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 September 30, 1997

        [  ]  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.)
              GREENWICH OFFICE PARK, BUILDING 2, 51 WEAVER STREET
                      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 September 30, 1997 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
SEPTEMBER 30, 1997

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.................7

PART II - OTHER INFORMATION

Item 1.  Legal Proceedings..................................................11

Item 2.  Changes in Securities..............................................12

Item 3.  Defaults Upon Senior Securities....................................12

Item 4.  Submission of Matters to a Vote of Security Holders................12

Item 5.  Other Information..................................................12

Item 6.  Exhibits and Reports on Form 8-K...................................12

<PAGE>

PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                      AMBASE CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
               THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30
                                  (UNAUDITED)



==============================================================================
                                        Third Quarter            Nine Months
(in thousands, except per share data)  1997        1996        1997       1996
==============================================================================

OPERATING EXPENSES:
Compensation and benefits           $   472     $   533     $ 1,464    $ 1,343
Professional and outside services        73          84         265        352
Insurance                                22          36          93        142
Occupancy                                22          27          65         68
Other operating                          29          46         110        124
------------------------------------------------------------------------------
                                        618         726       1,997      2,029
------------------------------------------------------------------------------
Operating loss                         (618)       (726)     (1,997)    (2,029)
------------------------------------------------------------------------------
Interest income                         656         690       2,008      1,948
Other income                             55           -          55         20
Other income - litigation and
   contingency reserves reversal          -           -           -      8,000
Realized loss on sale of investment
   securities - available for sale        -           -           -       (182)
------------------------------------------------------------------------------
Income (loss) from continuing
   operations before income taxes        93         (36)         66      7,757
Income tax benefit (expense)            (73)       (214)        262      7,272
------------------------------------------------------------------------------
Income (loss) from continuing
   operations                            20        (250)        328     15,029
Income from discontinued investment
   management operations,
   net of income taxes                    -          23           -         59
------------------------------------------------------------------------------

Net income (loss)                   $    20     $  (227)    $   328    $15,088
==============================================================================

PER SHARE DATA:
Income (loss) from
   continuing operations            $     -     $     -     $  0.01    $  0.34
Income from discontinued
   investment management
   operations, net of
   income taxes                           -           -           -          -
------------------------------------------------------------------------------

Net income (loss)                   $     -     $     -     $  0.01    $  0.34
==============================================================================

Average shares outstanding           44,534      44,534      44,534     44,534
==============================================================================

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

                                     - 1 -
<PAGE>
                      AMBASE CORPORATION AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS



==============================================================================
                                                September 30,     December 31,
                                                         1997             1996
(in thousands)                                     (unaudited)
==============================================================================
ASSETS:
Cash and cash equivalents
   (includes $65 in 1996 of restricted cash)        $    7,37        $   5,591
Investment securities - held to maturity
   (market value $44,266 and $47,261)                  44,252           47,259
Receivable from Home Holdings, Inc.                    12,818           13,186
Other assets                                              211              193
------------------------------------------------------------------------------
Total assets                                        $  64,653        $  66,229
==============================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts payable and accrued liabilities            $     222        $   1,428
Supplemental retirement plan                            4,820            4,724
Postretirement welfare benefits                         1,435            1,527
Other liabilities                                         315              605
Litigation and contingency reserves                     2,542            2,954
Income tax reserves                                    79,088           79,088
------------------------------------------------------------------------------
Total liabilities                                      88,422           90,326
------------------------------------------------------------------------------
Commitments and contingencies                               -                -
------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY:
Common stock                                              447              447
Paid-in capital                                       547,712          547,712
Accumulated deficit                                  (571,281)        (571,609)
Treasury stock                                           (647)            (647)
------------------------------------------------------------------------------
Total stockholders' equity                            (23,769)         (24,097)
------------------------------------------------------------------------------

Total liabilities and stockholders' equity          $  64,653        $  66,229
==============================================================================

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

                                     - 2 -
<PAGE>
                      AMBASE CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                        NINE MONTHS ENDED SEPTEMBER 30



==============================================================================
(in thousands)                                               1997         1996
==============================================================================

CASH FLOWS FROM OPERATING ACTIVITIES:
Income from continuing operations                         $   328     $ 15,029
Adjustments to reconcile  income from continuing
   operations to net cash used by
   continuing operations:
Other assets                                                    6         (242)
Accounts payable and accrued liabilities                   (1,206)        (458)
Litigation and contingency reserves uses                     (412)      (1,132)
Litigation and contingency reserves reversal                    -       (8,000)
Income tax reserves, net                                        -       (9,604)
Income tax refund - 1977                                        -        7,613
Other liabilities                                            (290)      (2,053)
Interest income - investment securities                    (1,832)      (1,787)
Realized loss on sale of investment securities
   - available for sale                                         -          182
Other, net                                                      5           27
------------------------------------------------------------------------------
Net cash used by operating activities of
   continuing operations                                   (3,401)        (425)
------------------------------------------------------------------------------
Net cash provided by discontinued investment
   management operations                                        -           61
------------------------------------------------------------------------------
CASH FLOWS FROM INVESETING ACTIVITIES:
Maturities of investment securities - held to maturity     34,550       53,105
Purchases of investment securities - held to maturity     (29,711)     (58,939)
Proceeds from Home Holdings, Inc. receivable                  368        3,949
Proceeds from sales of investment securities
   -available for sale                                          -           31
Other, net                                                    (25)           -
------------------------------------------------------------------------------
Net cash provided (used) by investing activities            5,182       (1,854)
------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents        1,781       (2,218)
Cash and cash equivalents at beginning of period            5,591        7,752
------------------------------------------------------------------------------

Cash and cash equivalents at end of period                $ 7,372     $  5,534
==============================================================================

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 1996 consolidated  financial statements
to  conform  with the 1997  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, 1996.

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 1997 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 September 30, 1997,  the
litigation and contingency reserves were $2,542,000. 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 September  30, 1997.  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.

During the second  quarter of 1996,  the  Company  reduced  its  litigation  and
contingencies reserves by $8,000,000 and recorded such amount as other income in
the second  quarter ended June 30, 1996.  This reduction was recorded based upon
the  Company's  determination,  due to a number  of  factors,  that  there was a
reduced  probability  of  incurring  costs to  defend  and/or  settle  potential
litigation  with respect to Carteret  Savings Bank, F.A.  ("Carteret"),  see the
Company's  Annual Report on Form 10-K for the year ended December 31, 1996, Item
3, for a further discussion.

                                    - 4 -
<PAGE>
                      AMBASE CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


Note 3 - Discontinued Investment Management Operations

On October 4, 1996,  the Company  sold its entire  interest in  Augustine  Asset
Management,  Inc. ("Augustine") to Augustine, for $500,000 in cash. Accordingly,
as of September  30,  1996,  the  operations  of Augustine  were  designated  as
discontinued  operations,  and the consolidated statements of operations for the
periods  presented herein were  retroactively  reclassified to report the income
from  discontinued   operations   separately  from  the  results  of  continuing
operations  by excluding  the  operating  revenues and expenses of  discontinued
operations from the respective  statement  captions.  The amount of income taxes
allocated to discontinued  operations  reflects the incremental effect on income
taxes that resulted from such operations.

Summarized   unaudited   information   relating  to  income   from   Augustine's
discontinued  operations  for the third quarter and nine months ended  September
30, 1996 is as follows:
==============================================================================
                                                             Third        Nine
(in thousands)                                             Quarter      Months
==============================================================================
Investment management fee revenue                           $  174       $ 479
Operating expenses                                            (116)       (339)
Interest income                                                  1           2
Minority interest                                              (12)        (30)
------------------------------------------------------------------------------
Income from discontinued operations before taxes                47         112
Income tax expense                                             (24)        (53)
------------------------------------------------------------------------------

Income from discontinued operations
   through September 30, 1996                               $   23       $  59
==============================================================================

Investment  management fee revenue  includes  $49,000 and $142,000 for the third
quarter and nine months ended  September  30, 1996,  respectively,  from related
parties.

NOTE 4 - CASH AND CASH EQUIVALENTS

Highly liquid  investments,  consisting  principally of funds held in short-term
money market accounts, are classified as cash equivalents.  Included in cash and
cash equivalents at December 31, 1996 is $65,000 of funds held in escrow,  which
were applied to the  satisfaction of certain  liabilities and were classified as
restricted.

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  - held to  maturity,  at  September  30 and December 31,
consist of the following:
==============================================================================
                                 1997                          1996
                    ----------------------------  ----------------------------
                                Cost or                       Cost or
                    Carrying  Amortized     Fair  Carrying  Amortized     Fair
(in thousands)         Value       Cost    Value     Value       Cost    Value
==============================================================================
U.S. Treasury Bills  $44,252    $44,252  $44,266   $47,259    $47,259  $47,261
==============================================================================

The  gross  unrealized  gains on  investment  securities,  at  September  30 and
December 31, consist of the following:
==============================================================================

(in thousands)                                                 1997       1996
==============================================================================

Held to Maturity:
Gross unrealized gains                                        $  14      $   2
==============================================================================

                                     - 5 -
<PAGE>
                      AMBASE CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


NOTE 6 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Additional information regarding cash flow for the third quarter ended September
30 is as follows:
==============================================================================
(in thousands)                                                1997        1996
==============================================================================
Cash received (paid) during the period:
Income taxes refunded (paid), net                           $  265      $5,299
==============================================================================

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.  Income taxes refunded,  net in 1996, include a 1977 tax
refund of $7,613,000 and $1,991,000 of payments to the IRS,  principally for the
1985 through 1991 tax years.

NOTE 7 - 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 September 30, 1997 and December 31, 1996, 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 1995 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  $29  million  of NOL
carryforwards  as noted in the Company's Annual Report on Form 10-K for the year
ended December 31, 1996, Item 8 Note 10.

                                    - 6 -
<PAGE>
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 recognized as an income tax benefit in the first quarter
ended March 31, 1997.  During the first quarter of 1996, the Company  received a
1977  income tax refund of  $7,613,000,  which was  recognized  as an income tax
benefit,  based on management's  review of the overall tax liability position of
the Company. During the first nine months of 1996, $1,991,000 of payments to the
IRS were charged against income tax reserves,  principally representing payments
for previously agreed to issues relating to the 1985 through 1991 tax years.

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.
On  October  4,  1996,  the  Company  sold its  entire  interest  in  Augustine.
Accordingly,  the operations of Augustine have been reclassified as discontinued
investment  management  operations in the  accompanying  consolidated  financial
statements.

FINANCIAL CONDITION

The Company's  assets at September 30, 1997 aggregated  $64,653,000,  consisting
principally of cash and cash equivalents of $7,372,000, investment securities of
$44,252,000  and a  $12,818,000  receivable  from  Home  Holdings,  Inc.  ("Home
Holdings").  During the first nine months of 1997, proceeds of $368,000 from the
Home Holdings  receivable were collected.  The Company  considers the receivable
from Home  Holdings  to be fully  collectible;  accordingly,  no  allowance  for
doubtful  accounts is  provided.  The  Company  will  continue  to monitor  Home
Holdings' status. For further information on the Company's  receivable from Home
Holdings,  see the  Company's  Annual  Report  on Form  10-K for the year  ended
December  31,  1996,  Item  8-Note  4. At  September  30,  1997,  the  Company's
liabilities,  including  reserves for  contingent  and alleged  liabilities,  as
further  described  in Part II - Item  1,  exceeded  total  recorded  assets  by
$23,769,000.

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 "Fresh Start" (an insurance  industry  issue).
During the first quarter of 1996, the Company  received a 1977 income tax refund
of $7,613,000; as a result, City no longer remains open for refunds. This amount
was  recognized  as an income tax benefit in the first  quarter  ended March 31,
1996, based on management's  review of the overall tax liability position of the
Company.

During the first nine months of 1996, in connection  with the  completion by the
IRS of the Company's  1985 to 1991 federal  income tax audits  (excluding  Fresh
Start), the Company made payments to the IRS totaling $1,991,000.  These amounts
were  previously  reserved for and recorded to the income tax reserves  account.
During the first  quarter of 1997,  $475,000 of income taxes were  refunded 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 of 1997.  The
federal income tax  adjustments  from the 1985 to 1991 audits  (excluding  Fresh
Start) did not result in additional payments of state or local income taxes. New
York State has completed their  examination of the Company's  income tax returns
through 1989,  and is currently  reviewing the Company's  income tax returns for
tax  years  1990 to 1992.  The IRS has  recently  completed  its  review  of the
Company's federal income tax return for 1992 with no adjustments.  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

                                    - 7 -
<PAGE>
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
United States Court of Appeals for the 7th Circuit  ("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 Appeals  Court 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.

With respect to the "Fresh  Start"  issue,  on March 13, 1996,  the IRS issued a
Notice of  Deficiency  to the  Company,  with respect to taxes owed for the year
1987.  The Company has disputed the Notice of Deficiency and has claimed that it
is entitled to "Fresh Start"  transition  relief under certain insurance company
tax  provisions  of the Tax Reform Act of 1986.  If the IRS is  successful,  the
amount of the  deficiency  would be material.  The Company  believes that it has
meaningful  defenses.  On June 7, 1996,  the Company  filed a petition  with the
United  States Tax Court for  redetermination  of the tax, and on July 23, 1996,
the IRS filed its answer. See Part II - Item 1, Legal  Proceedings,  Withholding
Taxes (Netherlands Antilles) and Fresh Start for additional details. See Results
of Operations below, for a further discussion of taxes.

At September 30, 1997, the litigation and contingency  reserves were $2,542,000.
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 September  30, 1997.  For a further
discussion,  see Part II - Item 1 - Legal  Proceedings,  Disputes  with Internal
Revenue Service, Withholding Taxes (Netherlands Antilles) and Fresh Start.

The Company has  significant  alleged tax  liabilities  and is a defendant  in a
number of lawsuits and  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. For a
discussion of alleged tax liabilities,  lawsuits and  governmental  proceedings,
see Part II - Item 1. 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.

The cash needs of the Company for the first nine months of 1997 were principally
satisfied  by  interest  income  received  on  investment  securities  and  cash
equivalents,  a $475,000 income tax refund,  and the Company's current financial
resources.  Management believes that the Company's cash resources are sufficient
to continue operations for 1997.

For the nine months ended  September 30, 1997,  cash of  $3,401,000  was used by
continuing  operations,  including the payment of prior year  accruals,  and the
payment of operating expenses partially offset by interest income and a $475,000
tax refund.  For the nine months ended  September 30, 1996, cash of $425,000 was
used by continuing  operations,  including the receipt of a 1977 tax refund, the
receipt of interest  income  partially  offset by payments  charged  against the
litigation and contingency reserves and the payment of operating expenses.

                                    - 8 -
<PAGE>
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 September 30,
1997.

RESULTS OF OPERATIONS - CONTINUING OPERATIONS

Summarized  financial  information for the continuing  operations of the Company
for the third quarter and nine months ended September 30 is as follows:
==============================================================================
                                         Third Quarter           Nine Months
(in thousands)                         1997        1996       1997        1996
==============================================================================

OPERATING EXPENSES:
Compensation and benefits             $ 472       $ 533     $1,464     $ 1,343
Professional and outside services        73          84        265         352
Insurance                                22          36         93         142
Occupancy                                22          27         65          68
Other operating                          29          46        110         124
------------------------------------------------------------------------------
                                        618         726      1,997       2,029
------------------------------------------------------------------------------
Operating loss                         (618)       (726)    (1,997)     (2,029)
------------------------------------------------------------------------------
Interest income                         656         690      2,008       1,948
Other income                             55           -         55          20
Other income - litigation and
   contingency reserves reversal          -           -          -       8,000
Realized loss on sale of investment
   securities - available for sale        -           -          -        (182)
------------------------------------------------------------------------------
Income (loss) from continuing operations
   before income taxes                   93         (36)        66       7,757
Income tax benefit (expense)            (73)       (214)       262       7,272
------------------------------------------------------------------------------

Income (loss) from
   continuing operations              $  20       $(250)    $  328     $15,029
==============================================================================

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 1997 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 income from continuing  operations of $20,000 and $328,000,
or $0.01 per share,  in the third quarter and nine month periods ended September
30, 1997,  respectively.  The 1997 nine month period  includes a $475,000 income
tax benefit, as further described in Financial Condition,  above. The 1997 third
quarter  and  nine  month   periods  also  include   other  income  of  $55,000,
attributable  to  the  collection  by an  inactive  subsidiary  of a  receivable
previously  considered  uncollectible.  Excluding these non-recurring items, the
Company  would have  reported a loss from  continuing  operations of $35,000 and
$202,000 in the third quarter and nine month  periods ended  September 30, 1997,
respectively. The Company recorded a loss from continuing operations of $250,000
in the third  quarter  ended  September  30,  1996 and  income  from  continuing
operations of $15,029,000 in the nine month period ended  September 30, 1996. As
further  described in  Financial  Condition,  above,  the 1996 nine month period
includes  other  income  of  $8,000,000,  resulting  from  a  reduction  in  the
litigation and  contingency  reserves,  and an additional  income tax benefit of
$7,613,000. Excluding these non-recurring items, the Company would have reported
a loss from continuing  operations of $584,000,  or $0.01 per share for the nine
month period ended September 30, 1996, respectively.

The Company  recorded income from continuing  operations  before income taxes of
$93,000 and $66,000 in the third quarter and nine month periods ended  September
30, 1997,  respectively.  The 1997 third quarter and nine month periods  include
non-recurring  other  income  of  $55,000.  The  Company  recorded  a loss  from
continuing  operations before income taxes of $36,000 in the third quarter ended
September  30, 1996.  For the nine month period ended  September  30, 1996,  the
Company  recorded  income from  continuing  operations  before  income  taxes of
$7,757,000,  which  includes  an  $8,000,000  reduction  in the  litigation  and
contingency reserves, as further described in Financial Condition, above.
                                     - 9 -
<PAGE>
Compensation  and  benefits  decreased  to $472,000 in the third  quarter  ended
September 30, 1997,  compared with $533,000 for the comparable 1996 period.  For
the nine month  period  ended  September  30,  1997,  compensation  and benefits
increased to  $1,464,000  from  $1,343,000  in the 1996 nine month  period.  The
increase in the 1997 nine month period is due to the hiring by the Company of an
employee who previously provided services as an independent consultant.

Professional and outside services decreased to $73,000 and $265,000 in the third
quarter and nine month periods ended September 30, 1997, compared to $84,000 and
$352,000 in the respective 1996 periods.  This decrease was primarily the result
of the hiring by the Company of an employee who previously  provided services as
an independent consultant, as noted above.

Insurance  expenses in the third quarter and nine month periods ended  September
30, 1997, as compared with the same 1996 periods,  decreased due to management's
continued renegotiation of insurance programs.

Interest  income was $656,000 and $2,008,000 in the third quarter and nine month
periods of 1997,  respectively,  compared  to  $690,000  and  $1,948,000  in the
respective 1996 periods.

Other  income of  $55,000 in the 1997 third  quarter  and nine month  periods is
attributable  to  the  collection  by an  inactive  subsidiary  of a  receivable
previously considered uncollectible.

The income tax  provision of $73,000 in the third  quarter  ended  September 30,
1997 is primarily  attributable  to a provision for state taxes.  The income tax
benefit of  $262,000  in the nine  month  period  ended  September  30,  1997 is
attributable to a $475,000 income tax refund,  as further described in Financial
Condition,  above, and a provision for state taxes of $213,000. During the first
quarter of 1996,  the Company  received a 1977 income tax refund of  $7,613,000,
which was  recognized  as an income tax benefit in the first quarter ended March
31, 1996, based on management's  review of the overall tax liability position of
the Company,  as further described in Financial  Condition,  above. In addition,
included in the income tax benefit for the third  quarter and nine month periods
ended September 30, 1996, respectively,  is a federal and state tax provision of
$214,000 and $341,000.  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

                                    - 10 -
<PAGE>
Part II - OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

The information  contained in Item 8 - Note 12 in AmBase's Annual Report on Form
10-K for the year ended  December 31, 1996 and in AmBase's  Quarterly  Report on
Form 10-Q for the  quarterly  periods ended March 31, 1997 and June 30, 1997 are
incorporated by reference  herein and the defined terms set forth below have the
same  meaning  ascribed  to them in those  reports.  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.

    (1)Withholding Taxes (Netherlands  Antilles).  A trial was held in this case
       on March 24,  1997,  after  which the Judge  asked the  Internal  Revenue
       Service  (the "IRS") and the Company to submit post trial  briefs,  which
       have been subsequently submitted to the United States Tax Court (the "Tax
       Court").

    (2)Fresh Start.  On October 20, 1997,  the United States  Supreme Court (the
       "Supreme Court") granted Atlantic Mutual Insurance  Company's  ("Atlantic
       Mutual") petition for certiorari for review of the Fresh Start issue. The
       Supreme Court could be expected to issue an opinion in Atlantic  Mutual's
       case during this term.

       The Company and the IRS have advised the Tax Court in the Company's Fresh
       Start  case  that,  in  the  interest  of  efficiency,  further  informal
       discovery and  negotiation  of a stipulation  of facts have been deferred
       pending the outcome of Atlantic Mutual's case in the Supreme Court.

       A decision on the merits in Atlantic  Mutual's  case by the Supreme Court
       may control the outcome of the Company's  Fresh Start case. No assurances
       can be given  concerning the outcome of the Company's  litigation on this
       issue.

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.

                                    - 11 -
<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

    None

(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,
    Treasurer and Controller
    (PRINCIPAL FINANCIAL AND
    ACCOUNTING OFFICER)

Date:  October 28, 1997

                                    - 12 -
<PAGE>