<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 31, 2000
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission file number 1-7265
AMBASE CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 95-2962743
(State of incorporation) (I.R.S. Employer Identification No.)
51 WEAVER STREET, BUILDING 2
GREENWICH, CONNECTICUT 06831-5155
(Address of principal executive offices) (Zip Code)
(203) 532-2000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days.
YES X NO
-------
At March 31, 2000, there were 46,208,519 shares of registrant's common stock,
$0.01 par value per share, outstanding, excluding 126,488 treasury shares.
<PAGE>
AmBase Corporation
Quarterly Report on Form 10-Q
March 31, 2000
<TABLE>
<CAPTION>
CROSS REFERENCE SHEET FOR
PARTS I and II Page
<S> <C> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.................................................................................1
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations..................................................7
Item 3. Quantitative and Qualitative Disclosures About Market Risk..........................................10
PART II - OTHER INFORMATION
Item 1. Legal Proceedings...................................................................................11
Item 2. Changes in Securities...............................................................................11
Item 3. Defaults Upon Senior Securities.....................................................................11
Item 4. Submission of Matters to a Vote of Security Holders.................................................11
Item 5. Other Information...................................................................................11
Item 6. Exhibits and Reports on Form 8-K....................................................................11
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
AMBASE CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
Quarter Ended March 31
(Unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
<S> <C> <C>
2000 1999
===== =====
Operating expenses:
Compensation and benefits......................................................... $ 939 $ 884
Professional and outside services................................................. 290 65
Insurance......................................................................... 14 18
Occupancy......................................................................... 24 23
Other operating................................................................... 36 48
-------- --------
1,303 1,038
-------- --------
Operating loss.................................................................... (1,303) (1,038)
-------- --------
Interest income................................................................... 582 531
Other income...................................................................... 50 43
-------- --------
Loss before income taxes.......................................................... (671) (464)
Income tax expense................................................................ (55) (55)
-------- --------
Net loss.......................................................................... $ (726) $ (519)
===== =====
Earnings per common share:
Net loss - basic.................................................................. $ (0.02) $ (0.01)
Net loss - assuming dilution...................................................... (0.02) (0.01)
===== =====
Average shares outstanding........................................................ 46,190 44,534
====== ======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
AMBASE CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands)
<TABLE>
<CAPTION>
<S> <C> <C>
March 31, December 31,
2000 1999
(unaudited)
======== =========
Assets
Cash and cash equivalents......................................................... $ 812 $ 2,646
Investment securities - held to maturity (market
value $43,237 and $43,259, respectively)...................................... 43,282 43,260
Investment in SDG, Inc. at cost................................................... 1,250 1,250
Other assets...................................................................... 503 522
-------- --------
Total assets...................................................................... $ 45,847 $ 47,678
===== =====
Liabilities and Stockholders' Equity
Liabilities:
Accounts payable and accrued liabilities.......................................... $ 605 $ 1,902
Supplemental retirement plan...................................................... 5,662 5,545
Postretirement welfare benefits................................................... 1,137 1,178
Other liabilities................................................................. 100 106
Litigation and contingency reserves............................................... 1,952 1,983
Income tax reserves............................................................... 66,388 66,388
-------- --------
Total liabilities................................................................. 75,844 77,102
-------- --------
Commitments and contingencies..................................................... - -
-------- --------
Stockholders' equity:
Common stock...................................................................... 463 455
Paid-in capital................................................................... 547,940 547,795
Accumulated deficit............................................................... (577,753) (577,027)
Treasury stock.................................................................... (647) (647)
-------- --------
Total stockholders' equity........................................................ (29,997) (29,424)
-------- --------
Total liabilities and stockholders' equity........................................ $ 45,847 $ 47,678
===== =====
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
AMBASE CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Three Months Ended March 31
(in thousands)
<TABLE>
<CAPTION>
<S> <C> <C>
2000 1999
==== ====
Cash flows from operating activities:
Net loss.......................................................................... $ (726) $ (519)
Adjustments to reconcile net loss to net cash used by operations:
Other assets...................................................................... 15 35
Accounts payable and accrued liabilities.......................................... (1,297) (1,017)
Litigation and contingency reserves uses.......................................... (31) (6)
Other liabilities................................................................. 70 43
Amortization of discount - investment securities.................................. (577) (525)
Other, net........................................................................ 4 3
-------- --------
Net cash used by operating activities............................................. (2,542) (1,986)
-------- --------
Cash flows from investing activities:
Maturities of investment securities - held to maturity............................ 61,300 23,446
Purchases of investment securities - held to maturity............................. (60,745) (22,202)
Purchases of other investment securities.......................................... - (250)
-------- --------
Net cash provided by investing activities......................................... 555 994
-------- --------
Cash flows from financing activities:
Stock options exercised........................................................... 153 -
-------- --------
Net cash provided by financing activities......................................... 153 -
-------- --------
Net decrease in cash and cash equivalents......................................... (1,834) (992)
Cash and cash equivalents at beginning of period.................................. 2,646 2,886
-------- --------
Cash and cash equivalents at end of period........................................ $ 812 $ 1,894
===== =====
Supplemental cash flow disclosures:
Income taxes paid................................................................. $ 49 $ 53
===== =====
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
AMBASE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 1 - Organization
The accompanying consolidated financial statements of AmBase Corporation and
subsidiaries (the "Company") are unaudited and subject to year-end adjustments.
All material intercompany transactions and balances have been eliminated. In the
opinion of management, the interim financial statements reflect all adjustments,
consisting of normal recurring adjustments, necessary for a fair presentation of
the Company's financial position and results of operations. Results for interim
periods are not necessarily indicative of results for the full year. Certain
reclassifications have been made to the 1999 consolidated financial statements
to conform with the 2000 presentation. The consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
("GAAP"). The preparation of financial statements in conformity with GAAP
requires management to make certain estimates and assumptions, that it deems
reasonable, that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from such estimates and
assumptions.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. Substantial contingent and
alleged liabilities exist against the Company through certain lawsuits and
governmental proceedings; see Part II - Item 1. These factors raise substantial
doubt about the Company's ability to continue as a going concern. The financial
statements do not include adjustments to the carrying value of assets and
liabilities, which might be necessary should the Company not continue in
operation. In order to continue on a long-term basis, the Company must both
resolve its contingent and alleged liabilities by prevailing upon or settling
these claims for less than the amounts claimed and generate profits by acquiring
existing operations and/or by developing new operations. The Company continues
to evaluate a number of possible acquisitions, and is engaged in the management
of its remaining assets and liabilities, including the contingent and alleged
tax and litigation liabilities, as described in Part II - Item 1. The Company
intends to aggressively contest all pending and threatened litigation and
governmental proceedings, as well as pursue all sources for contributions to
settlements. The unaudited interim financial statements presented herein should
be read in conjunction with the Company's consolidated financial statements
filed in its Annual Report on Form 10-K for the year ended December 31, 1999.
The Company's main source of non-operating revenue is interest earned on
investment securities and cash equivalents. The Company's management expects
that operating cash needs for the remainder of 2000 will be met principally by
the Company's current financial resources, and the receipt of non-operating
revenue consisting of interest income on investment securities and cash
equivalents.
Note 2 - Legal Proceedings
The Company has significant alleged tax liabilities and is a defendant in
certain lawsuits and governmental proceedings, the ultimate outcome of which
could have a material adverse effect on its financial condition and results of
operations. Because of the nature of the contingent and alleged tax and
litigation liabilities described in Part II - Item 1, and the inherent
difficulty in predicting the outcome of the litigation and governmental
proceedings, management is unable to predict whether the Company's recorded
reserves will be adequate or its resources sufficient to satisfy its ultimate
obligations. The accompanying consolidated financial statements do not include
any adjustments that might result from the outcome of these uncertainties.
Although the basis for the calculation of the litigation and contingency
reserves and income tax reserves are regularly reviewed by the Company's
management and outside legal counsel, the assessment of these reserves includes
an exercise of judgment and is a matter of opinion. At March 31, 2000, the
litigation and contingency reserves, other than for income tax issues, were
$1,952,000. For a discussion of alleged tax liabilities, lawsuits and
governmental proceedings, see Part II - Item 1.
In addition to the litigation and contingency reserves, the Company has a
reserve for income taxes of $66,388,000 at March 31, 2000. For a further
discussion, see Part II - Item 1 - Legal Proceedings, Dispute with Internal
Revenue Service over Withholding Taxes (Netherlands Antilles).
See Part II - Item 1 - Legal Proceedings, for a discussion of Supervisory
Goodwill Litigation and information regarding the Company's claims against Home
Holdings, Inc.
<PAGE>
AMBASE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
Note 3 - Cash and Cash Equivalents
Highly liquid investments, consisting principally of funds held in short-term
money market accounts, are classified as cash equivalents.
Note 4 - Investment Securities
Investment securities - held to maturity consist of U.S. Treasury Bills with
original maturities of one year or less and are carried at amortized cost based
upon the Company's intent and ability to hold these investments to maturity.
Investment securities - held to maturity at March 31, 2000 and December 31, 1999
consist of the following:
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
======================================== ===========================================
<S> <C> <C> <C> <C> <C> <C>
Cost or Cost or
Carrying Amortized Fair Carrying Amortized Fair
(in thousands) Value Cost Value Value Cost Value
======== ========== ======= ======== ========= =======
U.S. Treasury Bills $ 43,282 $ 43,282 $ 43,237 $ 43,260 $ 43,260 $ 43,259
====== ====== ====== ====== ====== ======
</TABLE>
The gross unrealized losses on investment securities was $45,000 at March 31,
2000 and $1,000 at December 31, 1999.
Other investment securities consist of convertible preferred and/or common stock
in AMDG, Inc., which were purchased through private placements, are classified
as other assets, and are carried at cost which approximates market value;
$350,000 at March 31, 2000 and December 31, 1999.
<PAGE>
AMBASE CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
Note 5 - Income Taxes
The Company and its 100% owned domestic subsidiaries file a consolidated federal
income tax return. The Company recognizes both the current and deferred tax
consequences of all transactions that have been recognized in the financial
statements, calculated based on the provisions of enacted tax laws, including
the tax rates in effect for current and future years. Net deferred tax assets
are recognized immediately when a more likely than not criterion is met; that
is, unless a greater than 50% probability exists that the tax benefits will not
actually be realized sometime in the future. The Company has calculated a net
deferred tax asset of $28 million as of March 31, 2000 and $28 million as of
December 31, 1999, arising primarily from net operating loss ("NOL")
carryforwards, alternative minimum tax credits and the excess of book over tax
reserves (not including the anticipated tax effects of NOL's expected to be
generated from the Company's tax basis in Carteret Savings Bank, F.A. and
subsidiaries ("Carteret"), resulting from the election decision, as more fully
described below). A valuation allowance has been established for the entire net
deferred tax asset, as management, at the current time, has no basis to conclude
that realization is more likely than not.
As a result of the Office of Thrift Supervision's December 4, 1992 placement of
Carteret in receivership, under the management of the Resolution Trust
Corporation ("RTC")/Federal Deposit Insurance Corporation ("FDIC"), and proposed
Treasury Reg. ss.1.597-4(g), the Company had previously filed its 1992 and
subsequent federal income tax returns with Carteret disaffiliated from the
Company's consolidated federal income tax return. Based upon the impact of
Treasury Reg. ss.1.597-4(g),which was issued in final form on December 20, 1995,
a continuing review of the Company's tax basis in Carteret, and the impact of
prior year tax return adjustments on the Company's 1992 federal income tax
return as filed, the Company decided not to make an election pursuant to final
Treasury Reg. ss.1.597-4(g) to disaffiliate Carteret from the Company's
consolidated federal income tax return effective as of December 4, 1992 (the
"election decision").
The Company has made numerous requests to the RTC/FDIC for tax information
pertaining to Carteret and the resulting successor institution, Carteret Federal
Savings Bank ("Carteret FSB"); however all of the information still has not been
received. Based on the Company not making the election decision, as described
above, and the receipt of some of the requested information from the RTC/FDIC,
the Company has amended its 1992 consolidated federal income tax return to
include the federal income tax effects of Carteret and Carteret FSB. The Company
is still in the process of amending its consolidated federal income tax returns
for 1993 and subsequent years.
The Company anticipates that, as a result of filing a consolidated federal
income tax return with Carteret FSB, a total of approximately $170 million of
tax NOL carryforwards will be generated from the Company's tax basis in
Carteret/Carteret FSB as tax losses are incurred by Carteret FSB of which $158
million are still available for future use. Based on the Company's recent filing
of its amended 1992 consolidated federal income tax return to include the
federal income tax effects of Carteret FSB, approximately $56 million of NOL
carryforwards are generated for tax year 1992 which expire in 2007, with the
remaining approximate $102 million of NOL carryforwards to be generated,
expiring no earlier than 2008. These NOL carryforwards would be available to
offset future taxable income, in addition to the NOL carryforwards as further
detailed below.
In June 1998, the Company paid $12,700,000 to the IRS for tax and estimated
interest to be applied to the Company's Fresh Start tax liability, which related
to a 1987 tax dispute with the IRS. Based on a Final Stipulation between the
Company and the IRS on the Fresh Start issue, the Company is presently awaiting
the IRS's final calculation of interest on the Fresh Start issue. In connection
with the Final Stipulation, the Company anticipates utilizing approximately $29
million of NOL's.
Based upon the Company's federal income tax returns as filed from 1993 to 1998
(subject to IRS audit adjustments), after utilizing $29 million of NOL
carryfowards in connection with Fresh Start; and excluding the NOL carryfowards
generated from the Company's tax basis in Carteret/Carteret FSB, as noted above,
at March 31, 2000 the Company has NOL carryforwards aggregating approximately
$20 million, available to reduce future federal taxable income which expire if
unused beginning in 2008.
<PAGE>
The utilization of certain carryforwards is subject to limitations under U.S.
federal income tax laws. In addition, the Company has approximately $21 million
of alternative minimum tax credit carryforwards, which are not subject to
expiration.
The Company contractually assumed the tax liabilities of City Investing Company
("City"), which, prior to September 1985, owned all the outstanding shares of
Common Stock of the Company. For all periods through 1992, the IRS and the
Company disagree only with respect to withholding taxes in connection with a
Netherlands Antilles finance subsidiary of City. The Company's federal income
tax returns for years subsequent to 1992 have not been reviewed by the IRS.
The Company has a reserve for income taxes of $66,388,000 at March 31, 2000. For
a further discussion, see Part II - Item 1 - Legal Proceedings, Dispute with
Internal Revenue Service over Withholding Taxes (Netherlands Antilles).
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition and Results of
Operations, which follows, should be read in conjunction with the consolidated
financial statements and related notes, which are contained in Item 1, herein.
FINANCIAL CONDITION
The Company's assets at March 31, 2000 aggregated $45,847,000 consisting
principally of cash and cash equivalents of $812,000 and investment securities
of $43,282,000. At March 31, 2000, the Company's liabilities, including reserves
for contingent and alleged liabilities, as further described in Part II - Item
1, exceeded total recorded assets by $29,997,000.
The Company contractually assumed the tax liabilities of City Investing Company
("City"), which, prior to September 1985, owned all the outstanding shares of
Common Stock of the Company. For all periods through 1992, the IRS and the
Company disagree only with respect to withholding taxes in connection with a
Netherlands Antilles finance subsidiary of City ("Withholding Taxes"). The
Company's federal income tax returns for years subsequent to 1992 have not been
reviewed by the IRS.
With respect to the Withholding Taxes issue, in connection with a Netherlands
Antilles finance subsidiary of City, on May 11, 1995, the IRS issued a Notice of
Deficiency for withholding taxes on interest payments for the years 1979 through
1985. In the Notice of Deficiency, the IRS contends that City's wholly owned
Netherlands Antilles finance subsidiary should be disregarded for tax purposes.
The Company vigorously contested the IRS's position in accordance with the IRS's
internal appeals procedures. In January 1992, the National Office of the IRS
issued technical advice supporting the auditing agent's position. In October
1992, the Company appealed this technical advice to the National Office. The
National Office advised the Company that it expected to issue technical advice
supporting the auditing agent's position, whereupon the Company advised the IRS
that it was withdrawing its technical advice request.
On June 30, 1995, the Company filed a petition in the United States Tax Court
("Tax Court") contesting the Notice of Deficiency. The IRS filed its answer on
August 23, 1995. The Company filed a motion for summary judgment in its favor on
February 13, 1996. On April 17, 1996, the IRS filed a Notice of Objection to the
Company's motion for summary judgment. The Tax Court requested, and the Company
filed, on July 3, 1996, a reply to the IRS's Notice of Objection. On September
19, 1996, the Court denied the Company's motion for summary judgment without
prejudice. Based on the Tax Court's examination of the record and the status of
the discovery process, the Tax Court concluded that summary adjudication at this
time was inappropriate. The Tax Court directed the parties to engage in full and
complete discovery as expeditiously as possible. A trial was held in this case
on March 24, 1997, after which the Judge asked the IRS and the Company to submit
post-trial briefs, which were submitted to the Tax Court in August 1997. If the
IRS were to prevail on this issue, the Company would be liable for taxes and
interest in excess of the Company's financial resources.
<PAGE>
In a case dealing with a similar withholding tax issue, the Tax Court ruled in
favor of the taxpayer, Northern Indiana Public Service Co. ("Northern Indiana"),
in November 1995. The Tax Court rejected the IRS's contention that interest paid
to Northern Indiana's foreign subsidiary was subject to United States tax
withholding. The IRS appealed this decision (Northern Indiana Public Service Co.
v. Commissioner) to the United States Court of Appeals for the 7th Circuit (the
"Appeals Court"). In June 1997 the Appeals Court affirmed the Tax Court's ruling
in favor of Northern Indiana. Although the Appeals Court decision in the
Northern Indiana case could be beneficial to the Company's case, it is not
necessarily indicative of the ultimate result of the final settlement of the
Netherlands Antilles issue between the Company and the IRS.
Based on an evaluation of the IRS's contention, counsel has advised the Company
that, although the outcome in litigation can by no means be assured, the Company
has a very strong case and should prevail. Notwithstanding counsel's opinion and
the Tax Court's ruling in the Northern Indiana case, it is not possible at this
time to determine the final disposition of this issue, when the issues will be
resolved, or their final financial effect. A final disposition of this issue in
the Company's favor would have a material positive effect on the Company's
Consolidated Statement of Operations and Financial Condition.
The Company has a reserve for income taxes of $66,388,000 at March 31, 2000. For
a further discussion, see Part II - Item 1 - Legal Proceedings, Dispute with
Internal Revenue Service over Withholding Taxes (Netherlands Antilles).
At March 31, 2000, the litigation and contingency reserves, other than for
income tax issues, were $1,952,000. For a discussion of alleged tax liabilities,
lawsuits and governmental proceedings, see Part II - Item 1.
The Company has significant alleged tax liabilities and is a defendant in
certain lawsuits and governmental proceedings, the ultimate outcome of which
could have a material adverse effect on its financial condition and results of
operations. Because of the nature of the contingent and alleged liabilities and
the inherent difficulty in predicting the outcome of the litigation and
governmental proceedings, management is unable to predict whether the Company's
recorded reserves will be adequate or its resources sufficient to satisfy its
ultimate obligations. The accompanying consolidated financial statements do not
include any adjustments that might result from the outcome of these
uncertainties. Although the basis for the calculation of the litigation and
contingency reserves and the income tax reserves are regularly reviewed by the
Company's management and outside legal counsel, the assessment of these reserves
includes an exercise of judgment, and is a matter of opinion. For a discussion
of alleged tax liabilities, lawsuits and governmental proceedings, see Part II -
Item 1.
The cash needs of the Company for the first three months of 2000 were
principally satisfied by interest income received on investment securities and
cash equivalents, and the Company's current financial resources. Management
believes that the Company's cash resources are sufficient to continue operations
for 2000.
For the three months ended March 31, 2000, cash of $2,542,000 was used by
operations, including the payment of prior year accruals and operating expenses,
partially offset by the receipt of interest income.
For the three months ended March 31, 1999, cash of $1,986,000 was used by
operations, including the payment of prior year accruals and operating expenses,
partially offset by the receipt of interest income.
The Company continues to evaluate a number of possible acquisitions and is
engaged in the management of its remaining assets and liabilities, including the
contingent and alleged tax and litigation liabilities, as described above.
Extensive discussions and negotiations are ongoing with respect to certain of
these matters. The Company intends to aggressively contest all pending and
threatened litigation and governmental proceedings, as well as pursuing all
sources of contributions to settlements. In order to continue on a long-term
basis, the Company must both resolve its contingent and alleged liabilities by
prevailing upon or settling these claims for less than the amounts claimed, and
generate profits by acquiring existing operations and/or by developing new
operations.
There were no material commitments for capital expenditures as of March 31,
2000.
<PAGE>
Results of Operations
Summarized financial information of the Company for the first quarter ended
March 31 is as follows:
<TABLE>
<CAPTION>
First Quarter
(in thousands) 2000 1999
===== =====
<S> <C> <C>
Operating expenses:
Compensation and benefits......................................................... $ 939 $ 884
Professional and outside services................................................. 290 65
Insurance......................................................................... 14 18
Occupancy......................................................................... 24 23
Other operating................................................................... 36 48
-------- --------
1,303 1,038
-------- --------
Operating loss.................................................................... (1,303) (1,038)
-------- --------
Interest income................................................................... 582 531
Other income...................................................................... 50 43
-------- --------
Loss before income taxes.......................................................... (671) (464)
Income tax expense................................................................ (55) (55)
-------- --------
Net loss.......................................................................... $ (726) $ (519)
===== =====
</TABLE>
The Company's main source of non-operating revenue is interest income earned on
investment securities and cash equivalents. The Company's management expects
that operating cash needs for the remainder of 2000 will be met principally by
the Company's current financial resources and the receipt of non-operating
revenue consisting of interest income earned on investment securities and cash
equivalents.
The Company recorded a net loss of $726,000 or $0.02 per share, for the first
quarter ended March 31, 2000 compared to a net loss of $519,000, or $0.01 per
share, for the first quarter ended March 31, 1999.
Compensation and benefits increased to $939,000 in the first quarter ended March
31, 2000, compared with $884,000 the 1999 first quarter. The increase is
primarily due to an increase in the accrual for 2000 incentive compensation,
which is not guaranteed, as compared to prior year amounts.
Professional and outside services increased to $290,000 in the first quarter
ended March 31, 2000, compared to $65,000 in the respective 1999 period. The
increase in the 2000 period is primarily the result of an increase in
Supervisory Goodwill litigation expenses as a result of the Company's Summary
Judgment motion and expert report preparation as further discussed in Part II
Item 1.
Insurance expenses decreased to $14,000 in the first quarter ended March 31,
2000, compared to $18,000 in the same 1999 period, due to management's continued
renegotiations of insurance premiums.
Interest income in the first quarter ended March 31, 2000 increased to $582,000
from $531,000 in the respective 1999 period. The increase was primarily
attributable to an increased yield on investments held in 2000 compared with
1999.
Other income of $50,000 and $43,000 for the first quarter of 2000 and 1999,
respectively is principally due to the collection by an inactive subsidiary of a
receivable previously considered uncollectible.
<PAGE>
The income tax provisions of $55,000 in the first quarter ended March 31, 2000
and 1999, is primarily attributable to provisions for state taxes. Income taxes
applicable to operating income (loss) are generally determined by applying the
estimated effective annual income tax rates to pretax income (loss) for the
year-to-date interim period. Income taxes applicable to unusual or infrequently
occurring items are provided in the period in which such items occur.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company holds short-term investments as a source of liquidity. The Company's
interest rate sensitive investments at March 31, 2000 and December 31, 1999 with
maturity dates of less than one year consist of the following:
<TABLE>
<CAPTION>
2000 1999
======================== =======================
Carrying Fair Carrying Fair
Value Value Value Value
(in thousands) ----------- ------- ----------- --------
<S> <C> <C> <C> <C>
U.S. Treasury Bills......................... $43,282 $43,237 $43,260 $43,259
======= ======= ====== ======
Weighted average interest rate.............. 5.68% 4.81%
======= ======
</TABLE>
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.
STOCKHOLDER INQUIRIES
Stockholder inquiries, including requests for the following: (i) change of
address; (ii) replacement of lost stock certificates; (iii) Common Stock name
registration changes; (iv) Quarterly Reports on Form 10-Q; (v) Annual Reports on
Form 10-K; (vi) proxy material; and (vii) information regarding stock holdings,
should be directed to:
American Stock Transfer and Trust Company
40 Wall Street, 46th Floor
New York, NY 10005
Attention: Shareholder Services
(800) 937-5449 or (718) 921-8200
In addition, the Company's public reports, including Quarterly Reports on Form
10-Q, Annual Reports on Form 10-K and Proxy Statements, can be obtained through
the Securities and Exchange Commission EDGAR Database over the Internet, at
www.sec.gov.
<PAGE>
Part II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The information contained in Item 8 - Note 11 in AmBase's Annual Report on Form
10-K for the year ended December 31, 1999 is incorporated by reference herein
and the defined terms set forth below have the same meaning ascribed to them in
that report. There have been no material developments in such legal proceedings,
except as set forth below.
The actions against the Company are in various stages. Nevertheless, the
allegations and claims are material and, if successful, could result in
substantial judgments against the Company. To the extent the aggregate of any
such judgments were to exceed the resources available, these matters would have
a material adverse effect on the Company's financial condition and results of
operations. Due to the nature of these proceedings, the Company and its counsel
are unable to express any opinion as to their probable outcome.
ITEM 2. CHANGES IN SECURITIES
Does not apply.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Does not apply.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Does not apply.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27. Financial Data Schedule (only submitted to SEC in electronic format)
(b) Form 8-K
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMBASE CORPORATION
By JOHN P. FERRARA
Vice President, Chief Financial Officer and Controller
(Principal Financial and
Accounting Officer)
Date: May 15, 2000
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<NAME> AmBase Corporation
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