U. S. Securities and Exchange Commission

                             Washington, D.C. 20549


                                   Form 10-QSB


(Mark One)
[ x ]            QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended     December 31, 1997
                              --------------------------------------------------

[   ]          TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
                                  EXCHANGE ACT

For the transition period from                   to           
                               -----------------    ----------------

       Commission file number           0-19499
                              ------------------------------

                         Champion Financial Corporation
    -----------------------------------------------------------------------
                    (Exact name of small business issuer as
                            specified in its charter)

              Utah                                               88-0169547
  (State or other jurisdiction                                (I.R.S. employer
of incorporation or organization)                            identification no.)

                           9495 E. San Salvador Drive
                            Scottsdale, Arizona 85258
                    (Address of principal executive offices)

                                 (602) 451-8575
                             ---------------------
                           (Issuer's telephone number)

    -----------------------------------------------------------------------
              (Former name, former address and former fiscal year,
                         if changed since last report)

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

                      APPLICABLE ONLY TO CORPORATE ISSUERS

     State the number of shares  outstanding of each of the issuer's  classes of
common equity, as of the last practicable date:

  Common stock, $0.001 par value, 5,855,802 outstanding as of January 16, 1998

                                        1
<PAGE>
                         Champion Financial Corporation
                                      Index







Part I:  Financial Information

         Item 1.  Financial Statements

                  Consolidated  Balance  Sheets as of December 31, 1997 and
                  March 31, 1997 ............................................3

                  Consolidated  Statements  of  Operations  for  the  Three
                  Months and Nine Months ended December 31, 1997 and 1996 ...4

                  Consolidated Statements of Cash Flows for the Nine Months
                  ended  December 31, 1997 and 1996 .........................5

                  Notes to Unaudited Consolidated Financial Statements ......6


         Item 2.  Management's   Discussion   and   Analysis  of  Financial
                  Condition and Results of Operations ......................10


Part II: Other Information

                  Exhibits - None

                  Signatures ...............................................13
                                     2
<PAGE>
                      CHAMPION FINANCIAL CORPORATION
                             AND SUBSIDIARIES
                        Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                                    December 31,
                                                                                       1997        March 31,
                                                                                    (UNAUDITED)      1997
                                                                                    -----------   -----------

                                     Assets

<S>                                                                                 <C>           <C>        
Current assets:
  Cash and cash equivalents                                                         $   206,561   $   896,096
  Trade accounts receivable, less allowance for doubtful accounts of $15,000            239,469       250,795
  Other current assets                                                                   26,130        14,415
                                                                                    -----------   -----------
            Total current assets                                                        472,160     1,161,306
                                                                                    -----------   -----------

Property and equipment, net                                                             168,361       158,109
Investment in healthcare technology company (note 2)                                    309,626          --
Purchase cost not yet allocated (note 1)                                              9,184,405          --
Capitalized financing cost (note 1)                                                     509,444          --
Other assets, at cost                                                                    84,092        89,795
                                                                                    -----------   -----------
                                                                                    $10,728,088   $ 1,409,210
                                                                                    ===========   ===========


                      Liabilities and Shareholders' Equity
Current liabilities:
  Accounts payable                                                                  $   162,815   $   267,351
  Accrued expenses (note 1)                                                             785,203        89,972
  Current portion of long term debt (note 1)                                            300,000          --
  Note payable (note 1)                                                                 130,486        24,340
  Deferred revenue                                                                         --          58,909
                                                                                    -----------   -----------
          Total current liabilities                                                   1,378,504       440,572

Long term liabilities:
  Term loam (note 1)                                                                  2,200,000          --
  Convertible debt (note 1)                                                           4,000,000          --
                                                                                    -----------   -----------
Total long term liabilities                                                           6,200,000          --
                                                                                    -----------   -----------
Total liabilities                                                                     7,578,504       440,572


Shareholders' equity:

   Common stock, $.001 par value 100,000,000 shares authorized, 5,855,802 shares
      issued and outstanding at December 31, 1997 and 5,473,302 at March 31, 1997         5,856         5,473
   Additional paid -in- capital                                                       3,093,015       874,897
   Retained earnings (accumulated deficit)                                               50,713        88,268
                                                                                    -----------   -----------
         Total shareholders' equity                                                   3,149,584       968,638

                                                                                    ===========   ===========
         Total liabilities and shareholders' equity                                 $10,728,088   $ 1,409,210
                                                                                    ===========   ===========
</TABLE>

See accompanying notes to unaudited consolidated financial statements.
                                                  3
<PAGE>
                         CHAMPION FINANCIAL CORPORATION
                                AND SUBSIDIARIES
                      Consolidated Statements of Operations
                                   (Unaudited)


<TABLE>
<CAPTION>
                                                               Three Months Ended             Nine Months Ended
                                                                   December 31,                  December 31,
                                                           --------------------------    --------------------------
                                                               1997           1996           1997           1996
                                                           -----------    -----------    -----------    -----------
<S>                                                        <C>            <C>            <C>            <C>        
Revenue:
   Repricing fees                                          $   588,258    $   459,988    $ 1,732,549    $ 1,273,756
   Member fees                                                 109,735         34,060        347,805        176,803
   Other fees                                                    1,600           --           12,185           --
                                                           -----------    -----------    -----------    -----------
                                                               699,593        494,048      2,092,539      1,450,559
                                                           -----------    -----------    -----------    -----------
Cost of services:
   PPO network fees                                            164,134        149,040        496,766        504,695
   Commissions                                                  90,987         60,323        273,602        145,393
   Billing refunds                                              10,541           (461)        17,893         16,880
   Contact lens purchases                                        2,803          3,562          8,378          8,391
   Other                                                          --             --             (112)          --
                                                           -----------    -----------    -----------    -----------
                                                               268,465        212,464        796,527        675,359
                                                           -----------    -----------    -----------    -----------

Gross profit from operations                                   431,128        281,584      1,296,012        775,200
                                                           -----------    -----------    -----------    -----------
General and administrative expenses:
   Wages and related                                           277,204        176,861        745,446        421,606
   Other operating                                             230,488        125,534        532,430        345,487
   Depreciation                                                 14,995         10,000         39,432         19,000
   Amortization                                                 12,457            922         16,259          1,522
                                                           -----------    -----------    -----------    -----------
                                                               535,144        313,317      1,333,567        787,615
                                                           -----------    -----------    -----------    -----------

Loss before income taxes                                      (104,016)       (31,733)       (37,555)       (12,415)

Income taxes (note 3)                                          (10,000)          --             --             --
                                                           -----------    -----------    -----------    -----------

Net Loss                                                   $   (94,016)   $   (31,733)   $   (37,555)   $   (12,415)

Retained earnings at beginning of period                       144,729        104,219         88,268         84,901
                                                           -----------    -----------    -----------    -----------
Retained earnings (accumulated deficit) at end of period        50,713         72,486         50,713         72,486
                                                           ===========    ===========    ===========    ===========

Earnings(loss) per share:  Basic                           $     (0.02)   $     (0.03)   $     (0.01)   $      0.01
                                                           ===========    ===========    ===========    ===========
                           Diluted                         $     (0.02)   $     (0.03)   $     (0.01)   $      0.01
                                                           ===========    ===========    ===========    ===========

Weighted average shares outstanding:  Basic                  5,539,823      2,200,000      5,495,556      2,200,000
                                                           ===========    ===========    ===========    ===========
                                      Diluted                5,539,823      2,200,000      5,495,556      2,200,000
                                                           ===========    ===========    ===========    ===========
</TABLE>

See accompanying notes to unaudited consolidated financial statements.
                                                  4
<PAGE>
                         Champion Financial Corporation
                      Consolidated Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                        Nine Months Ended December 31,
                                                                             1997             1996
                                                                         -----------      -----------
<S>                                                                      <C>              <C>         
Operating activities:
   Net loss                                                              $   (37,555)     $   (12,415)
   Adjustments to reconcile net income to net cash provided by
   operating activities:
   Depreciation                                                               39,432           19,000
   Amortization                                                               16,259            1,522
   Increase(decrease) in cash resulting from changes
   in operating assets and liabilities:
     Trade accounts receivable                                                11,326          (40,896)
     Other current assets                                                    (11,715)          (6,275)
     Accounts payable                                                       (104,536)         (22,496)
     Accrued expenses                                                        695,231           56,818
     Deferred revenue                                                        (58,909)          58,909
                                                                         -----------      -----------
         Net cash provided by operating activities                           549,533           54,167
                                                                         -----------      -----------

Investing activities:
   Purchases of equipment                                                    (49,684)         (34,580)
   Cash purchase cost not yet allocated                                   (6,965,904)            --
   Investment in healthcare technology company                              (309,626)            --
                                                                         -----------      -----------
        Net cash used in investing activities                             (7,325,214)         (34,580)
                                                                         -----------      -----------

Financing activities:
    Proceeds from note payable and term loan                               2,606,146             --
    Issuance of convertible debt                                           4,000,000             --
    Payment of financing cost                                               (520,000)            --
    Distribution to Shareholders                                                --           (100,000)
    Increase in line of credit                                                  --             50,000
                                                                         -----------      -----------
         Net cash provided by (used in) financing activities               6,086,146          (50,000)
                                                                         -----------      -----------

Net decrease in cash and cash equivalents                                   (689,535)         (30,413)

Cash and cash equivalents at beginning of year                           $   896,096      $    34,577
                                                                         -----------      -----------

Cash and cash equivalents at end of period                               $   206,561      $     4,164
                                                                         ===========      ===========
</TABLE>

See accompanying notes to unaudited consolidated financial statements.
                                       5
<PAGE>
                 CHAMPION FINANCIAL CORPORATION AND SUBSIDIARIES

              Notes to Unaudited Consolidated Financial Statements



(1)  Summary of Significant Accounting Policies

     Description of Business

     Champion Financial Corporation is a healthcare management company dedicated
     to controlling the costs,  improving the quality and enhancing the delivery
     of  healthcare  services.  The Company also provides  related  products and
     services  designed to reduce  healthcare  costs.  The  Company  markets and
     provides  programs  and  services  to  insurance  companies,   self-insured
     businesses  for  their  medical  plans and third  parties  that  administer
     employee  medical plans.  These programs and services assist its clients in
     reducing   healthcare  costs  for  group  health  plans  and  for  workers'
     compensation coverage and automobile accident injury claims.


     Business Combination

     On December 15, 1997, the Company acquired all of the outstanding  stock of
     HealthStar,  Inc.. The acquisition price is subject to certain  contractual
     adjustments,  which are expected to be resolved by March 31, 1998.  Through
     December 31, 1997, the purchase price has been measured at $9,184,405.  The
     acquisition will be recorded using the purchase method and accordingly, the
     purchase  price  will  be  allocated  to  the  assets   purchased  and  the
     liabilities assumed based upon fair values at the date of acquisition.  Any
     excess of purchase price over the fair value of net assets acquired will be
     recorded as goodwill.

     Management of the company is in the process of  determining  the fair value
     of the assets acquired and  liabilities  assumed which will be completed by
     March 31, 1998. Accordingly,  $9,184,405 has been recorded as Purchase Cost
     Not Yet Allocated for interim financial statement reporting purposes.

     The cash portion of the purchase was obtained through the following:

     *     $4,000,000  Series A 8% Senior  Subordinated  Convertible  Redeemable
           Debentures due December 3, 1999.
     *     $2,500,000 Term  Loan at 8.5%  secured  by  substantially  all of the
           assets of the company due March 31, 2001.
     *     $1,500,000  Revolving Line of Credit secured by substantially  all of
           the assets of the company due March 31, 2001.

     At December 31,  1997,  the Company did not have any  borrowings  under the
     Revolving Line of Credit. The entire balance of the convertible  debentures
     is
                                       6
<PAGE>
     long-term. $300,000 of the term loan is due by December 31, 1998.

     Champion  incurred  $520,000 of financing  costs in placing the convertible
     debt and term loan.  This cost has been  capitalized  and will be amortized
     over the term of the related debt.


     Use of Estimates

     Management  of the Company has made a number of estimates  and  assumptions
     relating to the reporting of assets and  liabilities  and the disclosure of
     contingent assets and liabilities to prepare these financial  statements in
     conformity  with  generally  accepted  accounting  principles.  Results  of
     operations during interim periods are not necessarily indications of annual
     operating results.


     Principles of Consolidation

     The consolidated  financial  statements include the financial statements of
     the  Company  and  its  two  wholly  owned  subsidiaries.  All  significant
     intercompany   balances   and   transactions   have  been   eliminated   in
     consolidation.  The  excess of  purchase  price  over fair  value of assets
     acquired is amortized on a straight-line basis over a 15-year period.


     Cash Equivalents

     Cash  equivalents  of $16,904 at December  31, 1997 consist of money market
     accounts  with the Company's  primary  financial  institution.  The Company
     considers all highly liquid  instruments with original  maturities of three
     months or less to be cash equivalents.


     Earnings (loss) per Share

     Earnings  (loss) per share are based upon the  weighted  average  number of
     shares  of  common  stock.  The  effect  of  common  stock  equivalents  is
     antidilutive.
                                       7
<PAGE>
     Fair Value of Financial Instruments

     The  fair  value of a  financial  instrument  is the  amount  at which  the
     instrument  could be exchanged  in a current  transaction  between  willing
     parties.  Management  believes that the recorded  amounts of current assets
     and  current  liabilities  approximate  fair  value  because  of the  short
     maturity of these instruments.


     Business and Credit Concentration

     The Company operates in a very competitive market. Its success is dependent
     upon the  ability  of its  marketing  group to  continue  to  identify  and
     contract with insurance companies and self-funded companies.  The Company's
     customers  are  located  throughout  the  United  States.   Four  customers
     accounted for the majority of the company's revenues.


     Revenue Recognition

     Repricing  fees are derived  from a  negotiated  percentage  of the medical
     savings  generated from customer claims managed by the Company.  These fees
     are recognized as revenue when the Company notifies the healthcare provider
     of their required billing reduction.  PPO network fees are paid to regional
     providers,  who are not contracted  directly with the company for access to
     their networks. Commissions are paid to external and internal brokers based
     upon a percentage of fees generated.

     Member fees are derived from companies that purchase annual  memberships in
     the FAVS program.  The membership fees are received at the inception of the
     annual  contract;  revenue is  deferred at that point and  recognized  on a
     straight-line basis over the 12-month period.


     Property and Equipment

     Property and equipment are stated at cost. Depreciation is calculated using
     the  straight-line  method over the  estimated  useful lives of the assets,
     which  approximates  three years for  equipment to five years for furniture
     and fixtures.
                                       8
<PAGE>
     Impairment of Long-Lived Assets

     Management reviews the possible impairment of long-lived assets and certain
     identifiable  intangible assets whenever events or changes in circumstances
     indicate  that the  carrying  amount  of an asset  may not be  recoverable.
     Recoverability of assets to be held and used is measured by a comparison of
     the  carrying  amount of an asset to future net cash flows  expected  to be
     generated by the asset.  If such assets are considered to be impaired,  the
     impairment to be recognized is measured by the amount by which the carrying
     amount of the assets exceeds the fair value of the assets.


(2)  Investment in Healthcare Technology Company

     In May 1997,  the company  paid  $309,626  to purchase a 12.4%  interest in
     Hayes,  Inc., that is a nationally  recognized leader in medical technology
     assessment. Hayes is a full-service company providing products and services
     in the areas of medical technology  assessment,  legal precedent  reporting
     and analysis, custom reporting,  individual case review and consulting. The
     investment in the common stock of Hayes is accounted for by the cost method
     which is believed to approximate fair value.


(3)  Income Taxes

     At December  31,  1997,  the  Company  has  available  net  operating  loss
     carryforwards of approximately  $500,000 and capital loss  carryforwards of
     approximately $1,000,000. There are certain limitations and restrictions on
     the use of these  losses;  however,  management  expects  to  fully  offset
     federal income taxes in the current fiscal year.  State and local taxes are
     recognized as incurred.

     The  acquisition  of  HealthStar  did  not  result  in any  book-tax  basis
     differences.   Management  believes  that  the  state  net  operating  loss
     carry-forwards  recorded  by  HealthStar  will  not  be  available  to  the
     consolidated entity.
                                       9
<PAGE>
Item 2.        Management's  Discussion and Analysis of Financial  Condition and
               Results of Operations


Management's  Discussion  and  Analysis of  Financial  Condition  and Results of
Operations  should be read in  conjunction  with the  financial  statements  and
footnotes for the quarter  ended  December 31, 1997 and the year ended March 31,
1997 contained in the Company's Form 10-K filed with the Securities and Exchange
Commission on June 27, 1997.

The managed healthcare cost containment  industry is highly  fragmented,  with a
large  number of  competitors.  The  Company  does not  believe  that any single
company  commands  significant  market  share.  The  management  of the  Company
believes the level of competition will continue to increase in the future.  Most
of the Company's  competitors  are national  managed care  providers,  insurance
companies,  HMOs, and third-party administrators that have implemented their own
managed  care  programs.   Several  large   insurance   companies  for  workers'
compensation,   health  and   automobile   have  also   implemented   their  own
cost-containment  programs  through the  carrier's  own  personnel.  Many of the
Company's current and potential  competitors are  significantly  larger and have
greater  financial,  technical,  marketing,  and  management  resources than the
Company.

The Company competes on the basis of its specialized  knowledge and expertise in
the managed healthcare services industry and on its ability to deliver effective
services to the customer  with a high level of customer  satisfaction  at a very
affordable  price.  There can be no  assurance  that the Company will be able to
compete   successfully.   The  managed   healthcare   industry  has  experienced
significant changes in recent years,  primarily as a result of rising healthcare
costs.  The Company will be required to respond to various  competitive  factors
affecting the healthcare  industry,  including new medical technologies that may
be  introduced;  general  trends  relating  to demand for  healthcare  services;
regulatory,  economic,  and political factors;  changes in patient demographics;
and competitive pricing strategies by HMOs and other healthcare plans.


RESULTS OF OPERATIONS


The company's consolidated revenues for the quarter ended December 31, 1997 were
$699,593  compared to $494,048  for the quarter  ended  December  31,  1996,  an
increase of $205,545 or 42%. Net revenues for the nine months ended December 31,
1997 increased $641,980 or 44% to $2,092,539 compared to $1,450,559 for the nine
months ended December 31, 1996.
                                       10
<PAGE>
The  company had a net loss of $94,016 in the quarter  ended  December  31, 1997
compared to a net loss of $31,733 for the quarter  ended  December 31, 1996,  an
increase of $62,283.  Net earnings  for the nine months ended  December 31, 1997
decreased  $25,140 to ($37,555)  compared to ($12,415) for the nine months ended
December  31,  1996.  The loss for the  quarter  and  nine  months  was due to a
write-down  of $69,739 in  receivables,  and an  increase  in  amortization  and
interest expense.


COST OF SERVICES


The company's cost of services consist primarily of access fees paid to regional
PPO networks for providers not contracted directly with the company, commissions
paid to outside brokers and in-house marketing  personnel and other services and
products  provided by outside  vendors.  Cost of services  increased  26% in the
quarter,  to $268,465  compared with $212,464 in the quarter ended  December 31,
1996. Cost of services for the nine months ended December 31, 1997 increased 18%
to $796,527  compared with $675,359 in the nine months ended  December 31, 1996.
Cost of services as a percentage  of revenue for the nine months ended  December
31,  1997,  decreased  to 38% from 47% from the nine months  ended  December 31,
1996. The improvement is the result of the company's  ongoing effort to contract
directly with the healthcare facilities and providers,  thereby reducing network
provider access fees as a percentage of revenue.


GENERAL AND ADMINISTATIVE EXPENSES


For the quarter ended  December 31, 1997,  general and  administrative  expenses
were  $535,144  compared to $313,317  for the quarter  ended  December 31, 1996.
General and administrative  expenses for the nine months ended December 31, 1997
were  $1,333,567  compared with $787,615 for the nine months ended  December 31,
1996. This increase was due primarily to expenses for additional  management and
administrative  personnel to  accommodate  the increase in business and expected
growth. The company expects general and  administrative  expenses to increase in
future periods.


LIQUIDITY & CAPITAL RESOURCES


The Company has historically funded its working capital requirements and capital
expenditures primarily from cash flow generated from operations  supplemented by
short-term borrowings under the Company's line of credit.

On December 15, 1997, the company  acquired  HealthStar,  Inc. based in Chicago,
Illinois.  HealthStar is a diversified healthcare and financial services company
with over 17 years experience in the formulation and management of PPO networks.
HealthStar
                                       11
<PAGE>
employs  over 220 people and  operates  managed  care  networks in the  Midwest,
Southeast and Southwest  regions,  covering 23 states and 1.5 million lives. The
HealthStar  PPO  network  includes  approximately  1,500  hospitals  and  65,000
physicians.

In connection with this  acquisition,  the Company issued $4,000,000 Series A 8%
Senior Subordinated  Convertible Redeemable  debentures.  The entire proceeds of
the issuance and the debentures were utilized in the  acquisition.  Beginning on
January 17, 1998,  the  debentures  are  convertible  into common  shares of the
Company's  stock based upon a formula  related to the market price of the stock.
In the event that the entire amount of the  debentures  have not been  converted
prior  to  the  maturity  date  of  December  3,  1999,  the   debentures   will
automatically convert to common shares of the company on the said maturity date.

In addition,  the company  secured a $1,500,000 line of credit with Harris Trust
and  Savings  Bank.  The line of credit is secured by  substantially  all of the
assets of  Champion  and its  subsidiaries,  including  HealthStar.  The company
anticipates  the line of credit will be  sufficient  to meet its cash flow needs
for the next year of operations.

Although  there can be no  assurances,  management  of the  Company  anticipates
growth and expansion to continue to  accelerate in 1998 through the  acquisition
of  complementary   businesses  or  business  lines,  management  personnel  and
infrastructure  additions.  The Company believes additional sources of cash flow
may be required in conjunction with any such acquisition activity.  There can be
no  assurance  that  the  Company  may be able to  obtain  such  funds  on terms
acceptable to the Company,  in which case there would be no cash utilized in the
acquisition. Management currently believes that cash on hand, available sources,
and anticipated operating results will produce sufficient cash flow for the next
year of operations.
                                       12
<PAGE>
                         CHAMPION FINANCIAL CORPORATION


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

                         Champion Financial Corporation

DATE:  January 29, 1998        BY: /S/ STEPHEN J. CARDER

                                   STEPHEN J. CARDER
                                   EXECUTIVE VICE PRESIDENT

                                   CHIEF FINANCIAL OFFICER
                                   AND TREASURER
                                       13