UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q


     [X]            Quarterly Report Pursuant to Section
                        13 or 15(d) of the Securities
                           Exchange Act of 1934


                For the quarterly period ended March 31, 2006

                                       or

     [   ]  Transition Report Pursuant to Section 13 or 15(d) of the
                     Securities Exchange Act of 1934

                       Commission file number 1-7265


                             AMBASE CORPORATION


             (Exact name of registrant as specified in its charter)



     Delaware                                       95-2962743

(State of incorporation)                (I.R.S. Employer Identification No.)



                           100 PUTNAM GREEN, 3RD FLOOR
                          GREENWICH, CONNECTICUT 06830

               (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  (or for such  shorter  period  that the
registrant  was required to file such  reports) and (2) has been subject to such
filing requirements for the past 90 days.

YES     X        NO ________

     Indicate by check mark whether the registrant is a large accelerated filer,
an accelerated filer, or a non-accelerated filer. See definition of "accelerated
filer and large  accelerated  filer" in Rule 12b-2 of the Exchange  Act.  (Check
one):

Large Accelerated Filer       Accelerated Filer     Non-Accelerated Filer  X

     Indicate  by check mark  whether  the  registrant  is a shell  company  (as
defined in Rule 12b-2 of the Exchange Act).

YES ________     NO     X

     At  May  11,  2006,  there  were  45,263,519  shares   outstanding  of  the
registrant's common stock, $0.01 par value per share.



<PAGE>



AmBase Corporation

Quarterly Report on Form 10-Q
March 31, 2006
<TABLE>
<CAPTION>
<S>                                                                                                          <C>
TABLE OF CONTENTS                                                                                             Page
                                                                                                             ------

PART I - FINANCIAL INFORMATION

Item 1.      Financial Statements (unaudited).....................................................................1

Item 2.      Management's Discussion and Analysis of
                   Financial Condition and Results of Operations.................................................16

Item 3.      Quantitative and Qualitative Disclosures About Market Risk..........................................20

Item 4.      Controls and Procedures.............................................................................21

PART II - OTHER INFORMATION

Item 1.      Legal Proceedings...................................................................................21

Item 1A.     Risk Factors........................................................................................22

Item 2.      Exhibits............................................................................................22

Signatures   ....................................................................................................22
</TABLE>








<PAGE>
PART I - FINANCIAL INFORMATION
Item 1.  FINANCIAL STATEMENTS
<TABLE>
<CAPTION>

                       AMBASE CORPORATION AND SUBSIDIARIES
                           Consolidated Balance Sheets
                                   (Unaudited)
<S>                                                                                   <C>             <C>
(in thousands, except for share and per share amounts)
                                                                                      March 31,       December 31,
                                                                                           2006               2005
                                                                                       ========          =========
Assets:
Cash and cash equivalents.........................................................    $   1,665         $    2,852
Investment securities:
    Held to maturity (market value $37,912 and $39,034, respectively).............       37,904             39,031
    Available for sale, carried at fair value ....................................        1,640              1,729
                                                                                       --------           --------
Total investment securities.......................................................       39,544             40,760
                                                                                       --------           --------
Real estate owned:
  Land............................................................................          554                554
  Buildings and improvements......................................................        1,900              1,900
                                                                                       --------           --------
                                                                                          2,454              2,454
  Less:  accumulated depreciation.................................................         (245)              (232)
                                                                                       --------           --------
Real estate owned, net............................................................        2,209              2,222
Other assets......................................................................           37                 49
                                                                                       --------           --------
Total assets......................................................................   $   43,455         $   45,883
                                                                                       ========           ========
Liabilities and Stockholders' Equity:
Liabilities:
Accounts payable and accrued liabilities..........................................   $      793         $    1,568
Supplemental retirement plan......................................................       15,059             14,595
Other liabilities.................................................................           36                 38
                                                                                       --------           --------
Total liabilities.................................................................       15,888             16,201
                                                                                       --------           --------
Commitments and contingencies (Note 3)............................................

Stockholders' equity:
Common stock ($0.01 par value, 200,000,000 authorized, 46,410,007 issued and,
   outstanding)                       .............................                         464                464
Paid-in capital...................................................................      547,978            547,956
Accumulated other comprehensive income............................................       (1,484)            (1,395)
Accumulated deficit...............................................................     (518,143)          (516,658)
Treasury stock, at cost - 1,146,488 and 176,488 shares, respectively..............       (1,248)              (685)
                                                                                       --------           --------
Total stockholders' equity........................................................       27,567             29,682
                                                                                       --------           --------

Total liabilities and stockholders' equity........................................   $   43,455         $   45,883
                                                                                       ========           ========
</TABLE>
     The accompanying notes are an integral part of these consolidated financial
statements.


<PAGE>
<TABLE>
<CAPTION>


                       AMBASE CORPORATION AND SUBSIDIARIES
                      Consolidated Statements of Operations
                           Three Months Ended March 31
                                   (Unaudited)
                      (in thousands, except per share data)


<S>                                                                                    <C>           <C>
                                                                                           Three Months
                                                                                          2006         2005
Revenues:                                                                                 ====         ====
Rental income.....................................................................     $    41       $    43

Operating expenses:
Compensation and benefits.........................................................       1,088         1,170
Professional and outside services.................................................         718           546
Property operating and maintenance................................................          31            28
Depreciation......................................................................          13            13
Insurance.........................................................................          17            16
Other operating...................................................................          46            50
                                                                                      ----------     ----------
                                                                                         1,913         1,823
                                                                                      ----------     ----------
Operating loss....................................................................      (1,872)       (1,780)
                                                                                      ----------     ----------
Interest income...................................................................         420           125
Realized gains on sales of investment securities..................................           -            20
                                                                                      ----------     ----------
Loss from continuing operations before
     income taxes.................................................................      (1,452)       (1,635)
Income tax expense................................................................         (33)          (30)
                                                                                      ----------     ----------
Loss from continuing operations...................................................      (1,485)       (1,665)
                                                                                      ----------     ----------
Income from operation of discontinued property....................................           -           341
                                                                                      ----------     ----------
Income from discontinued operations...............................................           -           341
                                                                                      ----------     ----------
Net loss..........................................................................    $ (1,485)      $(1,324)
                                                                                      ==========     ==========
Per share data:
Basic:
Loss from continuing operations...................................................    $  (0.03)      $ (0.04)
Income from discontinued operations...............................................           -          0.01
                                                                                      ----------     ----------
Net loss attributable to common
     Stockholders.................................................................    $  (0.03)      $ (0.03)
                                                                                      ============   ==========
Assuming dilution:
Loss from continuing operations...................................................    $  (0.03)      $ (0.04)
Income from discontinued operations...............................................           -          0.01
                                                                                      ----------     ----------
Net loss attributable to common
     Stockholders.................................................................    $  (0.03)      $ (0.03)
                                                                                      ==========     ==========
Weighted average common shares outstanding:
Basic.............................................................................      45,829        46,234
                                                                                      ==========     ==========
Diluted...........................................................................      45,829        46,234
                                                                                      ==========     ==========
</TABLE>

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

<PAGE>
<TABLE>
<CAPTION>

                       AMBASE CORPORATION AND SUBSIDIARIES
             Consolidated Statements of Comprehensive Income (Loss)
                           Three Months Ended March 31
                                   (Unaudited)
                                 (in thousands)

<S>                                                                                            <C>          <C>
                                                                                                  Three Months
                                                                                               2006         2005
                                                                                               =====        =====

Net loss..........................................................................          $(1,485)     $(1,324)

Unrealized holding losses on investment securities
     available for sale...........................................................              (89)        (182)
                                                                                            -------      -------

Comprehensive loss...................................................................       $(1,574)     $(1,506)
                                                                                            =======      =======
</TABLE>

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

<PAGE>
<TABLE>
<CAPTION>


                       AMBASE CORPORATION AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows
                           Three Months Ended March 31
                                   (Unaudited)
                                 (in thousands)
<S>                                                                                     <C>            <C>

                                                                                           2006          2005
                                                                                           ====          ====
Cash flows from operating activities:
Loss from continuing operations.......................................................  $(1,485)       $(1,665)
Adjustments to reconcile loss from continuing to net cash used by continuing operations:
    Depreciation and amortization.....................................................       13             13
    Accretion of discount - investment securities.....................................        -            (43)
    Realized gains on investment securities available for sale.......................         -            (20)
    Stock-based compensation expense..................................................       22              -
Changes in other assets and liabilities:
    Accrued interest receivable.......................................................        5              -
    Other assets......................................................................       12            379
    Accounts payable and accrued liabilities..........................................     (775)          (771)
    Suuplemental retirement plan and other liabilities................................      462         (1,326)
    Other, net........................................................................        2              2
                                                                                        --------     ----------
Net cash used by continuing operating activities......................................   (1,744)        (3,431)
                                                                                        --------     ----------
Income from discontinuing operations..................................................        -            341
Adjustments to reconcile income from discontinued operations to net cash
provided by discontinued operations:
    Depreciation and amortization related to discontinued operations..................        -             70
Changes in other assets and liabilities related to discontinued operations:
    Consolidated other assets & other liabilities.....................................        -             50
                                                                                        --------     ----------

Net cash provided by discontinued operations..........................................        -            461
                                                                                        --------     ----------
Net cash used by operating activities.................................................   (1,744)        (2,970)
                                                                                        --------     ----------
Cash flows from investing activities:
Maturities of investment securities - held to maturity................................   28,098          8,615
Purchases of investment securities - held to maturity.................................  (26,978)        (8,615)
Purchases of investment securities - available for sale...............................        -            548
Sales of investment securities - available for sale...................................        -           (252)
                                                                                        --------     ----------
Net cash provided by investing activities.............................................    1,120            296
                                                                                        --------     ----------
Cash flows from financing activities:
Common stock repurchased..............................................................     (563)             -
                                                                                        --------     ----------
Net cash used by financing activities.................................................     (563)             -
                                                                                        --------     ----------
Net decrease in cash and cash equivalents.............................................   (1,187)        (2,674)
Cash and cash equivalents at beginning of period......................................    2,852         10,124
                                                                                        --------     ----------
Cash and cash equivalents at end of period............................................  $ 1,665      $   7,450
                                                                                        ========     ==========
Supplemental cash flow disclosures:
Income taxes paid.....................................................................  $   427      $      38
                                                                                        ========     ==========
</TABLE>

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

<PAGE>

                       AMBASE CORPORATION AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

     Note 1 - Organization

     The accompanying  consolidated  financial  statements of AmBase Corporation
and its wholly-owned  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 only of normal recurring adjustments unless
otherwise  disclosed,  necessary for a fair statement 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 prior year  consolidated  financial  statements to conform
with the current year presentation.  The consolidated  financial statements have
been prepared in accordance with accounting principles generally accepted in the
United States of America ("GAAP") for interim financial information and with the
instructions  to Form 10-Q and Article 10 of Regulation  S-X. 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 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, 2005.

     The  Company's  assets  currently   consist  primarily  of  cash  and  cash
equivalents,  investment  securities,  and real estate owned. The Company's main
source of operating  revenue is rental income  earned on real estate owned.  The
Company also earns non-operating  revenue  principally  consisting of investment
earnings on investment securities and cash equivalents. The Company continues to
evaluate a number of possible acquisitions,  and is engaged in the management of
its assets and  liabilities,  including the contingent  assets,  as described in
Part II - Item 1. From time to time,  the  Company and its  subsidiaries  may be
named as a defendant in various lawsuits or proceedings.  The Company intends to
aggressively  contest all  litigation and  contingencies,  as well as pursue all
sources for contributions to settlements.

     In July 2005,  the  Company  completed  the sale of its 38,000  square foot
office  building  at  Two  Soundview  Drive  in  Greenwich,   Connecticut  ("Two
Soundview").  Accordingly,  the results of  operations  of Two Soundview for the
periods ended prior to the July 2005 sale have been  retroactively  reclassified
as  discontinued  operations  in  the  accompanying  Consolidated  Statement  of
Operations in accordance with Financial Accounting Standards Board, Statement of
Financial  Accounting  Standards  No. 144,  "Accounting  for the  Impairment  or
Disposal  of  Long-Lived  Assets"  ("SFAS  144").  See Note 7 herein for further
information.

     The  Company's  management  expects  that  operating  cash  needs  for  the
remainder  of 2006  will be met  principally  by the  receipt  of  non-operating
revenue  consisting of investment  earnings on  investment  securities  and cash
equivalents,  rental  income  received,  and  the  Company's  current  financial
resources.

     Note 2 - Recent Accounting Pronouncements

     Effective  January 1, 2006, the Company adopted the fair value  recognition
provisions  of  Statement  of Financial  Accounting  Standards  No. 123 (revised
2004),  "Share-Based  Payment,"  ("SFAS 123R"),  using the modified  prospective
approach and therefore has not restated  results for prior  periods.  Under this
method, stock-based compensation expense for all stock-based compensation awards
ended  March  31,  2006,  includes  compensation  expense  for  all  stock-based
compensation  awards granted prior to, but not yet vested as of January 1, 2006,
based on the grant date fair value  estimated  in  accordance  with the original
provisions of Statement of Financial  Accounting  Standards No. 123, "Accounting
for Stock-Based Compensation" ("SFAS 123"). Stock-based compensation expense for
all  stock-based  compensation  awards  granted after January 1, 2006,for  which
vesting is based solely on employment  service,  will be based on the grant date
fair value estimated in accordance with the provisions of SFAS 123R. The Company
recognizes these  compensation costs for only those shares expected to vest on a
straight-line  basis over the requisite  service  period of the award,  which is
generally  the option  vesting term of two years.  Prior to the adoption of SFAS
123R,  the  Company  recognized  stock-based  compensation  in  accordance  with
Accounting  Principles  Board  Opinion No. 25,  "Accounting  for Stock Issued to
Employees"  ("APB 25"). In March 2005, the  Securities  and Exchange  Commission
(the "SEC") issued Staff  Accounting  Bulletin No. 107 ("SAB 107") regarding the
SEC's  interpretation of SFAS 123R and the valuation of share-based payments for
public  companies.  The Company has  applied  the  provisions  of SAB 107 in its
adoption  of SFAS  123R.  See Note 10 to the  Company's  consolidated  financial
statements for a further discussion of stock-based compensation.
<PAGE>


                       AMBASE CORPORATION AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

     Note 3 - Legal Proceedings

     The information  contained in Item 8 - Note 10 in AmBase's Annual Report on
Form 10-K for the year ended  December 31, 2005,  is  incorporated  by reference
herein and the defined  terms set forth below have the same meaning  ascribed to
them in that  report.  There have been no  material  developments  in such legal
proceedings, except as set forth below.

     The Company is or has been a party in a number of lawsuits or  proceedings,
including the following:

     Supervisory  Goodwill  Litigation.  On April 11,  2006,  Judge Smith held a
status  conference.  The Court confirmed that the Company's  statement of issues
relating to the size of the  receivership  deficit will be due in June 2006. The
Government's  brief will be due in July 2006,  and AmBase's reply will be due in
August 2006. A status  conference to discuss further  proceedings in this matter
will be held in September 2006. No assurance can be given regarding the ultimate
outcome of the litigation.

     Both the Court of Federal  Claims and the Court of appeals  for the Federal
Circuit have issued numerous  decisions in cases that involve claims against the
United  States  based upon its breach of its  contracts  with  savings  and loan
institutions  through its 1989 enactment of FIRREA.  In particular,  the Federal
Circuit  has issued  decisions  rejecting  Takings  Clause  claims  advanced  by
shareholders of failed thrifts. Castle v. United States, 301F.3d 1328 (Fed. Cir.
2002;  Bailey v. United  States,  341F.3d  1342 (Fed.  Cir.  2003)  petition for
certiorari which was filed January 26, 2004. In April 2004, the Company filed an
amicus brief in support of the petition for certiorari filed by Bailey.  In June
2004, the United States  Supreme Court denied the petition for certiorari  filed
by Bailey.  The Court of Claims decision in the Company's case, as well as other
decisions in  Winstar-related  cases, are publicly available and may be relevant
to the Supervisory Goodwill Company's claims, but are not necessarily indicative
of the ultimate outcome of the Company's actions.

     Litigation  with  SDG,  Inc.  On  March  31,  2006,  the  parties  filed  a
stipulation with the Court withdrawing the appeal. The Appeals Court ordered the
case  withdrawn on April 5, 2006.  The Company  remains a shareholder in SDG and
AMDG and will  continue to monitor the status of SDG and its  subsidiary,  AMDG,
Inc.

     Note 4 - Cash and Cash Equivalents

     Highly  liquid  investments,   consisting  principally  of  funds  held  in
short-term  money market  accounts with  original  maturities of less than three
months, are classified as cash equivalents.



<PAGE>


                       AMBASE CORPORATION AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

     Note 5 - Investment Securities

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

     Investment  securities  - available  for sale,  consist of  investments  in
equity  securities  held for an indefinite  period and are carried at fair value
with net unrealized gains and losses recorded  directly in a separate  component
of stockholders' equity.

     Investment securities consist of the following:
<TABLE>
<CAPTION>
<S>                           <C>            <C>            <C>               <C>           <C>               <C>

                                            March 31, 2006                              December 31, 2005
                             ======================================           ======================================
                                               Cost or                                        Cost or
                              Carrying       Amortized         Fair           Carrying      Amortized           Fair
(in thousands)                   Value            Cost        Value              Value           Cost          Value
                                ======      ==========      =======           ========     ==========         ======
Held to Maturity:
U.S. Treasury Bills......     $ 37,904        $ 37,904     $ 37,912           $ 39,031      $ 39,031       $  39,034

Available for Sale:
Equity Securities.........       1,640           1,798        1,640              1,729         1,798           1,729
                             ---------       ---------     --------           --------      --------       ---------
                             $  39,544       $  39,702     $ 39,552           $ 40,760      $ 40,829       $  40,763
                             =========       =========     ========           ========      ========       =========
</TABLE>

     The gross unrealized gains (losses) on investment securities,  at March 31,
2006 and December 31, 2005 consist of the following:

<TABLE>
<CAPTION>
<S>                                                                                            <C>        <C>
(in thousands)                                                                                  2006         2005
                                                                                              =======       ======
Held to Maturity:
Gross unrealized gain ............................................................            $     8       $    3
                                                                                              =======       ======
Available for Sale:
Gross unrealized gains............................................................            $    20       $    -
                                                                                              =======       ======

Gross unrealized losses...........................................................            $  (178)      $  (69)
                                                                                              ========      ======
</TABLE>

     The realized gain on the sales of investment  securities available for sale
for the three months ended March 31, 2005 was as follows:
<TABLE>
<CAPTION>
<S>                                                                                          <C>
                                                                                             Three Months
(in thousands)                                                                                   2005
                                                                                             ============

Net sale proceeds.................................................................              $  548
Cost basis........................................................................                (528)
                                                                                               ----------
Realized gains....................................................................              $   20
                                                                                               ==========
</TABLE>

<PAGE>


                       AMBASE CORPORATION AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

     Note 6 - Property Owned

     As of March 31, 2006,  the Company owns one commercial  office  building in
Greenwich,  Connecticut  that contains  approximately  14,500  square feet.  The
Company utilizes a small portion of the office space for its executive  offices,
with the remaining  square  footage  available for lease to  unaffiliated  third
parties.

     Depreciation  expense is recorded on a  straight-line  basis over 39 years.
The  building  and   improvements  are  carried  at  cost,  net  of  accumulated
depreciation of $245,000 and $232,000,  at March 31, 2006 and December 31, 2005,
respectively.

     The Company  earns  rental  income  under  operating  leases with  tenants.
Minimum lease rentals are recognized on a straight-line  basis over the terms of
the leases.  The cumulative  difference  between lease revenue  recognized under
this method and the contractual lease payment terms is recorded as deferred rent
receivable  and the  balances  of $2,000  and  $5,000  as of March 31,  2006 and
December 31, 2005, respectively are included in other assets on the Consolidated
Balance Sheets.  Revenue from tenant  reimbursement of common area  maintenance,
utilities and other operating  expenses are recognized  pursuant to the tenant's
lease when earned and due from tenants.

     Included in property operating and maintenance are expenses for common area
maintenance,  utilities,  real  estate  taxes and other  reimbursable  operating
expenses,  which  have not been  reduced  by  amounts  reimbursable  by  tenants
pursuant to applicable lease agreements.

     See Note 7 herein  for  information  regarding  the  Company's  sale of Two
Soundview in July 2005.

     Note 7 - Discontinued Operations

     In May 2005,  the Company  entered into an agreement to sell Two Soundview,
originally purchased in December 2002, to Ceruzzi Holdings, LLC, an unaffiliated
third party. In July 2005, the Company completed the sale of Two Soundview.  The
sale  price  was   $28,000,000   less  normal  real  estate  closing  costs  and
adjustments. As a result of the sale of Two Soundview, the results of operations
of Two  Soundview  have been  designated  as  discontinued  operations,  and the
Consolidated  Statements of  Operations  for the periods ended prior to the July
2005  sale have been  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,  in accordance with SFAS 144. A gain from the
sale, of $10,298,000,  was reflected in the Company's  financial  statements for
the year ending December 31, 2005.

     Income from  discontinued  operations,  as summarized  below, for the three
month  period ended March 31, 2005,  reflects the results of  operations  of Two
Soundview.

     Income from discontinued operations is as follows:
<TABLE>
<CAPTION>
<S>                                                                                                 <C>
                                                                                                    Three Months
(in thousands)                                                                                          2005
Revenues:                                                                                           ============
Rental income.................................................................................      $    530
Operating expenses:
Professional and outside services.............................................................            11
Property operating and maintenance............................................................           103
Depreciation..................................................................................            70
Insurance.....................................................................................             4
Other operating...............................................................................             1
                                                                                                    ------------
                                                                                                         189
                                                                                                    ------------
Income from operation of discontinued property................................................      $    341
                                                                                                    ============
</TABLE>

     No  adjustment  for income  taxes has been  reflected  in the  income  from
discontinued  operations  presented above as the Company has sufficient  regular
net  operating  loss  ("NOL")   carryforwards   and   alternative   minimum  tax
carryforwards to offset the income.


<PAGE>


                       AMBASE CORPORATION AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements


     Note 8 - Income Taxes

     The Company and its 100% owned  domestic  subsidiaries  file a consolidated
federal income tax return.  The Company recognizes both the current and deferred
tax consequences of all transactions  that have been recognized in the financial
statements,  calculated  based on the provisions of enacted tax laws,  including
the tax rates in effect for current and future  years.  Net  deferred tax assets
are  recognized  immediately  when a more likely than not criterion is met; that
is, greater than 50%  probability  exists that the tax benefits will actually be
realized  sometime in the future.  The Company has calculated a net deferred tax
asset of $32  million  as of March  31,  2006 and  December  31,  2005,  arising
primarily from net operating loss ("NOL") carryforwards, alternative minimum tax
("AMT")  credits (not including the anticipated tax effects of NOL's expected to
be generated  from the  Company's tax basis in Carteret  Savings Bank,  F.A. and
subsidiaries  ("Carteret"),  resulting from the election decision, as more fully
described below). A valuation  allowance has been established for the entire net
deferred tax asset as management,  at the current time, has no basis to conclude
that realization is more likely than not.

     As a  result  of the  Office  of  Thrift  Supervision's  December  4,  1992
placement of Carteret in  receivership,  under the  management of the Resolution
Trust Corporation  ("RTC")/Federal  Deposit Insurance Corporation ("FDIC"),  and
then proposed Treasury Reg. ss.1.597-4(g),  the Company had previously filed its
1992 and subsequent federal income tax returns with Carteret  disaffiliated from
the Company's  consolidated  federal income tax return. Based upon the impact of
Treasury  Reg.  ss.1.597-4(g),  which was issued in final form on  December  20,
1995, a continuing review of the Company's tax basis in Carteret, and the impact
of prior year tax return  adjustments  on the Company's  1992 federal income tax
return as filed,  the Company decided not to make an election  pursuant to final
Treasury  Reg.   ss.1.597-4(g)  to  disaffiliate  Carteret  from  the  Company's
consolidated  federal  income tax return  effective  as of December 4, 1992 (the
"Election Decision").

     The Company has made numerous  requests to the RTC/FDIC for tax information
pertaining to Carteret and the resulting successor institution, Carteret Federal
Savings Bank ("Carteret  FSB");  however,  all of the information  still has not
been received. Based on the Company's Election Decision, as described above, and
the receipt of some of the requested information from the RTC/FDIC,  the Company
has  amended  its 1992  consolidated  federal  income tax return to include  the
federal  income tax  effects of Carteret  and  Carteret  FSB (the "1992  Amended
Return").  The  Company is still in the  process of  amending  its  consolidated
federal income tax returns for 1993 and subsequent years.

     The Company anticipates that, as a result of filing a consolidated  federal
income tax return with  Carteret FSB, a total of  approximately  $170 million of
tax NOL  carryforwards  will be  generated  from  the  Company's  tax  basis  in
Carteret/Carteret  FSB as tax losses are  incurred by Carteret FSB of which $158
million are still available for future use. Based on the Company's filing of the
1992  Amended  Return,  approximately  $56  million  of  NOL  carryforwards  are
generated  for  tax  year  1992  which  expire  in  2007,   with  the  remaining
approximately  $102 million of NOL  carryforwards  to be generated,  expiring no
earlier than 2008. These NOL  carryforwards  would be available to offset future
taxable income,  in addition to the NOL carryforwards as further detailed below.
The Company can give no assurances  with regard to the 1992 Amended  Return,  or
amended  returns for subsequent  years, or the final amount or expiration of NOL
carryforwards ultimately generated from the Company's tax basis in Carteret.

     In March 2000, the Company filed several carryback claims and amendments to
previously filed carryback claims with the IRS (the "Carryback  Claims") seeking
refunds from the IRS of  alternative  minimum tax and other federal income taxes
paid by the Company in prior years plus  applicable  IRS interest,  based on the
filing of the 1992 Amended Return.  In April 2003, IRS examiners issued a letter
to the Company  proposing to disallow the Carryback  Claims.  The Company sought
administrative review of the letter by protesting to the Appeals Division of the
IRS. In February  2005,  IRS Appeals  officials  completed  their  review of the
Carryback  Claims,  and disallowed  them.  The Company is currently  considering
whether to file suit for the tax refunds it seeks,  plus interest,  with respect
to the Carryback Claims. Even if the Company files suit, the Company can give no
assurances  as to the final  amounts of  refunds,  if any, or when they might be
received.


<PAGE>


                       AMBASE CORPORATION AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

     Based upon the Company's  federal  income tax returns as filed from 1993 to
2004  (subject  to IRS  audit  adjustments),  excluding  the  NOL  carryforwards
expected to be utilized in 2005, and excluding the NOL  carryforwards  generated
from the Company's tax basis in  Carteret/Carteret  FSB, as noted above at March
31,  2006,  the  Company has NOL  carryforwards  aggregating  approximately  $31
million,  available  to reduce  future  federal  taxable  income which expire if
unused  beginning in 2009.  The Company's  federal  income tax returns for years
subsequent to 1992 have not been reviewed by the IRS.

     The utilization of certain  carryforwards  is subject to limitations  under
U.S.  federal income tax laws. In addition,  the Company has  approximately  $21
million of AMT credit  carryforwards  ("AMT Credits"),  which are not subject to
expiration.  Based on the filing of the Carryback  Claims,  as further discussed
above,  the  Company is seeking to realize  approximately  $8 million of the $21
million of AMT Credits.

     Note 9 - Comprehensive Income (Loss)

     Comprehensive  income  (loss) is  composed  of net income  (loss) and other
comprehensive  income  (loss)  which  includes  the change in  unrealized  gains
(losses)  on  investment  securities  available  for  sale  and  recognition  of
additional minimum pension liability, as follows:
<TABLE>
<CAPTION>
<S>                                                                          <C>          <C>           <C>

                                                                                       Three Months Ended
(in thousands)                                                                           March 31, 2006
                                                                             =======================================
                                                                             Unrealized      Minimum      Accumulated
                                                                               Gains on      Pension            Other
                                                                             Investment    Liability    Comprehensive
                                                                             Securities   Adjustment           Income
                                                                             ==========   ==========    =============
Balance beginning of period................................................. $     (69)   $   (1,326)   $     (1,395)

Reclassification adjustment for
  gains realized in net loss................................................         -             -               -
Change during the period....................................................       (89)            -             (89)
                                                                             ----------   ----------    ------------
Balance end of period....................................................... $   (158)    $   (1,326)   $     (1,484)
                                                                             ==========   ==========    ============
</TABLE>

<TABLE>
<CAPTION>
<S>                                                                          <C>          <C>           <C>

                                                                                       Three Months Ended
(in thousands)                                                                           March 31, 2006
                                                                             =======================================
                                                                             Unrealized      Minimum      Accumulated
                                                                               Gains on      Pension            Other
                                                                             Investment    Liability    Comprehensive
                                                                             Securities   Adjustment           Income
                                                                             ==========   ==========    =============
Balance beginning of period................................................. $       37   $     (412)   $     (375)

Reclassification adjustment for gains
        realized in net loss................................................         (5)           -            (5)

Change during the period....................................................       (177)           -          (177)
                                                                             ----------   ----------    -------------
Balance end of period....................................................... $     (145)  $     (412)   $     (557)
                                                                             ==========   ==========    =============
</TABLE>

<PAGE>


                       AMBASE CORPORATION AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

     Note 10 - Stock-Based Compensation

     Under the  Company's  1993  Stock  Incentive  Plan (the "1993  Plan"),  the
Company may grant to officers and employees of the Company and its subsidiaries,
stock options ("Options"),  stock appreciation rights ("SARs"), restricted stock
awards ("Restricted Stock"), merit awards ("Merit Awards") and performance share
awards ("Performance  Shares"),  through May 28, 2008. An aggregate of 5,000,000
shares of the  Company's  Common Stock are reserved for issuance  under the 1993
Plan (upon the exercise of Options and Stock Appreciation Rights, upon awards of
Restricted  Stock  and  Performance  Shares);  however,  of  such  shares,  only
2,500,000 shares in the aggregate shall be available for issuance for Restricted
Stock  Awards and Merit  Awards.  Such shares shall be  authorized  but unissued
shares of Common  Stock.  As of March 31,  2006,  there  were  3,760,000  shares
available  for future stock option  grants.  Options may be granted as incentive
stock options  ("ISOs")  intended to qualify for  favorable tax treatment  under
Federal tax law or as nonqualified stock options ("NQSOs").  SARs may be granted
with  respect to any Options  granted  under the 1993 Plan and may be  exercised
only when the underlying Option is exercisable.  The 1993 Plan requires that the
exercise  price of all  Options  and SARs be equal to or  greater  than the fair
market value of the Company's  Common Stock on the date of grant of that Option.
The term of any ISO or  related  SAR  cannot  exceed  ten years from the date of
grant,  and the term of any NQSO cannot  exceed ten years and one month from the
date of  grant.  Subject  to the  terms  of the  1993  Plan  and any  additional
restrictions  imposed  at the  time  of  grant,  Options  and any  related  SARs
ordinarily will become exercisable  commencing one year after the date of grant.
Options granted  generally have a ten year  contractual  life and generally have
vesting  terms of two years from the date of grant.  In the case of a "Change of
Control" of the Company (as defined in the 1993 Plan),  Options granted pursuant
to the 1993 Plan may become fully exercisable as to all optioned shares from and
after the date of such Change in Control in the  discretion  of the Committee or
as  may  otherwise  be  provided  in  the  grantee's  Option  agreement.  Death,
retirement, or absence for disability will not result in the cancellation of any
Options.

     Effective  January 1, 2006, the Company adopted the fair value  recognition
provisions of SFAS 123R, using the modified  prospective  application method and
therefore  has not  restated  results  for prior  periods.  Under  this  method,
stock-based  compensation  expense for the three  months  ended March 31,  2006,
includes  compensation  expense for all stock-based  compensation awards granted
prior to, but not yet vested as of January 1, 2006, based on the grant date fair
value  estimated  in  accordance  with  the  original  provisions  of SFAS  123.
Stock-based compensation expense for all stock-based compensation awards granted
after January 1, 2006, for which vesting is based solely on employment  service,
will be based on the grant  date fair value  estimated  in  accordance  with the
provisions of SFAS 123R. The Company  recognizes  these  compensation  costs for
only those shares expected to vest, on a straight-line  basis over the requisite
service period of the awards,  which is generally the option vesting term of two
years.
<PAGE>


                       AMBASE CORPORATION AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements


     During  the  three  months  ended  March 31,  2006,  the  Company  recorded
compensation expense of $22,000 relating to unvested stock options. Compensation
expense  relating to stock options is recorded as a reduction to additional paid
in capital in the statement of stockholders' equity. Prior to 2006, as permitted
by SFAS 123, the Company  accounted for share-based  payments to employees using
APB 25's intrinsic value method and recognized no compensation cost for employee
stock  options in prior  years.  Had the Company  adopted SFAS 123R in the prior
period,  the impact of that standard would have  approximated the impact of SFAS
123 in the  disclosure  of  pro-forma  net income  (loss) and earnings per share
described as follows:
<TABLE>
<CAPTION>
<S>                                                                         <C>                 <C>
                                                                            March 31,           March 31,
(in thousands, except per share data)                                          2006                2005
Net loss:                                                                     =====               =======
As reported...............................................................  $ (1,485)           $  (1,324)
Add:  stock-based employee compensation expense included in
    reported net loss... .................................................        22                    -
Deduct: total stock-based employee compensation expense
    determined under fair value based methods for all awards..............       (22)                 (31)
                                                                            --------            ----------
Pro forma.................................................................  $ (1,485)           $  (1,355)
                                                                            ========            ==========
Net loss per common share:
Basic - as reported.......................................................  $  (0.03)           $   (0.03)
Basic - pro forma.........................................................     (0.03)               (0.03)
Assuming dilution - as reported...........................................     (0.03)               (0.03)
Assuming dilution - pro forma ............................................     (0.03)               (0.03)
                                                                            ========            ==========
</TABLE>

     The fair  value of each  option  award was  estimated  on the date of grant
using the  Black-Scholes-Merton  option valuation model  ("Black-Scholes")  that
uses the assumptions  noted in the following  table.  Expected  volatilities are
based  on  historical  volatility  of the  Company's  stock.  The  Company  uses
historical data to estimate option  exercises and employee  terminations  within
the valuation  model. The expected term of options granted is estimated based on
the  contractual  lives of option  grants,  option vesting period and historical
data and represents  the period of time that options  granted are expected to be
outstanding. The risk-free interest rate for periods within the contractual life
of the option is based on the U.S.  Treasury bond yield in effect at the time of
grant.  No  adjustments  were  made  in 2006 to the  input  assumptions  for the
calculation  of the fair value of stock options  granted in 2005 and prior years
from the pro forma amounts  previously  presented in the Company's  prior period
financial statements.

     The  Black-Scholes  option  valuation  model  requires  the input of
highly  subjective  assumptions,  including the expected life of the stock-based
award and price volatility.  The assumptions noted herein represent management's
best  estimates,  but these estimates  involve  inherent  uncertainties  and the
application of management  judgment.  As a result, if other assumptions had been
used,  our recorded and pro forma  stock-based  compensation  expense could have
been  materially  different  from that  depicted  herein.  In  addition,  we are
required to estimate the expected forfeiture rate and only recognize expense for
those shares  expected to vest.  If our actual  forfeiture  rate is  materially
different  from our  estimate,  the  share-based  compensation  expense could be
materially different.

     The Company believes that the use of the Black-Scholes model meets the fair
value  measurement   objectives  of  SFAS  123R  and  reflects  all  substantive
characteristics  of the instruments  being valued. No stock options were granted
during the period  ending  March 31,  2006.  The per share  grant date  weighted
average estimated values of employee stock option grants under the 1993 Plan, as
well as the assumptions  used to calculate such values granted during the period
ended March 31, 2005, are as follows:
<TABLE>
<CAPTION>
<S>                                                                                 <C>
                                                                                      March 31,
                                                                                        2005
                                                                                    -------------
       Weighted average fair value at grant date...........................              $0.39
       Expected dividend yield.............................................                  0%
       Risk-free interest rate.............................................               4.24%
       Expected volatility.................................................               0.44
       Expected life in years..............................................                  6
</TABLE>

<PAGE>


                       AMBASE CORPORATION AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements


     The following  table reports stock option  activity  during the three month
period ended March 31, 2006:
<TABLE>
<CAPTION>
<S>                                                    <C>            <C>        <C>
                                                                                   Weighted
                                                                      Weighted     Average
                                                                       Average     Remaining
                                                                         of        Exercise
                                                          Number      Exercise    Contractual
                                                          Shares        Price    Life (in years)
                                                       ------------   ---------  --------------
       Outstanding at January 1, 2006.........           1,440,000       $0.96
       Expired................................            (200,000)       0.66
                                                       -----------     -------
       Outstanding at March 31, 2006.........            1,240,000       $1.01           5.16
                                                       ===========     =======           ====
       Exercisable at March 31, 2006.........            1,036,000       $1.02           5.09
                                                       ===========     =======           ====
</TABLE>
     At March 31, 2006,  the exercise  price of stock  options  outstanding  was
greater than the market price of the Company's  stock;  therefore,  no intrinsic
value for stock options is reflected above.

The following table presents information regarding non-vested share activity
during the three month period ended March 31, 2006:
<TABLE>
<CAPTION>
<S>                                                        <C>        <C>
                                                                       Weighted
                                                                        Average
                                                           Number of  Grant-Date
                                                            Shares    Fair Value
                                                           ---------  ----------
       Non-vested at January 1, 2006............             528,000     $0.44
       Vested during period.....................            (324,000)    $0.41
                                                           ---------    ------
       Non-vested at March 31, 2006............              204,000     $0.47
                                                           =========    ======
</TABLE>

     The total fair value of shares  vested  during the three month period ended
March 31, 2006 and 2005, was $134,000 and $88,000, respectively. As of March 31,
2006,  there was  $66,000 of total  unrecognized  compensation  cost  related to
non-vested  share-based  compensation  arrangements  related  to  stock  options
granted  under the 1993 Plan.  That cost is  expected  to be  recognized  over a
weighted-average period of 0.75 years.

     Options to purchase  1,240,000  shares of common stock for the three months
ended March 31, 2006, and 1,440,000  shares of common stock for the three months
ended March 31, 2005, were excluded from the computation of diluted earnings per
share because these options were antidilutive.



<PAGE>


                       AMBASE CORPORATION AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements


     Note 11 - Pension and Savings Plans

     The Company  sponsors a non  tax-qualified  supplemental  retirement  plan,
initially  adopted by the  Company in 1985,  and as amended  and  restated  (the
"Supplemental  Plan"),  under  which only one current  executive  officer of the
Company is currently the sole participant.  The cost of the Supplemental Plan is
actuarially determined and is accrued but not funded.

     Pension expense for the Supplemental Plan was as follows:
<TABLE>
<CAPTION>
<S>                                                                                        <C>            <C>
                                                                                               Three Months Ended
                                                                                           -------------------------
                                                                                            March 31,     March 31,
(in thousands)                                                                                2006          2005
                                                                                           ==========     ==========
Service cost of current period...................................................          $     263      $     257
Interest cost on projected benefit obligation....................................                201            192
Amortization of unrecognized losses..............................................                  -             72
                                                                                           ----------     -----------
                                                                                           $     464      $      521
                                                                                           ==========     ===========
</TABLE>
     The liability for the  Supplemental  Plan, which is accrued but not funded,
increased  to  $15,059,000  at March 31, 2006 from  $14,595,000  at December 31,
2005.  The  Supplemental  Plan  liability  reflects the  actuarially  determined
accrued  pension  costs  calculated  in accordance  with  accounting  principles
generally  accepted  in the United  States of America  ("GAAP").  The  increased
liability is the result of additional  accrued  service and interest cost on the
liability. The Supplemental Plan liability can be further affected by changes in
discount rates,  mortality,  and experience  which could be different from those
assumed.

     The  Personnel  Committee  of the Board of  Directors  of the Company  (the
"Personnel  Committee")  had  been  reviewing  the  Supplemental  Plan  and  the
Company's  related  liability,  including  the  desirability  of  continuing  to
maintain and  administer  the  Supplemental  Plan,  the untying of Mr.  Bianco's
future  employment  with the Company  from the timing of his  Supplemental  Plan
benefit  payment(s),   the  Company's  overall  financial   position,   and  the
desirability  of  continued  accruals  under  the  Supplemental  Plan  after Mr.
Bianco's current employment contract expires on May 31, 2007. In connection with
this review,  the Personnel  Committee  had been  considering  various  options,
including whether or not to terminate and/or curtail the Supplemental  Plan. Mr.
Bianco (the Company's Chairman,  President and Chief Executive Officer,  and the
former  President and Chief Executive  Officer of Carteret Savings Bank, FA), is
the only current  employee of the Company who  participates in the  Supplemental
Plan  and his  Supplemental  Plan  benefit  is fully  vested.  For  purposes  of
computing his accrued benefit under the Supplemental  Plan, Mr. Bianco had 14.92
years  of  credited  service  as of  March  31,  2006,  and  assuming  continued
employment with the Company,  will have 16.08 years of credited service upon the
expiration of his current employment  contract with the Company on May 31, 2007.
His accrual  percentage  under the  Supplemental  Plan is 4%, in effect from the
time of his initial  employment  with the Company,  and in  accordance  with the
Supplemental  Plan, he has had the entitlement to receive his Supplemental  Plan
benefit in either a lump-sum or an annuity upon  termination  of his  employment
with the Company.



<PAGE>


                       AMBASE CORPORATION AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements

     During March 2006, the Company entered into a new employment agreement with
Mr. Bianco to extend his employment  with the Company for an additional five (5)
years beyond May 31, 2007, until May 31, 2012 (the "2007 Employment Agreement").
As part of the 2007  Employment  Agreement terms (i) Mr. Bianco's annual rate of
base salary will not increase  from his current  rate of base salary  during the
first three years of the 2007 Employment  Agreement;  (ii) Mr. Bianco's  service
accruals under the  Supplemental  Plan will cease as of May 31, 2007;  (iii) Mr.
Bianco's  Final  Average  Earnings  (as  defined in the  Supplemental  Plan) for
Supplemental Plan benefit  calculation  purposes,  are capped as of December 31,
2004; and (iv) Mr.  Bianco's bonus will no longer be linked to recovery  efforts
in connection with the Company's Supervisory Goodwill litigation. Instead, on or
about  May  31,  2007,  Mr.  Bianco  will  receive  a  lump-sum  payment  of his
Supplemental  Plan benefit of  $16,676,115,  which amount was  calculated on the
basis of a 5.75% discount rate, a "RP-2000" projected to 2004,  mortality table;
and 16.08 years of credited service,  and the Company and Mr. Bianco have agreed
to a long term incentive bonus formula,  at varying  percentages ranging from 5%
to  10%,  or  more,  based  upon  recoveries  received  by the  Company  for its
investment in Carteret Savings Bank, through litigation or otherwise  (including
the Company's Supervisory Goodwill  litigation).  The lump-sum Supplemental Plan
benefit  payment to Mr. Bianco will be paid to him from the Company's  available
financial resources.

     The  Supplemental  Plan has  been  amended  to  provide  for its  automatic
termination  immediately following the payment to Mr. Bianco of his Supplemental
Plan  lump-sum  benefit  on or  about  May 31,  2007.  In  accordance  with  the
accounting for the Supplemental Plan's scheduled termination on or about May 31,
2007,  in  accordance  with  GAAP,  the  ultimate   liability  relating  to  the
anticipated  termination  of  the  Supplemental  Plan  is not  reflected  in the
financial   statements  presented  herein,  as  all  conditions  for  the  final
termination  of the  Supplemental  Plan  have  not yet  been  met.  Based on the
actuarially determined accrued pension costs calculated in accordance with GAAP,
the Company will continue to recognize an expense for the Supplemental  Plan and
the  Supplemental  Plan  liability  will increase  through the date on which the
Supplemental Plan is terminated.

     The Company  sponsors the AmBase 401(k) Savings Plan (the "Savings  Plan"),
which is a "Section 401(k) Plan" within the meaning of the Internal Revenue Code
of 1986, as amended (the "Code"). The Savings Plan permits eligible employees to
make  contributions  of up to 15% of  compensation,  which  are  matched  by the
Company at a percentage  determined  annually.  The employer  match is currently
100%  of  the   employee's   compensation   eligible  for   deferral.   Employee
contributions to the Savings Plan are invested at the employee's discretion,  in
various investment funds. The Company's  matching  contributions are invested in
the same  manner as the  compensation  reduction  contributions.  The  Company's
matching contributions to the Savings Plan, charged to expense, were $52,000 for
the three months  ended March 31,  2006,  and $45,000 for the three months ended
March 31, 2005. All contributions are subject to maximum  limitations  contained
in the Code.

     Note 12 - Common Stock Repurchase Plan

     In January 2002, the Company  announced a common stock repurchase plan (the
"Repurchase  Plan") which allows for the  repurchase by the Company for up to 10
million shares of its common stock in the open market.

     The Repurchase Plan is conditioned upon favorable  business  conditions and
acceptable prices for the common stock.  Purchases under the Repurchase Plan may
be made,  from  time to time,  in the  open  market,  through  block  trades  or
otherwise.  Depending on market  conditions and other factors,  purchases may be
commenced or suspended any time or from time to time without prior notice.

<TABLE>
<CAPTION>
<S>                                       <C>             <C>             <C>                  <C>
                                           (a) Total (b) (c) Total Number
                                           Number of          Average     Shares Purchased           (d) Maximum Number
                                              Shares       Price Paid  as Part of Publicly       Shares that may yet be
                                           Purchased        per Share      Announced Plans     Purchased under the Plan
                                     ---------------    ------------------------------------  ---------------------------------
January 1, 2006 - January 31, 2006.....           -                 -            50,000                9,950,000
February 1, 2006 - February 28, 2006...     970,000       $      0.58         1,020,000                8,980,000
March 1, 2006 - March 31, 2006.........           -                 -         1,020,000                8,980,000
                                      -------------
                                            970,000
                                           ========
</TABLE>

     Item 2.  MANAGEMENT'S  DISCUSSION  AND ANALYSIS OF FINANCIAL  CONDITION AND
RESULTS OF OPERATIONS

     This quarterly report may contain  "forward-looking  statements" within the
meaning of Section 27A of the  Securities  Act of 1933,  as amended (the "Act"),
and  Section  21E of the  Securities  Exchange  Act of  1934,  as  amended  (the
"Exchange  Act"),  or  make  oral  statements  that  constitute  forward-looking
statements. The Company intends such forward-looking statements to be covered by
the safe harbor  provisions  for  forward-looking  statements  contained  in the
Private Securities Litigation Reform Act of 1995. Forward-looking statements are
inherently subject to risks and uncertainties, many of which cannot be predicted
or  quantified.  The  forward-looking  statements  may relate to such matters as
anticipated  financial  performance,   future  revenues  or  earnings,  business
prospects,  projected  ventures,  anticipated  market  performance,  anticipated
litigation  results or the timing of pending  litigation,  and similar  matters.
When  used  in  this   Annual   Report,   the  words   "estimates,"   "expects,"
"anticipates,"  "believes,"  "plans," "intends" and variations of such words and
similar  expressions  are intended to identify  forward-looking  statements that
involve risks and uncertainties. The Private Securities Litigation Reform Act of
1995 provides a safe harbor for forward-looking  statements.  In order to comply
with the terms of the safe harbor,  the Company  cautions readers that a variety
of factors could cause the Company's  actual results to differ  materially  from
the  anticipated  results  or  other  expectations  expressed  in the  Company's
forward-looking  statements.  These risks and  uncertainties,  many of which are
beyond the Company's control,  include,  but are not limited to: (i) transaction
volume in the securities markets; (ii) the volatility of the securities markets;
(iii)  fluctuations  in interest  rates;  (iv) risks inherent in the real estate
business,  including,  but not limited to tenant defaults,  changes in occupancy
rates or real estate values; (v) changes in regulatory  requirements which could
affect the cost of doing  business;  (vi)  general  economic  conditions;  (vii)
changes  in the rate of  inflation  and the  related  impact  on the  securities
markets;  (viii)  changes in federal and state tax laws;  and (ix) risks arising
from  unfavorable  decisions  in our current  material  litigation  matters,  or
unfavorable  decisions in other  supervisory  goodwill cases.  These are not the
only risks that we face.  There may be additional risks that we do not presently
know of or that we currently  believe are immaterial which could also impair our
business and financial position.

     Undue reliance  should not be placed on these  forward-looking  statements,
which are  applicable  only as of the date  hereof.  The Company  undertakes  no
obligation  to revise or update  these  forward-looking  statements  to  reflect
events or circumstances that arise after the date of this quarterly report or to
reflect  the  occurrence  of  unanticipated  events.  Accordingly,  there  is no
assurance that the Company's expectations will be realized.

     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 Part I - Item 1,
herein and the Company's  Annual Report on Form 10-K for the year ended December
31, 2005.  As a result of the sale of the  Company's  38,000  square foot office
building at Two Soundview Drive in Greenwich, CT ("Two Soundview") in July 2005,
the results of operations of Two Soundview have been  designated as discontinued
operations,  and the  Consolidated  Statements  of  Operations  for the  periods
presented herein have been 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.  See Part I - Item 1 - Note 7 for additional
information concerning the sale of Two Soundview in July 2005.

     LIQUIDITY AND CAPITAL RESOURCES

     The Company's assets at March 31, 2006, aggregated  $43,455,000  consisting
principally of cash and cash equivalents of $1,665,000, investment securities of
$39,544,000  and  real  estate  owned of  $2,209,000.  At March  31,  2006,  the
Company's  liabilities  aggregated  $15,888,000.  Total stockholders  equity was
$27,567,000.

     The liability for the Company's non tax-qualified  supplemental  retirement
plan, initially adopted by the Company in 1985, and as amended and restated (the
"Supplemental Plan"), which is accrued but not funded,  increased to $15,059,000
at March 31, 2006 from $14,595,000 at December 31, 2005. The  Supplemental  Plan
liability  reflects the actuarially  determined accrued pension costs calculated
in accordance with accounting principles generally accepted in the United States
of America ("GAAP"). The increased liability is the result of additional accrued
service and interest cost on the liability.  The Supplemental Plan liability can
be further  affected by changes in discount  rates,  mortality,  and  experience
which could be different from those assumed.



<PAGE>


     The  Personnel  Committee  of the Board of  Directors  of the Company  (the
"Personnel  Committee")  had  been  reviewing  the  Supplemental  Plan  and  the
Company's  related  liability,  including  the  desirability  of  continuing  to
maintain and  administer  the  Supplemental  Plan,  the untying of Mr.  Bianco's
future  employment  with the Company  from the timing of his  Supplemental  Plan
benefit  payment(s),   the  Company's  overall  financial   position,   and  the
desirability of future accruals under the  Supplemental  Plan after Mr. Bianco's
current  employment  contract  expires on May 31, 2007. In connection  with this
review, the Personnel Committee had been considering various options,  including
whether or not to terminate  and/or  curtail the  Supplemental  Plan. Mr. Bianco
(the Company's Chairman,  President and Chief Executive Officer,  and the former
President and Chief Executive Officer of Carteret Savings Bank, FA), is the only
current employee of the Company who  participates in the  Supplemental  Plan and
his  Supplemental  Plan benefit is fully  vested.  For purposes of computing his
accrued  benefit  under the  Supplemental  Plan,  Mr.  Bianco had 14.92 years of
credited service as of March 31, 2006, and, assuming  continued  employment with
the Company,  will have 16.08 years of credited  service upon the  expiration of
his current  employment  contract with the Company on May 31, 2007.  His accrual
percentage  under the  Supplemental  Plan is 4%, in effect  from the time of his
initial  employment with the Company,  and in accordance  with the  Supplemental
Plan, he has had the  entitlement  to receive his  Supplemental  Plan benefit in
either a lump-sum or an annuity  upon  termination  of his  employment  with the
Company.

     During March 2006, the Company entered into a new employment agreement with
Mr. Bianco to extend his employment  with the Company for an additional five (5)
years beyond May 31, 2007, until May 31, 2012 (the "2007 Employment Agreement").
As part of the 2007  Employment  Agreement terms (i) Mr. Bianco's annual rate of
base salary will not increase  from his current  rate of base salary  during the
first three years of the 2007 Employment  Agreement;  (ii) Mr. Bianco's  service
accruals under the  Supplemental  Plan will cease as of May 31, 2007;  (iii) Mr.
Bianco's  Final  Average  Earnings  (as  defined in the  Supplemental  Plan) for
Supplemental Plan benefit  calculation  purposes,  are capped as of December 31,
2004; and (iv) Mr.  Bianco's bonus will no longer be linked to recovery  efforts
in connection with the Company's Supervisory Goodwill litigation. Instead, on or
about  May  31,  2007,  Mr.  Bianco  will  receive  a  lump-sum  payment  of his
Supplemental  Plan benefit of  $16,676,115,  which amount was  calculated on the
basis of a 5.75% discount rate, a "RP-2000"  projected to 2004 mortality  table;
and 16.08 years of credited service,  and the Company and Mr. Bianco have agreed
to a long term incentive bonus formula,  at varying  percentages ranging from 5%
to  10%,  or  more,  based  upon  recoveries  received  by the  Company  for its
investment in Carteret Savings Bank, through litigation or otherwise  (including
the Company's Supervisory Goodwill  litigation).  The lump-sum Supplemental Plan
benefit  payment to Mr. Bianco will be paid to him from the Company's  available
financial resources.

     The  Supplemental  Plan has  been  amended  to  provide  for its  automatic
termination  immediately following the payment to Mr. Bianco of his Supplemental
Plan  lump-sum  benefit  on or  about  May 31,  2007.  In  accordance  with  the
accounting for the Supplemental Plan's scheduled termination on or about May 31,
2007,  in  accordance  with  GAAP,  the  ultimate   liability  relating  to  the
anticipated  termination  of  the  Supplemental  Plan  is not  reflected  in the
financial   statements  presented  herein,  as  all  conditions  for  the  final
termination  of the  Supplemental  Plan  have  not yet  been  met.  Based on the
actuarially determined accrued pension costs calculated in accordance with GAAP,
the Company will continue to recognize an expense for the Supplemental  Plan and
the  Supplemental  Plan  liability  will increase  through the date on which the
Supplemental Plan is terminated.

     For additional information with regard to the Supplemental Plan, see Part I
- Item 1 - Note 11 to the Company's consolidated financial statements.

     For the three months ended March 31, 2006,  cash of $1,744,000  was used by
continuing  operations,  including  the  payment  of  prior  year  accruals  and
operating expenses,  partially offset by the receipt of rental income,  interest
income and  investment  earnings.  The cash needs of the  Company  for the first
three  months of 2006 were  satisfied  by the  receipt  of  investment  earnings
received on investment  securities and cash equivalents,  rental income and to a
lesser extent the Company's current  financial  resources.  Management  believes
that the Company's  cash  resources are  sufficient to continue  operations  for
2006.

     For the three months ended March 31, 2005,  cash of $3,431,000  was used by
continuing  operations,  including the payment of prior year accruals (including
the legal accrual described below),  and operating  expenses partially offset by
the receipt of rental income, interest income, and investment earnings.

     In March 2005,  the Company paid  $1,867,000 of previously  incurred  legal
fees and other  expenses  relating  to the  Company's  defense of a  withholding
obligation   issue  with  the  Internal   Revenue   Service  ("IRS")  which  was
successfully concluded in October 2001. The Company had previously accrued these
costs  which were  reflected  in other  liabilities  in prior  period  financial
statements.


<PAGE>


     The Company continues to evaluate a number of possible  acquisitions and is
engaged  in  the  management  of  its  assets  and  liabilities,  including  the
contingent  assets.  Discussions  and  negotiations  are ongoing with respect to
certain of these  matters.  The  Company  intends to  aggressively  contest  all
litigation and contingencies, as well as pursue all sources for contributions to
settlements.  For a  discussion  of  lawsuits  and  proceedings,  including  the
Supervisory Goodwill litigation see Part I - Item 1 - Note 3.

     As of March 31, 2006, the Company owns one commercial  office  buildings in
Greenwich,  Connecticut. The building is approximately 14,500 square feet and is
available  for lease to  unaffiliated  third  parties with  approximately  3,500
square feet utilized by the Company for its executive offices.

     See Part I - Item 1 - Note 7 for further information concerning the sale of
the Company's 38,000 square foot building in July 2005. A gain from the sale, of
approximately $10 million,  was reflected in the Company's financial  statements
for the third quarter and nine month periods ending September 30, 2005.

     There are no material  commitments for capital expenditures as of March 31,
2006.  See  Part I - Item 1 - Note 11 to the  Company's  consolidated  financial
statements for  information  regarding the  Supplemental  Plan lump-sum  benefit
payment of $16,676,115  (to Mr. Bianco,  the Company's  Chairman,  President and
Chief  Executive  Officer),  expected  to be paid  on or  about  May  31,  2007.
Inflation  has had no material  impact on the  business  and  operations  of the
Company.

     During  February  2006,  the Company  repurchased  970,000 shares of common
stock from an unaffiliated party at a purchase price of $0.58 per share pursuant
to the  Company's  Repurchase  Plan.  See Part I - Item 1 - Note 12 for  further
information  regarding  the Company's  purchase of common stock  pursuant to its
common stock repurchase plan.

     In  December  2004,  the  Financial  Accounting  Standards  Board  ("FASB")
released SFAS No. 123 (revised 2004), "Share-Based Payment" ("SFAS 123R"), which
is a revision of Statement 123. SFAS 123R supersedes Accounting Principles Board
Option No. 25,  "Accounting for Stock Issued to Employees" ("APB 25"). SFAS 123R
requires all  share-based  payments to employees,  including  grants of employee
stock  options,  to be recognized in the statement of operations  based on their
fair values.  SFAS 123R is effective for fiscal years  beginning  after December
15, 2005;  however,  early adoption is permitted.  The Company adopted SFAS 123R
effective  on January 1, 2006.  In  accordance  with SFAS 123R,  the Company has
applied  the  "modified  prospective"  method  in  which  compensation  cost  is
recognized  beginning with the effective date (a) based on the  requirements  of
SFAS 123R for all share-based  payments granted after the effective date and (b)
based on the  requirements of SFAS 123 for all awards granted to employees prior
to the effective date of SFAS 123R that remain  unvested on the effective  date.
For further  information  regarding the Company's  adoption of SFAS 123R and its
impact on the Company's financial  statements,  see Part I - Item 1 - Note 10 to
the Company's consolidated financial statements.

     Results of  Operations  for the Three  Months  ended March 31, 2006 vs. The
Three Months Ended March 31, 2005

CONTINUING OPERATIONS

     The  Company's  main source of operating  revenue has recently  been rental
income earned on real estate owned. The Company also earns non-operating revenue
consisting  principally of investment earnings on investment securities and cash
equivalents.  The Company's management expects that operating cash needs for the
remainder  of 2006  will be met  principally  by the  receipt  of  non-operating
revenue  consisting of investment  earnings on  investment  securities  and cash
equivalents,  the Company's  current financial  resources,  and rental income on
real estate owned.

     As indicated  herein, as a result of the sale, the operating results of the
Company's  Two  Soundview  property for the periods ended prior to the July 2005
sale have been reclassified to discontinued  operations and accordingly,  rental
income from real estate owned  represents the Company's  remaining  property and
was $41,000 for the three months ended March 31, 2006 as compared to $43,000 for
the three months ended March 31, 2005. The decreased  amount of $41,000 in 2006,
compared to $43,000 in 2005, is principally  the result of a slight  decrease in
tenant reimbursables in 2006 versus the same 2005 period.



<PAGE>


     Compensation  and benefits  expenses  decreased to  $1,088,000 in the three
months ended March 31, 2006, compared with $1,170,000 in respective 2005 period.
The  decrease  was  principally  the  result  of  a  lower  level  of  incentive
compensation  and  Supplemental  Plan benefit  accruals,  offset  slightly by an
increase in other benefit  costs.  Included in  compensation  and benefits is an
accrual for the Supplemental  Plan of $464,000 for the three months period ended
March 31, 2006,  compared to $521,000 for the same 2005 period.  As noted above,
the Company  adopted  Statement 123R effective on January 1, 2006. In accordance
with SFAS 123R,  the Company has applied the  "modified  prospective"  method in
which  compensation  cost for stock  options is  recognized  beginning  with the
effective  date.  During the three  months  ended  March 31,  2006,  the Company
recorded  $22,000  of  compensation   expense  relating  to  stock  options.  In
accordance  with the "modified  prospective"  method,  no  compensation  expense
relating to stock  options was  recorded  for the three  months  ended March 31,
2005. For further information  regarding the Company's adoption of SFAS 123R and
its impact on the Company's financial  statements,  see Part I - Item 1 - Not 10
to the Company's consolidated financial statements.

     Professional  and outside  services  expenses  increased to $718,000 in the
three months ended March 31, 2006,  compared to $546,000 in the respective  2005
period.  The  increase  in the 2006  three  month  period,  as  compared  to the
respective  2005 period,  is  principally  the result of a higher level of legal
fees relating to the  Supervisory  Goodwill  litigation as a result of discovery
relating to the Show Cause  hearing  and, to a lesser  extent,  other  corporate
professional fees.

     Property  operating  and  maintenance  expenses  were $31,000 for the three
months ended March 31, 2006,  compared to $28,000 in the respective 2005 period.
The increased expenses in the 2006 three month period, compared to the same 2005
period,  is  generally  due  to  increased   utilities  costs  and  repairs  and
maintenance expenses.  Property operating and maintenance expenses have not been
reduced by tenant reimbursements.

     Interest  income for the three months  ended March 31,  2006,  increased to
$420,000 from $125,000 in the respective  2005 period,  is principally due to an
increase in the aggregate amount of cash  equivalents and investment  securities
invested as a result of the cash proceeds  received in connection  with the sale
of real estate owned in July 2005, and to a lesser extent, an increased yield on
investments due to rising interest rates, as further  discussed in Part I - Item
1 - Note 7.

     No investment  securities  available for sale were sold in the three months
ended March 31, 2006. For the three months ended March 31, 2005,  realized gains
on sales of investment securities available for sale were $20,000.

     The income tax provisions of $33,000 and $30,000 for the three months ended
March 31, 2006 and March 31, 2005, respectively, are primarily attributable to a
provision for a minimum tax on capital to the state of Connecticut. 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.

     DISCONTINUED OPERATIONS

     As  discussed  in  Part I - Item 1 - Note  7, in  July  2005,  the  Company
completed the sale of Two Soundview.  The sale price was $28,000,000 less normal
real  estate  closing  adjustments.  A gain  from  the  sale of  $10,298,000  is
reflected in the Company's financial statements for the year ending December 31,
2005.

     Income from discontinued operations was $341,000 for the three months ended
March 31, 2005.




<PAGE>


     Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The Company holds  short-term  investments  as a source of  liquidity.  The
Company's  interest rate sensitive  investments with maturity dates of less than
one year consist of the following:
<TABLE>
<CAPTION>
<S>                                                <C>            <C>          <C>           <C>

                                                      March 31, 2006             December 31, 2005
                                                   ====================        ======================
                                                   Carrying        Fair        Carrying          Fair
                                                      Value       Value           Value         Value
(in thousands)                                     --------       -----        --------         -----

U.S. Treasury Bills.........................       $ 37,904     $ 37,912       $ 39,031      $ 39,034
                                                   ========     ========       ========      ========

Weighted average interest rate..............           4.27%                       3.81%
                                                   ========                    ========

</TABLE>
     The Company's  current  policy is to minimize the interest rate risk of its
short-term  investments by investing in U.S.  Treasury Bills with  maturities of
less than one year. There were no significant changes in market exposures or the
manner in which interest rate risk is managed during the period.

     The Company's  portfolio of equity  securities has exposure to equity price
risk. Equity price risk is defined as the potential loss in fair value resulting
from an adverse  change in prices.  The equity  securities  are primarily in the
form of preferred stock in utility companies. The equity securities are held for
an indefinite period and are carried at fair value with net unrealized gains and
losses recorded directly in a separate component of stockholder's equity.

     The table below  summarizes  the Company's  equity price risk and shows the
effect of a hypothetical 20% increase and 20% decrease in market price as of the
dates indicated  below. The selected  hypothetical  changes are for illustrative
purposes  only and are not  necessarily  indicative  of the  best or worse  case
scenarios.

<TABLE>
<CAPTION>
<S>                                                                              <C>               <C>
(In thousands)                                                             March 31,      December 31,
                                                                            2006             2005
Equity Securities Available for Sale:                                  ==========       ==========

Fair value .........................................................      $1,640           $1,729
                                                                          ======           ======
Hypothetical fair value at a 20% increase in market price...........      $1,968           $2,075
                                                                          ======           ======
Hypothetical fair value at a 20% decrease in market price...........      $1,312           $1,383
                                                                          ======           ======
</TABLE>

<PAGE>


     Item 4. CONTROLS AND PROCEDURES

     Our  disclosure  controls  and  procedures  include our  controls and other
procedures to ensure that information required to be disclosed in this and other
reports under the  Securities  Exchange Act of 1934,  as amended (the  "Exchange
Act"),  is accumulated and  communicated to our management,  including our Chief
Executive  Officer  and  Chief  Financial  Officer  to  allow  timely  decisions
regarding  required  disclosure and to ensure that such information in recorded,
processed,  summarized and reported within the time periods. Our Chief Executive
Officer  and  Chief  Financial  Officer  have  conducted  an  evaluation  of our
disclosure  controls  and  procedures  as of March  31,  2006.  Based  upon this
evaluation,  our Chief  Executive  Officer  and  Chief  Financial  Officer  have
concluded  that our  disclosure  controls  and  procedures  (as  defined in Rule
13a-15(e)  promulgated  under the Exchange  Act) are  sufficiently  effective to
ensure that the  information  required to be  disclosed  by us in the reports we
file (under the  Exchange  Act) are  sufficiently  effective  to ensure that the
information  required  to be  disclosed  by us in the  reports we file under the
Exchange Act is recorded, processed, and summarized and reported with adequate
timeliness.

     There have been no changes  during the most  recent  fiscal  quarter in our
internal control over financial reporting that have materially affected,  or are
reasonably  likely to  materially  effect our internal  control  over  financial
reporting.

STOCKHOLDER INQUIRIES

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

         American Stock Transfer and Trust Company
         59 Maiden Lane
         New York, NY  10038
         Attention:  Shareholder Services
         (800) 937-5449 or (718) 921-8200 Ext. 6820

     Copies of Quarterly  reports on Form 10-Q,  Annual Reports on Form 10-K and
Proxy  Statements can also be obtained  directly from the Company free of charge
by sending a request to the Company by mail as follows:

         AmBase Corporation
         100 Putnam Green, 3rd Floor
         Greenwich, CT  06830
         Attn:  Shareholder Services

     In addition,  the Company's public reports,  including Quarterly Reports on
Form 10-Q,  Annual  Reports on Form 10-K and Proxy  Statements,  can be obtained
through the Securities and Exchange  Commission EDGAR Database over the Internet
at  www.sec.gov.  Materials  filed  with the SEC may also be read or  copied  by
visiting the SEC's Public Reference Room, 450 Fifth Street, NW,  Washington,  DC
20549. Information on the operation of the Public Reference Room may be obtained
by calling 1-800-SEC-0330.

     PART II - OTHER INFORMATION

     Item 1. LEGAL PROCEEDINGS

     For a discussion of the Company's legal proceedings, including a discussion
of the Company's Supervisory Goodwill litigation, see Part I - Item 1 - Note 3 -
Legal Proceedings.


<PAGE>


     Item 1A. RISK FACTORS

     There have been no material changes from risk factors previously  disclosed
in the Company's Annual Report on Form 10-K for the year ended December 31, 2005
in response to Item 1A to Part I of Form 10-K.

     Item 2. EXHIBITS

Exhibit  31.1  Rule  13a-14(a)  Certification  of Chief  Executive  Officer
Exhibit 31.2 Rule 13a-14(a)  Certification  of Chief  Financial  Officer
Exhibit 32.1 Section 1350  Certification of Chief Executive Officer
Exhibit 32.2 Section 1350 Certification of Chief Financial Officer


     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



     /s/ John P.  Ferrara
-------------------------------
By JOHN P.  FERRARA
Vice  President,  Chief  Financial Officer and
Controller
(Duly  Authorized  Officer and Principal  Financial and
Accounting Officer)


Date:  May 15, 2006