FORM 10-Q
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

(X) QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT
OF 1934

For Quarter Ended: September 30, 1997

Commission File Number: 0-14786

                                 AUTOINFO, INC.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

           DELAWARE                                   13-2867481
--------------------------------------------------------------------------------
(State or other jurisdiction of        (I.R.S. Employer Identification number)
 incorporation or organization)

            One Paragon Drive, Suite 255, Montvale, New Jersey 07645
--------------------------------------------------------------------------------
                     (Address of principal executive office)

                                 (201) 930-1800
--------------------------------------------------------------------------------
              (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 |_|

      Number of shares outstanding of the registrant's common stock as of
      November 10, 1997: 8,018,752 shares of common stock, $.01 par value.
<PAGE>

                         AUTOINFO, INC. AND SUBSIDIARIES

                                      INDEX

Part I.  Financial Information:

         Item 1. Financial Statements:                                      Page

              Condensed Balance Sheets -
              September 30, 1997 (unaudited) and December 31, 1996.............3

              Condensed Statements of Operations (unaudited)-
              Three and Nine months ended September 30, 1997 and 1996..........4

              Condensed Statements of Cash Flows (unaudited)-
              Nine months ended September 30, 1997 and 1996....................5

              Notes to Unaudited Condensed Financial Statements................6

Item 2.       Management's Discussion and Analysis of Financial
              Condition and Results of Operations..............................9

Part II. Other Information ...................................................13

Signatures ...................................................................14

Exhibit 11 ...................................................................15


                                       2
<PAGE>

                         AUTOINFO, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

                                                   September 30,   December 31, 
                                                       1997           1996
                                                   -------------   ------------
                                                     Unaudited        Audited
ASSETS

Gross automobile receivables                       $ 137,954,509   $ 81,406,679
Unearned interest                                    (33,392,893)   (19,867,745)
                                                   -------------   ------------
Net automobile receivables                           104,561,616     61,538,934
Allowance for credit losses                          (17,443,401)   (15,725,390)
                                                   -------------   ------------
Net automobile receivables after allowance for
  credit losses                                       87,118,215     45,813,544

Cash                                                   1,623,947      4,307,038
Restricted cash                                        4,446,860      6,380,437
Short-term investments                                 3,190,479      4,892,199
Fixed assets, net                                      2,236,339      1,725,774
Goodwill and other intangibles, net                    2,576,983      2,906,587
Other assets                                           8,334,343      8,425,502
                                                   -------------   ------------

                                                   $ 109,527,166   $ 74,451,081
                                                   =============   ============

LIABILITIES AND STOCKHOLDERS EQUITY

Liabilities:

  Revolving lines of credit                        $  67,034,902   $ 18,082,472
  Automobile receivables backed notes                 17,363,894     31,611,989
  Subordinated notes and other debt                   11,145,485     10,710,330
  Accounts payable and accrued liabilities             2,378,203      1,718,901
                                                   -------------   ------------
      Total liabilities                               97,922,484     62,123,692
                                                   -------------   ------------

Stockholder's Equity
  Common stock - authorized 20,000,000 shares
    $.01 par value; issued and outstanding -
    8,018,752 as of September 30, 1997 and
    7,954,752 as of December 31, 1996                     80,188         79,548
  Additional paid-in capital                          18,260,642     18,171,282
  Officer note receivable                               (466,797)      (466,797)
  Deferred compensation under stock bonus plan          (372,309)      (385,930)
  Retained earnings (deficit)                         (5,897,042)    (5,070,714)
                                                   -------------   ------------
      Total stockholder's equity                      11,604,682     12,327,389
                                                   -------------   ------------

                                                   $ 109,527,166   $ 74,451,081
                                                   =============   ============

              See notes to condensed unaudited financial statements


                                       3
<PAGE>

                         AUTOINFO, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF OPERATIONS
                                   (Unaudited)

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

                                        1997           1996           1997          1996
                                    ------------   ------------   ------------   -----------
<S>                                 <C>            <C>            <C>            <C>        
Revenues:
  Interest and other finance
    revenue                         $ 14,595,699   $  8,135,400   $  5,200,869   $ 3,057,362
  Investment income                      282,516        801,917         68,979       286,898
  Long distance telephone services       251,228        399,725         73,582       119,576
                                    ------------   ------------   ------------   -----------

    Total revenues                    15,129,443      9,337,042      5,343,430     3,463,836
                                    ------------   ------------   ------------   -----------

Costs and expenses:
  Interest expense                     5,845,726      2,678,941      2,297,947     1,008,410
  Operating expenses                   7,662,857      4,679,836      2,832,216     1,922,315
  Depreciation & amortization            499,165        814,727        179,581       325,604
  Provision for credit losses          5,317,000      2,626,000      5,317,000     2,626,000
  Restructuring charge                   617,000             --        617,000            --
  Unusual item-provision for
    credit losses on acquired
    automobile receivables                    --      4,300,000             --     2,300,000
                                    ------------   ------------   ------------   -----------
    Total operating expenses          19,941,748     15,099,504     11,243,744     8,182,329
                                    ------------   ------------   ------------   -----------

Loss from continuing operations       (4,812,305)    (5,762,462)    (5,900,314)   (4,718,493)

Income tax benefit                    (3,985,977)    (2,129,640)    (3,264,307)   (1,623,173)
                                    ------------   ------------   ------------   -----------

Net loss                            $   (826,328)  $ (3,632,822)  $ (2,636,007)  $(3,095,320)
                                    ============   ============   ============   ===========

Net loss per share                  $       (.10)  $       (.46)  $       (.32)  $      (.39)
                                    ============   ============   ============   ===========

Weighted average number of
  common and common                 ------------   ------------   ------------   -----------
  equivalent shares                    8,018,752      7,918,329      8,018,752     8,000,615
                                    ------------   ------------   ------------   -----------
</TABLE>

              See notes to condensed unaudited financial statements


                                       4
<PAGE>

                        AUTOINFO, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)

                                                       Nine Months Ended
                                                         September 30,
                                                      1997           1996
                                                  ------------   ------------
Cash flows from operating activities:
Net loss                                          $   (826,328)  $ (3,632,822)
Adjustments to reconcile net loss to net cash
  (used in) operating activities:
  Depreciation and amortization                        685,166        814,727
  Amortization of deferred compensation                 13,621         13,621
  Provision for credit losses                        5,317,000      6,926,000
Changes in assets and liabilities:
  Automobile receivables, net                      (46,621,671)   (23,861,673)
  Other assets                                          91,159     (3,233,686)
  Accounts payable and accrued liabilities             659,302       (649,339)
                                                  ------------   ------------

Net cash (used in) operating activities            (40,681,751)   (23,623,172)
                                                  ------------   ------------

Cash flows from investing activities:
  Capital expenditures                                (866,127)    (1,934,886)
  Proceeds from redemptions of short term
    investments                                     11,950,692     22,758,488
  Purchases of short term investments              (10,248,972)    (6,742,082)
                                                  ------------   ------------
Net cash provided by investing activities              835,593     14,081,520
                                                  ------------   ------------

Cash flows from financing activities:
  Increase in borrowings, net                       35,139,490      8,275,948
  Issuance of common stock                              90,000        390,375
  Decrease in restricted cash                        1,933,577             --
                                                  ------------   ------------
Net cash provided by financing activities           37,163,067      8,666,323
                                                  ------------   ------------

Net decrease in cash                                (2,683,091)      (875,329)
Cash at beginning of period                          4,307,038        964,842
                                                  ------------   ------------

Cash at end of period                             $  1,623,947   $     89,513
                                                  ============   ============

              See notes to condensed unaudited financial statements


                                       5
<PAGE>

                        AUTOINFO, INC. AND SUBSIDIARIES
                NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

Note 1. - Business and Summary of Significant Accounting Policies

Business

The Company's primary business is to purchase non-prime automobile retail
installment contracts from new and used automobile dealers. The Company, under
the operating name CarLoanCo, services these dealers by providing specialized
financing programs for buyers who typically have impaired credit histories and
are unable to access traditional sources of available consumer credit. In
December 1995, the Company acquired the operating assets of FALK Finance Company
("FFC"), a Norfolk Virginia based specialty financial services company. The
Company also provides long distance telephone communication services which are
marketed through an independent commissioned sales force.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and
its subsidiaries, all of which are wholly-owned. All significant intercompany
balances and transactions have been eliminated in consolidation.

Automobile Receivables

Automobile receivables represent retail installment sales contracts purchased
from automobile dealers at discounts ranging up to 20%.

Allowance for Credit Losses

The Company established an allowance for credit losses in the FFC acquired
portfolio as of the date of acquisition based upon an evaluation of a number of
factors including prior loss experience, contractual delinquencies, the value of
underlying collateral and other factors. At the time of the purchase of
installment contracts from dealers an allowance for credit losses is established
based on an analysis of similar factors. The allowance is periodically evaluated
for adequacy based upon a review of credit loss experience, delinquency trends,
static pool loss analysis and an estimate of future losses inherent in the
existing finance receivable portfolio. Subsequent to the purchase of loans, a
provision for losses, if any, is charged to income in order to maintain the
allowance at an adequate level. The Company charges the allowance for loss
account at the time a customer receivable is deemed uncollectable. Any reduction
in the required allowance will be amortized to income prospectively as an
adjustment in the yield on the related loans.

The estimate of the allowance for credit losses requires a high degree of
judgment based upon, among other things, the inherent risk associated with the
portfolio of loans being purchased from dealers. Changes in estimates and
additional losses on portfolios could develop in the future based on changes in
economic factors and other circumstances and such changes could be significant.
The Company estimates and records losses as they become apparent, estimable and
probable.

Concentration of Credit Risks

The Company's primary credit risk relates to lending to individuals who cannot
obtain traditional forms of financing. The Company is currently acquiring
automobile receivables in 12 states and, accordingly, does not believe that its
business is subject to credit risk with respect to geographic concentration.


                                       6
<PAGE>

Repossessed Vehicles Held for Sale

The Company repossesses the collateral when a determination is made that
collection efforts are unlikely to be successful. The value of a repossessed
vehicle is based upon an estimate of the net realizable amount upon liquidation.
As of September 30, 1997, there were 651 repossessed vehicles held for resale
with an aggregate value of approximately $2,146,000.

Revenue Recognition

The Company recognizes interest income from automobile receivables on the
interest method. The accrual of interest income is suspended when a loan is
ninety days contractually delinquent. All discounts on the purchase of
automobile receivables from dealers are held in reserve and are considered to
cover future anticipated credit losses. Fees received for the purchase of
automobile receivables are deferred and amortized to interest income over the
contractual lives of the contracts using the interest method.

Short-Term Investments

Debt and equity securities used as part of the Company's investment management
that may be sold in response to cash needs, changes in interest rates, and other
factors have been classified as securities available for sale. Such securities
are reported at cost which approximates fair value and have maturities of less
than one year and included:

                                                September 30,     December 31,
                                                    1997              1996
                                                -------------     ------------
Common stock and bond funds                      $1,626,694        $2,883,524
Money market instruments                          1,563,785           665,619
Municipal bonds                                          --         1,343,056
                                                -------------     ------------
                                                 $3,190,479        $4,892,199
                                                =============     ============

Gains and losses on disposition of securities are recognized on the specific
identification method in the period in which they occur. Unrealized gains and
losses, if material, would be excluded from earnings and reported as a separate
component of stockholders' equity on an after-tax basis. During the three and
nine month periods ended September 30, 1997 and 1996, gains and losses arising
from the disposition of marketable securities as well as unrealized gains and
losses were not material.

Fixed Assets

Depreciation of fixed assets is provided on the straight-line method over the
estimated useful lives of the related assets which range from three to five
years.

Goodwill and Other Intangibles

The excess of cost over the fair value of net assets acquired is allocated to
goodwill and other intangibles and is being amortized using the straight-line
method over periods of up to twenty years. In March 1995, the Financial
Accounting Standards Board issued SFAS No. 121 "Accounting for the Impairment of
Long-Lived Assets to Be Disposed Of." The pronouncement is effective for fiscal
years beginning after December 15, 1995. This statement requires that long-lived
assets and certain identifiable intangibles to be held and used by an entity be
reviewed for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable. The Company
currently uses methods that are consistent with SFAS No. 121 to evaluate the
carrying amount of goodwill and other intangibles including comparing estimated
future cash flows identified with each long-lived asset group. For purposes of
such comparison, portions of unallocated excess of cost over net assets acquired
were attributed to related long-lived assets and identifiable intangible assets
based upon the relative fair values of such 


                                       7
<PAGE>

assets at acquisition. In the fourth quarter of 1996, the Company determined
that certain components of goodwill and other intangible assets were impaired
resulting in a charge to operations of $11,193,000.

Net Income (Loss) Per Share

Net income (loss) per share of common stock is based on the weighted average
number of shares of common stock and common stock equivalents outstanding during
the period. The net income (loss) per share and the weighted average number of
common and common equivalent shares represent primary earnings per share data.
Fully diluted earnings per share is not presented since its effect is not
significant.

Use of Estimates

The preparation of these financial statements in conformity with generally
accepted accounting principles requires management to make certain estimates and
assumptions. These estimates and assumptions affect the reported amounts of
assets, liabilities and contingent liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the periods
presented. Management estimates that are particularly sensitive to change relate
to the determination of the adequacy of the allowance for credit losses on
automobile receivables. The Company believes that all such assumptions are
reasonable and that all estimates are adequate, however, actual results could
differ from those estimates.

Note 2 - General

The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and the instructions for Form 10-Q and Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes required
by generally accepted accounting principles for complete financial statements.
In the opinion of management, all adjustments consisting of normal recurring
accruals considered necessary for a fair presentation have been included.
Operating results for the three and nine months ended September 30, 1997 and
1996 are not necessarily indicative of the results that may be expected for a
full fiscal year. For further information, refer to the financial statement and
footnotes thereto included in the Company's report on Form 10-K for the year
ended December 31, 1996.

Note 3 - Liquidity and Capital Resources

In October 1996, the Company issued $36.3 million of securitized notes backed by
$40.3 million of automobile receivables to a group of institutional investors in
a private placement transaction. These notes were issued in two classes, $ 34.3
million of 6.53% Class "A" notes rated "AAA" by Standard & Poor's Rating Group
and "Aaa" by Moody's Investors Service and $ 2.0 million of 11.31% Class "B"
notes rated "BB" by Standard & Poor's Rating Group. The Class "A" notes were
credit enhanced with an insurance policy issued by MBIA Insurance Corporation.
The proceeds from the securitization were used to fund cash reserve accounts
($5.6 million) and the balance was used to reduce the amount outstanding under
the Company's senior credit facility. Among other provisions, the notes require
the maintenance of certain performance standards with respect to the portfolio
of loan contracts securitized and certain overall financial considerations of
the Company as a whole, including not realizing a net loss from operations in
any two consecutive quarters and maintenance of minimum tangible net worth, as
defined, of $7 million. At September 30, 1997 the Company was in compliance with
the requirement for minimum tangible net worth. However, as a result of the
losses incurred in the three month period ended September 30, 1997 which were
primarily related to the restructuring charge ($617,000) and the provision for
credit losses ($5,317,000), the Company did not meet certain performance
standards which, if not met in the quarter ended December 31, 1997, would
constitute an event of default.

In December 1996, the Company entered into a financing agreement with a lender
which provides for a $100 million line of credit to be used for the funding of
the acquisition of non-prime automobile receivables. This facility 


                                       8
<PAGE>

provides for borrowings at LIBOR plus 300 basis points and replaced the
Company's existing $42 million facility. Among other provisions, this facility
requires the Company to maintain tangible net worth, as defined, of $10 million
and is cancelable in the event of a material adverse change in the Company's
business. At September 30, 1997 the Company, as a result of the losses incurred
in the three month period ended September 30, 1997 which were primarily related
to the restructuring charge ($617,000) and the provision for credit losses
($5,317,000), did not meet the tangible net worth standard by approximately
$150,000. In addition, the Company was unable to satisfy its October 15, 1997
funding requirement resulting from defaulted and ineligible receivab les.
However, the lender did not, and has not, declared a default under the
agreement. The Company has provided the lender with additional collateral
including an interest in the anticipated cash flows upon the satisfaction of the
Class A and Class B securitized notes issued in October 1996 and any income tax
refund for the tax year ended May 31, 1998.

The Company is attempting to issue approximately $40 million of securitized
notes backed by approximately $48 million of automobile receivables. However,
several factors including adverse market conditions as well as the performance
of the Company's automobile receivables has delayed the consummation of this
transaction. The Company can not, at this time, determine the likelihood of
consummating this transaction on terms and conditions which would allow the
Company to repay the existing outstanding debt on these automobile receivables.

The Company's ability to continue to acquire automobile receivables as well as
plan for future expansion is directly related to its ability to secure required
capital. The Company has demonstrated the ability to secure warehouse lines of
credit, issue receivable secured notes and obtain subordinated debt. The Company
plans to continue to meet its capital needs through the cash flow generated from
the payment of principal and interest on its outstanding automobile portfolio,
the utilization of its senior credit facility, the issuance of receivable backed
notes and the issuance of subordinated debt instruments. However, the Company's
ability to secure required capital has been hampered based upon the inability to
consummate the sale of securitized notes, as described above, as well as the
uncertain status of the Company's primary credit facility. As of September 30,
1997, $32.9 million is available under the Company's senior credit facility.
Failure to obtain additional funding sources will materially restrict the
Company's future business activities and could, in the future, require the
Company to sell certain of the Loans in its Portfolio to meet its liquidity
requirements.


                                       9
<PAGE>

                         AUTOINFO, INC. AND SUBSIDIARIES

                     Management's Discussion and Analysis of
                  Financial Condition And Results of Operations

Forward Looking Statements

Certain statements made in this Quarterly Report on Form 10-Q are
"forward-looking statements" (within the meaning of the Private Securities
Litigation Reform Act of 1995) regarding the plans and objectives of management
for future operations. Such statements involve known and unknown risks,
uncertainties and other factors that may cause actual results, performance or
achievements of the Company to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. The forward-looking statements included herein are based on current
expectations that involve numerous risks and uncertainties. The Company's plans
and objectives are based, in part, on assumptions involving the continued
expansion of business. Assumptions relating to the foregoing involve judgments
with respect to, among other things, future economic, competitive and market
conditions and future business decisions, all of which are difficult or
impossible to predict accurately and many of which are beyond the control of the
Company. Although the Company believes that its assumptions underlying the
forward-looking statements are reasonable, any of the assumptions could prove
inaccurate and, therefore, there can be no assurance that the forward-looking
statements included in this Report will prove to be accurate. In light of the
significant uncertainties inherent in the forward-looking statements included
herein particularly in view of the Company's early stage operations, the
inclusion of such information should not be regarded as a representation by the
Company or any other person that the objectives and plans of the Company will be
achieved.

General

The Company, since December 1995, has been a specialized consumer finance
company that acquires and services automobile receivables from automobile
dealers selling new and used vehicles to non-prime customers.

Results of Operations

Three and Nine Months Ended September 30, 1997 and 1996

Revenues

Revenues for the three month periods ended September 30, 1997 and 1996 were
derived from the interest and other finance revenue ($5,201,000 and $ 3,057,000,
respectively), investment income ($69,000 and $287,000, respectively) and the
long-distance telephone service business ($74,000 and $120,000, respectively).
Revenues for the nine month periods ended September 30, 1997 and 1996 were
derived from the interest and other finance revenue ($14,596,000 and $8,135,000,
respectively), investment income ($283,000 and $802,000, respectively) and the
long-distance telephone service business ($251,000 and $400,000, respectively).
The increase in the interest and other finance revenue is directly related to
the growth in the Company's portfolio of automobile receivables from $52,445,000
to $ 104,562,000. The decrease in investment income is the result of the
investment by the Company in the growth of the automobile receivables portfolio.

Net Interest Income on Automobile Installment Contracts Receivable

The Company's principal revenue source is the net interest income, or net
spread, earned on its automobile installment contracts receivable. This net
spread is the differential between interest income received on loans receivable
and the interest expense on related loans payable. The following table
summarizes the pertinent data on 


                                       10
<PAGE>

the Company's automobile contracts receivable portfolio for the three and nine
month periods ended September 30, 1997 and 1996:

<TABLE>
<CAPTION>
                            Nine Months Ended September 30,    Three Months Ended September 30,
                                 1997              1996              1997           1996
                            -------------      ------------    --------------   ---------------
<S>                          <C>               <C>               <C>            <C>         
Average loans receivable     $ 84,389,000      $ 41,687,000      $101,718,000   $ 49,248,000
                            -------------      ------------    --------------   ---------------
Average loans payable          77,871,000        32,912,000        91,973,000     37,198,000
                            -------------      ------------    --------------   ---------------
                                                                
Interest income              $ 13,226,000      $  7,816,000      $  4,964,000   $  2,992,000
Interest expense                5,730,000         2,565,000         2,258,000        970,000
                            -------------      ------------    --------------   ---------------
Net interest  income         $  7,496,000      $  5,251,000      $  2,706,000   $  2,022,000
                            -------------      ------------    --------------   ---------------
                                                                
Yield on loans (1)                   20.9%             24.9%             19.5%          24.3%
Cost of funds                         9.8%             10.4%              9.8%          10.4%
                            -------------      ------------    --------------   ---------------
Net interest spread                  11.1%             14.5%              9.7%          13.9%
                            -------------      ------------    --------------   ---------------
                                                                
Net interest margin (2)              11.8%             16.7%             10.6%          16.4%
                            -------------      ------------    --------------   ---------------
</TABLE>

      (1)   Percentages are presented on an annualized basis

      (2)   Net interest margin is net interest income divided by average loans
            outstanding

Costs and Expenses

Interest expense for the three month periods ended September 30, 1997 and 1996
($2,298,000 and $1,008,000, respectively) and for the nine month periods ended
September 30, 1997 and 1996 ($5,846,000 and $2,679,000, respectively) was
primarily related to the debt outstanding under the Company's senior credit
facility, automobile receivables backed notes and subordinated debt. The
increase is directly related to the increase in total outstanding debt utilized
to support the growth of the automobile receivables portfolio.

Operating expenses for the three months ended September 30, 1997 and 1996
($2,832,000 and $1,922,000, respectively) and for the nine months ended
September 30, 1997 and 1996 ($ 7,663,000 and $4,680,000, respectively) consisted
primarily of the operating expenses of the non-prime automobile finance business
and corporate overhead. The increase is directly related to the opening of the
Northeast Region operating center in July 1996 and the general growth of the
Company's automobile finance business.

Depreciation and amortization expense for the three months ended September 30,
1997 and 1996 ($180,000 and $326,000, respectively) and for the nine months
ended September 30, 1997 and 1996 ($ 499,000 and $815,000, respectively)
consisted primarily of the depreciation of fixed assets and the amortization of
goodwill and other intangible assets associated with the acquisition of FFC in
December 1995. The decrease is the result of the write-off of goodwill in the
fourth quarter of 1996.

The provision for credit losses in the quarters ended September 30, 1997 and
1996 ($5,317,000 and $2,626,000, respectively) is the result of the Company
recording additional credit losses based upon the quality and performance of its
automobile receivable portfolio.

The restructuring charge in the quarter ended September 30, 1997 ($617,000),
which includes severance and other operating costs as well as the write-off of
certain assets, is the result of the Company's decision to consolidate
operations in its Norfolk, Virginia operating center.


                                       11
<PAGE>

The unusual item - provision for credit losses on acquired automobile
receivables in the three and nine months ended September 30, 1996 was the result
of the Company recording additional credit losses of $2,300,000 and $4,300,000,
respectively, on the portfolio acquired from FFC in December 1995.

Loss from Operations

Loss from operations for the three month periods ended September 30, 1997 and
1996 was ($5,900,000) and ($4,718,000), respectively. Loss from operations for
the nine month periods ended September 30, 1997 and 1996 was ($4,812,000) and
($5,762,000), respectively. Income tax benefits for the three month periods
ended September 30, 1997 and 1996 were $3,264,000 and $1,623,000, respectively.
Income tax benefits for the nine month periods ended September 30, 1997 and 1996
were $3,986,000 and $2,130,000, respectively. Income tax benefits are primarily
the result of timing differences in the treatment of net chargeoffs for tax
purposes. The Company has the ability to carryback tax basis losses and recover
taxes paid for the tax year ended May 31, 1995. Based upon losses incurred
through the period ended September 30, 1997 and the projected tax basis losses
for the balance of the tax year ended May 31, 1998, the Company anticipates full
recovery of taxes previously paid and has recorded this benefit in the current
period.

Automobile Receivables

The following table provides information regarding the Company's allowance for
credit losses as of September 30, 1997 and December 31, 1996:

                                                    September 30,   December 31,
                                                         1997          1996
                                                    ----------------------------
Allowance for credit losses                          $17,443,000   $ 15,725,000
Percentage of outstanding automobile receivables        16.7 %         25.5%

The following table summarizes the Company's delinquent accounts that were more
than 60 days delinquent as of September 30, 1997 and December 31, 1996:

                            September 30,              December 31,
                                1997                      1996
                            -----------------------------------------------
                               Amount        % (1)       Amount        %(1)
                            -----------------------------------------------
60 to 89 days delinquent     $4,339,000       3.2%      $3,290,000     4.1%
90 days or more delinquent    3,512,000       2.5%       1,739,000     2.2%
                            -----------------------------------------------

Total delinquent loans       $7,851,000       5.7%      $5,029,000     6.3%
                            ===============================================

      (1) All percentages are based on gross loans outstanding and are presented
on an annualized basis.

Management has reviewed its past due loans and repossessed collateral as of
September 30, 1997 and, in management's opinion, the allowance for credit losses
is adequate to absorb current and future losses in the portfolio.

Liquidity and Capital Resources

Since its entry into the Non-Prime Automobile industry in December 1995, the
Company has funded its operations with payments received from automobile
receivables, borrowings under senior credit facilities and the issuance of asset
backed secured notes.

In October 1996, the Company issued $36.3 million of securitized notes backed by
$40.3 million of automobile receivables to a group of institutional investors in
a private placement transaction. These notes were issued in two 


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<PAGE>

classes, $34.3 million of 6.53% Class "A" notes rated "AAA" by Standard &
Poor's Rating Group and "Aaa" by Moody's Investors Service and $ 2.0 million of
11.31% Class "B" notes rated "BB" by Standard & Poor's Rating Group. The Class
"A" notes were credit enhanced with an insurance policy issued by MBIA Insurance
Corporation. The proceeds from the securitization were used to fund cash reserve
accounts ($5.6 million) and the balance was used to reduce the amount
outstanding under the Company's senior credit facility. Among other provisions,
the notes require the maintenance of certain performance standards with respect
to the portfolio of loan contracts securitized and certain overall financial
considerations of the Company as a whole, including not realizing a net loss
from operations in any two consecutive quarters and maintenance of minimum
tangible net worth, as defined, of $7 million. At September 30, 1997 the Company
was in compliance with the requirement for minimum tangible net worth. However,
as a result of the losses incurred in the three month period ended September 30,
1997 which were primarily related to the restructuring charge ($617,000) and the
provision for credit losses ($5,317,000), the Company did not meet certain
performance standards which, if not met in the quarter ended December 31, 1997,
would constitute an event of default.

In December 1996, the Company entered into a financing agreement with a lender
which provides for a $100 million line of credit to be used for the funding of
the acquisition of non-prime automobile receivables. This facility provides for
borrowings at LIBOR plus 300 basis points and replaced the Company's existing
$42 million facility. Among other provisions, this facility requires the Company
to maintain tangible net worth, as defined, of $10 million and is cancelable in
the event of a material adverse change in the Company's business. At September
30, 1997 the Company, as a result of the losses incurred in the three month
period ended September 30, 1997 which were primarily related to the
restructuring charge ($617,000) and the provision for credit losses
($5,317,000), did not meet the tangible net worth standard by approximately
$150,000. In addition, the Company was unable to satisfy its October 15, 1997
funding requirement resulting from defaulted and ineligible receivab les.
However, the lender did not, and has not, declared a default under the
agreement. The Company has provided the lender with additional collateral
including an interest in the anticipated cash flows upon the satisfaction of the
Class A and Class B securitized notes issued in October 1996 and any income tax
refund for the tax year ended May 31, 1998.

The Company is attempting to issue approximately $40 million of securitized
notes backed by approximately $48 million of automobile receivables. However,
several factors including adverse market conditions as well as the performance
of the Company's automobile receivables has delayed the consummation of this
transaction. The Company can not, at this time, determine the likelihood of
consummating this transaction on terms and conditions which would allow the
Company to repay the existing outstanding debt on these automobile receivables.

The Company has outstanding $10.2 million of subordinated debt of which
approximately $700,000 is due in January 1998. Of this amount, $8.2 million of
12% notes was included with the liabilities assumed with the acquisition of FALK
Finance Company, Inc. ("FFC") in December 1995 and $2.0 million of 7.55% notes
was issued by the Company in 1994.

The Company's liquid assets amounted to $4.8 million as of September 30, 1997.
In addition, the Company had $4.4 million in Restricted Cash Reserve accounts
established pursuant to the Indenture Agreement executed in conjunction with the
issuance of Secu ritized Notes issued pursuant to the Private Placement
Memorandum dated October 11, 1996.

The total amount of debt outstanding as of September 30, 1997 and December 31,
1996 was $95.5 million and $60.4 million, respectively. This following table
presents the Company's debt instruments and weighted average interest rates on
such instruments as of September 30, 1997 and December 31, 1996, respectively:


                                       13
<PAGE>

                                       September 30, 1997      December 31, 1996
                                       ------------------      -----------------
                                                  Weighted              Weighted
                                                   Average               Average
                                      Balance       Rate      Balance     Rate
                                      -------       ----      -------     ----

Revolving lines of credit              $67.0        8.66%      $18.1      8.75%
Automobile receivable backed notes     $17.4        6.93%      $31.6      6.75%
Subordinated debt                      $10.2       11.14%      $10.2     11.14%
Other                                  $ 0.9        8.5%       $ 0.5      8.5%

The Company's ability to continue to acquire automobile receivables as well as
plan for future expansion is directly related to its ability to secure required
capital. The Company has demonstrated the ability to secure warehouse lines of
credit, issue receivable secured note s and obtain subordinated debt. The
Company plans to continue to meet its capital needs through the cash flow
generated from the payment of principal and interest on its outstanding
automobile portfolio, the utilization of its senior credit facility, the
issuance of receivable backed notes and the issuance of subordinated debt
instruments. However, the Company's ability to secure required capital has been
hampered based upon the inability to consummate the sale of securitized notes,
as described above, as well as the uncertain status of the Company's primary
credit facility. As of September 30, 1997, $32.9 million is available under the
Company's senior credit facility. Failure to obtain additional funding sources
will materially restrict the Company's future business activities and could, in
the future, require the Company to sell certain of the Loans in its Portfolio to
meet its liquidity requirements.

The Company is primarily engaged in the acquisition of automobile receivables.
It finances this acquisition program through the utilization of available lines
of credit and other forms of debt. Accordingly, an increase in the cost of
borrowing could adversely impact the results of operations by impacting the
spread between interest earned on existing automobile receivables and the cost
of borrowings which, to some degree, are variable. Inflation and changing prices
had no material impact on revenues or the results of operations for the three
and nine months ended September 30, 1997.


                                       14
<PAGE>

                         AUTOINFO, INC. AND SUBSIDIARIES
                           Part II - OTHER INFORMATION

Item 1 - 3:  Inapplicable

Item 4:      Submission of Matters to a Vote of Security Holders:  None

Item 5:      Inapplicable

Item 6 (a):  The following exhibits are filed with this report:
             Exhibit 11 - Calculation of Earnings Per Share

Item 6 (b):  No reports on Form 8-K were filed by the Registrant during the 
             quarter for which this report is filed.


                                       15
<PAGE>

                                   SIGNATURES

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

                                 AUTOINFO, INC.
                                  (Registrant)

                                /s/ Scott Zecher
               --------------------------------------------------
                                  Scott Zecher
                       President & Chief Executive Officer


                            /s/ William I. Wunderlich
               --------------------------------------------------
                              William I. Wunderlich
                       Treasurer, Secretary and Principal
                               Financial Officer

Date:  November 13, 1997


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