936

)

 

 

 

 

 

 

 

 

 

 

 

Per share data:

 

 

 

 

 

 

 

 

 

 

Net loss attributable to common stockholders - basic

 

$

(0.06

)

$

(0.10

)

$

(0.09

)

Net loss attributable to common stockholders - assuming dilution

 

$

(0.06

)

$

(0.10

)

$

(0.09

)

 

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

Basic

 

 

43,152

 

 

43,571

 

 

44,691

 

Assuming dilution

 

 

43,152

 

 

43,571

 

 

44,691

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

15

 

 


AMBASE CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

December 31

 

(in thousands, except for share and per share mounts)

 

Assets:

 

 

2009

 

 

2008

 

Cash and cash equivalents, (including restricted cash of $900 in 2008)

 

$

1,715

 

$

2,667

 

Investment securities:

 

 

 

 

 

 

 

Held to maturity (market value $10,000 and $11,400, respectively)

 

 

9,996

 

 

11,400

 

Total investment securities

 

 

9,996

 

 

11,400

 

 

 

 

 

 

 

 

 

Real estate owned:

 

 

 

 

 

 

 

Land

 

 

554

 

 

554

 

Buildings

 

 

1,900

 

 

1,900

 

 

 

 

2,454

 

 

2,454

 

Accumulated depreciation

 

 

(436

)

 

(385

)

 

 

 

 

 

 

 

 

Real estate owned, net

 

 

2,018

 

 

2,069

 

 

 

 

 

 

 

 

 

Other assets

 

 

72

 

 

105

 

Total assets

 

$

13,801

 

$

16,241

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity:

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

Accounts payable and accrued liabilities

 

$

289

 

$

304

 

Other liabilities

 

 

12

 

 

9

 

 

 

 

 

 

 

 

 

Total liabilities

 

 

301

 

 

313

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 10)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

Common stock ($0.01 par value, 200,000,000 authorized, 46,410,007 issued and 43,075,410 outstanding in 2009 and 43,215,464 outstanding in 2008)

 

 

464

 

 

464

 

Additional paid-in capital

 

 

548,044

 

 

548,044

 

Accumulated deficit

 

 

(532,899

)

 

(530,488

)

Treasury stock, at cost - 3,334,597 and 3,194,543 shares, respectively

 

 

(2,109

)

 

(2,092

)

Total stockholders’ equity

 

 

13,500

 

 

15,928

 

 

 

 

 

 

 

 

 

Total liabilities and stockholders’ equity

 

$

13,801

 

$

16,241

 

 

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

 

16

 

 


AMBASE CORPORATION AND SUBSIDIARIES

 

Consolidated Statements of Changes in Stockholders’ Equity

 

 

(in thousands)

 

 

 

 

Common stock

 

 

Additional paid-in capital

 

 

Accumulated other compre- hensive income (loss)

 

 

Accumulated deficit

 

 

Treasury stock

 

 

Total

 

December 31, 2006

 

$

 

464

 

$

548,044

 

$

(336

)

$

(522,121

)

$

(1,384

)

$

24,667

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

-

 

 

-

 

 

-

 

 

(3,936

)

 

-

 

 

(3,936

)

Common stock repurchased

 

-

 

 

-

 

 

-

 

 

-

 

 

(489

)

 

(489

)

Other comprehensive income

 

 

-

 

 

-

 

 

336

 

 

 

-

 

 

 

-

 

 

336

 

December 31, 2007

 

464

 

 

548,044

 

 

-

 

 

(526,057)

)

 

(1,873

)

 

20,578

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

-

 

 

-

 

 

-

 

 

(4,431

)

 

-

 

 

(4,431

)

Common stock repurchased

 

-

 

 

-

 

 

-

 

 

-

 

 

(219

)

 

(219

)

December 31, 2008

 

464

 

 

548,044

 

 

-

 

 

(530,488

)

 

(2,092

)

 

15,928

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

-

 

 

-

 

 

-

 

 

(2,411

)

 

-

 

 

(2,411

)

Common stock repurchased

 

-

 

 

-

 

 

-

 

 

-

 

 

(17

)

 

(17

)

December 31, 2009

$

464

 

$

548,044

 

$

-

 

$

(532,899

)

$

(2,109

)

$

13,500

 

 

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

 

AMBASE CORPORATION AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income (Loss)

Years Ended December 31,

(in thousands)

 

 

 

2009

 

2008

 

2007

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(2,411

)

$

(4,431

)

$

(3,936

)

Minimum pension liability adjustment, net of tax effect of $0

 

 

-

 

 

-

 

 

474

 

Unrealized holding losses on investment securities - available for sale, net of tax effect of $0

 

 

-

 

 

-

 

 

(138

)

Comprehensive loss

 

$

(2,411

)

$

(4,431

)

$

(3,600

)

 

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

 

 

17

 

 


AMBASE CORPORATION AND SUBSIDIARIES

Consolidated Statements of Cash Flows

Years Ended December 31

 

(in thousands)

 

2009

 

 

2008

 

 

2007

 

 

 

 

 

 

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

Net loss

$

(2,411

)

$

(4,431

)

$

(3,936

)

Adjustments to reconcile net loss to net cash used by operating activities

 

 

 

 

 

 

 

 

 

Accretion of discount - investment securities

 

(10

)

 

140

 

 

(34

)

Depreciation and amortization

 

51

 

 

51

 

 

51

 

Realized gains on sales of investment securities

 

-

 

 

-

 

 

(310

)

Amortization of minimum pension liability adjustment

 

 

-

 

 

 

-

 

 

474

 

Changes in other assets and liabilities:

 

 

 

 

 

 

 

 

 

Accrued interest receivable in investment securities

 

 

-

 

 

 

-

 

 

125

 

Other assets

 

33

 

 

127

 

 

1,014

 

Accounts payable and accrued liabilities

 

(15

)

 

(658

)

 

(209

)

Other liabilities and Supplemental Plan

 

3

 

 

(10

)

 

387

 

Payment of Supplemental Plan lump-sum benefit

 

 

-

 

 

 

-

 

 

(16,676

)

Other

 

-

 

 

-

 

 

(2

)

Net cash used by operating activities

 

(2,349

)

 

(4,781

)

 

(19,116

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

 

Maturities of investment securities - held to maturity

 

 

32,786

 

 

 

37,036

 

 

59,164

 

Purchases of investment securities - held to maturity

 

 

(31,372

 

)

 

 

(32,263

)

 

(40,855

)

Purchases of investment securities - available for sale

 

 

-

 

 

 

-

 

 

(31

)

Sales of investment securities - available for sale

 

 

-

 

 

 

-

 

 

1,620

 

Net cash provided by investing activities

 

 

1,414

 

 

 

4,773

 

 

19,898

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

 

Common stock repurchased

 

(17

)

 

(219

)

 

(489

)

Net cash used by financing activities

 

(17

)

 

(219

)

 

(489

)

 

 

 

 

 

 

 

 

 

 

Net change in cash and cash equivalents

 

(952

)

 

(227

)

 

293

 

Cash and cash equivalents at beginning of year

 

 

2,667

 

 

 

2,894

 

 

2,601

 

Cash and cash equivalents at end of year

 

$

 

1,715

 

$

 

2,667

 

$

2,894

 

 

 

 

 

 

 

 

 

 

 

Supplemental cash flow disclosure:

 

 

 

 

 

 

 

 

 

Income taxes paid

$

2

 

$

1

 

$

83

 

 

 

 

 

 

 

 

 

 

 

 

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

 

18

 

 


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 commercial office building in Greenwich, Connecticut and a 6.3% ownership interest in SDG, Inc. (“SDG”), a development stage pharmaceutical company. The Company previously owned an insurance company and a savings bank.

 

In February 1991, the Company sold its ownership interest in The Home Insurance Company and its subsidiaries. On December 4, 1992, Carteret Savings Bank, FA (“Carteret”) was placed in receivership by the Office of Thrift Supervision (“OTS”).

 

The Company currently earns non-operating revenue consisting principally 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 associated with its legal claims, as described inNotes 9 and 10.

 

Note 2 - Summary of Significant Accounting Policies

 

The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

 

Use of estimates in the preparation of financial statements

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions, that it deems reasonable, that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from such estimates and assumptions.

 

Principles of consolidation

 

The consolidated financial statements are comprised of the accounts of the Company and its majority owned subsidiaries. All material intercompany transactions and balances have been eliminated.

 

Cash and cash equivalents

 

Highly liquid investments, consisting principally of funds held in short-term money market accounts, with original maturities of less than three months, are classified as cash equivalents. Included in cash and cash equivalents at December 31, 2008, was $900,000 of funds held in escrow from a proposed real estate transaction. The transaction was terminated in 2008 and the escrow funds with accrued interest were returned in March 2009. In addition, the Company was reimbursed $50,000 for related expenses, which was reflected as other income in the Company’s 2009 consolidated financial statements.

 

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, were those securities that could be sold prior to maturity, were carried at fair value, with any net unrealized gains or losses reported in a separate component of other comprehensive income (loss), net of taxes.

 

Interest and dividends on investment securities are recognized when earned. Realized gains and losses on the sale of investment securities - available for sale are calculated using an average cost basis for determining the cost basis of the securities. The fair value of publicly traded investment securities is determined by reference to current market quotations.

 

The Company continually reviews its investments to determine whether a decline in fair value below the cost basis is other than temporary. If the decline in fair value is judged to be other than temporary, the cost basis of the security is written down to fair market value and the amount of the write down is included in the operations.

 

19

 

 


AMBASE CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

Income taxes

 

The Company and its domestic subsidiaries file a consolidated federal income tax return. The Company recognizes both the current and deferred tax consequences of all transactions that have been recognized in the financial statements, calculated based on the provisions of enacted tax laws, including the tax rates in effect for current and future years. Net deferred tax assets are recognized immediately when a more likely than not criterion is met; that is, a greater than 50% probability exists that the tax benefits will actually be realized sometime in the future. At the present time, management has no basis to conclude that realization is more likely than not and a valuation reserve has been recorded against net deferred tax assets.

 

Earnings per share

 

Basic earnings per share (“EPS”) excludes dilution and is computed by dividing net income (loss) by the weighted average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution of EPS that could occur if options to issue common stock were exercised. Options were anti-dilutive for all periods presented.

 

Stock-based compensation

 

Under the Company’s 1993 Stock Incentive Plan (the “1993 Plan”), the Company may grant to officers and employees of the Company and its subsidiaries, stock options (“Options”), stock appreciation rights (“SARs”), restricted stock awards (“Restricted Stock”), merit awards (“Merit Awards”) and performance share awards (“Performance Shares”), through May 28, 2018. 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. Options granted generally have a ten year contractual life and generally have vesting terms of two years from the date of grant. In the case of a “Change of Control” of the Company (as defined in the 1993 Plan), options granted pursuant to the 1993 Plan may become fully exercisable as to all optioned shares from and after the date of such Change in Control in the discretion of the Committee or as may otherwise be provided in the grantee’s Option agreement. Death, retirement, or absence for disability will not result in the cancellation of any Options.

 

Stock-based compensation expense for all stock-based compensation awards for which vesting is based solely on employment service, are based on the grant date fair value estimated in accordance with the provisions of SFAS 123R. The Company recognizes these compensation costs for only those shares expected to vest, on a straight-line basis over the requisite service period of the award, which is generally the option vesting term of two years. See Note 8 herein for a further discussion of stock-based compensation.

 

No stock based compensation expense was recorded in 2009, 2008 and 2007, as all previously granted outstanding options vested as of January 2, 2007. No stock option awards have been granted since January 2005. Compensation expense relating to stock options would be recorded in the Consolidated Statement of Operations, with a corresponding increase in additional paid in capital in the Consolidated Statement of Stockholders’ Equity.

 

20

 

 


AMBASE CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

Deferred rent receivable and revenue recognition

 

The Company previously earned rental income under operating leases with tenants. Minimum lease rentals were recognized on a straight-line basis over the term of the leases. The cumulative difference between lease revenue recognized on the straight-line method and the contractual lease payment terms, if any, was recorded as deferred rent receivable or payable and was included in other assets or other liabilities on the Consolidated Balance Sheets, as applicable. Revenue from tenant reimbursement of common area maintenance, utilities and other operating expenses were recognized pursuant to the tenant’s lease when earned and due from tenants.

 

Depreciation

 

Depreciation expense for buildings is calculated on a straight-line basis over 39 years. Tenant improvements if any, would be typically depreciated over the lesser of the remaining life of the tenants’ lease or the estimated useful lives of the improvements.

 

Liquidity

 

The Company’s management currently anticipates that operating cash needs for the next twelve months will be met principally by the Company’s current financial resources and the receipt of investment earnings on investment securities and cash equivalents.

 

New Accounting Pronouncements

 

In June 2009, the Financial Accounting Standards Board (“FASB”) issued FASB Accounting Standards Codification (“ASC”) 105, Generally Accepted Accounting Principles, which established the FASB Accounting Standards Codification as the sole source of authoritative generally accepted accounting principles. Pursuant to the provisions of FASB ASC 105, the Company has updated references to GAAP in its financial statements issued for the period ended September 30, 2009. The adoption of FASB ASC 105 did not impact the Company’s financial positions or results of operations.

 

There are no new accounting pronouncements that would likely materially affect the Company’s financial statements.

 

21

 

 


AMBASE CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

Note 3 - Investment Securities

 

Investment securities - held to maturity consist of U.S. Treasury Bills with original maturities of three months or more and are carried at amortized cost (which includes accrued interest) based upon the Company’s intent and ability to hold these investments to maturity.

 

Investment securities at December 31 consist of the following:

      

 

2009

 

2008

 

(in thousands)

 

 

 

Carrying Value

 

 

Cost or Amortized Cost

 

 

Fair Value

 

 

Carrying Value

 

 

Cost or Amortized Cost

 

 

Fair Value

 

Held to Maturity:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury Bills

$

9,996

 

$

9,996

 

$

10,000

 

$

11,400

 

$

11,400

 

$

11,400

 

 

 

$

 

9,996

 

$

9,996

 

$

10,000

 

$

11,400

 

$

11,400

 

$

11,400

 

 

The gross unrealized gains on investment securities at December 31, consist of the following:

 

 (in thousands)

Held to Maturity:

 

 

2009

 

 

2008

 

Gross unrealized gains

 

$

4

 

$

-

 

 

Realized gain on the sales of investment securities available for sale follow:

 

(in thousands) 

 

 

2007

 

Net sale proceeds

 

$

1,620

 

Cost basis

 

 

(1,310

)

Realized gain

 

$

310

 

 

No investment securities available for sale were sold during the years ended December 31, 2009 or 2008.

 

22

 

 


AMBASE CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

Note 4 - Earnings Per Share

 

The calculation of basic and diluted earnings per share, including the effect of dilutive securities, for the years ended December 31, is as follows:

 

(in thousands, except per share data)

 

 

2009

 

 

2008

 

 

2007

 

Net loss

$

(2,411

)

$

(4,431

)

$

(3,936

)

 

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding

 

43,152

 

 

43,571

 

 

44,691

 

 

 

 

 

 

 

 

 

 

 

Effect of Dilutive Securities:

 

 

 

 

 

 

 

 

 

Assumed stock option exercise

 

-

 

 

-

 

 

-

 

Weighted average common shares outstanding assuming dilution

 

 

43,152

 

 

 

43,571

 

 

44,691

 

 

 

 

 

 

 

 

 

 

 

Net loss per common share:

 

 

 

 

 

 

 

 

 

Basic

$

(0.06

)

$

(0.10

)

$

(0.09

)

Assuming dilution

 

(0.06

)

 

(0.10

)

 

(0.09

)

 

Options to purchase common stock of 851,000 in 2009, 866,000 shares in 2008, and 876,000 shares in 2007 were excluded from the computation of diluted earnings per share because they were antidilutive in the computation of earnings per share.

 

Note 5 - Stockholders’ Equity

 

Authorized capital stock consists of 50,000,000 shares of cumulative preferred stock, $0.01 par value, and 200,000,000 shares of Common Stock, $0.01 par value.

 

Changes in the outstanding shares of Common Stock of the Company are as follows:

 

 

 

2009

 

 

2008

 

 

2007

 

Balance at beginning of year

 

43,215,464

 

 

43,858,664

 

 

44,968,519

 

 

 

 

 

 

 

 

 

 

 

Common shares repurchased

 

(140,054

)

 

(643,200

)

 

(1,109,855

)

 

 

 

 

 

 

 

 

 

 

Balance at end of year

 

43,075,410

 

 

43,215,464

 

 

43,858,664

 

 

Common stock balances exclude treasury shares as of December 31, as follows:

 

 

 

2009

 

 

2008

 

 

2007

 

Treasury shares

 

3,334,597

 

 

3,194,543

 

 

2,551,343

 

 

 

 

 

 

 

 

 

 

 

Aggregate dollar value of treasury shares

$

2,109,000

 

$

2,092,000

 

$

1,873,000

 

 

 

 

 

 

 

 

 

 

 

Average cost per treasury share

$

0.63

 

$

0.66

 

$

0.73

 

 

At December 31, 2009, there were 5,110,000 common shares reserved for issuance under the Company’s stock option and other employee benefit plans.

 

23

 

 


AMBASE CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

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, 2011.

 

Common Stock Repurchase Plan

 

In January 2002, the Company announced a common stock repurchase plan (the “Repurchase Plan”) which allows for the repurchase by the Company for up to 10 million shares of its common stock in the open market.

 

The Repurchase Plan is conditioned upon favorable business conditions and acceptable prices for the common stock. Purchases under the Repurchase Plan may be made, from time to time, in the open market, through block trades or otherwise. Depending on market conditions and other factors, purchases may be commenced or suspended any time or from time to time without prior notice.

 

During the year 2009, the Company repurchased an aggregate of 140,054 shares of common stock from unaffiliated parties, at various dates, at market prices at their time of purchase for an aggregate cost, including broker commissions of $17,000, pursuant to the Repurchase Plan.

 

Note 6 - Comprehensive Income (Loss)

 

Components of other accumulated comprehensive income (loss), for the year ended December 31 follow:

 

 

(in thousands, except per share data)

 

2007

 

 

 

 

 

Minimum Pension Liability Adjustment

 

 

Unrealized Gains (Losses) on Investment Securities

 

 

Accumulated Other Comprehensive Income (Loss)

 

Balance beginning of period

$

(474

)

$

138

 

$

(336

)

Reclassification adjustment for gains realized in net loss

 

-

 

 

(211

)

 

(211

)

Change during the period

 

474

 

 

73

 

 

547

 

Balance end of period

$

-

 

$

-

 

$

-

 

                                                                                                                

 

24

 

 


AMBASE CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

Note 7 - Pension and Savings Plans

 

The Company previously sponsored a non tax-qualified supplemental retirement plan, initially adopted by the Company in 1985, and as amended and restated (the “Supplemental Plan”), under which only one current executive officer of the Company was the sole participant. The cost of the Supplemental Plan was accrued but not funded.

 

In accordance with an amendment to the Supplemental Plan, as previously adopted in March 2006, the liability for the Supplemental Plan was fully satisfied on May 31, 2007, by the lump-sum benefit payment of $16,676,115 (to Mr. Bianco, the Company’s Chairman, President and Chief Executive Officer), and immediately thereafter, the Supplemental Plan automatically terminated. The lump-sum Supplemental Plan benefit payment to Mr. Bianco was paid from the Company’s available financial resources. After May 31, 2007, no further Supplemental Plan expense was required to be recognized by the Company.

 

Pension expense for the Supplemental Plan for the year ended December 31 was as follows:

 

(in thousands)

 

 

2007

 

Interest cost on projected benefit obligation

 

$

394

 

Amortization of minimum pension liability

 

 

474

 

Service cost of current period

 

 

-

 

 

 

$

868

 

 

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 30% of compensation, which are matched by the Company at a percentage determined annually. Beginning in 2009, the employer match was reduced to 75% of the amount the employee elects to defer from the 2008 employer match of 100%. 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 compensation reduction contributions. The Company’s matching contributions to the Savings Plan, charged to expense, were $52,000, $69,000 and $60,000 in 2009, 2008 and 2007, respectively. All contributions are subject to maximum limitations contained in the Code.

 

Note 8 - Incentive Plans

 

Under the Company’s 1994 Senior Management Incentive Compensation Plan (the “1994 Plan”), any executive officer of the Company whose compensation is required to be reported to stockholders under the Securities Exchange Act of 1934 (the “Participants”) and who is serving as such at any time during the fiscal year as to which an award is granted, may receive an award of a cash bonus (“Bonus”), in an amount determined by the Personnel Committee of the Company’s Board of Directors (the “Committee”) and payable from an annual bonus fund (the “Annual Bonus Pool”). The Committee may award Bonuses under the 1994 Plan to Participants not later than 120 days after the end of each fiscal year (the “Reference Year”).

 

If the Committee grants a Bonus under the 1994 Plan, the amount of the Annual Bonus Pool will be an amount equal to the sum of (i) plus (ii), where:

 

(i) is ten percent (10%) of the amount by which the Company’s Total Stockholders’ Equity, as defined, on the last day of a Reference Year increased over the Company’s Total Stockholders’ Equity, as defined, on the last day of the immediately preceding Reference Year; and

 

(ii) is five percent (5%) of the amount by which the Company’s market value, as defined, on the last day of the Reference Year increased over the Company’s market value on the last day of the immediately preceding Reference Year.

 

25

 

 


Notwithstanding the foregoing, the 1994 Plan provides that in the event of a decrease in either or both of items (i) and/or (ii) above, the Annual Bonus Pool is determined by reference to the last Reference Year in which there was an increase in such item. If the Committee determines within the 120-day time period to award a Bonus, the share of the Annual Bonus Pool to be allocated to each Participant shall be as follows: 45% of the Annual Bonus Pool shall be allocated to the Company’s Chief Executive Officer, and 55% of the Annual Bonus Pool shall be allocated pro rata to each of the Company’s Participants as determined by the Committee. The Committee in its discretion may reduce the percentage of the Annual Bonus Pool to any Participant for any Reference Year, and such reduction shall not increase the share of any other Participant. The 1994 Plan is not the exclusive plan under which the Executive Officers may receive cash or other incentive compensation or bonuses. No Bonuses were paid attributable to the 1994 Plan for 2009, 2008, or 2007.

 

Under the Company’s 1993 Stock Incentive Plan (the “1993 Plan”), the Company may grant to officers and employees of the Company and its subsidiaries, stock options (“Options”), stock appreciation rights (“SARs”), restricted stock awards (“Restricted Stock”), merit awards (“Merit Awards”) and performance share awards (“Performance Shares”) through May 28, 2018. 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. Options granted generally have a ten year contractual life and generally have vesting terms of two years from the date of grant. In the case of a “Change of Control” of the Company (as defined in the 1993 Plan), Options granted pursuant to the 1993 Plan may become fully exercisable as to all optioned shares from and after the date of such Change in Control in the discretion of the Committee or as may otherwise be provided in the grantee’s Option agreement. Death, retirement, or absence for disability will not result in the cancellation of any Options.

 

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.

 

26

 

 


AMBASE CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

Incentive plan activity is summarized as follows:

 

(shares in thousands)

 

1993 Stock Incentive Plan

 

 

 

 

Shares Under Option

 

 

Weighted Average Exercise Price

 

Outstanding at December 31, 2006

 

 

1,240

 

$

1.01

 

Expired

 

 

(364

)

 

1.19

 

 

 

 

 

 

 

 

 

Outstanding at December 31, 2007

 

 

876

 

 

0.93

 

Expired

 

 

(10

)

 

1.19

 

 

 

 

 

 

 

 

 

Outstanding at December 31, 2008

 

 

866

 

 

0.90

 

Expired

 

 

(15

)

 

2.56

 

 

 

 

 

 

 

 

 

Outstanding at December 31, 2009

 

 

851

 

 

0.87

 

 

 

 

 

 

 

 

 

Options exercisable at:

 

 

 

 

 

 

 

December 31, 2009

 

 

851

 

$

0.87

 

December 31, 2008

 

 

866

 

 

0.90

 

December 31, 2007

 

 

876

 

 

0.93

 

 

The following table summarizes information about the Company’s stock options outstanding and exercisable under the 1993 Plan at December 31, 2009, as follows:

 

 

 

 

(shares in thousands)

 

 

Option Outstanding

 

 

 

Options Exercisable

 

 

 

 

 

Range of Exercise Prices

 

 

Shares

 

 

Weighted Average Remaining Contractual Life (in years)

 

 

Weighted Average Exercise Price

 

 

 

Shares

 

 

Weighted Average Exercise Price

 

 

 

 

$0.60 to $0.81

 

 

500

 

 

4.37

 

 

$0.72

 

 

 

500

 

 

$0.72

 

 

$0.95

 

 

15

 

 

0.01

 

 

0.95

 

 

 

15

 

 

0.95

 

 

$1.09

 

 

336

 

 

2.00

 

 

1.09

 

 

 

336

 

 

1.09

 

 

Total

 

 

851

 

 

 

 

 

 

 

 

 

851

 

 

0.87

 

 

At December 31, 2009, the weighted average remaining contractual life in years for options outstanding and options exercisable was 4.12 years. At December 31, 2009, the exercise price of stock options outstanding and exercisable was greater than the market price of the Company’s stock; therefore, no intrinsic value for stock options is reflected herein.

 

No stock based compensation expense was recorded in 2009, 2008 and 2007, as all previously granted outstanding options vested as of January 2, 2007. Additionally, as of January 2, 2007, all previously granted stock options had vested and no stock options vested after such date. No stock option awards have been granted since January 2005. Compensation expense relating to stock options would be recorded in the Consolidated Statement of Operations, with a corresponding increase to additional paid in capital in the Consolidated Statement of Stockholders’ Equity.

 

27

 

 


AMBASE CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

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

 

The Black-Scholes option valuation model requires the input of highly subjective assumptions, including the expected life of the stock-based award and stock price volatility. The assumptions noted herein represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management’s judgment. As a result, if other assumptions had been used, our recorded and pro forma stock-based compensation expense could have been materially different from that depicted herein. In addition, the Company is required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. If the actual forfeiture rate is materially different from the previous estimate, the share-based compensation expense could be materially different.

 

The Company believes that the use of the Black-Scholes model meets the fair value measurement objectives of SFAS 123R and reflects all substantive characteristics of the instruments being valued. No stock options were granted during the years ending December 31, 2009, 2008 and 2007.

 

The total fair value of shares vested during the full year period ended December 31, 2007 was $96,000. As of December 31, 2009, 2008 and 2007, there was no remaining unamortized compensation cost related to non-vested share-based compensation arrangements related to stock options granted under the 1993 Plan.

 

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

 

28

 

 


Note 9 - Income Taxes

 

The components of income tax (expense) benefit for the years ended December 31 are as follows:

 

(in thousands)

 

2009

 

2008

 

2007

 

 

 

 

 

 

 

 

 

 

 

 

 

Income tax (expense) benefit - current

 

$

(56

)

$

160

 

$

(50

)

Total

 

$

(56

)

$

160

 

$

(50

)

 

The components of pretax loss and the difference between income taxes computed at the statutory federal rate of 35% in 2009, 2008 and 2007, and the provision for income taxes for the years ended December 31 follows:

 

(in thousands)

 

2009

 

2008

 

2007

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss before income taxes

 

$

(2,411

)

$

(4,591

)

$

(3,886

)

 

 

 

 

 

 

 

 

 

 

 

Tax (expense) benefit :

 

 

 

 

 

 

 

 

 

 

Tax at statutory federal rate

 

$

844

 

$

1,607

 

$

1,360

 

Accounting loss benefit not recognized

 

 

(844)

 

 

(1,607

)

 

(1,360

)

State income taxes

 

 

(56

)

 

-

 

 

(50

)

Adjustment to prior year estimated tax accruals

 

 

-

 

 

160

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

Income tax (expense) benefit

 

$

(56)

 

$

160

 

$

(50

)

 

There were no unrecognized tax benefits at January 1, 2009 or December 31, 2009. Further, no significant changes in unrecognized income tax benefits are currently expected to occur over the next year. Interest and/or penalties related to underpayments of income taxes, if applicable, would be included in interest expense and operating expenses, respectively. The accompanying financial statements do not include any amounts for any such interest and/or penalties. The Company’s federal income tax returns for the years subsequent to 1992 have not been reviewed by the Internal Revenue Service (“IRS”) or state authorities. In October 2009, the Company received notification from the IRS that they would be reviewing the Company’s 2007 federal income tax return, which review is currently ongoing. The Company has not been notified of any potential tax audits by any state or local tax authorities. As such, the Company believes the statute of limitations for federal and state purposes are generally closed for tax years prior to 2005.

 

State income tax amounts for 2009 and 2007 primarily consist of a minimum tax on capital to the state of Connecticut

 

During 2008, the Company recorded other income of $247,000 attributable to an IRS interest refund received by the Company in June 2008. The refunds resulted from the Company’s pursuit of interest refund claims for several prior tax years under a tax code provision which allowed for the retroactive recovery of the interest differential where a taxpayer had a tax underpayment (subject to higher interest payment rates) for one tax year and a simultaneous tax overpayment (subject to lower interest refund rates) for another tax year.

 

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. §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. §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. §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”).

 

29

 

 


AMBASE CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

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. The Company believes, as a result of remaining consolidated with Carteret FSB for federal income tax return purposes, that the Company’s tax basis in its’ investment in Carteret/Carteret FSB can be converted into NOL’s, as tax losses are incurred, which could be available to carryforward/carryback into various federal income tax return years. However; since all of the Carteret FSB tax information has not been received, the Company is unable to determine with certainty, the amount of or the years in which any NOL’s may ultimately be generated; if the NOL carryforwards/carrybacks will be utilized in prior federal income tax return years; or the final expiration dates of any of the NOL carryforwards/carrybacks ultimately generated.

 

Based on information received to date, and prior to the recognition of the 1992 tax losses reflected on the Company’s 1992 amended federal income tax return, as further described below, the Company estimated that as of December 1992 it had a remaining tax basis related to its’ investment in Carteret/Carteret FSB of approximately $158 million. Based on the Company’s Election Decision, described above, and the receipt of some of the requested information from the RTC/FDIC, the Company 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 reviewing its consolidated federal income tax returns for 1993 and subsequent years.

 

The Company expects that the 1992 Amended Return will generate approximately $56 million of NOL’s for tax year 1992, which the Company is seeking to carryback to prior tax years to produce refunds of tax previously paid. The 1992 Amended Return has not yet been accepted by the IRS. See “Carryback Claims,” below for further information. As part of the 1992 Amended Return approximately $56 million, (of the $158 million), of Carteret/Carteret FSB tax basis is expected to be converted into NOL’s, (as tax losses are incurred) in tax year 1992, and will have expired in 2007, unless they are utilized as part of the “Carryback Claims,” or absorbed in earlier years based on inclusion of certain items in the consolidated group.

 

The Carteret/Carteret FSB tax basis, of approximately $102 million, remaining after recognition of the 1992 Amended Return, may be converted into NOL carryforwards/carrybacks as additional tax losses are incurred by Carteret/Carteret FSB and may be carried back or carried forward to other tax years; may be utilized in other tax years; or could begin to expire no earlier than 2008 based upon the year any NOL’s are ultimately generated. The Company can give no assurances with regard to the 1992 Amended Return, subsequent year returns, or the final amount or expiration of NOL carryforwards/carrybacks ultimately generated, if any, from the Company’s tax basis in Carteret/Carteret FSB. Any NOL’s ultimately generated from the Company’s tax basis in Carteret/Carteret FSB, would be in addition to the NOL carryforwards/carrybacks generated based on the Company’s federal income tax returns as previously filed, as further detailed above.

 

In March 2000, the Company filed with the IRS several carryback claims and amendments to previously filed carryback claims (the “Carryback Claims”) seeking refunds from the IRS of alternative minimum tax and other federal income taxes paid by the Company in prior years plus applicable IRS interest, based on the filing of the 1992 Amended Return. In April 2003, IRS examiners issued a letter to the Company proposing to disallow the Carryback Claims. The Company sought administrative review of the letter by protesting to the Appeals Division of the IRS. In February 2005, IRS appeals officials completed their review of the Carryback Claims and disallowed them. On April 29, 2008, the Company filed suit in the United States District Court for the District of Connecticut for the tax refunds it seeks, plus interest, with respect to the Carryback Claims. On September 29, 2009, the U.S. Department of Justice, representing defendant United States in the suit, filed a Motion to Dismiss. In response, on October 19, 2009, the Company filed its opposition to the Government’s Motion to Dismiss, as well as the Company’s own Motion for Partial Summary Judgment. The Company expects the Court to issue a ruling in response to these motions that may or may not be dispositive of the case. The Company can give no assurances as to the final amount of refunds, if any, or when they might be received.

SeeNote 10 – Legal Proceedings.

 

The FDIC has previously filed a federal income tax return for Carteret FSB for 1995 (as well as other years), which indicates that Carteret FSB allegedly could owe a 1995 federal income tax liability of $32 million, which including interest and penalty thereon, is alleged to be in excess of $120 million. The FDIC has stated to the United States Court of Federal Claims (“Court of Claims”) that the tax amounts are only estimates and are highly contingent. However; it is possible that the IRS may try to collect the alleged Carteret FSB federal income taxes from the Carteret FSB receivership.

 

30

 

 


AMBASE CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

The Company believes the Carteret FSB federal income tax returns filed by the FDIC were improperly filed and are neither accurate nor valid. The FDIC, as indicated above, continues to report the 1995 federal income tax liability, including interest and penalty, as a component of the alleged Carteret FSB receivership deficit. As part of the Supervisory Goodwill legal proceedings, the Company presented to the Court of Claims various arguments to support the position that no federal income tax would be owed as a result of the Carteret FSB receivership operations for tax year 1995; however, the Department of Justice and the FDIC have stated to the Court of Claims that they do not believe the Court of Claims has jurisdiction over that issue. The Supervisory Goodwill proceedings remain pending in the Court of Claims. Based on the information received to date, if the correct Carteret FSB federal income tax results were included with the Company’s originally filed federal income tax returns, the Company based upon consultation with its legal and tax advisors believes that no additional material federal income tax would be owed by the Company, although this cannot be assured because a contrary result is possible, given the uncertainty with various legal and factual assumptions underlying the Company’s beliefs. This assessment included among other items, a review of the Carteret FSB federal income tax returns as prepared by the FDIC and the correction of errors originally reported therein, the proper application of federal NOL carryforwards and carrybacks, and the adherence to statute of limitation provisions contained in the Internal Revenue Code, as amended. As explained above, although the Company does not believe that Carteret FSB or the Company will have a material federal income tax liability related to Carteret FSB for tax year 1995 (or any other tax year), the Company can give no assurances of the final amounts, if any, of federal income taxes owed by the Carteret FSB receivership or by the Company as a result of the Carteret FSB receivership operations. The Company is continuing to try to resolve these matters as part of the Supervisory Goodwill legal process and is also continuing to review the Carteret FSB federal income tax returns and the results of their inclusion with the Company’s federal income tax returns as previously filed. The Company is pursuing the Carryback Claims, as further described above, which could have an impact on the analysis of the prior year tax information. For further information on the Supervisory Goodwill legal proceedings, see Note 10 herein. The discussion of the Carteret FSB federal income tax results is intended to provide details as to the potential inter-relationship of the Carteret FSB federal income tax returns with the Company’s federal income tax positions. It is not a reflection of any federal income tax liability of the Company arising from the Carteret receivership operations.

 

 

31

 

 


AMBASE CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

Based upon the Company’s federal income tax returns as filed from 1993 to 2008 (subject to IRS audit adjustments), excluding all effects of the inclusion of Carteret/Carteret FSB from December 4, 1992 forward, as further discussed above, as of December 31, 2009, the Company has NOL carryforwards available to reduce future federal taxable income, which expire if unused, as follows:

 

Year

 

 

Amount

 

2010

 

$

5,300,000

 

2012

 

 

1,100,000

 

2018

 

 

5,400,000

 

2019

 

 

4,000,000

 

2020

 

 

2,600,000

 

2021

 

 

4,000,000

 

2022

 

 

3,200,000

 

2023

 

 

1,800,000

 

2024

 

 

700,000

 

2026

 

 

2,800,000

 

2027

 

 

3,100,000

 

2028

 

 

4,500,000

 

 

 

$

38,500,000

 

 

In addition to the NOL carryforwards noted above, the Company currently estimates that, an additional $16.7 million of NOL carryforwards could be generated from the 2007 tax year which would expire if unused in 2027, and $2.4 million of NOL carryforwards could be generated from the 2009 tax year which would expire if unused in 2029. In 2009, approximately $2.2 million of NOL carryforwards expired to the extent they remain unused. The unused carryforwards will have expired unless they are utilized in prior tax year or absorbed in an earlier year based on inclusion of certain items in the consolidated group. The utilization of certain carryforwards and carrybacks 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 defined further above, the Company would seek to utilize approximately $8 million of the $21 million of AMT Credits.

 

The Company has calculated a net deferred tax asset of $41 million and $39 million as of December 31, 2009 and 2008, respectively, arising primarily from NOL carryforwards and AMT credits. This amount does not include the anticipated tax effects of the NOL’s which could be generated from the Company’s investment 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.

 

32

 

 


AMBASE CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

 

Note 10 - Legal Proceedings

 

The Company is or has been a party in a number of lawsuits or proceedings, including the following:

 

Supervisory Goodwill Litigation. During the third quarter of 1993, the Company filed a claim against the United States, in the United States Court of Federal Claims (the “Court of Federal Claims” or the “Court”), based upon the impact of the Financial Institutions Reform, Recovery and Enforcement Act of 1989 (“FIRREA”) on the Company’s investment in Carteret Savings Bank (“Carteret”). Approximately 120 other similar so-called “supervisory goodwill” cases were commenced by other financial institutions and/or their shareholders; many are still pending in the Court of Federal Claims. Three of these cases, Winstar Corp. v. United States, Glendale Federal Bank, FSB v. United States, and Statesman Savings Holding Corp. v. United States (the “Consolidated Cases”), which involve many of the same issues raised in the Company’s suit, were appealed to the United States Supreme Court (the “Supreme Court”). On July 1, 1996, the Supreme Court issued a decision in the Consolidated Cases. The Supreme Court’s decision affirmed the lower Court’s grant of summary judgment in favor of the plaintiffs on the issue of liability and remanded the cases for a determination of damages. Although the decision in the Consolidated Cases is beneficial to the Company’s case, it is not necessarily indicative of the ultimate outcome of the Company’s action.

 

On September 18, 1996, the Court of Federal Claims entered an Omnibus Case Management Order that governed further pretrial proceedings in the Company’s action and most of the other so-called “Winstar-related” cases. On March 14, 1997, the Court entered an order permitting the Federal Deposit Insurance Company (“FDIC”) to intervene as an additional plaintiff in forty-three cases, including the Company’s case, but not allowing the FDIC to be substituted as the sole plaintiff in those cases.

 

On March 20, 1998, the FDIC filed a motion for partial summary judgment against the United States on certain liability issues, and the Company filed a memorandum in support of that mo