<PAGE>   1
                                    FORM 10-Q
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q
(Mark One)
 
   
[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
         SECURITIES EXCHANGE ACT OF 1934

For the Quarter Ended  January 31, 1998

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  1-9135

                                   ALFIN, INC.

               --------------------------------------------------
             (Exact name of registrant as specified in its charter)

          New York                                       13-3032734

-------------------------------                 -------------------------
(State or other jurisdiction of                      (I.R.S. Employer
incorporation or organization)                     Identification Number)

 720 Fifth Avenue, New York, N.Y.                   10019
-------------------------------                 ----------------
(Address of principal executive offices)          (Zip Code)

Registrant's telephone number, including area code (212) 333-7700

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes  X     No
                                      ----       ----

APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding
of each of the issuer's classes of common stock, as of the latest practicable
date: 11,787,983 shares of common stock, $.01 par value per share, at March 13,
1998.
<PAGE>   2
                          ALFIN, INC. AND SUBSIDIARIES

                                    FORM 10-Q


                                      INDEX
<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----
<S>                                                                        <C>
PART I - FINANCIAL INFORMATION

  Item 1.            Financial Statements

                     Condensed Consolidated Balance Sheets -
                     January 31, 1998 and July 31, 1997                      2-3

                     Condensed Consolidated Statements of
                     Operations for the three and six months
                     ended January 31, 1998 and 1997                           4

                     Condensed Consolidated Statements of
                     Cash Flows for the six months ended
                     January 31, 1998 and 1997                                 5

                     Notes to Condensed Consolidated
                     Financial Statements                                   6-10


Item 2.              Management's Discussion and Analysis
                     of Financial Condition and Results                    11-14
                     of Operations

Exhibit 11           Schedule of Computation
                     of Earnings per share                                    15

Signatures                                                                    16
</TABLE>

                                       1
<PAGE>   3
                          ALFIN, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                     ASSETS                                 January 31,         July 31,
                                                               1998               1997
                                                           (unaudited)
                                                           -----------        -----------
<S>                                                        <C>                <C>
CURRENT  ASSETS:

Cash & cash equivalents                                    $   113,648        $   658,378
Accounts receivable, net of allowances for
doubtful accounts and chargebacks of
 $1,377,610 and $891,532 at January 31, 1998
 and July 31,1997, respectively and
 sales allowances of $138,067 and $256,264
 at January 31, 1998 and July 31, 1997, respectively           415,947            167,021

Inventories                                                  2,065,776          2,227,549
Prepaid expenses and other current assets                       21,411            880,938
                                                           -----------        -----------
Total current assets                                         2,616,782          3,933,886
                                                           -----------        -----------
PROPERTY AND EQUIPMENT                                       2,432,875          2,333,028
 Less-accumulated depreciation and
 amortization                                               (1,926,524)        (1,740,341)
                                                           -----------        -----------
 Property and equipment, net                                   506,351            592,687
                                                           -----------        -----------
OTHER ASSETS:




Other                                                           75,000             83,938
                                                           -----------        -----------
 Total other assets                                             75,000             83,938
                                                           -----------        -----------
Total assets                                               $ 3,198,133        $ 4,610,511
                                                           ===========        ===========
</TABLE>


                 The accompanying notes are an integral part of
                  these condensed consolidated balance sheets.

                                       2
<PAGE>   4
                          ALFIN, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS



<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY                                                        
------------------------------------                          January 31,           July 31,
                                                                 1998                1997
                                                              (unaudited)
                                                             ------------        ------------
<S>                                                          <C>                 <C>
CURRENT LIABILITIES:


Due to related parties                                       $       --                  --
Accounts payable                                                2,001,483           1,365,767
Accrued expenses-other                                          1,430,791           1,313,971
                                                             ------------        ------------

  Total current liabilities                                     3,432,274           2,679,738

                                                             ------------        ------------

  Total liabilities                                             3,432,274           2,679,738
                                                             ------------        ------------

REDEEMABLE PREFERRED STOCK                                        750,000             750,000

SHAREHOLDERS' EQUITY:
Common stock, $.01 par value,
 17,000,000 shares authorized;
 11,787,983 shares issued and outstanding at
 January 31, 1998 and July 31,1997                                117,879             117,879

Additional paid-in capital                                     12,953,123          12,953,123

Accumulated deficit                                           (14,055,143)        (11,890,229)
                                                             ------------        ------------

  Total shareholders' equity                                     (984,141)          1,180,773
                                                             ------------        ------------
Total liabilities and share-
holders' equity                                              $  3,198,133        $  4,610,511
                                                             ============        ============
</TABLE>


              The accompanying notes are an integral part of these
                     condensed consolidated balance sheets.

                                       3
<PAGE>   5
                           ALFIN, INC AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                         Three Months Ended                         Six Months Ended
                                              January 31,                              January 31,
                                        1998               1997                1998                 1997
                                        ----               ----                ----                 ----
<S>                                <C>                 <C>                 <C>                 <C>
Net Sales                          $  1,379,724        $ 10,188,567        $  3,776,063        $ 19,823,279

Cost of goods sold                      382,707           3,856,834           1,154,098           6,952,128
                                   ------------        ------------        ------------        ------------
Gross profit on sales                   997,017           6,331,733           2,621,965          12,871,151

Selling, general and
 administrative expenses              2,427,775           5,305,301           4,848,628          10,970,850
                                   ------------        ------------        ------------        ------------
Operating(Loss)Profit                (1,430,758)          1,026,432          (2,226,663)          1,900,301

Other income (expense)
  Interest income (expense)              23,738             (21,027)             61,751             (39,438)
                                   ------------        ------------        ------------        ------------

Total other income (expense)             23,738             (21,027)             61,751             (39,438)
                                   ------------        ------------        ------------        ------------
(Loss) Income before
Provision for income taxes           (1,407,020)          1,005,405          (2,164,912)          1,860,863

Provision for
 Income Taxes                                 0             304,000                   0             569,000
                                   ------------        ------------        ------------        ------------
NET (LOSS) INCOME                  $ (1,407,020)       $    701,405        $ (2,164,912)       $  1,291,863
                                   ============        ============        ============        ============

Weighted average number
of common and common
equivalent shares                    11,787,983          11,958,194          11,787,983          12,099,491
                                   ------------        ------------        ------------        ------------

INCOME PER COMMON
 AND COMMON
 EQUIVALENT SHARES                 $      (0.12)       $       0.06        $      (0.18)       $       0.11
                                   ============        ============        ============        ============
</TABLE>



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


                                       4
<PAGE>   6
                          ALFIN, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
<TABLE>
<CAPTION>
                                                                    Six Months Ended
                                                                       January 31,
                                                                 1998                1997
                                                              -----------        -----------
<S>                                                           <C>                <C>
Cash Flows from Operating Activities:
Net (Loss) income                                             $(2,164,912)       $ 1,291,863
                                                              -----------        -----------


Adjustments to Reconcile Net (Loss)income to Net Cash
 Provided by (Used in) Operating Activities:
 Depreciation & Amortization                                      186,182            298,028
 (Increase) decrease in Accounts Receivable                      (248,926)            37,464
  Decrease in Inventory                                           161,773             82,294
 Decrease (Increase) in Prepaid Expenses & Other Assets           868,465           (468,600)
 Increase Accounts Payable
   & Accrued Expenses                                             752,535            208,321
                                                              -----------        -----------
Total Adjustments                                               1,720,029            157,507

Net Cash (Used in) Provided by
Operating Activities                                             (444,883)         1,449,370
                                                              -----------        -----------
Cash Flows from Investing Activities
  Capital Expenditures                                            (99,847)          (219,201)
                                                              -----------        -----------

Cash Flows from Financing Activities
Payment of Lines of Credit, net                                         0         (1,600,000)
Principal Payments of Mortgage Note                                     0           (150,000)
Payments to Related Parties                                             0             (4,826)
Proceeds from Sales of Stock                                            0             58,333
                                                              -----------        -----------
Net Cash Used in Financing Activities                                   0         (1,696,493)

Net Decrease in Cash and cash equivalents                        (544,730)          (466,324)
Cash and cash equivalents at Beginning of Period                  658,378          2,210,972
                                                              -----------        -----------
Cash and cash equivalents at End of Period                    $   113,648          1,744,648
                                                              ===========        ===========

Cash Paid during the quarter ended
Interest                                                      $         0        $    90,066
Income Taxes                                                            0             95,969
</TABLE>


                 The accompanying notes are an integral part of
                 these condensed consolidated statements

                                       5
<PAGE>   7
                          ALFIN, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                JANUARY 31, 1998
                                   (Unaudited)

(1) Summary of significant accounting policies:

In the opinion of management, the accompanying condensed consolidated financial
statements contain all of the adjustments necessary to present fairly the
Company's financial position at January 31, 1998 and July 31, 1997, the results
of its operations for the three and six months ended January 31, 1998 and 1997
and the cash flows for the three and six months ended January 31, 1998 and 1997.
All adjustments are of a normal recurring nature. The condensed consolidated
balance sheet at July 31, 1997 was taken from audited consolidated financial
statements previously filed with the Securities and Exchange Commission on the
Company's Form 10K.

All significant intercompany transactions and accounts have been eliminated in
consolidation. Interim period results are not necessarily indicative of the
results of operations for a full year.

These quarterly financial statements should be read in conjunction with the
Company's audited financial statements contained in the Annual Report on Form
10-K for the fiscal year ended July 31, 1997, filed with the Securities and
Exchange Commission.

Going Concern
During fiscal year 1997 and during the six months ended January 31, 1998,
significant losses from operations and cash used in operations were incurred as
a result of the discontinuance of appearances on HSN stemming from the Company's
dispute with Adrienne Newman. The Company has been significantly dependent on
HSN during the fiscal years ended 1995, 1996 and for the six months ended
January 31, 1997.

On February 9, 1998, the Company's board of directors approved an agreement with
an investment group headed by Barry W. Blank. Under the agreement the group
advanced the Company working capital of $500,000 and has committed to raise no
less than an additional $2 million in equity on or before April 30, 1998. The
initial $500,000 investment was in the form of a 12% five year note convertible
into the Company's common stock, commencing on August 1, 1998 at the rate of
$0.25 per share. The board of directors also elected Mr. Blank as President of
the Company and accepted the resignation of Elisabeth Fayer, the Company's
former Chairman and Chief Executive Officer, who owns a majority of the
Company's common stock through an affiliated company, Fine Fragrances
Distribution, Inc., ("FFD"). Mr. Blank is an investment banker who is employed
as the manager of the Phoenix office of J. Robbins Securities LLC and personally
owns seats on the New York and American Stock Exchanges. Under the agreement,
FFD also issued an option to the investment group to acquire all of its shares
of the Company's common stock and has granted Mr. Blank a proxy to vote these
shares. FFD owns approximately 7.1 million shares of the Company's common stock
which represents approximately 61% of the currently outstanding shares of such
stock. The option is exercisable for 12 months commencing on August 1, 1998 at
$0.25 per share.

On March 13, 1998, Barry Blank acting as sole director appointed Barry Feiner,
Joseph Giamenco and John McConnaughy, Jr. as additional directors of the Company

The Company has implemented a restructuring plan designed to move its operations
towards profitability and minimize the effect of the departure of Adrienne
Newman and the related discontinuance of the Company's appearances on HSN. This
plan includes significant operating expense reductions. In addition to the
expense reduction program the Company is attempting to improve its current
retail business by capitalizing on its niche salon/service presence. 


                                       6


<PAGE>   8
                          ALFIN, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                JANUARY 31, 1998
                                   (Unaudited)


The Company has committed to significantly reducing its operating expenses. In
addition to operating expenses reductions the Company's plans are focused in
the following areas:


o Continued realignment of the Company's U.S. department store operations by
  concentrating on profitable department store groups and markets.

o Further development of the Company's Canadian retail operations which have
  historically been profitable for the Company.

o Development of other revenues at distribution. The Company has made several
  presentations to the U.S. military and believes that an agreement will be
  reached which will lead to the distribution of the Arpel product line through
  its military bases. There can be no assurance that the Company will reach an
  agreement to distribute its products through U.S. military bases.

o Introduction of the Company's product line and salon services with retailers
  and/or distributors located outside of the Company's current United States
  and Canadian markets.

o Expansion of the Company's relationship with Spiegel. The Company and Spiegel
  are discussing plans to increase product offerings with distribution to a
  larger customer base. There can be no assurance that the Company and Spiegel
  will expand its relationship.

o The Company is currently finalizing its second professionally designed
  catalogue. This new addition will be mailed during the Spring season and will
  include new product offerings and reach a wider customer base. The Company has
  expanded the hours and upgraded its toll-free hotline designed to fill mail
  order requests for Adrien Arpel products. Trained beauty advisors are
  available to discuss the Company's products and offer professional skin care
  advice.       
  
Management believes that these initiatives combined with the financing under the
agreement with the Barry Blank group should improve the Company's operating and
financial condition. There can be no assurance that the Company will be
successful in implementing these initiatives.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of
credit risk consist principally of trade receivables. The Company's major
customers are department stores and, through January 1997, a television shopping
network. Concentration of credit risk with respect to trade receivables is
significant due to the dependence of certain customers in the Company's customer
base.


                                      7

<PAGE>   9
                          ALFIN, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                JANUARY 31, 1998
                                   (Unaudited)

Use of Estimates

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions 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 those estimates.

Cash & Cash Equivalents

The Company maintains money market accounts with maturities of three months or
less which are reflected as cash equivalents.

Advertising Expenses

The Company advertises through cooperative advertising programs and catalogs.
Advertising costs as a percentage of consolidated retail store sales has been
11.7% and 14.2% for the fiscal year ended July 31, 1997 and the six months ended
January 31, 1998 respectively. The Company expenses all advertising costs in the
period in which the cost is incurred.

Concentration of Revenues

The Company recognizes revenue at the time orders are shipped to customers. For
the six months ended January 31, 1998, approximately 74.3% of department store
sales were derived from merchandise, 6.4% from services and 19.3% from seasonal,
promotional items. As is common in the cosmetic industry, the Company provides
its customers with the limited right to return merchandise in order to balance
inventory and stock levels. The rate of return experienced by the Company varied
from between 4.7% and 3.1% for the fiscal year ended July 31, 1997, and six
months ended January 31, 1998 respectively.

(2)Inventory:

Inventory at January 31, 1998 and July 31, 1997 was comprised of finished goods
amounting to $948,129 and $790,079 respectively and components of $1,117,647 and
$1,437,470, respectively.

(3)Prepaid and other current assets:

During December 1996 the Company made a deposit of $1 million towards the
purchase of fragrance products from Laboratories Selecta in France ("Selecta").
This transaction was designed to provide additional product sales for the
Company in markets other than those currently handled by the Company's retail
cosmetic operations. During May 1997 the Company and Selecta agreed to cancel
this purchase. Under the agreement to cancel Selecta has refunded the Company
$260,125, $266,833, $271,281 and $277,990 on May 21, August 7, October 7, 1997,
and December 31, 1997 respectively. Interest on the repayment was charged at
10.5%.

                                      8
<PAGE>   10
                          ALFIN, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                JANUARY 31, 1998
                                   (Unaudited)

(4)Debt:


Lines of Credit:

On February 10, 1998 the Company received $500,000 in financing, pursuant to an
agreement with an investment group headed by Barry W. Blank. The financing is in
the form of a 12% five year note which is convertible into the Company's Common
Stock, commencing on August 1, 1998 at the rate of $0.25 per share.

Related Party Loans:

During October and November 1997 Fine Fragrance Distribution, Inc. ("FFD") a
company controlled by the Company's majority former shareholder, Ms. Elisabeth
Fayer, advanced $150,000 to the Company. This advance was repaid during January
1998.

(5)Computation of net income (loss) per common
   and common equivalent share:

Net income (loss) per common and common equivalent share was computed by
dividing net income (loss) by the weighted average number of shares of common
stock and common stock equivalents outstanding during the periods. Common stock
equivalents include the number of shares issuable on exercise of the outstanding
options and warrants less the number of shares that could have been purchased
with the proceeds from the exercise of the options and warrants based on the
average price of common stock during the period.

(6)Income Taxes:

The Company maintains approximately $5.4 million of Federal operating loss carry
forwards with expiration dates from 2005 to 2009; however, the use of
pre-acquisition loss carry forwards is limited by the Internal Revenue Code. As
such, the Company has not reflected a tax provision in its condensed
consolidated statement of operations for the quarter ended January 31, 1998.

(7) Other:

On October 28, 1996 the Company received notice from Adrienne Newman purporting
to terminate her April 4, 1990 Employment Agreement with the Company (such
agreement as subsequently amended is the "Employment Agreement"), based on an
alleged breach of the Employment Agreement by the Company. Ms. Newman served as
the President of the Company's wholly owned subsidiary, (Adrien Arpel, Inc.
("ARPEL") and had been selling host, under the name of Adrienne Arpel in its
sales program on the Home Shopping Network, Inc. ("HSN"). The Employment
Agreement provided for salary, fringe benefits and commission payments based
upon 33% of the revenues, net of direct expenses, attributable to television
shopping sales. Ms. Newman also had vested rights in 625,000 warrants, 500,000
of which were scheduled to expire in November 1998 and the remaining 125,000 of
which were scheduled to expires on July 31, 2001.


                                      9
<PAGE>   11
                          ALFIN, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                                JANUARY 31, 1998
                                   (Unaudited)


On November 8, 1996 the Company and Adrienne Newman reached an agreement (the
"Interim Agreement") whereby Ms. Newman agreed to appear as the selling host for
ARPEL on HSN shows scheduled for November and December 1996 and January 1997
(the "HSN Selling Period"). During the HSN Selling Period, Ms. Newman acted as
an independent contractor and not as an employee of the Company. The Company and
Ms. Newman also agreed to refrain from initiating legal action against the other
in connection with their dispute over Ms. Newman's termination of the Employment
Agreement until after the expiration of the HSN Selling Period.

On January 28, 1997, after the expiration of the HSN Selling Period, the Company
was served by Adrienne Newman with a summons and complaint returnable in the
Supreme Court, New York County whereby Ms. Newman asserted claims for damages
against the Company based upon alleged breaches by the Company of Ms. Newman's
Employment Agreement and the Interim Agreement. Unspecified damages were
claimed. A further claim requested a judicial determination that the Employment
Agreement was materially breached by the Company resulting in its termination.

On March 19, 1997, the Company served an Answer and Counterclaim in response to
the action commenced by Ms. Newman. The Company's Counterclaim asserts various
claims against Ms. Newman, seeking damages and injunctive relief. Among other
things, it is the position of the Company that Ms. Newman was in material breach
of her Employment Agreement when she terminated the Employment Agreement on
January 28, 1996. As a consequence, it is the Company's belief that Ms. Newman's
refusal to provide services to the Company throughout the term of her Employment
Agreement which expires April 1998, particularly her willful refusal and failure
to appear as the Company's selling host on HSN, will damage the Company in the
sum of at least eleven million ($11,000,000). The Company also asserted claims
against Ms. Newman for breaches of her covenant not to compete and her covenant
not to disclose trade secrets and proprietary data.

During May 1997, Ms. Newman started appearing on HSN as a representative of her
own company selling cosmetic products under the name "Signature Club A." Ms.
Newman has subsequently appeared on HSN on a monthly basis. The Company and its
attorneys have reviewed these appearances and may seek further legal remedies
and actions against Ms. Newman. During these appearances Ms. Newman was not
acting on behalf of the Company or its trademark protected Adrienne Arpel
product line.

The case is currently in the discovery phase. Upon completion of discovery the
action will be ready for trial but no trial date has yet been fixed.


                                      10

<PAGE>   12
                          ALFIN, INC. AND SUBSIDIARIES
                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

                                JANUARY 31, 1998

Results of Operations:

Certain statements in this report under the caption "Management's Discussion and
Analysis of Financial Condition and Results of Operations" constitute
"Forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995, including, without limitation, statements
regarding future cash requirements. Such forward-looking statements involve
known and unknown risks, uncertainties and other factors which may cause the
actual results, performance and achievements of the Company, or industry
results, to be materially different from any future results, performance, or
achievements expressed or implied by such forward-looking statements. Such
factors include, among others, general economic and business conditions;
industry capacity; industry trends, competition, litigation, material costs and
availability; the loss of any significant management personnel; the loss of any
significant customers; changes in business strategy or development plans;
quality of management; availability, terms and deployment of capital; business
abilities and judgment of personnel; availability of qualified personnel;
changes in, or the failure to comply with, government regulations; and other
factors referenced in this report.

SIX MONTHS ENDED JANUARY 31, 1998

The Company recorded a net loss of $2,164,912 for the six months ended January
31, 1998 as compared to net income of $1,291,863 for the six months ended
January 31, 1997. The net loss per common and common equivalent shares for the
six months ended January 31, 1998 was $(0.18) as compared to net income of $0.11
for the six months ended January 31, 1997.

Net sales for the six months ended January 31, 1998 decreased to $3,776,063 from
$19,823,279 for the six months ended January 31, 1997, a decrease of $16,047,216
or 81.0%. The decrease in sales is primarily attributable to an end of the
Company's relationship with the Home Shopping Network ("HSN") combined with a
decrease in sales to department stores. The Company's relationship with HSN
ended during January 1997 due to the Company's contract dispute with Ms.
Adrienne Newman. Sales to HSN for the six months ended January 31, 1997 were
$12,169,253. For a detailed discussion of the Company's dispute with Ms. Newman
see footnote 7, "Other."

Net sales to department stores for the six months ended January 31, 1998
decreased to $3,631,976 from $7,654,026 for the six months ended January 31,
1997, a decrease of $4,022,052 or 52.5%. The Company was distributing its
products to 166 department store locations as of January 31, 1998 as compared to
285 locations as of January 31, 1997. The Company recorded $144,087 from mail
order sales for the six months ended January 31, 1998. The Company started
filling phone requests for products during June 1997 by implementing a toll free
number where customers could speak to trained beauty advisors.

During December 1997 the Company entered into an agreement with Spiegel, Inc.
("Spiegel"). Under the terms of the agreement, the Company participated in
Spiegel's Specialty Catalogue Reverse Syndication Program ("Spiegel Program").
The Spiegel Program involved mailing the Company's product catalogue featuring a
selection of Adrien Arpel's top performing cosmetics and skin care products
priced between $18.50 and $69.95 to approximately 100,000 of Spiegel's customers
during January 1998. The Company is responsible for all promotional expenses,
including but no limited to printing and production costs related to mailing and
Spiegel is responsible for mailing costs. The Company and Spiegel are currently
discussing plans to expand this relationship with increased product offerings
and distribution to a larger customer base. The Company and Spiegel plan to
concentrate in markets where Arpel products are currently not available

                                       11
<PAGE>   13
through department stores. No assurance can be given that this expansion will
take place.

Cost of goods sold as a percentage of net sales was 30.6% for the six months
ended January 31, 1998 as compared to 35.1% for the six months ended January 31,
1997. The decrease is primarily related to product mix since products sold to
HSN have had higher cost of goods rate and consisted of 61.4% of total sales for
the six months ended January 31, 1997.

Selling, general and administrative expenses decreased to $4,848,628 for the six
months ended January 31, 1998 from $10,970,850 for the six months ended January
31, 1997, a decrease of $6,122,222 or 55.8%. This decrease is primarily
attributable to the decreased cost of operating the Company's current downsized
department store business combined with a decrease of $2,300,339 in compensation
payments to Ms. Newman which were attributable to her appearances on HSN during
the six months ended January 31, 1997. The Company has also implemented $2.2
million in annualized operating expense reductions during January 1997 and an
additional $500,000 during November 1997. For a discussion of the Company's
current restructuring plans, see "Liquidity and Capital Resources".

The Company recorded interest income of $61,751 during the six months ended
January 31, 1998 as compared to interest expense of $39,438 for the six months
ended January 31, 1997. The Company earned interest income on the payments it
received from Selecta. During the six months ended January 31, 1997 the Company
was still paying interest under its loan facility with PNC Bank.

THREE MONTHS ENDED JANUARY 31, 1998

The Company recorded a net loss of $1,407,020 for the three months ended January
31, 1998 as compared to net income of $701,405 for the three months ended
January 31, 1997. The net loss per common and common equivalent shares for the
three months ended January 31, 1998 was $(0.12) as compared to net income of
$0.06 for the three months ended January 31, 1997.

Net sales for the three months ended January 31, 1998 decreased to $1,379,724
from $10,188,567 recorded in the three months ended January 31, 1997, a decrease
of $8,808,843 or 86.5%. The decrease in sales is due primarily to the end of the
Company's relationship with HSN combined with a decrease in sales to department
stores. During the three months ended January 31, 1997 the Company recorded
sales to HSN in the amount of $6,441,671. Sales to department stores for the
three months ended January 31, 1998 decreased to $1,301,600 from $3,746,896, a
decrease of $2,445,295 or 65.3%. As indicated previously the Company was
distributing to 166 department store locations at January 31, 1998 as compared
to 285 locations at January 31, 1997. The Company recorded $78,124 from mail
order sales for the three months ended January 31, 1998.

Cost of goods sold as a percentage of net sales was 27.7% for the three months
ended January 31, 1998 as compared to 37.9% for the three months ended January
31, 1997.

Selling, general and administrative expenses for the three months ended January
31, 1998 decreased to $2,427,775 from $5,305,301 for the three months ended
January 31, 1997, a decrease of $2,877,526, or 54.2%.

The Company recorded interest income in the amount of $23,738 during the three
months ended January 31, 1998 as compared to interest expense of $21,027 for the
three months ended January 31, 1997.


LIQUIDITY AND CAPITAL RESOURCES

The Company had a working capital deficit of $815,492 at January 31, 1998, a
decrease of $2,069,640 from positive working capital of $1,254,148 at July 31,
1997.

                                       12
<PAGE>   14
During fiscal year 1997 and during the six months ended January 31, 1998,
significant losses from operations and cash used in operations were incurred as
a result of the discontinuance of appearances on HSN resulting from the
Company's dispute with Adrienne Newman. The Company had been significantly
dependent on HSN during the fiscal years ended 1995, 1996 and for the six months
ended January 31, 1997. The Company has been dependent upon cash generated from
operations and as a result of the above factors the Company's independent public
accountants issued a going concern audit opinion for the year ended July 31,
1997.

On February 9, 1998, the Company's Board of Directors approved an agreement with
an investment group headed by Barry W. Blank. Under the agreement the group
advanced the Company working capital of $500,000 and has committed to raise no
less than an additional $2 million in equity on or before April 30, 1998. There
can be no assurance that the Blank group will be successful in raising such
equity. If the Blank group is not successful and the Company cannot obtain
alternative financing, the Company will be adversely effected. The initial
$500,000 investment was in the form of a 12% five year note convertible into the
Company's Common Stock, commencing August 1, 1998, at the rate of $0.25 per
share. On February 9, 1998, the Company's Board of Directors elected Mr. Blank
as President of the Company and accepted the resignation of Elisabeth Fayer, the
Company's former Chairman and Chief Executive Officer, who owned a majority of
the Company's common stock through an affiliated company, Fine Fragrances
Distribution, Inc., ("FFD"). Mr. Blank is an investment banker who is employed
as the manager of the Phoenix office of J. Robbins Securities LLC and personally
owns seats on the New York and American Stock Exchanges. Under the agreement,
FFD also issued an option to the investment group to acquire all of its shares
of the Company's Common Stock and has granted Mr. Blank a proxy to vote these
shares. FFD owned approximately 7.1 million shares of the Company's Common Stock
that represented approximately 61% of the currently outstanding shares of such
stock. The option is exercisable for 12 months commencing on August 1, 1998 at
$0.25 per share.

The Company's former directors, Jacques Desjardins, Steven Korda and Suzanne
Langlois resigned their respective positions in conjunction with the above
agreement. Mr. Barry Feiner, an attorney who practices law in New York City,
Joseph Giamenco, who is the principal of GHM, Inc., an American Stock Exchange
specialist firm, and Mr. John McConnaughy, Jr., a private investor have been
installed in their places.

In July 1997, the Company was advised by the American Stock Exchange (the "ASE")
that it wished to review with the Company its continued listing eligibility on
the ASE based upon the Company falling below certain ASE continued listing
guidelines. The Company met with representatives of the ASE and made both oral
and written presentations to the ASE. The Company was advised by the ASE, by
letter dated September 15, 1997, that the Company's listing on the ASE would be
continued subject to future review by the ASE of the Company's favorable
progress in satisfying the ASE's guidelines for continued listing and to the
ASE's routine periodic reviews of the Company's SEC and other filings. The ASE
requested an updated report from the Company to be submitted on or before
December 17, 1997 which addressed, among other things, the Company's ability to
satisfy its cash needs and to achieve its projections of profitability. During
January 1998 and based upon the updated report submitted by the Company to the
ASE on December 17, 1997, the ASE notified the Company of its intention to
commence delisting procedures.


On January 21, 23, 28, and 29, 1998, the Company and representatives of the
Blank group made oral and written submissions to the ASE. The Company was
advised by letter dated February 3, 1998, that the ASE would continue the
Company's listing until May 1, 1998. This determination was subject to the
Company's receipt of the $500,000 in immediate cash, which occurred on February
9, 1998, and at least $2 million by April 30, 1998, as outlined under the
Company's agreement with the Barry Blank group. Additionally, the Company must
achieve its commitments to generate new revenue sources and reduce expenses as
set forth in its letters to the ASE. The ASE has requested a report on or before


                                       13
<PAGE>   15
May 1, 1998 which addresses the Company's ability to raise cash and explains 
any material deviation from the commitments and projections provided by the
Company. The ASE has also requested updated quarterly income statement and cash
flow projections for fiscal 1998 and a revised projected balance sheet as of
July 31, 1998. The Company does not satisfy the guidelines for the continued
listing of its securities on the ASE and no assurance can be given that the
listing will be retained.

The Company has committed to significantly reducing its operating expenses. In
addition to operating expenses reductions the Company's plans are focused in the
following areas:

-        Continued realignment of the Company's U.S. department store operations
         by concentrating on profitable department store groups and markets.

-        Further development of the Company's Canadian retail operations which
         have historically been profitable for the Company.

-        Development of other avenues of distribution. The Company has made
         several presentations to the U.S. military and believes that an
         agreement will be reached which will lead to the distribution of the
         Arpel product line through its military bases. There can be no
         assurance that the Company will reach an agreement to distribute its
         products through U.S. Military bases.

-        Introduction of the Company's product line and salon services with
         retailers and/or distributors located outside of the Company's current
         United States and Canadian markets.

-        Expansion of the Company's relationship with Spiegel. The Company and
         Spiegel are discussing plans to increase product offerings with
         distribution to a larger customer base. There can be no assurance that
         the Company and Spiegel will expand its relationship.

-        The Company is currently finalizing its second professionally designed
         catalogue. This new addition will be mailed during the spring season
         and will include new product offerings and reach a wider customer base.
         The Company has expanded the hours and upgraded its toll free hotline
         designed to fill mail order requests for Adrien Arpel products. Trained
         beauty advisors are available to discuss the Company's products and
         offer professional skin care advice.

Management believes that these initiatives combined with the financing under the
agreement with the Barry Blank group should improve the Company's operating and
financial condition. There can be no assurance that the Company will be
successful in implementing these initiatives.

                                       14

<PAGE>   16
                                                                      EXHIBIT 11


                          ALFIN, INC. AND SUBSIDIARIES

                  SCHEDULE OF COMPUTATION OF EARNINGS PER SHARE

<TABLE>
<CAPTION>
                                    Three Months Ended                    Six Months Ended
                                        January 31                           January 31
                                  1998              1997              1998               1997
                                  ----              ----              ----               ----

<S>                           <C>                <C>              <C>                 <C>
Net (Loss) Income              (1,407,020)          701,405       $ (2,164,912)       $ 1,291,863
                              -----------        ----------       ------------        -----------

Weighted average number
of shares outstanding          11,787,983        11,721,259         11,787,983         11,721,259

Add:
Common Stock
Equivalents under 1983
option plan                             0             1,503                  0              1,970

Common Stock
Equivalents under 1993
option plan                             0           125,292                  0            164,142

Common Stock
Equivalents represented
by Warrants                             0           110,140                  0            212,120

                              -----------        ----------       ------------        -----------

Weighted average number
of Shares used in
earnings per share             11,787,983        11,958,194         11,787,983         12,099,490

Earnings per share            $     (0.12)       $     0.06       $      (0.18)       $      0.11
</TABLE>


                                       15
<PAGE>   17
                           ALFIN, INC AND SUBSIDIARIES



SIGNATURES


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



                                             ALFIN, INC.

                                            (Registrant)





                                 /s/ Barry W. Blank
                                 ------------------------------
                                  Barry W. Blank
                                  President






Dated: March 13, 1998            /s/ Michael D. Ficke
                                 ------------------------------
                                 Michael D. Ficke
                                 Chief Financial Officer

                                       16