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, 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 March 31, 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
MARCH 31, 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..................................................10

Item 2.  Changes in Securities..............................................11

Item 3.  Defaults Upon Senior Securities....................................11

Item 4.  Submission of Matters to a Vote of Security Holders................11

Item 5.  Other Information..................................................11

Item 6.  Exhibits and Reports on Form 8-K...................................11











<PAGE>



PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

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




==============================================================================
(in thousands, except per share data)                         1997        1996
==============================================================================

OPERATING EXPENSES:
Compensation and benefits                                   $  516      $  416
Professional and outside services                               61         116
Insurance                                                       35          53
Occupancy                                                       22          19
Other operating                                                 38          35
------------------------------------------------------------------------------
                                                               672         639
------------------------------------------------------------------------------
Operating loss                                                (672)       (639)
------------------------------------------------------------------------------
Interest income                                                689         603
------------------------------------------------------------------------------
Income (loss) from continuing operations before income taxes    17         (36)
Income tax benefit                                             405       7,560
------------------------------------------------------------------------------
Income from continuing operations                              422       7,524
Income from discontinued investment management operations,
   net of income taxes                                           -          18
------------------------------------------------------------------------------
NET INCOME                                                  $  422      $7,542
==============================================================================

PER SHARE DATA:
Income from continuing operations                           $ 0.01      $ 0.17
Income from discontinued investment management operations,
   net of income taxes                                           -           -
------------------------------------------------------------------------------
NET INCOME                                                  $ 0.01      $ 0.17
==============================================================================

AVERAGE SHARES OUTSTANDING                                  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



==============================================================================
                                                       March 31,  December 31,
                                                            1997          1996
(in thousands)                                       (unaudited)
==============================================================================
ASSETS
Cash and cash equivalents (includes $57 and $65 of
   restricted cash)                                     $  5,975     $   5,591
Investment securities - held to maturity
   (market value $45,880 and $47,261)                     45,935        47,259
Receivable from Home Holdings, Inc.                       13,096        13,186
Other assets                                                 161           193
------------------------------------------------------------------------------
TOTAL ASSETS                                            $ 65,167     $  66,229
==============================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts payable and accrued liabilities                $    242     $   1,428
Supplemental retirement plan                               4,730         4,724
Postretirement welfare benefits                            1,496         1,527
Other liabilities                                            435           605
Litigation and contingency reserves                        2,851         2,954
Income tax reserves                                       79,088        79,088
------------------------------------------------------------------------------
Total liabilities                                         88,842        90,326
------------------------------------------------------------------------------
Commitments and contingencies                                  -             -
------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY:
Common stock                                                 447           447
Paid-in capital                                          547,712       547,712
Accumulated deficit                                     (571,187)     (571,609)
Treasury stock                                              (647)         (647)
------------------------------------------------------------------------------
Total stockholders' equity                               (23,675)      (24,097)
------------------------------------------------------------------------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY              $ 65,167     $  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
                            QUARTER ENDED MARCH 31




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

CASH FLOWS FROM OPERATING ACTIVITIES:
Income from continuing operations                         $   422     $  7,524
Adjustments to reconcile income from continuing
   operations to net cash provided (used) by
   continuing operations:
Other assets                                                   32           59
Accounts payable and accrued liabilities                   (1,186)        (469)
Litigation and contingency reserves uses                     (103)        (493)
Income tax reserves, net                                        -       (8,159)
Income tax refund - 1977                                        -        7,613
Other, net                                                   (813)        (455)
------------------------------------------------------------------------------
Net cash provided (used) by operating activities
   of continuing operations                                (1,648)       5,620
------------------------------------------------------------------------------
Net cash provided by discontinued investment
   management operations                                        -            2
------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Maturities of investment securities - held to maturity      5,450       16,000
Purchases of investment securities - held to maturity      (3,508)     (23,996)
Proceeds from Home Holdings, Inc. receivable                   90        2,657
Other, net                                                      -            1
------------------------------------------------------------------------------
Net cash provided (used) by investing activities            2,032       (5,338)
------------------------------------------------------------------------------
Net increase in cash and cash equivalents                     384          284
Cash and cash equivalents at beginning of period            5,591        7,752
------------------------------------------------------------------------------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                $ 5,975     $  8,036
==============================================================================

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 March 31,  1997,  the
litigation and contingency reserves were $2,851,000. 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,  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.




                                    - 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. The Company
had acquired a 51% ownership  interest in Augustine for $200,000 on November 10,
1993.  The  Company's  ownership  percentage  later  increased  to  66%  due  to
Augustine's  repurchase of outstanding shares from other shareholders.  Prior to
the Company's acquisition,  Augustine was controlled by Mr. Ronald J. Burns. Mr.
Burns previously served as a director of the Company from January 1991 until his
resignation from the Company's Board on December 28, 1995.

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   information  relating  to  income  from  Augustine's   discontinued
operations for the first quarter ended March 31, 1996 is as follows:

==============================================================================
(in thousands)
==============================================================================
Investment management fee revenue                                     $    146
Operating expenses                                                        (108)
Interest income                                                              1
Minority interest                                                           (9)
------------------------------------------------------------------------------
Income from discontinued operations before taxes                            30
Income tax expense                                                         (12)
------------------------------------------------------------------------------

INCOME FROM DISCONTINUED OPERATIONS THROUGH MARCH 31, 1996            $     18
==============================================================================

Investment  management fee revenue  includes $47,000 for the first quarter ended
March 31, 1996 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 March 31, 1997 and December 31, 1996 is $57,000 and $65,000,
respectively,  of funds held in escrow,  to be  applied to the  satisfaction  of
certain liabilities which have been classified as restricted.




                                    - 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 - held to maturity,  at March 31 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        $45,935     $45,935   $45,880    $47,259      $47,259   $47,261
===============================================================================


The gross unrealized gains and losses on investment securities,  at March 31 and
December 31, consist of the following:
==============================================================================
(in thousands)                                                1997        1996
==============================================================================

Held to Maturity:
Gross unrealized gains (losses)                             $   55       $  (2)
==============================================================================

NOTE 6 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Additional  information regarding cash flow for the first quarter ended March 31
is as follows:
==============================================================================
(in thousands)                                                1997        1996
==============================================================================
Cash received (paid) during the period:
Income taxes refunded (paid), net                           $  402      $7,016
==============================================================================

Income taxes  refunded,  net in 1997,  include  $475,000 of taxes  refunded as a
result of an  overpayment  to the IRS for 1988  through  1991 tax years.  Income
taxes refunded, net in 1996, include a 1977 tax refund of $7,613,000.

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 March 31, 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 tax effects of $170 million
of NOL's resulting from the Carteret  Savings Bank, F.A.  ("Carteret")  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.




                                    - 6 -

<PAGE>
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 during  1996, 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 has 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").

Based on the Company not making the election  decision,  as described above, the
Company will amend its 1992 through 1995 consolidated federal income tax returns
to  include  the  federal  income  tax  effects of  Carteret  and the  resulting
successor  institution,  Carteret  Federal  Savings  Bank.  The Company does not
believe a material increase in the Company's tax liabilities will result.

As a result of filing  consolidated  with Carteret,  the Company expects to have
available  approximately  $170  million of tax NOL  carryforwards,  expiring  no
earlier than 2007, available to offset future taxable income, in addition to the
$29,319,000 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.

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 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 in the  accompanying  consolidated  Statement  of  Operations,  based on
management's review of the overall tax liability position of the Company.

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 March 31,  1997  aggregated  $65,167,000,  consisting
principally of cash and cash equivalents of $5,975,000, investment securities of
$45,935,000  and a  $13,096,000  receivable  from  Home  Holdings,  Inc.  ("Home
Holdings").  During the first three months of 1997, proceeds of $90,000 from the
Home  Holdings  receivable  were  collected.  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 March 31, 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 $23,675,000.

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.  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  accompanying  consolidated  Statement of  Operations  for the first quarter
ended March 31, 1996, based on management's  review of the overall tax liability
position 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 1991, 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 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 $1,995,000.  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 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 Company's federal income tax return for 1992 is currently under examination.
The Company's  federal income tax returns for years  subsequent to 1992 have not
been reviewed by the IRS.

                                    - 7 -
<PAGE>
With respect to  withholding  taxes 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  the trial  ended,  the Judge  asked the IRS and the
Company  to submit  post-trial  briefs.  The  Company's  lawyers  are  presently
preparing  the  briefs.  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,  105 T.C. No. 22) to the United States Court of Appeals for the
7th  Circuit.  Although 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. The Company will continue to monitor the appeal.

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.

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.  The IRS and the Company are  presently  engaged in an
informal discovery process,  customary in Tax Court. 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 March 31, 1997, the litigation and contingency reserves were $2,851,000.  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,  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.

                                    - 8 -
<PAGE>
The  cash  needs  of the  Company  for the  first  three  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 three  months  ended  March 31,  1997,  cash of  $1,648,000  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 three months ended March 31, 1996,  cash of $5,620,000  was
provided by operating  activities,  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.

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,
1997.

RESULTS OF OPERATIONS - CONTINUING OPERATIONS

Summarized  financial  information for the continuing  operations of the Company
for the first quarter ended March 31 is as follows:
==============================================================================
(in thousands)                                               1997         1996
==============================================================================

Operating expenses:
Compensation and benefits                                   $ 516       $  416
Professional and outside services                              61          116
Insurance                                                      35           53
Occupancy                                                      22           19
Other operating                                                38           35
------------------------------------------------------------------------------
                                                              672          639
------------------------------------------------------------------------------
Operating loss                                               (672)        (639)
------------------------------------------------------------------------------
Interest income                                               689          603
------------------------------------------------------------------------------
Income (loss) from continuing operations before income taxes   17          (36)
Income tax benefit                                            405        7,560
------------------------------------------------------------------------------
 
INCOME FROM CONTINUING OPERATIONS                           $ 422       $7,524
==============================================================================

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 $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 loss from continuing  operations
of $53,000 for the first  quarter ended March 31, 1997. In the same 1996 period,
the Company recorded income from continuing operations of $7,524,000. As further
described in Financial Condition,  above, the 1996 first quarter period includes
an  additional  income tax  benefit of  $7,613,000.  Excluding  this  income tax
benefit,  the Company would have reported a loss from  continuing  operations of
$89,000 for the first quarter ended March 31, 1996.

The Company  recorded income from continuing  operations  before income taxes of
$17,000 in the first  quarter  ended  March 31,  1997,  compared  to a loss from
continuing  operations before income taxes of $36,000 in the first quarter ended
March 31, 1996.

Compensation  and  benefits  increased  to $516,000  in the 1997 first  quarter,
compared with $416,000 for the comparable 1996 period.  The increase in the 1997
period  is due to the  hiring  by the  Company  of an  employee  who  previously
provided services as an independent consultant.

                                    - 9 -

<PAGE>
Professional  and outside  services  decreased  to $61,000 in the first  quarter
ended March 31, 1997,  compared to $116,000 in the respective 1996 period.  This
decrease  was 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 first  quarter ended March 31, 1997, as compared with
the same 1996 period,  decreased due to management's  renegotiation of insurance
programs.

Interest  income  in the first  quarter  of 1997  increased  to  $689,000,  from
$603,000 in the respective 1996 period.

The income tax  benefit of  $405,000  recorded  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.  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  accompanying  Statement of
Operations  for 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 first  quarter ended March 31, 1996, is a state tax provision of
$53,000.  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

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 is incorporated  by reference  herein,
and the defined terms set forth below have the same meaning  ascribed to them in
such  Annual  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:

Angel, et  al. v. AmBase  Corp.  The Company  has settled  with  all  but eleven
claimants in  the Angel litigation  and  expects to  reach a settlement with the
remaining claimants in the near future.

Sovereign  Metal. In April 1997, this case was settled and the parties entered a
stipulation  and dismissal of plaintiff's  State Court claims against all of the
defendants, as well as a stipulation withdrawing the appeal of the State Court's
decision  granting  summary  judgment in favor of the Company and dismissing the
Company from the suit. Therefore, this action is concluded.



                                    - 10 -

<PAGE>



Disputes with Internal Revenue Service.

    Withholding Taxes (Netherlands  Antilles).  A trial was held in this case on
    March  24,  1997.  After the trial  ended,  the Judge  asked the IRS and the
    Company to submit post trial  briefs.  The  Company's  lawyers are presently
    preparing the briefs.

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.

(b) Supervisory Goodwill Litigation:

On March 14,  1997,  the Court of Federal  Claims  issued a formal  order on the
FDIC's  motion to intervene  and  substitute,  making final its prior  tentative
ruling  permitting  the  FDIC  to  intervene  as  an  additional   plaintiff  in
forty-three cases, including the Company's case, but not allowing the FDIC to be
substituted as the sole plaintiff.


ITEM 2.  CHANGES IN SECURITIES

Does not apply.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

Does not apply.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

Does not apply.

ITEM 5.  OTHER INFORMATION

None

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

    None

(b) Form 8-K

    None




                                    - 11 -

<PAGE>


                                  SIGNATURES


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


AMBASE CORPORATION








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

Date:  May 1, 1997



                                    - 12 -


<PAGE>




                                  EXHIBIT INDEX



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

   27                  Financial Data Schedule











                                      -13-