<PAGE>
     UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                 Washington, D.C. 20549

                     FORM 10-K
       FOR ANNUAL AND TRANSITION REPORTS PURSUANT
 TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANAGE ACT OF 1934

(Mark  One)
|X|  ANNUAL  REPORT  PURSUANT  TO  SECTION  13 OR 15(d) OF THE
     SECURITIES EXCHANGE ACT OF 1934

     For the fiscal year ended December 31, 2003

                          OR
|_|  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
     SECURITIES EXCHANGE ACT OF 1934

     For the transition period from ________ to ________


                    Commission file number 1-07265

                           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, CT 06830-6027
                    (Address of principal executive offices)

Registrant's telephone number, including area code: (203) 532-2000

        Securities registered pursuant to Section 12(g) of the Act:

                            Title of each class

                        Common Stock ($0.01 par value)

                        Rights to Purchase Common Stock

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 ___

Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated  by reference in Part III of this Form 10-K or any amendment to the
Form 10-K. X

Indicate by check mark whether the registrant is an  accelerated  filer (as
defined in Exchange Act Rule 12b-2).

Yes ______     No ___X___

At February 27, 2004, there were 46,233,519  shares of registrant's  Common
Stock  outstanding.  At June 30, 2003 the aggregate market value of registrant's
voting securities  (consisting of its Common Stock) held by nonaffiliates of the
registrant, based on the average bid and asking price on such date of the Common
Stock of $0.87 per share,  was  approximately  $31  million.  The  Common  Stock
constitutes registrant's only outstanding class of security.

Portions of the registrant's definitive Proxy Statement for its 2004 Annual
Meeting of Stockholders,  which Proxy Statement  registrant intends to file with
the Securities  and Exchange  Commission not later than 120 days after the close
of its  fiscal  year,  is  incorporated  by  reference  with  respect to certain
information contained therein, in Part III of this Annual Report.

The Exhibit Index is located in Part IV, Item 15, Page 32.


<PAGE>
AmBase Corporation

Annual Report on Form 10-K
December 31, 2003
<TABLE>
<CAPTION>
TABLE OF CONTENTS                                                                                             Page
----------------------------------------------                                                               ------
<S>           <C>
PART I

Item 1.       Business............................................................................................1

Item 2.       Properties..........................................................................................2

Item 3.       Legal Proceedings...................................................................................2

Item 4.       Submission of Matters to a Vote of Security Holders.................................................2

              Executive Officers of the Registrant................................................................2


PART II

Item 5.       Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of
                Equity Securities.................................................................................3

Item 6.       Selected Financial Data.............................................................................3

Item 7.       Management's Discussion and Analysis of Financial Condition and Results of Operations...............4

Item 7A.      Quantitative and Qualitative Disclosures About Market Risk..........................................8

Item 8.       Financial Statements and Supplementary Data.........................................................9

Item 9.       Changes in and Disagreements with Accountants on Accounting and Financial Disclosure...............30

Item 9A.      Controls and Procedures............................................................................30

PART III

Item 10.      Directors and Executive Officers of the Registrant.................................................30

Item 11.      Executive Compensation.............................................................................30

Item 12.      Security Ownership of Certain Beneficial Owners & Management & Related Stockholder Matters.........31

Item 13.      Certain Relationships and Related Transactions.....................................................31

Item 14.      Principal Accountant Fees and Services.............................................................31

PART IV

Item 15.      Exhibits, Financial Statement Schedules, and Reports on Form 8-K...................................32
</TABLE>
<PAGE>




PART I

ITEM 1.       BUSINESS

AmBase  Corporation  (the "Company" or "AmBase") is a Delaware  corporation
that was incorporated in 1975 by City Investing  Company  ("City").  AmBase is a
holding  company that,  through a wholly owned  subsidiary,  owns two commercial
office buildings in Greenwich,  Connecticut that are managed and operated by the
Company.  One building is approximately  14,500 square feet and is substantially
leased to  unaffiliated  third  parties  with  approximately  3,500  square feet
utilized  by the  Company  for its  executive  offices.  The other  building  is
approximately 38,000 square feet and is leased to unaffiliated third parties.

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  received from real estate owned.
The Company also earns non-operating revenue principally  consisting of interest
income  earned  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 8 - Note 10 to the Company's  consolidated financial
statements.  The Company  intends to  aggressively  contest all  litigation  and
contingencies,  as well as pursue all sources for  contributions to settlements.
The Company had 5 employees at December 31, 2003.

Background

City  originally  incorporated  AmBase as the holding  company for The Home
Insurance Company,  and its affiliated property and casualty insurance companies
("The  Home").  In 1985,  City,  which owned all the  outstanding  shares of the
Common Stock of the Company,  distributed the Company's  shares to City's common
stockholders. The Home was sold in February 1991.

In August 1988, the Company acquired Carteret Bancorp Inc. Carteret Bancorp
Inc.,  through its principal wholly owned subsidiary,  Carteret Savings Bank, FA
("Carteret"),  was  principally  engaged in retail  and  consumer  banking,  and
mortgage banking including mortgage  servicing.  On December 4, 1992, the Office
of  Thrift  Supervision  ("OTS")  placed  Carteret  in  receivership  under  the
management of the Resolution  Trust  Corporation  ("RTC") and a new institution,
Carteret  Federal Savings Bank, was established to assume the assets and certain
liabilities  of Carteret.  Following  the seizure of  Carteret,  the Company was
deregistered as a savings and loan holding company by the OTS,  although the OTS
retains jurisdiction for any regulatory violations prior to deregistration.  See
Part II - Item 8 - Note 10 to the Company's  consolidated  financial  statements
for a discussion of Supervisory Goodwill litigation relating to Carteret.

In December  1997, the Company  formed a new wholly owned  subsidiary,  SDG
Financial Corp. ("SDG Financial"),  to pursue merchant banking  activities.  SDG
Financial  purchased an equity interest in SDG, Inc. ("SDG") and was granted the
exclusive right to act as the investment  banking/financial advisor to SDG, Inc.
and  all  of  its  subsidiaries  and  affiliates.  The  Company  also  purchased
convertible  preferred and common stock in AMDG, Inc. ("AMDG"), a majority owned
subsidiary of SDG. SDG and AMDG are development stage pharmaceutical  companies.
In 2002 the Company  recorded a write down of its  investments  in SDG and AMDG,
see Part II - Item 7 - Results of Operations, for further information.


STOCKHOLDER INQUIRIES

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

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



<PAGE>


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  ("SEC") EDGAR Database over the
World Wide Web 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.

ITEM 2.     PROPERTIES

The Company owns two commercial office buildings in Greenwich, Connecticut.
One building is approximately  14,500 square feet and is substantially leased to
unaffiliated third parties with approximately  3,500 square feet utilized by the
Company for its executive offices.  The second building is approximately  38,000
square feet and is leased to unaffiliated third parties.

ITEM 3.     LEGAL PROCEEDINGS

For  a  discussion  of  the  Company's  legal  proceedings,  including  the
Company's Supervisory Goodwill litigation, see Part II - Item 8 - Note 10 to the
Company's consolidated financial statements.

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

None.

Executive Officers of the Registrant

Each  executive  officer  is  elected  to  serve in the  executive  officer
capacity set forth opposite his respective name until the next Annual Meeting of
Stockholders.  The Company is not aware of any family relationships  between any
of the executive officers or directors of the Company.

Set forth below is a list of executive  officers of the Company at December
31, 2003:
<TABLE>
<CAPTION>
<S>                                    <C>                             <C>

Name                                    Age                            Title
====                                    ===                            ==========
Richard A. Bianco                        56                            Chairman, President and
                                                                       Chief Executive Officer


John P. Ferrara                          42                            Vice President, Chief Financial Officer
                                                                       and Controller
</TABLE>

Mr. Bianco was elected a director of the Company in January  1991,  and has
served as President and Chief  Executive  Officer of the Company since May 1991.
On January 26, 1993,  Mr. Bianco was elected  Chairman of the Board of Directors
of the Company. He served as Chairman,  President and Chief Executive Officer of
Carteret, then a subsidiary of the Company, from May 1991 to December 1992.

Mr. Ferrara was elected to the position of Vice President,  Chief Financial
Officer and Controller of the Company in December 1995, having previously served
as Acting Chief  Financial  Officer,  Treasurer and Assistant Vice President and
Controller  since January 1995; as Assistant Vice President and Controller  from
January  1992 to  January  1995;  and as  Manager of  Financial  Reporting  from
December 1988 to January 1992.


<PAGE>


PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS,
        AND ISSUER PURCHASES OF EQUITY SECURITIES

The Common Stock of the Company  trades  through one or more market makers,
with  quotations  made available in the "pink sheets"  published by the National
Quotation Bureau, Inc. ("Pink Sheets"),  under the symbol ABCP. The sales prices
per share for the  Company's  Common Stock  represent  the range of the reported
high and low bid  quotations as indicated in the Pink Sheets or as  communicated
orally to the Company by market makers.  Such prices reflect interdealer prices,
without  retail  mark-up,  markdown  or  commission,  and  may  not  necessarily
represent actual transactions.
<TABLE>
<CAPTION>
<S>                                                     <C>                                        <C>

                                                       2003                                        2002
                                               =====================                       =====================
                                               High               Low                     High                Low
                                               ====               ===                     ====                ===
First Quarter.......................       $    0.90          $   0.70                $    1.60          $   1.11
Second Quarter......................            0.90              0.71                      1.44             0.95
Third Quarter.......................            1.11              0.68                      1.10             0.91
Fourth Quarter......................            0.85              0.64                      0.97             0.88
</TABLE>

As of January 30, 2004, there were  approximately  16,000 beneficial owners
of the  Company's  Common  Stock.  No  dividends  were  declared  or paid on the
Company's  Common Stock in 2003 or 2002.  The Company does not intend to declare
or pay dividends in the foreseeable future.

For information  concerning the Company's stockholder rights plan and common
stock  repurchase  plan,  see  Part  II -  Item  8 -  Note  5 to  the  Company's
consolidated financial statements.


ITEM 6.       SELECTED FINANCIAL DATA

The  selected  financial  data  should  be read  in  conjunction  with  the
Company's consolidated financial statements included in Part II - Item 8 of this
Form 10-K.
<TABLE>
<CAPTION>

                                                        Years ended December 31
                                         ==========================================================
<S>                                     <C>         <C>          <C>          <C>        <C>
(in thousands, except per  share  data)  2003       2002(a)       2001(b)       2000       1999
                                         ====       =======       =======       ====       ====
Operating revenue...................   $2,578       $   477       $   179     $    -     $    -
Interest  income....................      334           705         2,099      2,795      2,166
Net income (loss)...................   (3,559)       (5,133)       62,110      5,174     (4,515)
                                       =======      ========      =======     ======     =======
Net  income  (loss)  per  common  share
Basic...............................   $(0.08)      $ (0.11)      $  1.34     $ 0.11     $(0.10)
Assuming dilution...................    (0.08)        (0.11)         1.34       0.11      (0.10)
                                       =======      ========      =======     ======     =======
Dividends...........................        -             -             -          -          -
                                       =======      ========      =======     ======     =======
Total assets........................   $41,668      $43,656       $50,445    $53,102     $47,678
Total stockholders' equity..........    29,367       32,902        38,013    (24,097)    (29,424)
                                       =======      =======       =======    =======     =======
</TABLE>
(a) Net loss in 2002  includes a $1,600,000  charge to reflect a write down
of the Company's  investments in SDG and AMDG. See Part II - Item 7 - Results of
Operations, for further information.

(b) Net  income  in 2001  includes  a  $66,388,000  withholding  obligation
reserve  reversal  which  was  reflected  as other  income  in the  Consolidated
Statement  of  Operations.  See Part II - Item 7 - Results  of  Operations,  for
further information.


<PAGE>


ITEM 7.  MANAGEMENT'S  DISCUSSION  AND ANALYSIS OF FINANCIAL  CONDITION AND
         RESULTS OF OPERATIONS

Management's  Discussion and Analysis of Financial Condition and Results of
Operations  should  be read  in  conjunction  with  the  consolidated  financial
statements and related notes, which are contained in Part II - Item 8, herein.


Financial Condition and Liquidity

The  Company's  assets  at  December  31,  2003,  aggregated   $41,668,000,
consisting  principally of cash and cash  equivalents of $2,785,000,  investment
securities of $19,103,000 and real estate owned of $19,331,000.  At December 31,
2003,  the Company's  liabilities  aggregated  $12,301,000.  Total  stockholders
equity was $29,367,000.

The  liability  for the  supplemental  retirement  plan (the"  Supplemental
Plan"), which is accrued but not funded, increased to $9,292,000 at December 31,
2003 from  $7,608,000  at December 31, 2002.  The  Supplemental  Plan  liability
reflects the  actuarially  determined  Accrued  Pension Costs in accordance with
accounting  principles  generally  accepted  in the  United  States  of  America
("GAAP"). The increased liability is the result of an additional year of accrued
service and interest cost on the liability.  The Supplemental  Plan liability is
further  affected by changes in  discount  rates and  experience  which could be
different from that assumed. See Part II - Item 8 - Note 7 for further details.

For the year  ended  December  31,  2003,  cash of  $2,158,000  was used by
operations, including the payment of operating expenses and prior year accruals,
partially offset by the receipt of rental income, interest income and investment
earnings.  The cash needs of the Company for 2003 were principally  satisfied by
rental income and interest  income  received on investment  securities  and cash
equivalents  and  to  a  lesser  extent,  the  Company's  financial   resources.
Management believes that the Company's cash resources are sufficient to continue
operations for 2004.

For the year  ended  December  31,  2002,  cash of  $5,936,000  was used by
operations, including the payment of operating expenses and prior year accruals,
partially  offset by the  receipt  of  interest  income.  The cash  needs of the
Company  for 2002 were  principally  satisfied  by interest  income  received on
investment  securities and cash equivalents,  the Company's  financial resources
and rental income.

For the year  ended  December  31,  2001,  cash of  $4,640,000  was used by
operations, including the payment of prior year accruals and operating expenses,
partially  offset by the  receipt  of  interest  income.  The cash  needs of the
Company  for 2001 were  principally  satisfied  by interest  income  received on
investment  securities  and  cash  equivalents,   and  the  Company's  financial
resources.

Real  estate  owned,   consists  of  two  commercial  office  buildings  in
Greenwich,  Connecticut  which the Company  owns and  manages.  One  building is
approximately  14,500 square feet, is substantially leased to unaffiliated third
parties with  approximately  3,500  square feet  utilized by the Company for its
executive offices. The other building is approximately 38,000 square feet and is
leased to unaffiliated third parties.

During June 2003, the Company  repurchased 50,000 shares of common stock at
a purchase  price of $0.75 per share  pursuant  to its common  stock  repurchase
plan. There are no additional material  commitments for capital  expenditures as
of December 31, 2003.  Inflation has had no material  impact on the business and
operations of the Company.

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.  As of December 31, 2003,  the residual  balance of the  litigation
reserves of $1,267,000 was reclassified to other  liabilities for the payment of
previously  reserved for legal fees.  Prior year amounts have been  reclassified
for comparison purposes. For a discussion of lawsuits and proceedings, including
a discussion of the Supervisory Goodwill litigation, see Part II - Item 8 - Note
10 to the Company's consolidated financial statements.



<PAGE>


Results of Operations

Summarized financial  information for the operations of the Company for the
years ended December 31 is as follows:
<TABLE>
<CAPTION>
<S>                                                                       <C>               <C>               <C>
(in thousands)                                                              2003             2002              2001
                                                                           =====            =====             =====
Revenues:
Rental income                                                          $   2,578        $     477         $     179
                                                                        --------         --------          --------
Operating expenses:
Compensation and benefits.....................................             3,852            3,515             5,021
Professional and outside services.............................             1,476            1,641             1,020
Property operating & maintenance..............................               491              130               117
Depreciation .................................................               329               74                57
Insurance.....................................................               100               73                65
Other operating...............................................               188              161               186
                                                                        --------         --------          --------
                                                                           6,436            5,594             6,466
                                                                        --------         --------          --------
Operating loss................................................            (3,858)          (5,117)           (6,287)
                                                                        --------         --------          --------
Interest income...............................................               334              705             2,099
Realized gains on sales of investment securities
    available for sale .......................................                64                -                 -
Other income..................................................                26              215                75
Other income - termination of postretirement welfare plans....                 -              788                 -
Reversal of withholding obligation reserve....................                 -                -            66,388
Write down of investments.....................................                 -           (1,600)                -
                                                                        --------         --------          --------
Income (loss) before income taxes.............................            (3,434)          (5,009)           62,275
Income tax expense............................................              (125)            (124)             (165)
                                                                        --------         --------          --------
Net income (loss).............................................         $  (3,559)       $  (5,133)          $62,110
                                                                       =========        =========           =======
</TABLE>

The Company's  main source of operating  revenue is rental income earned on
real estate  owned.  The Company  also earns  non-operating  revenue  consisting
principally of interest  income on investment  securities and cash  equivalents.
The Company's  management  expects that operating cash needs in 2004 will be met
principally by rental income, the receipt of non-operating revenue consisting of
interest income earned on investment  securities and cash  equivalents,  and the
Company's current financial resources.

For the year ended  December 31, 2003,  the Company  recorded a net loss of
$3,559,000 or $0.08 per share.

The Company  recorded a net loss of $5,133,000 or $0.11 per share,  for the
year ended December 31, 2002. As further  described below,  2002 results include
non-recurring   other  income  of  $788,000   representing  the  termination  of
postretirement  benefit plans and $215,000 of additional other income.  The year
ended  December 31, 2002 also includes a charge of $1,600,000 to reflect a write
down of the Company's investments in SDG and AMDG, as further described below.

For the year ended  December 31, 2001,  the Company  recorded net income of
$62,110,000 or $1.34 per share. As further described below, 2001 results include
non-recurring   other  income  representing  the  reversal  of  the  Withholding
Obligation reserve.

Rental  income of  $2,578,000  in 2003,  compared to $477,000 in 2002,  and
$179,000 in 2001,  reflects a full year of rental  income for the 38,000  square
foot  commercial  office  building  purchased in December  2002.  The  increased
amounts of $477,000 in 2002,  compared to $179,000 in 2001, is the result of the
2001 period only  reflected  eight months of rental  income for a 14,500  square
foot building acquired in April 2001.



<PAGE>


Compensation  and benefits were $3,852,000 in 2003,  $3,515,000 in 2002 and
$5,021,000 in 2001. The increase in 2003 compared to 2002 is primarily due to an
increase in supplemental  retirement plan accruals. The increased amount in 2001
compared to 2002 is primarily due to an increase in 2001 incentive  compensation
paid as a result of the  successful  resolution  of the  withholding  obligation
issue as further described below.

Professional  and outside  services  decreased to  $1,476,000  in 2003 from
$1,641,000  in 2002,  and rose from  $1,020,000  in 2001.  The  decrease in 2003
compared to 2002 is the result of legal fees  incurred  in 2002  relating to the
Zurich arbitration proceedings which were not incurred in 2003, partially offset
by increased  legal fees incurred for the Supervisory  Goodwill  litigation as a
result of the court  decision and  subsequent  filings during 2003. The increase
for the year 2002 compared with the year 2001 is primarily due to legal expenses
incurred in connection  with the Zurich  Arbitration  proceedings.  Expenses for
professional  and outside  services in 2003,  2002 and 2001 do not include costs
associated  with  defending  pending  and  threatened  litigation,   which  were
previously  reserved for and were charged  against the litigation  reserves when
paid.

Property operating and maintenance expenses were $491,000 in 2003, $130,000
in 2002 and $117,000 in 2001. The 2003 period includes expenses relating to both
of the Company's  owned  commercial  office  buildings for a full year. The 2002
period  includes  expenses  relating to a 14,500 square foot building for a full
year,  plus expenses for a 38,000 square foot  building for December  2002.  The
lower  expense in 2001  compared to 2002 is due to the fact that the 2001 period
reflects property  ownership expenses for a 14,500 square foot building for only
8 months,  offset to some extent by office  relocation  costs  incurred in 2001.
Property  operating  and  maintenance  expenses  have not been reduced by tenant
reimbursements.

Interest income was $334,000 in 2003, $705,000 in 2002, $2,099,000 in 2001.
The decrease in 2003 compared to the 2002 period, was primarily  attributable to
a lower average level of investment  securities held as a result of the building
purchased  in  December  2002,  and to a lesser  extent,  a lower  yield on cash
equivalents and investment securities.  These decreases were partially offset by
interest income received on higher yielding investment  securities available for
sale.  The  decrease  in  2002  compared  to  the  2001  period,  was  primarily
attributable to a lower yield on cash equivalents and investment securities, and
to a lesser  extent,  a lower average level of investment  securities.  Interest
rates on  investments in treasury bills  decreased  throughout  2003 compared to
2002 and 2001.  During 2003  interest  rates on  investments  in treasury  bills
ranged from  approximately 1.4% down to 0.9% compared to approximately 1.9% down
to 1.2% in 2002 and approximately 6.0% down to 3.5% in 2001.

In the year ended  December  31, 2003,  other  income  represents a federal
income tax refund for the tax year 1996.  Other  income of  $215,000  in 2002 is
principally  attributable to the collection on an investment  previously written
off.  Other  income  of  $75,000  for  the  year  ended  December  31,  2001  is
attributable   to  the   collection  of  a  receivable   previously   considered
uncollectable.

In 2002,  additional  other income of  $788,000,  is the result of the full
termination of the retiree  medical and life insurance  plans in accordance with
generally accepted  accounting  principles.  The Company has no future liability
for  any of  these  medical  or  life  insurance  plans.  The  Company  and  its
subsidiaries  do  not  provide   postretirement   welfare  benefits  to  current
employees.

The 2001  results  include a  $66,388,000  Withholding  Obligation  reserve
reversal  which is reflected as other  income in the  Consolidated  Statement of
Operations  as a result of a May 2001 United States Tax Court ruling in favor of
City  Investing  Company  ("City"),  holding  that City was not  liable  for the
payment of withholding  taxes. The IRS had contended that the withholding of tax
on interest  payments  were due by City in  connection  with City's  Netherlands
Antilles finance subsidiary for the years 1979 through 1985.

Write down of investments in 2002 reflects the Company's  write down of its
investments  in SDG and  AMDG of  $1,250,000  and  $350,000,  respectively.  The
Company  recorded  the write down in  September  2002,  in  connection  with the
ongoing  evaluation of its investments,  and the determination that the value of
its investments in SDG and AMDG had been other than temporarily impaired.  Under
GAAP,  if an  investment  is other than  temporarily  impaired,  the  Company is
required to reflect an adjustment in its Financial Statements.


<PAGE>


Factors   considered  in  the  Company's   decision  to  write  down  these
investments  included,  in part, the general inactive status of SDG's and AMDG's
clinical testing, as well as SDG's and AMDG's current financial  condition.  The
Company  is not  selling  or  disposing  of its  investments  in SDG or AMDG and
remains  hopeful that it will be able to fully realize its investment  value. In
September  2000,  the Company  filed a lawsuit  against  SDG, and certain of its
officers and directors, to pursue claims against the parties,  including but not
limited to SDG's failure to honor a contract which granted the Company the right
to act as the exclusive investment  banking/financial advisor to SDG, and all of
its subsidiaries and affiliates.  See Part II - Item 8, Note 10 to the Company's
consolidated  financial  statements,  for further information.  The Company will
continue to monitor the status of its SDG and AMDG  investments  and  vigorously
pursue recovery of its legal claims. However, there can be no assurance that the
Company  will be able to  recover  all or any  part of its  investment  in these
companies or that its legal actions will be successful.

The 2003,  2002 and 2001 income tax  provisions  of $125,000,  $124,000 and
$165,000, respectively, are principally attributable to state and local taxes.

A  reconciliation  between income taxes  computed at the statutory  federal
rate and the provision for income taxes is included in Part II - Item 8 - Note 9
to the Company's consolidated financial statements.

From time to time,  the Company may  publish  "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,  or make oral
statements that constitute  forward-looking  statements.  These  forward-looking
statements  may relate to such  matters as  anticipated  financial  performance,
future revenues or earnings, business prospects, projected ventures, anticipated
market  performance,  and similar  matters.  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)  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 the Company's current material litigation matters,
or unfavorable  decisions in other supervisory  goodwill cases. The Company does
not undertake any obligation to update or revise any forward-looking  statements
whether as a result of future events, new information or otherwise.

Application of Critical Accounting Policies

Our  consolidated  financial  statements  are  based on the  selection  and
application of accounting  principles generally accepted in the United States of
America,  which require us to make estimates and assumptions about future events
that  affect  the  amounts   reported  in  our  financial   statements  and  the
accompanying  notes.  Future events and their effects cannot be determined  with
absolute  certainty.  The  determination  of estimates  requires the exercise of
judgment.  Actual  results  could  differ  from  those  estimates,  and any such
differences  may be material to the  financial  statements.  We believe that the
following accounting policies, which are important to our financial position and
results of  operations,  require a higher  degree of judgment and  complexity in
their  application  and represent the critical  accounting  policies used in the
preparation of our financial statements.  If different assumptions or conditions
were to prevail,  the results  could be materially  different  from our reported
results. For a summary of all our accounting policies,  including the accounting
policies discussed below, see Part II - Item 8 - Note 2.

Supplemental   Retirement   Plan:  Our   supplemental   pension  plan  (the
"Supplemental  Plan")  accrued  liability and benefit  costs are developed  from
actuarial valuations. Inherent in these valuations are key assumptions including
discount rates, and projected  future  earnings,  which are updated on an annual
basis at the beginning of each year. We are required to consider  current market
conditions,  including  changes in interest rates, in making these  assumptions.
Material changes in our accrued Supplemental Plan liability and annual costs may
occur in the future due to changes in assumptions  or experience  different than
that  assumed.  The  Supplemental  Plan  liability  is not  funded and is net of
unrecognized losses of $1,730,000.

The key assumptions used in developing the 2003  Supplemental  Plan benefit
costs  and  accrued  liability  were a  6.25%  discount  rate,  a 6.0%  rate  of
compensation  increase,  and the  amortization of  unrecognized  losses over the
average  remaining  lives  of  active   participants.   These  assumptions  were
consistent with prior year assumptions except that the discount rate was reduced
by one-half of a percent due to current market conditions.



<PAGE>


Legal  Proceedings:  From time to time the Company and its subsidiaries may
be named  as a  defendant  in  various  lawsuits  or  proceedings.  Based on the
favorable  resolution during 2003, of litigation pending,  the Company presently
is not aware of any pending or threatened litigation which could have a material
adverse  effect  on the  consolidated  financial  statements  presented  herein.
Management of the Company in consultation with outside legal counsel continually
reviews  the  likelihood  of  liability  and  associated  costs of  pending  and
threatened  litigation including the basis for the calculation of any litigation
reserves.  The assessment of these reserves includes an exercise of judgment and
is a matter of opinion.  As of December  31, 2003,  the residual  balance of the
litigation  reserves of $1,267,000 was reclassified to other liabilities for the
payment of  previously  reserved  for legal fees.  Prior year  amounts have been
reclassified  for  comparison  purposes.  The  Company  intends to  aggressively
contest  all  threatened  litigation  and  contingencies,  as well as pursue all
sources for  contributions  to  settlements.  For a  discussion  of lawsuits and
proceedings, see Part II - Item 8 - Note 10.

Income Tax Audits: The Company's federal, state and local tax returns, from
time to time,  may be  audited by the tax  authorities,  which  could  result in
proposed assessments or a change in the net operating loss ("NOL") carryforwards
currently  available.  The  Company's  federal  income tax returns for the years
subsequent to 1992 have not been reviewed by the Internal Revenue  Service.  The
accrued amounts for income taxes reflects  management's  best judgment as to the
amounts payable for all open tax years.

Deferred Tax Assets:  As of December 31, 2003, the Company had deferred tax
assets arising  primarily from net operating loss  carryforwards and alternative
minimum tax credits  available to offset  taxable  income in future  periods.  A
valuation  allowance has been  established for the entire net deferred tax asset
of $34 million,  as  management,  at the current time,  has no basis to conclude
that realization is more likely than not. The valuation allowance was calculated
in  accordance  with the  provisions  of Financial  Accounting  Standards  Board
Statement of Financial  Accounting  Standards  No. 109,  "Accounting  for Income
Taxes" ("SFAS 109"), which places primary  importance on a company's  cumulative
operating  results for the current and preceding  years. We intend to maintain a
valuation  allowance for the entire deferred tax asset until sufficient positive
evidence exists to support a reversal. See Part II - Item 8 - Note 9.



ITEM 7A. 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  at December 31, 2003 and 2002,
with maturity dates of less than one year consist of the following:
<TABLE>
<CAPTION>

                                                                   2003                              2002
(in thousands)                                              ==========================  =========================

<S>                                                        <C>             <C>          <C>              <C>
                                                            Carrying          Fair       Carrying             Fair
                                                               Value         Value          Value            Value
                                                            -----------    -----------  ------------    ----------

U.S. Treasury Bills.....................................        $17,329        $17,331       $18,259       $18,260
                                                                =======        =======       =======       =======

Weighted average interest rate..........................           0.94%                        1.24%
                                                                =======                      =======
</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 year.
















<PAGE>

ITEM 8.       FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                         REPORT OF INDEPENDENT AUDITORS




To the Board of Directors
and Stockholders of
AmBase Corporation

In our opinion,  the consolidated  financial statements listed in the index
appearing under Item 15(a) (1) present  fairly,  in all material  respects,  the
financial  position of AmBase  Corporation and its  subsidiaries at December 31,
2003 and 2002, and the results of their operations and their cash flows for each
of the three years in the period  ended  December  31, 2003 in  conformity  with
accounting  principles  generally  accepted in the United States of America.  In
addition,  in our opinion,  the financial statement schedule listed in the index
appearing under Item 15(a) (2) presents fairly,  in all material  respects,  the
information  set  forth  therein  when  read in  conjunction  with  the  related
consolidated  financial  statements.  These  financial  statements and financial
statement  schedule are the  responsibility  of the  Company's  management;  our
responsibility  is to  express  an opinion  on these  financial  statements  and
financial  statement  schedule  based on our audits.  We conducted our audits of
these statements in accordance with auditing standards generally accepted in the
United  States of America,  which  require that we plan and perform the audit to
obtain reasonable  assurance about whether the financial  statements are free of
material  misstatement.  An audit includes examining,  on a test basis, evidence
supporting the amounts and  disclosures in the financial  statements,  assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall  financial  statement  presentation.  We believe that our
audits provide a reasonable basis for our opinion.




/s/PricewaterhouseCoopers, LLP
New York, New York
March 15, 2004



<PAGE>
<TABLE>
<CAPTION>


                       AMBASE CORPORATION AND SUBSIDIARIES
                      Consolidated Statements of Operations
                             Years Ended December 31



<S>                                                                         <C>             <C>               <C>

(in thousands, except per share data)                                       2003             2002              2001
                                                                            ====             ====              ====
Revenues:
Rental income                                                           $  2,578        $     477           $   179
                                                                        --------         --------          --------

Operating expenses:
Compensation and benefits.....................................             3,852            3,515             5,021
Professional and outside services.............................             1,476            1,641             1,020
Property operating and maintenance ...........................               491              130               117
Depreciation .................................................               329               74                57
Insurance.....................................................               100               73                65
Other operating...............................................               188              161               186
                                                                        --------         --------          --------
                                                                           6,436            5,594             6,466
                                                                        --------         --------          --------
Operating loss................................................            (3,858)          (5,117)           (6,287)
                                                                        --------         --------          --------
Interest income...............................................               334              705             2,099
Realized gains of the sales of investment
    securities available for sale.............................                64                -                 -
Other income..................................................                26              215                75
Other income - termination of postretirement welfare plans....                 -              788                 -
Reversal of withholding obligation reserve....................                 -                -            66,388
Write down of investments.....................................                 -           (1,600)                -
                                                                        --------         --------          --------
Income (loss) before income taxes.............................            (3,434)          (5,009)           62,275
Income tax expense ...........................................              (125)            (124)             (165)
                                                                        --------         --------          --------
Net income (loss).............................................          $ (3,559)        $ (5,133)         $ 62,110
                                                                        ========         ========          ========
Net income (loss) per common share:
Basic.........................................................          $  (0.08)        $(0.11)           $  1.34
Assuming dilution ............................................             (0.08)         (0.11)              1.34
                                                                        ========         =======           =======
Weighted average common shares outstanding:
Basic.........................................................            46,182           46,209            46,209
                                                                        ========         ========           =======
Assuming dilution.............................................            46,182           46,209            46,314
                                                                        ========         ========           =======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.


<PAGE>


                   AMBASE CORPORATION AND SUBSIDIARIES
                 Consolidated Balance Sheets December 31


<TABLE>
<CAPTION>
<S>                                                                                     <C>              <C>
(in thousands, except for share amounts)                                                     2003              2002
                                                                                             ====              ====
Assets:
Cash and cash equivalents.......................................................        $   2,785        $    4,918
Investment securities:
    Held to maturity (market value $17,331 and $18,260, respectively)...........           17,329            18,259
    Available for sale, carried at fair value...................................            1,774               621
                                                                                        ---------        ----------
Total investment securities.....................................................           19,103            18,880

Accounts receivable ............................................................               21               109
Real estate owned:
     Land.......................................................................            6,954             6,954
     Buildings..................................................................           12,810            12,772
                                                                                        ---------        ----------
                                                                                           19,764            19,726
     Less: accumulated depreciation ............................................             (433)             (104)
                                                                                        ---------        ----------
Real estate owned, net..........................................................           19,331            19,622
                                                                                        ---------        ----------
Other assets....................................................................              428               127
                                                                                        ---------        ----------
Total assets....................................................................        $  41,668        $   43,656
                                                                                        =========        ==========
Liabilities and Stockholders' Equity:
Liabilities:
Accounts payable and accrued liabilities........................................        $   1,376        $    1,563
Supplemental retirement plan....................................................            9,292             7,608
Other liabilities...............................................................            1,633             1,583
                                                                                        ---------        ----------
Total liabilities...............................................................           12,301            10,754
                                                                                        ---------        ----------
Commitments and contingencies...................................................                -                 -
                                                                                        ---------        ----------
Stockholders' equity:
Common stock ($0.01 par value, 200,000,000 authorized,
   46,335,007 issued)...........................................................              463               463
Paid-in capital.................................................................          547,940           547,940
Accumulated other comprehensive income..........................................               84                22
Accumulated deficit.............................................................         (518,435)         (514,876)
Treasury stock, at cost - 176,488 and 126,488 shares, respectively..............             (685)             (647)
                                                                                        ---------        ----------
Total stockholders' equity......................................................           29,367            32,902
                                                                                        ---------        ----------
Total liabilities and stockholders' equity......................................        $  41,668        $   43,656
                                                                                        =========        ==========
</TABLE>

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


<PAGE>




                     AMBASE CORPORATION AND SUBSIDIARIES
          Consolidated Statements of Changes in Stockholders' Equity




<TABLE>
<CAPTION>

<S>                             <C>          <C>          <C>                        <C>                  <C>          <C>

                                                          Accumulated other
(in thousands)                  Common        Paid-in         comprehensive               Accumulated     Treasury
                                 stock        capital          income (loss)                  deficit        stock     Total
                                =======      ========     ==================         ================     ========     =====
December 31, 2000.............  $   463      $547,940     $               -          $       (571,853)    $  (647)  $(24,097)
Net income....................        -             -                     -                    62,110           -     62,110
                                -------      --------     -----------------          ----------------     -------   --------

December 31, 2001.............      463       547,940                     -                  (509,743)       (647)    38,013
Net loss......................        -             -                     -                    (5,133)          -     (5,133)
Other comprehensive
      income .................        -             -                    22                         -           -         22
                                -------      --------     ------------------         ----------------     -------   --------

December 31, 2002.............      463       547,940                    22                  (514,876)       (647)    32,902
Net loss......................        -             -                     -                    (3,559)          -     (3,559)
Common stock repurchased......        -             -                     -                         -         (38)       (38)
Other comprehensive
      income..................        -             -                    62                         -           -         62
                                -------      --------     -----------------          ----------------     -------   --------
December 31, 2003.............  $   463     $  547,940    $              84          $      (518,435)     $  (685)  $ 29,367
                                =======     ==========    =================          ================     =======   ========
</TABLE>


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




                       AMBASE CORPORATION AND SUBSIDIARIES
             Consolidated Statements of Comprehensive Income (Loss)
                             Years Ended December 31
                                 (in thousands)




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

                                                                       2003            2002           2001
                                                                      ======          ======         ======
Net income (loss) ............................................       $(3,559)        $(5,133)       $ 62,110

Unrealized holding gains on investment securities -
     available for sale, net of tax effect of $0..............            84              22               -
                                                                     -------         -------        --------

Comprehensive income (loss)...................................       $(3,475)        $(5,111)        $62,110
                                                                     =======         =======         =======
</TABLE>

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





<PAGE>

                       AMBASE CORPORATION AND SUBSIDIARIES
                      Consolidated Statements of Cash Flows
                             Years Ended December 31


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

(in thousands)                                                                       2003             2002           2001
                                                                                     ====             ====           ====
Cash flows from operating activities:
Net income (loss)........................................................        $ (3,559)       $ (5,133)       $ 62,110
Adjustments to reconcile net income (loss) to net cash used
     by operating activities:
    Accretion of discount - investment securities........................            (198)            (631)        (2,037)
    Depreciation and amortization........................................             329               74             57
    Realized gains on investment securities available for sale...........             (64)               -              -
     Termination of postretirement welfare plans ........................               -             (788)             -
    Reversal of withholding obligation reserve...........................               -                -        (66,388)
Changes in other assets and liabilities:
    Accounts receivable .................................................              88             (103)             -
    Write down of investments ...........................................               -            1,600              -
    Other assets.........................................................            (301)             (85)            (3)
    Accounts payable and accrued liabilities.............................            (187)          (1,704)         1,378
    Other liabilities....................................................           1,734              813            243
Other, net...............................................................               -               21              -
                                                                                 --------    .    --------       --------
Net cash used by operating activities....................................          (2,158)          (5,936)        (4,640)
                                                                                 --------         --------       --------
Cash flows from investing activities:
Maturities of investment securities - held to maturity...................          50,001          128,715        102,765
Purchases of investment securities - held to maturity....................         (48,873)        (106,111)      ( 94,413)
Purchases of investment securities - available for sale..................          (1,668)            (599)             -
Sales of investment securities - available for sale......................             641                -              -
Building improvements....................................................             (38)               -              -
Purchase of real estate..................................................               -          (17,291)        (2,435)
Other, net...............................................................               -               10              9
                                                                                 --------         --------       --------
Net cash provided by investing activities................................              63            4,724          5,926
                                                                                 --------    .    --------       --------
Cash flows from financing activities:
Common stock repurchased.................................................             (38)               -              -
                                                                                 --------         --------       --------
Net cash used by financing activities....................................             (38)               -              -
                                                                                 --------         --------       --------
Net increase (decrease) in cash and cash equivalents.....................          (2,133)          (1,212)         1,286
Cash and cash equivalents at beginning of year...........................           4,918            6,130          4,844
                                                                                 --------         --------       --------
Cash and cash equivalents at end of year.................................        $  2,785         $  4,918       $  6,130
                                                                                 ========         ========       ========
Supplemental cash flow disclosure:
Income taxes paid........................................................        $     135        $    156       $    179
                                                                                 =========        ========       ========
</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

AmBase  Corporation  (the "Company") is a holding company which,  through a
wholly owned  subsidiary,  owns two  commercial  office  buildings in Greenwich,
Connecticut and a 6.3% ownership  interest in SDG, Inc.  ("SDG"),  a development
stage  pharmaceutical  company. The Company previously held a majority ownership
interest in  Augustine  Asset  Management,  Inc.  ("Augustine"),  an  investment
advisor, and also previously owned an insurance company and a savings bank.

In February  1991,  the  Company  sold its  ownership  interest in The Home
Insurance  Company  ("The  Home") and its  subsidiaries.  On  December  4, 1992,
Carteret  Savings Bank, FA ("Carteret") was placed in receivership by the Office
of Thrift Supervision ("OTS").

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 interest earned 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 Note 10.

Note 2 - Summary of Significant Accounting Policies

The consolidated financial statements have been prepared in accordance with
accounting  principles  generally  accepted  in the  United  States  of  America
("GAAP").   Certain   reclassifications   have  been  made  to  the  prior  year
consolidated financial statements to conform to the 2003 presentation.

Use of estimates in the preparation of financial statements:

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.

Principles of consolidation:

The consolidated  financial statements are comprised of the accounts of the
Company  and  its  majority  owned  subsidiaries.   All  material   intercompany
transactions and balances have been eliminated.  The Company continually reviews
its  investments  to  determine  whether a decline in fair value  below the cost
basis is other  than  temporary.  If the  decline  in fair value is judged to be
other than  temporary,  the cost basis of the  security is written  down to fair
market  value and the amount of the write down is included  in the  Consolidated
Statement of Operations.

Cash and cash equivalents:

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

Investment securities:

Securities  that the  Company has both the  positive  intent and ability to
hold to maturity are classified as investment  securities - held to maturity and
are carried at amortized cost. Investment securities - available for sale, which
are those  securities  that may be sold prior to  maturity,  are carried at fair
value, with any net unrealized gains or losses reported in a separate  component
of stockholders' equity, net of taxes.

Interest and  dividends on  investment  securities  are  recognized  in the
Consolidated  Statement of Operations when earned.  Realized gains and losses on
the sale of investment  securities - available for sale are calculated  using an
average cost basis for determining  the cost basis of the  securities.  The fair
value of publicly  traded  investment  securities  is determined by reference to
current market quotations.





<PAGE>



                       AMBASE CORPORATION AND SUBSIDIARIES
             Notes to Consolidated Financial Statements (continued)


Income taxes:

The Company  and its  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, a greater than 50% probability exists that the tax benefits will actually be
realized sometime in the future. At the present time, management has no basis to
conclude that  realization  is more likely than not and a valuation  reserve has
been recorded against net deferred tax assets.

Earnings per share:

Basic  earnings  per share  ("EPS")  excludes  dilution  and is computed by
dividing  net income  (loss) by the  weighted  average  number of common  shares
outstanding for the period.  Diluted EPS reflects the potential  dilution of EPS
that could occur if options to issue common stock were exercised.

Stock-based compensation:

The Company adopted the disclosure requirements of the Financial Accounting
Standards  Board,   Statement  of  Financial   Accounting   Standards  No.  123,
"Accounting for Stock-Based  Compensation" ("SFAS 123") and continues to account
for stock  compensation  using APB Opinion 25,  "Accounting  for Stock Issued to
Employees"  ("APB 25"),  making pro forma  disclosures  of net income (loss) and
earnings  per share as if the fair  value  based  method  had been  applied.  No
compensation expense, attributable to stock incentive plans, has been charged to
earnings.  For a further  discussion and a summary of assumptions used, see Note
8.

For  purposes of pro forma  disclosures,  the  estimated  fair value of the
options is amortized to expense over the options' vesting period. If the Company
had elected to recognize  compensation  cost for stock options based on the fair
value  at the  date of grant  for  stock  options,  consistent  with the  method
prescribed  by Statement  123, net income (loss) and net income (loss) per share
for the year ended December 31, would have been changed to the pro forma amounts
indicated below.
<TABLE>
<CAPTION>
<S>                                                                           <C>                <C>                 <C>

(in thousands, except per share data)                                          2003                2002               2001
                                                                              =====               =====              =====
Net income (loss):
As reported.....................................................         $   (3,559)          $  (5,133)         $  62,110
Deduct: pro forma stock based compensation expense for
    stock options pursuant to Statement 123.....................               (104)               (216)               (42)
                                                                         ----------            ---------          --------
Pro forma.......................................................         $   (3,663)          $  (5,349)         $  62,068
                                                                         ==========           ==========         =========
Net income (loss) per common share:
Basic - as reported.............................................         $    (0.08)          $   (0.11)         $    1.34
Basic - pro forma...............................................              (0.08)              (0.11)              1.34
Assuming dilution - as reported.................................              (0.08)              (0.11)              1.34
Assuming dilution - pro forma ..................................              (0.08)              (0.11)              1.34
                                                                         ==========           ==========          ========
</TABLE>

Deferred rent receivable and revenue recognition:

The Company  earns  rental  income  under  operating  leases with  tenants.
Minimum lease rentals are recognized on a  straight-line  basis over the term 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 is 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.

<PAGE>



                       AMBASE CORPORATION AND SUBSIDIARIES
             Notes to Consolidated Financial Statements (continued)


Property operating and maintenance:

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 lease agreements. Depreciation:

Depreciation  expense for buildings is calculated on a straight-line  basis
over 39 years. Tenant improvements are typically  depreciated over the remaining
life of the tenants lease.

New Accounting Pronouncements:

In July 2001, the FASB issued Statement of Financial  Accounting  Standards
No.  141,  "Business   Combination"  (SFAS  141")  and  Statement  of  Financial
Accounting  Standards No. 142,  "Goodwill and Other  Intangible  Assets"  ("SFAS
142").  SFAS 141 requires the purchase  method of  accounting to be used for all
business  combinations  initiated after June 30, 2001, and addresses the initial
recognition and measurement of goodwill and other  intangible  assets  acquired.
SFAS 142 requires  that  goodwill  not be amortized  but instead be measured for
impairment. The Company adopted SFAS 141 and SFAS 142 effective July 1, 2001.

In November 2002, the FASB issued FASB  Interpretation No. 45, "Guarantor's
Accounting  and  Disclosure  Requirements  for  Guarantees,  Including  Indirect
Guarantees  of  Indebtedness  of Others"  ("FIN 45").  FIN 45 requires that upon
issuance of a guarantee,  the guarantor  must recognize a liability for the fair
value of the  obligation  it assumes  under  that  guarantee  regardless  if the
guarantor receives separate identifiable consideration.

In January 2003, the FASB issued FASB Interpretation No. 46, "Consolidation
of  Variable  Interest  Entities"  ("FIN  46").  FIN  46  provides  guidance  on
identifying  entities  for which  control is achieved  through  means other than
through voting rights and how to determine if the entity should be consolidated.
In addition,  FIN 46 requires all enterprises with a significant interest in the
entity to make additional disclosures.

The  adoption  of SFAS  141,  SFAS  142,  FIN 46 and FIN 46 have  not had a
significant  effect,   individually  or  in  the  aggregate,  on  the  Company's
consolidated financial position or consolidated results of operations.



<PAGE>


                       AMBASE CORPORATION AND SUBSIDIARIES
             Notes to Consolidated Financial Statements (continued)


Note 3 - 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 at December 31 consist of the following:
<TABLE>
<CAPTION>

                                                2003                                              2002
                              ========================================        =========================================
<S>                           <C>             <C>                <C>          <C>             <C>                 <C>

                                                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...   $  17,329        $  17,329      $  17,331       $  18,259         $  18,259      $  18,260
Available for Sale:
     Equity Securities....       1,774            1,690          1,774             621               599            621
                             ---------        ---------      ---------       ---------         ---------      ---------
                             $  19,103        $  19,019      $  19,105       $  18,880         $  18,858      $  18,881
                             =========        =========      =========       =========         =========      =========
</TABLE>

The gross unrealized gains on investment securities at December 31, consist
of the following:
<TABLE>
<CAPTION>
<S>                                                                                         <C>                <C>
(in thousands)                                                                                 2003                2002
                                                                                               ====                ====
Held to Maturity - Gross unrealized gains...........................................        $     2            $      1
                                                                                               ====                ====
Available for Sale - Gross unrealized gains.........................................        $    84            $     22
                                                                                               ====                ====

The realized gain on the sale of investment  securities  available for sale
for the years ended December 31, 2003 and 2002, is as follows:

(in thousands)                                                                                 2003                2002
                                                                                               ====                ====
Net sale proceeds...................................................................        $   641            $      -
Cost basis..........................................................................           (577)                  -
                                                                                               ----                ----
Realized gain.......................................................................        $    64            $      -
                                                                                               ====                ====

</TABLE>
In 2002, in connection with the ongoing evaluation of its investments,  the
Company  determined the value of its investments in SDG and AMDG, Inc.  ("AMDG")
had been other than temporarily impaired.  Under GAAP, if an investment is other
than temporarily  impaired,  the Company is required to reflect an adjustment in
its Financial Statements. Accordingly, the Company recorded a write down, during
2002,  of  its   investments  in  SDG  and  AMDG  of  $1,250,000  and  $350,000,
respectively.  See Note 10 - Legal  Proceedings - Litigation  with SDG, Inc. for
further   information.   The  Company  retains  ownership  of  these  investment
securities  consisting of convertible  preferred stock and common stock in AMDG,
which were purchased through private  placements.  These investments are carried
at a written down value of $0 at December 31, 2003 and 2002.



<PAGE>


                       AMBASE CORPORATION AND SUBSIDIARIES
             Notes to Consolidated Financial Statements (continued)

Note 4 - Earnings Per Share

The  calculation  of basic and diluted  earnings per share,  including  the
effect of dilutive securities, for the years ended December 31, is as follows:
<TABLE>
<CAPTION>
<S>                                                                  <C>                 <C>                   <C>

(in thousands, except per share data)                                 2003                2002                  2001
                                                                     =====               =====                 =====

Net income (loss).............................................   $  (3,559)          $  (5,133)              $62,110
                                                                     =====               =====                 =====

Weighted average common shares outstanding ...................      46,182              46,209                46,209

Effect of Dilutive Securities:
Assumed stock option exercise.................................           -                   -                   105
                                                                     -----               -----                 -----
Weighted average common shares outstanding assuming dilution..      46,182              46,209                46,314
                                                                     =====               =====                 =====
Net income (loss) per common share:
Basic.........................................................   $   (0.08)          $   (0.11)              $  1.34
Assuming dilution ............................................       (0.08)              (0.11)                 1.34
                                                                     =====               =====                 =====
</TABLE>

Options to purchase  common  stock of 1,125,000  shares in 2003,  1,170,000
shares in 2002 and 175,000 shares in 2001 were excluded from the  computation of
diluted earnings per share because these options were antidilutive.


Note 5 - Stockholders' Equity

Authorized  capital  stock  consists  of  50,000,000  shares of  cumulative
preferred stock,  $0.01 par value, and 200,000,000 shares of Common Stock, $0.01
par value.

Changes in the  outstanding  shares of Common  Stock of the  Company are as
follows:
<TABLE>
<CAPTION>
<S>                                                               <C>               <C>                 <C>

                                                                       2003              2002                2001
                                                                  ==============    ==============      ===============
Balance at beginning of year..........................              46,208,519       46,208,519          46,208,519

Common shares repurchased.............................                 (50,000)               -                   -
                                                                  --------------    --------------      ---------------
Balance at end of year................................              46,158,519       46,208,519          46,208,519
                                                                  ==============    ==============      ===============
</TABLE>

During June 2003, the Company  repurchased 50,000 shares of common stock at
a purchase  price of $0.75 per share  pursuant  to its common  stock  repurchase
plan.



<PAGE>


                       AMBASE CORPORATION AND SUBSIDIARIES
             Notes to Consolidated Financial Statements (continued)

At December 31, 2003, Common Stock balances exclude 176,488 treasury shares
carried  at an  average  cost of  $3.88  per  share,  aggregating  approximately
$685,000.  At December 31, 2002 and 2001,  Common Stock balances exclude 126,488
treasury   shares  carried  at  an  average  of  $5.12  per  share   aggregating
approximately $647,000.

At December 31,  2003,  there were  5,185,000  common  shares  reserved for
issuance under the Company's stock option and other employee benefit plans.

The Company  issued  75,000  previously  authorized  common  shares  during
February  2004, in connection  with the exercise of an employee  stock option at
the exercise price of $0.21 per share.


Stockholder Rights Plan:

On January 29, 1986, the Company's  Board of Directors  declared a dividend
distribution  of one right  for each  outstanding  share of Common  Stock of the
Company.  The rights, as amended,  which entitle the holder to purchase from the
Company a common share at a price of $75.00,  are not exercisable until either a
person or group of  affiliated  persons  acquires  25% or more of the  Company's
outstanding common shares or upon the commencement or disclosure of an intention
to  commence  a tender  offer or  exchange  offer for 20% or more of the  common
shares.  The rights are redeemable by the Company at $0.05 per right at any time
until the earlier of the tenth day following an  accumulation  of 20% or more of
the Company's shares by a single acquirer or group, or the occurrence of certain
Triggering Events (as defined in the Stockholder  Rights Plan). In the event the
rights become exercisable and thereafter, the Company is acquired in a merger or
other business combination,  or in certain other circumstances,  each right will
entitle the holder to purchase from the surviving corporation,  for the exercise
price,  Common Stock  having a market  value of twice the exercise  price of the
right.  The rights are subject to adjustment  to prevent  dilution and expire on
February 10, 2006.

Common Stock Repurchase Plan:

The Company's Board of Directors has approved and authorized  management to
establish and implement a common stock repurchase plan (the "Repurchase  Plan").
The  Repurchase  Plan  is  dependent  upon  favorable  business  conditions  and
acceptable purchase prices for the common stock and allows for the repurchase of
up to 10 million shares of the Company's common stock in the open market. During
June 2003, the Company  repurchased  50,000 shares of common stock at a purchase
price of $0.75 per share pursuant to the Repurchase Plan.

Note 6 - Comprehensive Income

Comprehensive  income (loss), for the year ended December 31 is composed of
net income  (loss) and other  comprehensive  income  (loss)  which  includes the
change in  unrealized  gains on  investment  securities  available  for sale, as
follows:
<TABLE>
<CAPTION>
<S>                                          <C>                              <C>

(in thousands)                                          2003                            2002
                                               ===============================  ==========================
                                               Unrealized        Accumulated    Unrealized     Accumulated
                                               Gains on          Other            Gains on           Other
                                               Investment        Comprehensive  Investment   Comprehensive
                                               Securities        Income         Securities          Income
                                               ==========        =============  ==========   =============
Balance beginning of period..................  $       22        $          22  $        -   $           -
Change during the period.....................          62                   62          22              22
..............................................  ----------        -------------  ----------   -------------
Balance end of period........................  $       84        $          84  $       22   $          22
                                               ==========        =============  ==========   =============
</TABLE>

There were no components of other comprehensive income (loss) during 2001.





<PAGE>


                       AMBASE CORPORATION AND SUBSIDIARIES
             Notes to Consolidated Financial Statements (continued)

Note 7 - Pension and Savings Plans

The  Company   sponsors  a  non-qualified   supplemental   retirement  plan
("Supplemental Plan") under which only one current executive officer and certain
former officers of the Company are  participants.  The cost of the  Supplemental
Plan is actuarially determined and is accrued but not funded.

Pension expense for the  Supplemental  Plan for the years ended December 31
was as follows:
<TABLE>
<CAPTION>
<S>                                                                         <C>                <C>                <C>

(in thousands)                                                              2003                2002               2001
                                                                            ====                ====               ====
Service cost of current period................................       $       870        $        756        $       537
Interest cost on projected benefit obligation.................               646                 549                521
Amortization of unrecognized losses...........................               206                  82                 51
                                                                     -----------        ------------        -----------
                                                                     $     1,722        $      1,387        $     1,109
                                                                     ===========        ============        ===========
</TABLE>

A reconciliation  of the changes in the projected  benefit  obligation from
the beginning of the year to the end of the year is as follows:
<TABLE>
<CAPTION>
<S>                                                                                          <C>                   <C>

(in thousands)                                                                               2003                  2002
                                                                                             ====                  ====
Projected benefit obligation at beginning of year...............................        $   9,601         $       8,077
Service cost....................................................................              869                   756
Interest cost...................................................................              646                   549
Actuarial (gain) loss, including effect of change in assumptions................              (56)                  679
Benefits paid...................................................................              (38)                 (460)
                                                                                        ---------         -------------
Projected benefit obligation at end of year.....................................        $  11,022         $       9,601
                                                                                        =========         =============

Accrued  pension  costs for the  Supplemental  Plan at December 31, and the
major assumptions used to determine these amounts, are summarized below:

(dollars in thousands)                                                                       2003                  2002
                                                                                             ====                  ====
Actuarial present value of benefit obligations:
Accumulated benefit obligations, fully vested...................................        $   9,238         $       7,521
                                                                                        =========         =============
Projected benefit obligation for service rendered to date.......................        $  11,022         $       9,601
Unrecognized net loss...........................................................           (1,730)               (1,993)
                                                                                        ---------         -------------
Accrued pension costs...........................................................        $   9,292              $  7,608
                                                                                        =========         =============
Major assumptions:
Discount rate...................................................................             6.25%                 6.75%
Rate of increase in future compensation.........................................             6.0%                  6.0%
                                                                                        =========         =============
</TABLE>

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 salary, which are matched by the
Company at a percentage  determined  annually.  The employer  match is currently
100% of the employee's salary 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  salary   reduction   contributions.   The  Company's   matching
contributions to the Savings Plan, charged to expense, were $36,000, $24,000 and
$14,000 in 2003, 2002 and 2000,  respectively.  All contributions are subject to
maximum limitations contained in the Code.
<PAGE>

                       AMBASE CORPORATION AND SUBSIDIARIES
             Notes to Consolidated Financial Statements (continued)

Note 8- Incentive Plans

Under the Company's 1994 Senior Management Incentive Compensation Plan (the
"1994 Plan"), an executive officer of the Company whose compensation is required
to be reported to  stockholders  under the Securities  Exchange Act of 1934 (the
"Participants") and who is serving as such at any time during the fiscal year as
to which an award is granted, may receive an award of a cash bonus ("Bonus"), in
an amount  determined  by the  Personnel  Committee  of the  Company's  Board of
Directors (the  "Committee")  and payable from an annual bonus fund (the "Annual
Bonus  Pool").   The  Committee  may  award  Bonuses  under  the  1994  Plan  to
Participants  not later  than 120 days  after the end of each  fiscal  year (the
"Reference Year").

If the  Committee  grants a Bonus  under the 1994  Plan,  the amount of the
Annual Bonus Pool will be an amount equal to the sum of (i) plus (ii), where:

     (i) is ten  percent  (10%) of the  amount  by  which  the  Company's  Total
Stockholders'  Equity, as defined, on the last day of a Reference Year increased
over the Company's Total  Stockholders'  Equity, as defined,  on the last day of
the immediately preceding Reference Year; and

     (ii) is five  percent  (5%) of the  amount  by which the  Company's  market
value,  as defined,  on the last day of the Reference  Year  increased  over the
Company's  market value on the last day of the immediately  preceding  Reference
Year.

Notwithstanding the foregoing,  the 1994 Plan provides that in the event of
a decrease in either or both of items (i) and/or (ii)  above,  the Annual  Bonus
Pool is determined by reference to the last Reference Year in which there was an
increase in such item.  If the  Committee  determines  within the  120-day  time
period to award a Bonus,  the share of the Annual  Bonus Pool to be allocated to
each  Participant  shall be as  follows:  45% of the Annual  Bonus Pool shall be
allocated to the Company's Chief Executive Officer,  and 55% of the Annual Bonus
Pool  shall be  allocated  pro  rata to each of the  Company's  Participants  as
determined  by the  Committee.  The Committee in its  discretion  may reduce the
percentage of the Annual Bonus Pool to any  Participant  for any Reference Year,
and such reduction  shall not increase the share of any other  Participant.  The
1994 Plan is not the  exclusive  plan under  which the  Executive  Officers  may
receive cash or other incentive  compensation  or bonuses.  No Bonuses were paid
attributable to the 1994 Plan for 2003.

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.  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.  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.



<PAGE>


                       AMBASE CORPORATION AND SUBSIDIARIES
             Notes to Consolidated Financial Statements (continued)

As a condition  to any award of  Restricted  Stock or Merit Award under the
1993 Plan, the Committee may require a participant to pay an amount equal to, or
in excess of, the par value of the shares of  Restricted  Stock or Common  Stock
awarded to him or her. Restricted Stock may not be sold, assigned,  transferred,
pledged or otherwise encumbered during a "Restricted Period",  which in the case
of grants to  employees  shall not be less than one year from the date of grant.
The Restricted Period with respect to any outstanding shares of Restricted Stock
awarded to  employees  may be reduced by the  Committee  at any time,  but in no
event  shall  the  Restricted  Period be less  than one  year.  Except  for such
restrictions,  the  employee  as the owner of such  stock  shall have all of the
rights of a  stockholder  including,  but not limited to, the right to vote such
stock and to receive  dividends  thereon as and when paid.  In the event that an
employee's  employment is terminated  for any reason,  an employee's  Restricted
Stock will be forfeited;  provided,  however,  that the Committee may limit such
forfeiture in its sole  discretion.  At the end of the  Restricted  Period,  all
shares  of  Restricted  Stock  shall  be  transferred  free  and  clear  of  all
restrictions to the employee.  In the case of a Change in Control of the Company
(as defined in the 1993 Plan),  an  employee  may receive his or her  Restricted
Stock free and clear of all restrictions in the discretion of the Committee,  or
as may otherwise be provided pursuant to the employee's Restricted Stock award.

Performance  Share  awards of  Common  Stock  under the 1993 Plan  shall be
earned on the basis of the  Company's  performance  in relation  to  established
performance  measures  for a specific  performance  period.  Such  measures  may
include, but shall not be limited to, return on investment,  earnings per share,
return on stockholder's  equity, or return to stockholders.  Performance  Shares
may not be sold, assigned,  transferred,  pledged or otherwise encumbered during
the relevant performance period.  Performance Shares may be paid in cash, shares
of Common Stock or shares of Restricted  Stock in such portions as the Committee
may determine. An employee must be employed at the end of the performance period
to receive payments of Performance Shares; provided,  however, in the event that
an  employee's  employment  is  terminated  by  reason  of  death,   disability,
retirement or other reason  approved by the  Committee,  the Committee may limit
such  forfeiture in its sole  discretion.  In the case of a Change in Control of
the Company (as  defined in the 1993 Plan),  an employee  may receive his or her
Performance  Shares in the discretion of the  Committee,  or as may otherwise be
provided in the employee's Performance Share award.

During  January  2004,  the Board of Directors of the Company  approved the
award of  incentive  and  non-qualified  stock  options to certain  employees to
acquire  240,000  shares of AmBase  Common  Stock at exercise  prices  $0.66 per
share, pursuant to the 1993 Plan.

The Company's  1985 Stock Option Plan (the "1985  Plan"),  provided for the
granting of up to 2,000,000  shares of stock  options for the purchase of Common
Stock to salaried  employees,  through May 22, 1995. No additional stock options
can be awarded under the 1985 Plan. As of December 31, 2003,  75,000 shares were
reserved for issuance under the 1985 Plan.  These shares were issued in February
2004, pursuant to the exercise of an employee stock option.






















<PAGE>

                       AMBASE CORPORATION AND SUBSIDIARIES
             Notes to Consolidated Financial Statements (continued)

Incentive plan activity is summarized as follows:
<TABLE>
<CAPTION>
<S>                                                   <C>               <C>                <C>                 <C>

                                                              1993 Stock                           1985 Stock
(shares in thousands)                                         Incentive Plan                       Option Plan
                                                       =========================          =============================
                                                                        Weighted                               Weighted
                                                        Shares           Average           Shares               Average
                                                         Under          Exercise            Under              Exercise
                                                        Option             Price           Option                 Price
                                                         =====           =======            =====               =======
Outstanding at December 31, 2000...................        370         $    2.38               75                 $0.21
Granted............................................        280              0.64                -                     -
Forfeited..........................................       (255)             1.86                -                     -
                                                      --------         =========            -----               =======
Outstanding at December 31, 2001...................        395         $    1.49               75                 $0.21
Granted............................................        700              1.14                -                     -
                                                      --------         =========            -----               =======
Outstanding at December 31, 2002...................      1,095         $    1.27               75                 $0.21
Expired............................................        (45)             4.02                -                     -
Exercised..........................................          -                 -                -                     -
                                                      --------        ----------            -----               -------
Outstanding at December 31, 2003..................       1,050        $     1.15               75                 $0.21
                                                      ========        ==========            =====               =======
Options exercisable at:
     December 31, 2003.............................        614        $     1.14               75                 $0.21
     December 31, 2002.............................        285              1.81               75                  0.21
     December 31, 2001.............................        145              2.85               75                  0.21
                                                      ========        ==========            =====               =======
</TABLE>

The  following  table  summarizes  information  about the  Company's  stock
options  outstanding  and  exercisable  under  the 1985  Plan  and 1993  Plan at
December 31, 2003, as follows:
<TABLE>
<CAPTION>

(shares in thousands)                        Options Outstanding                             Options Exercisable

                                       ==============================                ===================================
<S>    <C>              <C>            <C>                 <C>                       <C>                     <C>

                                          Weighted
                                           Average
                                         Remaining           Weighted                                          Weighted
       Range of                        Contractual            Average                                           Average
       Exercise                               Life           Exercise                                          Exercise
         Prices         Shares          (in years)              Price                  Shares                     Price
         ======          =====            ========            =======                   =====                   =======
          $0.21             75                   1         $     0.21                      75                $     0.21
 $0.60 to $0.66            220                   2               0.66                     220                      0.66
 $0.95 to $1.05             60                   2               1.03                      60                      1.03
 $1.09 to $1.19            700                   5               1.14                     264                      1.10
 $2.56 to $3.65             70                   2               2.88                      70                      2.88
                      --------               =====              =====                --------                   =======
          Total          1,125                                                            689
                      ========                                                          =====
</TABLE>

The Company has adopted the  disclosure  only  provisions of Statement 123,
but  continues to apply APB 25 in  accounting  for employee  stock  options.  No
compensation expense, attributable to stock incentive plans, has been charged to
earnings.  The fair value of stock  options  granted by the  Company in 2002 and
2001  used to  compute  pro forma  net  income  (loss)  and  earnings  per share
disclosures  is the  estimated  fair value at date of grant.  No employee  stock
options were granted in 2003.


<PAGE>

                       AMBASE CORPORATION AND SUBSIDIARIES
             Notes to Consolidated Financial Statements (continued)


The Black-Scholes  option pricing model was used to estimate the fair value
of the options at grant date based on factors as  follows:

<TABLE>
<CAPTION>
<S>                                                                        <C>                  <C>
                                                                            2002                2001
                                                                           =====                ====
Dividend yield.....................................                            0%                  0%
Volatility.........................................                         0.56                0.51
Risk free interest   rate..........................                         5.04%               5.04%
Expected life in years.............................                          5-6                 4-6
Weighted average fair value at grant date..........                        $0.59               $0.25
                                                                           =====              ======
</TABLE>

 The Black-Scholes option valuation model was developed for use
in  estimating  the  fair  value  of  traded  options,  which  have  no  vesting
restrictions and are fully  transferable.  In addition,  option valuation models
require the input of highly subjective  assumptions including the expected stock
price   volatility.   Because  the   Company's   employee   stock  options  have
characteristics  significantly  different  from  those of  traded  options,  and
because changes in the subjective  input  assumptions can materially  affect the
fair value estimate, and given the substantial changes in the price per share of
the Company's Common Stock, in management's  opinion, the existing models do not
necessarily  provide a reliable single measure of the fair value of its employee
stock options.  For a summary of the pro forma amounts  calculated in accordance
with SFAS 123, see Note 2.


Note 9 - Income Taxes

The components of income tax expense for the years ended December 31 are as
follows:
<TABLE>
<CAPTION>
<S>                                                                         <C>                 <C>                <C>

(in thousands)                                                              2003                2002               2001
                                                                            ====                ====               ====
Income tax expense - current state and local..................             $(125)              $(124)            $(165)
                                                                           =====               =====             ======
</TABLE>

The  components of pretax income (loss) and the  difference  between income
taxes computed at the statutory  federal rate of 35% in 2002, 2001 and 2000, and
the provision for income taxes for the years ended December 31 follows:
<TABLE>
<CAPTION>
<S>                                                                    <C>                  <C>               <C>

(in thousands)                                                              2003                2002               2001
                                                                            ====                ====               ====

Income (loss) before income taxes...............................       $  (3,434)          $  (5,009)        $   62,275
                                                                       =========           =========         ==========

Tax (expense) benefit:
Tax at statutory federal rate...................................       $   1,202           $  1,753          $  (21,796)
Reversal of Withholding Obligation reserve......................               -                  -              23,236
Accounting loss benefit not recognized..........................          (1,202)            (1,753)             (1,440)
State income taxes..............................................            (125)              (124)               (165)
                                                                      ----------           --------          -----------
Income tax expense..............................................      $     (125)          $   (124)         $     (165)
                                                                      ==========           ========          ===========
</TABLE>

State income tax amounts for 2003, 2002 and 2001,  respectively,  primarily
consist of a minimum tax on capital to the state of Connecticut.



<PAGE>


                       AMBASE CORPORATION AND SUBSIDIARIES
             Notes to Consolidated Financial Statements (continued)

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, 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 (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 IRS is currently reviewing the Company's 1992 Amended Return
in connection with several carryback claims filed by the Company, as further
described 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. The Carryback Claims and 1992 Amended Return
are currently being reviewed by the IRS. In April 2003, IRS examiners issued a
letter to the Company proposing to disallow the Carryback Claims. The Company
has sought administrative review of the letter by protesting to the Appeals
Division of the IRS. The Company has met with IRS Appeals Officials to discuss
the Carryback Claims and the appeals process is ongoing. The Company can give no
assurances that the Carryback Claims will be ultimately allowed by the IRS, the
final amount of the refunds, if any, or when they might be received.

Based upon the Company's federal income tax returns as filed from 1993 to 2002
(subject to IRS audit adjustments), and excluding the NOL carryforwards
generated from the Company's tax basis in Carteret/Carteret FSB, as noted above,
at December 31, 2003, the Company has NOL carryforwards available to reduce
future federal taxable income, which expire if unused, as follows:

<TABLE>
<S>              <C>             <C>
                2008             $1,300,000
                2009              6,900,000
                2010              5,300,000
                2012              1,100,000
                2018              5,400,000
                2019              4,000,000
                2020              2,600,000
                2021              4,000,000
                2022              3,200,000
                              -------------
                                $33,800,000
                              =============
</TABLE>



<PAGE>


                       AMBASE CORPORATION AND SUBSIDIAIRES
             Notes to Consolidated Financial Statements (continued)

The Company's federal income tax returns for the 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.

The Company has calculated a net deferred tax asset of $34 million and $31
million as of December 31, 2003 and 2002, respectively, arising primarily from
NOL's and alternative minimum tax credits (not including the anticipated tax
effects of the NOL's expected to be generated from the Company's tax basis in
Carteret, resulting from the Election Decision, as more fully described above).
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.

Note 10 - Legal Proceedings

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

(a) Marshall Manley v. AmBase Corporation. On November 14, 1996, Marshall Manley
("Manley"), a former President, Chief Executive Officer and Director of the
Company, commenced an action against the Company, seeking indemnification from
the Company pursuant to a May 27, 1993 employment settlement agreement between
Manley and the Company. Manley sought reimbursement of certain alleged payments
he made to the Trustee in the bankruptcy proceedings of the law firm of Finley,
Kumble, Wagner, Heine, Underberg, Manley & Casey (the "Manley action"), of
approximately $2.4 million plus interest, arguing that he served at such firm at
the request of the Company. The Company filed its answer on January 21, 1997,
raising substantial affirmative defenses which the Company vigorously pursued.
On October 30, 1997, AmBase amended its Answer and Counterclaims to include a
claim of fraud against Manley. In December 1997, Manley moved for summary
judgment. The Company raised substantial opposition to the motion and moved to
strike certain of Manley's affirmative defenses which Manley raised in
connection with the Company's fraud claim against Manley. 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 jury trial of the plaintiff's breach of contract claims took place in May
2000 in the United States District Court for the Southern District of New York,
and resulted in a verdict against the Company. The Company's counterclaims for
fraud and reformation were tried to the Court immediately following the jury's
verdict. In December 2000, the Court, in response to the Company's motion for
judgment as a matter of law and/or for a new trial, vacated the jury's earlier
verdict (thereby nullifying it) and ordered a new trial. Subsequent to the
Court's vacatur of the jury's verdict in January 2001, the Court dismissed the
Company's counterclaims for fraud and reformation. A second jury trial was held
in November 2001, which resulted in a verdict in favor of the Company. Manley
then filed a Notice of Appeal and a Fed. R. Civ. P. 59 motion seeking to set
aside this second verdict. In March 2002, the Court denied Manley's Fed. R. Civ.
P. 59 motion. In April 2002, Manley filed an amended Notice of Appeal. Oral
argument on the amended Notice of Appeal was heard in January 2003. In July
2003, the Second Circuit issued a written decision denying all of Manley's
claims in his Notice of Appeal. On August 19, 2003, the Second Circuit issued
its mandate rejecting the appeal. Manley did not petition the Second Circuit for
rehearing nor petition the United States Supreme Court for a Writ of Certiorari
to review the Second Circuit's decision. This matter is, therefore, concluded.

(b) Litigation with SDG, Inc. In September 2000, the Company filed a lawsuit in
the United States District Court for the District of Connecticut (Case No.
3:00CV1694 (DJS)) (the "Court") against SDG Inc. ("SDG"), and certain of its
officers and directors to pursue various claims against such parties, including,
but not limited to, the claims that SDG failed to honor a binding contract which
granted the Company the right to act as the exclusive investment
banking/financial advisor to SDG, and its subsidiaries and affiliates. SDG filed
various counterclaims which the Company believes are without merit. A trial in
this matter was completed during May 2003, and all parties submitted post trial
briefs during August 2003. The Court has not yet made a ruling. The Company will
continue to monitor the status of SDG and its subsidiary, AMDG, Inc., and
vigorously pursue the matter.







<PAGE>


                       AMBASE CORPORATION AND SUBSIDIARIES
             Notes to Consolidated Financial Statements (continued)

(c) Supervisory Goodwill Litigation. During the third quarter of 1993, the
Company filed a claim against the United States, in the United States Court of
Federal Claims (the "Court of Federal Claims" or the "Court"), based upon the
impact of the Financial Institutions Reform, Recovery and Enforcement Act of
1989 ("FIRREA") on the Company's investment in Carteret Savings Bank
("Carteret"). Approximately 120 other similar so-called "supervisory goodwill"
cases, were commenced by other financial institutions and/or their shareholders,
many are still pending in the Court of Federal Claims. Three of these cases,
Winstar Corp. v. United States, Glendale Federal Bank, FSB v. United States, and
Statesman Savings Holding Corp. v. United States (the "Consolidated Cases"),
which involve many of the same issues raised in the Company's suit, were
appealed to the United States Supreme Court (the "Supreme Court"). On July 1,
1996, the Supreme Court issued a decision in the Consolidated Cases. The Supreme
Court's decision affirmed the lower Court's grant of summary judgment in favor
of the plaintiffs on the issue of liability and remanded the cases for a
determination of damages. Although the decision in the Consolidated Cases is
beneficial to the Company's case, it is not necessarily indicative of the
ultimate outcome of the Company's action.

On September 18, 1996, the Court of Federal Claims entered an Omnibus Case
Management Order that will govern further proceedings in the Company's action
and most of the other so-called "Winstar-related" cases. On March 14, 1997, the
Court entered an order permitting the Federal Deposit Insurance Company ("FDIC")
to intervene as an additional plaintiff in forty-three cases, including the
Company's case, but not allowing the FDIC to be substituted as the sole
plaintiff in those cases.

On March 20, 1998, the FDIC filed a motion for partial summary judgment against
the United States on certain liability issues, and the Company filed a
memorandum in support of that motion. Fact discovery for the Company was
completed November 30,1999 pursuant to an extension of time granted by the
Court. On September 9, 1999, the Company filed a Motion For Partial Summary
Judgment On Liability under a Fifth Amendment Takings claim theory of recovery.
On November 24, 1999, the FDIC, as successor to the rights of Carteret and as
Plaintiff-Intervenor in the case, filed a response brief opposing the Company's
Motion. On December 6, 1999, the Department of Justice (the "DOJ") (on behalf of
the United States) filed a brief opposing the Company's Motion For Partial
Summary Judgment On Liability and Cross-Moved for Summary Judgment On the
Company's Takings claim. On January 25, 2000, the Company responded to the DOJ's
brief and the FDIC's brief by filing a Brief (i) In Reply To Defendant's
Opposition To Plaintiffs' Motion For Partial Summary Judgment, (ii) In
Opposition To Defendant's Cross-Motion For Summary Judgment, and (iii) In Reply
To FDIC's Response To Plaintiffs' Motion For Partial Summary Judgment. On
February 22, 2000 the DOJ filed a brief in Reply To Plaintiffs' Opposition To
Defendant's Cross-Motion For Summary Judgment.

On October 2, 2000, Senior Judge Loren Smith of the Court of Federal Claims
heard oral arguments in the Company's Supervisory Goodwill case against the
United States government. The Court heard arguments both as to the contractual
liability of the United States to Carteret Savings Bank, and as to the Company's
claim against the United States under the Takings Clause of the Fifth Amendment.

On August 25, 2003, the Court of Federal Claims issued a decision in which it
(i) ruled that the Government had entered into and breached its supervisory
goodwill contracts with the Company's wholly-owned subsidiary, Carteret; (ii)
rejected the Company's claim that it was entitled to recover damages directly
from the Government under the Takings Clause for the loss of Carteret; and (iii)
rejected the Company's claim that the Government had "illegally exacted" $62.5
million that the Company paid into Carteret subsequent to the Government's
breach of the Goodwill contracts. Specifically, the Court held that the Company
could not recover damages under the Takings Clause because it could be restored
to the position it was in before the breach through Carteret's breach of
contract action.

On September 17, 2003, the Company filed a Motion to Dismiss The FDIC and to
Define The Appropriate Measure of Carteret's Contract Damages. On September 30,
2003, the FDIC, as plaintiff-intervenor in the case, and the United States, as
defendant in the case, each filed a separate response to the Company's motion.
On October 1, 2003, the Court held a telephonic status conference pursuant to an
order set forth in the August 25, 2003 opinion.




<PAGE>


                       AMBASE CORPORATION AND SUBSIDIARIES
              Notes to Consolidated Financial Statement (continued)

Pursuant to that status conference, the Court ordered that through their
additional briefing on the Company's Motion to Dismiss the FDIC and to define
the appropriate measure of Carteret's contract damages (i.e., through the
Company's reply brief and the surreply brief granted to the FDIC and the United
States), the parties should address the question of, "whether the Court has the
power to review the amount of the receivership deficit as administered by the
FDIC." In an order dated October 16, 2003, the Court modified the briefing
schedule such that the Company filed its reply brief as required on October 31,
2003, and the surreply brief of the FDIC and the United States were filed as
required in November, 2003. The Court held oral argument on this issue on
November 20, 2003. The Company is currently awaiting a ruling. 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, 341 F.3d 1342 (Fed. Cir 2003), petition for
certiorari filed January 26, 2004, currently pending. These decisions, as well
as other decision in Winstar-related cases, are publicly available and may be
relevant to the Company's claims, but are not necessarily indicative of the
ultimate outcome of the Company's actions.

(d) Other

AmBase Corporation v. City Investing Company Liquidating Trust, et al. - New
York Court Action. On January 31, 2001, the Company filed a Complaint in the
United States District Court for the Southern District of New York (the "NY
Court") seeking determination that City Investing Company Liquidating Trust (the
"Trust"), as successor to City Investing Company ("City"), should be primarily
liable for amounts, if any, owed to the IRS in connection with a Netherlands
Antilles withholding tax issue of City. The IRS had contended that the
withholding of tax on interest payments were due by City in connection with
City's Netherlands Antilles finance subsidiary for the years 1979 through 1985.
The Company was also seeking other relief and certain other damages from the
Trust and its Trustees. On February 23, 2001, the Trust filed a Motion to
Dismiss the Company's Complaint in this action. On March 9, 2001 the Company
filed its opposition to the Trust's Motion to Dismiss. On March 19, 2001 the
Trust filed its reply to the Company's opposition. On May 30, 2001, the Company
submitted a letter to Judge Stanton, before whom the case was docketed,
acknowledging that the Tax Court had ruled against the IRS on the issue of
whether or not any withholding obligation was due, and that this decision, would
render the declaratory judgment portion of the Company's action against the
Trust moot. On October 26, 2001, a pre-trial conference was held before Judge
Stanton, during which he authorized the Company to supplement its prior
opposition to the pending motion to dismiss. Those supplemental memoranda and
affidavits were filed in November 2001. Thereafter, the Trust filed its reply.
On January 11, 2002, the NY Court dismissed the Company's Complaint. The Company
timely filed a Fed. R. Civ. P. Rule 59 motion ("Rule 59 Motion") seeking to set
aside the NY Court's decision to dismiss the Complaint that was subsequently
responded to by the Trust. In February 2002 the NY Court denied the Company's
Rule 59 Motion. The Company subsequently filed an appeal of the NY Court
decision, to the Second Circuit Court of Appeals. Oral argument on the appeal
was held in November 2002. On April 3, 2003, a panel of the Second Circuit
issued a decision affirming the dismissal of the Company's complaint. The
Company filed a petition for rehearing to the Second Circuit and on June 12,
2003, the Second Circuit panel that issued the April 3, 2003, decision denied
the petition for rehearing and the Second Circuit denied the petition for
rehearing in banc. On September 10, 2003, the Company petitioned the United
States Supreme Court for a Writ of Certiorari seeking review of the Second
Circuit's decision. On October 15, 2003, the Trust filed its opposition to the
Company's petition. On October 27, 2003, the Company filed its reply to the
Trust's opposition. In November 2003, the United State Supreme Court denied the
Company's Writ of Certiorari. This matter, therefore, is concluded.


Note 11 - Fair Value of Financial Instruments

The carrying amounts reported in the balance sheet for cash and cash
equivalents, and accounts payable and accrued liabilities approximate fair value
due to the short-term nature of these instruments. The fair value of investment
securities - held to maturity and investment securities available for sale are
based on current market quotations. During 2002, other investment securities
were written down to their net realizable value as further described in Note 3.
The carrying value of applicable other liabilities approximates their fair
value.




<PAGE>


                       AMBASE CORPORATION AND SUBSIDIAIRES
              Notes to Consolidated Financial Statement (continued)

Note 12 - Property Owned

The Company owns two commercial office buildings in Greenwich, Connecticut that
contain 14,500 and 38,000 square feet, respectively. The Company utilizes a
small portion of the office space in the first building for its executive
offices and leases the remaining square footage to unaffiliated third parties.
The buildings are carried at cost, net of accumulated depreciation of $433,000
and $104,000 at December 31, 2003 and 2002, respectively. Depreciation expense
is recorded on a straight-line basis over 39 years. Tenant security deposits of
$308,000 and $226,000 at December 31, 2003 and 2002, respectively, are included
in other liabilities.

The property is leased to tenants under operating leases with varying terms.
Future minimum rentals receivable from tenants under non-cancelable operating
leases, excluding tenant reimbursements of operating expenses and real estate
tax escalations, are approximately as follows:

<TABLE>
<CAPTION>
                                                                December 31
                                                             ------------------
<S>     <C>                                                  <C>

         2004...............................................   $   1,790,000
         2005   ............................................       1,818,000
         2006...............................................       1,635,000
         2007...............................................       1,441,000
         2008...............................................         937,000
         Thereafter.........................................         814,000
</TABLE>

Rent expense charged to earnings,  for office space previously  leased, was
$43,000 for the year ended December 31, 2001.

Note 13 - Quarterly Financial Information (unaudited)

Summarized quarterly financial information follows:
<TABLE>
<CAPTION>

                                                First            Second            Third            Fourth         Full
(in thousands, except per share data)         Quarter           Quarter          Quarter           Quarter         Year
                                                =====             =====            =====             =====        =====
<S>                                           <C>               <C>              <C>               <C>            <C>
2003:
Revenues................................     $    614         $     617          $   615          $    732     $  2,578
Operating expenses......................        1,392             1,857            1,573             1,614        6,436
Operating loss..........................         (778)           (1,240)            (958)             (882)      (3,858)
Loss before income taxes................         (693)           (1,102)            (875)             (764)      (3,434)
Net loss................................         (724)           (1,133)            (907)             (795)      (3,559)
                                             ========        ==========          ========         ========     ========
Net loss per common share:
Basic...................................     $  (0.02)        $   (0.02)           (0.02)            (0.02)       (0.08)
Assuming dilution.......................        (0.02)            (0.02)           (0.02)            (0.02)       (0.08)
                                             ========         =========          =======          ========     ========

2002:
Revenues................................     $     74         $      71          $    83          $    249     $    477
Operating expenses......................        1,147             1,288            1,411             1,748        5,594
Operating loss..........................       (1,073)           (1,217)          (1,328)           (1,499)      (5,117)
Loss before income taxes................         (675)           (1,029)          (2,739)             (566)      (5,009)
Net loss................................         (706)           (1,060)          (2,770)             (597)      (5,133)
                                             ========         =========          =======          ========     ========
Net loss per common share:
Basic ..................................     $  (0.02)        $   (0.02)         $ (0.06)         $  (0.01)    $  (0.11)
Assuming dilution.......................        (0.02)            (0.02)           (0.06)            (0.01)       (0.11)
                                             =========        =========          =======          ========     ========
</TABLE>




<PAGE>



ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
 AND FINANCIAL DISCLOSURE.
None.

ITEM 9A.      CONTROLS AND PROCEDURES

The Company maintains disclosure controls and procedures that are designed to
ensure that information required to be disclosed in the Company's Exchange Act
reports is recorded, processed, summarized and reported within the time periods
specified in the SEC's rules and forms, and that such information is accumulated
and communicated to the Company's management, including its Chief Executive
Officer and Chief Financial Officer, as appropriate, to allow timely decisions
regarding required disclosure based on the definition of "disclosure controls
and procedures" in Rule 13a-15. In designing and evaluating the disclosure
controls and procedures, management recognized that any controls and procedures,
no matter how well designed and operated, can provide only reasonable assurance
of achieving the desired control objectives, and management necessarily was
required to apply its judgment in evaluating the cost-benefit relationship of
possible controls and procedures. Also, the Company has investments in certain
unconsolidated entities. As the Company does not control or manage these
entities, its controls and procedures with respect to such entities are
necessarily substantially more limited than those it maintains with respect to
its consolidated subsidiaries.

As of December 31, 2003, the Company carried out an evaluation, under the
supervision and with the participation of the Company's management, including
the Company's Chief Executive Officer and the Company's Chief Financial Officer,
of the effectiveness of the design and operation of the Company's disclosure
controls and procedures. Based on the foregoing, the Company's Chief Executive
Officer and Chief Financial Officer concluded that the Company's disclosure
controls and procedures were effective.

There have been no significant changes in the Company's internal controls or in
other factors that could significantly affect the internal controls subsequent
to the date the Company completed its evaluation.

PART III

ITEM 10.     DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

Information concerning executive officers required by this item is set forth
following Item 4 of Part I of this report under the caption "Executive Officers
of the Registrant", pursuant to General Instruction G to Form 10-K. For the
information required to be set forth by the Company in response to this item
concerning directors of the Company, see the Company's definitive Proxy
Statement for its Annual Meeting of Shareholders to be held on May 21, 2004,
under the captions "Proposal No. 1 - Election of Director" and "Information
Concerning the Board and its Committees", which is incorporated herein by
reference, which the Company intends to file with the Securities and Exchange
Commission not later than 120 days after the close of its 2003 fiscal year.

ITEM 11.     EXECUTIVE COMPENSATION

For the information required to be set forth by the Company in response to this
item, see the Company's definitive Proxy Statement for its Annual Meeting of
Shareholders to be held on May 21, 2004, under the captions "Executive
Compensation" and "Employment Contracts", which are incorporated herein by
reference, which the Company intends to file with the Securities and Exchange
Commission not later than 120 days after the close of its 2003 fiscal year.



<PAGE>



ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
           RELATED STOCKHOLDER MATTERS.

The following table summarizes information about securities authorized for
issuance under equity compensation plans of the Company at December 31, 2003 as
follows:
<TABLE>
<CAPTION>
<S>                      <C>                          <C>                          <C>

                         Shares to be issued          Weighted average
                         upon exercise of             exercise price of            Shares available for
                         outstanding options          outstanding options           future issuance
                           ============                =============                 =============

Equity Compensation
   Plans approved
   by stockholders               1,125,000             $       1.07                     3,950,000
                                                       ============
Equity Compensation
   Plan not approved
   by stockholders                       -                                                110,000
                            --------------                                           ------------
Total                            1,125,000             $       1.07                     4,060,000
                             =============                 =============             ============
</TABLE>


Plan not approved by stockholders

The Company has 110,000  shares of common stock reserved for issuance under
the AmBase  Corporation  Stock Bonus Plan (the "Stock  Bonus  Plan"),  which was
approved by the Board of  Directors  of the Company in 1989.  The purpose of the
Stock Bonus Plan is to encourage  individual  performance and to reward eligible
employees whose performance,  special achievements,  longevity of service to the
Company or suggestions  make a significant  improvement or  contribution  to the
growth and profitability of the Company. The Stock Bonus Plan is administered by
the  Personnel  Committee of the Board of  Directors.  Members of the  Personnel
Committee  are not eligible for an award  pursuant to the Stock Bonus Plan.  The
Company's  President may also designate  eligible  employees to receive  awards,
which are not to be in excess of 100 shares of Common Stock. No fees or expenses
of any kind are to be charged to a  participant.  Any  employee of the  Company,
except for certain officers or directors of the Company, are eligible to receive
shares  under the Stock  Bonus  Plan.  Distributions  of shares may be made from
authorized but unissued shares,  treasury shares or shares purchased on the open
market.

For other  information  required to be set forth by the Company in response
to this  item,  see the  Company's  definitive  Proxy  Statement  for its Annual
Meeting of  Shareholders  to be held on May 21, 2004,  under the caption  "Stock
Ownership", which is incorporated herein by reference, which the Company intends
to file with the  Securities  and  Exchange  Commission  not later than 120 days
after the close of its 2003 fiscal year.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

None.

ITEM 14.     PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information  concerning  Principal  Accountant Fees and Services is set
forth by the Company under the heading "Proposal 2 - Appointment of Accountants"
in  the  Company's   definitive  Proxy  Statement  for  its  Annual  Meeting  of
Shareholders  to be  held on May 21,  2004,  which  is  incorporated  herein  by
reference,  which the Company  intends to file with the  Securities and Exchange
Commission not later than 120 days after the close of its 2003 fiscal year.



<PAGE>


PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) Documents filed as a part of this report:

1. Index to Financial Statements: Page
<TABLE>
<S>     <C>   <C>                                                                                               <C>

         AmBase Corporation and Subsidiaries:
              Report of Independent Auditors.....................................................................9
              Consolidated Statements of Operations.............................................................10
              Consolidated Balance Sheets.......................................................................11
              Consolidated Statements of Changes in Stockholders' Equity........................................12
              Consolidated Statements of Comprehensive Income (Loss) ...........................................12
              Consolidated Statements of Cash Flows.............................................................13
              Notes to Consolidated Financial Statements........................................................14
</TABLE>

2. Index to Financial Statements Schedules:

     Schedule III - Real Estate and Accumulated Depreciation

3.  Exhibits:   3A.  Restated   Certificate  of   Incorporation  of  AmBase
Corporation (as amended through February 12, 1991) (incorporated by reference to
Exhibit  3A to the  Company's  Annual  Report  on Form  10-K for the year  ended
December 31, 1990).

     3B.  By-Laws of AmBase  Corporation  (as amended  through  March 15, 1996),
(incorporated  by reference to Exhibit 3B to the Company's Annual Report on Form
10-K for the year ended December 31, 1995).


     4. Rights  Agreement  dated as of February 10, 1986 between the Company and
American Stock  Transfer and Trust Co. (as amended March 24, 1989,  November 20,
1990,  February  12, 1991,  October 15,  1993,  February 1, 1996 and November 1,
2000)  (incorporated by reference to Exhibit 4 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1990, the Company's  Quarterly  Report
on Form 10-Q for the quarterly  period ended  September 30, 1993,  the Company's
Annual  Report  on Form  10-K  for the  year  ended  December  31,  1995 and the
Company's Quarterly Report on Form 10-Q for the Quarterly period ended September
30, 2000, respectively).

     10A.   1985  Stock  Option  Plan  for  Key  Employees  of  AmBase  and  its
Subsidiaries  (incorporated  by reference to Exhibit 10B to the Company's Annual
Report on Form 10-K for the year ended December 31, 1989).

     10B. 1993 Stock  Incentive  Plan as amended  (incorporated  by reference to
Exhibit  A  to  the  Company's   Proxy  Statement  for  the  Annual  Meeting  of
Stockholders held on May 28, 1998).

     10C. 1994 Senior Management  Incentive  Compensation Plan  (incorporated by
reference to Exhibit A to the Company's  Proxy  Statement for the Annual Meeting
of Stockholders held on May 27, 1994).

     10D.  AmBase  Officers  and Key  Employees  Stock  Purchase  and Loan  Plan
(incorporated by reference to Exhibit 10E to the Company's Annual Report on Form
10-K for the year ended December 31, 1989).

     10E.  AmBase  Supplemental  Retirement Plan  (incorporated  by reference to
Exhibit  10C to the  Company's  Annual  Report on Form  10-K for the year  ended
December 31, 1989).

     10F.  Assignment  and  Assumption  Agreement  dated as of August 30,  1985,
between the Company and City  (incorporated  by  reference  to Exhibit 28 to the
Company's Current Report on Form 8-K dated September 12, 1985).


<PAGE>



     10G.  Employment  Agreement  dated as of June 1, 1991  between  Richard  A.
Bianco and the Company,  as amended December 30, 1992 (incorporated by reference
to Exhibit 10G to the  Company's  Annual  Report on Form 10-K for the year ended
December 31, 1992), as amended  February 24, 1997  (incorporated by reference to
Exhibit  10G to the  Company's  Annual  Report on Form  10-K for the year  ended
December  31,  1996),  as amended  March 6, 2001  (incorporated  by reference to
Exhibit  10G to the  Company's  Annual  Report on Form  10-K for the year  ended
December 31, 2000) and as amended  December 16, 2001  (incorporated by reference
to Exhibit 10G to the  Company's  Annual Report on Form 10-K for the year ending
December 31, 2001.

     14. AmBase Corporation - Code of Ethics as adopted by Board of Directors.

     21. Subsidiaries of the Registrant.

     23. Consent of Independent Accountants.

     31.1 Rule 13a-14(a)  Certification  of Chief Executive  Officer Pursuant to
          Rule 13a-14.

     31.2 Rule 13a-14(a)  Certification  of Chief Financial  Officer Pursuant to
          Rule 13a-14.

     32.1 Section 1350 Certification of Chief Executive Officer pursuant to Rule
          18 U.S.C. Section 1350.

     32.2 Section 1350 Certification of Chief Financial Officer pursuant to Rule
          18 U.S.C. Section 1350.

Exhibits, except as otherwise indicated above, are filed herewith.

     (b) Reports on Form 8-K.

     The Company did not file any Current Reports on Form 8-K during the quarter
ended December 31, 2003.



<PAGE>



Signatures

Pursuant  to the  requirements  of  Section  13 or 15(d) 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/ RICHARD A.  BIANCO
Chairman,  President  and Chief  Executive  Officer
Principal Executive Officer)
Date: March 25, 2004

Pursuant to the  requirements of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities on the dates indicated.




/s/  RICHARD  A.  BIANCO                   /s/ JOHN P.  FERRARA
Chairman,  President,                      Vice President,  Chief  Financial
Chief Executive Officer                    Officer and Controller
and Director                               (Principal Financial and Accounting
Date:  March 25, 2004                      Officer)
                                           Date: March 25, 2004



/s/ JOHN B. COSTELLO                       /s/ ROBERT E. LONG
Director                                   Director
Date: March 25, 2004                       Date: March 25, 2004



/s/ MICHAEL L. QUINN
Director
Date: March 25, 2004


















<PAGE>
<TABLE>
<CAPTION>


                       AMBASE CORPORATION AND SUBSIDIARIES
             SCHEDULE III. REAL ESTATE AND ACCUMULATED DEPRECIATION
                                December 31, 2003
                             (dollars in thousands)

<S>             <C>                    <C>                       <C>                     <C>

COLUMN A        COLUMN B                     COLUMN C                  COLUMN D                       COLUMN E
-----------     ------------------     ---------------------     -------------------     -----------------------------------------
                                                                 Cost Capitalized
                                                                 Subsequent to           Gross Amount at which Carried at
                                       Initial Cost to Company   Acquisition                      the Close of the Period
                                       =======================   ===================     =========================================
                                                    Building &                                             Building &
Description     Encumbrances           Land        Improvements     Improvements          Land            Improvements     Total
===========     ==================     ======      ============  ===================     =======          =============  =========
Office Building:
Greenwich, CT...$              -       $  554      $      1,880  $                20     $   554          $       1,900  $   2,454
Greenwich, CT...$              -        6,400            10,892                   18       6,400                 10,910     17,310
                ------------------     ------      ------------  -------------------     -------          -------------  ---------
Total...........$              -       $6,954      $     12,772  $                38     $ 6,954          $      12,810  $  19,764
                ==================     ======      ============  ===================     ========         =============  =========

                                                                                         [Additional columns below]
[Continued from above table, first column(s) repeated]

COLUMN A        COLUMN F                     COLUMN G                  COLUMN H                       COLUMN I
-----------     ------------------     ---------------------     -------------------     -----------------------------------------
                Accumulated                                                              Life on Which Depreciated
Description     Depreciation           Date Constructed          Date Acquired           Latest Income Statement
===========     ==================     =====================     ===================     =========================================
Office Building:
Greenwich, CT...$            130         1970                    Apr.-01                                39 years
Greenwich, CT...             303         1977                    Dec.-02                                39 years
                ------------------     =============             ===========             =========================================
Total...........$            433
                ================
</TABLE>

[a] Reconciliation of total real estate carrying value is as follows:
<TABLE>
<CAPTION>
<S>                               <C>                         <C>                      <C>

                                      Year Ended                 Year Ended                 Year Ended
                                  December 31, 2003           December 31, 2002         December 31, 2001
                                  =================           =================         =================
Balance at beginning of year......$          19,726           $           2,435         $               -
Improvements......................               38                           -                         -
Acquisitions.. ...................                -                      17,291                     2,435
                                  -----------------           -----------------         -----------------
Balance at end of year............$          19,764            $         19,726         $           2,435
                                  =================            ================         =================
Total cost for federal tax
purposes at end of each year......$          19,764            $         19,726         $           2,435
                                  =================            ================         =================

[b] Reconciliation of accumulated depreciation as follows:

Balance at beginning of year......$             104            $             42         $               -
Depreciation expense..............              329                          62                        42
                                  -----------------            ----------------         -----------------
Balance at end of year........... $             433            $            104         $              42
                                  =================            ================         =================
</TABLE>

<PAGE>

DIRECTORS AND OFFICERS

Board of Directors
Richard A. Bian                John B. Costello        Robert E. Long
Chairman, President and        Private Investor        Managing Director
Chief Executive Officer                                Goodwyn, Long & Black
AmBase Corporation

Michael Quinn
Private Investor

AmBase Officers
Richard A. Bianco              John P. Ferrara
Chairman, President and        Vice President, Chief Financial Officer
Chief Executive Officer        and Controller

INVESTOR INFORMATION


<TABLE>
<CAPTION>
<S>                                                                 <C>
Annual Meeting of Stockholders                                      Corporate Headquarters

 The 2004 Annual Meeting is currently  scheduled to be held          AmBase Corporation
 at 9:00 a.m. Eastern Time, on Friday, May 21, 2004, at:             100 Putnam Green, 3rd Floor
                                                                     Greenwich, CT  06830-6027
     Hyatt Regency Hotel                                             (203) 532-2000
     1800 East Putnam Avenue
     Greenwich, CT  06870

                                                                     Stockholder Inquiries

 Common Stock Trading                                                Stockholder  inquiries,  including requests for the
 ====================
                                                                     following:  (i) change of address; (ii) replacement
 AmBase stock is traded through one or more market-makers of lost stock
 certificates;(iii) Common Stock name with quotations made available in the
 "pink sheets" registration changes; (iv) Quarterly Reports on published by the
 National Quotation Bureau, Inc. Form 10-Q; (v) Annual Reports on Form 10-K;
 (vi)
                                                                     proxy  material;  and (vii)  information  regarding
 Issue                Abbreviation       Ticker Symbol               stockholdings, should be directed to:

 Common Stock         AmBase             ABCP                        American Stock Transfer and Trust Company
                                                                         59 Maiden Lane
                                                                         New York, NY  10038
 Transfer Agent and Registrar                                            Attention: Shareholder Services
 ============================
                                                                         (800) 937-5449 or (718) 921-8200 Ext. 6820
 American Stock Transfer and Trust
     Company                                                         In  addition,   the   Company's   public   reports,
 59 Maiden Lane                                                      including  Quarterly  Reports on Form 10-Q,  Annual
 New York, NY  10038                                                 Reports on Form 10-K and Proxy  Statements,  can be
 Attention: Shareholder Services                                     obtained   through  the   Securities  and  Exchange
 (800) 937-5449 or (718) 921-8200 Ext. 6820                          Commission  EDGAR  Database over the World Wide Web
                                                                     at www.sec.gov.

 Independent Auditors                                                Number of Stockholders

 PricewaterhouseCoopers LLP                                          As of January 30, 2004, there were
 1177 Avenue of the Americas                                         approximately 16,000 stockholders.
 New York, NY  10036
</TABLE>