SECURITIES AND EXCHANGE COMMISSION

                              WASHINGTON, D.C. 20549

                                   FORM 10-KSB/A

     Amended annual report under Section 13 or 15(d) of the Securities  Exchange
Act of 1934 for the fiscal year ended December 31, 1999

                             Commission File Number

                                     0-17832

                         Allstate Financial Corporation

                 (Name of Small Business Issuer in Its Charter)

                         Virginia              54-1208450
                ------------------------- -------------------
      (State or other jurisdiction of         (I.R.S. Employer
        incorporation or organization)       Identification No.)


                     8180 Greensboro Drive, McLean, VA 22210
                     --------------------------------- -----
               (Address of principal executive offices) (Zip Code)

Issuer's telephone number, including area code:  (703) 883-9757

      Securities registered pursuant to Section 12(g) of the Exchange Act:
                          Common Stock - No par value

 Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 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

Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure  will be contained,  to
the  best  of  registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB. X

Revenues for year ended December 31, 1999 were $3,621,336

The  aggregate  market  value of the common stock held by non  affiliates  as of
March 27, 2000 was $1,211,939  computed by reference to the closing market price
at which the stock was traded on the OTC Bulletin Board (Symbol ASFN).

The number of shares  outstanding of the issuer's  common stock, as of March 27,
2000 was 2,324,616.

Transitional Small Business Disclosure Format (check one):  Yes ____  No __X__
                                                                           -


                      DOCUMENTS INCORPORATED BY REFERENCE.

                                     None.


<PAGE>


Part I

This Form 10-KSB may contain certain  "forward-looking  statements"  relating to
the Company  (defined  in Item 1 below) that  represent  the  Company's  current
expectations or beliefs,  including,  but not limited to, statements  concerning
the Company's operations,  performance, financial condition and growth. For this
purpose, any statements contained in this Form 10-KSB that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the  generality  of the  foregoing,  words  such  as  "may",  "will",  "expect",
"believe",  "anticipate",  "intend", "could",  "estimate", or "continue", or the
negatives or other variations thereof, or comparable terminology are intended to
identify  forward-looking  statements.  These statements by their nature involve
substantial  risks and  uncertainties,  such as  credit  losses,  dependence  on
management and key personnel, seasonality, and variability of quarterly results,
ability  of the  Company  to  continue  its growth  strategy,  competition,  and
regulatory  restrictions relating to potential new activities,  certain of which
are  beyond  the  Company's  control.  Should  one or more  of  these  risks  or
uncertainties  materialize or should the underlying assumptions prove incorrect,
actual outcomes and results could differ  materially from those indicated in the
forward-looking statements.

Item 1.  Description of Business

Allstate  Financial  Corporation (the "Company") was incorporated in 1982 in the
Commonwealth of Virginia.  The Company is a commercial finance  institution that
provides  financing to small and middle-market  businesses through loans secured
by accounts receivable,  inventory, machinery and equipment, and real estate. In
October  1999,  the  Company  sold the  factoring  business,  the portion of the
business that  purchased  discounted  invoices with  recourse.  The Company will
continue to receive revenue from this sale for the foreseeable  future. In 1997,
the Company began a program of purchasing  invoices without  recourse,  assuming
the risk that an account  debtor  may become  insolvent.  This  activity  ceased
during 1998. The Company's subsidiary Lifetime Options, Inc. manages a portfolio
of life insurance policies it purchased from individuals facing life-threatening
illnesses. During 1997, Lifetime Options ceased purchasing policies.

The Company  incurred  net losses of $17.3  million in 1999 and $6.1  million in
1998. As a result,  the Company was not in compliance  with the covenants in its
revolving  bank line of credit.  Pursuant to a  forbearance  agreement  with its
senior lenders, the Company sold a majority of its performing assets in order to
repay its bank line of credit.  The  Company  does not have  current  sources of
capital, outside of collections of existing receivables, to fund new advances to
clients.

The  Company's  independent  auditors  issued an  unqualified  audit opinion and
stated  that the  recurring  losses  from  operations  and the  March  31,  2000
expiration  of the  working  capital  loan  raise  substantial  doubt  about the
Company's  ability to continue as a going  concern.  The Company is developing a
strategic  turnaround  plan  which,  if  successfully  implemented,   management
believes  will enable the Company to  continue  as a going  concern.  This plan,
which  has not yet been  finalized  and which  will be  subject  to  shareholder
approval,  is  discussed  in Note M of the notes to the  Consolidated  Financial
Statements  contained herein. There can be no assurance that (1) the final terms
of the plan can be agreed  upon with the  holders of the  Company's  convertible
subordinated  notes, (2) the Company's  shareholders
                                        2
<PAGE>

will approve the plan,(3)the plan will be successfully  implemented,(4) new
financing will be obtained, or (5) the Company will be able to continue as
a going concern.

Unless  the  context  requires  or  otherwise  permits,  all  references  to the
"Company"   include  Allstate   Financial   Corporation  and  its  wholly  owned
subsidiaries.

The Company's corporate offices in McLean,  Virginia house all of its credit and
client administration activities.

Business of Company

Principal Products

The  Company's  principal  products  are  financing  for small and  medium-sized
businesses, usually those with annual sales of $1 million to $10 million dollars
per year.  Through  its  offering of  advances  secured by accounts  receivable,
inventory,  machinery and equipment,  and real estate ("Asset-Based  Lending" or
"ABL"),  the  Company  provides  its clients  with the  ability to expand  their
working capital and acquire productive business assets.

During October 1999, the Company sold its factoring portfolio.  The Company will
receive  a  premium  over  time  based  on  the  performance  of  the  Purchased
Receivables  sold.  The  Company  does not  intend  to  re-enter  the  factoring
business.

Distribution Methods

The ABL  product  is  marketed  through  referrals  from  business  consultants,
lawyers,  accountants,  commercial and investment bankers.  The Company requires
extensive  financial  information and reporting from clients who seek to qualify
for its ABL product,  and believes that these kinds of referral  sources will be
more likely to provide  prospects that will qualify for such financing.  Through
its  BusinessFundingUSA  site  on the  World  Wide  Web,  the  Company  receives
applications  over the internet for its ABL product  directly  from  prospective
borrowers.

Competition

In its ABL  business,  the  Company  faces  competition  from other  asset-based
lenders,  and commercial banks that offer secured financing.  Due to the size of
facilities that it offers,  the Company  competes with both regional  sources of
financing  and large  national  organizations.  Many of these  competitors  have
significant financial,  marketing and operational resources, and may have access
to capital at lower costs than the Company can obtain.

Sources of Capital

The  Company's  requirement  for  capital  is a  function  of the  level  of its
investment  in  receivables.  The  Company  funds this  investment  through  its
                                        3
<PAGE>

convertible  subordinated notes, and internally generated funds. At December 31,
1999, the Company was not able to fund new advances to clients.

The Forebearance  Agreement (as hereinafter defined) with the Company's
revolving  bank  credit  group  expired on  December  24,  1999.  Line of credit
availability  at December 31, 1999 was zero.  The banks were owed $566,279 as of
December  31,  1999.  The  interest  rate on the line of credit was equal to the
agent lender's base rate plus 4.75%.  The loan was repaid in full on January 13,
2000. The Company may seek a replacement for this line of credit.

To augment its working capital during the  forebearance  period Company
obtained a $1,000,000  working  capital loan from Value Partners,  Ltd.  ("Value
Partners"),  a major  stockholder.  The working capital loan bears a 10% rate of
interest,  which is payable quarterly, and requires mandatory prepayments of 25%
of collections of certain  assets.  The  outstanding  balance of the loan is due
March 31,  2000.  As of December  31,  1999,  the Company  owed  $779,772 on the
working  capital  loan.  The  Company  may  seek to  extend  the due date of the
outstanding balance of the loan.

The Company also has  outstanding  $4,954,000 in aggregate  principal  amount of
convertible  subordinated  notes, of which $357,000 is due in September 2000 and
$4,597,000 is due in September 2003. The notes are unsecured and subordinated in
payment  to all  other  senior  debt of the  Company.  The notes due in 2000 are
convertible  into  common  stock of the  Company at $7.50 per share and  require
interest  payments  based on a spread over the prime rate. The notes due in 2003
are  convertible  into common stock of the Company at $6.50 per share and bear a
fixed  interest rate of 10%. In addition,  upon the occurrence of certain change
of control events,  the holders of the notes have the ability to put their notes
back to the  Company.  The  notes  due 2003 have  financial  covenants  that are
similar to but less restrictive than the covenants in the line of credit.  There
are no financial  covenants in the convertible  subordinated  debt due September
30,  2000.  The  Company is  currently  in default on the  interest  payment due
December  31,  1999,  and  on  certain  financial   covenants  relating  to  the
subordinated debt due September 30, 2003.

Unless the Company  replaces  its line of credit or succeeds in  implementing  a
business plan under which it can return to  profitability,  the Company does not
believe that the proceeds of the convertible  subordinated  notes and internally
generated funds will be sufficient to finance the Company's funding requirements
for the near term.

Client Base

         The Company's clients are small- to medium-sized  growth and turnaround
companies with annual revenues typically between $1 million and $10 million. The
Company's  clients have not typically  qualified for traditional  bank financing
because they are either too new, too small,  undercapitalized  (over-leveraged),
unprofitable or otherwise  unable to satisfy the  requirements of a bank lender.
Accordingly,  there is a significant risk of default and client failure inherent
in the Company's business.

                                       4
<PAGE>

The following table  indicates the  composition of the Company's  receivables by
type of client business as of December 31, 1999 and 1998.
<TABLE>
<CAPTION>

                                                                                December 31,
----------------------------------------------------------- ---------------------------- -----------------------------
                                                                       1999                          1998
                                                                       ----                          ----
----------------------------------------------------------- ---------------------------- -----------------------------
<S>                                                           <C>              <C>          <C>             <C>
Business of Client                                            Receivables      Percent      Receivables     Percent
------------------                                            -----------      -------      -----------     -------
-----------------------------------------------------------
                                                              In Thousands                  In Thousands
-----------------------------------------------------------
  Importer and distributor of:
-----------------------------------------------------------
    Jewelry and jewelry boxes                                        $4,847        39.7%           $8,797       20.6%
-----------------------------------------------------------
    Videotapes                                                          610          5.0            1,401         3.3
-----------------------------------------------------------
    Computer components and software (1)                                923          7.5            1,414         3.3
-----------------------------------------------------------
    Plastic bags                                                         --           --           12,452        29.2
-----------------------------------------------------------
  Importer, manufacturer and distributor of
     apparel wear, accessories and other
     durable goods                                                      147          1.3            3,423         8.0
-----------------------------------------------------------
  Life insurance contracts                                            1,890         15.5            2,629         6.2
-----------------------------------------------------------
  Provider of trucking and air freight                                1,590         13.0            2,668         6.3
-----------------------------------------------------------
  Provider of publishing, direct mail and
    advertising                                                       1,333         10.9            3,206         7.5
-----------------------------------------------------------
  Contracts for construction and construction
    Supply                                                              438          3.6            2,228         5.2
-----------------------------------------------------------
  Legal claims receivable                                               221          1.9              371         0.9
-----------------------------------------------------------
  Food industry                                                          61          0.5            1,036         2.4
-----------------------------------------------------------
  Provider of computer training                                          --           --            1,350         3.2
-----------------------------------------------------------
  Provider of engineer and health temps                                  --           --              334         0.8
-----------------------------------------------------------
  Provider of uniform sales & rentals                                    --           --              125         0.3
-----------------------------------------------------------
  Other                                                                 138          1.1            1,215         2.8
                                                                        ---          ---            -----  ----------
-----------------------------------------------------------
         Total                                                      $12,198       100.0%          $42,649      100.0%
                                                                    =======       ======          =======      ======
-----------------------------------------------------------
<FN>

1      Includes a participation of others of $744,435 at December 31, 1999 and
$759,424 at December 31, 1998.
</FN>
</TABLE>


                     [THIS SECTION INTENTIONALLY LEFT BLANK]

                                       5
<PAGE>

<TABLE>
<CAPTION>

The following table  indicates the  composition of the Company's  receivables by
state of client location as of December 31, 1999 and 1998.

                                                            1999                          1998
<S>                                         <C>                   <C>         <C>                <C>
------------------------------------------- --------------------- ----------- ------------------ --------------
Client State                                    Receivables        Percent       Receivables        Percent
------------------------------------------- --------------------- ----------- ------------------ --------------
                                                In Thousands                    In Thousands

------------------------------------------- --------------------- ----------- ------------------ --------------
New York                                                  $5,779       47.4%            $25,963          60.9%
-------------------------------------------
New Jersey                                                 2,396        19.6              5,375           12.6
-------------------------------------------
Virginia                                                   2,111        17.3              3,000            7.0
-------------------------------------------
California (1)                                             1,573        12.9              2,731            6.4
-------------------------------------------
Pennsylvania                                                 147         1.2                707            1.7
-------------------------------------------
Wisconsin                                                    124         1.0                125            0.3
-------------------------------------------
Delaware                                                      68         0.6                404            0.9
-------------------------------------------
Florida                                                       --          --              1,979            4.6
-------------------------------------------
North Carolina                                                --          --                727            1.7
-------------------------------------------
Connecticut                                                   --          --                423            1.0
-------------------------------------------
Minnesota                                                     --          --                330            0.8
-------------------------------------------
District of Columbia                                          --          --                213            0.5
-------------------------------------------
Maryland                                                      --          --                208            0.5
-------------------------------------------
Rhode Island                                                  --          --                204            0.5
-------------------------------------------
New Mexico                                                    --          --                160            0.4
-------------------------------------------
Illinois                                                      --          --                 50            0.1
-------------------------------------------
Georgia                                                       --                             50            0.1

    Total                                                $12,198      100.0%            $42,649         100.0%
                                                         =======      ======            =======         ======
------------------------------------------- --------------------- ----------- ------------------ --------------
<FN>
2      Includes a participation of others of $744,435 at December 31, 1999 and
 $759,424 at December 31, 1998.
</FN>
</TABLE>
The tables above reflect the composition of the Company's  receivables by client
industry  and state of client  location at the dates  indicated.  Tables for the
1998 year include  purchased  invoices of the  Company's  factoring  activities.
Because the  Company's  major  clients tend to change  significantly  over time,
these  tables  are not  likely  to  reflect  the  composition  of the  Company's
receivables by client industry or state of location at future points in time.

From  time to time,  a single  client  or  single  industry  may  account  for a
significant  portion of the Company's  receivables.  For the year ended December
31,  1999,  two  clients  accounted  for more  than 10% of the  Company's  gross
earnings.  The total gross earnings for these two clients accounted for 25.8% of
the  Company's  gross  earnings.  Two of these  clients were written off in full
during 1999 and the third repaid its loans outstanding prior to the end of 1999.
This  compares to the year ended  December  31,  1998,  where two  clients  each

                                       6
<PAGE>

accounted for 36.6% of the  Company's  total earned  discounts and interest.  At
December 31, 1999, two clients each accounted for more than 10% of the Company's
outstanding gross finance receivables,  and those two clients together accounted
for 51.53% of the Company's total finance receivables. At December 31, 1998, two
clients each  accounted  for more than 10% of the  Company's  outstanding  gross
finance  receivables,  and those two clients together accounted for 36.9% of the
Company's total finance receivables.

Historically,  the Company has not  expected to maintain a funding  relationship
with a client for more than two years.  The  Company  expected  that its clients
would qualify for more competitively priced bank or asset-based financing within
that time period, or would be liquidated. Therefore, the Company's major clients
have  tended to  change  significantly  over  time.  Although  the  Company  has
historically been successful in replacing major clients, the loss of one or more
major clients and an inability to replace those clients could have and has had a
material adverse effect on the Company.

Obligor (Account Debtor) Information

The Company sold its factoring  portfolio in October 1999 and does not intend to
re-enter the factoring  business.  The quality of the purchased invoices was the
Company's primary security against credit losses from its factoring  activities.
The  Company  generally  did not  purchase  accounts  receivable  that  had aged
significantly.

As of December 31, 1999 and 1998, the Company's  receivables  included zero ($0)
and $23.7  million of  purchased  invoices on which  approximately  zero (0) and
4,200 entities,  respectively,  were obligated.  If the Company had not received
payment on a Factored account receivable within 90 days after its acquisition or
if at any time prior to 90 days the  Company  determines  that it is unlikely to
receive payment, the Company required the client to repay the amount the Company
advanced on the  receivable  plus the amount of discount  earned.  If,  after 90
days,  follow up calls to account  debtors  led the  Company to believe  that an
invoice is collectable  within a reasonable period of time, the Company may have
allowed the advance to remain  outstanding in return for an additional  discount
from the client.  In that event, the earned discount owed on the original period
of the  advance was  collected  from the client at the end of 90 days and earned
discounts thereafter accrued as if the account receivable were a new purchase.

From time to time, a single account debtor or several  account  debtors may have
been obligated on a significant portion of the Company's gross factored accounts
receivable.  As of December 31, 1999 and 1998, the largest single account debtor
accounted for  approximately  zero (0%) and 2%,  respectively,  of the Company's
gross purchased invoices.

Government Regulation

State  usury laws  generally  limit the amount of interest  that a creditor  may
contract for,  charge or receive in connection with the lending of money. In the
Commonwealth of Virginia (in which the Company's operating offices are located),
there are no  restrictions  on the  rates of  interest  and  fees,  which may be
charged by the Company to commercial borrowers.

                                       7
<PAGE>

Employees

The Company  currently  has three  full-time  employees.  None of the  Company's
employees is a party to any  collective  bargaining  agreement,  and  management
considers its relations with employees to be satisfactory.

Item 2.  Description of Property

The Company's  principal  offices  occupied  approximately  8,000 square feet of
space in an office building in Arlington,  Virginia. The Company's lease on this
property  expires in December  2001.  The cost of renting  this office space was
approximately  $178  thousand  in 1999  compared to $184  thousand in 1998.  The
Company has a right of first refusal to acquire an additional,  contiguous 1,500
square feet at its present site when that space becomes  available.  The Company
has made  arrangements to assign its lease on the Arlington  location to a third
party and has obtained a sublease on  approximately  1,500 square feet of office
space in a commercial building located in McLean, VA. The cost of renting at the
new location  will be  approximately  $30 thousand  during 2000.  The Company is
subleasing  from,  and will share  certain of the  expenses of  occupancy  with,
Harbourton Financial Corp., a financial services firm which is majority owned by
Value Partners,

Commencing  November 1997, the Company also occupied  approximately 2,500 square
feet of space in an office  building in New York City. The costs of renting this
facility were $81 thousand in 1998 and $14 thousand in 1997. The Company elected
to terminate the lease in February  1999 for a one-time fee of $35 thousand.  At
the same time the Company  leased an executive  suite  facility in New York City
for a  term  ending  July  1999.  The  annual  rent  on  the  new  facility  was
approximately $26 thousand. The lease was terminated in July 1999.

Item 3. Legal Proceedings

See Notes to Consolidated Financial Statements-(L)Commitments and Contingencies.



Item 4. Submission of Matters To A Vote Of Security Holders
None.
                                        8
<PAGE>

Part II

Item 5. Market For Common Equity and Related Stockholder Matters

The Company's  common stock is traded on the OTC Bulletin  Board (Symbol  ASFN).
Prior to October 18, 1999,  the Company's  common stock was traded on the Nasdaq
Stock Market.

                                       8
<PAGE>

The following  table sets forth the range of high and low bids for the Company's
common  stock in the over the  counter  market  for the  periods  indicated,  as
furnished by the National  Association  of Securities  Dealers,  Inc. These bids
represent  prices among  dealers,  do not include retail  markups,  markdowns or
commissions, and may not represent actual transactions.
<TABLE>
<CAPTION>
                                   Fiscal Years Ended December 31,
                                             1999                                   1998
<S>                     <C>            <C>            <C>              <C>
----------------------- -------------- -------------- ---------------- -------------------
                            High            Low            High               Low
----------------------- -------------- -------------- ---------------- -------------------
First Quarter               $4.50          $3.50          $9.000             $5.688
-----------------------
Second Quarter              7.09           2.03            8.375             5.438
-----------------------
Third Quarter               2.13           0.47            7.250             3.375
-----------------------
Fourth Quarter              0.56           0.36            4.375             2.625
----------------------- -------------- -------------- ---------------- -------------------
</TABLE>
On March 16, 2000,  there were  approximately 38 stockholders of record based on
information provided by the Company's transfer agent. The number of stockholders
of record does not  reflect the actual  number of  individual  or  institutional
stockholders of the Company because a significant portion of the Company's stock
is held in street  name.  Based on the best  information  made  available to the
Company by the transfer agent, there are approximately 790 beneficial holders of
the Company's common stock.

The  Company  has not  paid a  dividend  and  does not  anticipate  paying  cash
dividends to holders of its common stock for the foreseeable future. The Company
currently  intends to retain any earnings for future  capital  requirements  and
growth.


Item 6. Management's Discussion and Analysis or Plan of Operation

General

The Company is a commercial finance institution that provides financing to small
and middle-market  businesses through Asset-Based  Lending,  advances secured by
accounts receivable, inventory, machinery and equipment, and real estate.

Lifetime Options,  Inc., a Viatical Settlement Company ("Lifetime  Options"),  a
wholly-owned  subsidiary  of the Company,  was engaged in the business of buying
life insurance policies, at a discount, from individuals facing life-threatening
illnesses.  During 1997, Lifetime Options ceased purchasing policies,  and it is
now engaged solely in managing its existing portfolio.

The Company's clients are small- to medium-sized businesses with annual revenues
typically ranging between $1 million and $10 million. The Company's clients have
not typically  qualified for traditional bank or asset-based  financing  because
                                        9
<PAGE>

they are  either  too new,  too  small,  undercapitalized  (or  over-leveraged),
unprofitable or otherwise unable to satisfy the requirements of a bank. They are
frequently  experiencing  periods  of rapid  growth or some  level of  financial
stress.  Thus,  the Company  generally  relies on the quality of obligors of the
client or the  assets  the client  can  pledge as  collateral,  rather  than the
financial condition of the client itself.

Year ended December 31, 1999 vs. year ended December 31, 1998

During 1999, the Company  suffered a high level of credit  losses.  Due to these
losses,  the Company was not in  compliance  with the covenants in its revolving
bank line of credit.  The Company  negotiated  an agreement  with the bank group
which called for the bank group to forebear from exercising its rights to demand
payment (that agreement,  and successor  agreements,  are hereinafter called the
"Forebearance  Agreement(s)")  while the Company  attempted to obtain sufficient
liquidity to repay the bank group.  With no other immediate source of financing,
the Company,  with the concurrence of the bank group, elected to find buyers for
the majority of its performing  assets. On October 29, 1999 the Company sold the
Purchased  Receivables  and the  Advances  Receivable  related to its  factoring
business  to  Metro  Factors,  Inc.  ("Metro"),  for $6  million,  a price  that
approximated  the carrying value of the assets involved.  Simultaneous  with the
sale,  the  Company  purchased  a  participation  in  certain  of  the  Advances
Receivable  associated with the factoring  clients for $1.5 million.  Metro will
act as the  servicer  with  regard to these  participations.  The  Company  will
receive  a  premium  over  time  based  on  the  performance  of  the  Purchased
Receivables  sold to Metro.  The Company did not record any gain or loss on this
transaction. At the time of the sale, the Company took a restructuring charge to
downsize the  operations.  In addition,  in December  1999, the Company sold the
Advances Receivable of one of its ABL relationships.  The proceeds of both asset
sales were applied to the revolving bank line of credit.

In its factoring  product  line,  the Company  purchased  invoices at their face
amount,  and made an advance payment to its client against the collection of the
invoices.  The amount (less  negotiated  discounts)  of the advance  payment was
based upon the size,  age and type of accounts being  purchased,  the quality of
client  documentation  and the Company's  judgment as to the payment history and
creditworthiness of the obligors. The Company generated revenue through purchase
discounts, which were negotiated on a client-by-client basis.

The  Company's  ABL product line  provides  asset-based  loans to the  Company's
clients,  primarily  working capital and equipment loans, at negotiated  spreads
over the prime rate. In its ABL activities,  the Company typically  analyzes the
accounts receivable collateral,  obtains appraisals, based on liquidation value,
of the other  collateral  offered and  extends  credit  based upon a  negotiated
percentage of the appraised  collateral  values.  Under  investment  policies in
place prior to entering into the  Forebearance  Agreement,  the Company targeted
ABL  relationships  in the $1 million to $3 million range. At December 31, 1999,
the Company had performing ABL Advances  Receivables of $3.9 million,  including
the $1.5 million in participations acquired as part of the sale of the factoring
portfolio.  During January of 2000, a second ABL was paid off, with the proceeds
paying the revolving  bank line of credit in full. The Company has one remaining
larger ($1.5  million)  ABL. Due to the reduced  level of liquidity  because the
Company  is  operating  without  a bank line of  credit,  this  client  has been
informed  that its line of credit  will not be  renewed  at its  March 31,  2000
maturity  date. Due to its lack of liquidity and reduced  equity  position,  the
Company  has  revised  its  lending   policies   and  is   targeting   borrowing
relationships  in the $250 thousand range.  The Company will continue to service
its current  accounts,  and plans to reinvest  the  proceeds of  collections  of
performing and nonperforming accounts in such new investments.

                                       10
<PAGE>

At December  31, 1999 and 1998,  the Company had zero ($0) and $832  thousand in
income  taxes  receivable,  and zero ($0) and $4.0  million in  deferred  income
taxes,  respectively.  Income taxes  receivable  represent  the amounts of taxes
refundable  for the years  then  ended.  The  deferred  income  taxes  represent
projected   decreases  in  taxes   payable  in  future  years  as  a  result  of
carryforwards  at the  end of  each  year.  During  1999,  the  Company  took an
allowance  of $4.0  million  against  deferred  income taxes since it had become
unlikely that the Company would realize these tax savings in the near future.

Other assets decreased 93.3%, to $44 thousand from $654 thousand at December 31,
1999 and 1998, respectively.  This decrease was the result of a decrease in land
and buildings held for resale.

The  following  table breaks down total revenue by type of  transaction  for the
periods indicated and the percentage relationship of each type of transaction to
total revenue.
<TABLE>
<CAPTION>
                                                               For the Years Ended December 31,
                                                     1999                               1998
<S>                                  <C>              <C>         <C> <C>                       <C>          <C>
          Type of Revenue            Earned Revenue    Percent             Earned Revenue        Percent
------------------------------------ ---------------- ----------- --- ------------------------- -----------  --
Discount on purchased invoices            $1,555,359        43.0   %                $4,229,332        41.1   %
------------------------------------

------------------------------------
Earnings on advances receivable            1,659,871        45.8                     3,719,873        36.1
------------------------------------

------------------------------------
Earnings on purchased life
  insurance policies                               -           -                        15,000         0.1
------------------------------------

------------------------------------
Fees and other income                        406,106        11.2                     2,337,013        22.7
                                             -------  --    ----                     ---------        ----
------------------------------------

------------------------------------
Total revenue                             $3,621,336       100.0   %               $10,301,218       100.0   %
                                          ==========       =====                   ===========       =====
</TABLE>


Total  revenue  decreased by 65% in 1999 versus 1998, to $3.6 million from $10.3
million. Within total revenue,  discounts on purchased invoices decreased 63% in
1999 as compared to 1998.  The Company sold its  factoring  portfolio in October
1999.

Earnings on advances  receivable  decreased by 55% in 1999 versus 1998. This was
attributable to a significant  reduction in performing  loan balances.  Fees and
other income  decreased  83% in 1999 as compared to 1998,  to $406 thousand from
$2.3 million,  respectively.  The decrease was because of the decrease in volume
and the sale of the factoring portfolio.

                                       11
<PAGE>

The  following  table  sets  forth  certain  items of  expense  for the  periods
indicated and the percentage  relationship of each item to total expenses in the
period.
<TABLE>
<CAPTION>
                                                                For the Years Ended December 31,
                                                                  1999                              1998
<S>                                      <C>               <C>         <C>   <C>              <C>        <C>
---------------------------------------- ----------------- ----------- ----- ---------------- ---------- ---------
            Type of Expense                   Amount        Percent              Amount        Percent
---------------------------------------- ----------------- ----------- ----- ---------------- ---------- ---------
Compensation and fringe benefits               $2,058,877       12.2    %         $3,447,656       17.3      %
----------------------------------------

----------------------------------------
General and administrative                      3,000,755        17.8              4,963,636       24.9
----------------------------------------

----------------------------------------
Interest expense                                1,293,217         7.7              1,903,336        9.6
----------------------------------------

----------------------------------------
Provision for credit losses                    10,177,825        60.3              9,598,503       48.2
----------------------------------------

----------------------------------------
Expenses from discontinued

  Operations                                       79,619         0.5                      -          -
----------------------------------------

----------------------------------------
Restructuring charge                              259,221         1.5
                                                  -------   ---------
                                                                                           -          -
----------------------------------------

----------------------------------------
Total expenses                                 $16,869,514              100.0     $19,913,131      100.0
                                               ===========              =====     ===========      =====

</TABLE>
Compensation and fringe benefits decreased $1.4 million,  or 40%, due to sale of
the  factoring  portfolio  and general  downsizing  of the  business,  offset by
severance paid to several officers, which was not part of the restructuring.

General and administrative  expense,  in total,  decreased $2.0 million, or 40%.
The  amounts  in 1998  included  approximately  $1.0  million  in proxy  related
professional  fees and  expenses.  The  remainder of the decrease was due to the
downsizing of the Company.

Interest  expense  decreased  $610  thousand,  or 32%,  due to  decreases in the
average amount  outstanding  under the Company's bank line of credit,  partially
offset by increases in interest rates under the forbearance agreement.

The provision for credit losses represented the largest category of expense as a
component  of revenue in 1999 and 1998.  In 1999,  the Company  provisioned  for
losses on two large  ABL's in the  amount of  approximately  $9.2  million.  The
Company also provisioned an increase to the valuation allowance on the remaining
life insurance policies by $710 thousand,  and took a provision of $200 thousand
against a client that filed bankruptcy in 1998.

During 1998, the Company had  charge-offs of $9.6 million,  while  recovering or
reclassifying $59 thousand. Of the charge-offs,  approximately $5.3 million were
related to  accounts  placed on  non-performing  status  prior to 1998 and which
continued to  deteriorate in 1998,  including $908 thousand  related to the 1998
disposition  at a loss of real  estate  collateral  securing  an advance and the

                                       12
<PAGE>

deterioration  of  collections  on health  club notes,  $1.3  million due to the
bankruptcy  of a major  obligor  during  1998,  $890  thousand due to a decision
rendered in 1998 adverse to the Company in a lawsuit,  and $857  thousand due to
the failure of a client during 1998. Of the $4.1 million of charge-offs  related
to loans placed on non-accrual  status in 1998, $3.4 million related to a single
client  who filed  for  bankruptcy  in 1998.  Net  charge-offs  for 1998 of $9.5
million and the  provision of $9.6 million  resulted in an allowance  for credit
losses  of $2.8  million,  or  7.93%  of  receivables  (net of  earned  income),
exclusive of life insurance policies,  outstanding as of December 31, 1998. None
of the allowance at December 31, 1998 was allocated to non-performing  accounts,
which  were  carried  at net  realizable  value  of $3.0  million.  The  Company
determines  overall reserve levels based on an analysis which takes into account
a number of factors  including a  determination  of the risk  involved with each
individual  client,  plus additional  considerations  based on concentration and
asset class.

In 1999 the Company  charged-off  $9.2 million,  while recovering $536 thousand.
The recoveries  related  primarily to clients that filed  bankruptcy in 1998. At
December  31,  1999,  the  allowance  for losses,  net of amounts  allocated  to
impaired assets, was $329 thousand.  This represents 8.31% of the performing ABL
portfolio  at December 31,  1999.  As a percentage  of the ABL loans the Company
expects to continue to hold,  the reserve was 46.27% at December 31,  1999.  The
Company  believes  that the  allowance for credit losses is adequate in light of
the risks inherent in the portfolio at year-end 1999.

The Company took a  restructuring  charge during the third quarter of 1999.  The
restructuring  charge  relates  to the sale of the  factoring  portfolio  and is
comprised of employee  severance  pay,  write-down  or write-off of assets,  and
lease  termination  payments.  As of  December  31,  1999,  the  Company has not
expended  and  continues  to accrue $34  thousand  related to lease  termination
payments.  The Company  continues to negotiate with various  lessors of real and
personal  property and expects to conclude these  negotiations by the end of the
second  quarter of 2000.  While the Company  expects the accrual to be adequate,
there can be no assurance  that the accrual will be  sufficient  and the Company
may have to incur further expenses to terminate the leases in question.

Liquidity and Capital Resources

The  Company's  requirement  for  capital  is a  function  of the  level  of its
investment in receivables. The Company funds this investment through its working
capital loan, convertible subordinated notes, and internally generated funds.

The Company was operating under a forbearance agreement negotiated with its bank
lenders. As of December 24, 1999, the forbearance agreement expired. The line of
credit  availability at December 31, 1999 was zero ($0).  Under the forebearance
agreement,  the  interest  rate on the line of  credit  was  equal to the  agent
lender's  base rate plus 2.25%.  After the  expiration of the agreement the rate
charged was the agent lender's base rate plus 4.75%. The loan was repaid in full
in January 2000. The Company may seek replacement financing.
                                        13
<PAGE>


To augment its working capital during the  forebearance  period the Company
obtained a  $1,000,000  working  capital loan from Value  Partners.  The working
capital  loan  bears a 10% rate of  interest,  which is payable  quarterly,  and
repayment terms of 25% of collections of certain assets. The outstanding balance
of the loan is due March 31,  2000.  The Company may seek to extend the due date
of the  outstanding  balance of the loan.  As of December 31, 1999,  the Company
owed $799,772 on the working capital loan.

As of  December  31,  1997,  the  Company  had  convertible  subordinated  notes
(collectively the "Old Notes")  outstanding with an aggregate  principal of $5.0
million.  The Old  Notes  were  issued in  exchange  for  785,475  shares of the
Company's common stock  (currently held by the Company as treasury  stock).  The
Old Notes (i) mature on September 30, 2000, (ii) bear interest at the prime rate
plus  1.25%  per  annum  (9.75%  per  annum at  December  31,  1999),  (iii) are
convertible  into common  stock of the Company at $7.50 per share,  and (iv) are
subordinated  in right of  payment to the  Company's  secured  revolving  credit
facility.

The Old Notes had a provision that upon the  occurrence of certain  "fundamental
changes",  the holders had the right to have these  notes  redeemed at par.  The
election of the new Board of Directors at the May 1998  shareholder  meeting was
deemed to have  constituted  a  fundamental  change  under that  provision.  The
Company:

-  Advised all noteholders of their right to redeem the notes at par;
-  Issued new convertible  subordinated notes to Value Partners to provide the
     Company with a funding  source to repurchase  all notes  tendered under the
     fundamental change provision;

-   Repurchased the tendered notes; and
-   Offered all remaining  noteholders,  that were  accredited  investors,  the
     opportunity  to  exchange  their Old Notes  for  newly  issued  convertible
     subordinated notes.

The old  noteholders  tendered $2.9 million of Old Notes for  repurchase at par.
Additionally,  Old Notes with a par of $1.7 million were  exchanged  for the new
issue of Convertible Subordinated Notes.

During 1998,  convertible  subordinated notes were issued (collectively the "New
Notes") that (i) have a maturity of September 30, 2003,  (ii) bear interest at a
fixed  rate of 10% per  annum,  (iii) are not  redeemable  at the  option of the
Company, (iv) are convertible into the Company's common stock at $6.50 per share
and (v) are subordinated in right of payment to the Company's  secured revolving
credit facility. The New Notes have financial covenants that are similar to, but
less restrictive than, the covenants in the Company's revolving line of credit.

As of December 31, 1999, the Company had convertible subordinated notes (Old and
New  Notes)  outstanding  of $5.0  million.  The  Company  was in default of the
interest payment on the New Notes as of December 31, 1999.

The Company expended $181 thousand and $52 thousand on premises and equipment in
1999 and 1998, respectively, principally in connection with upgrades to computer
equipment,  office furniture and equipment. The Company funded such expenditures
from  internally  generated  funds or borrowings  under the line of credit.  The
Company  does not plan to  continue  to  significantly  enhance  its  management
information systems.

                                       14
<PAGE>

Impact of Inflation

Management  believes  that  inflation  has  not  had a  material  effect  on the
Company's income, expenses or liquidity during the past two years. The Company's
advances  receivable bear interest at a combination of fixed and floating (base)
rates, while the majority of its notes payable are at fixed rates. Therefore, an
environment  of  falling  interest  rates  could  have  adverse  affects  on the
Company's net interest spread.

Item 7.  Financial Statements
See pages 26 to 51.

Item 8.  Changes In And Disagreements With Accountants On Accounting And
Financial Disclosure

On May 18,  1999,  the  Company  dismissed  Deloitte & Touche,  LLP as the
Company's auditors.  The Company did not have any disagreement with the previous
auditor as to any  matters of  accounting  principles  or  practices,  financial
statement  disclosure,  or auditing scope or procedures.  The Form 8-K filed May
24,  1999 is hereby  incorporated  by  reference.  On March 14, 2000 the Company
appointed McGladrey & Pullen, LLP as auditors. The Form 8-K filed March 14, 2000
is hereby incorporated by reference.

Part III

     Item 9.  Directors,  Executive  Officers,  Promoters  and Control  Persons:
Compliance with Section 16(a) of the Exchange Act


Section  16(a) of the  Securities  Exchange  Act of 1934  ("Exchange  Act")
requires the Company's officers and directors, and persons who own more than ten
percent  of its  Common  Stock,  to file  reports of  ownership  and  changes in
ownership  with the  Securities  and  Exchange  Commission  (the  "Commission").
Officers,  directors and greater than ten percent  stockholders  are required by
the  Commission  to furnish the Company  with copies of all Section  16(a) forms
that they file.

Based solely on its review of the copies of such forms  received by it, and
written  representations  from certain reporting  persons,  the Company believes
that all Section 16(a) filing  requirements  applicable to its current officers,
directors, and 10% shareholders were complied with during 1999.


                                        15
<PAGE>




Item 10.  Executive Compensation

Summary Compensation Table

The  following  table  provides  certain  summary  information   concerning
compensation  paid or accrued by the Company for the years  ended  December  31,
1999,  1998 and 1997,  to or on behalf of  individuals  serving as the Company's
Chief Executive  Officer,  the Company's only other executive  officer as of the
end of the last fiscal year, and two additional  individuals for whom disclosure
would  have  been  provided  but for the fact that  each was not  serving  as an
executive officer at the end of the fiscal year.
















                     [THIS SECTION INTENTIONALLY LEFT BLANK]








                                        16
<PAGE>


<TABLE>
<CAPTION>

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

                                                                                   Awards-        All Other
                                                     Annual         Annual       Securities        Compen-
            Name and                                 Salary          Bonus       Underlying        sation(1)
       Principal Position              Year            ($)            ($)          Options           ($)

---------------------------------- ------------- ---------------- ------------ ---------------- ---------------
Charles G. Johnson                     1999              178,222            -           60,000           1,517
Director/CEO                           1998                    -            -                -          18,765(2)

David W. Campbell                      1999               83,032            -                -          12,500(3)
Director, Interim CEO(4),              1998               90,200            -                -           9,964(5)
Chairman of the Board                  1997                    -            -            8,000          22,365(6)

C. Fred Jackson                        1999              178,500            -                -               -
Secretary/Treasurer and CFO,           1998               69,598            -           30,000               -
Senior Credit Officer

Lawrence M. Winkler                    1999               26,315            -                -         115,706(7)
Secretary/Treasurer and                1998              163,550       17,685                -           4,417
CFO                                    1997              163,373       23,572                -           3,580

Wade Hotsenpiller                      1999              112,852            -                -          21,154(8)
Sr. VP and COO,                        1998              138,096       23,750                -           3,631
Sr. VP and Mgr., Factoring             1997              122,831       12,500                -           2,263
</TABLE>

1  Annual  compensation  does not  include  amounts  attributable  to other
miscellaneous  benefits received by the named executive  officers.  The costs to
the Company of  providing  such  benefits  during 1998 did not exceed 10% of the
total  salary and bonus paid to or accrued  for the  benefit of such  individual
executive officer.
2  Represents  consulting  fees paid during the period prior to becoming an
employee.
3 Represents consulting fees of $12,500.
4 Interim CEO from June 29, 1998 to January 21, 1999.
5 Includes directors fees of $8,500.
6 Includes directors fees of $14,500 and consulting fees of $7,865.
7 Represents an amount  payable  pursuant to an  arrangement  in connection
with termination of employment.
8 Represents an amount  payable  pursuant to an  arrangement  in connection
with termination of employment.

                                        17
<PAGE>




Stock Options

Option Grants In Last Fiscal Year
<TABLE>
<CAPTION>
<S>                                <C>                <C>                      <C>             <C>
---------------------------------- ------------------ ------------------------ --------------- ------------------

                                       Number of
                                      Securities         Percent of Total
                                      Underlying        Options Granted to      Exercise or     Expiration Date
              Name                  Options Created     Employees in Fiscal      Base Price
                                                               Year


Charles G. Johnson                      30,000                           50.0           $4.00      1/21/2006

Charles G. Johnson                      30,000                           50.0           $6.50      1/21/2006


</TABLE>
<TABLE>
<CAPTION>
Aggregated Option Exercises In Last Fiscal Year And Fiscal Year End Option Values

None of the named executive officers exercised any stock options during 1999.
<S>                          <C>             <C>          <C>                                  <C>
---------------------------- --------------- ------------ ------------------------------------ -----------------------------------

           Name                  Number of      Value                  Number Of               Value Of Unexercised In-The-Money
                                Underlying    Realized           Securities Underlying             Options At Fiscal Year-End
                                Securities       ($)         Unexercised Options At Fiscal
                              Acquired On                              Year-End
                                Exercise
                                                          ---------------- ------------------- --------------- -------------------

                                                            Exercisable      Unexercisable       Exercisable   Unexercisable
---------------------------- --------------- ------------ ---------------- ------------------- --------------- -------------------
Charles G. Johnson                 --            --           60,000               --              $ 0               $ 0
David W. Campbell                  --            --             --                 --                0                 0
C. Fred Jackson                    --            --           30,000               --                0                 0
Lawrence Winkler                   --            --             --                 --                0                 0
Wade Hotsenpiller                  --            --             --                 --                0                 0
</TABLE>

Compensation of Directors

For the period from January,1999  through June, 1999, directors who are not
officers of or  consultants  to the  Company  received a fee of $2,000 per board
meeting attended in person,  plus  reimbursement  for their expenses  associated
with attending those meetings.  Directors who are not officers of or consultants
to the  Company  also may  receive a fee of $500 per board  meeting  attended by
conference  telephone  call.From  July,1999  through  December,  1999 the  board
eliminated such fees.  Directors do not receive  additional fees to serve on any
committee or as chair of any committee
                                        18
<PAGE>

Directors  who are  officers of or  consultants  to the Company  receive no
compensation  for serving as directors,  but are  reimbursed  for  out-of-pocket
expenses related to attending board or committee meetings.

Mr.   Campbell  was  paid  a  consulting  fee  of  $2,500  per  month  as
non-executive  chairman  for the period  during which he was not employed by the
Company, from July, 1999, through December, 1999.
 .
Employment Agreements and Termination of Employment Agreements


The Company is  currently a party to  employment  agreements  with  Messrs.
Johnson and Jackson. The following sets forth their principal terms.

Mr.  Johnson,  the  Company's  President  and  CEO,  has  entered  into  an
employment  agreement  with the Company dated January 20, 1999. The agreement is
for a term of three years from the initial date. However,  commencing on January
1, 2001,  the term shall be extended  one day at the end of every day during its
length and the new  maturity  date of the term shall be  increased  by that day,
unless  either  party  shall  notify  the  other of its  intention  to stop such
extension,  in which case the new maturity  date shall be one year from the date
of such notice.  Mr.  Johnson's  salary was  established  at $185,000 per annum,
subject to periodic increases by the Board of Directors. Mr. Johnson may receive
an  annual  incentive  bonus  of up to 100% of his  annual  salary  at the  sole
discretion of the Board.  Mr.  Johnson  received a grant of 60,000 stock options
(30,000 with an exercise  price equal to $4.00 per share and 30,000 options with
an exercise  price of $6.50 per share).  All of the options have a maturity date
of seven years from the date of issuance and are  immediately  exercisable.  Mr.
Johnson was provided an automobile allowance of $500 per month, reimbursement of
housing  expenses  up to $15,000,  and  reimbursement  of moving and  short-term
storage  expenses  up to $10,000,  with the  housing  and moving  expenses to be
grossed-up to reflect federal, state and local taxes.

The agreement contains confidentiality and non-compete provisions,
obligates the Company to include Mr. Johnson in any benefit plans generally made
available to employees,  provides  reimbursement of bona fide business and trade
association expenses, and provides for certain death and disability benefits. In
addition,  if  Mr.Johnson's  employment  is terminated by the Company for other
than death,  disability or cause or by Mr. Johnson for Good Reason (as defined),
then Mr. Johnson will receive severance equal to (1)a lump sum payment equal to
his base salary for the greater of one year or the remaining  term,  (2)various
fringe  benefits,   including  his  automobile  allowance,  for  one  year,  and
(3)bonuses  through  and  including  the  year  of  termination,  pro-rated  as
appropriate.  "Good  Reason"  is  defined to  include  certain  adverse  actions
following a business  combination  or Change of Control.  "Change of Control" is
defined to include the  acquisition  of a  controlling  interest in the Company,
including beneficial ownership of 25% or more of the common stock, by any person
or entity other than Value Partners.
                                        19
<PAGE>


Mr.  Jackson's  agreement is dated  September 1, 1998,  provides for a base
salary of  $175,000,  and has a term of one year that is extended one day at the
end of every day during the term,  unless either party shall notify the other of
its  intention  to stop such  extensions,  in which case the closing date of the
term shall be one year from the date of such notice.  Pursuant to the agreement,
Mr. Jackson  received a grant of 30,000 incentive stock options with an exercise
price of $5.00 per share. Said options will expire upon the earlier of ten years
from the date of issuance or termination of employment.  The agreement  contains
confidentiality and non-compete provisions, obligates the Company to provide Mr.
Jackson with an automobile allowance of $500 per month,  requires the Company to
include Mr. Jackson in any benefit plans  generally made available to employees,
and  provides  for  certain  death and  disability  benefits.  In  addition,  if
Mr. Jackson's  employment  is  terminated  either by the  Company for other than
death,  disability or cause or by Mr. Jackson  following certain adverse actions
subsequent to a business combination or Change of Control, then Mr. Jackson will
receive  severance  equal to (1) a lump sum payment equal to his base salary for
one year, and (2) various fringe benefits,  including his bonuses and automobile
allowance,  for one year. The  definition of Change in Control in  Mr. Jackson's
agreement is similar to the definition in Mr. Johnson's agreement.

     Lawrence W.  Winkler,  formerly  Senior Vice  President,  Secretary  and
Treasurer of the Company,  had a contract with the Company that expired on March
31, 1999.  Effective  April 1, 1999, the Company and Mr. Winkler agreed that Mr.
Winkler's employment would be terminated without cause effective immediately and
the Company would pay Mr. Winkler a severance  amount of $115,706 upon execution
of a Separation and Release Agreement.

     Wade  Hotsenpiller,  formerly  Senior Vice  President  and Chief  Operating
Officer of the  Company,  had a contract  with the Company that expired on March
31, 1999.  Effective April 1, 1999, the Company and Mr. Hotsenpiller agreed that
if Mr.  Hotsenpiller's  employment  was terminated for other than cause he would
receive  severance  payments.  Effective  October  8, 1999 the  Company  and Mr.
Hotsenpillar  agreed  that Mr.  Hotsenpiller's  employment  would be  terminated
without cause effective immediately and the Company would pay Mr. Hotsenpiller a
severance  amount of  $21,154  upon  execution  of a  Separation  and Release
Agreement.

Item 11. Security Ownership of Certain Beneficial Owners and Management

     The following  table sets forth, as of March 15, 2000, the amount of common
stock of the Company beneficially owned by: (i) each person known to the Company
to be the  beneficial  owner  of more  than 5% of the  aggregate  shares  of the
Company's  outstanding  common stock,  (ii) each director of the Company,  (iii)
each of the current named executive officers in the Summary  Compensation Table,
and (iv) all executive officers and directors as a group.
                                        20
<PAGE>


<TABLE>
<CAPTION>

<S>-------------------------------------------------- <C>------------------------- <C>-----------------------
                                                            Common Shares
                 Name and Address                        Beneficially Owned           Percent of Class

----------------------------------------------------   --------------------------- --------------------------
Timothy G. Ewing (1, 20
Ewing and Partners
Value Partners, Ltd.
4514 Cole Avenue, Suite 808
Dallas, Texas 75201                                           1,314,060                     44.2%

Walter P. Carucci(3)
Carucci Family Partners
Carr Securities Corp.
One Penn Plaza, Suite 4720
New York, NY 10014                                             220,656                      9.4%

Herzog,Heine,Geduld,Inc.
525 Washington Blvd., 10th Floor
Jersey City, NJ  07002                                         200,571                      8.6%

Tweedy, Browne Company L.L.C.
52 Vanderbilt Avenue
New York, NY  10017                                            165,150                      7.1%

Lindsay B. Trittipoe
4208 West Franklin St.
Richmond, VA  23221                                            135,289                      5.8%

      Directors:
C. Scott Bartlett, Jr.(4)                                       13,495                      0.6%

David W. Campbell                                                9,000                        0

Charles G. Johnson                                              61,000                      2.6%

Steven W. Lefkowitz                                             13,000                      0.6%

Edward A. McNally                                               14,000                      0.6%

William H. Savage (5)                                           50,385                      2.1%

                                                        21
<PAGE>


      Executive Officers who are not Directors:
C. Fred Jackson (6)                                             40,133                      1.7%

For all Executive  Officer and Directors as a Group            335,302                      13.4%
(8 persons)
</TABLE>
                                        21
<PAGE>

1 Ewing & Partners, a Texas general partnership,  is the general partner of
Value Partners. Timothy G. Ewing is the general partner and the Managing Partner
of Ewing & Partners.  In  addition,  Ewing  Asset  Management,  L.L.C.,  a Texas
limited liability company ("EAM"),  holds a 1% general  partnership  interest in
Ewing & Partners.  Mr. Ewing is the Manager and 100% owner of EAM. The principal
place of business  for Ewing & Partners,  EAM,  and Mr. Ewing is the same as for
Value Partners.

     2 Value  Partners owns  $4,197,000 of Allstate's  Convertible  Subordinated
Notes due September 30, 2003 ("New Notes"), which are currently convertible into
645,692  shares of common  stock and are included in the table.  Excluding  such
shares,  Value  Partners  owns  668,368  shares  or  28.8%  of  the  issued  and
outstanding common stock.

     3 Walter P. Carucci is the general  partner of Carucci Family  Partners and
President of Carr  Securities,  Inc. Mr. Carucci  personally owns 80,000 shares,
Carucci Family Partners owns 120,000 shares, and Carr Securites owns 964 shares.
In addition,  Carucci  Family  Partners  owns  $128,000 of New Notes,  which are
convertible into 19, 692 shares of stock, which are included in the table.

     4 Mr.  Bartlett owns $1,000 of New Notes,  which are currently  convertible
into 153 shares of common stock, and are included in the table

     5 Mr.  Savage owns $100,000 of New Notes,  which are currently  convertible
into 15,385 shares of` common stock, and are included in the table.

     6 Mr. Jackson owns $1,000 of the Company's  convertible  subordinated notes
due September 30, 2000,  which are convertible  into 133 shares of common stock,
and are included in the table.


The amounts in the above  tables are based on filings or other  information
furnished  by  the  respective   individuals  or  entities.   Under   applicable
regulations,  shares  are  deemed  to be  beneficially  owned by a person  if he
directly or indirectly has or shares the power to vote or dispose of the shares,
whether or not he has any  economic  interest  in the shares.  Unless  otherwise
indicated, the named beneficial owner has sole voting and dispositive power with
respect to the shares. Under applicable regulations,  a person is deemed to have
beneficial  ownership of any shares of common stock which may be acquired within
60 days of March 15, 2000 pursuant to the exercise of outstanding  stock options
or convertible  notes.  Shares of common stock owned by such person or group are
deemed  to be  outstanding  for the  purpose  of  computing  the  percentage  of
outstanding  common  stock  owned  by such  person  or  group,  but  not  deemed
outstanding for the purpose of computing the percentage of common stock owned by
any other  person or group.  The amounts set forth in the table  include  shares
which may be received upon the exercise of stock options within 60 days of March
15, 2000 as follows:  Mr.  Bartlett,  13,000  shares;  Mr.  Campbell,  none; Mr.
Johnson,  60,000 shares;  Mr.  Lefkowitz,  13,000 shares;  Mr.  McNally,  13,000
shares; Mr. Savage,  13,000 shares;  Mr. Trittipoe,  13,000 shares; Mr. Jackson,
30,000 shares; and all directors and officers as a group, 155,000 shares.
                                        22
<PAGE>


Item 12.  Certain Relationships and Related Transactions

Certain Transactions


In September 1998,  Value Partners  purchased  $2,896,000 of Notes for cash
from the Company in order to fund the Company's  repurchase of a similar  amount
of subordinated  convertible notes due September 30, 2000 ("Old Notes"). The New
Notes have a higher interest rate (10% fixed),  a lower conversion rate into the
common stock  ($6.50 per share  versus  $7.50 per share under the Old Notes),  a
maturity date of September 30, 2003, and more restrictive  financial  covenants.
The Company made an exchange  offer of New Notes to all holders of Old Notes who
were  accredited  investors and who did not have their Old Notes  repurchased by
the Company,  and $1,701,000 of Old Notes  (including  $1,301,000  held by Value
Partners)  were  exchanged  for New Notes.  As the holder of over 50% of the new
Notes,  Value  Partners has the right to name, at any time and from time to time
so long as the Notes are outstanding, (a) one of the directors of the Company so
long as the Board  shall have eight or fewer  members,  including  the  director
named by Value  Partners,  and (b) two  directors  of the  Company  if the Board
exceeds eight members,  including the first director named by Value Partners. To
date,  Value  Partners  has not  exercised  this right.

The Company obtained a $1,000,000 working capital loan from Value Partners.
The  working  capital  loan  bears a 10%  rate of  interest,  which  is  payable
quarterly,  and repayment  terms of 25% of  collections of certain  assets.  The
outstanding  balance of the loan is due March 31, 2000. As of December 31, 1999,
the Company owed $799,772 on the working capital loan.






                    [THIS SECTION INTENTIONALLY LEFT BLANK]











                                        23
<PAGE>


Item 13. Exhibits and Reports on Form 8-K
(a) 1. Financial Statements:                                   Page Number

The following financial statements are submitted:

Independent Auditors' Reports on Consolidated Financial

Statements and Schedule                                         26-27

Consolidated Balance Sheets as of December 31, 1999 and 1998    28

Consolidated Statements of Operations for the years ended
years ended December 31, 1999 and 1998                          29

Consolidated Statements of Shareholders' Equity for
the years ended December 31, 1999 and 1998                      30

Consolidated Statements of Cash Flows for the years
ended December 31, 1999 and 1998                                31-32

Notes to Consolidated Financial Statements                      33-50


2. Financial Statement Schedules

The following financial statement schedule is filed as part of this report:
Schedule IV Indebtedness to Related parties
for the years ended December 31, 1999 and 1998.                 51

Schedules other than those listed above have been omitted since they
are either not required or the information is included elsewhere in the
financial statements or notes thereto.

Exhibit  3.  Articles of Incorporation and By-laws

Documents  incorporated by reference - See  Registration  Statement on Form S-1,
Registration No. 33-46748

                                       24
<PAGE>

Exhibit  4.  Instruments Defining the Rights of Security Holders

Documents  incorporated by reference - See  Registration  Statement on Form
S-1, Registration No. 33-46748

Documents  incorporated  by reference - See the Company's  Annual Report on Form
10-KSB for the Fiscal Year Ended December 31, 1995

Exhibit 10. Material Contracts

Waiver and  Amendment  No. 1 dated as of August 12,  1998 to Amended and
Restated  Revolving  Credit and  Security Agreement of May 12, 1997.

Waiver and  Amendment No. 2 dated as of September  14, 1998 to amended and
Restated  Revolving  Credit and Security Agreement of May 12, 1997.

Loan agreement with Value  Partners,  Ltd. dated August 20, 1999 for $1 million.
Form 8-K filed  September 7, 1999 is hereby incorporated by reference.

Forbearance  agreement  with bank lenders  dated August 1, 1999.  Form 8-K filed
September 7, 1999 is hereby incorporated by reference.

Extension of the Forbearance Agreement dated August 1, 1999. Form 10-QSB for the
period ending September 30, 1999 is hereby incorporated by reference.

Contract for sale of the factoring portfolio dated October 29, 1999. Form 10-QSB
for the period ending September 30, 1999 is hereby incorporated by reference.

Exhibit 10.9 Employment Contracts

Employment  and  Compensation  Agreement  dated January 20, 1999 with Charles G.
Johnson incorporated by reference to the Company's filing on Form 10-QSB for the
quarter ended March 31, 1999.

Employment  and  Compensation  Agreement  dated  September  1, 1998 with C. Fred
Jackson incorporated by reference to the Company's filing on Form 10-QSB for the
quarter ended September 30, 1998.

Exhibit 21.  Subsidiaries of the Company

Exhibit 27.  Financial Data Schedule

                                       25
<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders
Allstate Financial Corporation and subsidiaries
Arlington, Virginia

We  have  audited  the  accompanying  consolidated  balance  sheet  of  Allstate
Financial  Corporation and subsidiaries as of December 31, 1999, and the related
consolidated statements of operations,  shareholders' equity, and cash flows for
the year then  ended.  Our  audit  also  included  the 1999  information  on the
financial statement schedule listed in the Index at Item 13(a)2. These financial
statements  and  financial  statement  schedule  are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an  opinion  on the
financial statements and financial statement schedule based on our audit.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining on a test basis,  evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our  opinion,  the  1999  consolidated  financial  statements  and  financial
statement  schedule referred to above present fairly, in all material  respects,
the financial position of Allstate Financial  Corporation and subsidiaries as of
December 31, 1999, and the results of their  operations and their cash flows for
the  year  ended  December  31,  1999  in  conformity  with  generally  accepted
accounting principles.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note M to the
financial statements,  the Company has suffered recurring losses from operations
and its line of credit  available  for working  capital  expires March 31, 2000.
This raises substantial doubt about the Company's ability to continue as a going
concern.  Management's  plans in regard to these  matters are also  described in
Note M. The  consolidated  financial  statements do not include any  adjustments
that might result from the outcome of this uncertainty.

McGladrey & Pullen, LLP
Raleigh, NC

March 17, 2000



                                       26
<PAGE>




INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Shareholders
Allstate Financial Corporation and subsidiaries
Arlington, Virginia

We  have  audited  the  accompanying  consolidated  balance  sheet  of  Allstate
Financial  Corporation and subsidiaries as of December 31, 1998, and the related
consolidated statements of operations,  shareholders' equity, and cash flows for
the year then ended.  Our audit also included the financial  statement  schedule
for the year ended  December 31, 1998 listed in the Index at Item 13(a) 2. These
financial  statements and financial statement schedule are the responsibility of
the Company's  management.  Our  responsibility  is to express an opinion on the
financial statements and financial statement schedule based on our audits.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards  require that we plan and perform the audit to obtain reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes examining on a test basis,  evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion,  such consolidated  financial  statements present fairly, in all
material respects,  the financial position of Allstate Financial Corporation and
subsidiaries  as of December 31, 1998,  and the results of their  operations and
their cash flows for the year then ended in conformity  with generally  accepted
accounting  principles.  Also, in our opinion, such financial statement schedule
for the year ended December 31, 1998,  when  considered in relation to the basic
consolidated  financial  statements taken as a whole,  presents  fairly,  in all
material respects, the information set forth therein.

Deloitte & Touche,LLP

Washington,D.C.
February 4,1999
(March 30, 1999 as to the obtaining of debt waivers described in Note F)





                                       27
<PAGE>





<TABLE>
<CAPTION>
                                      ALLSTATE FINANCIAL CORPORATION AND SUBSIDIARIES
                                            CONSOLIDATED BALANCE SHEETS

                                                                                                 December 31,

------------------------------------------------------------------------------- ------------------------ --------------------
                                                                                                   1999                  1998
<S>                                                                             <C>                      <C>
------------------------------------------------------------------------------- ------------------------ --------------------
                                          ASSETS

-------------------------------------------------------------------------------
Cash                                                                                          $ 353,962             $2,420,644
                                                                                              ---------             ----------
-------------------------------------------------------------------------------

-------------------------------------------------------------------------------
Purchased receivables                                                                         2,110,454             22,302,284
-------------------------------------------------------------------------------
Advances receivable                                                                           9,329,366             15,652,457
                                                                                              ---------             ----------
-------------------------------------------------------------------------------
                                                                                             11,439,820             37,954,741
-------------------------------------------------------------------------------
Less: Allowance for credit losses                                                           (4,316,399)            (2,799,931)
                                                                                            -----------             ----------
-------------------------------------------------------------------------------
Total receivables - net                                                                       7,123,421             35,154,810
                                                                                              ---------             ----------
-------------------------------------------------------------------------------

-------------------------------------------------------------------------------
Income tax receivable                                                                                 -                831,656
-------------------------------------------------------------------------------
Deferred income taxes                                                                                 -              3,960,946
-------------------------------------------------------------------------------
Furniture, fixtures and equipment, net                                                          151,375                166,400
-------------------------------------------------------------------------------
Other assets                                                                                     43,643                653,957
                                                                                                 ------                -------
-------------------------------------------------------------------------------
TOTAL ASSETS                                                                                 $7,672,401            $43,188,413
                                                                                             ==========            ===========
-------------------------------------------------------------------------------

-------------------------------------------------------------------------------
                           LIABILITIES AND SHAREHOLDERS' EQUITY
-------------------------------------------------------------------------------
Accounts payable and accrued expenses                                                        $1,009,921             $1,081,655
-------------------------------------------------------------------------------
Credit balances of factoring clients                                                                  -              4,559,570
-------------------------------------------------------------------------------
Notes payable                                                                                 1,366,051             15,014,717
-------------------------------------------------------------------------------
Convertible subordinated notes                                                                4,954,000              4,958,000
                                                                                              ---------              ---------
-------------------------------------------------------------------------------
TOTAL LIABILITIES                                                                             7,329,972             25,613,942
                                                                                              ---------             ----------
-------------------------------------------------------------------------------

-------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY:
-------------------------------------------------------------------------------
  Preferred stock, authorized 2,000,000 shares with
-------------------------------------------------------------------------------
    no par value; no shares issued or outstanding                                                     -                      -
-------------------------------------------------------------------------------

-------------------------------------------------------------------------------
  Common stock, authorized 10,000,000 shares with no par
-------------------------------------------------------------------------------
    value; 3,105,828 issued; 2,324,616 outstanding at December
-------------------------------------------------------------------------------
    31, 1999 and 2,324,083 outstanding at December 31, 1998,
-------------------------------------------------------------------------------
    Exclusive of shares held in treasury                                                         40,000                 40,000
-------------------------------------------------------------------------------

-------------------------------------------------------------------------------
  Additional paid-in-capital                                                                 18,874,182             18,874,182
-------------------------------------------------------------------------------

-------------------------------------------------------------------------------
  Treasury stock, 781,212 shares at December 31, 1999
-------------------------------------------------------------------------------
    and 781,745 shares at December 31, 1998                                                 (4,967,472)            (4,986,520)
-------------------------------------------------------------------------------

-------------------------------------------------------------------------------
  (Deficit) Retained earnings                                                              (13,604,281)              3,646,809
                                                                                           ------------              ---------
-------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY                                                                      342,429             17,574,471
                                                                                                -------             ----------
-------------------------------------------------------------------------------
                                                                                            $ 7,672,401            $43,188,413
                                                                                            ===========            ===========
------------------------------------------------------------------------------- ------------------------ --------------------

                 See Notes to Consolidated Financial Statements
</TABLE>



                                       28
<PAGE>




<TABLE>
<CAPTION>

                                      ALLSTATE FINANCIAL CORPORATION AND SUBSIDIARIES
                                           CONSOLIDATED STATEMENTS OF OPERATIONS
                                           For the Years Ended December 31, 1999
-------------------------------------------------------------------------------- ------------------------ --------------------
                                                                                                 1999                  1998

<S>                                                                              <C>                      <C>
-------------------------------------------------------------------------------- ------------------------ --------------------
REVENUE

--------------------------------------------------------------------------------
  Earned discounts and interest                                                                $ 3,215,230            $7,964,205
--------------------------------------------------------------------------------
  Fees and other revenue                                                                           340,536             2,337,013
--------------------------------------------------------------------------------
  Revenue from discontinued operations                                                              65,570                     -
                                                                                                    ------            ----------
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
    TOTAL REVENUE                                                                                3,621,336            10,301,218
                                                                                                 ---------            ----------
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
EXPENSES

--------------------------------------------------------------------------------
  Compensation and fringe benefits                                                               2,058,877             3,447,656
--------------------------------------------------------------------------------
  General and administrative                                                                     3,000,755             4,963,636
--------------------------------------------------------------------------------
  Interest expense                                                                               1,293,217             1,903,336
--------------------------------------------------------------------------------
  Provision for credit losses                                                                   10,177,825             9,598,503
--------------------------------------------------------------------------------
  Expenses from discontinued operations                                                             79,619                     -
--------------------------------------------------------------------------------
  Restructuring Charge                                                                             259,221                     -
                                                                                                   -------              ---------
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
    TOTAL EXPENSES                                                                              16,869,514            19,913,131
                                                                                                ----------            ----------
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
LOSS BEFORE INCOME TAX EXPENSE                                                                (13,248,178)           (9,611,913)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
INCOME TAX EXPENSE (BENEFIT)                                                                     4,002,912           (3,556,400)
                                                                                                 ---------           -----------
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
NET LOSS                                                                                     $(17,251,090)          $(6,055,513)
                                                                                             =============          ============
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
NET LOSS PER COMMON SHARE
--------------------------------------------------------------------------------
  Basic and  Diluted                                                                            $   (7.42)             $  (2.61)
                                                                                                ==========             =========
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
WEIGHTED AVERAGE NUMBER OF SHARES
    OUTSTANDING

--------------------------------------------------------------------------------
  Basic and  Diluted                                                                             2,324,616             2,322,222
                                                                                                 =========             =========
---------------------------------------------------------------------------------- ------------------------ --------------------
</TABLE>
                 See Notes to Consolidated Financial Statements




                                       29
<PAGE>





<TABLE>
<CAPTION>

                 ALLSTATE FINANCIAL CORPORATION AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

                     YEARS ENDED DECEMBER 31, 1998 AND 1997

------------------------------- --------------- -------------------- -------------------- ------------------- -------------------
                                   Additional

                                    Common            Paid in             Treasury             Retained
                                    Stock            Capital               Stock              Earnings              Total
<S>                             <C>             <C>                  <C>                  <C>                 <C>
------------------------------- --------------- -------------------- -------------------- ------------------- -------------------
Balance - January 1, 1998              $40,000          $18,852,312         $(5,030,594)          $9,702,322         $23,564,040
-------------------------------
Amortization of Treasury                                                          28,084                                  28,084
Stock Costs
-------------------------------
Conversion of Convertible                                                         15,990                                  15,990
Subordinated Notes to 2,132
shares of common stock
-------------------------------
3,500 Options exercised                                      21,870                                                       21,870
-------------------------------
Net Loss                                     -                                                   (6,055,513)         (6,055,513)
                                  ------------  -------------------- --------------------       -----------         -----------
                                                                  -                    -
-------------------------------

-------------------------------
Balance - December 31, 1998             40,000           18,874,182          (4,986,520)           3,646,809          17,574,471
-------------------------------
Amortization of Treasury                                                          15,050                                  15,050
Stock Costs
-------------------------------
Conversion of Convertible                                                          3,998                                   3,998
Subordinated Notes to 533
shares of common stock
-------------------------------
Net Loss                                     -                    -                             (17,251,090)        (17,251,090)
                                   -----------  -------------------  -------------------        ------------        ------------

-------------------------------
Balance - December 31, 1999            $40,000          $18,874,182         $(4,967,472)       $(13,604,281)           $ 342,429
                                       =======          ===========         ============       =============           =========

                 See notes to Consolidated Financial Statements
</TABLE>


                                       30
<PAGE>


<TABLE>
<CAPTION>
                 ALLSTATE FINANCIAL CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                        For the Years Ended December 31,

----------------------------------------------------------------------------------------------------------------------------
                                                                                          1999                 1998
----------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------
<S>                                                                                    <C>                   <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
      Net Loss                                                                           $(17,251,090)         $(6,055,513)
      Adjustments to reconcile net loss
           to cash provided (used) by operating activities:
           Depreciation - net                                                                   69,759              112,334
           Impairment of software                                                                    -              218,202
           Loss on disposition of furniture, equipment, and
               Automobiles                                                                     113,895               49,487
           Provision for credit losses                                                      10,177,825            9,598,503
           Changes in operating assets and liabilities:
               Other assets                                                                    610,314            1,748,150
               Accounts payable and accrued expenses                                          (71,734)              661,299
               Income taxes receivable                                                         831,656                    -
               Deferred income taxes                                                         3,960,946          (3,976,142)
                                                                                             ---------          -----------
NET CASH (USED) PROVIDED BY OPERATING ACTIVITIES                                           (1,558,429)            2,356,320
                                                                                           -----------            ---------

CASH FLOWS FROM INVESTING ACTIVITIES:
      Purchase of receivables and advances                                               (117,988,306)        (202,674,562)
      Collection and sale of receivables, including life insurance
           contracts, and advances                                                         135,841,870          197,126,096
      (Decrease)/Increase in credit balances of factoring clients                          (4,559,570)              834,314
      Sale of furniture, fixtures, and equipment                                                12,765                    -
      Purchase of furniture, fixtures and equipment                                          (181,394)             (52,183)
                                                                                             ---------             --------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES                                            13,125,365          (4,766,335)
                                                                                            ----------          -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
      Proceeds from line of credit                                                          82,768,908          100,417,016
      Proceeds from subordinated debt                                                                -            4,597,000
      Proceeds from working capital loan                                                     1,000,000                    -
      Principal payments on line of credit                                                (97,217,346)         (99,820,361)
      Principal payments on subordinated debt                                                  (4,000)          (4,613,000)
      Principal payments on working capital loan                                             (200,228)                    -
      Treasury stock acquisition costs                                                          19,048               28,084
      Options exercised                                                                                              21,870
                                                                                             ---------               ------

NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES                                          (13,633,618)              630,609
                                                                                          ------------              -------

NET DECREASE IN CASH                                                                       (2,066,682)          (1,779,406)

CASH, Beginning of period                                                                    2,420,644            4,200,050
                                                                                             ---------            ---------
                                                                                                                (Continued)
</TABLE>


                                       31
<PAGE>


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

CASH, End of period                                                                          $ 353,962          $ 2,420,644
                                                                                             =========          ===========

      Interest paid                                                                         $1,295,214          $ 1,802,979
                                                                                            ==========          ===========
      Income taxes paid                                                                       $ 32,466            $ 419,742
                                                                                              ========            =========

SUPPLEMENTAL SCHEDULE OF NONCASH ACTIVITIES
      Conversion of Factoring Clients to ABL Loans                                          $9,309,511               $    -
                                                                                            ==========               ======
      Issuance of common stock in exchange
           for convertible subordinated notes                                                 $  3,998             $ 15,990
                                                                                                                (Concluded)

</TABLE>

                See Notes to Consolidated Financial Statements


                     [THIS SECTION INTENTIONALLY LEFT BLANK]


                                       32
<PAGE>



                ALLSTATE FINANCIAL CORPORATION AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

A.       SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting and reporting policies of Allstate Financial  Corporation and its
subsidiaries  (collectively,   the  "Company")  conform  to  generally  accepted
accounting  principles and the general  practices within the financial  services
industry.  Those policies that materially  affect the determination of financial
position,  results  of  operations,  and cash  flows are  summarized  below.  In
preparing its financial statements, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities as of the
dates shown in the  consolidated  balance  sheets and the  statements of income.
Actual results could differ  significantly  from those estimates.  In the normal
course of business,  the Company  encounters  economic  risks.  Economic risk is
comprised of interest  rate risk,  credit risk,  and market risk.  Interest rate
risk is the risk that unfavorable  discrepancies will occur between the rates of
interest earned by the Company on its receivables portfolio and its own costs of
borrowing  funds  in the  market.  Credit  risk is the  risk of  default  on the
Company's  purchased  receivable  and advance  portfolio  that  results from the
borrowers'  inability or unwillingness to make contractually  required payments.
Market risk  reflects  changes in the value of collateral  underlying  purchased
receivable and advance receivables and the valuation of the Company's owned real
estate.

The  determination of the allowance for credit losses is based on estimates that
are  susceptible to significant  changes in the economic  environment and market
conditions. Management believes that, as of December 31, 1999, the allowance for
credit  losses is  adequate  based on the  information  currently  available.  A
worsening in the state of the general economy or a protracted  economic  decline
could increase the likelihood of losses due to credit and market risks and could
create the need for substantial additions to the allowance for credit losses.

Consolidation

The consolidated  financial  statements  include the accounts of the Company and
its wholly owned  subsidiaries  after elimination of all material  inter-company
transactions.  During 1999 due to the Company shedding  significant  assets, the
Lifetime Options Inc. A Viatical  Settlement  Company subsidiary now comprises a
significant portion of total assets.

Purchased and Advance Receivables and Allowance for Credit Losses

Purchased  receivables consist of invoices and insurance claims, which have been
purchased with or without recourse to the seller,  and life insurance  policies.
Invoices are stated at the face amount  outstanding,  net of unearned  discounts
and  participations.  Insurance  claims are  stated at the agreed  amount of the
settlement assigned to the Company,  net of unearned  discounts.  Life insurance
policies  are stated at the purchase  price paid for the  policies  plus accrued
earnings,  net of an allowance based on management's  estimate of the discounted
present value of the expected cash flows from the contracts. Because most of the
purchased life insurance  policies are  underwritten  by highly rated  insurance
companies  (and,  in many cases,  backed by state  guaranty  funds),  management
believes that credit risk is not material.

                                       33
<PAGE>

Advances  Receivable  are  interest-bearing  loans  collateralized  by  clients'
pledged  assets  and  general  liens and are stated at the  aggregate  principal
amount outstanding plus accrued earnings.

The allowance for credit losses  represents the provision charged to operations,
less  purchased   receivables  or  advances  receivables  charged  off,  net  of
recoveries.  The  allowance  for credit losses is maintained at a level that, in
management's judgment, is sufficient to absorb losses inherent in the receivable
portfolio. The allowance for credit losses is based upon management's review and
evaluation of the receivable portfolio.  Factors considered in the establishment
of the allowance for credit losses include  management's  evaluation of specific
receivables, the adequacy of underlying collateral,  historical loss experience,
expectations  of  future  economic  conditions  and their  impact on  particular
industries  and  individual  clients,  and  other  discretionary   factors.  The
allowance  for credit losses is based on estimates of potential  future  losses,
and ultimate  losses may vary from the current  estimates.  These  estimates are
typically reviewed quarterly and as adjustments become necessary, the effects of
the change in estimates  are charged  against the allowance for credit losses in
the period in which they become known.  When any receivable  becomes doubtful as
to  collection  of  discount  or  interest  income,  the  account  is  placed on
non-performing status and, in accordance with The Financial Accounting Standards
Board ("FASB")  Statement of Financial  Accounting  Standards  ("SFAS") No. 114,
Accounting  by Creditors  for  Impairment of a Loan, as amended by SFAS No. 118,
Accounting  by  Creditors  for  Impairment  of a Loan - Income  Recognition  and
Disclosure,  is considered by  management  to be  "impaired".  When a receivable
becomes  non-performing  the Company  discontinues  the accrual of earnings  for
financial statement purposes. If the Company determines that it is not likely to
recover,  from any source,  the amount of its initial advance and the earned but
unpaid discount or interest  thereon,  then the Company  increases the allowance
for  credit  losses  or  reduces  the  carrying  value  of  the  non-performing,
receivable to its  estimated  fair value and makes a charge to its allowance for
credit  losses  in an  amount  equal to the  difference  between  the  Company's
investment in the non-performing receivable and its estimated fair value.

Purchased  and advance  receivables  are fully charged off against the allowance
when the Company has exhausted its efforts  against the client's  customer,  the
client,  guarantors,  other third parties and any additional collateral retained
by the Company.

Furniture, Fixtures and Equipment

Furniture, fixtures and equipment are recorded at cost. Depreciation is computed
using straight line and accelerated  methods over the estimated  useful lives of
the related assets.

Other Assets

At the date of  acquisition,  other  assets  are  recorded  at fair  value  less
estimated  selling  costs.  Write-downs,  if any,  to fair  value at the date of
acquisition are charged  against the allowance for credit losses.  Subsequent to
acquisition,  the  asset is  adjusted  to the lower of cost or fair  value  less
estimated  costs  to sell and  adjustments,  if any,  are  charged  against  the
allowance for credit losses.  Operating expenses  pertaining to other assets are
expensed in operations in the period in which they are incurred. Gains or losses

                                      34
<PAGE>

on the  disposition  of other assets are first  reflected in the  allowance  for
credit losses. Any gain which exceeds the amount, if any, previously written-off
is reflected in current income.

The amounts  ultimately  recovered by the Company from other assets could differ
materially  from the amounts used in arriving at the net  carrying  value of the
assets  because  of  future  market   factors  beyond  the  Company's   control,
adversarial  actions  taken by the  client  or other  owners  of the  foreclosed
property or changes in the Company's strategy for recovering its investment.

Fair Value of Financial Instruments

In accordance with the requirements of SFAS No. 107, Disclosure About Fair Value
of  Financial   Instruments,   which  requires  the  disclosure  of  fair  value
information about financial  instruments when it is practicable to estimate that
fair value and excessive costs would not be incurred,  the following methods and
assumptions were used in estimating the fair value of financial instruments:

     Cash  and  Cash  Equivalents--The   carrying  amounts  for  cash  and  cash
equivalents approximate fair value.

     Purchased,  advance  receivables  and  commitments - The carrying amount of
     receivables  approximate  fair value because of the short maturity of these
     instruments.

     Notes payable,  consisting of adjustable and fixed rate notes, are recorded
     at book values, which approximate the respective fair values.

     Convertible  subordinated  notes  payable are  primarily  fixed  rate.  The
     carrying amount of these notes approximates fair value because the interest
     rate,  conversion  price,  and period to  maturity  have not  significantly
     changed since the dates that the notes were issued.

Unearned and Earned Discounts on Purchased Receivables

At the time of purchase,  the unearned discount is deducted from the face amount
of the  invoice  and is  recorded  as a  reduction  to  such  invoice.  Unearned
discounts are recognized as income in accordance  with the  respective  terms of
the  agreements  between  the  Company  and  each of its  clients.  The  Company
recognizes  discounts  on the  first day of each time  interval.  The  Company's
method of  recognizing  earned  discounts  does not differ  materially  from the
interest method. At the time an invoice is purchased, a due date is set based on
the  client's  sales  terms.  This  due  date  is  used  to  identify  past  due
receivables.  The  accrual of earned  discounts  is  discontinued  when,  in the
opinion of management,  the collection of additional  earnings from the client's
customer,  the client,  guarantors  or  collateral  held,  if any, is  unlikely.
Invoices which have been  identified as past due may continue to accrue earnings
if, in the opinion of management, collection of the earnings from one or more of
the above sources is likely.

When invoices are placed on non-performing  status, earned discounts theretofore
accrued in the current year are charged  against  current year's earnings if, in

                                       35
<PAGE>

the opinion of management,  the collection of such earnings is unlikely.  Earned
discounts  accrued in prior years are charged to the allowance for credit losses
if, the opinion of management, the collection of such earnings is unlikely.

Interest and Discounts Earned on Advances Receivable

Interest  and  discounts  earned on  advances  receivable  accrue on the average
monthly  or  semi-monthly  outstanding  amount  or on the daily  balance  of the
advance.  Accrued  earnings  are  typically  required to be paid in full no less
frequently than monthly in arrears.

Fees and Other Income

Fee income includes  application  fees,  letter of credit and guaranty fees, and
commitment or facility fees received from clients.  Commitment and facility fees
are deferred and  recognized  over the term of the  commitment  or facility on a
straight-line  basis.  Application  fees are paid by clients  to the  Company to
cover the cost of performing credit  investigations  and field  examinations and
are recognized when received. Letter of credit and guaranty fees are usually for
a sixty- to ninety-day  period and are  recognized  when the letter of credit or
letter of guaranty is issued.

Other income includes  supplemental  discounts (i.e.,  early termination  fees),
interest income and miscellaneous income.


Revenue from discontinued operations

Revenue from discontinued  operations includes amounts received and accrued from
the  purchaser of the  Company's  previous  factoring  clients.  The amounts are
calculated by the purchaser as a percentage of net interest  income and remitted
monthly in arrears.

Income Taxes

Deferred taxes are provided on a liability  method  whereby  deferred tax assets
are recognized for deductible  temporary  differences and operating loss and tax
credit  carryforwards  and deferred tax  liabilities  are recognized for taxable
temporary  differences.  Temporary  differences are the differences  between the
reported  amounts of assets and  liablities  and their tax bases.  Deferred  tax
assets are reduced by a valuation  allowance when, in the opinion of management,
it is more likely than not that some  portion or all of the  deferred tax assets
will not be realized.  Deferred tax assets and  liabilities are adjusted for the
effects of changes in tax laws and rates on the date of enactment.

                     [THIS SECTION INTENTIONALLY LEFT BLANK]

                                       36
<PAGE>

<TABLE>
<CAPTION>

B.       RECEIVABLES

Receivables consist of the following at December 31:
<S>                                            <C>                     <C>
---------------------------------------------- ----------------------- ------------------------
                                                        1999                    1998
---------------------------------------------- ----------------------- ------------------------
Invoices and insurance claims                               $ 234,445              $23,731,826
----------------------------------------------
  Less: Unearned discount                                    (13,953)              (3,299,175)
----------------------------------------------
  Less: Participations                                              -                (759,424)
----------------------------------------------
Life Insurance policies                                     1,889,962                2,629,057
                                                            ---------                ---------
----------------------------------------------

----------------------------------------------
Total Purchased receivables - net                          $2,110,454              $22,302,284
                                                           ==========              ===========
----------------------------------------------

----------------------------------------------
Advances receivable                                       $10,073,989              $16,288,673
----------------------------------------------
  Less: Unearned discount                                           -                (636,216)
----------------------------------------------
  Less: Participations                                      (744,623)                        -
                                                            ---------           --------------
----------------------------------------------

----------------------------------------------
Total Advances receivable - net                            $9,329,366              $15,652,457
                                                           ==========              ===========
----------------------------------------------

</TABLE>

Invoices  purchased  usually become due within a maximum of 90 days.  After this
time, the Company generally  requires the client to repay the amount advanced on
the receivable  plus the earned  discount under the full recourse  provisions of
its  agreements.  If at any time the Company  determines  that it is unlikely to
receive payment on a purchased invoice, the Company retains the right to require
its clients to repay the amount the Company has advanced on the receivable  plus
the amount of discount earned.

Advances  receivable  may be  made  on a  revolving  basis  or  require  monthly
amortization.  Revolving  advances  receivable  secured by current  assets (e.g.
accounts  receivable  or inventory)  are subject to a daily or weekly  borrowing
base  formula and come due in a single,  lump sum payment at the maturity of the
agreement between the Company and its client.

Changes in the allowance for credit losses were as follows:
<TABLE>
<CAPTION>
<S>                                                            <C>
-------------------------------------------------------------- ---------------------------

-------------------------------------------------------------- ---------------------------
BALANCE, January 1, 1998                                                        2,738,931
--------------------------------------------------------------
Provision for credit losses                                                     9,598,503
--------------------------------------------------------------
Receivables charged off                                                       (9,596,124)
--------------------------------------------------------------
Recoveries                                                                         58,621
                                                                                   ------
--------------------------------------------------------------

--------------------------------------------------------------
BALANCE, December 31, 1998                                                      2,799,931
--------------------------------------------------------------
Provision for credit losses                                                    10,177,825
--------------------------------------------------------------
Receivables charged off                                                       (9,197,053)
--------------------------------------------------------------
Recoveries                                                                        535,696
                                                                                  -------
--------------------------------------------------------------

--------------------------------------------------------------
BALANCE, December 31, 1999                                                     $4,316,399
                                                                               ==========
</TABLE>

                                       37
<PAGE>


Impaired  loans  recognized  in  conformity  with SFAS No.  114,  Accounting  by
Creditors for  Impairment of a Loan,  which  requires the Company to measure the
value of each impaired  loan based on the present  value of its expected  future
cash flows discounted at the loan's  effective  interest rate or, as a practical
expedient,  the  loan's  observable  market  price  or  the  fair  value  of the
collateral  if the loan is  collateral  dependent;  as amended by SFAS No.  118,
Accounting  by  Creditors  for  Impairment  of a Loan - Income  Recognition  and
Disclosures,  which allows the Company to use existing  methods for  recognizing
interest income on impaired loans, are as follows:
<TABLE>
<CAPTION>
                                                                                  December 31,
<S>                                                                <C>                <C>
------------------------------------------------------------------ ------------------ ------------------
                                                                          1999               1998
------------------------------------------------------------------ ------------------ ------------------
Total recorded investment in impaired loans                               $5,354,476         $2,633,856
------------------------------------------------------------------

------------------------------------------------------------------
Amount of recorded  investment in impaired  loans for which there
is no related allowance                                                     $367,455         $2,633,856
------------------------------------------------------------------

------------------------------------------------------------------
Amount of recorded  investment in impaired  loans for which there
is a related allowance                                                    $4,987,021                  -
------------------------------------------------------------------

------------------------------------------------------------------
Related allowance for impaired loans                                      $3,987,021                  -
------------------------------------------------------------------ ------------------ ------------------
</TABLE>
The  average  recorded  investment  in impaired  loans  during 1999 and 1998 was
$7,809,301 and $2,065,105, respectively.

See  note  J-Financial  obligations  with  off-balance  sheet  risk  and  credit
concentrations.
<TABLE>
<CAPTION>


C. FURNITURE, FIXTURES AND EQUIPMENT

The Company's investment in furniture, fixtures, and equipment consists of the following:


                                                                                         December 31,
<S>                                                          <C>                  <C>
------------------------------------------------------------ -------------------- ----------------------
                                                                    1999                  1998
------------------------------------------------------------ -------------------- ----------------------

------------------------------------------------------------
Furniture, fixtures and equipment                                       $447,800              $ 634,296
------------------------------------------------------------
Automobiles                                                                    -                 21,290
------------------------------------------------------------
Less:  Accumulated depreciation                                        (296,425)              (489,186)
                                                             -         ---------              ---------
------------------------------------------------------------
                                                                        $151,375              $ 166,400
                                                                        ========              =========
</TABLE>
Furniture,  fixtures and  equipment is pledged as  collateral  under a revolving
line of credit (see Note F).

                     [THIS SECTION INTENTIONALLY LEFT BLANK]

                                       38
<PAGE>

<TABLE>
<CAPTION>
D. OTHER ASSETS

     Other assets consist of:
                                                                           December 31,
------------------------------------------------- ------------------------------ ---------------------------
                                                              1999                          1998
<S>                                               <C>                            <C>
------------------------------------------------- ------------------------------ ---------------------------
Land held for sale                                                        $   -                    $375,000
-------------------------------------------------
Condominium held for sale                                                     -                     172,575
-------------------------------------------------
Employee advance                                                              -                       6,000
-------------------------------------------------
Prepaid expenses                                                              -                      42,602
-------------------------------------------------
Miscellaneous receivables                                                43,643                      57,780
                                                                         ------                      ------
-------------------------------------------------
                                                                        $43,643                    $653,957
                                                                        =======                    ========
------------------------------------------------- ------------------------------ ---------------------------
</TABLE>
E. CREDIT BALANCES DUE CLIENTS

At December 31, 1999 and 1998,  credit balances of factoring  clients  consisted
of: (i) a holdback reserve of zero ($0) and $3,139,873,  respectively,  which is
payable to clients upon the collection of receivables, (ii) a factors reserve of
zero ($0) and $7,250 in 1999 and 1998 (which represents amounts due to factoring
clients  subject to contractual  limitation)  and (iii) cash  collateral of zero
($0) and $1,412,447, respectively.
<TABLE>
<CAPTION>
F. NOTES PAYABLE AND CONVERTIBLE SUBORDINATED NOTES

Notes payable consist of:                                                        December 31,
-------------------------------------------------------------------- ----------------- --------------------
                                                                           1999               1998
<S>                                                                  <C>               <C>
-------------------------------------------------------------------- ----------------- --------------------
Notes payable; due on demand;
 interest payable at1/4% over prime;
 unsecured                                                                     $    -            $  14,717
--------------------------------------------------------------------
Revolving line of credit; due immediately, interest at prime plus
 4.75% and .5%,in 1999 and 1998, respectively
                                                                              566,279           15,000,000
--------------------------------------------------------------------
Note payable, due March 31, 2000, interest at 10%, unsecured
                                                                              799,772

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

--------------------------------------------------------------------
  Total notes payable                                                      $1,366,051          $15,014,717
                                                                           ==========          ===========
--------------------------------------------------------------------

--------------------------------------------------------------------
Convertible Subordinated Notes; due September 30,
  2000; interest payable at 1.25% over prime;
  unsecured                                                                  $357,000             $361,000
--------------------------------------------------------------------

--------------------------------------------------------------------
Convertible Subordinated Notes; due September 30,
  2003; interest payable at 10% fixed; unsecured                            4,597,000            4,597,000
                                                                            ---------            ---------
--------------------------------------------------------------------
  Total convertible subordinated notes                                     $4,954,000           $4,958,000
                                                                           ==========           ==========
</TABLE>

                                       39
<PAGE>

At December 31, 1999 and 1998, the prime rate was 8.50% and 7.75%, respectively.

Aggregate  annual  principal  payments  on  notes  payable  for the  five  years
subsequent to December 31, 1999, are as follows:
<TABLE>
<CAPTION>
<S>                                                                  <C>
-------------------------------------------------------------------- --------------------------------------
                     Years Ending December 31,                                      Amount

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

--------------------------------------------------------------------
     2000                                                                                      $ 1,723,051
--------------------------------------------------------------------
     2001                                                                                                -
--------------------------------------------------------------------
     2002                                                                                                -
--------------------------------------------------------------------
     2003                                                                                        4,597,000
--------------------------------------------------------------------
     2004                                                                                                -
                                                                                                         -
--------------------------------------------------------------------
    Total                                                                                       $6,320,051
                                                                                                ==========
-------------------------------------------------------------------- --------------------------------------
</TABLE>
As  of  December  31,  1998,  the  Company  had  $1,217,407  available  under  a
$25,000,000  million secured revolving line of credit from a group of banks. The
revolving line of credit contained  various sub facilities that limited its use.
The entire  facility  could be used for  borrowing  to finance  the  purchase of
invoices or advances secured by accounts receivable.  However, the Company could
(i) borrow only $5,000,000  collateralized  by advances secured by machinery and
equipment,  (ii) borrow only $2,500,000  collateralized  by advances  secured by
inventory,  and  (iii)  issue  only  up to  $5,000,000  of  Letters  of  Credit.
Borrowings  under the credit  facility bore interest at a spread over the bank's
base rate or a spread over LIBOR,  at the  Company's  election.  The Company was
subject to covenants  that are typical in revolving  credit  facilities  of this
type. At December 31, 1998, the Company was in default of the  covenants,  which
related  to  interest  coverage  and the  maximum  amount of funds  which may be
advanced to any one  client.  Waivers of the  defaults  were  received  from the
members of the bank group.

As of December 31, 1999, the Company was operating under a forbearance agreement
negotiated  with its bank  lenders.  As of December  24, 1999,  the  forbearance
agreement  expired.  The line of credit  availability  at December  31, 1999 was
zero.  The interest  rate on the line of credit was equal to the agent  lender's
base rate plus 4.75%.  The loan was repaid in full in January 2000.  The Company
may seek replacement financing.

To augment  its  working  capital  during the  forebearance  period the  Company
obtained a  $1,000,000  working  capital loan from Value  Partners.  The working
capital  loan  bears a 10% rate of  interest,  which is payable  quarterly,  and
repayment terms of 25% of collections of certain assets. The outstanding balance
of the loan is due March 31,  2000.  The Company may seek to extend the due date
of the  outstanding  balance of the loan.  As of December 31, 1999,  the Company
owed $799,772 on the working capital loan.

As of  December  31,  1997,  the  Company  had  convertible  subordinated  notes
(collectively  the "Old  Notes")  outstanding  with an  aggregate  principal  of
$4,974,000.  The Old Notes were  issued in exchange  for  785,475  shares of the
Company's common stock  (currently held by the Company as treasury  stock).  The
Old Notes (i) mature on September 30, 2000, (ii) bear interest at the prime rate
plus 1.25% per annum,  (iii) are convertible into common stock of the Company at
$7.50 per share,  and (iv) are subordinated in right of payment to the Company's
secured revolving credit facility.

                                       40
<PAGE>

The Old Notes had a provision that upon the  occurrence of certain  "fundamental
changes",  the holders had the right to have these  notes  redeemed at par.  The
election of the new Board of Directors at the May 1998  shareholder  meeting was
deemed to have  constituted  a  fundamental  change  under that  provision.  The
Company:

- Advised all noteholders of their right to redeem the notes at par.

- Issued new convertible  subordinated notes to Value Partners to provide the
  Company with a funding  source to repurchase  all notes  tendered under the
  fundamental change provision.

- Repurchased the tendered notes.
- Offered all remaining  noteholders,  that were  accredited  investors,  the
  opportunity  to  exchange  their Old Notes  for  newly  issued  convertible
  subordinated notes.

The old  noteholders  tendered  $2,896,000  of Old Notes for  repurchase at par.
Additionally,  Old Notes with a par of  $1,701,000  were  exchanged  for the new
issue of convertible subordinated notes.

During 1998,  convertible  subordinated notes were issued (collectively the "New
Notes") that (i) have a maturity of September 30, 2003,  (ii) bear interest at a
fixed  rate of 10% per  annum,  (iii) are not  redeemable  at the  option of the
Company, (iv) are convertible into the Company's common stock at $6.50 per share
and (v) are  subordinated  in the  right of  payment  to the  Company's  secured
revolving  credit  facility.  The New Notes have  financial  covenants  that are
similar to, but less restrictive than, the covenants in the Company's  revolving
line of credit.  At December 31, 1999,  the Company was in default of several of
the covenants of the New Notes. The Company is negotiating with the debt holders
to resolve these  defaults.  There can be no assurance that an agreement will be
reached.

As of December 31, 1999 and 1998, the Company had convertible subordinated notes
(Old and New Notes) outstanding of $4,954,000 and $4,958,000, respectively.

G. STOCK OPTION AND BENEFIT PLAN

Stock Option Plans

In October 1995, FASB issued SFAS No. 123, Accounting for Stock-Based
Compensation. This Statement gives the Company the option of either:
1)continuing to account for stock options and other forms of stock compensation
paid to employees under the current accounting rules (APB No. 25, Accounting
for Stock Issued to Employees) while providing the disclosures required under
SFAS No. 123, or 2) adopting SFAS No. 123. The Company continues to account
for stock options under APB No. 25 and provides the additional disclosures as
required by SFAS No. 123.

                                      41
<PAGE>



Qualified Plan

The Company has reserved  275,000  shares of common stock for issuance under its
qualified stock option plan, which expires February 7, 2000. Options to purchase
common  stock are granted at a price equal to the fair market value of the stock
at the date of grant or 110% of fair  market  value of the  stock at the date of
grant for  stockholders  owning 10% or more of the combined  voting stock of the
Company.  The following table summarizes qualified stock option transactions for
the years ended December 31, 1999 and 1998.
<TABLE>
<CAPTION>
-------------------------------------------------- ------------------- --------------------------------------
                                                   Number of Options               Option Price
                                                                                     Per Share
<S>                                                <C>                 <C>
-------------------------------------------------- ------------------- --------------------------------------
Outstanding, January 1, 1998                                  148,800                         $5.37 to $7.75
--------------------------------------------------
Granted                                                        30,200                         $5.00 to $7.75
--------------------------------------------------
Exercised                                                     (3,500)                         $5.62 to $6.50
--------------------------------------------------
Forfeited or expired                                         (57,900)                        $5.62 to $14.00
                                                             --------
--------------------------------------------------

--------------------------------------------------
Outstanding, December 31, 1998                                117,600                         $5.00 to $7.75
--------------------------------------------------
Granted                                                        95,000                         $4.00 to $6.54
--------------------------------------------------
Exercised                                                           -                                      -
--------------------------------------------------
Forfeited or expired                                        (112,000)                         $4.00 to $7.75
                                                            ---------
--------------------------------------------------

--------------------------------------------------
Outstanding, December 31, 1999                                100,600                         $4.00 to $6.50
                                                              =======
--------------------------------------------------
Exercisable, December 31, 1999                                 90,501
                                                               ======

</TABLE>
Non-Qualified Plan

The Company has reserved  150,000  shares of common stock for issuance under its
non-qualified  stock option plan,  which  expires  February 7, 2000.  Options to
purchase  shares of common  stock are granted at a price equal to the fair value
of the  stock at the date of grant  except  in the case of  options  granted  to
directors,  in which case the minimum  price is the greater of $7.00 and 110% of
fair value at the time of grant.  The following table  summarizes  non-qualified
stock option transactions from 1998 through 1999:
<TABLE>
<CAPTION>
<S>                                                <C>                 <C>
-------------------------------------------------- ------------------- --------------------------------------
                                                   Number of Options               Option Price
                                                                                     Per Share

-------------------------------------------------- ------------------- --------------------------------------
Outstanding, January 1, 1998                                   69,000                        $7.00 to $14.00
--------------------------------------------------
Granted                                                        35,000                                  $7.00
--------------------------------------------------
Forfeited or expired                                          (2,000)                                 $14.00
                                                              -------
--------------------------------------------------

--------------------------------------------------
Outstanding, December 31, 1998                                102,000                                  $7.00
--------------------------------------------------
Granted                                                        30,000                                  $7.00
--------------------------------------------------
Forfeited or expired                                         (67,000)                                  $7.00
                                                             --------
--------------------------------------------------

--------------------------------------------------
Outstanding, December 31, 1999                                 65,000                                  $7.00
                                                               ======
--------------------------------------------------
Exercisable, December 31, 1999                                 65,000                                  $7.00
                                                               ======
</TABLE>

                                       42
<PAGE>

Qualified and Non-Qualified Plans

The table  below  summarized  the option  activity  for both plans for the years
ended December 31:
<TABLE>
<CAPTION>
<S>                                                           <C>                  <C>
------------------------------------------------------------- -------------------- -----------------
                                                                     1999                1998
------------------------------------------------------------- -------------------- -----------------

-------------------------------------------------------------
Outstanding at January 1                                                  219,600           217,800
-------------------------------------------------------------
Granted                                                                   125,000            65,200
-------------------------------------------------------------
Exercised                                                                       -           (3,500)
-------------------------------------------------------------
Forfeited or expired                                                    (179,000)          (59,900)
                                                                        ---------          --------
-------------------------------------------------------------
Outstanding at December 31                                                165,600           219,600
                                                                          =======           =======
-------------------------------------------------------------
Exercisable at December 31                                                155,501           151,201
                                                                          =======           =======
</TABLE>
The weighted average fair value at date of grant for options granted during 1999
and 1998 was $1.85 and $0.98, respectively. The fair value of options at date of
grant was estimated using the  Black-Scholes  model with an expected option life
of 1.5-3.0 years and 2.5 years in 1999 and 1998, respectively, and the following
weighted average assumptions,  respectively, for 1999 and 1998: dividend yield -
none either year; interest rate - 6.29% and 6.86%;  volatility 65.00% and 38.00%
for the respective year.

Weighted average option exercise price  information (both plans) for years ended
December 31:
<TABLE>
<CAPTION>
<S>                                                          <C>                  <C>
------------------------------------------------------------ -------------------- -----------------
                                                                    1999                1998
------------------------------------------------------------ -------------------- -----------------
Per Share

Outstanding at January 1                                                   $6.37             $6.24
------------------------------------------------------------
  Granted                                                                   5.76              5.01
------------------------------------------------------------
  Exercised                                                                    -              6.25
------------------------------------------------------------
  Forfeited or Expired                                                      6.26              5.76
                                                             -              ----              ----
------------------------------------------------------------

------------------------------------------------------------
Outstanding at December 31                                                 $5.84             $6.37
                                                                           =====             =====
------------------------------------------------------------

------------------------------------------------------------
Exercisable at December 31                                                 $5.94             $6.49
                                                                           =====             =====
</TABLE>
The Company's net loss would have increased by $166,614 or $0.07 per share basic
and  dilutive  for 1999,  in  stock-based  compensation  cost for the  Company's
qualified and  non-qualified  stock option plans if the plan had been determined
based on the fair  value at the grant  dates for  awards  under the  plans.  The
Company's net loss would have been increased by $88,335 or $0.04 per share basic
and dilutive for 1998.

Retirement Plan

Effective   January  1,  1990,  the  Company  adopted  the  Allstate   Financial
Corporation 401(k) Retirement Plan (the "Plan") for the benefit of the Company's
employees.  The Plan  provides for the deferral of up to 15% of a  participating
employee's  salary,   subject  to  certain  limitations,   and  a  discretionary
contribution  by  the  Company.  The  Company's  contribution  is  allocated  to

                                       43
<PAGE>

participating   employees   based  on  relative   compensation.   The  Company's
contribution  for the years ended  December  31, 1999 and 1998 was zero ($0) and
$46,701, respectively.  During 1999, the plan was terminated and all monies were
distributed.

Effective  April 1, 1999,  the  Company  became a  participant  in a  nationally
managed 401(k) plan (1999 plan) for the benefit of the Company's employees.  The
1999 plan  provides  for the  deferral of up to 17% of a  participant's  salary,
subject to certain annual limitations,  and a matching  contribution of up to 3%
by the Company. The Company's  contribution for the year ended December 31, 1999
was $18,233.

H. INCOME TAXES

Income tax expense (benefit) consists of:
<TABLE>
<CAPTION>

                                                                   Years Ended December 31,
    ----------------------------------------------------- ------------------------- --------------------
                                                                     1999                  1998
    <S>                                                   <C>                       <C>
    ----------------------------------------------------- ------------------------- --------------------
    Federal:
    -----------------------------------------------------
      Current                                                             $ 32,466            $  45,187
    -----------------------------------------------------
      Deferred                                                           3,683,680          (3,366,887)
                                                                         ---------          -----------
    -----------------------------------------------------
                                                                         3,716,146          (3,321,700)
                                                                         ---------          -----------
    -----------------------------------------------------

    -----------------------------------------------------
    State:
    -----------------------------------------------------
      Current                                                                9,500                    -
    -----------------------------------------------------
      Deferred                                                             277,266            (234,700)
                                                                           -------            ---------
    -----------------------------------------------------
                                                                           286,766            (234,700)
                                                                           -------            ---------
    -----------------------------------------------------

    -----------------------------------------------------
    Total income tax expense (benefit)                                  $4,002,912         $(3,556,400)
                                                                        ==========         ============
    -----------------------------------------------------

    -----------------------------------------------------
    Tax (benefit) expense at statutory rate                           $(4,504,040)         $(3,268,050)
    -----------------------------------------------------
    Change in (benefit) expense resulting from:
    State income taxes, net of Federal income
    tax effect                                                           (428,023)            (154,903)
    -----------------------------------------------------
    Valuation Allowance                                                  9,232,642
    -----------------------------------------------------
    Other                                                               (297,667)            (133,447)
                                                                         ---------            ---------
    -----------------------------------------------------
                                                                        $4,002,912         $(3,556,400)

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

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

    -----------------------------------------------------
    Effective tax rate                                                       37.0%                37.0%
                                                                            =====                 =====
    </TABLE>



                     [THIS SECTION INTENTIONALLY LEFT BLANK]

                                       44
<PAGE>



<TABLE>
<CAPTION>

    The deferred tax asset consists of:

                                                                                 December 31,
    --------------------------------------------------------- --------------------- ----------------
                                                                       1999               1998
    <S>                                                          <C>                <C>
    ------------------------------------------------             ------------------ ----------------
    Deferred tax asset:
    ---------------------------------------------------------
    Operating Loss Carryforwards                                         7,506,082        2,750,273
    ---------------------------------------------------------
     Allowance for credit losses                                        $1,726,560       $1,124,030
    ---------------------------------------------------------
     Fixed assets                                                                            86,644
                                                                     -------------           ------
    ---------------------------------------------------------
                                                                         9,232,642        3,960,946
    ---------------------------------------------------------
    Valuation allowance                                                (9,232,642)
                                                                                                  -
    ---------------------------------------------------------
                                                                                                  -
                                                                           $     -       $3,960,946
                                                                           =======       ==========
    ---------------------------------------------------------
    Total

</TABLE>
The Company has reduced all deferred tax assets to zero by utilizing a valuation
allowance because the deferred tax assets more than likely will not be realized.

The  Company's  net  operating  loss ("NOL") at December  31, 1999,  amounted to
$18,765,205.  The Company's use of the NOL's prior to the  expirations  of their
carry-forward  periods  may be limited by the  provisions  of Section 382 of the
Internal  Revenue Code of 1986 ("the  Code"),  if it is  determined  that it has
undergone a change of ownership,  as defined by the section.  The  carry-forward
period associated with the NOL expires according to the following schedule:

              ------------------------------ ---------------------------------
                    Year of expiration                     Amount

              ------------------------------ ---------------------------------
              ------------------------------ ---------------------------------
                        2018                                     $6,875,682
                        2019                                     11,889,523
                                           -                     ----------
                        Total                                   $18,765,205
                                                                ===========
              ------------------------------ ---------------------------------


I.       RELATED-PARTY TRANSACTIONS

In 1998 the "Allstate Financial Corporation  Independent  Shareholders/Directors
Committee"  (the  "Committee"),  which was composed of Value  Partners,  Ltd., a
major shareholder;  David W. Campbell, William H. Savage, Edward A. McNally, and
Lindsay  B.  Trittipoe,  independent  directors  of the  Company;  and C.  Scott
Bartlett, a former director of the Company,  proposed the election of a slate of
directors in opposition to the nominees proposed by the Company's management. In
their proxy filing,  the Committee advised  shareholders  that, if successful in
the election, they would seek reimbursement for their expenses from the Company.
The Company  paid  directly or  reimbursed  Value  Partners,  Ltd.  for expenses
incurred by the Committee in the amount of $397,318 in 1998. This  reimbursement
was  recorded  in the  consolidated  statement  of  operations  as a general and
administrative expense.

Value Partners, Ltd., was paid approximately $314,000 and $207,000 in 1999 and
1998, respectively, ininterest on convertible subordinated notes.Value Partners,
Ltd. held convertible subordinated notes of $4,197,000 at December 31, 1999 and

                                      45
<PAGE>

1998. In addition, the Company owes Value Partners, Ltd., interest of $104,000
that was due December 31, 1999. As stated in Note F, the Company is working with
the holders of the New Notes to resolve this default situation. There can be no
 assurance that an agreement will be reached.

In September 1999, Value Partners, Ltd. made a $1 million loan to the Company.
The note bears interest at 10%, payable quarterly, and is due in full on March
31, 2000. Also, the Company is required to made principal payments on this debt
as certain assets are received in cash. Value Partners, Ltd. received $12,161
in intereston this loan during 1999. As of December 31, 1999 the loan balance
was $799,772.


 J. FINANCIAL OBLIGATIONS WITH OFF-BALANCE SHEET RISK AND CREDIT CONCENTRATIONS

The Company is a party to financial  obligations with off-balance  sheet risk in
the normal course of business to meet the financing needs of its clients.  These
financial  obligations include conditional  commitments to purchase receivables,
obligations under guaranties issued by the Company and reimbursement obligations
under  letters of credit  issued for the Company's  account.  These  obligations
involve,  to varying  degrees,  elements  of credit risk in excess of the amount
recognized on the balance sheet.

The Company's  maximum exposure to credit loss under financial  obligations with
off-balance  sheet risk is represented by the  contractual or notional amount of
these  obligations.  The  Company  uses  the  same  credit  policies  in  making
conditional  commitments  and incurring  contingent  obligations  as it does for
on-balance sheet  obligations.  These commitments have fixed expiration dates or
other  termination  clauses and usually  require payment of a fee by the client.
Since many of the  commitments  may expire  without being drawn upon,  the total
commitment amounts do not necessarily  represent future cash  requirements.  The
Company  receives  collateral to secure  letters of credit and  guarantees.  The
Company no longer engages in this line of business.

Financial  obligations  whose contract or notional amounts represent credit risk
are as follows:

                                             December 31,

                                    1999                   1998
      --------------------- --------------------- ------------------------
Conditional Commitments
to purchase Receivables         $     -              $47,810,000
                                =======              ===========



For the year ended December 31, 1999,  three clients  accounted for 25.8% of the
Company's  total  earned  discounts  and  interest.  Two of these  clients  were
written-off  during 1999 and the third client paid off all outstanding  balances
prior to the end of 1999. At December 31, 1999, two clients accounted for 51.53%
of the  Company's  total  receivables.  One of these  clients is  classified  as
non-performing and the Company has allocated specific reserves for this client.

                                       46
<PAGE>

For the year ended December 31, 1998,  three clients  accounted for 46.4% of the
Company's  total earned  discounts  and  interest.  At December 31, 1998,  three
clients  accounted for 48.7% of the Company's  total  receivables.  Although the
Company monitors account debtor concentration and regularly evaluates the credit
worthiness of account  debtors,  there can be no assurances  that account debtor
concentration could not have a material adverse effect on the Company.

K.       NET INCOME PER SHARE

In March  1997,  FASB  issued SFAS No.  128,  Earnings  Per Share.  SFAS No. 128
supersedes APB No. 15 to conform earnings per share to  international  standards
as well as to simplify the complexity of the computation  under APB No. 15. SFAS
No. 128 requires dual  presentation  of basic and diluted  earnings per share on
the face of the income statement. Basic earnings per share excludes dilution and
is  computed  by  dividing  income  available  to  common  shareholders  by  the
weighted-average  number of common shares  outstanding  for the period.  Diluted
earnings per share reflect the potential dilution that could occur if securities
or other contracts to issue common stock were exercised or converted into common
stock.  SFAS No. 128 is  effective  for both interim and annual  periods  ending
after December 15, 1997. For the years ending December 31, 1999 and 1998,  there
is no difference between the basic and diluted earnings per share.

The following  table details the  calculation of the basic and diluted  earnings
per share.





<TABLE>
<CAPTION>
-------------------------------------------- -------------------- ----------------------- ------------------
                                                Income (Loss)      Shares (Denominator)       Per-Share
                                                                          -------------
                                                 (Numerator)                                    Amount
<S>                                          <C>                  <C>                     <C>
-------------------------------------------- -------------------- ----------------------- ------------------

Year Ended December 31, 1998
--------------------------------------------
Basic EPS

 Net (loss)                                         $(6,055,513)               2,322,222            $(2.61)
--------------------------------------------
Effect of dilutive securities
 Stock options                                                 -                       -

                                                                                                          -
--------------------------------------------
Diluted EPS
 Net (loss) plus assumed
 Conversions                                       $(6,055,513)                2,322,222            $(2.61)
                                                   =============               =========            =======
--------------------------------------------

Year Ended December 31, 1999
--------------------------------------------
Basic EPS

 Net (loss)                                        $(17,251,090)               2,324,616            $(7.42)
--------------------------------------------
Effect of dilutive securities
 Stock options                                                 -                       -

--------------------------------------------
Diluted EPS
 Net (loss) plus assumed
 Conversions                                       $(17,251,090)               2,324,616            $(7.42)
                                                   =============               =========            =======

</TABLE>

                                       47
<PAGE>

During  1999 and 1998,  respectively,  there were  various  options to  purchase
165,600  and  103,700  shares of common  stock  which were not  included  in the
computation  of the diluted EPS because the options'  exercise price was greater
than the average market price of the common shares.

The Company  incurred net losses for the years ended December 31, 1999 and 1998.
Since the  inclusion of stock  options in the  computation  of diluted EPS would
have had an antidilutive  effect,  the common shares associated with the options
were excluded from the computation.

The  convertible  subordinated  notes,  which convert into the Company's  common
stock at $6.50 and $7.50 per share,  were also excluded from the  computation of
the diluted EPS because the  conversion  price was greater than the market price
at any given point  during which they were  outstanding  for the two years ended
December 31, 1999.

L. COMMITMENTS AND CONTINGENCIES

The Company leases office space under operating leases with Consumer Price Index
escalations and rental escalations based on increases in base operating expenses
as defined in the agreements.  The Company's headquarters lease was renegotiated
during 1995 and extended for six years to December 1, 2001 at a reduced  rental.
The Company also pays rent for storage space and office  equipment.  The Company
is currently  negotiating with the landlord to reduce or eliminate the space the
Company is  occupying.  There can be no  assurance  that the  situation  will be
resolved.


     Future minimum rental payments are as follows:

       ----------------------------------------- ------------------------
                        Years Ending December 31, Amount

       ----------------------------------------- ------------------------
                                  2000 $215,000
                    -----------------------------------------
                                  2001  189,000
                    -----------------------------------------
                                  2002        -
                    -----------------------------------------
                                  2003        -
                    -----------------------------------------
                                  2004        -
                                     ----------
                              total    $404,000
                                       ========
       ----------------------------------------- ------------------------

Rental  expense for the years ended  December 31, 1999 and 1998 was $184,768 and
$330,226, respectively.

The Company is a counterclaim  defendant in Allstate Financial Corporation v.
A.G.  Construction,  Inc. (n/k/a A.G.Plumbing,  Inc.),  American  General
Construction  Corp.,  Adam  Guziczek  and  Cheryl Lee  Guziczek  (hereinafter
collectively  referred to as "AG") pending in the United States Bankruptcy Court
for the Southern  District of New York.  In a 1993 action the Company  undertook
an attempt to recoveragainst AG. An answer and  counterclaim  was filed  against
the  Company.  The  counterclaim  asserted  claims  for  usury,  diversion  of
proceeds  of public improvement  contracts,  and  overpayments  to  the  Company
by  AG in  excess of $2,000,000  (hereinafter the "Counterclaims").No specific
damage claims amount was set forth in the Counterclaims.
                                        48
<PAGE>


No action was ever  taken by the  trustee in the AG  bankruptcy  proceedings  to
pursue the  Counterclaims.  On June 2, 1997,  the trustee for the AG  bankruptcy
estate filed a motion to abandon these claims against the Company. On October 7,
1997, New York Surety Company (hereinafter  referred to as the "Surety"),  which
provided  the  payment  and  performance  bond  to AG  in  connection  with  the
construction jobs performed for the City of New York, filed pleadings  objecting
to the  abandonment  of such claims  against the Company,  asserting that it was
subrogated to AG's claims.  The proposed  complaint adopts the Counterclaims and
seeks an accounting.  The Surety asserts damages of approximately $4,000,000. On
April 9, 1998, the bankruptcy court remanded the matter to state court.

On  June  24,  1998,  the  Surety  was  formally   declared   insolvent  by  the
Superintendent of Insurance of the State of New York (hereinafter referred to as
the "Superintendent") and as such the Superintendent was judicially appointed as
rehabilitator  of the  Surety to  conduct  its  business.  At this  time,  it is
uncertain  whether the  Superintendent  will  continue to pursue the  litigation
against the Company.

The  Company  believes it has  meritorious  defenses  to the  Counterclaims  and
intends to  vigorously  defend all claims.  However,  the  litigation  is in the
preliminary stage and the probability of a favorable or unfavorable  outcome and
the potential  amount of loss, if any, cannot be determined or estimated at this
time.

Except as described above, the Company is not party to any litigation other than
routine proceedings  incidental to its business, and the Company does not expect
that these other proceedings will have a material adverse effect on the Company.

M.       UNCERTAINTIES

The Company has  incurred  net losses of $17 million and $6 million in the years
ending December 31, 1999 and 1998, respectively. During the last four years, the
Company has incurred  severe loan losses that caused the Company's  bank lenders
to restrict the line of credit and request repayment.  The Company was forced to
sell assets to comply with the lenders' request. The need to use the proceeds of
sales to repay the bank lenders made it  impractical  for the Company to solicit
and make loans to new clients.  The Company is also in default on its New Notes,
and has outstanding litigation (see Note L) which presents additional contingent
liabilities.

In response to this situation,  the Company has taken several steps in an effort
to return the Company to profitability.  The Company has consummated the sale of
the  factoring  portfolio  and certain  ABL loans,  reduced  staffing  and other
expenses, repaid the bank lenders, and moved to smaller office space.

The Company is also  developing  a strategic  turnaround  plan (the "Plan") that
contemplates,  among other things, a recapitalization of the Company in the form

                                       49
<PAGE>

of the exchange of the New Notes for common  stock.  The board of directors  has
appointed a committee of outside  directors to negotiate with the holders of the
New Notes over the terms of the exchange.

Other major elements of the Plan include:

o    A limitation on transfers of common stock by existing or potential  holders
     of over 4.9% of outstanding  shares, thereby helping to preserve the NOL's
     for future use.

o    An increase in the number of authorized shares to facilitate the conversion
     and enable the Company to consider  possible  acquisitions  of, or business
     combinations  with, firms in financial  services  involving the issuance of
     new shares.

o    The possible  re-incorporation  of the Company  under  Delaware law to take
     advantage of provisions favorable to the Plan.

The Company has held preliminary discussions with Value Partners,  Ltd., a large
shareholder  of the Company and the holder of a majority of the New Notes,  with
respect to the Plan.Value Partners is supportive of the of the major elements of
the Plan and has  encouraged the company to finalize the details and present the
Plan for approval by the Board and recommendation to the shareholders the annual
meeting.  The actual exchange rate at which the New Notes will be converted into
common stock will be negotiated  by the committee of the board of directors.  In
addition,  the final  terms of the Plan will  depend in part upon an analysis of
the effects of Section 382 of the Code and the preservation of the Company's NOL
carry-forwards. See Note H - Income Taxes.

Certain  elements  of the plan will  require  shareholder  approval  and will be
presented to the shareholders  for a vote at the Company's  annual meeting.  The
board of  directors  has  postponed  the date of the annual  meeting in order to
allow  sufficient time for the Plan to be finalized.  The Company  believes that
when the Plan is approved by the shareholders and implemented,  the Company will
be positioned for future growth.  The Company believes the conversion of the New
Notes to equity will reduce the Company's interest costs and position it to more
effectively  obtain  new  senior  funding  to  expand  its loan  portfolio.  The
satisfactory   completion  of  the  Plan  is  essential,   as  the  Company  has
insufficient cash flow to service the interest payments on the New Notes.

However,  there  can be no  assurance  that the  Plan  will be  approved  by the
shareholders,  that the final terms of the conversion  can be agreed upon,  that
the Company will be  successful  in  redeploying  the amounts it  currently  has
invested  in  nonperforming  assets  into  new ABL  relationships,  or that  new
financing will be obtained.

If the plan can be  accomplished,  management  believes  that the  Company  will
continue as a going concern.



                                       50
<PAGE>

<TABLE>
<CAPTION>

                                   SCHEDULE IV

                         INDEBTEDNESS TO RELATED PARTIES

------------------------------------------- ------------------- ------------------ --------------- -------------------
                                                Balance at                                            Balance at
                                              Beginning of                            Amounts            End of
Name of Creditor                                   Period          Additions              Paid           Period
<S>                                         <C>                 <C>                <C>             <C>
------------------------------------------- ------------------- ------------------ --------------- -------------------
Year Ended December 31, 1999:
-------------------------------------------

-------------------------------------------
  All directors and officers as a
-------------------------------------------
    Group                                            $ 102,000             $    -          $    -           $ 102,000
-------------------------------------------
  Value Partners, Ltd.                               4,197,000          1,000,000         200,228           4,996,772
                                            -        ---------          ---------         -------           ---------
-------------------------------------------
                                                    $4,299,000         $1,000,000        $200,228          $5,098,772
                                                    ==========         ==========        ========          ==========
-------------------------------------------

-------------------------------------------
Year Ended December 31, 1998:
-------------------------------------------

-------------------------------------------
  All directors and officers as a
-------------------------------------------
    Group                                               $    -          $ 102,000            $  -           $ 102,000
-------------------------------------------
  Various other related parties                        156,216                            157,098                  --
                                                                              882

-------------------------------------------
  Value Partners, Ltd.                               1,301,000          2,896,000              --           4,197,000
                                                     ---------          ---------          ------           ---------
-------------------------------------------
                                                    $1,457,216         $2,998,882        $157,098          $4,299,000
                                                    ==========         ==========        ========          ==========
</TABLE>






                     [THIS SECTION INTENTIONALLY LEFT BLANK]



                                     51
<PAGE>




SIGNATURES

In accordance  with Section 13 or 15(d) of the Securities  Exchange Act of 1934,
the  registrant  has duly  caused  this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

ALLSTATE FINANCIAL CORPORATION

By: _______/s/_______
     Charles G. Johnson
     President and CEO

In accordance with the Securities Exchange Act of 1934, the following persons on
behalf of the registrant  and in the capacities and on the dates  indicated have
signed this report below.

           ________/s/_________Charles G. Johnson
Date    April 28, 2000         President, Chief Executive Officer, Director

            _______/s/_________C. Fred Jackson
Date    April 28, 2000          Secretary/Treasurer, Chief Financial Officer

            _______/s/_________David W. Campbell
Date    April 28, 2000         Chairman, Director

           ________/s/________ William H. Savage
 Date    April 28, 2000         Director

            _______/s/_________Edward A. McNally
Date    April 28, 2000           Director

           ________/s/_________Lindsay B. Trittipoe
Date    April 28, 2000           Director

           ________/s/_________C. Scott Bartlett
Date    April 28, 2000           Director

           ________/s/_________Steven Lefkowitz
Date    April 28, 2000           Director