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 September 30, 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 November 3, 1997
---------------------------                      -------------------------------
Common stock, $.01 par value                      13,754,039


<PAGE>


                              COMFORCE CORPORATION


                                      INDEX


                                                                          Page
                                                                         Number
                                                                         ------

PART I    FINANCIAL INFORMATION

Item 1.   Financial Statements (Unaudited)

          Condensed Consolidated Balance Sheets
                  September 30, 1997 and December 31, 1996                    1

          Condensed Consolidated Statements of Operations
                  for the three months and nine months ended
                  September 30, 1997 and September 30, 1996                   3

          Condensed Consolidated Statement of Changes in Stockholders'
                  Equity for the nine months ended September 30, 1997         4

          Condensed Consolidated Statements of Cash Flows
                  for the nine months ended September 30, 1997
                  and September 30, 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                                   18



SIGNATURES                                                                   19


<PAGE>


                         PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

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


<TABLE>
<CAPTION>
                                                               September 30,       December 31,
                                                                   1997               1996
                                                               -------------       ------------
                                                               (unaudited)
                    ASSETS
<S>                                                                <C>               <C>    
Current assets:
   Cash and equivalents                                            $ 2,670           $ 3,608
   Restricted cash                                                     360              --
  Accounts receivable, net of allowance of doubtful
      accounts of $501 in 1997 and $213 in 1996
  Prepaid expenses                                                  26,547            12,042
                                                                     1,050               243
  Deferred income tax                                                2,028               278
  Deferred financing fees                                            1,628              --
                                                                       590              --
  Other                                                                243               373
                                                                   -------           -------
          Total current assets                                      35,116            16,544
                                                                   -------           -------

Property, plant and equipment                                        1,937               890
Less:  accumulated depreciation and amortization                       488               146
                                                                   -------           -------
                                                                     1,449               744
                                                                   -------           -------
Other assets:
   Excess of cost over net assets acquired, net of
      accumulated amortization of $1,425 in 1997 and
      $526 in 1996                                                  38,722            24,756
   Other                                                               452             1,322
                                                                   -------           -------
                                                                    39,174            26,078
                                                                   -------           -------
                           Total Assets                            $75,739           $43,366
                                                                   =======           =======
</TABLE>


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


                                        1

<PAGE>



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


<TABLE>
<CAPTION>
                                                                September 30,    December 31,    
                                                                -------------    ------------    
                                                                    1997            1996
                                                                    ----            ----
         LIABILITIES                                            (unaudited)
<S>                                                                <C>           <C>     
Current liabilities:
   Borrowings under revolving line of credit                       $ 16,488      $  3,850
   Accounts payable                                                     956         1,398
   Accrued expenses                                                   5,232         1,961
   Payroll tax liabilities                                            3,337           969
   Income taxes                                                        --             354
                                                                   --------      --------
                    Total current liabilities                        26,013         8,532
                                                                   --------      --------
                                                                               
                                                                               
Deferred income tax                                                            
Long-term debt                                                           90            90
                                                                     20,000          --
Other liabilities                                                       690          --
                                                                   --------      --------
                    Total liabilities                                46,793         8,622
                                                                   --------      --------
                                                                             
Commitments and contingencies                                                  
                                                                               
       STOCKHOLDERS EQUITY                                                     
6% Series  D  convertible preferred  stock, $.01 par value;                    
    15,000 shares authorized,7,002 shares issued and                           
    outstanding in 1996.  Liquidation value of $1,000 per                      
    share ($7,002,000)                                                         
                                                                       --               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 in 1997)              1             1
                                                                               
Common stock, $.01 par value;  100,000,000 shares                              
    authorized,  13,744,039 shares                                             
    issued and outstanding in 1997                                             
    and 12,701,934  shares issued and outstanding in 1996               137           127

    Additional paid-in capital                                       30,485        34,253
                                                                               
    Retained earnings (deficit) since January 1, 1996                (1,677)          362
                                                                   --------      --------
    Total stockholders' equity                                       28,946        34,744
                                                                   --------      --------
    Total liabilities and stockholders' equity                     $ 75,739      $ 43,366
                                                                   ========      ========
                                                                             
    The accompanying notes are an integral part of the condensed consolidated
                              financial statements.
</TABLE>

                                        2

<PAGE>


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

<TABLE>
<CAPTION>
                                                               Three Months Ended September 30,    Nine Months Ended September 30,
                                                               -------------------------------     -------------------------------

                                                                    1997              1996             1997             1996
                                                                  ---------        ---------        ---------        ---------
<S>                                                               <C>              <C>              <C>              <C>      
Net Sales                                                         $  54,509        $  20,356        $ 145,986        $  33,514
                                                                  ---------        ---------        ---------        ---------
Costs and expenses:
Cost of goods sold                                                   47,476           17,688          127,227           28,690
Selling, general and administrative                                   4,503            1,718           11,842            2,891
Depreciation and amortization                                           439              115            1,241              343
                                                                  ---------        ---------        ---------        ---------
                                                                     52,418           19,521          140,310           31,924
                                                                  ---------        ---------        ---------        ---------
Operating income                                                      2,091              835            5,676            1,590
                                                                  ---------        ---------        ---------        ---------

Other income                                                           --                 13              344               29
Interest expense:
Bridge financing costs                                                 --               --             (5,822)            --
Other interest, net of interest income                               (1,135)             (51)          (2,151)            (102)
                                                                  ---------        ---------        ---------        ---------

                                                                     (1,135)             (38)          (7,629)             (73)
                                                                  ---------        ---------        ---------        ---------
Income (loss) before income taxes                                       956              797           (1,953)           1,517
Provision (credit) for income taxes                                     391              342             (646)             610
                                                                  ---------        ---------        ---------        ---------

Net income (loss)                                                       565              455           (1,307)             907


Dividends on preferred stock                                              6              123              732              193
                                                                  ---------        ---------        ---------        ---------
Income (loss) available to common stockholders                    $     559        $     332        $  (2,039)       $     714
                                                                  =========        =========        =========        =========


Earnings (loss) per share                                         $    0.04        $    0.03        $   (0.15)       $    0.06
                                                                  =========        =========        =========        =========


Weighted average number of shares of common
stock and common stock equivalents outstanding                       15,116           13,303           13,256           12,661
                                                                  =========        =========        =========        =========
</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
                 (Unaudited in thousands, except per share data)


<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           124,000              1             --             --             --             -- 
   Exercise of stock warrants           65,000              1             --             --             --             -- 
   Redemption of Series F
      preferred stock                       --             --             --             --         (2,750)            -- 
   Conversion of Series D
      preferred stock                  583,500              6         (7,002)            (1)            --             -- 
   Issuance of common stock as
      inducement to effect
      Series D conversion               87,750              1             --             --             --             -- 
   SEC Registration fees                    --             --             --             --             --             -- 
   Issuance of warrants in
      connection with debt
      placement                             --             --             --             --             --             -- 
   Issuance of common stock in
      connection with payment
      right                            385,591              4             --             --             --             -- 
   Issuance of common stock as
      consideration for interest
      owed on debt                     118,145              1             --             --             --             -- 
   Redemption of common
      stock                           (321,867)            (4)            --             --             --             -- 
   Redemption of partial shares
      of common stock                      (14)            --             --             --             --             -- 
   Net loss                                 --             --             --             --             --             -- 
   Dividends:
   Series D preferred stock                 --             --             --             --             --             -- 
   Series F preferred stock                 --             --             --             --             --             -- 
                                   -----------    -----------    -----------    -----------    -----------    ----------- 
   Balance as of 
     September 30, 1997             13,744,039           $137              0             $0            500             $1 
                                   ===========    ===========    ===========    ===========    ===========    =========== 
</TABLE>


                                                    Retained                 
                                                    Earnings                 
                                                    (Deficit)                
                                     Additional      Since           Total   
                                      Paid-in       January 1,    Stockholders' 
                                      Capital         1996           Equity  
                                      -------         ----           ------

Balance at December 31, 1996           $34,253           $362        $34,744
   Exercise of stock options               141             --            142
   Exercise of stock warrants              170             --            171
   Redemption of Series F
      preferred stock                   (3,162)            --         (3,162)
   Conversion of Series D
      preferred stock                       (5)            --             --
   Issuance of common stock as
      inducement to effect
      Series D conversion                  492           (493)            --
   SEC Registration fees                  (619)            --           (619)
   Issuance of warrants in
      connection with debt
      placement                          1,004             --          1,004
   Issuance of common stock in
      connection with payment
      right                                 (4)            --             --
   Issuance of common stock as
      consideration for interest
      owed on debt                         632             --            633
   Redemption of common
      stock                             (2,417)            --         (2,421)
   Redemption of partial shares
      of common stock                       --             --             --
   Net loss                                 --         (1,307)        (1,307)
   Dividends:
   Series D preferred stock                 --           (195)          (195)
   Series F preferred stock                 --            (44)           (44)
                                   -----------    -----------    -----------
   Balance as of 
     September 30, 1997                $30,485        $(1,677)       $28,946
                                   ===========    ===========    ===========


    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>
                                                                         Nine Months Ended
                                                                           September 30,
                                                                        -------------------
                                                                        1997         1996
                                                                        ----         ----
<S>                                                                     <C>         <C>     
Net cash flows used by operating activities                             $(2,755)    $(4,321)
                                                                        -------    --------
Cash flows from investing activities:

   Acquisition payments, net of cash acquired                           (14,355)     (9,442)

   Officer loans                                                             30        (367)

   Restricted cash                                                         (360)        (50)

   Additions to property, plant and equipment                              (548)       (183)
                                                                        -------    --------

Net cash flows (used by) from investing activities                      (15,233)    (10,042)
                                                                        -------    --------
                                                                                   
Cash flows from financing activities:
   Payment of note payable                                                   --        (500)

   Proceeds from revolving lines of credit                               52,835        4,150

   Repayment on revolving lines of credit                               (45,481)       (900)

   Proceeds from short-term debt                                         20,628          --

   Payment of short-term debt                                           (27,930)         --

   Proceeds from long-term debt                                          20,000          --

   Repurchase of common stock                                            (2,421)         --

   Proceeds from issuance of Preferred Stock                                 --      11,052

   Proceeds from exercise of stock options                                  142          23

   Proceeds from exercise of warrants                                       171       1,046

   Payment of registration costs                                           (619)       (100)

   Dividends paid                                                          (275)       (105)
                                                                        -------    --------

Net cash flows from financing activities                                 17,050      14,666
                                                                        -------    --------

Increase (decrease) in cash and cash equivalents                           (938)        303

Cash and equivalents, beginning of period                                 3,608         649
                                                                        -------    --------

Cash and equivalents, end of period                                     $ 2,670    $    952
                                                                        =======    ========

Supplemental cash flow information:

Cash paid during the period for:

    Interest                                                             $1,044    $    103

    Income taxes paid                                                       227         119

Supplemental schedule of noncash investing and financing activities:

   Quasi-reorganization                                                      --     (93,847)

   Common stock issued to settle liabilities                                633         276

   Issuance of short-term debt to redeem Series F preferred stock         3,162          --


   Dividends accrued but not yet paid                                       102          88

   Net change in ARTRA receivables and liabilities                           --      (2,968)

   Warrants issued in connection with the sale of convertible             1,004          --
      debentures

   Warrants issued in connection with short-term loan                       100          --

   Warrants issued in connection with credit facility                       170          --
   Common stock issued for purchase of Force Five, Inc.                      --         500
   Repayment of officer loans (see note 9)                                  352          --
</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

COMFORCE  Corporation  ("COMFORCE" or 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  ("Rhotech").  Rhotech is in the  business of
providing contract employees to other businesses.

The accompanying  unaudited interim financial statements of COMFORCE Corporation
have been prepared  pursuant to the rules and  regulations of the Securities and
Exchange  Commission  (the  "SEC").  Certain  information  and note  disclosures
normally included in annual financial  statements have been condensed or omitted
pursuant  to those rules and  regulations.  In the  opinion of  management,  all
adjustments,  consisting of normal,  recurring adjustments  considered necessary
for a fair presentation,  have been included.  Although management believes that
the disclosures  made are adequate to ensure that the  information  presented is
not  misleading,  it is suggested  that these  financial  statements  be read in
conjunction  with the financial  statements  and notes  thereto  included in the
Company's  Annual  Report on Form 10-K for the fiscal  year ended  December  31,
1996.  The results of the nine months ended  September 30, 1997 and 1996 are not
necessarily indicative of the results of operations for the entire 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.

In June 1997,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial Accounting Standards No. 130, "Reporting  Comprehensive Income" ("SFAS
130"),  which  requires  that  changes  in  comprehensive  income  be shown in a
financial  statement  that is  displayed  with  the  same  prominence  as  other
financial statements.  SFAS No. 130 becomes effective in fiscal 1999. Management
has not yet  evaluated  the  effects of this change on the  Company's  financial
statements.

In  June  1997,  the  Financial  Accounting  Standards  Board  issued  Financial
Accounting  Standards No. 131,  "Disclosures About Segments of an Enterprise and
Related Information" ("SFAS 131"), which changes the way public companies report
information about segments.  SFAS 131, which is based on the management approach
to  segment  reporting,   includes   requirements  to  report  selected  segment
information  quarterly and entity-wide  disclosures about products and services,
major  customers,  and the  material  countries  in which the  entity  holds and
reports revenues.  SFAS 131 becomes effective in fiscal 1999. Management has not
yet evaluated the effect of this change on the Company's financial statements.


                                        6

<PAGE>


         NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued

               3. CERTAIN ACQUISITIONS AND PROPOSED ACQUISITIONS

Rhotech Acquisition

On February  28,  1997,  the Company  purchased  all of the stock of Rhotech for
$14.8 million in cash,  plus a contingent  payout to be paid over three years on
future earnings of Rhotech 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 Rhotech  was  accounted  for under the
purchase  method and,  accordingly,  Rhotech'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 Subordinated Convertible Debentures. (See Note 4.) Rhotech
provides  specialists  primarily  in  the  technical  services  and  information
technology  sectors.  In connection with the closing of the Rhotech  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.

Proposed Uniforce Acquisition and Related Financing

On August 13, 1997,  the  Company,  Uniforce  Services,  Inc.  ("Uniforce")  and
COMFORCE  Columbus,   Inc.,  a  wholly-owned  subsidiary  of  the  Company  (the
"Subsidiary"), executed an Agreement and Plan of Merger (the "Merger Agreement")
which provides for the  acquisition of Uniforce by the Company.  Pursuant to the
Merger  Agreement,  on October 27, 1997,  the Company  caused the  Subsidiary to
commence a tender offer (the "Offer") to acquire all of the outstanding Uniforce
common  stock (the  "Uniforce  Shares") for a per share price of $28 in cash and
0.5217  shares  of the  Company's  Common  Stock  (collectively  the "Per  Share
Amount"),  or an aggregate purchase price of approximately $93.6 million in cash
and  approximately  1.6 million shares of the Company's Common Stock. The Merger
Agreement  also  provides,  subject  to  various  conditions  some of which  are
described  below,  for a merger (the "Merger")  pursuant to which all holders of
Uniforce Shares who have not tendered their stock to the Subsidiary will receive
the Per Share  Amount,  and Uniforce  will become a  wholly-owned  subsidiary of
COMFORCE Operating, Inc., a newly-formed, wholly-owned subsidiary of the Company
("COI").

Pursuant to the Merger Agreement, the Company's obligation to accept for payment
and pay for shares of  Uniforce  Shares  pursuant to the Offer is subject to the
condition that at least two-thirds of the then  outstanding  Uniforce Shares are
tendered or otherwise held by the Company,  and to certain other conditions.  In
addition,  the Merger is subject to various  conditions  set forth in the Merger
Agreement, and may also be terminated by either party in circumstances specified
in the Merger Agreement.

The Company  estimates that the total amount of funds required by the Subsidiary
to purchase  all of the  Uniforce  Shares  issued and  outstanding  and Uniforce
Shares issuable upon exercise of the outstanding Uniforce stock options pursuant
to the Offer and the Merger will be  approximately  $93.6 million.  In addition,
the Company  estimates  that the total  amount of funds  required  to  refinance
certain existing  indebtedness of the Company and Uniforce,  provide for working
capital and pay fees and expenses  incurred in connection with the Offer and the
Merger will be approximately $80.6 million.

The Company and COI expect to obtain debt  financing in the aggregate  amount of
$210  million  (which  includes  a $75  million  revolving  credit  facility  as
discussed  below),  of which  approximately  $93.6  million  will be  applied to
purchase  the  Uniforce  Shares in the Offer and  effect  the  Merger  and $80.6
million  will be used to pay related fees and  expenses  and  refinance  certain
existing  indebtedness of Uniforce and the Company. The Offer and the Merger are
both conditioned upon the receipt of this financing by the Company.

                                        7

<PAGE>


         NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued


In August 1997, the Company engaged NatWest Capital Markets Limited  ("NatWest")
to act as  its  exclusive  financial  advisor  and  initial  purchaser  or  lead
placement  agent in connection  with certain debt offerings to fund the Uniforce
acquisition,  such  offerings  to be  conducted  on a  best  efforts  basis.  No
assurance  can be given that NatWest will be  successful  in  consummating  such
offerings.

In addition,  in November  1997, the Company  received a commitment  letter from
Heller  Financial,  Inc.  ("Heller") for a $75 million revolving credit facility
(the "New Credit  Facility") to refinance the existing credit  facilities of the
Company and Uniforce.  This financing is subject to various  conditions,  and no
assurance  can be given the New Credit  Facility  will be made  available to the
Company or, if so, on terms which are acceptable to the Company.

In accordance  with the foregoing,  the Company  expects to finance the Uniforce
acquisition and to refinance the existing  credit  facilities of the Company and
Uniforce  through (i) the issuance of $110 million in principal amount of Senior
Notes due 2007 to be issued by COI, a  wholly-owned  subsidiary  of the Company,
(ii) the issuance of 25,000 Units  representing  $25 million in principal amount
of  Senior  Secured  PIK  Debentures  due 2009 with  Warrants  to  purchase  the
Company's Common Stock to be issued by the Company,  (iii) an initial draw under
the New Credit  Facility  to be entered  into by COI and Heller,  together  with
existing cash  balances,  aggregating  $39.2  million (the New Credit  Facility,
together  with  the  issuance  of the  Senior  Notes  and the  Units,  the  "New
Financings").

4.   DEBT

At September 30, 1997, current and long-term debt (in thousands) consists of:

<TABLE>
<CAPTION>
                                                                         September 30,          December 31,
                                                                         -------------          ------------
                                                                             1997                   1996
                                                                             ----                   ----
<S>                                                                        <C>                     <C>   
Current debt
    Revolving line of credit, due in July 1998, with interest
    payable monthly at the bank's prime rate plus .75%.  At
    September 30, 1997,  the bank's prime rate was 8.5%.                   $16,488                 $3,850

Long-term debt
   Term  loan with interest payable at the bank's prime rate
   plus 1.75%.  At September  30, 1997, the bank's prime rate              $20,000
   was 8.5%.
</TABLE>

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  ("Old
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 Old 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"),  which  premium had been
included as an accretive  dividend in December  1996.  The Old  Debentures  bore
interest at the rate of 8% per annum,  and were to bear  interest at the rate of
10% per annum  commencing 180 days after each Closing Date.  Interest on the Old
Debentures was payable  quarterly in cash or in common stock of the Company,  at
the  Company's  option.  Warrants to purchase  302,400  shares of the  Company's
common  stock at prices  ranging  from $6.85 to $7.65 per share  were  issued in
connection  with this  financing,  which were valued at $734,000.  In connection
with this financing,  the Company incurred costs of  approximately  $5.8 million
which were expensed during the first half of 1997.


                                        8

<PAGE>


         NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued

On June 25,  1997,  the Company  completed a $40 million  credit  facility  (the
"Existing  Credit  Facility")  with  Fleet  National  Bank,  as lender and agent
("Fleet"),  and U.S. Bank,  Washington,  as lender ("U.S. Bank")  (collectively,
"Lenders"). The Existing Credit Facility consists of a revolving credit facility
of up to $20 million and a $20 million term loan.

The Company  utilized  all of the proceeds of the term loan and a portion of the
availability  under the revolving  credit facility to redeem the Company's $25.2
million in outstanding  principal amount of Old Debentures issued principally to
fund the Company's  acquisition  of Rhotech in February 1997.  Additional  funds
available  under the revolving  credit facility were used to retire the existing
$7.5 million  revolving  credit  facility of Rhotech with U.S. Bank. The Company
intends to use available  funds under the revolving  credit facility for working
capital and general corporate purposes,  including for acquisitions,  subject to
the  satisfaction  of the conditions  therefore set forth in the Existing Credit
Facility.  Borrowings under the revolving credit facility are subject to various
financial covenants and other conditions. At September 30, 1997, the Company was
in compliance with all covenants and conditions of the Existing Credit Facility.

The revolving credit facility and the term loan bear interest at a rate equal to
0.75% and 1.75%, respectively, in excess of Fleet's prime rate as announced from
time to time. The Company's  obligations  under the Existing Credit Facility are
secured by substantially all of its assets. In addition,  James L. Paterek,  the
Chairman of the Company,  Christopher P. Franco,  the Chief Executive Officer of
the Company, and Michael Ferrentino,  the President of the Company, each pledged
500,000 shares of the Company's common stock held by them and all of the options
to purchase common stock held by them as additional collateral for the Company's
obligations under the Existing Credit Facility.  The scheduled  maturity date of
the  revolving  credit  facility is July 10, 1998.  Subject to Fleet's  right to
issue a call notice requiring repayment of the term loan at any time on or after
July 10, 1998,  the term loan is payable in quarterly  installments  as follows:
$750,000  on July 1,  1998 and at the end of each  calendar  quarter  thereafter
through and including December 31, 1999;  $1,475,000 at the end of each calendar
quarter  beginning March 31, 2000 and ending March 31, 2002, and a final balloon
payment equal to the sum of unpaid  principal plus accrued  interest on June 30,
2002. The Company  intends to restructure  its financing with the New Financings
discussed in Note 3.

The  Company  incurred  fees and  expenses  of  approximately  $1.7  million  in
connection with obtaining the Existing Credit Facility,  which will be amortized
over the term of the Existing  Credit  Facility,  including  amounts  awarded to
Messrs.  Paterek,  Franco and  Ferrentino  for pledging  their shares to further
collateralize the Company's  obligations under the Existing Credit Facility (see
Note 9). In addition,  the Company agreed to issue to Fleet warrants to purchase
(i)  100,000  shares of  common  stock at an  exercise  price of $7.30 per share
($1.50 per share in excess of the average  closing price of the common stock for
the five business days ended June 24, 1997), exercisable until June 25, 2000 and
(ii) upon the  occurrence of certain  specified  conditions,  100,000  shares of
common  stock at an  exercise  price of $0.75 per share in excess of the average
closing price of the common stock for the five business days ending prior to the
date of the occurrence of the specified  conditions,  exercisable  commencing on
such date and for a period of three years thereafter (see Note 5).

5.   EQUITY

During the first nine  months of 1997,  options to  purchase  124,000  shares of
common stock at a price of $1.125 per share were exercised.

During the first nine months of 1997, the Company  issued  warrants with a value
of $734,000 to purchase  302,400  shares of common stock at prices  ranging from
$6.85 to $7.65 in connection  with issuance of the Old  Debentures  and warrants
with a value of $170,000 to purchase  100,000  shares of common stock at a price
of $7.30 per share in connection with a long-term credit facility.

                                        9

<PAGE>


         NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued

During the first nine months of 1997, the Company issued 100,000 warrants with a
value of $100,000 in connection with a short-term loan made to the Company.

During the first nine  months of 1997,  warrants to  purchase  65,000  shares of
common stock were exercised at prices ranging from $2.00 to $3.375 per share.

During the first nine months of 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 Old Debentures. (See Note 4.)

During the first nine months of 1997,  7,002 shares of Series D Preferred  Stock
were converted  into 671,250 shares of common stock under the conversion  terms.
Such common shares  included 87,750 shares with a market value of $493,000 given
to induce certain  conversions.  These additional shares have been accounted for
as a preferred stock dividend in the second quarter of 1997.

In June 1997,  118,145 shares of common stock were issued in  consideration  for
interest of $633,000 owed on the Old Debenture financing.

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.

In February  1997,  in  connection  with its sale of its Old  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 made in satisfaction of
the payment right  described  above,  subject to termination of such put options
upon earlier repayment of the Old Debentures. 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 and May 28, 1997, the investors  elected
to exercise the put option.  As a result of the  Company's  satisfaction  of the
payment  right  through its  issuance of shares of common  stock,  the number of
shares the Company was required to repurchase  was  increased by 80,782  shares.
Consequently,  the Company  repurchased  310,782  shares of its common stock for
$2,300,000.  The put options for June 27, 1997 and July 27, 1997  terminated  by
their terms by reason of the Company's  repayment of the Old  Debentures on June
25, 1997.

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  common stock  equivalents and are
excluded from this calculation. The dividends of $688,000 accrued or paid on the
Series D Preferred  Stock for the nine months ended  September 30, 1997, and the
dividends of $6,000 and $44,000 respectively

                                       10

<PAGE>


         NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued

accrued or paid on the Series F  Preferred  Stock for the three and nine  months
ended September 30, 1997, have been deducted for computing earnings available to
common stockholders.  For the nine month period ended September 30, 1997, common
stock  equivalents have not been included in this calculation as their effect is
antidilutive.  For the three and nine month periods ended September 30, 1997 and
the three and nine  month  periods  ended  September  30,  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):

<TABLE>
<CAPTION>
                                               Three Months Ended September 30,         Nine Months Ended September 30,
                                               --------------------------------         -------------------------------
                                                   1997                1996                 1997                1996
                                                   ----                ----                 ----                ----
<S>                                            <C>                 <C>                  <C>                    <C>
Earnings (loss) available for common
  stockholders                                 $       559         $      332           $   (2,039)           $     714
                                               -----------         -----------          ---------             ---------

Weighted average number of shares
  outstanding for the period                         13,731            11,285               13,256                9,548

Dilutive effect of common stock equivalents           1,385             2,018                  --                 3,113
                                               ------------        ----------           -----------            --------
                                                     15,116            13,303               13,256               12,661
                                                ===========        ==========           ==========             ========

Primary earnings (loss) per share              $        .04        $     0.03           $    (0.15)            $   0.06
                                               ============        ==========           ==========             ========
</TABLE>


7.   INCOME TAXES

In the three  month  and nine  month  periods  ended  September  30,  1997,  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 amortization.

8.   LITIGATION

In January 1997,  Austin A. Iodice,  who served as the Company's Chief Executive
Officer,  President  and Vice  Chairman  while the  Company  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
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,  and the
court scheduled hearings on these motions for December 1997. The Company intends
to vigorously defend these suits.

In a case filed in U.S. District Court, Central District of California,  against
Rhotech and Technical Staff Associates,


                                       11

<PAGE>


         NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, continued

Inc.  ("TSA"),  which was acquired by Rhotech in 1992,  TSA's  former  insurance
carrier  has  alleged  that  TSA  and  Rhotech  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 Rhotech's insurance carrier,  which is defending
it with a reservation of rights.  Rhotech 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.

In  December  1994,  the  Company  was  notified  by the  Federal  Environmental
Protection  Agency  that  it  was a  potentially  responsible  party  under  the
Comprehensive  Environmental  Response,  Compensation  and Liability Act of 1980
("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 manufacturing  operations.  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.  In October  1997,  ARTRA  entered  into a
settlement  agreement  with the plaintiffs to settle the case for a cash payment
of  $50,000.  Under the terms of this  settlement  agreement,  the  Company  was
dismissed as a defendant in the case and released and discharged  from liability
in connection with this matter.

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 $5  million.  The  Company is
presently soliciting quotations to obtain errors and omissions coverage.

9.   RELATED PARTY TRANSACTION

The Company paid L.H. Frishkoff & Company, a certified public accounting firm at
which Richard  Barber,  a Director of the Company,  is a partner,  approximately
$196,907 in fees during 1997 for tax-related advisory services.

As a condition to the funding of the Existing  Credit Facility (see Note 4), the
Lenders  required  James L. Paterek,  the  Company's  Chairman,  Christopher  P.
Franco,  the Company's  Chief Executive  Officer,  and Michael  Ferrentino,  the
Company's  President,  to each  pledge as  additional  collateral  to secure the
Company's  obligations  under the Existing Credit Facility 500,000 shares of the
Company's  common stock owned by them and all of the options to purchase  common
stock held by them (281,250 shares in the case of Messrs. Paterek and Ferrentino
and 112,500 shares in the case of Mr. Franco), which shares had a current market
value in excess of $12 million at the approximate time of the  transaction.  The
board of directors of the Company engaged an independent valuation firm to value
these pledges by the principals.

In recognition of both the  substantial  benefit  afforded to the Company by the
pledges  and the cost to the  principals  of making  the  pledges,  the board of
directors authorized the issuance of an aggregate consideration of approximately
$650,000 to these  principals,  which amount was  utilized to repay  outstanding
loans of such officers due to the Company and related payroll withholding taxes.
The board of directors  has deemed such  consideration  reasonable  based on the
valuation  of the  pledges  as  determined  by the  appraisal  performed  by the
independent   valuation  firm.  The  aggregate  amount  of  this  consideration,
approximately  $650,000, is included as a part of the fees and expenses incurred
in connection with the Existing Credit Facility (as described in Note 4).


                                       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.  See "Forward  Looking  Statements"  in this Item 2 for a discussion of
certain of such risks and uncertainties.

Overview

Set forth below is a discussion and analysis of financial  condition and results
of operations  of the Company.  The Company  believes that its future  operating
results may not be directly  comparable to historical  operating  results of the
Company if its proposed acquisition of Uniforce Services,  Inc.  ("Uniforce") is
consummated  (see  Note  3 to the  Unaudited  Condensed  Consolidated  Financial
Statements).

In addition,  since October 1995, the Company has completed seven  acquisitions.
Each of these prior  acquisitions has been accounted for on a purchase basis and
the results of operations of each of the businesses  acquired have been included
in the Company's  historical  financial statements from the date of acquisition.
Certain of these  prior  acquisitions  provide  for  contingent  payments by the
Company as a part of the purchase consideration based upon the operating results
of the acquired businesses for specified future periods.  The prior acquisitions
have been financed by the Company  principally  through its issuance of debt and
equity securities and borrowings under bank credit facilities.  As a result, the
Company's  historical  results of operations  include bridge financing costs and
preferred stock dividends which may not be incurred in future periods.

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 sectors.  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  employees  of the  Company.  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.
Staffing and consulting  companies,  including the Company,  typically pay their
billable employees weekly for their services before receiving payment from their
customers, often resulting in significant outstanding receivables. To the extent
the Company  increases  revenues  through  acquisitions  and/or internal growth,
these receivables will grow and there will be greater requirements for borrowing
availability under its credit facilities to fund current operations.

In addition,  the  principal  assets of staffing and  consulting  companies  are
typically their  relationships with their employees and their customers,  rather
than tangible  assets.  Consequently,  amortization of intangibles,  principally
goodwill,  has increased as a result of the Company's seven  acquisitions  since
October 1995 and can be expected to further increase if the Company continues to
grow through acquisitions.


                                       13

<PAGE>



Results of Operations

Three Months Ended  September 30, 1997 Compared to Three Months Ended  
September 30, 1996

Revenues of $54.5  million for the three  months ended  September  30, 1997 were
$34.1  million,  or nearly 168% higher than  revenues for the three months ended
September 30, 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.

Cost of revenues  for the three  months  ended  September  30, 1997 was 87.1% of
revenues or a 0.2% increase  compared to cost of revenues of 86.9% for the three
months ended September 30, 1996.

Selling, general and administrative expenses as a percentage of revenue was 8.3%
for the three months ended  September  30, 1997,  compared to 8.4% for the three
months ended September 30, 1996.

Operating income for the three months ended September 30, 1997 was $2.1 million,
compared to operating  income of $835,000  for the three months ended  September
30, 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 September 30, 1997 is
attributable  principally  to interest  charged  under the Company's $40 million
credit  facility (the "Existing  Credit  Facility") with Fleet National Bank, as
lender and agent ("Fleet"),  and U.S. Bank, Washington,  as lender ("U.S. Bank")
(collectively, "Lenders").

The income tax provision  for the three months ended  September 30, 1997 was for
$391,000 on pretax  income of $956,000,  compared to taxes of $342,000 on pretax
income of $797,000 for the three months ended September 30, 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.

Nine Months Ended September 30, 1997 Compared to Nine Months Ended 
September 30, 1996

Revenues  of $146  million  for the nine months  ended  September  30, 1997 were
$112.5  million,  or nearly 336% higher than  revenues for the nine months ended
September 30, 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.

Cost of  revenues  for the nine  months  ended  September  30, 1997 was 87.2% of
revenues  compared  to cost of  revenues  of  85.6%  for the nine  months  ended
September  30, 1996.  The 1997 cost of revenues  increase of 1.6% is a result of
COMFORCE's  expansion  into  more  mature  technical  staffing  sectors,   which
historically generate gross margins substantially lower than  telecommunications
and information technology sectors, principally due to the nature of the related
contracts and competition in this sector.

Selling, general and administrative expenses as a percentage of revenue was 8.1%
for the nine months  ended  September  30,  1997,  compared to 8.6% for the nine
months ended September 30, 1996. The decrease is principally attributable to the
acquisitions completed during 1996 and 1997 which contributed increased revenues
with lower incremental selling, general and administrative costs.

Operating  income for the nine months ended September 30, 1997 was $5.7 million,
compared to operating income of $1.6 million for the nine months ended September
30, 1996. This increase was principally attributable to the Company's completion
of five acquisitions since the end of the first quarter of 1996.


                                       14

<PAGE>



The Company's  interest  expense for the nine months ended September 30, 1997 is
attributable  principally to the amortization of bridge finance costs payable on
the $25.2 million principal amount of Subordinated  Convertible Debentures ("Old
Debentures")  issued by the Company in February and March 1997,  the proceeds of
which were used to partially fund the  acquisition  of RHO Company  Incorporated
("Rhotech") and for working capital purposes. The Old Debentures were refinanced
in June 1997.

The income tax  reflects a credit for the nine months ended  September  30, 1997
for $646,000 on a loss before  income taxes of $2 million,  compared to taxes of
$610,000 on pretax  income of $1.5 million for the nine months  ended  September
30, 1996.  Such credit  assumes  that the Company  will have  taxable  income in
future periods. 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 nine months 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 the Old Debentures in February and March
1997 and borrowings  under a short-term  credit  facility with U.S. Bank entered
into in February 1997 which provided for up to $7.5 million in  availability.  A
portion of the net  proceeds  from the offering of the Old  Debentures  was also
used to fund the Company's acquisition of Rhotech in February 1997.

On June  25,  1997,  the  Company  completed  the $40  million  Existing  Credit
Facility.  The Existing Credit Facility  consists of a revolving credit facility
of up to $20 million and a $20 million  term loan.  The Company  utilized all of
the  proceeds  of the term  loan and a  portion  of the  availability  under the
revolving  credit  facility  to  redeem  the Old  Debentures.  Additional  funds
available  under the revolving  credit facility were used to retire the existing
$7.5 million  revolving  credit  facility with U.S. Bank. The Company intends to
use available funds under the revolving  credit facility for working capital and
general corporate purposes, including for acquisitions,  subject to satisfaction
of the conditions set forth in the Existing Credit  Facility.  Borrowings  under
the revolving  credit  facility are subject to various  financial  covenants and
other conditions.

The revolving credit facility and the term loan bear interest at a rate equal to
0.75% and 1.75%, respectively, in excess of Fleet's prime rate as announced from
time to time. The Company's  obligations  under the Existing Credit Facility are
secured by substantially all of its assets.  Subject to Fleet's right to issue a
call notice  requiring  repayment  of the term loan at any time on or after July
10,  1998,  the term loan is  payable  in  quarterly  installments  as  follows:
$750,000  on July 1,  1998 and at the end of each  calendar  quarter  thereafter
through and including December 31, 1999,  $1,475,000 at the end of each calendar
quarter  beginning March 31, 2000 and ending March 31, 2002, and a final balloon
payment equal to the sum of unpaid  principal plus accrued  interest on June 30,
2002. The Company  presently  expects to repay the Existing Credit Facility with
the proceeds from the New  Financings (as defined and described in Note 3 to the
Condensed Consolidated Financial Statements), although no assurance can be given
that the New Financings will be completed.  See "Forward Looking  Statements" in
this Item 2.

The  Company  has  historically  paid its  billable  employees  weekly for their
services  before  receiving  payment from its customers.  Additionally,  certain
statutory  payroll and related  taxes,  as well as other  fringe  benefits,  are
generally  paid by the Company  before the  Company  receives  payment  from its
customers. Consequently, a significant portion of the Company's cost of revenues
is normally paid by the Company prior to receiving  payment from its  customers.
Increases  in the  Company's  revenues,  resulting  from  expansion  of existing
offices or establishment of new offices,  will require additional cash resources
necessary to support such growth.  Following the Uniforce acquisition,  the debt
service  costs  associated  with the  borrowing  under the New  Financings  will
significantly  increase  liquidity  requirements.   Management  of  the  Company
believes that, based on pro forma results of operations and anticipated  growth,
including  growth  through  acquisitions,  cash flow from  operations  and funds
anticipated to be available  under the New Credit Facility (as defined in Note 3
to the  Condensed  Consolidated  Financial  Statements)  will be  sufficient  to
service the Company's indebtedness,  to fund growth at anticipated levels and to
meet  anticipated  working  capital  requirements  for the  foreseeable  future.
However,  various  factors  could  prevent  the  Company  from  realizing  these
objectives.

The Company is obligated under various  acquisition  agreements to make earn-out
payments to the sellers of acquired

                                       15

<PAGE>



companies,  subject  to the  acquired  companies'  meeting  certain  contractual
requirements.  For calendar year 1997, sellers are entitled to earn-out payments
of $521,000,  all of which have been paid.  The maximum  amount of the remaining
potential  earn-out  payments  is $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.

Cash and cash  equivalents  decreased  $938,000  during  the nine  months  ended
September 30, 1997.  Cash flows of $2,756,000  used in operating  activities and
cash flows of $15,232,000  used by investing  activities  were in excess of cash
flows  provided  by  financing  activities  of  $17,050,000.  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 Rhotech.  Cash flows from
financing activities were principally  attributable to net proceeds available to
the  Company  in  connection  with its sale of the Old  Debentures  (which  were
redeemed on June 25, 1997),  net borrowings  under the credit facility with U.S.
Bank (which was repaid on June 25, 1997) and net  borrowings  under the Existing
Credit  Facility.  The Old Debentures were redeemed and the net borrowings under
the credit  facility  with U.S. Bank were repaid with proceeds from the Existing
Credit Facility (as described in Note 4 to the Company's Condensed  Consolidated
Financial Statements).

As of September 30, 1997,  approximately  $39.0 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  approximately  $4.0 million.  Various  factors
could impact the Company's ability to generate the earnings necessary to support
this  amortization  schedule.  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.

The  Company  estimates  that the total  amount of funds  required to effect the
Uniforce  acquisition  will be  approximately  $93.6 million.  In addition,  the
Company  estimates that the total amount of funds required to refinance  certain
existing  indebtedness of the Company and Uniforce,  provide for working capital
and pay fees and expenses  incurred in connection with the Uniforce  acquisition
will be  approximately  $80.6 million.  The Company  expects to fund these costs
from the proceeds of the New Financings and available cash from operations.  See
Note 3 to the Condensed Consolidated  Financial Statements.  No assurance can be
given  that  the  New  Financings  will  be  completed.   See  "Forward  Looking
Statements" in this Item 2.

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 information  technology  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.


                                       16

<PAGE>



In June 1997,  the  Financial  Accounting  Standards  Board issued  Statement of
Financial Accounting Standards No. 130, "Reporting  Comprehensive Income" ("SFAS
130"),  which  requires  that  changes  in  comprehensive  income  be shown in a
financial  statement  that is  displayed  with  the  same  prominence  as  other
financial statements.  SFAS No. 130 becomes effective in fiscal 1999. Management
has not yet  evaluated  the  effects of this change on the  Company's  financial
statements.

In  June  1997,  the  Financial  Accounting  Standards  Board  issued  Financial
Accounting  Standards No. 131,  "Disclosures About Segments of an Enterprise and
Related Information" ("SFAS 131"), which changes the way public companies report
information about segments.  SFAS 131, which is based on the management approach
to  segment  reporting,   includes   requirements  to  report  selected  segment
information  quarterly and entity-wide  disclosures about products and services,
major  customers,  and the  material  countries  in which the  entity  holds and
reports revenues.  SFAS 131 becomes effective in fiscal 1999. Management has not
yet evaluated the effect of this change on the Company's financial statements.

Forward Looking Statements

Certain  statements in this Item 2 and in the notes to the  Company's  Condensed
Consolidated  Financial  Statements  suggest that the Company expects to acquire
Uniforce  and  consummate  the New  Financings.  Such  statements,  and  similar
statements  as to the  likely  effect  of such  transactions  and the  Company's
objectives and  management's  beliefs with respect  thereto are forward  looking
statements.  The  Company  may not be  successful  in  acquiring  Uniforce or in
consummating the New Financings,  and/or the effect of such  transactions on the
Company's actual results could otherwise differ  materially from those projected
or  suggested  in any forward  looking  statement.  Factors  that could cause or
contribute  to the  foregoing  include,  but are not limited  to, the  following
important factors:

The  Company  will need to obtain  additional  financial  resources  to fund its
strategy  of  growth  through  acquisition,   geographic  expansion  and  market
development,   including   consummation   of  the  Uniforce   acquisition.   The
consummation of the Uniforce  acquisition and the financing therefor are subject
to numerous conditions customary to such transactions, including, in the case of
the Uniforce  acquisition,  the Company's ability to obtain adequate  financing.
The Company is currently in  discussions  with  financing  sources and currently
anticipates  that it will be able to obtain such  financing  and  thereafter  to
consummate the Uniforce  acquisition.  No assurances can be given, however, that
such  financing  will be able to be  arranged or that such  acquisition  will be
consummated.


                                       17

<PAGE>



PART II - OTHER INFORMATION

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

(a) Exhibits.

2.1     Agreement and Plan of Merger,  dated as of August 13, 1997, by and among
        COMFORCE  Corporation,  COMFORCE  Columbus,  Inc. and Uniforce Services,
        Inc. (included as an exhibit to the Company's Current Report on Form 8-K
        dated August 20, 1997 and incorporated herein by reference).

2.2     Stockholders  Agreement,  dated as of  August  13,  1997,  by and  among
        COMFORCE Corporation,  COMFORCE Columbus, Inc., John Fanning and Fanning
        Asset  Partners,  L.P., a Georgia  limited  partnership  (included as an
        exhibit to the  Company's  Current  Report on Form 8-K dated  August 20,
        1997 and incorporated herein by reference).

10.1    Loan  Agreement  dated as of June 25, 1997 among the  Company,  COMFORCE
        Telecom,  Inc., Sumtec Corporation,  COMFORCE Technical Services,  Inc.,
        Project Staffing Support Team, Inc., COMFORCE Information  Technologies,
        Inc., Force Five, Inc.,  COMFORCE IT Acquisition  Corp., RHO Acquisition
        Company,  RHO Company  Incorporated,  Fleet  National  Bank, as bank and
        agent,  and U.S.  Bank,  Washington,  as bank (included as an exhibit to
        Registration Statement on Form S-3 filed by the Company on July 11, 1997
        and incorporated herein by reference).

10.2    Stock Option Agreement dated as of September 8, 1997 between the Company
        and  Michael D. Madden  (included  as an exhibit to  Amendment  No. 1 to
        Registration  Statement  on Form S-4 filed by the Company on October 17,
        1997 and incorporated herein by reference).

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


(b) Reports on Form 8-K.

        During the quarter  ended  September  30,  1997,  the Company  filed the
        following Current Reports on Form 8-K:

        On July 10, 1997 and July 11, 1997,  the Company filed a Current  Report
        and  an  amendment  thereto,   respectively,   in  connection  with  the
        completion of certain  financing with Fleet National Bank and U.S. Bank,
        Washington  and  the  redemption  of  the  Company's  $25.2  million  in
        outstanding principal amount of Subordinated Convertible Debentures.

        On August 20, 1997,  the Company  filed a Current  Report in  connection
        with the execution of an Agreement and Plan of Merger  pursuant to which
        the Company, through a subsidiary, intends to acquire Uniforce Services,
        Inc.



                                       18

<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: November 7, 1997                            /s/ PAUL J. GRILLO
                                                   --------------------------
                                                   Vice President/Finance
                                                   Chief Financial Officer


                                       19