U.S. SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549
                                   FORM 10-QSB

(Mark One) |X|  QUARTERLY  REPORT  UNDER  SECTION 13 OR 15(d) OF THE  SECURITIES
EXCHANGE  ACT OF 1934  FOR  THE  QUARTERLY  PERIOD  ENDED  MARCH  31,  2000  |_|
TRANSITION  REPORT UNDER SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE ACT OF
1934 FOR THE TRANSITION PERIOD FROM _________ TO __________

                         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 Identification No.)
incorporation or organization)

        8180 Greensboro Drive, McLean, VA                 22102
---------------------------------------------- ---------------------------------
       Address of principal executive offices)         (Zip Code)

                                 (703) 883-9757

                           (Issuer's telephone number)

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

Yes       X       No
          -------         --

The number of shares  outstanding of the issuer's common stock, no par value, as
of May 10, 2000, was 2,324,616.

                  Transitional Small Business Disclosure Format

    (check one): Yes             No      X



<PAGE>


                         ALLSTATE FINANCIAL CORPORATION

                                   FORM 10-QSB

                                                                           INDEX

                                                                            Page
                                                                          Number

Part I - Financial Information
        Item 1 - Financial Statements

                Consolidated Condensed Balance Sheets at March 31, 2000
                        (unaudited)and December 31, 1999                       3
                Consolidated Condensed Statements of Operations for the Three
                        Months Ended March 31, 2000 and 1999 (unaudited)       4
                Consolidated Condensed Statements of Shareholders' Equity for
                        the Year Ended December 31, 1999 and Three Months Ended
                        March 31, 2000 (unaudited)                             5
                Consolidated Condensed Statements of Cash Flows for the Three
                        Months Ended March 31, 2000 and 1999 (unaudited)       6
                Notes to Consolidated Financial Statements (unaudited)      7-10

        Item 2 - Management's Discussion and Analysis or Plan
                       of Operations and Financial Condition               10-15


Part II - Other Information

        Item 1 - Legal Proceedings                                            16

        Item 3 - Defaults Upon Senior Securities                              16

        Item 6- Exhibits and Reports on Form 8-K                             16

 Signatures                                                                   17


<PAGE>




                         PART I - FINANCIAL INFORMATION

                ALLSTATE FINANCIAL CORPORATION AND SUBSIDIARIES
                     CONSOLIDATED CONDENSED BALANCE SHEETS


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


                                                                                         March 31, 2000      December 31,1999

                                                                                           (Unaudited)
                                            ASSETS

Cash                                                                                        $ 210,934              $ 353,962

Purchased receivables                                                                       2,088,180              2,110,454
Advances receivable                                                                         8,379,465              9,329,366
                                                                                            ---------              ---------

                                                                                           10,467,645             11,439,820

Less: Allowance for credit losses                                                         (4,323,100)            (4,316,399)
                                                                                          -----------            -----------

Total receivables - net                                                                     6,144,545              7,123,421
                                                                                            ---------              ---------

Furniture, fixtures and equipment, net                                                        125,538                151,375

Other assets                                                                                   32,610                 43,643
                                                                                               ------                 ------

TOTAL ASSETS                                                                               $6,513,627             $7,672,401
                                                                                           ==========             ==========

                          LIABILITIES AND SHAREHOLDERS' EQUITY

Accounts payable and accrued expenses                                                        $918,339             $1,009,921

Notes payable                                                                                 619,900              1,366,051

Convertible subordinated notes                                                              4,954,000              4,954,000
                                                                                            ---------              ---------

TOTAL LIABILITIES                                                                           6,492,239              7,329,972
                                                                                            ---------              ---------



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,
   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                                                           (4,964,642)            (4,967,472)

  Accumulated Deficit                                                                    (13,928,152)           (13,604,281)
                                                                                         ------------           ------------

TOTAL SHAREHOLDERS' EQUITY                                                                     21,388                342,429
                                                                                               ------                -------
                                                                                          $ 6,513,627            $ 7,672,401
                                                                                          ===========            ===========

</TABLE>
See Notes to Consolidated Financial Statements


<PAGE>


                ALLSTATE FINANCIAL CORPORATION AND SUBSIDIARIES
                CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
<S>                                                                                 <C>                      <C>

THREE MONTHS ENDED:                                                                       March 31, 2000       March 31, 1999
------------------------------------------------------------------------------      --------------------     ----------------
  REVENUE


    Earned discounts and interest                                                              $131,950            $1,614,471

    Fees and other revenue                                                                       71,763               181,574
                                                                                                 ------               -------
      TOTAL REVENUE                                                                             203,713             1,796,045
                                                                                                -------             ---------

  EXPENSES


    Compensation and fringe benefits                                                            168,897               610,013

    General and administrative                                                                  217,342               405,293

    Interest expense                                                                            141,345               375,574

    Provision for credit losses                                                                      -                     -
                                                                                            ------------           -----------

      TOTAL EXPENSES                                                                            527,584             1,390,880
                                                                                                -------             ---------

  (LOSS) INCOME  BEFORE INCOME TAX EXPENSE                                                    (323,871)               405,165



  INCOME TAX EXPENSE                                                                                  -               149,911
                                                                                          -------------               -------



  NET  (LOSS) INCOME                                                                        $ (323,871)              $255,254
                                                                                            ===========              ========

  NET  (LOSS) INCOME PER COMMON SHARE

    Basic and  Diluted                                                                        $  (0.14)               $  0.11
                                                                                              =========               =======

  WEIGHTED AVERAGE NUMBER OF SHARES

      OUTSTANDING


    Basic and Diluted                                                                         2,324,616             2,327,016
</TABLE>

See Notes to Consolidated Financial Statements



                      [THIS SPACE INTENTIONALLY LEFT BLANK]


<PAGE>


                ALLSTATE FINANCIAL CORPORATION AND SUBSIDIARIES
           CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY
     YEAR ENDED DECEMBER 31, 1999 AND THE THREE MONTHS ENDED MARCH 31, 2000


<TABLE>
<CAPTION>

------------------------------------ -------------- ----------------- ------------------ ------------------- -----------------
                                                       Additional
                                        Common          Paid in           Treasury            Retained
                                         Stock          Capital             Stock             Earnings            Total
------------------------------------ -------------- ----------------- ------------------ ------------------- -----------------
<S>                                  <C>            <C>               <C>                <C>                 <C>
Balance- January 1, 1999                   $40,000       $18,874,182         $4,986,520          $3,646,809       $17,574,471

Amortization of Treasury Stock

Costs                                                                            15,050                                15,050

Conversion of Convertible
Subordinated Notes to 533 shares
of common stock                                                                   3,998                                 3,998

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
                                           =======       ===========       ============       =============         =========

Amortization of treasury stock
acquisition costs (unaudited)
                                                                                  2,803                                 2,803

Net Income (unaudited)                                                        (323,871)                             (323,871)
                                                                              ---------                             ---------

Balance - March 31, 2000
(unaudited)                                $40,000       $18,874,182       $(4,964,642)       $(13,928,152)           $21,388
                                           =======       ===========       ============       =============           =======


See Notes to Consolidated Financial Statements

                      [THIS SPACE INTENTIONALLY LEFT BLANK]

</TABLE>

<PAGE>
                ALLSTATE FINANCIAL CORPORATION AND SUBSIDIARIES
                CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                  (Unaudited)

<TABLE>
<CAPTION>
<S>                                                                                     <C>                    <C>
Three Months Ended:                                                                         March 31, 2000      March 31, 1999
CASH FLOWS FROM OPERATING ACTIVITIES:
      Net (Loss) Income                                                                       $ (323,871)           $ 255,254
      Adjustments to reconcile net income
           to cash provided (used) by operating activities:
           Depreciation - net                                                                      19,999              13,000
           Changes in operating assets and liabilities:
               Other receivables                                                                   11,033             442,657
               Accounts payable and accrued expenses                                             (91,582)           (489,575)
               Income taxes receivable and deferred income taxes                                        -             160,941
                                                                                               ----------             -------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES                                                (384,421)             382,277
                                                                                                ---------             -------
CASH FLOWS FROM INVESTING ACTIVITIES:
      Purchase of receivables and advances                                                              -        (63,915,174)
      Collection of receivables, including life insurance
           contracts, and advances                                                                978,876          66,480,661
      (Decrease) in credit balances of factoring clients                                                -         (2,024,903)
      Sale (Purchase) of furniture, fixtures and equipment                                         11,498            (11,957)
                                                                                                   ------            --------
NET CASH PROVIDED BY INVESTING ACTIVITIES                                                         990,374             528,627
                                                                                                  -------             -------
CASH FLOWS FROM FINANCING ACTIVITIES:
      Proceeds from lines of credit                                                                     -          32,592,132
      Principal payments on lines of credit                                                     (746,151)         (34,595,000)
      Treasury stock acquisition costs                                                            (2,830)               4,071
                                                                                                  -------               -----
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES                                                (748,981)           1,898,797
                                                                                                ---------           ---------
NET (DECREASE) IN CASH                                                                          (143,028)           (987,893)
CASH, Beginning of period                                                                         353,962           2,420,644
                                                                                                  -------           ---------
CASH, End of period                                                                              $210,934          $1,432,751
                                                                                                 ========          ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
      Interest paid                                                                              $ 41,345          $388,691
                                                                                                 ========          ========
      Income taxes paid                                                                             $   -           $ 8,592
                                                                                                    =====           =======
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                                                       $   -             $ 998
                                                                                                    =====             =====
</TABLE>
See Notes to Consolidated Financial Statements
<PAGE>
ALLSTATE FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  General.  The  consolidated   financial  statements  of  Allstate  Financial
Corporation and subsidiaries  (the "Company")  included herein are unaudited for
the periods ended March 31, 2000 and 1999; however, they reflect all adjustments
which, in the opinion of management, are necessary to present fairly the results
for the  periods  presented.  The  December  31,  1999  balance  sheet  has been
extracted  from audited  financial  information.  Certain  information  and note
disclosures  normally  included in financial  statements  prepared in accordance
with generally  accepted  accounting  principles  have been condensed or omitted
pursuant to the rules and regulations of the Securities and Exchange Commission.
Allstate  Financial  Corporation  believes that the  disclosures are adequate to
make the information presented not misleading. The results of operations for the
three months ended March 31, 2000 are not necessarily  indicative of the results
of operations to be expected for the remainder of the year. It is suggested that
these  consolidated  financial  statements  be  read  in  conjunction  with  the
consolidated  financial  statements  and  notes  thereto  included  in  Allstate
Financial Corporation's Annual Report on Form 10-KSB for the year ended December
31, 1999.

2. Lines of Credit.  In January  2000,  the Company  repaid its bank  lenders in
full. Previously the Company obtained a $1,000,000  supplemental working capital
loan from Value Partners, a major shareholder.  The supplemental working capital
loan bears a 10% rate of interest,  which is payable quarterly.  The outstanding
balance of the  supplemental  loan was due March 31, 2000. As of March 31, 2000,
the Company owed $619,900 on the  supplemental  loan.  The Company does not have
any  outside  source  of  liquidity  to fund new  business,  and is  relying  on
collections of existing accounts to fund its current clients.

3. Certain  Contingencies.  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 recover against 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.  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.
<PAGE>
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.

The Company's principal offices previously  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
had made  arrangements to assign its lease on the Arlington  location to a third
party, but the Company, the third party, and the landlord, whose approval of the
transaction was required by the terms of the lease, failed to reach agreement on
documentation.  The Company  remains  liable for the lease and has entered  into
negotiations  with the  landlord to be  released  from its  obligations  for the
remainder of the lease term.  There can be no assurance  that such  negotiations
will be successful.  The Company is occupying 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 a
separate financial  services firm that is majority owned by Value Partners,  the
Company's majority shareholder.

4. Credit  Concentrations.  For the quarter ended March 31, 2000,  three clients
each accounted for 10% of the Company's  total earned  interest,  for a total of
57.0% of the Company's total earned interest among them, as compared to 66.9% of
earned  interest  and  discount  for the three  largest  clients  (each of which
accounted for over 10% of the total) in the quarter ended December  31,1999.  At
March 31, 2000,  the three clients  accounted  for 31.3% of the Company's  total
receivables, while at December 31, 1999 the three clients accounted for 17.0%.

5. Stock Options. The Company maintains two stock option plans: (1) an Incentive
Stock  Option  Plan  (Qualified),  and (2) a  Non-Qualified  Stock  Option  Plan
(Non-Qualified).  No  additional  grants  can be made  under  these  plans as of
February 7, 2000.  The Company  continues to account for stock options under APB
25 and provides the additional disclosures as required by SFAS No. 123.

Qualified Plan

The Company had reserved  275,000  shares of common stock for issuance under its
qualified stock option plans. Options to purchase common stock were granted at a
price equal to the fair  market  value of the stock on 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.

Non-Qualified Plan

The Company had reserved  150,000  shares of common stock for issuance under its
non-qualified stock option plan. Options to purchase shares of common stock were
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 was the greater of $7.00 or 110% of fair value at the time of grant.
<PAGE>
The table  below  summarizes  the option  activity  for both the  Qualified  and
Non-Qualified Stock Option plans for the three months ended March 31, 2000.


                      Three Months Ended March 31, 2000

                      Outstanding January 1                            155,500

                      Granted                                                -

                      Exercised                                              -

                      Forfeited or expired                               (100)
                                                                           -----
                      Outstanding                                      155,400
                                                                       =======
                      Exercisable                                      155,300
                                                                       =======


6. 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 liabilities 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.  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.

7. Uncertainties. The Company continued to incur net losses in the quarter ended
March 31, 2000,  although it has made  further  cuts in expenses  and  overhead.
Through the repayment of an  asset-based  loan and the collection of an impaired
asset,  the Company repaid the bank lenders and the Value Partners  supplemental
working capital loan (see note 8-Subsequent  event.) The Company continues to be
in default on its New Notes.

The Company has also  continued to develop its  strategic  turnaround  plan (the
"Plan".) The committee of outside directors  appointed by the board of directors
has begun  negotiations  with the holders of the New Notes over the terms of the
exchange of those notes for common stock,  which is an important  element of the
Plan.

Other major elements of the Plan include:

-    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.

-    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.

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

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
Company  believes  that  when  the  Plan is  approved  by the  shareholders  and
implemented,  the Company  will be  positioned  for future  growth.  The Company
<PAGE>
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  continues to have 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.

8.  Subsequent  event. On April 5, 2000, the Company and a Client entered into a
settlement  agreement,  in which the Company agreed to accept $1,200,000 in cash
in settlement of a balance on an impaired loan of $4,735,684.  As a result,  the
Company charged off $3,535,684 of the balance  against a previously  established
reserve. Simultaneously the Company also exercised, for a total consideration of
$4000, a warrant to purchase four million shares of common stock in the Client's
parent  corporation,  with a  market  value  on the  date  of the  agreement  of
$1,160,000.  The common  stock is subject to  restrictions  on sale or  transfer
according to Rule 144 of the  Securities  Act of 1933. In addition,  on April 5,
2000, the Company repaid the working capital loan to Value Partners.

   Management's Discussion and Analysis of Financial Condition and Results of
                                   Operations
Forward-Looking Information

This Form 10-QSB contains certain  "forward-looking  statements" relating to the
Company  which  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-QSB 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 negative or other variation
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,  seasonally,  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.

General

The Company is a commercial  finance  institution  which  provides  financing to
small businesses,  usually those with annual sales of $1 million to $10 million,
through  loans  secured  by  accounts  receivable,   inventory,   machinery  and
equipment,  and real  estate.  Prior to the sale of its  factoring  business  in
October, 1999, the Company also purchased accounts receivable at a discount with
recourse to the seller.  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.
<PAGE>

The Company's  clients do not typically  qualify 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.

The  Company  faces  competition  from other  asset-based  lenders,  diversified
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.

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 a material
adverse effect on the Company.

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.

Other than Lifetime  Options,  none of the Company's  subsidiaries  is currently
engaged in business, which could have a material effect on the Company.

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 internally
generated  funds.  The Company also has outstanding  approximately $5 million in
aggregate  principal  amount of  convertible  subordinated  notes of which  $357
thousand are due in September  2000 and $4.6 million are due in September  2003.
The Company believes the $1.2 million proceeds from the recent  settlement of an
impaired loan, together with other internally generated funds will be sufficient
to finance the Company's funding  requirements for the near term.  However,  the
Company's  cash  position  has  significantly  declined in recent  periods,  and
expenses  continue  to exceed  revenues.  In  addition,  The  Company's  current
liabilities exceed its cash on hand.

Impact of Inflation

Management  believes  that  inflation  has  not  had a  material  effect  on the
Company's  income,  expenses or liquidity  during the three month periods ending
March 31, 2000 and 1999. 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.
<PAGE>

Results of Operations

The  following  table sets forth  certain  items of revenue  and expense for the
periods  indicated and indicates the  percentage  relationships  of each item to
total revenue.
<TABLE>
<CAPTION>



Three months ended:                                                             March 31,2000                 March 31,1999
------------------------------------------------------------- ------------------------------- -----------------------------
                                                              (Unaudited)                     (Unaudited)
<S>                                                              <C>                 <C>          <C>              <C>
REVENUE

  Earned discounts and interest                                       $131,950          64.8%       $1,614,471         89.9%
  Fees and other revenue                                                71,764           35.2          181,574         10.1
                                                                        ------           ----          -------         ----
    TOTAL REVENUE                                                      203,713         100.0%        1,796,045        100.0%
                                                                       -------         ------        ---------       ------
EXPENSES

  Compensation and fringe benefits                                     168,897           82.9          610,013         33.9

  General and administrative                                           217,342          106.7          405,293         22.5

  Interest expense                                                     141,345           69.4          375,574         21.0
                                                                       -------           ----          -------         ----
    TOTAL EXPENSES                                                     527,584          258.9        1,390,880         77.4
                                                                       -------          -----        ---------         ----

INCOME BEFORE INCOME TAX EXPENSE                                     (323,871)        (159.0)          405,165         22.6
                                                                     ---------        -------          -------         ----

INCOME TAX EXPENSE                                                           -              -          149,911         8.3
                                                                 -------------    -----------          -------         ---

NET INCOME (LOSS)                                                   $(323,871)       (159.0)%        $ 255,254        14.3%
                                                                    ==========       ========        =========        =====

NET INCOME (LOSS)PER COMMON SHARE
  Diluted and Basic                                                    $(0.14)                          $ 0.11
                                                                       =======                          ======

WEIGHTED AVERAGE NUMBER
 OF SHARES OUTSTANDING

  Diluted                                                            2,324,616                       2,327,016
  Basic                                                              2,324,616                       2,324,138
</TABLE>

Total  Revenue.  Total revenue  consists of (i) discounts on purchased  invoices
earned  in the  Company's  factoring  business  from the  purchase  of  accounts
receivable  and interest  earnings on ABL advances  receivable and (ii) fees and
other  revenue,  which  consist  primarily of  application  fees,  commitment or
facility fees and other  transaction  related  financing  fees,  and the premium
which the Company  receives over time over time based on the  performance of the
Purchased Receivables sold during 1999.

                      [THIS SPACE INTENTIONALLY LEFT BLANK]

<PAGE>

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 Three Months Ended:                                   March 31, 2000                  March 31,1999
<S>                                              <C>               <C>           <C>             <C>
                                                 ----------------- ------------- --------------- --------------
Type of Revenue                                  Earned Revenue    Percent       Earned Revenue  Percent
------------------------------------------------ ----------------- ------------- --------------- --------------
Discount on purchased invoices                              $   -             -       $ 380,691           21.2%
Earnings on advances
    Receivable                                            131,950         64.8%       1,233,780            68.7

Fees and other revenue                                    71,763           35.2         181,574            10.1
                                                 --       -------          ----         -------            ----
Total revenue                                            $203,713          100%      $1,796,045          100.0%
                                                         ========  ====    ====      ==========          ======
------------------------------------------------ ----------------- ------------- --------------- --------------
</TABLE>
Total revenue decreased by 88.6% in the three months ended March 31, 2000 versus
the same  period in 1999,  to $204  thousand  from $1.8  million.  Within  total
revenue,  the Company had no discounts on purchased  invoices in 2000 due to the
sale of the factoring  business.  Earnings on advances  receivable  decreased by
89.3% in the three months  ending March 31, 2000 versus the same period in 1999.
The  earnings  decrease  was  attributable  to a the  decrease  in  the  average
outstanding balance of advances  receivable,  $8.8 million in the March 31, 2000
quarter versus $23.8 million in the March 31, 1999 quarter,  as well as a higher
percentage  component of non-performing  advances.  The Company is not currently
adding new  accounts  to the  portfolio,  but may fund  additional  advances  to
existing clients if requested to do so.

Fees and other revenue  decreased  60.4% in three months ended March 31, 2000 as
compared  to the same  period  in 1999.  Fee  income  related  to the  factoring
business and to new  facilities or renewals and  increases to existing  accounts
decreased,  while the premium the Company  expects to collect over time based on
the performance of the Purchased Receivables sold in 1999 increased.

Compensation and Fringe  Benefits.  In the three months ended March 31, 2000 and
1999,  compensation  and  fringe  benefits  were $169  thousand  (82.9% of total
revenue) and $610 thousand  (34.0% of total  revenue),  respectively.  The lower
compensation  and fringe  benefits  during 2000 were the result of a decrease in
the number of employees.

General and Administrative  Expense.  Total general and  administrative  expense
decreased by $188  thousand  (46.4%) to $217 thousand from $405 thousand for the
three month  period  ended March 31, 2000  compared  with 1999.  The decrease in
expenses is a result in the  decrease in staff as well as lower  litigation  and
professional fees, as the amount of active litigation decreased.

Interest  Expense.  Interest  expense was $141 thousand (69.4% of total revenue)
versus $376 thousand  (21.0% of total  revenue) for the three months ended March
31, 2000 and 1999,  respectively.  The decrease in interest expense is primarily
attributable to a decrease in the average amount of debt outstanding, due to the
payoff  of the  bank  revolving  credit.  Interest  expense  on the  Convertible
Subordinated  Notes was  comparable  in the three  months ended March 31 2000 to
that in the 1999 quarter.

Provision for Credit  Losses.  During the three months ended March 31, 2000, the
Company had no  charge-offs,  while  recovering  $7  thousand.  During the three
months ended March 31, 1999, the Company had charge-offs of $78 thousand,  while
recovering  $177  thousand.  Net recoveries for the three months ended March 31,
2000 resulted in a marginal increase to the allowance for credit losses. At $4.3
<PAGE>

million, the allowance was 50.4% of total receivables (net of participations and
unearned income), exclusive of life insurance policies,  outstanding as of March
31,  2000.  At March 31,  2000,  $4 million of the  allowance  was  allocated to
non-performing accounts.

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.  Based on this analysis,  the Company believes the
allowance  for credit  losses is adequate in light of the risks  inherent in the
portfolio at March 31, 2000. The Company carefully monitors the portfolio, but a
deterioration in one or more clients could have a material adverse effect on the
Company.

Receivables
<TABLE>
<CAPTION>

Receivables consist of the following, at the dates indicated.
<S>                                          <C>                                 <C>
                                                                 March 31, 2000                     December 31,1999
-------------------------------------------- ----------------------------------- -----------------------------------
Invoices and insurance claims                                          $212,171                             $234,445

  Less: unearned discount                                              (13,953)                             (13,953)

Life insurance policies (net)                                         1,889,962                            1,889,962
                                                                      ---------                            ---------

Total purchased receivables                                         $2,088,180                            $2,110,454
                                                                    ===========                           ==========

Advances receivable                                                  $9,124,088                          $10,073,989

  Less : participation                                                (744,623)                            (744,623)
                                                                      ---------                            ---------

Total advances receivable                                           $8,379,465                            $9,329,366
                                                                    ===========                           ==========
</TABLE>
Non-performing receivables included within the above totals were $5.3 million at
March 31, 2000 and $5.4 million at December 31, 1999.

From  time to time,  a single  client  or  single  industry  may  account  for a
significant portion of the Company's  receivables.  As detailed in Note 4 to the
Consolidated Financial Statements,  three clients accounted for more than 10% of
total earned discounts and interest for the three-month  periods ended March 31,
2000. Three different  clients  accounted for 10% each of total earned discounts
and interest for the three-month period ended December 31, 1999. The Company has
adopted  a policy  to  generally  restrict  the size of any one new  client to a
maximum  of $500  thousand.  and to take  steps  to  reduce  the size of the two
existing  clients  who are  currently  over that  limit.  Although  the  Company
carefully monitors client and industry concentration,  there can be no assurance
that the risks associated with client or industry concentration could not have a
material adverse effect on the Company.

Subsequent  Events.  On April 5, 2000,  the Company and a Client  entered into a
settlement agreement, in which the Company agreed to accept $1.2 million in cash
in settlement of a balance on an impaired loan of $4.8 million. As a result, the
Company charged off $3.6 million of the balance against a previously established
reserve. Simultaneously the Company also exercised, for a total consideration of
$4000, a warrant to purchase four million shares of common stock in the Client's
parent  corporation,  with a  market  value  on the  date  of the  agreement  of
$1.1million.  The common  stock is subject to  restrictions  on sale or transfer
according to Rule 144 of the  Securities  Act of 1933. In addition,  on April 5,
2000, the Company repaid the working capital loan to Value Partners.

      Uncertainties.  The Company  continued  to incur net losses in the quarter
ended  March  31,  2000,  although  it has made  further  cuts in  expenses  and
overhead.  Through the repayment of an asset-based loan and the collection of an
<PAGE>

impaired  asset,  the Company  repaid the bank  lenders  and the Value  Partners
supplemental  working  capital loan (see Subsequent  event.) The Company
continues to be in default on its New Notes.

The Company has also  continued to develop its  strategic  turnaround  plan (the
"Plan".) The committee of outside directors  appointed by the board of directors
has begun  negotiations  with the holders of the New Notes over the terms of the
exchange of those notes for common stock,  which is an important  element of the
Plan.

Other major elements of the Plan include:

-    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.

-    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.

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

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
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  continues to have 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.

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<PAGE>


PART II - OTHER INFORMATION

ITEM 1. - LEGAL PROCEEDINGS
For details regarding legal proceedings,  see Note 3 to the unaudited  financial
statements  contained  in this  Form  10-QSB.

ITEM 3. -  DEFAULTS  UPON  SENIOR SECURITIES  As discussed in Note 2 to the
unaudited  financial  statements,  at March 31,2000 the Company was in default
of its  obligation  to Value  Partners, Ltd. for the balance of the working
capital loan. On April 5, 2000, the loan waspaid in full.

ITEM 6(a). - EXHIBITS
Exhibit 27.  Financial Data Schedule

ITEM 6(b). - REPORTS ON FORM 8-K
Form 8-K as filed with the Securities  and Exchange  Commission on March 14,2000
is incorporated by reference.

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<PAGE>



SIGNATURES

In accordance with the  requirements of the Securities and Exchange Act of 1934,
the Company  caused  this report to be signed on its behalf by the  undersigned,
thereunto duly authorized.

ALLSTATE FINANCIAL CORPORATION




         Date:    May 15, 1999              _____/s/ ______
                                            Charles G. Johnson
                                            Chief Executive Officer


         Date:    May 15, 1999              _____/s/_______
                                            C. Fred Jackson
                                            Chief Financial Officer