SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D.C. 20549

                                  FORM 10 - QSB

               QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE

                         SECURITIES EXCHANGE ACT OF 1934



         FOR QUARTER ENDED JUNE 30, 1997 COMMISSION FILE NUMBER 0-17832

                         Allstate Financial Corporation
--------------------------------------------------------------------------------
             (exact name of registrant as specified in its charter)




                Virginia                        54-1208450
          (State of Incorporation) (I.R.S. Employer Identification No)

            2700 South Quincy Street, Suite 540, Arlington, VA 22206

          (address of principal executive offices)          (zip code)



Registrant's Telephone Number, Including Area Code:  (703) 931-2274



Indicate  by the check mark  whether  the  Registrant  (1) has filed all reports
required to be filed by Section 13 or 15 of the  Securities and Exchange Act of
1934  during the  preceding  12 months and (2) has been  subject to such  filing
requirements for the past 90 days. Yes [ X ] No [ ]

2,317,919 Common Shares were outstanding as of June 30, 1997.


<PAGE>




                         ALLSTATE FINANCIAL CORPORATION
                                   FORM 10-QSB
                                      INDEX

                                                                     Page
                                                                     Number
Part I - Financial Information

     Item 1 -  Financial Statements

         Consolidated Balance Sheets at June 30, 1997
         and December 31, 1996                                        1-2

         Consolidated Statements of Operations Three Months Ended
         June 30, 1997 and 1996                                        3

         Consolidated Statements of Shareholders' Equity Three
         Months Ended June 30, 1997 and Year Ended
         December 31, 1996                                             4

         Consolidated Statements of Cash Flows Three Months Ended
         June 30, 1997 and 1996                                       5-6

         Notes to Consolidated Financial Statements                   7-9

     Item 2 -  Management's Discussion and Analysis of Results of
         Operations and Financial Conditions                         10-18


Part II - Other Information

     Item 1 - Legal Proceedings                                       19

     Item 4 - Submission of Matters To a Vote of Security Holders     19

     Item 5 - Other Information                                       19

     Item 6 - Exhibits and Reports on Form 8-K                        19

     Signatures                                                       20



<PAGE>





















                         PART I - FINANCIAL INFORMATION









<PAGE>



                 ALLSTATE FINANCIAL CORPORATION AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS

                                                         June 30,   December 31,
                                                            1997       1996
                                   (Unaudited)
                                     ASSETS

CURRENT ASSETS:
     Cash ..........................................   $ 2,132,825   $ 1,624,899
     Receivables:
         Finance, net ..............................    15,257,344    30,574,239
         Purchased life insurance contracts, net ...     4,349,938     4,493,088
         Other .....................................     2,593,450     4,394,975

     Prepaid expenses ..............................       143,012       154,434

     Income Tax Receivable .........................       557,561     1,150,289

     Deferred income taxes .........................       893,000       893,000
                                                       -----------   -----------

     TOTAL CURRENT ASSETS ..........................    25,927,130    43,284,924

FURNITURE, FIXTURES AND EQUIPMENT, Net .............       500,327       538,164

OTHER ASSETS .......................................     3,459,309     2,116,343
                                                       -----------   -----------

                                                       $29,886,766   $45,939,431
                                                       ===========   ===========



                      LIABILITIES AND SHAREHOLDERS' EQUITY


CURRENT LIABILITIES:
     Accounts payable and accrued expenses .....     $   316,068     $   446,360
     Notes payable .............................          36,580      14,851,582
     Note payable-related party ................         103,000         103,000
     Credit balances of factoring clients ......       1,332,381       2,964,873
                                                     -----------     -----------

      TOTAL CURRENT LIABILITIES ................       1,788,029      18,365,815


                                        1

<PAGE>



                 ALLSTATE FINANCIAL CORPORATION AND SUBSIDIARIES

                           CONSOLIDATED BALANCE SHEETS
                                   (continued)


                                                      June 30,      December 31,
                                                        1997            1996
                                   (Unaudited)

NONCURRENT PORTION OF NOTES PAYABLE:
     Related parties .........................           56,095           61,969
     Convertible Subordinated Notes ..........        4,985,110        4,985,110
                                                     ----------       ----------

         TOTAL LIABILITIES ...................        6,829,234       23,412,894
                                                     ----------       ----------

COMMITMENTS AND CONTINGENCIES

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;  3,102,328
      issued, 2,317,919 outstanding at June
      30, 1997 and December 31, 1996,
      exclusive of shares held in the Treasury        40,000             40,000

Additional paid-in-capital ...............        18,852,312         18,852,312

Treasury Stock (784,409 shares) ..........        (5,034,584)        (5,034,584)

Retained Earnings ........................         9,199,804          8,668,809
                                                ------------       ------------

    TOTAL SHAREHOLDERS' EQUITY ...........        23,057,532         22,526,537
                                                ------------       ------------

                                                $ 29,886,766       $ 45,939,431
                                                ============       ============



                 See Notes to Consolidated Financial Statements

                                        2

<PAGE>



<TABLE>
                                 ALLSTATE FINANCIAL CORPORATION AND SUBSIDIARIES
                                       CONSOLIDATED STATEMENTS OF OPERATIONS

<CAPTION>
                                           Three Months Ended June 30,    Six Months Ended June 30,
                                           --------------------------      ------------------------
                                                1997            1996         1997           1996
                                             ---------    -----------    ----------      --------
                                            (Unaudited)     (Unaudited)  (Unaudited)    (Unaudited)


  <S>                                       <C>           <C>            <C>           <C>
  INCOME:
       Earned discounts .................   $ 1,497,010   $ 2,722,140    $ 3,789,595   $ 5,055,961
       Fees and other income ............       585,103       563,398      1,024,624     1,115,250
                                            -----------   -----------    -----------   -----------

           Total Income .................     2,082,113     3,285,538      4,814,219     6,171,211
                                            -----------   -----------    -----------   -----------

  EXPENSES:
       Compensation and fringe benefits .       730,246       995,894      1,462,196     1,846,381
       General and administrative expense       501,210       941,088      1,039,947     1,551,722
       Interest expense .................       223,330       426,983        627,327       782,343
       Provision for credit losses ......       120,790     3,928,570        675,790     4,552,229
       Commission .......................        72,961       136,145        166,112       225,786
                                            -----------   -----------    -----------   -----------

            TOTAL EXPENSES ..............     1,648,537     6,428,680      3,971,372     8,958,461
                                            -----------   -----------    -----------   -----------

  INCOME/(LOSS) BEFORE INCOME TAXES .....       433,576    (3,143,142)       842,847    (2,787,250)

  INCOME TAXES/(BENEFIT) ................       160,452    (1,162,900)       311,852    (1,031,200)
                                            -----------   -----------    -----------   -----------

  NET INCOME/(LOSS) .....................   $   273,124   $(1,980,242)   $   530,995   $(1,756,050
                                            ===========   ===========    -----------   -----------

  NET INCOME/(LOSS) PER SHARE ...........   $       .12   $     (0.85)   $       .23   $      (.75)
                                            ===========   ===========    -----------   -----------

  WEIGHTED AVERAGE NUMBER OF SHARES .....     2,317,917     2,316,853      2,317,919     2,339,157
                                            ===========   ===========    ===========   ===========
</TABLE>

                                        3

<PAGE>


<TABLE>

                 ALLSTATE FINANCIAL CORPORATION AND SUBSIDIARIES
                 CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
                          YEAR ENDED DECEMBER 31, 1996
                       AND SIX MONTHS ENDED JUNE 30, 1997

<CAPTION>

                                                        Common           Paid in         Treasury         Retained
                                                       Stock             Capital          Stock           Earnings

<S>               <C>                                  <C>           <C>             <C>               <C>
BALANCE - January 1, 1996                              $40,000       $18,852,312     $(2,871,901)      $9,709,953

  Exchange of Convertible
     Subordinated Notes for
     338,275 shares of common stock                      -                -           (2,170,683)           -

  Conversion of Convertible Subordinated
     Notes to 1,066 shares of Common
     Stock                                               -                -                 8,000           -

  Net Loss                                               -                -              -             (1,041,144)
                                                   ----------- ----------------------------------      ----------


BALANCE - December 31, 1996                             40,000       18,852,312      $(5,034,584)      $8,668,809

  Net Income (unaudited)                               -                  -              -                530,995
                                                  ------------ ----------------------------------      ----------

BALANCE - June 30, 1997                                $40,000       $18,852,312     $(5,034,584)      $9,199,804
                                                       =======       ===========     ============      ==========
</TABLE>




                                        4

<PAGE>

<TABLE>
                 ALLSTATE FINANCIAL CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)
<CAPTION>

                                                               Six Months Ended June 30,
                                                               -------------------------
                                                                  1997           1996
                                                               --------        ---------
<S>                                                       <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net Income/(Loss) ................................   $     530,995    $  (1,756,050)
     Adjustments to reconcile net income
         to cash provided by operating activities:
         Depreciation - net ...........................          98,000           61,800
         Provision for credit losses ..................         675,790        4,552,229
     Changes in operating assets and liabilities:
         Decrease/(Increase) in other receivables .....       1,801,525          (92,226)
         Decrease in prepaid expenses .................          11,422           10,775
         (Increase)/Decrease in other assets ..........      (1,342,966)         916,774
         (Decrease)/Increase in accounts payable
              and accrued expenses ....................        (130,292)         346,838
         Decrease/(Increase) in income taxes receivable         592,728       (1,060,093)
                                                          -------------    -------------


NET CASH PROVIDED BY
     OPERATING ACTIVITIES .............................       2,237,202        2,980,047
                                                          -------------    -------------


CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchase of finance receivables, including
         accounts receivable, secured advances,
         repurchases and life insurance contracts .....     (91,944,410)     (94,407,704)
     Collection of finance receivables, including
         accounts receivable, secured advances,
         repurchases and life insurance contracts .....     106,728,665       96,364,604
     (Decrease) in credit balances of factoring clients      (1,632,492)        (235,227)
     Purchase of furniture, fixtures and equipment ....         (60,163)         (58,171)
                                                          -------------    -------------


NET CASH PROVIDED BY
    INVESTING ACTIVITIES ..............................      13,091,600        1,663,502
                                                          -------------    -------------
</TABLE>


                                        5

<PAGE>


<TABLE>

                 ALLSTATE FINANCIAL CORPORATION AND SUBSIDIARIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (continued)
<CAPTION>

                                                              Six Months Ended June 30,
                                                           -----------------------------
                                                             1997               1996
                                                           -----------       ----------

<S>                                                        <C>               <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
     Proceeds from line of credit and
         other borrowings ................                 33,827,009        29,786,262
     Principal payments on line of credit
         and other borrowings ............                (48,647,885)      (32,141,686)
     Treasury Stock Acquisition Costs ....                     --           (    22,678)
                                                          ============      ============

NET CASH USED IN FINANCING ACTIVITIES: ...                (14,820,876)       (2,378,102)
                                                          ------------      ------------

NET INCREASE IN CASH .....................                    507,926         2,265,447

CASH, Beginning of period ................                  1,624,899           754,295
                                                           -----------     ------------

CASH, End of period ......................               $  2,132,825      $  3,019,742
                                                         ============      ============



SUPPLEMENTAL DISCLOSURE OF CASH FLOW
  INFORMATION:

     Interest paid .......................              $    627,327       $    781,652
                                                        ============       ============

     Income taxes paid ...................              $    150,000       $     28,897
                                                        ============       ============

     Supplemental Schedule of
     Noncash Activities

     Transfer of finance and other
        receivables to other assets ......              $  1,305,489       $    560,655
                                                        ============       ============

     Issuance of Convertible Subordinated
        Notes in exchange for Common Stock             $       --          $  2,148,000
                                                       ============        ============

</TABLE>

                                        6

<PAGE>



                 ALLSTATE FINANCIAL CORPORATION AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.  GENERAL.  The  consolidated   financial  statements  of  Allstate  Financial
Corporation and its wholly owned  subsidiaries  (the "Company")  included herein
are  unaudited  for all  periods  ended June 30,  1997 and 1996;  however,  they
reflect all adjustments  which,  in the opinion of management,  are necessary to
present fairly the results for the periods  presented.  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  June  30,  1997  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-KB for the
year ended December 31, 1996.

2. NET INCOME PER SHARE.  Net income per share of common stock has been computed
by  dividing  net income by the  weighted  average  number of common  shares and
common stock equivalents outstanding during the periods presented. Stock options
are considered common stock equivalents,  unless determined to be anti-dilutive.
For the  quarters  ended  June  30,  1997  and  1996,  weighted  average  shares
outstanding  were  2,317,917 and 2,316,853,  respectively.  At June 30, 1997 and
December 31, 1996 there were 180,000 and 158,400 stock options  outstanding,  at
exercise prices ranging from $5.4375 to $14.00 per share.  During the year ended
December  31,  1996,  24,867  options  were  forfeited.  There  were no  options
exercised during 1996 or during the six months ended June 30, 1997.

In March 1997,  the Financial  Accounting  Standards  Board issued SFAS No. 128,
"Earnings Per Share". SFAS No. 128 supersedes APB No. 15 to conform earnings per
share with  internal  standards  as well as to simplify  the  complexity  of the
computation  under APB No. 15. In summary,  SFAS No. 128  replaces  the previous
primary earnings per share ("EPS") calculation with a basic EPS calculation. The
basic EPS differs  from the primary EPS  calculation  in that the basic EPS does
not include any potentially dilutive securities.  Fully dilutive EPS is replaced
with diluted EPS and should be disclosed  regardless  of its dilutive  impact on
EPS. SFAS No. 128 is effective for both interim and annual  periods ending after
December 15, 1997. The EPS in the  Statements of Operations are presented  under
APB NO. 15.  Proforma  EPS under SFAS No. 128 for the six months  ended June 30,
1997 and 1996  would  not  have resulted  in  a material  difference from EPS as
shown.

3. LINE OF CREDIT.  As of June 30,  1997,  the Company had  approximately  $25.0
million  available  under a $25 million  secured  revolving line of credit.  The
credit facility contains a $5.0 million sub-facility for the issuance of letters
of credit,  a $5 million  sub-facility  the proceeds of which may be used by the
Company to make advances to clients secured by machinery and equipment and a

                                        7

<PAGE>



$2.5  million  sub-facility  the proceeds of which may be used by the Company to
make  advances  to clients  secured by  inventory.  Borrowings  under the credit
facility  bear  interest  at a spread over the bank's base rate or a spread over
LIBOR, at the Company's election.  The Company is subject to covenants which are
typical in revolving credit facilities of this type. On May 28, 1997, the credit
facility was amended and restated.  The maturity date on this credit facility is
May 27, 2000.

     During  1996  Lifetime  Options,  Inc.,  a Viatical  Settlement  Company (a
wholly-owned  subsidiary of the  Company),  had a $2 million  revolving  line of
credit  with a local  federal  savings  bank.  This  line of credit  expired  on
December 31, 1996 at which time all indebtedness was paid in full.

4. CONVERTIBLE  SUBORDINATED NOTES PAYABLE. As of June 30, 1997, the Company had
outstanding $4,978,000 in aggregate principal amount of Convertible Subordinated
Notes.  The Notes (I) mature on September 30, 2000; (ii) currently bear interest
at the rate of 9.5% per annum which rate may  fluctuate in  accordance  with the
prime  rate,  but may not fall below 8% nor rise above 10% per annum;  (iii) are
convertible  into  common  stock of the  Company at the rate of $7.50 per share;
(iv) are subordinated to Senior Indebtedness (as defined) of the Company and (v)
were issued pursuant to an indenture which contains certain  covenants which are
less restrictive than those contained in the Company's  secured revolving credit
facility.  Upon the occurrence of certain change of control  events,  holders of
the Notes have the right to have their Notes redeemed at par.

5. NEW FINANCIAL ACCOUNTING STANDARDS. In June 1996,  SFAS No. 125,  "Accounting
for   Transfers  and  Servicing  of Financial  Assets   and  Extinguishments  of
Liabilities"  was  issued.  SFAS  No.  125  provides  accounting  and  reporting
standards for transfers and servicing of financial assets and extinguishments of
liabilities,  based on a financial-components  approach that focuses on control.
Under this  approach,  after a  transfer  of  financial  assets,  financial  and
servicing  assets are recognized if controlled or liabilities  are recognized if
incurred. Financial and servicing assets are removed from the balance sheet when
control has been surrendered and liabilities are removed when extinguished. SFAS
No.  125 was  effective  and  adoptive  on  January  1, 1997 and will be applied
prospectively.  The  Company  does not  anticipate  any  material  effect on its
financial position from this implementation.

6.  CERTAIN  CONTINGENCIES.  The  Company is a  defendant  in White,  Trustee v.
Allstate  Financial  Corporation  pending in the U.S.  Bankruptcy  Court for the
Western District of Pennsylvania. The Company provided receivables financing and
advances for Lyons Transportation  Lines, Inc. ("Lyons").  Lyons was the subject
of a leveraged buy-out and subsequently  filed a bankruptcy  petition.  In 1991,
the Lyon's trustee brought an action against the Company  claiming,  among other
things,  fraudulent transfer and breach of contract. A partial summary judgement
was granted in favor of the Company which reduced the fraudulent  transfer claim
by $1.6 million. As a consequence,  the remaining  fraudulent transfer claim was
approximately  $1,000,000.  In late  1994,  the  Company  reached  a  settlement
agreement with the Lyons trustee,  subject to approval by the bankruptcy  court,
which  would have  released  the  Company  from all claims  upon the  payment of
$300,000. In connection with the settlement, the Company paid and added $300,000
to the  provision  for  credit  losses  in  1994.A  creditor  in the  bankruptcy
proceeding,

                                        8

<PAGE>



Sherwin-Williams  Company,  objected to the proposed  settlement  amount and, in
March 1995, the objection,  was sustained by the bankruptcy  court.  The Company
appealed  the  order  sustaining  the  objection,  however,  in  April  1996 the
appellate  court  exercised its  discretion not to hear the appeal at that time.
The $300,000 previously paid by the Company was returned to the Company in April
1996. The matter is currently being litigated in the District Court.  Management
does  not  believe  at this  time  that  the  Company  has a  material  exposure
significantly in excess of the previously agreed upon settlement amount.

     In  connection  with the same  transaction,  the  Company was also named in
January 1994 as a defendant in  Sherwin-Williams  Company v. Robert Castello et.
al.  pending in the United States  District  Court for the Northern  District of
Ohio.  Sherwin-Williams  is  suing  all  parties  with  any  involvement  in the
transaction  to  recover  damages  allegedly  incurred  by  Sherwin-Williams  in
connection  with the leveraged  buy-out and the  bankruptcy  litigation  arising
therefrom.  Sherwin-Williams  asserts  that it has or will  incur  pension  fund
liabilities  and  other  liabilities  as a  result  of  the  transaction  in the
approximate amount of $11 million and has asserted claims against the Company in
that amount. The complaint asserts,  among other things,  that the purchasers of
Lyons breached their purchase  agreement with  Sherwin-Williams  by pledging the
assets of Lyons to the Company to obtain the down payment. The Company was not a
party to the  purchase  agreement.  The  Company  filed a motion to dismiss  the
claims and a motion to stay discovery pending a ruling on the motion to dismiss.
The  motion  to stay  discovery  was  granted  and,  in March  1996,  a  federal
magistrate  recommended  to the  District  Court  that the  Company's  motion to
dismiss be  granted.  Prior to the  District  Court  ruling on the  magistrate's
recommendation,   Sherwin-Williams  filed  an  amended  complaint.  The  amended
complaint  added two  additional  claims for "civil  conspiracy"  and  "tortious
interference with contract".  The two new claims arise from essentially the same
allegations set forth in the earlier complaint,  i.e., that the Company assisted
in the breach of the purchase  agreement.  In March 1997, the federal magistrate
again recommended to the District Court that the Company's motion to dismiss the
claims contained in the original complaint be granted.  However,  the magistrate
recommended that the Company's motion to dismiss the two new claims contained in
the amended complaint be denied. Management does not believe the litigation will
have a material effect on the financial position or results of operations of the
Company because, in management's opinion, the claims are without merit.

     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  proceedings  will  have a  material  adverse  effect on the
Company.  From time to time,  the Company is required to initiate  litigation to
collect  amounts owed by former clients,  guarantors or obligors.  In connection
with such  litigation,  the Company  periodically  encounters  counterclaims  by
defendant(s) for material amounts.  Such counterclaims are typically without any
factual  basis and,  management  believes,  are usually  asserted for  defensive
purposes by the litigant.



                      [THIS SPACE INTENTIONALLY LEFT BLANK]


                                        9

<PAGE>



MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
 OPERATIONS

FORWARD-LOOKING INFORMATION

     Certain  disclosures  contained in this Form 10-QSB contain forward looking
information  based on current  information and  expectations of the Company that
involve a number of risks, uncertainties and assumptions,  including the overall
state of the  economy,  competition  among  financial  institutions,  the credit
quality of the Company's clients and account debtors,  and the Company's ability
to generate  growth in earning  assets  through the  generation of new business.
Should one or more of these risks or  uncertainties  materialize,  or should the
underlying  assumptions  prove incorrect,  actual outcomes could vary materially
from those expected.

GENERAL

     The Company's  principal  business is the  discounted  purchase of accounts
receivable,  usually on a full recourse,  full notification  basis. In addition,
the Company  also makes  advances to its clients  collateralized  by  inventory,
equipment, real estate and other assets ("Collateralized Advances"). The Company
has elected to continue to more aggressively pursue the making of Collateralized
Advances as it perceives  the need by its targeted  customers  for such advances
and  such  funding  is  not  readily   available  from  many  of  the  Company's
competitors.  On  occasion,  the Company  will also  provide  other  specialized
financing  structures  which  satisfy the unique  requirements  of the Company's
clients.  The Company  also  provides  its  clients  with  letters of  guaranty,
arranges  for the  issuance of letters of credit for its  clients  and  provides
other related financial services.

     The Company's  clients are small- to  medium-sized  businesses  with annual
revenues typically ranging between $600,000 and $75,000,000.  Historically,  the
Company's  clients  have  not  qualified  for  traditional  bank or  asset-based
financing  because  they are either too new,  too  small,  undercapitalized  (or
over-leveraged), unprofitable or otherwise unable to satisfy the requirements of
a bank or traditional,  asset-based lender.   Given the Company's typical client
profile,  there is a significant risk of default and  client failure inherent in
the Company's business.

     Banks and other asset-based lenders have,  however,  started to lend to the
Company's traditional,  high risk type of client.  Continuing competition within
the  marketplace  from  banks,  asset-based  lenders and newly  created  finance
companies  have  encroached  upon the Company's  potential  client base and have
negatively   affected  earned   discounts  on  factored   accounts   receivable.
Additionally, the Company has attracted larger clients which often increases the
amount of time needed to negotiate and fund new business.  Also,  Collateralized
Advances require more in-depth and diverse due diligence which can further delay
the funding of new business.  Nonetheless, the Company believes that its ability
to  respond  quickly  and to provide  specialized,  flexible  and  comprehensive
financing structures to its clients enables it to compete effectively.  In order
to remain competitive, the Company is, where necessary and appropriate, offering
lower  rates than it has  historically.  The  Company  believes  that  increased
competition will continue for the foreseeable  future and will continue to exert
downward  pressure  on  pricing,  especially  in the  Company's  core  factoring
business.  To counter the downward  pressure on pricing,  the Company intends to
continue to diversify  its sources of income,  primarily by  continuing to place
emphasis on funding relationships which include (in addition to the factoring of
accounts receivable) the making of Collateralized Advances.
                                       10

<PAGE>



     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  ultimately  qualify for more  competitively  priced bank or
asset-based  financing within that time period.  Therefore,  the Company's major
clients have tended to change significantly over time. Today,  however,  because
the Company is, where necessary and appropriate, offering lower rates and making
Collateralized  Advances,  it is possible  that the  duration  of the  Company's
funding  relationships  with its  clients may be  extended.  Even if the Company
succeeds in extending the duration of its funding relationship with its clients,
there  will  not  be a  corresponding  increase  in  non-current  assets  on the
Company's  balance sheet.  This is because it is anticipated  that the Company's
funding relationships with its clients will continue to renew no less frequently
than once a year.  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.

     Lifetime  Options,  a  wholly-owned  subsidiary  of the  Company,  provided
financial   assistance  to  individuals  facing   life-threatening   illness  by
purchasing their life insurance policies at a discount from face value.  Because
most  of  the  life  insurance   policies  purchased  by  Lifetime  Options  are
underwritten by highly rated insurance  companies (and, in many cases, backed by
state guaranty  funds),  the management of Lifetime Options believes that credit
risk is not material to its business.

     Lifetime  Options has  curtailed  its  operations.  This  decision  enables
management to better focus on the Company's core commercial  finance business at
a time when competition has reduced yields,  and medical advances have created a
certain degree of uncertainty, in Lifetime Options' business.

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

RESULTS OF OPERATIONS

       The  following  table sets forth  certain items of income and expense for
the periods indicated and indicates the percentage  relationship of each item to
total income.


                     [THIS SPACE INTENTIONALLY LEFT BLANK]


                                       11

<PAGE>


<TABLE>
<CAPTION>

                                                                      For the Three Months Ended June 30,
                                                                  -----------------------------------------------     
                                                                           1997                     1996
                                                                  ---------------------     ---------------------
                                                                        (Unaudited)                (Unaudited)

<S>                                                               <C>             <C>         <C>            <C>  
INCOME
   Earned discounts                                               $1,497,010      71.9%       $2,722,140     82.9%
   Fees and other income                                             585,103      28.1           563,398     17.1
                                                                 -----------    ------       -----------    -----
        TOTAL INCOME                                               2,082,113     100.0%        3,285,538    100.0%
                                                                  ----------     -----        ----------    -----

EXPENSES
   Compensation and fringe benefits                                   730,246     35.1           995,894     30.3
   General and administrative expense                                 501,210     24.1           941,088     28.6
   Interest expense                                                   223,330     10.7           426,983     13.0
   Provision for credit losses                                        120,790      5.8         3,928,570    119.6
   Commissions                                                         72,961      3.5           136,145      4.2
                                                                 ------------    -----      ------------   ------

         TOTAL EXPENSES                                             1,648,537     79.2         6,428,680    195.7
                                                                   ----------    -----        ----------    -----

INCOME (LOSS) BEFORE INCOME TAXES (BENEFIT)                           433,576     20.8        (3,143,142) (95.7)

INCOME TAXES (BENEFIT)                                                160,452      7.7        (1,162,900) (35.4)
                                                                  -----------   ------        ----------  -----

NET INCOME (LOSS)                                                  $  273,124     13.1%      $(1,980,242) (60.3  )%
                                                                   ----------    =====       =========== =======

NET INCOME PER SHARE                                                    $0.12                    $( 0.85)
                                                                        =====                    =======

WEIGHTED AVERAGE NUMBER OF SHARES                                   2,317,917                  2,316,853
                                                                    =========                  =========
</TABLE>

<TABLE>
<CAPTION>

                                                                      For the Six Months Ended June 30,
                                                                  -----------------------------------------------     
                                                                           1997                     1996
                                                                  ---------------------     ---------------------
                                                                        (Unaudited)                (Unaudited)

<S>                                                               <C>             <C>         <C>            <C>  
INCOME
   Earned discounts                                                $3,789,595     78.8%       $5,055,961     81.9%
   Fees and other income                                            1,024,624     21.2         1,115,250     18.1
                                                                  -----------  -------       -----------    -----
      TOTAL INCOME                                                  4,814,219    100.0%        6,171,211    100.0%
                                                                  -----------    -----        ----------    -----

EXPENSES
   Compensation and fringe benefits                                 1,462,196     30.4         1,846,381     29.9
   General and administrative expense                               1,039,947     21.6         1,551,722     25.1
   Interest expense                                                   627,327     13.0           782,343     12.7
   Provision for credit losses                                        675,790     14.0         4,552,229     73.8
      Commissions                                                     166,112      3.5           225,786      3.7
                                                                 ------------     ----        ----------      ---

      TOTAL EXPENSES                                                3,971,372     82.5         8,958,461    145.2
                                                                 ------------    -----        ----------    -----

INCOME (LOSS) BEFORE INCOME TAXES                                     842,847     17.5        (2,787,250)    45.2

INCOME TAXES (BENEFIT)                                                311,852      6.5        (1,031,200)    16.7
                                                                 ------------   ------       -----------     ----

NET INCOME (LOSS)                                                    $530,995     11.0%      $(1,756,050)    28.5%
                                                                     --------     ====       ===========     ====

NET INCOME (LOSS) PER SHARE                                             $0.23                     $(0.75)
                                                                        =====                      ======

WEIGHTED AVERAGE NUMBER OF SHARES                                   2,317,919                  2,339,157
                                                                    =========                  =========

</TABLE>


                                                        12

<PAGE>



     TOTAL INCOME.  Total income consists of (I) earned  discounts and (ii) fees
and other  income.  "Earned  discounts"  consist  primarily  of income  from the
purchase of accounts  receivable  and life  insurance  policies  and income from
Collateralized   Advances.   "Fees  and  other  income"  consist   primarily  of
application fees,  commitment or facility fees, other related financing fees and
supplemental  discounts  paid by clients who do not sell the  minimum  volume of
accounts receivable required by their contracts with the Company (including as a
result of "graduating" to a lower cost source of funding).


     The following table breaks down total income by type of transaction for the
periods indicated and the percentage relationship of each type of transaction to
total income.

                                        For the Three Months Ended June 30,

                                            1997                    1996
                                        (Unaudited)              (Unaudited)
                                     ---------------------  --------------------
                                     Earned     % of Total    Earned  % of Total
         Type of Transaction         Income        Income     Income     Income
         -------------------        ----------     -------  ----------  --------
Discount on Factored
     Accounts Receivable .......    $  835,726       40.1%  $1,378,380     42.0%
Earnings on Collateralized
     Advances ..................       365,501       17.6      884,727     26.9
Earnings on Purchased Life
     Insurance Policies ........       100,000        4.8      186,467      5.7
Other Earnings .................       195,783        9.4      272,566      8.3
                                    ----------    -------   ----------    -----
     Total .....................     1,497,010       71.9    2,722,140     82.9
Fees and Other Income ..........       585,103       28.1      563,398     17.1
                                    ----------    -------   ----------    -----
     Total Income ..............    $2,082,113      100.0%  $3,285,538    100.0%
                                    ==========    =======    ==========   ======

                                        For the Six Months Ended June 30,

                                            1997                    1996
                                        (Unaudited)              (Unaudited)
                                     ---------------------  --------------------
                                     Earned     % of Total    Earned  % of Total
         Type of Transaction         Income        Income     Income     Income
         -------------------        ----------     -------  ----------  --------
Discount on Factored
     Accounts Receivable .......    $2,320,053       48.2%  $2,562,245     41.5%
Earnings on Collateralized
     Advances ..................       836,744       17.4    1,660,635     26.9
Earnings on Purchased Life
     Insurance Policies ........       200,000        4.2      342,072      5.5
Other Earnings .................       432,798        8.9      491,009      8.0
                                    ----------    -------   -----------    -----
     Total .....................     3,789,595       78.7    5,055,961     81.9
Fees and Other Income ..........     1,024,624       21.3    1,115,250     18.1
                                    ----------    -------   -----------    -----
     Total Income ..............    $4,814,219      100.0%  $6,171,211    100.0%
                                    ==========    =====     ==========    =====

                                       13

<PAGE>

     Total income decreased 22.0% in the first half of 1997 from the same period
in 1996, from $6.2 million to $4.8 million; total income decreased 36.6% for the
second  quarter of 1997 over the same period in 1996,  from $3.3 million to $2.1
million. Earned discounts from factored accounts receivable decreased 9.5%, from
$2.6  million to $2.3 million in the first half of 1997 versus the first half of
1996. In the second quarter earned  discounts from factored  accounts  decreased
39.4% to $0.8 million from $1.4 million.  The decline in earned  discounts  from
factored accounts receivable in the second quarter of 1997 is largely the result
of lost volume  attributable to a large client that paid its obligations in full
during the second  quarter.  Volume in the third  quarter of 1997  appears to be
improving. Earned discounts from factored accounts receivable as a percentage of
total  factored  accounts  receivable  purchased were 3.1% and 3.4% in the first
halves of 1997 and 1996, respectively;  in the second quarters of 1997 and 1996,
earned  discounts  were  3.1%  and  3.5%,  respectively,  of  factored  accounts
receivable.  The  reduction  during  the first half of 1997  versus  1996 in the
average earned discount from factored accounts  receivable reflects the downward
pressure on pricing from  competition in the Company's core factoring  business.
In the first half of 1997 and 1996,  earned  discounts  from  factored  accounts
receivable accounted for 48.2% and 41.5%, respectively,  of total income. In the
second  quarters  of 1997 and  1996  earned  discounts  from  factored  accounts
receivable accounted for 40.1% and 42.0%, respectively, of total income.


     Earned discounts from Collateralized Advances decreased approximately 49.6%
in the first half of 1997 versus the comparable period in 1996, to approximately
$0.8 million from $1.7 million and decreased  approximately  58.7% in the second
quarter of 1997 over the same quarter in 1996,  to  approximately  $366 thousand
from $885 thousand.  In the first halves of 1997 and 1996, earned discounts from
Collateralized Advances constituted approximately 17.4% and 26.9%, respectively,
of total income. The decline in earned discounts from Collateralized Advances in
1997 does not  reflect a  strategic  move  away  from  Collateralized  Advances.
Rather, it reflects a reduction in the average amount of Collateralized Advances
outstanding  during the  relevant  periods.  In the second  quarters of 1997 and
1996, earned discounts from Collateralized Advances constituted 17.6% and 26.9%,
respectively,  of total income.  Collateralized Advances currently bear interest
at a rate, on average, of approximately 2% per month calculated generally on the
average  outstanding  amount of the  Collateralized  Advance  during  the month.
Earned  discounts from  Collateralized  Advances are required to be paid in cash
monthly in arrears. See Provision for Credit Losses below.


     As of June 30, 1997 and  December 31, 1996,  factored  accounts  receivable
included on the Company's  balance  sheet were $11.3  million  (56.7%) and $22.4
million (59.6%), respectively, of gross finance receivables. As of June 30, 1997
and December 31, 1996, Collateralized Advances included on the Company's balance
sheet were $3.0 million (15.0%) and $8.8 million (23.4%), respectively, of gross
finance  receivables.

     Fees and other income remained relatively flat, approximately $1.0 million,
in the first half of 1997 as compared to 1.1 in the same period in 1996.  In the
second  quarter of 1997,  fees and other income were $585  thousand  compared to
$563 thousand. For 1997, included in fee income is an unusually large supplement
discount in the amount of $165,000.  This is  partially  offset by a decrease in
facility fees of approximately 105,000.

                                       14

<PAGE>



     COMPENSATION  AND FRINGE  BENEFITS.  In the first  halves of 1997 and 1996,
compensation  and fringe  benefits were $1.5 million (30.4% of total income) and
$1.8 million (29.9% of total income),  respectively.  For the second quarters of
1997 and 1996,  compensation  and fringe  benefits were $730 thousand  (35.1% of
total income) and $996 thousand  (30.3% of total income),  respectively.  Within
compensation and fringe benefits,  executive compensation decreased in the first
half of 1997 as compared to the same period in 1996,  from $714 thousand  (11.6%
of total income) to $431 thousand (9.0% of total income). Executive compensation
also  decreased in the second  quarter of 1997 as compared to the same period in
1996,  from $419 thousand  (12.8% of total  income) to $209  thousand  (10.0% of
total income).  The higher compensation and fringe benefits (including executive
compensation)  during 1996 were chiefly the result of expenses  associated  with
the  severance  of a key  employee  and costs  associated  with  replacing  that
employee.

     GENERAL AND ADMINISTRATIVE EXPENSE.  General and administrative expense was
$1.0 million (21.6% of total income) as compared to $1.6 million (25.1% of total
income)  for the first  halves of 1997 and 1996,  respectively.  For the  second
quarters of 1997 and 1996, general and administrative  expense was $501 thousand
(24.1% of total income) and $941 thousand (28.6% of total income), respectively.
The  decrease  for the first  half and  second  quarters  of 1997 was  primarily
attributable to a decrease in professional fees offset partially by increases in
depreciation. Professional fees were $290 thousand (6.0% of total income) in the
first half of 1997 versus  $754  thousand  (12.2% of total  income) in the first
half of 1996 and were $132 thousand (6.4% of total income) in the second quarter
of 1997 versus $507 thousand  (15.4% of total  income) in the second  quarter of
1996. The decrease in professional fees in 1997 is attributable,  in part to the
final  resolution of legal  proceedings  instituted in prior years.  General and
administrative  expense (other than professional  fees) for the six months ended
June 30,  1997 and 1996 was $750  thousand  (16.6%) and $797  thousand  (12.9%),
respectively.  For the three  months  ended June 30, 1997 and 1996,  general and
administrative  expense (other than professional fees) was $369 thousand (17.1%)
and $434 thousand (13.2%), respectively.

     INTEREST  EXPENSE.  Interest  expense  was $627  thousand  (13.0%  of total
income) versus $782 thousand  (12.7% of total income) for the first half of 1997
and 1996,  respectively,  and $223 thousand  (10.7% of total income) versus $427
thousand  (13.0% of total  income)  for the  second  quarters  of 1997 and 1996,
respectively.  The decrease in interest expense is attributable to a decrease in
the average  daily  balance  outstanding  on the  Company's  revolving  lines of
credit. Interest expense on the Convertible Subordinated Notes was comparable in
the first half and second  quarter of 1997, to that in the first half and second
quarter  of  1996.  The  average  daily  outstanding  balance  on the  Company's
revolving  lines of credit  was $7.5  million  and $11.0  million  for the first
halves of 1997 and 1996,  respectively,  and $3.3 million and $12.4  million for
the three  months  ended  June 30,  1997 and  1996,  respectively.  The  average
interest rate paid on the Company's revolving lines of credit decreased to 9.07%
during the first  half of 1997 from 9.17%  during the first half of 1996 and was
9.16%  during the second  quarter of 1997 as compared to 9.12% during the second
quarter of 1996.

     PROVISION  FOR CREDIT  LOSSES.  Credit  loss  experience,  the  adequacy of
underlying  collateral,  changes  in the  character  and  size of the  Company's
receivables  portfolio and management's judgment are factors used in determining
the  provision  for credit  losses and the adequacy of the  allowance for credit
losses.  Other factors given  consideration  in determining  the adequacy of the
allowance are the level of related credit balances of factoring  clients and the
current and anticipated impact of economic conditions on the creditworthiness of
the Company's clients and

                                       15

<PAGE>



account debtors.  To mitigate the risk of credit loss, the Company,  among other
things:  (I)  thoroughly  evaluates the  collateral to be made available by each
client;  (ii) usually collects its factored  accounts  receivable  directly from
account debtors,  which are frequently  (though not always) large,  creditworthy
companies or governmental entities;  (iii) purchases,  or takes a first priority
security  interest  in, all  accounts  receivable  of each  client;  (iv) takes,
whenever available,  blanket liens on all of its clients' other assets and, when
making  Collateralized  Advances,  it employs  what  management  believes  to be
conservative   loan-to-value  ratios  based  on  auction  or  liquidation  value
appraisals  performed by  independent  appraisers;  (v) almost  always  requires
personal  guaranties  (either unlimited  guaranties or guaranties limited to the
validity and  collectability of factored accounts  receivable) from its clients'
principals,  and (vi)  actively  monitors  its  portfolio  of factored  accounts
receivable,  including the  creditworthiness of account debtors and periodically
evaluates the value of other collateral securing Collateralized Advances.

     Management  recognizes that Collateralized  Advances entail different,  and
possibly  greater,   risks  to  the  Company  than  the  factoring  of  accounts
receivable. Risks associated with the making of Collateralized Advances (but not
the factoring of accounts receivable) include, among others (I) certain types of
collateral  securing  Collateralized  Advances may  diminish in value  (possibly
precipitously)  over time (sometimes short periods of time), (ii)  repossessing,
safeguarding and liquidating  collateral  securing  Collateralized  Advances may
require the Company to incur  significant fees and expenses some or all of which
may not be recoverable, (iii) clients may dispose of (or conceal) the collateral
securing  Collateralized  Advances  and (iv)  clients or natural  disasters  may
destroy the collateral securing Collateralized Advances. The Company attempts to
manage these risks,  respectively,  by (I) engaging  independent  appraisers  to
review periodically the value of collateral securing  Collateralized Advances at
intervals  established  by  management  based  on  the  characteristics  of  the
underlying collateral,  (ii) employing  conservative  loan-to-value ratios which
management  believes  should  generally  enable  the  Company  to  recover  from
liquidation  proceeds most of the fees and expenses  incurred in connection with
repossessing,  safeguarding  and liquidating  collateral,  (iii) using its field
examiners to inspect  collateral  periodically and, when  appropriate,  engaging
independent  collateral  monitoring  firms to implement  appropriate  collateral
control systems,  including  bonding certain of the client's  employees and (iv)
requiring clients to maintain  appropriate amounts and types of insurance issued
by insurers  acceptable  to the Company  naming the Company as the party to whom
loss is paid.  Although  management  believes  that the  Company  has (or  third
parties  acting on behalf of the Company have) the requisite  skill to evaluate,
monitor  and  manage  the risks  associated  with the  making of  Collateralized
Advances,  there can be no assurance that the Company will in fact be successful
in doing so.

     The provision for credit losses decreased from $4.6 million (73.8% of total
income) in the first  half of 1996 to  $675,790  (14.0% of total  income) in the
first six months of 1997.  The provision for credit losses during the first half
of 1996  included a  provision  of $3.9  million  in the second  quarter of 1996
associated   with   management's   decision  to  write-off  or  write-down  nine
non-performing  assets  totaling $4.2 million.  As of June 30, 1997 and December
31, 1996 the allowance for credit losses was 16.0% ($3.2 million) and 6.9% ($2.6
million)  of gross  finance  receivables,  respectively.  At June  30,  1997 the
accrual of earnings was suspended on $4.6 million of gross  finance  receivables
as compared to $4.5 million of gross finance  receivables  at December 31, 1996.
In addition,  "other  receivables" and "other assets" appearing on the Company's
balance sheet typically do not accrue earnings for financial statement purposes.
The  following   table  provides  a  summary  of  the  Company's  gross  finance
receivables (which includes primarily

                                       16

<PAGE>



factored   accounts   receivable,   Collateralized   Advances  and   non-earning
receivables),  "other receivables" and "other assets" and information  regarding
the allowance for credit losses as of the dates indicated.

                                          As of (or for    As of (or for the Six
                                         the Year Ended)   Months Ended June 30,
                                       December 31, 1996     1997         1996
                                       -----------------    ------       -----
                                                  (Dollars in thousands)

Gross Finance Receivables, Other
  Receivables and Other Assets Data:
Gross Finance Receivables ...............      $ 37,600    $ 20,005    $ 30,989
Non-Earning Receivables (also included
  in Gross Finance Receivables) .........         4,548       4,587         850
Other Receivables .......................         4,390       2,592       2,849
Other Assets (excluding
miscellaneous) ..........................         1,884       3,187         900

Allowance for credit
  losses:
Balance, January 1 ......................         2,351       2,579       2,351
Provision for credit
  losses ................................         5,878         676       4,552
Receivables charged off .................        (5,711)       (360)     (4,523)
Recoveries ..............................             6         316           4
Ending Balance ..........................      $  2,579    $  3,211    $  2,384

Allowance for Credit Losses as a percent of:
Gross Finance Receivables ...............          6.85%       16.0%       7.69%
Non-Earning Receivables .................          56.7%       70.0%     280.45%
Non-Earning Receivables, Other
  Receivables and Other Assets ..........          28.3%      30.98%      51.84%

As a percent of the sum of Gross
  Finance Receivables, Other
  Receivables and Other Assets:
Non-Earning
  Receivables ...........................          10.4%      17.79%       2.45%
Other Receivables .......................          10.0%      10.00%       8.20%
Other Assets ............................          4.29%      12.36%       2.59%

     Although the Company  maintains an allowance for credit losses in an amount
deemed by management to be adequate to cover potential  losses, no assurance can
be given that the allowance will in fact be adequate or that an  inadequacy,  if
any, in the allowance could not have a material  adverse effect on the Company's
earnings in future periods.  Furthermore,  although management believes that its
periodic  estimates of the value of "other  receivables"  and "other assets" are
appropriate,  no  assurance  can be given  that the  amounts  which the  Company
ultimately  collects with respect to other receivables and other assets will not
differ significantly from management's  estimates or that those differences,  if
any,  could not have a material  adverse  effect on the  Company's  earnings  in
future periods.

                                       17

<PAGE>



     COMMISSIONS.  Commission expense was $116,112 (3.5% of total income) in the
first half of 1997 as compared to $225,786  (3.7% of total  income) in the first
half of 1996.  For the  quarter  ended June 30,  1997,  commission  expense  was
$72,961 (3.5% of total income)  versus  $136,145  (4.2% of total income) for the
same quarter in 1996. The reduction in commission expense is directly related to
the decrease in earned discounts.

IMPACT OF INFLATION

     Management  believes that  inflation  has not had a material  effect on the
Company's income, expenses or liquidity during the past three years.

     Changes in interest rate levels do not  generally  affect the income earned
by the Company in the form of discounts  charged.  Rising  interest rates would,
however,  increase  the  Company's  cost of borrowed  money based on its current
borrowing arrangements which are prime or base rate adjusted credit facilities.

CHANGES IN FINANCIAL CONDITION

     The  Company's  total assets  decreased  34.9% to $29.9 million at June 30,
1997 from $45.9  million at December  31, 1996.  The  decrease is primarily  the
result of a decrease in net finance receivables.

LIQUIDITY AND CAPITAL RESOURCES

     The  Company's  principal  funding  sources are the  collection of factored
accounts receivable,  retained cash flow and external borrowings. For additional
detail  regarding  external  borrowings,  see  Notes  3 and 4 to  the  unaudited
financial statements contained in this Form 10- QSB.

     The Company  believes that internally  generated funds and borrowings under
its  revolving  credit  facility  will be  sufficient  to finance the  Company's
funding requirements for the next 12 months.

     At June 30, 1997 and December 31, 1996, the Company had working  capital of
$24.1 million and $24.9 million,  respectively, and a ratio of current assets to
current liabilities of 14.5 to 1 and 2.36 to 1, respectively.





                      [THIS SPACE INTENTIONALLY LEFT BLANK]

                                       18


<PAGE>



                           PART II -OTHER INFORMATION



ITEM 1. -LEGAL PROCEEDINGS

         For details  regarding legal  proceedings,  see Note 5 to the unaudited
financial statements contained in this Form 10-QSB.

ITEM 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

          None

ITEM 5. - OTHER INFORMATION

         None.

ITEM 6(a). - EXHIBITS

         EXHIBIT 10.1. MATERIAL CONTRACTS

               Amendment  to  Exhibit  10.7 -  Exhibit  10.7 is  amended  in its
          entirety by the Amended and  Restated  Revolving  Credit and  Security
          Agreement  dated as of May 28, 1997,  among the  Company,  the Lenders
          party  thereto and IBJ Schroder  Bank and Trust Company (as lender and
          as Agent).

               Amendment  to  Exhibit  10.7 - First  Amendment  to  Amended  and
          Restated Revolving Credit and Security Agreement dated as of  June 20,
          1997.



         EXHIBIT 10.9. EMPLOYMENT CONTRACTS

               Employment and Compensation  Agreement,  effective  as of  May 5,
          1997, by and between the Company and Frances B. Madden.

          Ehibit 27.  FINANCIAL DATA SCHEDULE

ITEM 6(b). - REPORTS ON FORM 8-K

         None.

                                       19

<PAGE>


SIGNATURES

         Pursuant to the  requirements of Section 13 or 15 (d) of the Securities
and Exchange  Act of 1934,  the Company has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.

                         ALLSTATE FINANCIAL CORPORATION



Date:     August 13, 1997                     /s/ Lawrence M. Winkler
                                              -----------------------
                                              Lawrence M. Winkler
                                              Secretary/Treasurer
                                              Chief Financial Officer


                                       20


<PAGE>