AmBase Corp

ITEM 1A.

RISK FACTORS

The Company is subject to various risks, many of which are beyond the Companys 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 Companys business, financial condition, operating results and stock price. An investment in the Companys 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 Companys 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 Companys common stock.

Operating Risks

Going Concern

The Company has incurred operating losses and used cash for operating activities for the past several years. The Company has continued to keep operating expenses at a reduced level; however, there can be no assurance that the Companys current level of operating expenses will not increase or that other uses of cash will not be necessary. The Company believes that based on its current level of operating expenses, its existing cash and cash equivalents may not be sufficient to cover operating cash needs through the twelve month period from the financial statement reporting date. Based on the above factors, management determined there is substantial doubt about the Companys ability to continue as a going concern within one year after the date that the financial statements are issued. The accompanying consolidated financial statements have been prepared assuming that the Company will 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 as a going concern, the Company must take steps to manage its current level of cash and cash equivalents, through various ways, including but not limited to, raising additional capital through the sale of equity or debt securities or long term borrowings, which may include additional borrowings from affiliates of the Company, relitigation funding agreements, reducing operating expenses, and seeking recoveries from various sources. There can be no assurance that the Company will be able to adequately implement these cash management measures, in whole or in part or raise capital or obtain financing on terms acceptable to the Company, if at all.

To provide the necessary cash resources to continue operations and continue the litigation related to the 111 West 57th PropertyOn April 1, 2024, the Company has commencpleted a private placement offering (the Equity Offering)the issuance and sale, of 44,200,460 shares of the Companys common stock (the Shares) to existing shareholdersin the private placement of the Companyfering (the Equity Offering) in reliance  on the exemption from registration under Rule 506(c) of the Securities Act of 1933, as amendpreviously disclosed (the Securities Act). The purchase price for one share of Common Stockterms and conditions in the Equity Offering is $0.20. The Company expects to receive gross proceeds of approximately $8.8 million in connections Forms 8-K filed with the Equity Offering before deducting offering expenses. There are no limitations on the Companys use of such proceeds when received, although it is anticipated that a substantiSEC on February 28, 2024 and April 1, 2024, including 1,250,000 Shares purchased by an institutional part of the proceeds will be appliinvestor not affiliated to repayment of existingwith the Company obligations. Theand 42,950,460 Shares are not being registered under the Securities Act and will be rpurchased by BARC Investricted securities under the Securities Actments, LLC, and will generally be subject to a minimum holding period affiliate of six months under Rule 144 before the Shares may be resold. The Shares will be offerethe Company owned and sold only to existing stockholders of recordcontrolled by two of the Company as of February 28, 2024 (the Record Date).

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Each qualifyis directors ang stockholder will be permitted to purchase up to his, hd their sibling. The offer or its pro rata sharand sale of the Sshares in the Equity Offering, based  was completed in reliance on the amount of shares of Common Stock owned by such stockholder asexemption from registration under Rule 506(c) of the Record Date, in an amount equal to up to one hRegulation D promulgated undred and eight and one-half percent (108.5%er Section 4(a)(2) of the number Securities Act of shares of Common Stock beneficially owned by such stockholder as of1933, as amended. See Part II Item 8 Note 5 to the Record DCompanys consolidate. The Equity Offering commenced on or about February 28, 2024, and will remaind financial statements, for additional information

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The open for a period of thirty (30) calendar days ending on March 29, 2024 (Company will continue to consider and explore othe Subscriptir litigation Deadline). The Sharefunding agreements will be offered and sold pursuant to a Subscripth third party litigation Agreement (the Subscription Agreement) to befunders that it could entered into by and between the Company and each subscribing stockholder. Ifor portions of the litigation connection with the Equity Offersts for up to $5 million of funding, the Company has enat market tered into a standby purchasms to be agreement dated February 28, 2024 (the SPA) with BARC Investments, LLC (BARC), an affiliate of the Company owned and controlled by Company directors Alessandra F. Bianco and Richard A. Bianco, Jr. Ud upon at such times. In general, litigation funding agreements are structured so that the litigation funder the terms of the SPA, BARC has agreed to act as standby a purchaser for all of the shares of common stock would receive back their initial funding amount first (i.e. being offered in the Equity Offering that are not otherwise subscribed tofore any recovery is received by other stockholders prior to the Subscription Deadline. A Company), plus an additional information aboutmultiple ranging from 1.0 times to 3.5 times the Equity Offering, incluamount funded (depending the material terms and coon various factors), plus dependitions ofng on the Equity Offering and informafunder, addition about how stockholders may subscribe for Shares in the Equity Offering, including al fees, expenses, interest and potentially an additional percentage of the form of Subscription Agreement, atotal recovery received. There set forth incan be no assurance that the Companys Current Report on Form 8-K as filed with the SEC would be able to secure any such additional litigation funding on February 28, 2024acceptable terms or at all.

The While the Companys Chairman, Presidagement and Chief Executive Office, Mr. Richard A. Bianco (R.A. Bianco) has indicated that, if is evaluating future courses of action to protect and when needed, he would provide a working capital lin/or recover the value of credit to tthe Company on an as needed basis, subject to customary and market terms and conditions to be agreed upon at such time, until such time as the Equity Offering hs equity investment in the 111 West 57th Property, the adverse developments make it uncertain as been completed. However, to whethere can be no assurance that the Equity Offering any such courses of action will be completed within the timeframe contemplatsuccessful. Any such efforts are likely to require sustained or at all. As of Decembeffort over 31, 2023, Mr. R.A. Bianco provided loans to the Company in the amounts aggregating $3,198,000a period of time and substantial additional financial resources. In January, February, and Marability to recover all or most of such 2024, Mr. R.A. Bianco provided additionvalue would, in all likelihood, have a material loan(s) toadverse effect on the Company. For additions financial informacondition, see Part II Item 8 Note 10 to t and future prospects. The Companys consolidated financial statements can give no assurances with regard if it will prevail with respect to any of its claims.

For additional information with regard to the Companys investment in the 111 West 57th Property and the legal proceedings related thereto see Part II Item 8 Note 3 and Note 8 to the Companys consolidated financial statements.

The Company has incurred operating losses over the last several years and may not be able to achieve profitability.

We expect our operating expenses in 20245 will remain generally close to our most recent levels, although there can be no assurance that the Companys current level of operating expenses will not increase or that other uses of cash will not be necessary, including increased costs related to the Companys legal proceeding depending on a variety of factors including the status of legal proceedings, appeals, discovery expert fees, and other litigation related expenses. These losses, among other things, have had and will continue to have an adverse effect on our working capital, total assets and stockholders equity. Because of the numerous risks and uncertainties associated with property development and management, we are unable to predict if or when we may become profitable.

The Company is in a competitive business.

The real estate industry is highly competitive. 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 Companys ability to make suitable property acquisitions on favorable terms in the future.

We are a party to legal proceedings relating to our equity interest in the joint real estate venture 111 West 57th Partners, and may become subject to additional litigation in the future, all of which continue to have an adverse effect on our financial condition, results of operations, cash flow and per share trading price of our common stock.

We are currently party to lawsuits relating to our equity interest in the joint real estate venture 111 West 57th Property, as further described in Part II Item 8 Note 8 to our consolidated financial statements. There can be no assurance that the Company will prevail with any of its claims with respect to its interests in the 111 West 57th Property or that any course of action will be successful in recovering value for the Company from this investment. If the Company is unable to recover all or most of the value of its investment in the 111 West 57th Property, there would be a material adverse effect on the Companys financial condition and future prospects, including the Companys ability to continue as a going concern. In addition, in the future we may become subject to additional litigation, including claims relating to our operations, assets, offerings, and otherwise in the ordinary course of business. Some of these claims may result in significant defense costs and potentially significant judgments against us, some of which are not, or cannot be insured against. An adverse determination with respect to any of these claims may result in our having to pay material judgments, or settlements, which could have a material adverse effect on our financial condition, results of operations, cash flow and per share trading price of our common stock. Certain litigation or the resolution of certain litigation may affect the availability or cost of some of our insurance coverage, which could adversely impact our results of operations and cash flows and potentially expose us to increased risks that would be uninsured.

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Illiquidity of real estate limits our ability to act quickly.

Real estate investments are relatively illiquid. Such illiquidity may limit our ability to react quickly in response to changes in economic and other conditions. If we want to sell an investment, we might not be able to dispose of that investment in the time period we desire, and the sales price of that investment might not recoup or exceed the amount of our investment. These limitations on our ability to sell properties or investments could have a material adverse effect on our financial condition and results of operations.

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Property ownership through equity investments and/or in joint ventures could subject us to the differing business objectives of our co-venturers.

The Company has entered into, and may continue in the future to enter into, equity investments and/or joint ventures (including limited liability companies and partnerships) in which the Company does not hold a direct or controlling interest in the assets underlying the entities in which it invests, including equity investments and/or joint ventures in which (i) the Company owns a direct interest in an entity which controls such assets, or (ii) the Company owns a direct interest in an entity which owns indirect interests, through one or more intermediaries, of such assets. These equity investments and/or joint ventures may include ventures through which the Company would own an indirect economic interest of less than 100 percent of a property owned directly by such joint ventures and may include equity investments and/or joint ventures that the Company does not control or manage. These investments involve risks that do not exist with properties in which the Company owns a controlling interest with respect to the underlying assets, including the possibility that (i) we may become subject to material, legal disputes with our joint venture partners, as is the case with respect to our investment in the 111 West 57th Property; (ii) our co-venturers or partners may, at any time, become insolvent or otherwise refuse to make capital contributions when due, (iii) we may be subject to additional capital calls for joint venture development or other expenses which we may be unable or unwilling to meet, possibly resulting in substantial dilution of our investment, (iv) we may become liable with respect to guarantees of payment or performance by the joint ventures, or (v) we may become subject to buy-sell arrangements which could cause us to sell our interests or acquire our co-venturers or partners interests in a joint venture. Even where we have major decision rights or do not have major decision rights, because we lack a controlling interest, our co-venturers or partners may be in a position to take action contrary to our instructions or requests or contrary to our policies or objectives. While we seek protective rights against such contrary actions, there can be no assurance that we will be successful in procuring any such protective rights, or if procured, that the rights will be sufficient to fully protect us against contrary actions. Our organizational documents do not limit the amount of available funds that we may invest in equity investments and/or joint ventures and/or partnerships. If the objectives of our co-venturers or partners are inconsistent with ours, it may adversely affect our ability to make receive and distributions or payments to our investors.

We may be unable to identify suitable properties for equity investments and acquisitions and any new investments and acquisitions may fail to perform as expected and subject us to new risks, including risks created by geographic concentration.

The Company may not be able to identify suitable properties for equity investments and acquisitions. Even if we are able to identify suitable properties for equity investments and acquisitions, we may not be able to carry out such equity investments or acquisitions on favorable terms, or at all. Any new equity investments in properties or newly acquired properties may not perform as expected and may subject us to unknown liability with respect to liabilities relating to such properties for clean-up of undisclosed environmental contamination or claims by tenants, residents, vendors or other persons against the former owners of the properties. Inaccurate assumptions regarding future rental or occupancy rates, or fluctuations in the target market could result in overly optimistic estimates of future revenues. In addition, future operating expenses or the costs necessary to bring an acquired property up to standards established for its intended market position may be underestimated. The search for and process of acquiring such properties will also require a substantial amount of managements time and attention.

Fluctuations in the local market in which the Companys equity investment in a development property is located may adversely impact the Companys financial condition and operating results.

The 111 West 57th Property, which the Company purchased an equity investment in during 2013, is located in New York City. This geographic concentration could present risks if the New York City property market performance falls below expectations. The economic condition of this market could affect occupancy, property revenues, and expenses, from the property and future asset value.

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

The Company may experience economic harm if any damage to the Companys property or properties 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 Companys insurers will be financially viable if the Company makes a claim. The Company may suffer losses that are not covered under the Companys 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 or properties, as well as any potential future revenue from the property or properties.

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Development and redevelopment activities may be delayed, not completed, and/or not achieve expected results.

The Companys investments in development and redevelopment activities generally entail certain risks, including the following:

These risks may reduce the funds available for distribution to the Company and have a material adverse effect on the Companys financial condition and results of operations. Further, investment in and the development and redevelopment of real estate is also subject to the general risks associated with real estate investments. For further information regarding these risks, see the risk factor The Company is subject to risks inherent in owning, developing and leasing real estate.

We are dependent on our key personnel whose continued service is not guaranteed and the loss of whose service could have a material adverse effect on our business.

Whether our business is successful will be dependent in part upon the leadership, strategic business direction and real estate experience of our executive officers, particularly Mr. R.A. Bianco, our Chairman, President and Chief Executive Officer. Although we have entered into an employment agreement with Mr. R.A. Bianco, none of our executive officers or directors are subject to any covenants not to compete against the Company should they terminate their affiliation with the Company. While we believe that we could find replacements for these key personnel, loss of their services could adversely affect our operations. We do not carry key man life insurance on any of our other executive officers or directors.

Changes in the composition of the Companys assets and liabilities through acquisitions, divestitures or corporate restructuring may affect the Companys 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 Companys assets and liabilities or how such assets and liabilities are held could significantly affect the Companys financial position and the risks that the Company faces.

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

Terrorist attacks or armed conflicts could affect the Companys business or the businesses of the Companys 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 Companys 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 Companys operating results and revenues and may result in volatility of the market price for the Companys common stock.

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The Company is subject to risks inherent in owning, developing 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 Companys control. In addition to general risks related to owning commercial real estate, the Companys risks include, among others:

Each of these factors could have a material adverse effect on the Companys ability to receive distributions from its properties and investments and the Companys financial condition and results of operations. In addition, real estate investments are relatively illiquid, which means that the Companys ability to promptly sell the Companys property in response to changes in economic and other conditions may be limited.

Security breaches and other disruptions could compromise our information and expose us to liability, which would cause our business and reputation to suffer.

In the ordinary course of our business, we collect and store sensitive data that may include intellectual property, our proprietary business information and that of our tenants and business partners, including personally identifiable information of our tenants and employees, on our networks. Despite our security measures, our information technology and infrastructure may be vulnerable to attacks by hackers or breached due to employee error, malfeasance or other disruptions. Any such breach could compromise our networks and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability under laws that protect the privacy of personal information, disrupt our operations, and damage our reputation, which could adversely affect our business.

The Company may not be able to generate sufficient taxable income to fully realize the Companys 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.

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Because the Company from time to time maintains a majority of its assets in cash and/or 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 Acts 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 Companys 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 Companys operating costs. Such changes could have a material adverse effect on the Companys business, results of operations and financial condition.

Anti-takeover Risks

Our amended and restated shareholder rights plan may delay or prevent an acquisition of us that shareholders may consider favorable or may prevent efforts by our shareholders to change our directors or our management, which could decrease the value of your common shares.

On March 27, 2019, the Companys Board of Directors adopted the New Rights Plan which is designed to provide adequate time for our Board of Directors and shareholders to assess an unsolicited takeover bid for our company, to provide our Board of Directors with sufficient time to explore and develop alternatives for maximizing shareholder value if a takeover bid is made, and to provide shareholders with an equal opportunity to participate in a takeover bid and receive full and fair value for their common shares. The New Rights Plan is set to expire on March 27, 2029. The rights will become exercisable only when a person, including any party related to it, acquires or attempts to acquire 25% or more of our outstanding common stock. Should such an acquisition occur or be announced, each right would, upon exercise, entitle a rights holder, other than the acquiring person and related persons, to purchase common shares at a 50% discount to the market price at the time. The New Rights Plan may inhibit a change in control of the Company by a third party in a transaction not approved by the Companys Board of Directors. If a change in control is inhibited or delayed in this manner, it may adversely affect the market price of the Companys common stock.

Other Risks

Outbreaks of highly infectious or contagious diseases may, materially and adversely impact the business, income, cash flow, results of operations and financial condition of the Company, including the 111 West 57th Property.

The national and global impacts of a pandemic, such as the COVID-19 pandemic, may present material uncertainty and risk with respect to our financial condition, results of operations and cash flows. Moreover, many of the risk factors set forth in this Form 10-K could be interpreted as heightened risks as a result of the impact of a pandemic. Impacts from a pandemic may include the following:

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The same factors as described immediately above may also impact our workforce. A disruption in the normal operations of our workforce, as well as the possibility of illness among our employees or a substantial portion of our workforce, could also adversely affect our operations.

We face possible risks associated with the physical effects of climate change.

We cannot predict with certainty whether climate change is occurring and, if so, at what rate. However, the physical effects of climate change could have a material adverse effect on our 111 West 57th Property, operations, and business. To the extent climate change causes changes in weather patterns or severity, our markets could experience increase in storm intensity (including floods, tornadoes, hurricanes, or snow and ice storms), rising sea-levels, and changes in precipitation, temperature, air quality, and quality and availability of water. Over time, these conditions could result in physical damage to, or declining demand for, our properties or our inability to operate the buildings efficiently or at all. Climate change may also indirectly affect our business by increasing the cost of (or making unavailable) property insurance on terms we find acceptable, increasing the cost of required resources, including energy, other fuel sources, water, and waste and snow removal services, and increasing the risk and severity of flood and earthquakes at our properties. Should the impact of climate change be severe or occur for lengthy periods of time, our financial condition or results of operations could be adversely impacted. In addition, compliance with new or more stringent laws or regulations or stricter interpretations of existing laws may require material expenditure by us. For example, various federal, state, and local laws and regulations have been implemented or are under consideration to mitigate the effects of climate change caused by greenhouse gas emissions. Among other things, "green" building codes may seek to reduce emissions through the imposition of standards for design, construction materials, water and energy usage and efficiency, and waste management. Such codes could require us to make improvements to our existing properties, increase the costs of maintaining or improving our existing properties or developing new properties, or increase taxes and fees assessed on us or our properties. Expenditures required for compliance with such codes may affect our cash flow and results of operations.