SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

              [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended March 31, 1997

                                       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 1-6081

                              COMFORCE CORPORATION
             (Exact name of registrant as specified in its charter)

           Delaware                                              36-2262248
 State or other jurisdiction                                  I.R.S. Employer
 of incorporation or organization                            Identification No.

2001 Marcus Avenue Lake Success, New York                          11042
Address of principal executive offices                           Zip Code



Registrant's telephone number, including area code: (516) 328-7300
         

                                 Not Applicable
Former name, former address and former fiscal year, if changed since last report

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

                               Yes __X__ No _____

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.


          Class                                       Outstanding at May 5, 1997
Common stock, $.01 par value                                    13,259,025


                                                    

<PAGE>



                              COMFORCE CORPORATION


                                      INDEX


                                                                           Page
                                                                          Number
                                                                          ------

PART I   FINANCIAL INFORMATION                                                1

Item 1.  Financial Statements (Unaudited)                                     1

         Condensed Consolidated Balance Sheets
              March 31, 1997 and December 31, 1996                            1

         Condensed Consolidated Statements of Operations
              for the three months ended  March 31, 1997
              and March 31, 1996                                              3

         Condensed Consolidated Statement of Changes in Stockholders'
              Equity for the three months ended
              March 31, 1997                                                  4

         Condensed Consolidated Statements of Cash Flows
              for the three months ended March 31, 1997
              and March 31, 1996                                              5

         Notes to Condensed Consolidated Financial Statements                 6

Item 2.  Management's Discussion and Analysis of
              Financial Condition and Results of Operations                  13


PART II  OTHER INFORMATION

Item 6.  Exhibits and Reports on Form 8-K                                    16



SIGNATURES                                                                   17



<PAGE>




                         PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements

                      COMFORCE CORPORATION AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (in thousands)


                                                      March 31,    December 31,
                                                        1997           1996
                                                      ---------    ------------
                                                     (Unaudited)
                    ASSETS
Current assets:
   Cash and equivalents                                $ 4,654       $ 3,608
   Restricted cash                                       1,000            --
   Accounts receivable, net of allowance of  
      doubtful accounts of $423 in 1997
      and $213 in 1996                                  25,465        12,042
   Prepaid expenses                                      1,086           243
   Deferred income tax                                   1,639           278
   Deferred financing fees                               2,436            --
   Other                                                   493           373
                                                       -------       -------
          Total current assets                          36,773        16,544
                                                       -------       -------
Property, plant and equipment                            1,652           890
Less:  accumulated depreciation and
   amortization                                            212           146
                                                       -------       -------
                                                         1,440           744
                                                       -------       -------
Other assets:
   Excess of cost over net assets acquired,
      net of accumulated amortization of $787
      in 1997 and $526 in 1996                          39,223        24,756
   Other                                                   134         1,322
                                                       -------       -------
                                                        39,357        26,078
                                                       -------       -------
                                                       $77,570       $43,366
                                                       =======       =======


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


                                        1

<PAGE>



                      COMFORCE CORPORATION AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                      (in thousands except per share data)


<TABLE>
<CAPTION>


                                                                                            March 31,               December 31,
                                                                                            ---------               ------------
                                                                                               1997                     1996
                                                                                               ----                     ----
                                                                                            (unaudited)
<S>                                                                                           <C>                      <C>         
         LIABILITIES
Current liabilities:
   Borrowings under revolving line of credit                                                  $ 6,328                  $ 3,850
   Accounts payable                                                                             1,957                    1,398
   Accrued expenses                                                                             7,502                    1,961
   Payroll tax liabilities                                                                      3,495                      969
   Income taxes                                                                                   275                      354
   Short-term debt                                                                             25,163                       --
                                                                                              -------                  -------     
                    Total current liabilities                                                  44,720                    8,532
                                                                                              -------                  -------  
                                                                                                                
Deferred income tax                                                                                90                       90
Other liabilities                                                                                 868                       --
                                                                                              -------                  -------     
                    Total liabilities                                                          45,678                    8,622
                                                                                              -------                  -------  
                                                                                                                
Commitments and contingencies                                                                                   
Common stock subject to redemption                                                              4,600                       --
                                                                                                                
                                                                                                                
       STOCKHOLDERS' EQUITY                                                                                     
                                                                                                                
6% Series D convertible  preferred  stock,  $.01 par value; 15,000 authorized,                                  
6,480 issued and outstanding in 1997, and 7,002 shares issued and outstanding in                                
1996. Liquidation value of $1,000 per share ($6,480,000)                                            1                        1
                                                                                                                
5% Series F convertible preferred stock, $.01 par value;                                                        
10,000 shares authorized 500 shares issued and outstanding in                                                   
1997 and 3,250 shares issued and outstanding in 1996.  Liquidation                                              
value of $1,000 per share ($500,000)                                                                1                        1
                                                                                                                
Common stock, $.01 par value;  100,000,000 shares authorized,  12,873,434 issued                                
and outstanding in 1997 and 12,701,934 issued                                                                   
and outstanding in 1996                                                                           129                      127
Additional paid-in capital                                                                     27,035                   34,253
Retained earnings since January 1, 1996                                                           126                      362
                                                                                              -------                  -------     
                                                                                               27,292                   34,744
                                                                                              -------                  -------     
                                                                                              $77,570                  $43,366
                                                                                              =======                  =======
                                                                                                                               
                                                                                                                      
</TABLE>

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

                                        2

<PAGE>



                      COMFORCE CORPORATION AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                      (in thousands, except per share data)
                                  (Unaudited)

<TABLE>
<CAPTION>


                                                                                                     Three Months Ended March 31,
                                                                                                     ----------------------------
                                                                                                     1997                     1996
                                                                                                     ----                     ----

<S>                                                                                                <C>                     <C>     
Revenues                                                                                           $ 35,808                $  3,265
                                                                                                   --------                --------

Costs and expenses:
     Cost of revenues                                                                                31,086                   2,452
     Selling, general and administrative                                                              3,060                     568
     Depreciation and amortization                                                                      341                      77
                                                                                                   --------                --------
                                                                                                     34,487                   3,097
                                                                                                   --------                --------
Operating income                                                                                      1,321                     168
                                                                                                   --------                --------

Interest expense:
     Bridge financing costs                                                                          (1,418)                   --
     Other interest, net of interest income                                                            (291)                     (1)
     Other income                                                                                       344                       3
                                                                                                   --------                --------
                                                                                                     (1,365)                      2
                                                                                                   --------                --------

Earnings (loss) before income taxes                                                                     (44)                    170
Provision for income taxes                                                                              (58)                    (70)
                                                                                                   --------                --------
Net income (loss)                                                                                      (102)                    100

Dividends on preferred stock                                                                            134                    --
                                                                                                   --------                --------
     Income (loss) available to common stockholders                                                ($   236)               $    100
                                                                                                   ========                ========

Earnings (loss) per share                                                                          ($  0.02)               $   0.01
                                                                                                   --------                --------
          Net earnings (loss)                                                                      ($  0.02)               $   0.01
                                                                                                   ========                ========

Weighted average number of shares of common stock and
common stock equivalents outstanding                                                                 12,776                  10,884
                                                                                                   ========                ========


</TABLE>




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


                                        3

<PAGE>



                                   COMFORCE CORPORATION AND SUBSIDIARIES
                                CONDENSED CONSOLIDATED STATEMENT OF CHANGES
                                         IN STOCKHOLDERS' EQUITY
                                  (in thousands, except per share data)
                                             (unaudited)

<TABLE>
<CAPTION>

                                                                                                     
                                                                                                     
                                                                                                     
                                                                                    Series D                      Series F         
                                                   Common Stock                  Preferred Stock               Preferred Stock      
                                                   ------------                  ---------------               ---------------      
                                   
                                                 Shares      Dollars           Shares       Dollars         Shares         Dollars
                                                 ------      -------           ------       -------         ------         -------

<S>                                          <C>           <C>                  <C>       <C>                 <C>        <C>    
Balance at December 31, 1996                 12,701,934    $       127          7,002     $         1          3,250     $         1
   Exercise of stock options                    118,000              1           --              --             --              --  
   Exercise of stock warrants                    10,000           --             --              --             --              --  
   Redemption of Series F
   preferred stock                                 --             --             --              --           (2,750)           --  
   Conversion of Series D
   preferred stock                               43,500              1           (522)           --             --              --  
   SEC Registration fees                           --             --             --              --             --              --  
   Issuance of warrants in
   connection with debt
   placement                                       --             --             --              --             --              --  
   Reclassification of common                      --             --             --              --             --              --  
   stock subject to redemption
   Net earnings                                    --             --             --              --             --              --  
   Dividends:                                      --             --             --              --             --              --  
   Series D preferred stock                        --             --             --              --             --              --  
   Series F preferred stock                        --             --             --              --             --              --  
                                            -----------    -----------    -----------     -----------    -----------     -----------
                                             12,873,434    $       129          6,480     $         1            500     $         1
                                            ===========    ===========    ===========     ===========    ===========     ===========
                                                                                                                         

<CAPTION>

                                                                                                   Retained   
                                                                                                   Earnings                  Total 
                                                                          Additional                 Since                   Stock-
                                                                            Paid-in                January 1,               holders'
                                                                            Capital                  1996                    Equity 
                                                                            -------                  ----                    ------ 
<S>                                                                        <C>                     <C>                     <C>     
Balance at December 31, 1996                                               $ 34,253                $    362                $ 34,744
   Exercise of stock options                                                    131                    --                       132
   Exercise of stock warrants                                                    21                    --                        21
   Redemption of Series F
   preferred stock                                                           (3,162)                   --                    (3,162)
   Conversion of Series D
   preferred stock                                                             --                      --                         1
   SEC Registration fees                                                       (196)                   --                      (196)
   Issuance of warrants in
   connection with debt
   placement                                                                    588                    --                       588
   Reclassification of common                                                (4,600)                   --                    (4,600)
   stock subject to redemption
   Net earnings                                                                --                      (102)                   (102)
   Dividends:                                                                  --                      --                      --   
   Series D preferred stock                                                    --                      (102)                   (102)
   Series F preferred stock                                                    --                       (32)                    (32)
                                                                           --------                --------                --------
                                                                           $ 27,035                $    126                $ 27,292
                                                                           ========                ========                ========
                                                                                                                          

</TABLE>


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


                                        4

<PAGE>



                      COMFORCE CORPORATION AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
                            (Unaudited in thousands)


<TABLE>
<CAPTION>


                                                                                                            Three Months Ended
                                                                                                                  March 31,
                                                                                                       ----------------------------
                                                                                                           1997                1996
                                                                                                           ----                ----
<S>                                                                                                    <C>                 <C>      
Net cash flows used by operating activities                                                            $ (1,146)           $   (216)
                                                                                                        -------              ------
Cash flows from investing activities:
   Acquisition payments, net of cash acquired                                                           (14,178)             (2,086)
   Officer loans                                                                                           --                   (38)
   Restricted cash                                                                                       (1,000)               --
   Additions to property, plant and equipment                                                              (247)                 (6)
                                                                                                        -------              ------
Net cash flows (used by) from investing activities                                                      (15,425)             (2,130)
                                                                                                        -------              ------ 
Cash flows from financing activities:
   Proceeds from revolving line of credit                                                                 8,336               1,900
   Repayment on line of credit                                                                          (11,141)               --
   Proceeds from short-term debt                                                                         20,628                --
   Proceeds from exercise of stock options                                                                  131                  22
   Proceeds from exercise of warrants                                                                        21                --
   Payments of registration costs                                                                          (196)               --
   Dividends paid                                                                                          (162)               --
                                                                                                        -------              ------
Net cash flows from financing activities                                                                 17,617               1,922
                                                                                                        -------              ------
Increase (decrease) in cash and cash equivalents                                                          1,046                (424)
Cash and equivalents, beginning of period                                                                 3,608                 649
                                                                                                        -------              ------
Cash and equivalents, end of period                                                                    $  4,654            $    225
                                                                                                        =======              ======
Supplemental cash flow information: Cash paid during the period for:
    Interest                                                                                           $    120            $      1
    Income taxes paid                                                                                        71                --
Supplemental schedule of noncash investing and financing activities:
   Quasi-reorganization                                                                                    --               (93,848)
   Issuance of short-term debt to redeem Series F preferred stock                                         3,162                --
   Accrued dividends                                                                                         68                --
   Amounts assumed by ARTRA                                                                                --                   909
   Warrants issued in connection with the sale of convertible debentures                                    488                --
   Warrants issued in connection with short-term loan                                                       100                --


</TABLE>

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


                                        5


<PAGE>




                      COMFORCE CORPORATION AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1.   BASIS OF PRESENTATION

The  accompanying   condensed  consolidated  financial  statements  of  COMFORCE
Corporation  ("COMFORCE"  or  the  "Company"),  formerly  The  Lori  Corporation
("Lori"),  are  presented  on a going  concern  basis,  which  contemplates  the
realization of assets and the  satisfaction  of liabilities in the normal course
of  business.  The  Company  currently  operates  in one  industry  segment as a
provider of  telecommunications  and computer  technical staffing and consulting
services worldwide.

Effective January 1, 1996, the Company effected a  quasi-reorganization  through
the  application of $93,847,000 of its  $95,993,000  Additional  Paid in Capital
account to eliminate its  Accumulated  Deficit.  The Company's  Board decided to
effect a  quasi-reorganization  given that the  Company  achieved  profitability
following its entry into the technical staffing business and  discontinuation of
its unprofitable jewelry business.

As discussed in Note 3, on February 28, 1997,  the Company  purchased all of the
stock of RHO Company  Incorporated  ("RHO"). RHO is in the business of providing
contract employees to other businesses.

These condensed  consolidated  financial  statements are presented in accordance
with the  requirements  of Form 10-Q and  consequently  do not  include  all the
disclosures  required in the Company's Annual Report on Form 10-K.  Accordingly,
the Company's  Annual Report on Form 10-K for the fiscal year ended December 31,
1996, as filed with the  Securities and Exchange  Commission,  should be read in
conjunction  with  the  accompanying  consolidated  financial  statements.   The
condensed  consolidated  balance  sheet as of December 31, 1996 was derived from
the audited consolidated  financial statements in the Company's Annual Report on
Form 10-K.

Reported  interim results of operations are based in part on estimates which may
be subject to year-end  adjustments.  In addition,  these  quarterly  results of
operations are not necessarily indicative of those expected for the year.

2.   STATEMENT OF FINANCIAL ACCOUNTING STANDARDS

In February 1997, the Financial  Accounting Standards Board issued Statements of
Financial  Accounting  Standards No. 128, "Earnings per Share" ("SFAS No. 128"),
which  establishes  standards for computing  and  presenting  earnings per share
(EPS).  SFAS No.  128 will be  effective  for  financial  statements  issued for
periods  ending after December 15, 1997.  Earlier  application is not permitted.
Management  has not yet  evaluated  the effects of this change on the  Company's
financial statements.

3.   CERTAIN ACQUISITIONS

On February 28, 1997,  the Company  purchased  all of the stock of RHO for $14.8
million payable in cash, plus a contingent payout to be paid over three years on
future  earnings  of RHO payable in stock in an  aggregate  amount not to exceed
$3.3 million.  The maximum number of shares issuable under the contingent payout
is 386,249  shares.  The acquisition of RHO was accounted for under the purchase
method  and,  accordingly,  RHO's  operations  are  included  in  the  Company's
statement of operations  from the date of  acquisition.  The cash portion of the
purchase  price paid at closing was  principally  funded  through the  Company's
offering  of  convertible  debentures.  See  Note 4.  RHO  provides  specialists
primarily in the technical services and IT sectors.



                                        6

<PAGE>


        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

In connection  with the closing of the RHO acquisition and in recognition of the
efforts of James L.  Paterek,  Chairman of the Company,  Christopher  P. Franco,
Chief Executive Officer of the Company, and Michael Ferrentino, President of the
Company,  including  providing their personal guarantees on certain loans to the
Company through the pledging of their shares of Company stock,  the Company paid
each of these officers $75,000.

The following  unaudited pro forma summary presents the consolidated  results of
operations (in thousands,  except per share data) as if the RHO  acquisition has
occurred  on January 1, 1996 and does not  purport to be an  indication  of what
would have occurred had the acquisition  been made as of that date or of results
which may occur in the future.


                                                        Three Months Ended
                                                             March 31,
                                                     --------------------------
                                                       1997              1996
                                                     --------          --------
                                                          (Unaudited)

Revenue                                              $ 50,118          $ 23,715

Net loss from operations                             $   (934)         $   (137)
                                                     ========          ========
Net loss per share                                   $  (0.07)         $  (0.01)
                                                     ========          ========


The above pro forma data  assumes the  issuance  of $15.0  million of short term
debt to finance the RHO acquisition.  Pro forma adjustments  include an interest
cost  increase  of $95,000 in 1997 and  $112,000  in 1996,  additional  goodwill
amortization of $62,000 and $89,000 in the 1997 and 1996 periods,  respectively,
and the related income tax effect.

4.   DEBT

At March 31, 1997, notes payable and long-term debt (in thousands) consisted of:




                                                       March 31,    December 31,
                                                         1997           1996
                                                       ---------    ------------
Outstanding debt
  Revolving line of credit, due in July 1997,
  with interest  payable monthly at  the bank's
  prime rate. At March 31, 1997,
  the bank's prime rate was 8.25%                         $ 6,328     $ 3,850

Convertible Debt                                           25,163        --
                                                          -------     -------

                                                          $31,491     $ 3,850
                                                          =======     =======


The revolving line of credit  agreement allows for borrowings up to a maximum of
$7.5  million.  Borrowings  against  the  line  cannot  exceed  80% of  eligible
receivables,  as defined. The borrowing is collateralized by accounts receivable
and other assets of RHO. As of March 31, 1997, the Company was not in compliance
with certain loan  covenants and had received  waivers of compliance  with these
covenants.

                                        7

<PAGE>


        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

From  February  27 to March 21, 1997 (each date of sale a "Closing  Date"),  the
Company  sold  $25.2  million  of  its   Subordinated   Convertible   Debentures
("Debentures")  to certain  institutional  investors for cash or in exchange for
shares of the  Company's  Series F  Preferred  Stock.  In the case of the shares
exchanged, the Company effected the repurchase of 2,750 of the 3,250 outstanding
shares of its Series F Preferred  Stock by issuing  Debentures  in the  original
principal  amount of 115% of the  liquidation  value of the  Series F  Preferred
Stock to the holders  thereof  (the  "Series F Holders").  The  Debentures  bear
interest at the rate of 8% per annum  during the 180 day period  following  each
Closing Date and thereafter at the rate of 10% per annum  continuing until fully
paid or converted. Interest on the Debentures is payable quarterly in cash or in
common stock of the Company, at the Company's option.

The  Debentures  may be  redeemed by the Company in whole or in part at any time
from  issuance  through 360 days after any Closing  Date at a  redemption  price
equal to the sum of (i) the principal amount thereof,  (ii) all accrued,  unpaid
interest  thereon,  and  (iii)  premiums  ranging  from 5%  (2.5% in the case of
Debentures  exchanged  for Series F  Preferred  Stock) for  Debentures  redeemed
within 60 days after any Closing Date and  increasing  up to 25% for  Debentures
redeemed  between  181 and 360 days  after any  Closing  Date.  The  Company  is
currently seeking long-term  financing to redeem these Debentures and to provide
capital for continued expansion of its operations.

In addition, the Debentures may be converted, in whole or in part, at the option
of the holder  beginning  181 days  following  each Closing  Date. If any holder
elects to convert Debentures, the Company has the option to effect the requested
conversion in either cash or in shares of the Company's  common stock, or in any
combination  thereof.  Cash  conversions are payable at 125% of face value (plus
accrued  interest).  Stock  conversions  are payable at 100% of face value (plus
accrued interest) in common stock valued at 75% of the average closing bid price
for the five trading days ending on the trading day before the  conversion.  Any
portion of any Debenture  which remains  outstanding  on the 360th day following
the applicable Closing Date will be automatically converted to cash or shares of
common stock, or any combination  thereof,  as determined by the Company.  Under
certain  circumstances,  the aggregate number of shares of common stock issuable
is limited,  which could  require that the Company  effect  certain  conversions
through cash payments.

From  February 27 to March 21,  1997,  the Company  issued  three year  warrants
("Warrants")  to purchase up to 504,000 shares of its Company's  common stock at
exercise  prices  ranging  from $6.85 to $7.65 per share.  Warrants  to purchase
201,600  shares of common  stock with a value of  $488,000  have vested and will
become exercisable six months after each Closing Date (each an "Exercise Date").
Warrants to purchase the remaining  302,400  shares of common stock will vest in
one-third  increments (and become exercisable on the respective  Exercise Dates)
if the  Debentures  are not repaid within 90, 120 and 150 days after the Closing
Dates.  The Company  also issued  additional  three year  warrants  ("Additional
Warrants")  to purchase  504,000  shares of the Company's  common  stock,  which
Additional Warrants will vest (and become exercisable on the respective Exercise
Dates) if the Debentures are not redeemed  within 180 days following the Closing
Dates. The Additional  Warrants will have an exercise price equal to the average
closing price of the  Company's  common stock over the five-day  trading  period
ending 179 days after the respective Closing Dates.

5.   EQUITY

In January  1997,  63,000 stock  options were  exercised at an average  price of
$1.125.

In January 1997, 10,000 warrants were exercised at an average price of $2.062.

In February  1997,  55,000 stock  options were  exercised at an average price of
$1.125.


                                        8

<PAGE>


        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

In February and March 1997, the Company  issued  201,600  warrants in connection
with the sale of the Debentures with a value of $488,000.

In February  1997,  the Company  effected the  repurchase  of 2,750 of the 3,250
outstanding  shares of its Series F Preferred  Stock with a value of  $3,162,000
through the issuance of its Debentures (see Note 4).

On February  28,  1997,  the Company  issued  100,000  warrants  with a value of
$100,000 in connection with a short-term loan made to the Company.

In March 1997, 522 shares of Series D Preferred Stock were converted into 43,500
shares of common stock at price of $12 per share.

6.   EARNINGS PER SHARE

Earnings per common share is computed by dividing  net  earnings  available  for
common stockholders by the weighted average number of shares of common stock and
common stock equivalents  (stock options and warrants),  outstanding during each
period.  Common  stock  equivalents  relate to  outstanding  stock  options  and
warrants.  For this  computation,  shares of the  Series F  Preferred  Stock are
anti-dilutive  and as such are not considered  equivalents for this calculation.
The  shares  of  Series  D  Preferred  Stock  are not  considered  common  stock
equivalents and are excluded from primary  earnings per share.  The dividends of
$102,000  accrued or paid on the Series D Preferred  Stock and the  dividends of
$32,000  accrued or paid on the Series F Preferred  Stock have been deducted for
computing earnings available to common stockholders.  For the period ended March
31, 1997, common stock equivalents have not been included in this calculation as
their  effect is  anti-dilutive.  For the period  ended  March 31,  1996,  fully
diluted   earnings  per  share  have  not  been   presented  as  the  result  is
anti-dilutive or does not differ from primary earnings per share.

Primary earnings per share is calculated as follows (in thousands):


                                                              1997        1996
                                                            --------    --------

Earnings (loss) available for common stockholders           ($   236)   $    100
                                                            ========    ========
Weighted average number of shares outstanding for the
  period                                                      12,776       9,310
Dilutive effect of common stock equivalents                     --         1,574
                                                            --------    --------

                                                              12,776      10,884
                                                            ========    ========


Primary earnings (loss) per share                           ($  0.02)   $   0.01
                                                            ========    ========
                                                             

7.   INCOME TAXES

In the first  quarter  of 1997 and 1996,  the  difference  between  the  Federal
statutory income tax rate and the Company's effective tax rate relates primarily
to state income taxes and the nondeductibility of certain intangible assets.

8.   LITIGATION

In January 1997,  Austin A. Iodice,  who served as the Company's Chief Executive
Officer,   President   and  Vice  Chairman   while  the  Company,   through  its
subsidiaries,  was engaged in the jewelry  business,  and  Anthony  Giglio,  who
performed  the  functions of the  Company's  Chief  Operating  Officer while the
Company was engaged in the jewelry  business,  filed  separate suits against the
Company in the Connecticut Superior

                                        9

<PAGE>


        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

Court alleging that the Company had breached the terms of management  agreements
entered  into with them by failing to honor  options to  purchase  common  stock
awarded to them in connection with the management of the jewelry  business under
the  terms of such  management  agreements  and the  Company's  Long-Term  Stock
Investment  Plan.  The suits  allege  that the  plaintiffs  are  entitled  to an
unspecified amount of damages.  The Company believes that the option to purchase
370,419  shares  granted to Mr.  Iodice  (through  Nitsua,  Ltd., a  corporation
wholly-owned  by him) and the option to purchase  185,210  shares granted to Mr.
Giglio,  each  having an  exercise  price of $1.125 per share,  expired in 1996,
three  months  after  Messrs.  Giglio and Iodice  ceased to be  employed  by the
Company.  Messrs.  Giglio  and  Iodice  maintain  that they were  agents and not
employees  of the Company and that the options  continue to be  exercisable.  In
March 1997,  the  Company  filed  motions to dismiss  each of these  suits.  The
Company intends to vigorously defend these suits.

In a case filed in U.S. District Court, Central District of California,  against
RHO and Technical Staff Associates,  Inc. ("TSA"),  which was acquired by RHO in
1992, TSA's former insurance  carrier has alleged that TSA and RHO are obligated
to  repay  to it  approximately  $1.6  million  that it was  required  to pay in
connection  with an  injury  and  death  that  occurred  in  November  1992 to a
temporary  employee  of TSA.  The action has been  referred  to RHO's  insurance
carrier,  which is  defending  it with a  reservation  of  rights.  RHO has been
granted  summary  judgment with respect to all claims made in the action,  which
judgment is the subject of an appeal by the plaintiff.  Management believes that
the case is without substantial merit and intends to vigorously defend it.

Prior to its entry into the jewelry  business in 1985,  the Company  operated in
excess  of 20  manufacturing  facilities  for the  production  of,  inter  alia,
photocopy machines,  photographic  chemicals and paper coating. These operations
were sold or  discontinued  in the late 1970s and early 1980s.  Certain of these
facilities  may have used  and/or  generated  hazardous  materials  and may have
disposed of the hazardous substances,  particularly before the enactment of laws
governing the safe disposal of hazardous substances, at an indeterminable number
of sites.  Although the controlling  stockholders and current  management had no
involvement in such prior manufacturing operations, the Company could be held to
be responsible for clean-up costs if any hazardous  substances were deposited at
these manufacturing  sites, or at off-site waste disposal  locations,  under the
Comprehensive  Environmental  Response,  Compensation  and Liability Act of 1980
("CERCLA"),  or under other Federal or state environmental laws now or hereafter
enacted. However, except for the Gary, Indiana site described below, the Company
has not been notified by the Federal Environmental Protection Agency (the "EPA")
that it is a  potentially  responsible  party for,  nor is the Company  aware of
having disposed of hazardous substances at, any site.

In December  1994,  the Company was notified by the EPA that it is a potentially
responsible  party under CERCLA for the disposal of  hazardous  substances  at a
site in Gary, Indiana.  The alleged disposal occurred in the mid-1970s at a time
when the Company conducted operations as APECO Corporation.  In this connection,
in December 1994, the Company was named as one of approximately 80 defendants in
a case brought in the United States District Court for the Northern  District of
Indiana by a group of 14 potentially responsible parties who agreed in a consent
order  entered  into with the EPA to clean-up  this site.  The  plaintiffs  have
estimated the cost of cleaning up this site to be $45 million,  and have offered
to settle the case with the Company for  $991,445.  This amount  represents  the
plaintiffs'  estimate of the Company's pro rata share of the clean-up  costs. At
the direction of ARTRA, which, as described below, is contractually obligated to
the Company for any  environmental  liabilities,  the Company declined to accept
this settlement proposal, which was subsequently withdrawn.

The evidence produced by the plaintiffs to date is the testamentary  evidence of
four former  employees of a waste disposal  company that deposited wastes at the
Gary,  Indiana  site  identifying  the  Company as a customer  of such  disposal
company,  and entries in such disposal  company's  bookkeeping  ledgers  showing
invoices to the  Company.  The  Company,  however,  has neither  discovered  any
records which indicate, nor

                                       10

<PAGE>


        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

located  any  current or former  employees  who have  advised,  that the Company
deposited  hazardous  substances at the site.  Management and its counsel cannot
state whether a negative outcome is probable  regarding the Company's  potential
liability at this site.

Under the terms of the Assumption  Agreement and a subsequent  agreement entered
into  between  ARTRA  and the  Company,  ARTRA has  agreed to pay and  discharge
substantially  all of the Company's  pre-existing  liabilities and  obligations,
including environmental  liabilities at any sites at which the Company allegedly
operated  facilities  or disposed of  hazardous  substances,  whether or not the
Company is currently  identified as a potentially  responsible  party  therefor.
Consequently, the Company is entitled to full indemnification from ARTRA for any
environmental  liabilities  associated with the Gary, Indiana site. In addition,
ARTRA has deposited  125,000  shares of the Company's  common stock in escrow as
collateral  to satisfy any judgment  adverse to the Company or to pay any agreed
upon  settlement  amount with respect to the Gary,  Indiana site, and to satisfy
certain other obligations assumed by ARTRA. Proceeds from the sale of the shares
held in escrow might not be  sufficient  to satisfy any such judgment or pay any
such  settlement  amount.  While ARTRA is obligated to indemnify the Company for
any  environmental  liabilities,  no  assurance  can be given that ARTRA will be
financially  capable of satisfying its obligations with respect to any liability
in  connection  with  the  Gary,   Indiana  site  or  any  other   environmental
liabilities. ARTRA has advised that it intends to vigorously defend this case.

The Company is a party to routine  contract  and  employment-related  litigation
matters  in the  ordinary  course  of its  business.  No such  pending  matters,
individually  or in the  aggregate,  if  adversely  determined,  are believed by
management  to be material to the  business,  results of operations or financial
condition of the Company.  The Company maintains  general  liability  insurance,
property insurance,  automobile insurance, employee benefit liability insurance,
owner's and contractor's  protective insurance and exporter's foreign operations
insurance  with  coverage  of $1  million  on a per claim  basis and $2  million
aggregate  (with $3 million  umbrella  coverage).  The Company  insures  against
workers'  compensation in amounts required under applicable state law and in the
amount of $500,000 in the case of foreign  workers.  The Company also  maintains
fidelity  insurance  in the  amount of  $25,000  per claim  and  directors'  and
officers'  liability  insurance  in the  amount of $2  million.  The  Company is
presently soliciting quotations to obtain errors and omissions coverage.

9.   RELATED PARTY TRANSACTION

The Company paid L.H. Friskoff & Company,  a certified public accounting firm at
which Richard  Barber,  a Director of the Company,  is a partner,  approximately
$69,000 in fees during 1997 for tax-related advisory services.

10.  SUBSEQUENT EVENTS

In December 1996, the Company sold 460,000 shares of its common stock,  together
with a related  payment  right  requiring  the  Company to make a payment to the
investors in either cash or common stock, at the Company's option,  equal to the
amount by which $10.00 per share exceeded the average  closing bid price for the
five trading days prior to April 1, 1997.  In addition,  in December  1996,  the
Company sold 350,000 shares of its common stock, together with a related payment
right requiring the Company to make a payment to the investors in either cash or
common stock, at the Company's  option,  equal to the amount by which $12.05 per
share exceeded the average  closing bid price for the five trading days prior to
April 1, 1997. On April 1, 1997, the Company  satisfied  these payment rights by
issuing 385,591 shares of its common stock.



                                       11

<PAGE>


        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)

In February 1997, in connection with its sale of its Debentures to the investors
who purchased  460,000  shares of the Company's  common stock in December  1996,
described  above,  the Company granted to such investors put options under which
the  Company  agreed to  repurchase  115,000  of the shares on each of April 28,
1997,  May 28,  1997,  June 27,  1997 and July 27,  1997 at a purchase  price of
$10.00 per share,  payable in cash, subject to adjustment based on payments made
in  satisfaction  of the  payment  right  described  above.  In the case of cash
payments  under  the  payment  right,  this  adjustment  is  effected  through a
reduction of the put option price by the amount of the cash payment. In the case
of  payments  in stock  under the payment  right,  this  adjustment  is effected
through an increase in the aggregate number of shares subject to the put option,
without  adjustment of the aggregate  put option price.  On April 28, 1997,  the
investors elected to exercise the first put option. As a result of the Company's
satisfaction of the payment right through its issuance of shares of common stock
as of April 1, 1997,  the number of shares the Company is required to repurchase
has been increased by 40,391 shares.  Consequently,  the Company is repurchasing
155,391 shares of its common stock for $1,150,000.

                                       12

<PAGE>



Item 2.

MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF  FINANCIAL  CONDITION  AND RESULTS OF
OPERATIONS

The  discussion  set  forth  below  supplements  the  information  found  in the
unaudited  consolidated  financial  statements  and related  notes.  The matters
discussed below and elsewhere in this Report contain forward looking  statements
that involve risks and uncertainties,  many of which may be beyond the Company's
control.

Overview

The October 1995 acquisition of COMFORCE Telecom marked the Company's entry into
the technical staffing  business,  followed by the acquisition of six additional
technical  staffing  businesses  through February 1997. The Company's results of
operations   and   financial   condition   reflect  its  rapid  growth   through
acquisitions.  Amortization  of  intangibles,  principally  goodwill,  has  also
increased as a result of acquisitions.

The Company serves customers in three principal  sectors --  telecommunications,
information technology and technical services. In the telecommunications sector,
the Company provides staffing for wireline and wireless  communications  systems
development,  satellite and earth station  deployment,  network  management  and
plant modernization.  In the information technology sector, the Company provides
staffing for  specific  projects  requiring  highly  specialized  skills such as
applications  programming and development,  client/server  development,  systems
software  architecture and design,  systems engineering and systems integration.
In the technical  services sector,  the Company  provides  staffing for national
laboratory  research in such areas as environmental  safety,  alternative energy
source  development  and laser  technology,  and provides  highly-skilled  labor
meeting diverse  commercial needs in the avionics and aerospace,  architectural,
automotive, energy and power, pharmaceutical, marine and petrochemical fields.

Gross margins on staffing services can vary  significantly  depending on factors
such as the specific services being performed, the overall contract size and the
amount of recruiting  required.  Margins on the Company's sales in the technical
services   sector  are   typically   significantly   lower  than  those  in  the
telecommunications and information technology ("IT") sectors, although the trend
in the IT staffing sector has been toward lower gross margins  generally as this
sector matures and  consolidates.  Additionally,  in certain markets the Company
has  experienced  significant  pricing  pressure  from some of its  competitors.
Consequently,  changes in the Company's  sales mix can be expected to impact the
overall gross margins generated by the Company.

Staffing personnel placed by the Company are Company  employees.  The Company is
responsible for employee related expenses for its employees,  including workers'
compensation,  unemployment compensation insurance, Medicare and Social Security
taxes  and  general  payroll  expenses.   The  Company  offers  health,  dental,
disability and life insurance to its billable employees.

Results of Operations

Three Months Ended March 31, 1997 Compared to Three Months Ended March 31, 1996

Revenues of $35.8  million for the three  months ended March 31, 1997 were $32.5
million, or 997% higher than revenues for the three months ended March 31, 1996.
The  increase in 1997  revenues is  attributable  principally  to the  Company's
completion of five  acquisitions  since the end of the first quarter of 1996 and
growth in the  telecommunications  and information  technology sectors which are
served by the Company.

Cost of revenues of the three  months ended March 31, 1997 was 86.8% of revenues
compared to cost of revenues of 75.1% for the three months ended March 31, 1996.
The 1997  cost of  revenues  increase  of 11.7%  is a  result  of the  Company's
expansion into more mature technical staffing markets.


                                       13

<PAGE>



Selling, general and administrative expenses as a percentage of revenue was 8.5%
for the three  months  ended  March 31,  1997,  compared  to 17.4% for the three
months  ended  March 31,  1996.  The  decrease  of 8.9% is  attributable  to the
acquisitions  completed during 1996 and 1997 which  contributed  greater revenue
with lower incremental selling, general and administrative costs.

Operating  income for the three  months  ended March 31, 1997 was $1.3  million,
compared to  operating  income of $168,000  for the three months ended March 31,
1996. This increase was principally  attributable to the Company's completion of
five acquisitions since the end of the first quarter of 1996.

The  Company's  interest  expense for the three  months  ended March 31, 1997 is
attributable  principally to the interest payable on the $25.2 million principal
amount of subordinated  convertible  debentures (the "Debentures") issued by the
Company in February and March 1997, the proceeds of which were used to partially
fund the RHO acquisition and for working capital purposes.

The income tax  provision  for the three months ended March 31, 1997 was $58,000
on a loss before income taxes of $44,000, compared to taxes of $70,000 on pretax
income of $170,000 for the three months  ended March 31,  1996.  The  difference
between the Federal  statutory  income tax rate and the Company's  effective tax
rate relates primarily to state income taxes and the nondeductibility of certain
intangible assets.

Financial Condition, Liquidity and Capital Resources

During the first quarter of 1997, the Company's primary sources of funds to meet
working  capital needs were from  operations,  funds made available  through the
Company's  $25.2  million  offering of Debentures in February and March 1997 and
borrowings  under a short-term  credit  facility with U.S.  Bank of  Washington,
National  Association (the "U.S. Bank Credit Facility") entered into in February
1997 which  provides  for up to $7.5 million in  availability.  A portion of the
proceeds  from the  Debenture  offering was used to retire the  Company's  $10.0
million credit facility with The Chase Manhattan Bank.

The Company is presently seeking to obtain a credit facility  providing for term
loan and  revolving  credit  availability  of from $50 million to $75 million to
fund  additional  acquisitions,  to retire the U.S. Bank Credit  Facility (which
matures in July 1997) and to finance future working capital needs. In respect of
its working  capital  requirements,  the  Company  typically  pays its  billable
employees weekly for their services before receiving payment from its customers.
As new offices are  established or acquired,  or as existing  offices expand and
revenues are increased, there will be greater requirements for cash resources to
fund current operations.

Management  believes that such a replacement  credit facility will be sufficient
to meet its anticipated level of business activity in 1997. However, the Company
can give no  assurance  that such a credit  facility  will be  available  or, if
available,  that  it will be  available  on  terms  acceptable  to the  Company.
Although  management  believes that the funds provided by  operations,  the U.S.
Bank Credit Facility and funds  remaining  under the $25.2 million  placement of
Debentures will be sufficient to meet its present  working capital  requirements
through July 1997, the Company's inability to obtain a new credit facility could
require the Company to delay,  scale back or eliminate all or some of its market
development and acquisition projects and could have a material adverse effect on
the Company's business, financial condition and results of operations.

The Company is obligated under various  acquisition  agreements to make earn-out
payments  to  the  sellers  of  acquired  companies,  subject  to  the  acquired
companies' meeting certain contractual requirements. The maximum amount of these
potential  earn-out  payments is $717,000 in cash payable in 1997 and $5 million
in cash and $4.5 million in stock payable in the three-year  period from 1998 to
2000. The Company cannot currently  estimate whether it will be obligated to pay
the maximum amount;  however, the Company anticipates that the cash generated by
the operations of the acquired  companies will provide all or a substantial part
of the capital required to fund the cash portion of the earn-out payments.


                                       14

<PAGE>



Cash and cash  equivalents  increased $1.0 million during the three months ended
March 31, 1997.  During the first  quarter of 1997,  cash flows of $17.6 million
provided by  financing  activities  exceeded  cash flows of $1.2 million used in
operating  activities  and  cash  flows  of  $15.4  million  used  by  investing
activities.   Cash  flows  used  by  operating   activities   were   principally
attributable  to the  need to fund  growth  in  accounts  receivable  and  their
carrying costs. Cash flows used in investing  activities are principally related
to the purchase of RHO. Cash flows from financing  activities were  attributable
to net proceeds  available to the Company in  connection  with its sale of $25.2
million of Debentures and net borrowings under the U.S. Bank Credit Facility.

As of March 31, 1997,  approximately $39.2 million, or 51%of the Company's total
assets were intangible assets. These intangible assets  substantially  represent
amounts  attributable  to goodwill  recorded in  connection  with the  Company's
acquisitions  and will be amortized over a five to 40 year period,  resulting in
an annual  charge of in excess of $1 million.  Various  factors could impact the
Company's   ability  to  generate  the   earnings   necessary  to  support  this
amortization  schedule,  including  fluctuations in the economy,  the degree and
nature of  competition,  demand for the  Company's  services,  and the Company's
ability to integrate the operations of acquired businesses, to recruit and place
staffing professionals, to expand into new markets and to maintain gross margins
in the face of  pricing  pressures.  The  failure  of the  Company  to  generate
earnings  necessary  to  support  the  amortization  charge  may  result  in  an
impairment of the asset.  The resulting  write-off could have a material adverse
effect on the Company's business, financial condition and results of operations.

Seasonality

The Company's  quarterly  operating results are affected primarily by the number
of billing days in the quarter and the seasonality of its customers' businesses.
Demand for services in the technical services sector has historically been lower
during the year-end  holidays  through  January of the following  year,  showing
gradual  improvement  over the remainder of the year.  Although less  pronounced
than in technical  services,  the demand for services of the  telecommunications
and IT sectors is typically  lower  during the first  quarter  until  customers'
operating  budgets  are  finalized.  The  Company  believes  that the effects of
seasonality  will be less  severe in the future as revenues  contributed  by the
information technology and telecommunications  sectors continue to increase as a
percentage of the Company's consolidated revenues.

Other Matters

In February 1997, the Financial  Accounting Standards Board issued Statements of
Financial  Accounting  Standards No. 128, "Earnings per Share" ("SFAS No. 128"),
which  establishes  standards for computing and  presenting  earnings per share.
SFAS No. 128 will be  effective  for  financial  statements  issued for  periods
ending after December 15, 1997. Earlier application is not permitted. Management
has not yet  evaluated  the  effects of this change on the  Company's  financial
statements.





                                       15

<PAGE>



                           PART II - OTHER INFORMATION

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

(a)  Exhibits.

27.1 Financial  Data  Schedule  (included in EDGAR  document only for use by the
     Securities and Exchange Commission).

(b)  Reports on Form 8-K.

     On January 13, 1997, the Company filed  Amendment No. 2 to a Current Report
     on Form 8-K/A to amend the financial  statements  of the acquired  business
     filed in connection with the Force Five acquisition.

     On January 13, 1997, the Company filed  Amendment No. 1 to a Current Report
     on Form  8-K/A  to  include  the  financial  statements  and the pro  forma
     financial statements required in connection with the AZATAR acquisition.

     On January 13, 1997, the Company filed  Amendment No. 1 to a Current Report
     on Form  8-K/A  to  include  the  financial  statements  and the pro  forma
     financial  statements  required  in  connection  with  the  RHO  definitive
     agreement and the Continental acquisition.

     On February 3, 1997, the Company filed  Amendment No. 2 to a Current Report
     on Form  8-K/A  to  amend  the pro  forma  financial  statements  filed  in
     connection with the AZATAR acquisition.

     On February 4, 1997, the Company filed  Amendment No. 3 to a Current Report
     on Form 8-K/A to amend the financial  statements  of the acquired  business
     filed in connection with the RRA acquisition.

     On February 4, 1997, the Company filed  Amendment No. 2 to a Current Report
     on Form  8-K/A  to  amend  the pro  forma  financial  statements  filed  in
     connection with the RHO definitive agreement and Continental acquisition.

     On March 14, 1997, the Company filed a Current Report on Form 8-K to report
     the  completion  of the RHO  acquisition,  changes  in  management  and the
     offering of debentures in a private placement.

     On April 14, the Company filed  Amendment No. 1 to a Current Report on Form
     8-K/A  to  include  the  financial   statements  and  pro  forma  financial
     statements required in connection with the completed RHO acquisition.

                                       16

<PAGE>



                                   SIGNATURES

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



                                               COMFORCE CORPORATION
                                               Registrant


Dated: May 15, 1997                             /s/ PAUL J. GRILLO
                                               --------------------------------
                                                Vice President/Finance
                                                Chief Financial Officer


                                       17