FORM 10-Q

                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C.  20549


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


                 For the quarterly period ended June 30, 1998

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

                         Commission file number 1-7265


                              AMBASE CORPORATION


            (Exact name of registrant as specified in its charter)


                                   DELAWARE

                           (State of incorporation)
                                  95-2962743

                     (I.R.S. Employer Identification No.)
                         51 WEAVER STREET, BUILDING 2
                      GREENWICH, CONNECTICUT 06831-5155

            (Address of principal executive offices)     (Zip Code)

                                (203) 532-2000

             (Registrant's telephone number, including area code)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days.

YES     X        NO

At June 30, 1998,  there were 44,533,519 shares  of  registrant's  common stock,
$0.01 par value per share, outstanding, excluding 126,488 treasury shares.

<PAGE>

AMBASE CORPORATION

QUARTERLY REPORT ON FORM 10-Q
JUNE 30, 1998

CROSS REFERENCE SHEET FOR
PARTS I AND II                                                            PAGE

PART I - FINANCIAL INFORMATION

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

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

PART II - OTHER INFORMATION

Item 1.  Legal Proceedings..................................................13

Item 2.  Changes in Securities..............................................14

Item 3.  Defaults Upon Senior Securities....................................14

Item 4.  Submission of Matters to a Vote of Security Holders................14

Item 5.  Other Information..................................................14

Item 6.  Exhibits and Reports on Form 8-K...................................14

<PAGE>

PART I - FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                      AMBASE CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF OPERATIONS
                  SECOND QUARTER AND SIX MONTHS ENDED JUNE 30
                                  (UNAUDITED)


<TABLE>
<CAPTION>
==============================================================================
(in thousands,                         Second Quarter            Six Months
except per share data)                1998         1997        1998       1997
==============================================================================
<S>                                <C>          <C>         <C>        <C>
OPERATING EXPENSES:
Compensation and benefits          $   444      $   476     $   958    $   992
Professional and outside services      380          131         650        192
Insurance                               22           36          45         71
Occupancy                               22           21          43         43
Other operating                         12           43          55         81
------------------------------------------------------------------------------
                                       880          707       1,751      1,379
------------------------------------------------------------------------------
Operating loss                        (880)        (707)     (1,751)    (1,379)
------------------------------------------------------------------------------
Interest income                        593          663       1,225      1,352
------------------------------------------------------------------------------
Loss before income taxes              (287)         (44)       (526)       (27)
Income tax (expense) benefit           (64)         (70)       (128)       335
------------------------------------------------------------------------------

NET INCOME (LOSS)                  $  (351)     $  (114)    $  (654)   $   308
==============================================================================

EARNINGS PER COMMON SHARE:
Net income (loss) - basic          $ (0.01)     $     -     $ (0.02)   $  0.01
Net income (loss) assuming dilution  (0.01)           -       (0.02)      0.01
==============================================================================

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

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


<TABLE>
<CAPTION>
==============================================================================
                                                      June 30,    December 31,
                                                          1998            1997
(in thousands)                                      (unaudited)
==============================================================================
<S>                                                  <C>             <C>
ASSETS
Cash and cash equivalents                            $   2,072       $   5,548
Investment securities - held to maturity (market
   value $33,224 and $44,276, respectively)             33,215          44,310
Receivable from Home Holdings, Inc.                     12,728          12,736
Investment in SDG, Inc. at cost                          1,250           1,250
Other assets                                               332             426
------------------------------------------------------------------------------

TOTAL ASSETS                                         $  49,597       $  64,270
==============================================================================

LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts payable and accrued liabilities             $     326       $   1,550
Supplemental retirement plan                             4,972           4,865
Postretirement welfare benefits                          1,349           1,412
Other liabilities                                          172             196
Litigation and contingency reserves                      2,225           2,340
Income tax reserves                                     66,388          79,088
------------------------------------------------------------------------------
Total liabilities                                       75,432          89,451
------------------------------------------------------------------------------
Commitments and contingencies                                -               -
------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY:
Common stock                                               447             447
Paid-in capital                                        547,712         547,712
Accumulated deficit                                   (573,347)       (572,693)
Treasury stock                                            (647)           (647)
------------------------------------------------------------------------------
Total stockholders' equity                             (25,835)        (25,181)
------------------------------------------------------------------------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY           $  49,597       $  64,270
==============================================================================
</TABLE>
The  accompanying  notes are an integral  part of these  consolidated  financial
statements.  See Note 4 for further  information  with  regard to the  Company's
receivable from Home Holdings, Inc.

                                     - 2 -

<PAGE>

                      AMBASE CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                           SIX MONTHS ENDED JUNE 30

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

(in thousands)                                               1998         1997
==============================================================================
<S>                                                      <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)                                        $   (654)    $    308
Adjustments to reconcile net income (loss) to
   net cash used by operations:
Other assets                                                   58           (2)
Accounts payable and accrued liabilities                   (1,224)      (1,238)
Litigation and contingency reserves uses                     (115)        (321)
Income tax reserves uses                                  (12,700)           -
Other liabilities                                             (24)        (278)
Interest income - investment securities                    (1,170)      (1,236)
Other, net                                                     46          (13)
------------------------------------------------------------------------------
Net cash used by operating activities                     (15,783)      (2,780)
------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Maturities of investment securities - held to maturity     39,692        5,450
Purchases of investment securities - held to maturity     (27,428)      (3,508)
Proceeds from Home Holdings, Inc. receivable                    8          275
Other, net                                                     35          (25)
------------------------------------------------------------------------------
Net cash provided by investing activities                  12,307        2,192
------------------------------------------------------------------------------
Net decrease in cash and cash equivalents                  (3,476)        (588)
Cash and cash equivalents at beginning of period            5,548        5,591
------------------------------------------------------------------------------

CASH AND CASH EQUIVALENTS AT END OF PERIOD               $  2,072     $  5,003
==============================================================================
</TABLE>
The  accompanying  notes are an integral  part of these  consolidated  financial
statements.

                                     - 3 -
<PAGE>
                      AMBASE CORPORATION AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - ORGANIZATION

The accompanying  consolidated  financial  statements of AmBase  Corporation and
subsidiaries (the "Company") are unaudited and subject to year-end  adjustments.
All material intercompany transactions and balances have been eliminated. In the
opinion of management, the interim financial statements reflect all adjustments,
consisting of normal recurring adjustments, necessary for a fair presentation of
the Company's financial position and results of operations.  Results for interim
periods are not  necessarily  indicative  of results for the full year.  Certain
reclassifications  have been made to the 1997 consolidated  financial statements
to  conform  with the 1998  presentation.  The  financial  statements  have been
prepared in accordance with generally accepted accounting  principles  ("GAAP").
The  preparation  of  financial  statements  in  conformity  with GAAP  requires
management to make estimates and  assumptions,  that it deems  reasonable,  that
affect  the  reported  amounts  of assets  and  liabilities  and  disclosure  of
contingent  assets and  liabilities at the date of the financial  statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from such estimates and assumptions.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going  concern.  Substantial  contingent and
alleged  liabilities  exist  against the Company  through  certain  lawsuits and
governmental proceedings,  see Part II - Item 1. These factors raise substantial
doubt about the Company's ability to continue as a going concern.  The financial
statements  do not  include  adjustments  to the  carrying  value of assets  and
liabilities  which  might be  necessary  should  the  Company  not  continue  in
operation.  In order to  continue on a long-term  basis,  the Company  must both
resolve its  contingent and alleged  liabilities by prevailing  upon or settling
these claims for less than the amounts claimed and generate profits by acquiring
existing  operations and/or by developing new operations.  The Company continues
to evaluate a number of possible acquisitions,  and is engaged in the management
of its remaining  assets and  liabilities,  including the contingent and alleged
tax and  litigation  liabilities,  as described in Part II - Item 1. The Company
intends to  aggressively  contest  all  pending and  threatened  litigation  and
proceedings, as well as pursue all sources for contributions to settlements. The
unaudited  interim  financial  statements  presented  herein  should  be read in
conjunction with the Company's  consolidated  financial  statements filed in its
Annual Report on Form 10-K for the year ended December 31, 1997.

The  Company's  main  source of  non-operating  revenue  is  interest  earned on
investment  securities and cash equivalents.  The Company's  management  expects
that operating  cash needs for the remainder of 1998 will be met  principally by
the Company's  current  financial  resources,  and the receipt of  non-operating
revenue consisting of interest income received on investment securities and cash
equivalents.

NOTE 2 - LEGAL PROCEEDINGS

The  Company  has  significant  alleged tax  liabilities  and is a defendant  in
certain  lawsuits and  governmental  proceedings,  the ultimate outcome of which
could have a material  adverse effect on its financial  condition and results of
operations.  Because  of the  nature  of the  contingent  and  alleged  tax  and
litigation  liabilities  described  in  Part  II -  Item  1,  and  the  inherent
difficulty  in  predicting  the  outcome  of  the  litigation  and  governmental
proceedings,  management  is unable to predict  whether the  Company's  recorded
reserves  will be adequate or its  resources  sufficient to satisfy its ultimate
obligations.  The accompanying  consolidated financial statements do not include
any  adjustments  that might  result  from the  outcome of these  uncertainties.
Although  the  basis  for the  calculation  of the  litigation  and  contingency
reserves  and  income tax  reserves  are  regularly  reviewed  by the  Company's
management and outside legal counsel,  the assessment of these reserves includes
an exercise  of  judgment  and is a matter of  opinion.  At June 30,  1998,  the
litigation  and  contingency  reserves,  other than for income tax issues,  were
$2,225,000.   For  a  discussion  of  alleged  tax  liabilities,   lawsuits  and
governmental proceedings, see Part II - Item 1.

In  addition  to  the  litigation  and  contingency reserves, the  Company has a
reserve  for  income  taxes  of  $66,388,000  at  June 30, 1998.  For  a further
discussion,  see  Part II - Item 1 - Legal  Proceedings, Disputes  with Internal
Revenue Service, Withholding Taxes (Netherlands Antilles).

See  Note 8 and Item 2 -  Financial  Condition  for  information  regarding  the
Company's June 1998 payment to the IRS for tax and estimated  interest,  in full
satisfaction  of the Company's  Fresh Start tax liability and utilization of net
operating loss carryforwards.

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


See Note 4 for further information  regarding the Company's receivable from Home
Holdings,  Inc. ("Home Holdings") and the Company's  continuing rights to pursue
certain  disputed  claims  against Home Holdings  pursuant  to the Home Holdings
bankruptcy case proceedings.

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

NOTE 3 - CASH AND CASH EQUIVALENTS

Highly liquid  investments,  consisting  principally of funds held in short-term
money market accounts, are classified as cash equivalents.

NOTE 4 - RECEIVABLE FROM HOME HOLDINGS, INC.

In 1991,  the Company  sold its entire  interest in The Home  Insurance  Company
("Home Insurance") and its subsidiaries to Home Holdings, Inc. ("Home Holdings")
pursuant to an agreement  between the Company,  Home Insurance and Home Holdings
(then known as TVH Acquisition  Corporation)  dated as of September 28, 1990 (as
amended the "Stock  Purchase  Agreement").  As part of the sale  proceeds,  Home
Holdings agreed to pay $48 million to the Company over a period of years to meet
certain  specified  obligations  of the Company,  as  incurred,  relating to tax
issues,  litigation and administrative  expenses.  The Company had collected the
portion  of this  receivable  with  respect  to  litigation  and  administrative
expenses.  As of January 15,  1998,  the  Company  believed  that the  remaining
receivable, related principally to tax issues, was at least $12,728,000.

On January 15, 1998,  Home Holdings filed a voluntary  petition for relief under
Chapter 11 of the United States  Bankruptcy  Code ("Chapter  11"). Home Holdings
scheduled  the  Company's  outstanding   receivable  from  Home  Holdings  as  a
contingent  general  unsecured claim in the amount of  $11,703,136.  The Company
disagreed with Home Holdings'  characterization of its receivable as contingent,
and also with the amount of the  outstanding  receivable.  The Company filed, in
connection with the Home Holdings  bankruptcy  case, a proof of claim ("Proof of
Claim") for all damages, which was significantly in excess of $12,728,000.

On  January  15,  1998,  Home  Holdings  filed,  along  with  its  petition,   a
pre-arranged plan of reorganization under Chapter 11 (the "Plan").  According to
Home Holdings' Plan and accompanying  disclosure  statement,  general  unsecured
creditors of Home Holdings,  including the Company,  were to receive a projected
future recovery of approximately 38.3% of the amounts owed to them.

The Company filed with the United States Bankruptcy Court  ("Bankruptcy  Court")
an objection to the Plan. Thereafter,  Home Holdings filed a Second Amended Plan
(the "Amended Plan").  According to the Amended Plan, Home Holdings purported to
leave the Company's claim unimpaired,  which means that the Company would retain
its  rights to seek the full  amount  of its  outstanding  receivable  from Home
Holdings  after the Amended  Plan was  confirmed,  and would not be limited to a
recovery of approximately 38.3%. The Company disagreed with the characterization
of its claim as unimpaired, and filed an objection to the Amended Plan.

Home Holdings then filed a number of amended  plans,  culminating in the Revised
Third Amended and Restated Plan of Reorganization (the "Revised Plan"), to which
the Company  agreed.  The Revised Plan was confirmed by order of the  Bankruptcy
Court dated June 9, 1998, and was declared effective on July 29, 1998.

Pursuant  to  the Revised Plan, on July 30,  1998,  the Company  received  $15.2
million in full  satisfaction  of all of the Company's  claims  relating to Home
Holdings other than certain  disputed claims relating to Section  7.4(c)(iii) of
the Stock  Purchase  Agreement  (the "Disputed  Claims").  The Company's  rights
against  Home  Holdings  in respect of the  Disputed  Claims are  preserved  and
survive the effective  date of the Revised Plan,  and the Company may pursue any
such claims in federal or state court.  The Revised Plan further provides credit
support for any amounts due the Company on account of the Disputed Claims in the
form of a Keepwell Agreement provided by Zurich Reinsurance Center Holdings.  On
the effective date of the Revised Plan, the Company  withdrew its Proof of Claim
and exchanged cross releases with Home Holdings and various other parties.


                                    - 5 -
<PAGE>

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


NOTE 5 - INVESTMENT SECURITIES

Investment  securities - held to maturity  consist of U.S.  Treasury  Bills with
original  maturities of one year or less and which are carried at amortized cost
based upon the  Company's  intent  and  ability  to hold  these  investments  to
maturity.
<TABLE>
<CAPTION>
Investment securities - held to maturity  at June 30 and December 31 consist of
the following:
===============================================================================
                                1998                             1997
                  ---------------------------      ----------------------------
                                       Cost or                          Cost or
                  Carrying  Amortized     Fair     Carrying  Amortized     Fair
(in thousands)       Value       Cost    Value        Value       Cost    Value
===============================================================================
<S>                <C>        <C>      <C>          <C>        <C>      <C>
U.S. Treasury
   Bills           $33,215    $33,215  $33,224      $44,310    $44,310  $44,276
===============================================================================
</TABLE>
<TABLE>
<CAPTION>
The gross  unrealized  gains and losses on investment  securities at June 30 and
December 31 consist of the following:
===============================================================================
(IN THOUSANDS)                                           1998              1997
===============================================================================
<S>                                                     <C>              <C>
Held to Maturity - Gross unrealized gains (losses)      $   9            $  (34)
===============================================================================
</TABLE>
Other  investment  securities  at June 30, 1998 and December 31, 1997 consist of
$100,000  of  convertible  preferred  stock in  AMDG,  Inc.,  that  the  Company
purchased  through a private  placement in December 1997, is classified as other
assets and carried at cost which approximates market value.


                                      - 6 -

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

NOTE 6 - EARNINGS PER SHARE
<TABLE>
<CAPTION>
The  calculation  of basic  earnings per share and dilutive  earnings per share,
including  the effect of  dilutive  securities,  for the second  quarter and six
months ended June 30, is as follows:
===============================================================================
                Quarter Ended June 30, 1998     Six Months Ended June 30, 1998
             --------------------------------  --------------------------------
(in thousands                             Per                               Per
except per          Loss       Shares   Share         Loss        Shares  Share
share data)  (Numerator)(Denominator)  Amount  (Numerator) (Denominator) Amount
===============================================================================
<S>             <C>          <C>       <C>       <C>           <C>       <C>
BASIC EARNINGS
  PER SHARE:
Net loss        $ (351)     44,534     $(0.01)   $ (654)       44,534    $(0.02)
                   ===                   ====       ===                    ====
EFFECT OF
  DILUTIVE
  SECURITIES:
Assumed stock
  option
  exercise                   1,711                    -         1,719         -
                             -----                              -----
DILUTED EARNINGS
  PER SHARE:
Net loss and
  assumed
  conversions   $ (351)     46,245     $(0.01)   $ (654)       46,253    $(0.02)
===============================================================================
</TABLE>
<TABLE>
<CAPTION>
===============================================================================
                Quarter Ended June 30, 1997     Six Months Ended June 30, 1997
             --------------------------------  --------------------------------
(in thousands                             Per                               Per
except per          Loss       Shares   Share       Income        Shares  Share
share data)  (Numerator)(Denominator)  Amount  (Numerator) (Denominator) Amount
===============================================================================
<S>             <C>         <C>        <C>       <C>           <C>       <C>
BASIC EARNINGS
  PER SHARE:
Net income
  (loss)        $(114)      44,534     $    -    $  308        44,534    $ 0.01
                  ===                     ===       ===                    ====   
EFFECT OF
  DILUTIVE
  SECURITIES:
Assumed stock
  option
  exercise          -        1,686          -         -         1,675         -
                             -----                              -----
DILUTED EARNINGS
  PER SHARE:
Net income
  (loss) and
  assumed
  conversions   $(114)      46,220     $    -    $  308        46,209    $ 0.01
===============================================================================
</TABLE>
NOTE 7 - SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
Additional  information  regarding cash flow for the six months ended June 30 is
as follows:
===============================================================================
(in thousands)                                                1998         1997
===============================================================================
<S>                                                         <C>          <C>
Cash received (paid) during the period:
Income taxes refunded (paid), net                         $(12,861)      $  300
===============================================================================
</TABLE>
Income  taxes  paid,  net in 1998  include  $12,700,000  for  tax and  estimated
interest paid to the Internal  Revenue Service  ("IRS") in full  satisfaction of
the  Company's  Fresh  Start  tax  liability.  See  Part  II -  Item  1 -  Legal
Proceedings,  Disputes with Internal  Revenue  Service,  Fresh Start for further
information.

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

                                    - 7 -
<PAGE>
                      AMBASE CORPORATION AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


NOTE 8 - INCOME TAXES

The Company and its 100% owned domestic subsidiaries file a consolidated federal
income tax return.  The Company  accounts  for income taxes in  accordance  with
Statement of Financial  Accounting  Standards  No. 109,  "Accounting  for Income
Taxes" ("Statement 109"). Statement 109 recognizes both the current and deferred
tax consequences of all transactions  that have been recognized in the financial
statements,  calculated  based on the provisions of enacted tax laws,  including
the tax rates in effect for current and future  years.  Statement  109  requires
that net deferred tax assets be recognized  immediately  when a more likely than
not criterion is met; that is, unless a greater than 50% probability exists that
the tax  benefits  will not actually be realized  sometime in the future.  Under
Statement  109,  the  Company has  calculated  a net  deferred  tax asset of $28
million,  as of June 30, 1998 and $33 million as of December 31,  1997,  arising
primarily from net operating loss ("NOL") carryforwards, the excess of book over
tax reserves and alternative  minimum tax credits (not including the anticipated
tax effects of 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  ("OTS")  December 4, 1992
placement of  Carteret in  receivership, under  the management of the Resolution
Trust Corporation ("RTC")/Federal  Deposit Insurance  Corporation ("FDIC"),  and
proposed Treasury Reg. ss.1.597-4(g), the Company had previously  filed its 1992
through  1996  federal  income tax  returns with Carteret disaffiliated from the
Company's  consolidated  federal  income  tax  return. Based  upon the impact of
Treasury Reg.  ss.1.597-4(g), which  was  issued in  final form  on December 20,
1995, a continuing review of the Company's tax basis in Carteret, and the impact
of  prior year tax  return adjustments on  the Company's 1992 federal income tax
return  as filed, the Company decided  not to make an election pursuant to final
Treasury  Reg.  ss. 1.597-4(g)  to  disaffiliate  Carteret  from  the  Company's
consolidated  federal  income tax  return effective  as of December 4, 1992 (the
"election decision").

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

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

In June 1998,  the Company  paid  $12,700,000  to the IRS for tax and  estimated
interest in full  satisfaction  of the Company's  Fresh Start tax liability.  In
connection  with the  Company's  payment to the IRS, the Company  also  utilized
approximately  $40 million of NOL's. As a result,  the Company has remaining NOL
carryforwards of approximately $15 million expiring  beginning in 2008, and $145
million of additional NOL  carryforwards  generated from the Company's tax basis
in  Carteret/Carteret  FSB expiring no earlier than 2007. See Item 2 - Financial
Condition and Part II - Item 1 Legal Proceedings, Disputes with Internal Revenue
Service for further  information  regarding the Company's  payment to the IRS in
connection with the Fresh Start tax proceeding.

The Company  contractually assumed the tax liabilities of City Investing Company
("City"),  which,  prior to September 1985, owned all the outstanding  shares of
Common Stock of the Company. The Company also contractually  assumed certain tax
liabilities of The Home and its  subsidiaries  from September 1985 through 1989.
For all periods through 1992, the IRS and the Company disagree only with respect
to  withholding  taxes  in  connection  with  a  Netherlands   Antilles  finance
subsidiary  of  City.  The  Company's  federal  income  tax  returns  for  years
subsequent to 1992 have not been reviewed by the IRS.

                                    - 8 -
<PAGE>

The Company has a reserve for income taxes of  $66,388,000 at June 30, 1998. For
a further  discussion,  see Part II Item 1 - Legal  Proceedings,  Disputes  with
Internal Revenue Service, Withholding Taxes (Netherlands Antilles).

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

NOTE 9 - SUBSEQUENT EVENT

As  more  fully  discussed  in  Note 4,  the  Home  Holdings Revised Plan became
effective on July 29, 1998 and on July 30, 1998 the Company received $15,200,000
pursuant  to  Home  Holdings  Revised  Plan, in  full satisfaction of all of the
Company's claims relating to Home Holdings other than certain Disputed Claims.

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

Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations,  which follows,  should be read in conjunction with the consolidated
financial statements and related notes, which are contained in Item 1, herein.

FINANCIAL CONDITION

The  Company's  assets  at June  30,  1998  aggregated  $49,597,000,  consisting
principally of cash and cash equivalents of $2,072,000 and investment securities
of $33,215,000  and a receivable from Home Holdings,  Inc. ("Home  Holdings") of
$12,728,000. At June 30, 1998, the Company's liabilities, including reserves for
contingent and alleged  liabilities,  as further  described in Part II - Item 1,
exceeded total recorded assets by $25,835,000.

In June 1998,  the Company  paid  $12,700,000  to the IRS for tax and  estimated
interest in full  satisfaction of the Company's Fresh Start tax liability.  This
amount was previously  reserved for as part of the Company's income tax reserves
account.  See Note 8 for a more  complete  discussion  regarding  the  Company's
payment  to the IRS in  connection  with the  Fresh  Start  tax  proceeding  and
utilization of net operating loss carryforwards.

Pursuant  to the Home  Holdings  Revised  Third  Amended  and  Restated  Plan of
Reorganization  (the "Revised  Plan"),  on  July 30,  1998 the Company  received
$15,200,000 in full  satisfaction  of all the Company's  claims relating to Home
Holdings  other than certain  disputed  claims.  See Item 1 - Note 4 for further
information regarding the Company's receivable from Home Holdings.

The Company  contractually assumed the tax liabilities of City Investing Company
("City"),  which,  prior to September 1985, owned all the outstanding  shares of
Common Stock of the Company. The Company also contractually  assumed certain tax
liabilities of The Home and its  subsidiaries  from September 1985 through 1989.
For all periods through 1992, the IRS and the Company disagree only with respect
to  withholding  taxes  in  connection  with  a  Netherlands   Antilles  finance
subsidiary  of  City.  The  Company's  federal  income  tax  returns  for  years
subsequent to 1992 have not been reviewed by the IRS.

With respect to the  Withholding  Taxes issue,  in connection with a Netherlands
Antilles finance subsidiary of City, on May 11, 1995, the IRS issued a Notice of
Deficiency for withholding taxes on interest payments for the years 1979 through
1985.  In the Notice of  Deficiency,  the IRS contends  that City's wholly owned
Netherlands  Antilles finance subsidiary should be disregarded for tax purposes.
The Company vigorously contested the IRS's position in accordance with the IRS's
internal  appeals  procedures.  In January 1992, the National  Office of the IRS
issued technical advice  supporting the auditing  agent's  position.  In October
1992, the Company  appealed this technical  advice to the National  Office.  The
National Office advised the Company that it expected to issue  technical  advice
supporting the auditing agent's position,  whereupon the Company advised the IRS
that it was withdrawing its technical advice request.

On June 30, 1995,  the Company  filed a petition in the United  States Tax Court
("Tax Court")  contesting the Notice of Deficiency.  The IRS filed its answer on
August 23, 1995. The Company filed a motion for summary judgment in its favor on
February 13, 1996. On April 17, 1996, the IRS filed a Notice of Objection to the
Company's motion for summary judgment. The Tax Court requested,  and the Company
filed,  on July 3, 1996, a reply to the IRS's Notice of Objection.  On September
19, 1996,  the Court denied the Company's  motion for summary  judgment  without
prejudice.  Based on the Tax Court's examination of the record and the status of
the discovery process, the Tax Court concluded that summary adjudication at this
time was inappropriate. The Tax Court directed the parties to engage in full and
complete  discovery as expeditiously as possible.  A trial was held in this case
on March 24, 1997, after which the Judge asked the

                                    - 9 -
<PAGE>

IRS and the Company to submit  post-trial  briefs,  which have subsequently been
submitted  to the Tax  Court.  If the IRS were to  prevail  on this  issue,  the
Company  would be  liable  for  taxes and  interest  in excess of the  Company's
financial resources.

In a case dealing with a similar  withholding tax issue,  the Tax Court ruled in
favor of the taxpayer, Northern Indiana Public Service Co. ("Northern Indiana"),
in November 1995. The Tax Court rejected the IRS's contention that interest paid
to Northern  Indiana's  foreign  subsidiary  were  subject to United  States tax
withholding. The IRS appealed this decision (Northern Indiana Public Service Co.
v.  Commissioner) to the United States Court of Appeals for the 7th Circuit (the
"Appeals Court").  The Appeals Court recently affirmed the Tax Court's ruling in
favor of Northern  Indiana.  Although the Appeals Court decision in the Northern
Indiana case could be beneficial to the  Company's  case, it is not  necessarily
indicative of the ultimate  result of the final  settlement  of the  Netherlands
Antilles issue between the Company and the IRS.

Based on an evaluation of the IRS's contention,  counsel has advised the Company
that, although the outcome in litigation can by no means be assured, the Company
has a very strong case and should prevail. Notwithstanding counsel's opinion and
the Tax Court's ruling in the Northern  Indiana case, it is not possible at this
time to determine the final  disposition of this issue,  when the issues will be
resolved,  or their final financial effect. A final disposition of this issue in
the  Company's  favor  would have a material  positive  effect on the  Company's
Consolidated Statement of Operations and Financial Condition.

The Company has a reserve for income taxes of  $66,388,000 at June 30, 1998. For
a further  discussion,  see Part II Item 1 - Legal  Proceedings,  Disputes  with
Internal Revenue Service, Withholding Taxes (Netherlands Antilles).

At June 30, 1998, the litigation and contingency reserves, other than for income
tax issues,  were  $2,225,000.  For a  discussion  of alleged  tax  liabilities,
lawsuits and governmental proceedings, see Part II - Item 1.

The  Company  has  significant  alleged tax  liabilities  and is a defendant  in
certain  lawsuits and  governmental  proceedings,  the ultimate outcome of which
could have a material  adverse effect on its financial  condition and results of
operations.  Because of the nature of the contingent and alleged liabilities and
the  inherent  difficulty  in  predicting  the  outcome  of the  litigation  and
governmental proceedings,  management is unable to predict whether the Company's
recorded  reserves will be adequate or its  resources  sufficient to satisfy its
ultimate obligations.  The accompanying consolidated financial statements do not
include  any   adjustments   that  might   result  from  the  outcome  of  these
uncertainties.  Although the basis for the  calculation  of the  litigation  and
contingency  reserves and the income tax reserves are regularly  reviewed by the
Company's management and outside legal counsel, the assessment of these reserves
includes an exercise of judgment,  and is a matter of opinion.  For a discussion
of alleged tax liabilities, lawsuits and governmental proceedings, see Part II -
Item 1.

The cash needs of the Company for the first six months of 1998 were  principally
satisfied  by  interest  income  received  on  investment  securities  and  cash
equivalents,  and the Company's current financial  resources.  On  July 30, 1998
the Company  received  $15,200,000  pursuant to the Home Holdings  Revised Plan.
Management believes that the Company's cash resources are sufficient to continue
operations for 1998.

For the six  months  ended  June  30,  1998,  cash of  $15,783,000  was  used by
operations,  including the payment of  $12,700,000  to the IRS for the Company's
Fresh Start tax liability,  the payment of prior year accruals,  and the payment
of operating  expenses  partially offset by the receipt of interest income.  For
the six months ended June 30, 1997,  cash of $2,780,000  was used by operations,
including the payment of prior year accruals and operating  expenses,  partially
offset by a $475,000 tax refund and the receipt of interest income.

The  Company  continues  to  evaluate  a  number of possible acquisitions and is
engaged in the management of its remaining assets and liabilities, including the
contingent and alleged tax and litigation  liabilities,  as described in Part II
Item 1. Extensive  discussions  and  negotiations  are ongoing  with  respect to
certain  of these  matters.  The  Company  intends  to aggressively  contest all
pending and  threatened  litigation  and  governmental  proceedings,  as well as
pursuing all sources of contributions to settlements. In order to continue  on a
long-term  basis, the  Company  must  both  resolve  its  contingent and alleged
liabilities  by  prevailing  upon  or settling these  claims  for less  than the
amounts  claimed,  and  generate  profits  by acquiring existing operations and/
or by developing new operations.

There were no material commitments for capital expenditures as of June 30, 1998.

                                    - 10 -
<PAGE>

RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
Summarized  financial  information of the Company for the second quarter and six
months ended June 30 is as follows:
==============================================================================
                                        Second Quarter           Six Months
(in thousands)                         1998        1997       1998        1997
==============================================================================
<S>                                <C>          <C>       <C>         <C>
Operating expenses:
Compensation and benefits            $  444      $  476    $   958     $   992
Professional and outside services       380         131        650         192
Insurance                                22          36         45          71
Occupancy                                22          21         43          43
Other operating                          12          43         55          81
------------------------------------------------------------------------------
                                        880         707      1,751       1,379
------------------------------------------------------------------------------
Operating loss                         (880)       (707)    (1,751)     (1,379)
------------------------------------------------------------------------------
Interest income                         593         663      1,225       1,352
------------------------------------------------------------------------------
Loss before income taxes               (287)        (44)      (526)        (27)
Income tax benefit (expense)            (64)        (70)      (128)        335
------------------------------------------------------------------------------

NET INCOME (LOSS)                    $ (351)     $ (114)   $  (654)    $   308
==============================================================================
</TABLE>
The Company's main source of non-operating  revenue is interest income earned on
investment  securities and cash equivalents.  The Company's  management  expects
that operating  cash needs for the remainder of 1998 will be met  principally by
the  Company's  current  financial  resources  and the receipt of  non-operating
revenue  consisting of interest income earned on investment  securities and cash
equivalents.

The Company recorded a net loss of $351,000, or $0.01 per share and $654,000, or
$0.02 per share for the  second  quarter  and six months  ended  June 30,  1998,
respectively.

The Company recorded a net loss of $114,000 and recorded net income of $308,000,
or $0.01 per share,  in the second  quarter and six month periods ended June 30,
1997,  respectively.  The 1997 six month period  includes a $475,000  income tax
benefit,  as further  described in Financial  Condition,  above.  Excluding  the
$475,000  income  tax  benefit,  the  Company  would  have  reported a loss from
continuing operations of $167,000 in the six month period ended June 30, 1997.

Compensation  and  benefits  decreased  to $444,000  and  $958,000 in the second
quarter and six month periods ended June 30, 1998,  respectively,  compared with
$476,000 and $992,000 for the  comparable  1997 periods The decrease in the 1998
periods is due to a decrease in compensation  costs in the 1998 periods compared
with the respective 1997 periods.

Professional  and outside  services  increased  to $380,000  and $650,000 in the
second  quarter and six months  ended June 30, 1998,  respectively,  compared to
$131,000  and  $192,000  in the  respective  1997  periods.  This  increase  was
primarily  the result of legal fees incurred  attributable  to the Home Holdings
bankruptcy case.

Insurance  expenses  decreased to $22,000 and $45,000 in the second  quarter and
six months  ended June 30, 1998,  respectively,  from $36,000 and $71,000 in the
same 1997 periods,  due to  management's  continued  renegotiation  of insurance
programs.

Interest  income in the  second  quarter  and six  months  ended  June 30,  1998
decreased to $593,000 and $1,225,000, respectively, from $663,000 and $1,352,000
in the respective  1997 periods.  The decrease was primarily  attributable  to a
lower average level of cash equivalents and investment securities.

                                     - 11 -
<PAGE>
The income tax  provision of $64,000 and $128,000 in the second  quarter and six
months  ended  June 30,  1998,  respectively,  is  primarily  attributable  to a
provision  for state  taxes.  The income tax  provision of $70,000 in the second
quarter ended June 30, 1997 is primarily  attributable  to a provision for state
taxes. The income tax benefit of $335,000 in the six month period ended June 30,
1997 is attributable to a $475,000  income tax refund,  as further  described in
Financial Condition,  above, and a provision for state taxes of $140,000. Income
taxes applicable to operating income (loss) are generally determined by applying
the estimated  effective annual income tax rates to pretax income (loss) for the
year-to-date interim period.  Income taxes applicable to unusual or infrequently
occurring items are provided in the period in which such items occur.

STOCKHOLDER INQUIRIES

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

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

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.

                                     - 12 -

<PAGE>

PART II - OTHER INFORMATION 

ITEM 1.  LEGAL PROCEEDINGS

The information contained in Item 8 - Note 13 in AmBase's  Annual Report on Form
10-K  for  the year ended December 31, 1997 and  in AmBase's Quarterly Report on
Form  10-Q  for  the  quarterly  period ended March 31, 1998 are incorporated by
reference  herein  and  the defined  terms set forth below have the same meaning
ascribed to them in that report.  There  have been  no  material developments in
such legal proceedings, except as set forth below.

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

Marshall  Manley  v.  AmBase Corporation.   Oral argument on Manley's Motion for
Summary  Judgment  and  the  Company's  motion  to  strike  Manley's affirmative
defenses was  held on May 15, 1998.  The court denied both motions.  The case is
currently scheduled for trial in October 1998.

Disputes with Internal Revenue Service.

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

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

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

    On  April  21, 1998, the Supreme Court decided the Fresh Start issue against
    Atlantic  Mutual,  agreeing  with  the  government  in  upholding  the  IRS'
    regulation  which  defines  reserve  strengthening for purposes of the Fresh
    Start transition  rule.  The  opinion  was approved by nine justices without
    dissent.  The Supreme Court's  decision in favor  of the IRS in the Atlantic
    Mutual  case  has  a  substantial  adverse  effect on the Company's own case
    pending in the Tax Court.

    Based  on  the  Supreme  Court's  decision  in  the Atlantic Mutual case and
    discussion with the Company's outside advisors, on June 10, 1998 the Company
    paid  $12,700,000  to  the  IRS  for  tax  and  estimated  interest  in full
    satisfaction  of  the  Company's Fresh Start tax liability.  This amount was
    previously  reserved  for  as  part  of  the  Company's  income tax reserves
    account.   In  calculating  the  amount  paid  to  the IRS, the Company also
    utilized  approximately  $40  million  of  its NOL carryforwards, as further
    described in Part I - Item 1 - Note 8.

The actions against the Company, including those identified in (a) above, are in
various stages.  Nevertheless,  the  allegations and claims are material and, if
successful, could result  in substantial  judgments against the Company.  To the
extent  the  aggregate  of  any  such  judgments  were  to  exceed the resources
available,  these  matters could have a material adverse effect on the Company's
financial  condition  and  results  of  operations.  Due  to the nature of these
proceedings, the Company and its counsel are unable to express any opinion as to
their probable outcome.

                                     - 13 -
<PAGE>

ITEM 2.  CHANGES IN SECURITIES

Does not apply.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

Does not apply.

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

At  the Annual Meeting of Stockholders  on May 28, 1998, the following proposals
were voted upon:

Stockholders approved the appointment of Price Waterhouse LLP as the independent
accountants of  the  Company for  the year ending December 31, 1998.  The shares
were voted as follows:  39,388,389  shares  for and 691,839 against, with 53,637
shares abstaining.  There were no broker non-votes.

Stockholders  also  approved  an  amendment  to  AmBase Corporation's 1993 Stock
Incentive  Plan,  extending  the  termination  date  for the period during which
awards  may be granted under the 1993 Plan to May 28, 2008 from May 28, 1998, by
a vote of 14,971,430 for  the  proposal and 3,741,564 against the proposal, with
182,223 shares abstaining.  There were 21,238,648 broker non-votes.

ITEM 5.  OTHER INFORMATION

None

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

    27.  Financial Data Schedule (only submitted to SEC in electronic format)

(b) Form 8-K

    None


                                  SIGNATURES


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


AMBASE CORPORATION




By  JOHN P. FERRARA
    Vice President, Chief Financial Officer
    and Controller
    (Principal Financial and
    Accounting Officer)

Date:  July 31, 1998

                                     - 14 -
<PAGE>

                           EXHIBIT INDEX


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

  27  Financial Data Schedule - June 30, 1998
  27  Restated Financial Data Schedule - March 31, 1996
  27  Restated Financial Data Schedule - June 30, 1996
  27  Restated Financial Data Schedule - September 30, 1996
  27  Restated Financial Data Schedule - December 31, 1996






                                    - 15 -