<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

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

                  For the quarterly period ended March 31, 1998

                                       OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES 
     EXCHANGE ACT OF 1934

                         Commission file number 1-11999

                        ALTERNATIVE LIVING SERVICES, INC.

     DELAWARE                                                         39-1771281
     (State or other jurisdiction of        (I.R.S. Employer Identification No.)
     incorporation or organization)

                        450 N. SUNNYSLOPE ROAD, SUITE 300
                                 BROOKFIELD, WI
                                      53005
                    (Address of principal executive offices)
                                   (Zip Code)

                                 (414) 789-9565
              (Registrant's telephone number, including area code)

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

   Yes      [X]      No    [ ]

     AS OF MAY 12, 1998, THERE WERE 21,906,912 SHARES OF THE REGISTRANT'S COMMON
STOCK, PAR VALUE $0.01, OUTSTANDING.

(Number of shares outstanding of each class of the issuer's classes of common
stock, as of the latest practical date.)


<PAGE>   2


                        ALTERNATIVE LIVING SERVICES, INC.
                                      INDEX


                         Part I. Financial Information

<TABLE>
<CAPTION>

                                                                                           PAGE NO.
                                                                                          ----------
<S>                                                                                          <C> 
Item 1.  Financial Statements:

         Condensed Consolidated Balance Sheets as of March 31, 1998 and
            December 31, 1997.............................................................     1

         Condensed Consolidated Statements of Operations for the Three Months
            Ended March 31, 1998 and 1997 ................................................     2

         Condensed Consolidated Statements of Cash Flows for the Three Months
            Ended March 31, 1998 and 1997.................................................     3

         Notes to Condensed Consolidated Financial Statements.............................     4

Item 2.  Management's Discussion and Analysis of Financial Condition and
            Results of Operations.........................................................     5

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.......................     8


                           Part II. Other Information

Item 6.  Exhibits and Reports on Form 8-K.................................................     8
</TABLE>




<PAGE>   3




                         PART 1 - FINANCIAL INFORMATION

ITEM 1.    FINANCIAL STATEMENTS

               ALTERNATIVE LIVING SERVICES, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>

                                                                           March 31,          December 31,
                                                                             1998                 1997               
                                                                          -----------         ------------
                                                                          (Unaudited)
                                ASSETS
<S>                                                                         <C>                   <C>      
Current Assets:
  Cash and cash equivalents........................................         $  68,420             $  79,838
  Short-term investments...........................................            50,000                90,000
  Resident receivables, net........................................             3,523                 1,832
  Pre-opening costs, net of amortization...........................             7,727                 5,785
  Other current assets.............................................            19,084                21,378
                                                                            ---------             ---------
      Total current assets.........................................           148,754               198,833
                                                                            ---------             ---------
Property and equipment:
  Land.............................................................            35,809                34,143
  Building & improvements..........................................           211,770               160,991
  Furniture, fixtures & equipment..................................            30,833                23,702
  Construction in progress.........................................           135,860               114,277
                                                                            ---------             ---------
  Property & equipment, gross......................................           414,272               333,113
  Less: accumulated depreciation...................................           (11,433)               (9,500)
                                                                            ---------             ---------
Property and equipment, net........................................           402,839               323,613
Long-term investments..............................................             4,435                 4,435
Investments in and advances to unconsolidated affiliates...........            16,167                 1,607
Goodwill, net......................................................             5,350                 5,380
Other assets.......................................................            22,572                19,684
                                                                            ---------             ---------
      Total assets.................................................         $ 600,117             $ 553,552
                                                                            =========             =========

                 LIABILITIES AND STOCKHOLDERS' EQUITY 
Current liabilities:
  Current installments of long-term obligations....................         $   2,142             $   2,677
  Short-term notes payable.........................................             5,586                18,900
  Accounts payable.................................................            26,238                20,645
  Accrued expenses.................................................            24,247                27,083
                                                                            ---------             ---------
      Total current liabilities....................................            58,213                69,305
                                                                            ---------             ---------
Long-term obligations, less current installments...................           131,413               108,069
Convertible debt...................................................           228,750               210,000
Deferred gain on sale and other....................................            14,402                12,421
Minority interest..................................................            10,179                 9,860
Stockholders' equity:
  Common stock.....................................................               219                   214
  Additional paid-in capital.......................................           174,881               165,206
  Accumulated deficit..............................................           (17,940)              (21,523)
                                                                            ---------             ---------
    Total stockholders' equity.....................................           157,160               143,897
                                                                            ---------             ---------
      Total liabilities and stockholders' equity...................         $ 600,117             $ 553,552
                                                                            =========             =========
</TABLE>

     See accompanying notes to condensed consolidated financial statements.



                                       1
<PAGE>   4


               ALTERNATIVE LIVING SERVICES, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
                      (IN THOUSANDS, EXCEPT PER SHARE DATA)


<TABLE>
<CAPTION>

                                                                           Three Months Ended
                                                                               March 31,
                                                                          ----------------------  
                                                                           1998            1997
                                                                          -------        -------  
<S>                                                                       <C>            <C>
   Revenue:
     Resident service fees...........................................     $45,651        $23,471
     Other...........................................................         833            229
                                                                          -------        -------
       Total operating revenue.......................................      46,484         23,700
   Operating expenses:
     Residence operations............................................      29,444         15,252
     Lease expense...................................................       8,989          5,113
     General and administrative......................................       4,802          3,412
     Depreciation and amortization...................................       3,397          1,628
                                                                          -------        -------
       Total operating expenses......................................      46,632         25,405
                                                                          -------        -------
   Operating (loss)..................................................        (148)        (1,705)
                                                                          -------        -------
   Other income (expense):
     Interest expense, net...........................................        (729)          (127)
     Other, net......................................................         (27)           (13)
     Equity in losses of unconsolidated affiliates...................         (12)           (88)
     Minority interest in losses of consolidated subsidiaries.......        4,499            938
                                                                          -------        -------
       Total other income (expense) net..............................       3,731            710
                                                                          -------        -------

   Net income (loss) before income taxes.............................       3,583           (995)

   Income taxes                                                                --             --
                                                                          -------        -------
       Net income (loss).............................................     $ 3,583        $  (995)
                                                                          =======        =======

   Net Income Per Share Data:

   Basic:
     Net income (loss) per common share..............................     $  0.16        $ (0.05)
                                                                          =======        =======
     Weighted average common shares outstanding......................      21,761         18,539
                                                                          =======        =======
   Diluted:
     Net income (loss) per common and common equivalent
       share.........................................................     $  0.16        $ (0.05)
                                                                          =======        =======
     Weighted average common and common equivalent
       shares outstanding............................................      22,344         18,539
                                                                          =======        =======
</TABLE>


     See accompanying notes to condensed consolidated financial statements.


                                       2

<PAGE>   5


               ALTERNATIVE LIVING SERVICES, INC. AND SUBSIDIARIES

                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                                 (IN THOUSANDS)


<TABLE>
<CAPTION>

                                                                                                Three Months Ended
                                                                                                     March 31,
                                                                                           ------------------------------
                                                                                               1998             1997
                                                                                           -------------    -------------
<S>                                                                                          <C>              <C>
Cash flows from operating activities:
  Net income (loss)...................................................................       $   3,583        $    (995)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating
activities:
  Depreciation and amortization.......................................................           3,397            1,628
  Equity in net loss from investments in unconsolidated affiliates....................              12               88
  Minority interest in losses of consolidated subsidiaries............................          (4,499)            (938)
  (Increase) decrease in net resident receivables.....................................          (1,881)           4,362
  Increase in pre-opening costs.......................................................          (3,811)            (628)
  Decrease (increase) in other current assets.........................................           2,107           (3,597)
  Increase in accounts payable........................................................           5,619              360
  Increase in accrued expenses........................................................              60              326
  Decrease in accrued merger costs....................................................          (2,448)            (146)
  Changes in other assets and liabilities, net........................................          (1,346)              13
                                                                                             ---------        ---------
Net cash (used in) provided by operating activities...................................             793              473
                                                                                             ---------        ---------

Cash flows from investing activities:
  Payments for property, equipment and project development costs......................         (82,676)         (46,334)
  Acquisitions of affiliates and facilities, net of cash..............................          (8,477)              --
  Changes in investments in and advances to unconsolidated affiliates.................          (7,017)            (470)
  Purchase of limited partnership interests...........................................          (1,826)              --
  Decrease in investments.............................................................          40,000               --
                                                                                             ---------        ---------
Net cash used in investing activities.................................................         (59,996)         (46,804)
                                                                                             ---------        ---------

Cash flows from financing activities:
  Repayments of short-term borrowings.................................................         (13,314)          (8,289)
  Repayments of long-term obligations.................................................         (10,932)            (128)
  Proceeds from issuance of debt......................................................          30,926           10,506
  Proceeds from issuance of convertible debt..........................................          18,750               --
  Payments for financing costs........................................................          (1,900)              --
  Proceeds from sale/leaseback transactions...........................................          12,320           20,522
  Issuance of common stock and other capital contributions............................           9,442               --
  Contributions by minority partners and minority stockholders........................           2,493              766
                                                                                             ---------        ---------
Net cash provided by financing activities.............................................          47,785           23,377
                                                                                             ---------        ---------

Net decrease in cash and cash equivalents.............................................         (11,418)         (22,954)
                                                                                             ---------        ---------
Cash and cash equivalents:
  Beginning of period.................................................................          79,838           39,454
                                                                                             =========        =========
  End of period.......................................................................       $  68,420        $  16,500
                                                                                             =========        =========

Supplemental disclosure of cash flow information:
  Cash paid for interest, including amounts capitalized...............................       $  1,627         $     924
                                                                                             ========         =========   
  Cash paid (received) during year for income taxes...................................       $  1,256         $      --
                                                                                             ========         =========
</TABLE>

     See accompanying notes to condensed consolidated financial statements.


                                       3
<PAGE>   6
               ALTERNATIVE LIVING SERVICES, INC. AND SUBSIDIARIES

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

(1)  BASIS OF PRESENTATION

     The condensed consolidated balance sheets as of March 31, 1998 and December
31, 1997, the condensed consolidated statements of operations for the three
months ended March 31, 1998 and 1997 and the condensed consolidated statements
of cash flows for the three months ended March 31, 1998 and 1997 contained
herein include the accounts of Alternative Living Services, Inc. (the "Company")
and its affiliates which are under the common financial control of the Company.
All significant intercompany accounts have been eliminated in consolidation. In
the opinion of management, all adjustments (consisting only of normal recurring
items) necessary for a fair presentation of such condensed consolidated
financial statements have been included. The results of operations for the three
months ended March 31, 1998, are not necessarily indicative of the results to be
expected for the full fiscal year.

     The condensed consolidated financial statements do not include all
information and footnotes necessary for a complete presentation of financial
position, results of operations, and cash flows in conformity with generally
accepted accounting principles. The accompanying condensed consolidated
financial statements should be read in conjunction with the audited consolidated
financial statements and notes thereto included in the Company's Annual Report
on Form 10-K, for the year ended December 31, 1997.

(2)  ACQUISITIONS

     On March 5, 1998, the Company acquired an assisted living residence having
an aggregate capacity of 167 residents in Oceanside, California. This
acquisition, which has been accounted for as a purchase, had an initial purchase
price of $16.7 million, $8.5 million of which was paid in cash and the remainder
was debt and liabilities assumed by the Company.

(3)  DEBT FINANCING

     On March 31, 1998, the Company obtained $31.0 million in mortgage financing
from Nomura Asset Capital Corporation. This mortgage financing is secured by 10
existing residences, bears interest at a rate of 7.83% and is to be repaid over
seventeen years.


(4)  NEW ACCOUNTING PRONOUNCEMENTS

     In April 1998, the AICPA issued Statement of Position No. 98-5 "Reporting
on the Costs of Start-up Activities." This Statement provides guidance on the
financial reporting of start-up activities and organization costs. It requires
costs of start-up activities and organization costs to be expensed when
incurred. This Statement is required to be adopted for fiscal years beginning
after December 15, 1998. As of March 31, 1998, the effect of this Statement
would result in a maximum charge to pre-tax net income of approximately $9.0
million, or $0.40 per diluted share, and would be reported as a cumulative
effect of a change in accounting principle.

(5)  RECLASSIFICATIONS

     Certain reclassifications have been made in the 1997 financial statements
to conform with the 1998 financial statement presentation.


                                       4
<PAGE>   7


ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
           RESULTS OF OPERATIONS

OVERVIEW

     The Company's continued rapid growth has had a significant impact on the
Company's results of operations and accounts for most of the changes in results
between the first three months of 1998 and 1997. As of March 31, 1998 and 1997,
the Company operated or managed 253 and 156 residences with aggregate capacity
of 10,717 and 6,265 residents, respectively. The Company is also constructing or
developing approximately 165 residences with aggregate capacity of 7,520 as of
March 31, 1998. For the three months ended March 31, 1998, the Company generated
operating revenue of $46.5 million, incurred an operating loss of $148,000, and
realized net income of $3.6 million.

     The Company intends to continue to pursue its growth strategy by developing
and constructing additional assisted living residences and, as appropriate
opportunities arise, acquiring assisted living operations. Newly opened assisted
living residences typically operate at a loss during the first six to 12 months
of operation, primarily due to the incurrence of certain fixed and variable
expenses in advance of the achievement of targeted rent and service fees from
the lease-up of such residences (referred to as lease-up expenses). In addition,
the development and construction of residences involve the commitment of
substantial capital over a typical six to 12 month construction period, the
consequence of which may be an adverse impact on the Company's liquidity. In the
case of acquired residences, resident turnover and increased marketing
expenditures which may be required to reposition such residences, together with
the possible disruption of operations resulting from required renovations, may
adversely impact the financial performance of such residences for a period of
time after acquisition. As a result, the Company could incur additional
operating losses in future periods as the operating expenses associated with
developing, renovating and operating residences and supporting the corporate
infrastructure necessary to manage the Company's growth strategy may only be
partially offset by operating profits generated by stabilized residences.

THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THE THREE MONTHS ENDED MARCH 31, 
1997

     Operating Revenue. Operating revenues for the three months ended March 31,
1998 were $46.5 million representing an increase of $22.8 million, or 96%, from
the $23.7 million for the comparable 1997 period. Substantially all of this
increase resulted from the addition of newly constructed residences and other
residences acquired by the Company. The Company operated 253 and 156 residences
at March 31, 1998 and 1997, respectively.

     Residence Operating Expenses. Residence operating expenses for the three
months ended March 31, 1998 increased to $29.4 million from $15.3 million in the
three-month period ended March 31, 1997 due to the increased number of
residences operated during the 1998 period. Operating expenses as a percentage
of operating revenue for the three months ended March 31, 1998 and 1997 were
63.3% and 64.4%, respectively.

     Lease Expense. Lease expense for the three months ended March 31, 1998 was
$9.0 million, compared to $5.1 million in the comparable period in 1997. Such
increase was primarily attributable to the utilization of additional
sale/leaseback financing totaling $160.7 million during 1997.

     General and Administrative Expense. General and administrative expenses for
the three months ended March 31, 1998 were $4.8 million compared to $3.4 million
for the comparable 1997 period representing a decline as a percentage of
operating revenue from 14% in 1997 to 10% in 1998. The increase in expenses was
primarily attributable to salaries, related payroll taxes and employee benefits
for additional corporate personnel retained to support the Company's actual and
anticipated growth. The Company expects that its general and administrative
expenses will continue to decrease as a percentage of operating revenue as the
Company grows and achieves additional economies of scale.


                                       5

<PAGE>   8

     Depreciation and Amortization. Depreciation and amortization for the three
months ended March 31, 1998 was $3.4 million, representing an increase of $1.8
million, or 109%, from $1.6 million for the comparable period in 1997. This
increase resulted primarily from depreciation of fixed assets and amortization
of pre-opening costs on the larger number of new residences that opened during
the 12 month period ended March 31, 1998, versus the comparable period in 1997.
The Company amortizes pre-opening costs over a twelve month period from the date
the residence opens. Upon the adoption of Statement of Position No. 98-5
"Reporting on the Costs of Start-up Activities," the Company will expense 
pre-opening costs, as defined, when they are incurred.

     Interest Expense, Net. Interest expense, net of interest income, was
$729,000 for the three months ended March 31, 1998 compared to $127,000 for the
comparable period in 1997. Gross interest expense (before interest
capitalization and interest income) for the 1998 period was $5.7
million compared to $1.6 million for the 1997 period, an increase of $4.1
million. This increase is primarily attributable to the issuance of the 7%
Convertible Subordinated Debentures due 2004 in May 1997, the issuance of the
5.25% Convertible Subordinated Debentures due 2002 in December 1997 and an
increase in the amount of mortgage financing used in the 1998 period as compared
to the 1997 period. The Company capitalized $3.1 million of interest expense in
the 1998 period compared to $1.1 million in the comparable 1997 period due to
increased construction activity in 1998. Construction in progress was $135.9
million at March 31, 1998 compared to $58.8 million at March 31, 1997. Interest
income for the 1998 period was $1.8 million as compared to $372,000 for the 1997
period. This increase was primarily due to the investment of the proceeds
received from the concurrent offering of convertible debt and equity in December
1997.

     Minority Interest in Losses of Consolidated Subsidiaries. Minority interest
in losses of consolidated subsidiaries for the three months ended March 31, 1998
was $4.5 million, representing an increase of $3.6 million from $938,000 for the
comparable period in 1997. The increase was primarily attributable to the
increase in the number of residences in lease-up that are owned by the Company
with joint venture partners. During the first quarter of 1998, the Company had
an average of 42 residences held in joint venture relationships compared to an
average of three residences in joint venture relationships during the first
quarter of 1997.

     Income Taxes. No income tax provision has been recorded for the three
months ended March 31, 1998 due to the utilization of net operating loss
carryforwards.

LIQUIDITY AND CAPITAL RESOURCES

     For the three months ended March 31, 1998 and 1997 cash flow from
operations was $793,000 and $473,000, respectively. Cash flows provided by
operations in the 1998 period were offset by cash flow deficits caused by the
significant increase in new residences opened and to the related operating
losses experienced in the lease-up phase of operations and to Sterling merger
related costs paid in the first quarter of 1998 totaling approximately $2.0
million.

     During the three months ended March 31, 1998, the Company raised
approximately $72.4 million of financing. Financing was provided through the
sale of 5.25% Convertible Subordinated Debentures due 2002 (the "5.25%
Debentures") and common stock in January 1998 which provided net proceeds of
$18.3 million and $9.2 million, respectively, $12.3 million of sale/leaseback
financing, $30.1 million of secured mortgage financing, $2.5 million of minority
partner contributions. In addition, the Company assumed existing debt of $8.2
million related to a facility acquired in March 1998.

     The above financing was used to fund $82.7 million in construction and
development activity, $8.5 million in acquisition activity, $1.8 million in
joint venture minority interest buy-outs, and operating cash flows. An
additional $24.2 million of cash and cash equivalents was used to pay down or
retire notes payable 


                                       6
<PAGE>   9


and debt during the quarter. The above activity resulted in a decrease in cash
and cash equivalents at March 31, 1998 of $11.4 million. Due primarily to the
investing and financing activity described above, the Company had working
capital of approximately $90.5 million at March 31, 1998, compared to working
capital of $129.5 million at December 31, 1997.

     To achieve its growth objectives, the Company will need to obtain
sufficient financing to fund its development, construction and
acquisition activities. The Company has plans to develop approximately $400
million of residences for the 12 month period ended March 31, 1999.
Historically, the  Company has financed its development program and
acquisitions through a combination of various forms of real estate financing
(mortgage and sale/leaseback financing), capital contributions from joint
venture partners and the sale of its securities. The Company currently has
executed non-binding letters of intent with various health care REITs for
financing commitments aggregating approximately $574 million, $382 million of
which has been utilized by the Company through March 31, 1998. In addition, the
Company has obtained $130 million of commitments from conventional financing
lenders for the purpose of providing permanent financing on stabilized
residences. As of March 31, 1998, $42.8 million of this conventional financing
has been utilized. In addition to financing construction and development costs,
the Company will require capital resources to meet its operating and working
capital needs incurred primarily through the start-up and lease-up phases of
new residences. The Company believes that its cash on hand, financing under
these commitments, other financing that the Company expects to be able to
access and equity contributions from its joint venture development partners
will be sufficient to fund its growth strategy for the next 18 months.

     The Company is obligated under its joint venture arrangements to purchase
the equity interests of its joint venture partners upon the election of such
partners upon agreed upon terms and conditions. Within the next twelve months,
the Company will become subject to such contingent purchase obligations with
respect to equity interests held by joint venture partners, exercisable at their
election, related to certain of the Company's residences. At such times as such
contingent purchase obligations are exercisable, the Company may also elect to
exercise its rights to purchase such interests. Based on a number of
assumptions, including assumptions as to the number of residences to be
developed with joint venture partners, the timing of such development, the time
at which such options will be exercised and the fair market value of such
residences at the date such options are exercised, the Company estimates that it
may require approximately $25 million to $30 million to satisfy these purchase
obligations during the 12 month period ended March 31, 1999.

IMPACT OF INFLATION

     To date, inflation has not had a significant impact on the Company.
Inflation could, however, affect the Company's results of operations due to the
Company's dependence on its senior resident population who rely on liquid assets
and relatively fixed incomes to pay for the Company's services. As a result, the
Company may not be able to increase residence service fees to account fully for
increased operating expenses. In structuring its fees, the Company attempts to
anticipate inflation levels, but there can be no assurance that the Company will
be able to anticipate fully or otherwise respond to any future inflationary
pressures. In addition, given the significant amount of construction and
development activity which the Company anticipates, inflationary pressures could
affect the Company's cost of new product deployment and financing. There can be
no assurances that financing will be available on terms acceptable to the
Company.

YEAR 2000 ISSUE

     As a result of certain computer programs being written using two digits
rather than four to define the applicable year, any of the Company's computer
systems that have date sensitive software may recognize a date using "00" as the
year 1900 rather than the year 2000 (the so-called "Year 2000 Issue"). This
could result in a system failure or miscalculations causing disruptions of
operations, including, among other things, a temporary inability to process
transactions, send invoices or engage in normal business activities.


                                       7

<PAGE>   10
     The Company is in the process of evaluating its computer systems to
determine what modification (if any) are necessary to make such systems
compatible with the year 2000 requirements. However, because many of the
Company's computer systems have been put into service within the last several
years, or are currently being replaced with year 2000 compliant systems, the
Company does not expect any such modifications to have a material adverse effect
on the Company's consolidated financial position or results of operations. There
can be no assurance, however, that the computer systems of other companies on
which the Company's systems rely will be timely modified, or that a failure to
modify such systems by another company, or modifications that are incompatible
with the Company's systems, would not have a material adverse effect on the
Company.

FORWARD-LOOKING STATEMENTS

     Any statements contained in this Form 10-Q, which are not historical facts,
are forward-looking statements that involve risks and uncertainties. The Company
cautions the reader that forward-looking statements, such as the future impact
of the Company's growth on profitability and liquidity and capital resources may
differ materially as a result of risks facing the Company. These risks include,
but are not limited to, the history of operating losses, ability to continue
growth, ability to manage rapid expansion, development and construction risks,
risks associated with acquisitions, possible need for additional financing, risk
of rising interest rates and substantial debt and operating lease payment
obligations.

ITEM 3.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     Not applicable.


                           PART II - OTHER INFORMATION


ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

     (a)   Exhibits:

           10.1     Guaranty and Suretyship Agreement by Alternative Living
                    Services, Inc. in favor of Nomura Asset Capital Corporation 
                    dated March 31, 1998.

           10.2     Loan agreement dated March 31, 1998 by and between
                    ALS-Venture I, Inc., and Nomura Asset Capital Corporation.

           11.1     Statement Regarding Computation of Net Income (Loss) Per 
                    Share

           27.1     Financial Data Schedule

     (b)   Reports on Form 8-K: The Registrant filed the following reports with 
           the Securities and Exchange Commission on Form 8-K during the 
           quarter ended March 31, 1998:

                    On January 28, 1998, the Company filed a current report on
                    Form 8-K dated December 19, 1997 reporting under Item 5
                    thereof the following transactions:

                    On January 2, 1998, the Company consummated the sale of an
                    additional $18.75 million aggregate principal amount of the
                    5.25% Debentures as a result of the exercise by the
                    underwriters of the over-allotment option granted to them
                    and, in connection therewith, the Company received net
                    proceeds (before deduction of expenses) of approximately
                    $18.3 million.

                    On January 15, 1998, the Company consummated the sale of an
                    additional 420,000 shares of common stock as a result of the
                    exercise by the underwriters of the over-allotment option
                    granted to them and, in connection therewith, the Company
                    received net proceeds (before deduction of expenses) of
                    approximately $9.2 million.


                                       8

<PAGE>   11


                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Brookfield, State of
Wisconsin, on the 13th day of May, 1998.


                                        ALTERNATIVE LIVING SERVICES, INC.      
                               
                               
                               
Date: May 13, 1998                 By:  /s/  Thomas E. Komula
                                        ---------------------------------------
                                        Thomas E. Komula
                                        Senior Vice President, Treasurer, Chief
                                        Financial Officer and Secretary
                                        (Principal Financial Officer)
                          



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