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, 1998

        [  ]  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

                           (State of incorporation)
                                  95-2962743

                     (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, 1998,  there were 44,533,519  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, 1998

CROSS REFERENCE SHEET FOR
PARTS I AND II                                                            PAGE

PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements................................................1

Item 2.  Management's Discussion and Analysis of
         Financial Condition and Results of Operations.......................9

PART II - OTHER INFORMATION

Item 1.  Legal Proceedings..................................................12

Item 2.  Changes in Securities..............................................13

Item 3.  Defaults Upon Senior Securities....................................13

Item 4.  Submission of Matters to a Vote of Security Holders................13

Item 5.  Other Information..................................................13

Item 6.  Exhibits and Reports on Form 8-K...................................13











<PAGE>



PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                      AMBASE CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                            QUARTER ENDED MARCH 31
                                  (UNAUDITED)


<TABLE>
<CAPTION>
==============================================================================

(in thousands, except per share data)                         1998        1997
==============================================================================
<S>                                                         <C>         <C>
OPERATING EXPENSES:
Compensation and benefits                                   $  514      $  516
Professional and outside services                              270          61
Insurance                                                       23          35
Occupancy                                                       21          22
Other operating                                                 43          38
------------------------------------------------------------------------------
                                                               871         672
------------------------------------------------------------------------------
Operating loss                                                (871)       (672)
------------------------------------------------------------------------------
Interest income                                                632         689
------------------------------------------------------------------------------
Income (loss) before income taxes                             (239)         17
Income tax (expense) benefit                                   (64)        405
------------------------------------------------------------------------------

NET INCOME (LOSS)                                           $ (303)     $  422
==============================================================================

EARNINGS PER COMMON SHARE:
Net income (loss) - basic                                   $(0.01)     $ 0.01
Net income (loss) - assuming dilution                        (0.01)       0.01
==============================================================================

AVERAGE SHARES OUTSTANDING                                  44,534      44,534
==============================================================================
</TABLE>
The  accompanying  notes are an integral  part of these  consolidated  financial
statements.


                                     - 1 -

<PAGE>



                      AMBASE CORPORATION AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
===============================================================================
                                                        March 31,  December 31,
                                                             1998          1997
(in thousands)                                         (unaudited)
===============================================================================
<S>                                                       <C>          <C>
ASSETS
Cash and cash equivalents                                 $ 1,155      $ 5,548
Investment securities:
   Held to maturity (market value $47,374 and
   $44,276, respectively)                                  47,370       44,310
   Available for sale, carried at fair value (cost $100)      100          100
------------------------------------------------------------------------------
Total investment securities                                47,470       44,410
------------------------------------------------------------------------------
Receivable from Home Holdings, Inc.                        12,728       12,736
Investment in SDG, Inc. at cost                             1,250        1,250
Other assets                                                  262          326
------------------------------------------------------------------------------

TOTAL ASSETS                                              $62,865      $64,270
==============================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts payable and accrued liabilities                  $   515      $ 1,550
Supplemental retirement plan                                4,918        4,865
Postretirement welfare benefits                             1,376        1,412
Other liabilities                                             180          196
Litigation and contingency reserves                         2,272        2,340
Income tax reserves                                        79,088       79,088
------------------------------------------------------------------------------
Total liabilities                                          88,349       89,451
------------------------------------------------------------------------------
Commitments and contingencies                                   -            -
------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY:
Common stock                                                  447          447
Paid-in capital                                           547,712      547,712
Accumulated deficit                                      (572,996)    (572,693)
Treasury stock                                               (647)        (647)
------------------------------------------------------------------------------
Total stockholders' equity                                (25,484)     (25,181)
------------------------------------------------------------------------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                $62,865      $64,270
==============================================================================
</TABLE>
The  accompanying  notes are an integral  part of these  consolidated  financial
statements.


                                     - 2 -

<PAGE>



                      AMBASE CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                            QUARTER ENDED MARCH 31


<TABLE>
<CAPTION>
==============================================================================

(in thousands)                                               1998         1997
==============================================================================
<S>                                                        <C>           <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)                                          $ (303)       $ 422
Adjustments to reconcile net income (loss) to
   net cash used by operations:
Other assets                                                   39           32
Accounts payable and accrued liabilities                   (1,035)      (1,186)
Litigation and contingency reserves uses                      (68)        (103)
Interest income - investment securities                      (611)        (617)
Other, net                                                      2         (196)
------------------------------------------------------------------------------
Net cash used by operating activities                      (1,976)      (1,648)
------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Maturities of investment securities - held to maturity      4,650        5,450
Purchases of investment securities - held to maturity      (7,099)      (3,508)
Proceeds from Home Holdings, Inc. receivable                    7           90
Other, net                                                     25            -
------------------------------------------------------------------------------
Net cash provided (used) by investing activities           (2,417)       2,032
------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents       (4,393)         384
Cash and cash equivalents at beginning of period            5,548        5,591
------------------------------------------------------------------------------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                 $1,155       $5,975
==============================================================================
</TABLE>
The  accompanying  notes are an integral  part of these  consolidated  financial
statements.


                                     - 3 -

<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 1997 consolidated  financial statements
to  conform  with the 1998  presentation.  The  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 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 I. 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
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, 1997.

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 1998 will be met  principally by
the Company's  current  financial  resources,  and the receipt of  non-operating
revenue consisting of interest income received 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,  1998,  the
litigation and contingency reserves were $2,272,000. 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  $79,088,000  at March  31,  1998.  For a further
discussion,  see Part II - Item 1 - Legal  Proceedings,  Disputes  with Internal
Revenue Service, Withholding Taxes (Netherlands Antilles) and Fresh Start.

See  Part II - Item 1 -  Legal  Proceedings,  for a  discussion  of  Supervisory
Goodwill Litigation.

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.

                                    - 4 -
<PAGE>


                      AMBASE CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


Note 4 - Receivable From Home Holdings, Inc.

In 1991, the Company sold its entire interest in The Home Insurance  Company and
its subsidiaries to Home Holdings,  Inc. ("Home Holdings").  As part of the sale
proceeds,  Home Holdings  agreed to pay $48 million to the Company over a period
of years  to meet  certain  specified  future  obligations  of the  Company,  as
incurred,  relating to tax issues,  litigation and administrative  expenses. The
Company has collected the portion of this  receivable with respect to litigation
and administrative  expenses.  The Company's  remaining  receivable at March 31,
1998 is at least $12,728,000, and relates principally to tax issues.

On or about  January 15,  1998,  Home  Holdings  filed a voluntary  petition for
relief under Chapter 11 of the United States  Bankruptcy  Code  ("Chapter  11").
Home Holdings also filed a pre-arranged plan of reorganization  under Chapter 11
(the  "Bankruptcy  Plan").  According  to the  Bankruptcy  Plan  and  disclosure
statement,  general unsecured creditors of Home Holdings, including the Company,
were to  receive a  projected  future  recovery  of  approximately  38.3% of the
amounts owed to them.

The Company filed with the United States Bankruptcy Court  ("Bankruptcy  Court")
an objection to the Bankruptcy  Plan.  Thereafter,  Home Holdings filed a Second
Amended Plan (the  "Amended  Plan") on April 29, 1998.  According to the Amended
Plan,  Home Holdings  proposes to leave the Company's  claim  unimpaired,  which
means that the  Company  would  retain its rights to seek the full amount of its
outstanding  receivable  from Home Holdings after the Amended Plan is confirmed,
and not be limited to a recovery of approximately  38.3%. The Company  disagrees
with the  characterization of its claim as unimpaired.  The Company is currently
reviewing the Amended  Plan,  and must file its  objections,  if any, by May 14,
1998. Based on the Company's  current  analysis of the information  available at
this time, no allowance for doubtful  accounts has been provided as of March 31,
1998 or December 31, 1997.

Home  Holdings has  scheduled the  Company's  outstanding  receivable  from Home
Holdings as a contingent  general  unsecured claim in the amount of $11,703,136.
The Company disagrees with Home Holdings'  characterization of its receivable as
contingent,  and also with the amount of the outstanding receivable. The Company
has filed,  in  connection  with the Home Holdings  bankruptcy  case, a Proof of
Claim ("Proof of Claim") for all damages,  which is  significantly  in excess of
$12,728,000.  The Bankruptcy Court has scheduled a hearing date for July 1998 to
determine the allowed amount of the Company's Proof of Claim.



                                    - 5 -

<PAGE>


                      AMBASE CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


NOTE 5 - INVESTMENT SECURITIES

Investment  securities - held to maturity  consist of U.S.  Treasury  Bills with
original  maturities of one year or less and which are carried at amortized cost
based upon the  Company's  intent  and  ability  to hold  these  investments  to
maturity.

Investment  securities - available for sale generally  consist of investments in
equity  securities held for an indefinite  period and were carried at fair value
with net  unrealized  gains and  losses  reported  in a  separate  component  of
stockholders'  equity.  At March  31,  1998 and  December  31,  1997  investment
securities  - available  for sale consist of $100,000 of  convertible  preferred
stock in AMDG, Inc., which the Company  purchased through a private placement in
December 1997.
<TABLE>
<CAPTION>
Investment securities at March 31 and December 31 consist of the following:
=============================================================================
                                1998                             1997
                  ----------------------------    ---------------------------
                                       Cost or                         Cost or
                  Carrying  Amortized     Fair    Carrying  Amortized     Fair
(in thousands)       Value       Cost    Value       Value       Cost    Value
==============================================================================
<S>                <C>        <C>      <C>         <C>        <C>      <C>
Held to Maturity:
   U.S. Treasury
     Bills         $47,370    $47,370  $47,374     $44,310    $44,310  $44,276
Available for Sale:
   Equity Securities   100        100      100         100        100      100
------------------------------------------------------------------------------
                   $47,470    $47,470  $47,474     $44,410    $44,410  $44,376
==============================================================================
</TABLE>

<TABLE>
<CAPTION>
The gross unrealized  gains and losses on investment  securities at March 31 and
December 31 consist of the following:
==============================================================================

(IN THOUSANDS)                                          1998              1997
==============================================================================
<S>                                                   <C>               <C>
Held to Maturity - Gross unrealized gains (losses)    $    4            $  (34)
Available for Sale - Gross unrealized gains (losses)       -                 -
==============================================================================
</TABLE>

                                    - 6 -

<PAGE>

                      AMBASE CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


NOTE 6 - EARNINGS PER SHARE

<TABLE>
<CAPTION>
The  calculation  of basic  earnings per share and dilutive  earnings per share,
including the effect of dilutive securities,  for the periods ended March 31, is
as follows:
==============================================================================
                                                          1998
                                        --------------------------------------
                                              LOSS         SHARES    PER SHARE
(IN THOUSANDS EXCEPT PER SHARE DATA)   (NUMERATOR)  (DENOMINATOR)      AMOUNT
==============================================================================
<S>                                         <C>            <C>          <C>
BASIC EARNINGS PER SHARE:
Net loss                                    $ (303)        44,534       $(0.01)
                                               ===                        ====

EFFECT OF DILUTIVE SECURITIES:
Assumed stock option exercise                    -          1,727            -
                                                            -----

DILUTED EARNINGS PER SHARE:
Net loss and assumed conversions            $ (303)        46,261       $(0.01)
==============================================================================
</TABLE>

<TABLE>
<CAPTION>
==============================================================================
                                                          1997
                                        --------------------------------------
                                            INCOME         SHARES    PER SHARE
(IN THOUSANDS EXCEPT PER SHARE DATA)    (NUMERATOR)  (DENOMINATOR)      AMOUNT
==============================================================================
<S>                                         <C>            <C>          <C>
BASIC EARNINGS PER SHARE:
Net income                                  $  422         44,534       $ 0.01
                                               ===                        ====

EFFECT OF DILUTIVE SECURITIES:
Assumed stock option exercise                    -          1,688            -
                                                            -----

DILUTED EARNINGS PER SHARE:
Net income and assumed conversions          $  422         46,222       $ 0.01
==============================================================================
</TABLE>

NOTE 7 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

<TABLE>
<CAPTION>
Additional  information regarding cash flow for the quarter ended March 31 is as
follows:
==============================================================================
(in thousands)                                                1998        1997
==============================================================================
<S>                                                         <C>         <C>
Cash received (paid) during the period:
Income taxes refunded (paid), net                           $  (74)     $  402
==============================================================================
</TABLE>
Income taxes  refunded,  net in 1997,  include  $475,000 of taxes  refunded as a
result of an  overpayment  to the  Internal  Revenue  Service  ("IRS")  for 1988
through 1991 tax years.

                                    - 7 -

<PAGE>


                      AMBASE CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


NOTE 8 - INCOME TAXES

The Company and its 100% owned domestic subsidiaries file a consolidated federal
income tax return.  The Company  accounts  for income taxes in  accordance  with
Statement of Financial  Accounting  Standards  No. 109,  "Accounting  for Income
Taxes" ("Statement 109"). Statement 109 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.  Statement  109  requires
that net deferred tax assets be recognized  immediately  when a more likely than
not criterion is met; that is, unless a greater than 50% probability exists that
the tax  benefits  will  actually  be realized  sometime  in the  future.  Under
Statement  109,  the  Company has  calculated  a net  deferred  tax asset of $33
million,  as of March 31, 1998 and December 31, 1997, arising primarily from net
operating loss ("NOL")  carryforwards,  the excess of book over tax reserves and
alternative  minimum tax credits (not including the  anticipated  tax effects of
approximately  $170 million 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 OTS's December 4, 1992 placement of Carteret in receivership,
under the management of the Resolution Trust Corporation ("RTC")/Federal Deposit
Insurance Corporation ("FDIC"),  and proposed Treasury Reg.  ss.1.597-4(g),  the
Company had  previously  filed its 1992 through 1996 federal  income tax returns
with Carteret  disaffiliated from the Company's  consolidated federal income tax
return. Based upon the impact of Treasury Reg.  ss.1.597-4(g),  which was issued
in final form on December 20, 1995, a  continuing  review of the  Company's  tax
basis in Carteret,  and the impact of prior year tax return  adjustments  on the
Company's  1992 federal income tax return as filed,  the Company  decided not to
make an election  pursuant to final Treasury Reg.  ss.1.597-4(g) to disaffiliate
Carteret from the Company's  consolidated federal income tax return effective as
of December 4, 1992 (the "election decision").

The  Company has made  numerous  requests to the  RTC/FDIC  for tax  information
pertaining to Carteret and the resulting successor institution, Carteret Federal
Savings Bank ("Carteret  FSB"),  but this information has not yet been received.
Based on the Company not making the election  decision,  as described above, and
upon receipt of the requested  information  from the RTC/FDIC,  the Company will
amend its 1992 through 1996  consolidated  federal income tax returns to include
the federal  income tax  effects of  Carteret  and  Carteret  FSB.  Based on the
information  currently  available,  the  Company  does not  believe  a  material
increase in the Company's tax liabilities will result.

The Company  anticipates that, as a result of filing  consolidated with Carteret
FSB,  approximately $170 million of tax NOL carryforwards will be generated from
the Company's tax basis in  Carteret/Carteret  FSB as tax losses are incurred by
Carteret FSB. The NOL  carryforwards  generated  from the Company's tax basis in
Carteret/Carteret  FSB would expire no earlier than 2007, and would be available
to  offset  future  taxable  income,  in  addition  to the  $30  million  of NOL
carryforwards  as noted in the Company's Annual Report on Form 10-K for the year
ended December 31, 1997, Item 8 - Note 11.

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. The Company also contractually  assumed certain tax
liabilities of The Home and its  subsidiaries  from September 1985 through 1989.
For all periods  through 1992, the IRS and the Company do not agree with respect
to only two issues,  withholding taxes in connection with a Netherlands Antilles
finance  subsidiary  of City,  and the  Company's  entitlement  to  Fresh  Start
transition  relief under  certain  insurance  company tax  provisions of the Tax
Reform Act of 1986 (other insurance industry taxpayers face similar issues under
the Fresh Start  provision).  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 $79,088,000 at March 31, 1998. For
a further  discussion,  see Part II - Item 1 - Legal Proceedings,  Disputes with
Internal Revenue Service,  Withholding  Taxes  (Netherlands  Antilles) and Fresh
Start.

During the first  quarter of 1997,  the Company  received a $475,000  income tax
refund,  as a result of an  overpayment to the IRS for the 1988 through 1991 tax
years.  This amount was  recorded as an income tax benefit in the first  quarter
ended March 31, 1997.



                                    - 8 -

<PAGE>


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,  1998  aggregated  $62,865,000,  consisting
principally of cash and cash equivalents of $1,155,000, investment securities of
$47,470,000,  and a receivable from Home Holdings, Inc. ("Home Holdings"). On or
about  January 15, 1998,  Home  Holdings  filed a voluntary  petition for relief
under Chapter 11 of the United States  Bankruptcy  Code.  See Item 1 - Note 4 to
the  Company's  consolidated  financial  statements  for  a  further  discussion
regarding the Company's  receivable  from Home Holdings.  At March 31, 1998, the
Company's   liabilities,   including   reserves  for   contingent   and  alleged
liabilities,  as further  described in Part II - Item 1, exceeded total recorded
assets by $25,484,000.

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. The Company also contractually  assumed certain tax
liabilities of The Home and its  subsidiaries  from September 1985 through 1989.
For all periods  through 1992, the IRS and the Company do not agree with respect
to only two issues,  withholding taxes in connection with a Netherlands Antilles
finance  subsidiary  of City,  and the  Company's  entitlement  to  Fresh  Start
transition  relief under  certain  insurance  company tax  provisions of the Tax
Reform Act of 1986 (other insurance industry taxpayers face similar issues under
the Fresh Start  provision).  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 have subsequently been submitted to the Tax Court. If
the IRS were to prevail on this issue, the Company would be liable for taxes and
interest in excess of the Company's financial resources.

In a case dealing with a similar  withholding tax issue,  the Tax Court ruled in
favor of the taxpayer, Northern Indiana Public Service Co. ("Northern Indiana"),
in November 1995. The Tax Court rejected the IRS's contention that interest paid
to Northern  Indiana's  foreign  subsidiary  were  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").  The Appeals Court recently 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.

                                    - 9 -
<PAGE>

With  respect to the Fresh  Start  issue,  on March 13,  1996,  the IRS issued a
deficiency  notice to the  Company on the Fresh  Start  issue  which  asserts an
increase in tax for the year 1987. If the IRS is  successful,  the amount of the
deficiency would be material. On June 7, 1996, the Company filed a petition with
the United  States Tax Court (the "Tax  Court") to dispute the entire  amount of
the asserted  deficiency and to  redetermine  the tax, and on July 23, 1996, the
IRS filed its answer.  The IRS and the Company  began  engaging in the  informal
discovery process customary in the Tax Court.

On July 22, 1997, another insurance company taxpayer,  Atlantic Mutual Insurance
Company  ("Atlantic  Mutual"),  filed a petition for  certiorari in its own case
seeking  review of the Fresh Start issue by the United States Supreme Court (the
"Supreme  Court").  In response,  on September 19, 1997, the United States filed
its brief with the Supreme Court in that case in which it  recommended  that the
Supreme  Court hear the case.  The Supreme Court granted the petition on October
20, 1997, has received briefs, and heard oral argument on March 2, 1998.

Because it was  expected  that the  Supreme  Court  would  address  the  reserve
strengthening  issue,  the  Company  and the IRS  advised  the Tax  Court in the
Company's  own case that,  in the  interests  of  efficiency,  further  informal
discovery and  negotiation of a stipulation  of facts had been deferred  pending
the Supreme Court's ruling in Atlantic Mutual.

On April 21,  1998,  the Supreme  Court  decided  the Fresh Start issue  against
Atlantic  Mutual,  agreeing with the government in upholding the IRS' regulation
which defines reserve  strengthening  for purposes of the Fresh Start transition
rule.  The opinion was approved by nine justices  without  dissent.  The Supreme
Court's  decision  in  favor  of the  IRS  in the  Atlantic  Mutual  case  has a
substantial  adverse  effect on the Company's own case pending in the Tax Court,
but at this time, the effect has not been quantified.

The Company has a reserve for income taxes of $79,088,000 at March 31, 1998. For
a further  discussion,  see Part II - Item 1 - Legal Proceedings,  Disputes with
Internal Revenue Service,  Withholding  Taxes  (Netherlands  Antilles) and Fresh
Start.

At March 31, 1998, the litigation and contingency reserves were $2,272,000.  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  1998  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 1998.

For the three  months  ended  March 31,  1998,  cash of  $1,976,000  was used by
operations,  including  the payment of prior year  accruals,  and the payment of
operating  expenses  partially offset by the receipt of interest income. For the
three months ended March 31, 1997,  cash of $1,648,000  was used by  operations,
including the payment of prior year accruals and operating  expenses,  partially
offset by a $475,000 tax refund and 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 in Part II -
Item 1.  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,
1998.
                                    - 10 -
<PAGE>

RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
Summarized  financial  information  of the Company for the first  quarter  ended
March 31 is as follows:
==============================================================================
(in thousands)                                               1998         1997
==============================================================================
<S>                                                        <C>          <C>
Operating expenses:
Compensation and benefits                                  $  514       $  516
Professional and outside services                             270           61
Insurance                                                      23           35
Occupancy                                                      21           22
Other operating                                                43           38
------------------------------------------------------------------------------
                                                              871          672
------------------------------------------------------------------------------
Operating loss                                               (871)        (672)
------------------------------------------------------------------------------
Interest income                                               632          689
------------------------------------------------------------------------------
Income (loss) before income taxes                            (239)          17
Income tax (expense) benefit                                  (64)         405
------------------------------------------------------------------------------

NET INCOME (LOSS)                                          $ (303)      $  422
==============================================================================
</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 1998 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  $303,000,  or $0.01 per share for the first
quarter ended March 31, 1998.

The Company recorded net income of $422,000 in the first quarter ended March 31,
1997,  which  includes a $475,000  income tax benefit,  as further  described in
Financial  Condition,  above.  Excluding  the $475,000  income tax benefit,  the
Company  would have  reported a net loss of $53,000 for the first  quarter ended
March 31, 1997.

Professional  and outside  services  increased to $270,000 in the first  quarter
ended March 31, 1998,  compared to $61,000 in the respective  1997 period.  This
increase was  primarily  the result of legal fees  incurred  with current  legal
proceedings.

Insurance  expenses  decreased to $23,000 in the first  quarter  ended March 31,
1998,  from  $35,000  in the same 1997  period,  due to  management's  continued
renegotiation of insurance programs.

Interest  income was $632,000 in the first quarter,  compared to $689,000 in the
respective  1997  period.  The decrease was  primarily  attributable  to a lower
average level of cash equivalents and investment securities.

The income tax provision of $64,000 in the first quarter ended March 31, 1998 is
primarily attributable to a provision for state taxes. The income tax benefit of
$405,000 in the first quarter of 1997 is  attributable  to a $475,000 income tax
refund, as further described in Financial Condition,  above, and a provision for
state taxes of $70,000.  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.

STOCKHOLDER INQUIRIES

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

      AMERICAN STOCK TRANSFER AND TRUST COMPANY
      40 Wall Street, 46th Floor
      New York, NY  10005
      Attention:  Shareholder Services
      (800) 937-5449 OR (718) 921-8200

                                    - 11 -
<PAGE>

PART II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

The information  contained in Item 8 - Note 13 in AmBase's Annual Report on Form
10-K for the year ended December 31, 1997 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.

(a)  The  Company  is a  defendant  in a  number  of  lawsuits  or  proceedings,
including, but not limited to, the following:

Disputes with Internal Revenue Service.

    Fresh  Start.  The one issue  remaining  for tax year 1987 is the  Company's
    entitlement to Fresh Start transition relief under certain insurance company
    tax  provisions  of the Tax Reform  Act of 1986  (other  insurance  industry
    taxpayers face similar issues under the Fresh Start provision). On March 13,
    1996,  the IRS issued a deficiency  notice to the Company on the Fresh Start
    issue  which  asserts an  increase  in tax for the year 1987.  If the IRS is
    successful, the amount of the deficiency would be material. On June 7, 1996,
    the Company  filed a petition with the United States Tax Court ("Tax Court")
    to dispute the entire amount of the asserted  deficiency  and to redetermine
    the tax,  and on July 23,  1996,  the IRS filed its answer.  The IRS and the
    Company began engaging in the informal  discovery  process  customary in the
    Tax Court.

    On July 22,  1997,  another  insurance  company  taxpayer,  Atlantic  Mutual
    Insurance Company  ("Atlantic  Mutual"),  filed a petition for certiorari in
    its own case  seeking  review of the Fresh Start issue by the United  States
    Supreme Court ("Supreme  Court").  The Supreme Court granted the petition on
    October 20, 1997, received briefs and heard oral argument on March 2, 1998.

    Because it was  expected  that the Supreme  Court would  address the reserve
    strengthening  issue,  the  Company and the IRS advised the Tax Court in the
    Company's own case that, in the interests of  efficiency,  further  informal
    discovery  and  negotiation  of a  stipulation  of facts  had been  deferred
    pending the Supreme Court's ruling in Atlantic Mutual.

    On April 21, 1998,  the Supreme  Court decided the Fresh Start issue against
    Atlantic  Mutual,  agreeing  with  the  government  in  upholding  the  IRS'
    regulation  which defines  reserve  strengthening  for purposes of the Fresh
    Start  transition  rule.  The opinion was approved by nine justices  without
    dissent.  The Supreme  Court's  decision in favor of the IRS in the Atlantic
    Mutual  case has a  substantial  adverse  effect on the  Company's  own case
    pending  in the Tax  Court  but,  at this  time,  the  effect  has not  been
    quantified.

The actions against the Company, including those identified in (a) above, are in
various  stages.  Nevertheless,  the allegations and claims are material and, if
successful,  could result in substantial  judgments against the Company.  To the
extent  the  aggregate  of any  such  judgments  were to  exceed  the  resources
available,  these matters could 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.

                                    - 12 -
<PAGE>

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

None

ITEM 5.  OTHER INFORMATION

None

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

    27.  Financial Data Schedule

(b) Form 8-K

    None




                                  SIGNATURES


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.


AMBASE CORPORATION







BY  JOHN P. FERRARA
    Vice President, Chief Financial Officer
    and Controller
    (PRINCIPAL FINANCIAL AND
    ACCOUNTING OFFICER)

Date:  May 15, 1998


                                    - 13 -

<PAGE>


                           EXHIBIT INDEX


Exhibit
  No.                  Description
-------                -----------

  27                Financial Data Schedule





                                    - 14 -