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 SEPTEMBER 30, 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)


               Delaware                                        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 November 6, 2000, was 7,668,004


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 September 30, 2000 (unaudited)
               and December 31, 1999                                           3
         Consolidated Condensed Statements of Operations for the Three and Nine
               Months Ended September 30, 2000 and 1999 (unaudited)            4
         Consolidated Condensed Statements of Shareholders' Equity for the
               Year Ended December 31, 1999 and Nine Months Ended
               September 30, 2000 (unaudited)                                  5
         Consolidated  Condensed Statements of Cash Flows for the
               Nine Months Ended September 30, 2000 and 1999 (unaudited)       6

         Notes to Consolidated Condensed Financial Statements (unaudited)      7

     Item 2 -  Management's Discussion and Analysis  or Plan
         of Operations and Financial Condition                                 9

Part II - Other Information
     Item 1 - Legal Proceedings                                               13

     Item 2.- Changes In Securities And Use Of Proceeds                       13

     Item 3 - Defaults Upon Senior Securities                                 13

     Item 4 - Submission of Matters to a Vote of Security Holders             14

     Item 6 - Exhibits and Reports on Form 8-K                                14

Signatures                                                                    14


                                       2
<PAGE>



   PART I - FINANCIAL INFORMATION

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

------------------------------------------------------------------------------- ----------------------- --------------------
                                                                                   September  30, 2000     December 31,1999
-------------------------------------------------------------------------------
------------------------------------------------------------------------------- ----------------------- --------------------
<S>                                                                               <C>                    <C>
                                                                                           (Unaudited)
-------------------------------------------------------------------------------
ASSETS
-------------------------------------------------------------------------------
Cash                                                                                        $2,319,383             $353,962
-------------------------------------------------------------------------------
Purchased receivables                                                                        1,711,426            2,110,454
-------------------------------------------------------------------------------
Advances receivable                                                                          2,301,301            9,329,366
                                                                                             ---------            ---------
-------------------------------------------------------------------------------
                                                                                             4,012,727           11,439,820
-------------------------------------------------------------------------------
Less: Allowance for credit losses                                                            (564,877)          (4,316,399)
                                                                                             ---------          -----------
-------------------------------------------------------------------------------
Total receivables - net                                                                      3,447,850            7,123,421
                                                                                             ---------            ---------
-------------------------------------------------------------------------------
Securities available for sale                                                                  236,000                    -
-------------------------------------------------------------------------------
Furniture, fixtures and equipment, net                                                          99,899              151,375
-------------------------------------------------------------------------------
Other assets                                                                                   193,791               43,643
                                                                                               -------               ------
-------------------------------------------------------------------------------
TOTAL ASSETS                                                                                $6,296,923           $7,672,401
                                                                                            ==========           ==========
-------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
-------------------------------------------------------------------------------
Accounts payable and accrued expenses                                                       $1,019,113           $1,009,921
-------------------------------------------------------------------------------
Notes payable                                                                                        -            1,366,051
-------------------------------------------------------------------------------
Convertible subordinated notes                                                               4,954,000            4,954,000
                                                                                             ---------            ---------
-------------------------------------------------------------------------------
TOTAL LIABILITIES                                                                            5,973,113            7,329,972
                                                                                             ---------            ---------
-------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY:
-------------------------------------------------------------------------------
Preferred stock, authorized 2,000,000 shares with
no par value; no shares issued or outstanding                                                        -                    -
-------------------------------------------------------------------------------
Common  stock,  par  value  $.01,  authorized   20,000,000,   issued  3,280,828,
outstanding 2,499,616 at September 30, 2000; no par value, authorized 10,000,000
shares, issued 3,105,828, outstanding 2,324,616
at December 31,1999 (exclusive of shares  held in treasury)                                     32,808               40,000
-------------------------------------------------------------------------------
Additional paid-in-capital                                                                  18,970,624           18,874,182
-------------------------------------------------------------------------------
Treasury stock, 781,212 shares                                                             (4,954,023)          (4,967,472)
-------------------------------------------------------------------------------
Accumulated deficit                                                                       (13,957,599)         (13,604,281)
-------------------------------------------------------------------------------
Accumulated other comprehensive income:
unrealized gains on investment securities                                                      232,000                    -
                                                                                               -------          -----------
-------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY                                                                     323,810              342,429
                                                                                               -------              -------
-------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                                  $6,296,923           $7,672,401
                                                                                            ==========           ==========
</TABLE>




See Notes to Consolidated Condensed Financial Statements


                                       3
<PAGE>


   ALLSTATE FINANCIAL CORPORATION AND SUBSIDIARIES
   CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
   (Unaudited)
<TABLE>
<CAPTION>

  ----------------------------------------------
                                                             For the Three Months                    For the Nine Months
                                                              Ended September 30,                    Ended September 30,
  ----------------------------------------------
                                                           2000                 1999               2000                1999
<S>                                                  <C>              <C>                 <C>              <C>
                                                           ----                 ----               ----                ----
  ----------------------------------------------
  REVENUE
  ----------------------------------------------
  Earned discounts and interest                           $70,807            $592,511            $287,735          $2,805,244
  ----------------------------------------------
  Fees and other revenue                                   93,686              34,736             284,233             359,182
                                                           ------              ------             -------             -------
  ----------------------------------------------
  TOTAL REVENUE                                           164,493             627,247             571,968           3,164,426
                                                          -------             -------             -------           ---------
  ----------------------------------------------
  EXPENSES
  ----------------------------------------------
  Compensation and fringe                                 112,805             523,171             398,048           1,786,867
   benefits
  ----------------------------------------------
  General and administrative                              307,204             563,375             850,035           2,318,024
  ----------------------------------------------
  Interest expense                                        169,809             319,874             516,523           1,030,839
  ----------------------------------------------
  Provision for credit losses                           (473,830)             800,000           (839,319)           9,176,057
   (recovery)
  ----------------------------------------------
  Restructuring Charge                                         -              259,221                  -              259,221
                                                     ------------             -------        ------------             -------
  ----------------------------------------------
  TOTAL EXPENSES                                          115,988           2,465,641             925,286          14,571,008
                                                          -------           ---------             -------          ----------
  ----------------------------------------------
  INCOME (LOSS) BEFORE INCOME
   TAX EXPENSE                                             48,505         (1,838,394)           (353,318)        (11,406,582)
  ----------------------------------------------
  INCOME TAX EXPENSE                                            -               9,500                               4,031,349
                                                    -------------            --------       -------------           ---------

  ----------------------------------------------
  NET INCOME (LOSS)                                       $48,505        $(1,847,894)          $(353,318)       $(15,437,931)
                                                          =======        ============          ==========       =============
  ----------------------------------------------
  NET INCOME (LOSS) PER COMMON
   SHARE
  ----------------------------------------------
  Basic and Diluted                                          $.02             $(0.79)              ($.15)             $(6.64)
                                                             ====             =======              ======             =======
  ----------------------------------------------
  WEIGHTED  AVERAGE
   NUMBER OF SHARES OUTSTANDING
  ----------------------------------------------
  Basic and Diluted                                     2,499,616           2,324,616           2,403,644           2,324,400
                                                        =========           =========           =========           =========
</TABLE>


See Notes to Consolidated Condensed Financial Statements


                                       4
<PAGE>


   ALLSTATE FINANCIAL CORPORATION AND SUBSIDIARIES
   CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
   YEAR ENDED DECEMBER 31, 1999 AND THE NINE MONTHS ENDED SEPTEMBER 30, 2000
  ---------------------- ----------- --------------- ---------------- ----------------- --------------------- -----------------
                                                                        Accumulated
                                       Additional                          Other          Retained Earnings
                           Common       Paid in         Treasury       Comprehensive          (Deficit)
                           Stock        Capital           Stock            Income                                Total
  ---------------------- ----------- --------------- ---------------- ----------------- --------------------- -----------------
<S>                      <C>         <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)
                                                  -           13,449                 -                     -          13,449
   ----------------------
   Unrealized gains on
   investment
   securities
   (unaudited)
                                  -               -                -            232,000                     -         232,000
  ----------------------
   Issue of 175,000
   shares to
   non-employee
   directors
   (unaudited)
                                  -          89,250                -                 -                     -          89,250
  ----------------------
   Conversion of
   issued Virginia
   shares to $0.01 par
   value Delaware
   shares                   (7,192)           7,192                -                 -                     -               -
  ----------------------
   Net (Loss)
   (unaudited)                   -               -                 -                 -             (353,318)       (353,318)
                                 ------         --------          ---------     ----------         ---------       ---------
   ---------------------
   Balance - Sept. 30,
   2000
   (unaudited)              $32,808     $18,970,624     $(4,954,023)          $232,000           $(13,957,599)      $323,810
                            =======     ===========     ============          ========           =============      ========
  ----------------------
</TABLE>

         See Notes to Consolidated Condensed Financial Statements


                                       5
<PAGE>

   ALLSTATE FINANCIAL CORPORATION AND SUBSIDIARIES
   CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
         (Unaudited)
<TABLE>
<CAPTION>
                                                                                      Nine Months Ended September 30,
------------------------------------------------------------------------------------------------------------------------------

                                                                                           2000                       1999
------------------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>                     <C>

CASH FLOWS FROM OPERATING ACTIVITIES:
     Net (Loss)                                                                      $(353,318)              $(15,437,931)
     Adjustments to reconcile net (loss)
      to cash provided (used) by operating activities:
      Depreciation - net                                                                 62,697                     53,587
      Automobiles                                                                             -                     65,440
      Provision for credit losses (recoveries)                                        (839,319)                  9,176,057
      Deferred Income Taxes                                                                                      3,960,946
      Changes in operating assets and liabilities:
       Other receivables                                                              (150,148)                    627,630
       Accounts payable and accrued expenses                                              9,192                  (284,901)
       Income taxes receivable                                                               -                       8,824
                                                                                ---------------                    -------
NET CASH  (USED) BY OPERATING ACTIVITIES                                            (1,270,896)                (1,016,340)
                                                                                    -----------                -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchase of receivables and  advances                                            (886,000)              (106,526,864)
     Collection of purchased receivables
      and advances receivable                                                         4,832,158                117,403,655
     Recoveries of charged-off assets (net of participant portion)                      623,981
     (Decrease) in credit balances of factoring clients                                       -                (4,146,426)
     Sale of Automobiles                                                                      -                      6,800
     Sale (Purchase) of furniture, fixtures and equipment                              (11,221)                  (181,394)
                                                                                       --------                  ---------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES                                      4,558,918                  6,519,771
                                                                                      ---------                  ---------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Proceeds from lines of credit                                                            -                 76,427,897
     Principal payments on lines of credit                                          (1,366,050)               (83,871,948)
     Treasury stock acquisition costs                                                    13,449                     12,219
                                                                                         ------                     ------
NET CASH PROVIDED (USED) BY FINANCING  ACTIVITIES                                   (1,322,601)                (7,431,832)
                                                                                    -----------                -----------
NET  INCREASE (DECREASE) IN CASH                                                      1,965,421                (1,928,401)
                                                                                      ---------                -----------
CASH, Beginning of period                                                               353,962                  2,420,644
                                                                                        -------                  ---------
CASH, End of period                                                                  $2,319,383                   $492,243
                                                                                     ==========                   ========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
 INFORMATION:
     Interest paid                                                                      $67,250                   $283,111
                                                                                        =======                   ========

SUPPLEMENTAL SCHEDULE OF NONCASH
ACTIVITIES
     Conversion of factoring clients to ABL loans                                         $   -                 $9,309,511
     Issuance of common stock in exchange
      for convertible subordinated notes                                                  $   -                     $3,998
     Issuance of common stock as directors' fees                                        $89,250                       $  -
     Unrealized gain on securities available for sale received in
      settlement of non-performing advance                                           $1,156,000                          -
     Unrealized gain (loss) on securities available for sale                          ($924,000)                          -
</TABLE>


See Notes to Consolidated Condensed Financial Statements


                                       6
<PAGE>


ALLSTATE FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

1.  General.  The  consolidated   financial  statements  of  Allstate  Financial
Corporation and subsidiaries  ("Allstate") included herein are unaudited for the
periods ended September 30, 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.  At the reconvened annual meeting of the shareholders
of Allstate held on August 29, 2000,  shareholders  approved the reincorporation
of Allstate as a Delaware  corporation.  The  reincorporation  into Delaware was
completed  on September  1, 2000.  The  consolidated  financial  statements  for
Allstate  at   September   30,   2000   reflect   adjustments   related  to  the
reincorporation as a Delaware  corporation.  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 U.S Securities and Exchange
Commission.  Allstate  believes  that the  disclosures  are adequate to make the
information  presented not  misleading.  The results of operations for the three
and nine months ended September 30, 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's Annual Report on Form 10-KSB for the year ended December 31, 1999.

2. Lines of Credit.  In January 2000,  Allstate repaid its bank lenders in full.
Previously Allstate obtained a $1,000,000 supplemental working capital loan from
Value Partners Ltd. ("Value  Partners"),  Allstate's  majority  shareholder.  On
April 5, 2000 Allstate  repaid the working  capital loan in full.  Allstate does
not have any outside source of liquidity to fund new business, and is relying on
collections  of  existing  accounts  and  impaired  assets  to fund its  current
clients.

3. Certain Contingencies. At June 30, 2000 Allstate was 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  ("AG"),  pending in the United  States  Bankruptcy  Court for the
Southern District of New York. In a 1993 action Allstate undertook an attempt to
recover against AG. An answer and counterclaim was filed against Allstate.

In August 2000  Allstate  entered into a settlement of the A.G.  litigation.  In
exchange for the payment of $105,000, the successors to the party that filed the
counterclaim agreed to drop their objection to the trustees'  abandonment of the
claim against Allstate.

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

Allstate  previously  occupied  approximately  8,000  square feet of space in an
office  building in Arlington,  Virginia as its principal  location.  Allstate's
lease on this property  would have expired in December 2001. The cost of renting
this office space was  approximately  $178,000 in 1999.  At the end of May, 2000
Allstate was released from its  obligations for the remainder of the lease term.
Allstate sublets approximately 1,500 square feet of office space in a commercial
building  located in McLean,  Virginia.  The cost of renting at the new location
will be approximately  $30,000 during 2000.  Allstate subleases from, and shares
certain of the  expenses of occupancy  with,  Harbourton  Financial  Corporation
("Harbourton"),  a separate  financial  services firm that is majority  owned by
Value Partners.

4.  Credit  Concentrations.  For the three  months  ended  September  30,  2000,
interest and fees from two clients  each  accounted  for over 10% of  Allstate's
total earned  revenue,  representing  31.19% of  Allstate's  total  revenue,  as
compared  to 36.8% of  revenue  from the three  largest  clients,  each of which
accounted  for over 10% of the total,  in the three months ended  September  30,
1999.

At September  30, 2000,  one client  accounted  for more than 10% of  Allstate's
total receivables.  The loan, which represented 21.2% of total receivables, is a
participation in a loan which was originated by and is serviced by Harbourton.

Subsequent  to  September  30,  2000,   Allstate  purchased  from  Harbourton  a
participation  interest  in a second  loan that  accounted  for more than 10% of
Allstate's total receivables. This loan represented 29.9% of total receivables.

5. Stock Options.  Allstate maintains three stock option plans: (1) an Incentive
Stock Option Plan  ("Qualified  Plan"),  (2) a  Non-Qualified  Stock Option Plan
("Non-Qualified  Plan"), and (3) its 2000 Stock Option Plan ("2000 Plan"), which
allows for grants of both  qualified and  non-qualified  options.  No additional
grants can be made under the Qualified or Non-Qualified

                                       8
<PAGE>

Plans as of  February  7,  2000.  The 2000  Plan was  approved  by the  board of
directors  of Allstate on June 13, 2000,  subject to the approval of  Allstate's
shareholders.  Subsequently,  on August 8, 2000,  the plan was  approved  by the
shareholders.  Allstate  continues to account for stock options under APB 25 and
provides the additional disclosures as required by SFAS No. 123.

Qualified  Plan -  Allstate  had  reserved  275,000  shares of common  stock for
issuance under its Qualified Plan. 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 Allstate.

Non-Qualified  Plan - Allstate had reserved  150,000  shares of common stock for
issuance  under its  Non-Qualified  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.

2000 Plan - Allstate reserved the lesser of 450,000 or 8% of the then issued and
outstanding  shares of common  stock for  issuance  under its 2000  Plan.  As of
November 6, 2000 the amount of shares reserved was 450,000. No options have been
granted under the 2000 Plan.

The table below summarizes the option activity for all three plans for the three
months ended September 30, 2000.


                                          Three Months Ended
                                          September 30, 2000
 Outstanding July 1                             155,400
       Granted                                       -
       Exercised                                      -
Forfeited or expired                                  -
     Outstanding                                155,400
                                                =======

     Exercisable                                155,300
                                                =======


6. Restricted Stock Plan. Allstate's board of directors approved Allstate's 2000
Restricted  Stock Plan for  Non-Employee  Directors on June 13, 2000.  This plan
reserved  175,000 shares of common stock for issuance to non-employee  directors
for past services.  All of the shares were awarded on June 13, 2000,  subject to
the approval of the plan by the  shareholders.  The closing  price of Allstate's
common  stock  as  traded  on the  Nasdaq  OTC  Market  on  June  13 was  $0.51.
Subsequently, on August 8, 2000, this plan was approved by the shareholders.

7. 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.  Allstate has reduced the deferred tax assets by utilizing a
valuation  allowance,  because the deferred tax assets more than likely will not
be  realized.  The  remaining  tax assets  equal the  deferred  tax  liabilities
resulting from the unrealized gain on investment securities.

8. Uncertainties and Subsequent Events.  Allstate achieved  profitability during
the quarter  because of  collections  of  previously  charged -off assets.  This
permitted a provision for recoveries.  Through the collection of impaired assets
Allstate believes it now has sufficient cash to provide the funds required under
the Harbourton  merger  agreement (see below) and support its operations for the
remainder of the fiscal year.

Allstate  continued to be in default on its 10% Convertible  Subordinated  Notes
due September  2003  ("Allstate  Notes") as of September 30, 2000. On October 5,
2000,  Allstate filed a plan of arrangement with the Delaware Court of Chancery,
setting  forth the proposed  conversion  of the  Allstate  Notes  together  with
accrued but unpaid  interest,  into common stock of Allstate at a price of $0.95
per share of common stock. (the "Notes Conversion"). The Delaware court approved
the Notes  Conversion  on October 6, 2000,  and minor  changes  were made to the
approval order on October 11, 2000.


                                       9
<PAGE>

On October  26,  2000,  Allstate  Notes with an  aggregate  principal  amount of
$4,331,000,  together  with  $578,970  of  accrued  but  unpaid  interest  at  a
negotiated default rate of 12.5% simple, were converted into 5,168,388 shares of
newly issued  Allstate  common stock.  The remaining  $266,000 of Allstate Notes
were  brought  current.  Value  Partners  held  Allstate  Notes with a principal
balance of $4,197,000 and received  5,008,481 shares of Allstate common stock as
a result of the Notes Conversion. Following the Notes Conversion, Value Partners
held a total of 5,676,849 shares of Allstate common stock, representing 74.0% of
the currently  outstanding shares. Value Partners is now deemed to be in control
of Allstate.

On October 2, 2000 all of Allstate's  variable rate notes due September 30, 2000
and accrued interest thereon was paid.

Effective  September 18, 2000 and September 25, 2000,  respectively,  Charles G.
Johnson  resigned  as a director  and as  President  of  Allstate  for  personal
reasons.  David W.  Campbell,  Allstate's  Chairman of the Board,  was appointed
interim  President.  In addition  Timothy G.  Ewing,  who  controls  the general
partner of Value  Partners,  was  appointed  a director  of  Allstate  effective
September 18, 2000.

On October 25, 2000,  Allstate entered into an Agreement and Plan of Merger with
Harbourton.  Allstate's majority shareholder, Value Partners, currently controls
74.0% of Allstate and controls 95.7% of Harbourton.  If the merger is completed,
Value  Partners  will own  approximately  84.8% of the common stock of Allstate.
Under the terms of the proposed  transaction  Allstate will issue  7,516,162 new
shares of Allstate common stock to the three  shareholders of Harbourton,  which
equals 49.5% of the total 15,184,166  shares expected to be outstanding when the
merger is completed.  For purposes of the merger agreement,  Allstate assigned a
value of $0.95  per share to these  new  shares,  which  exceeds  recent  market
prices.  Allstate will also pay to the Harbourton shareholders an amount of cash
equal to the difference between  Harbourton's total  stockholders'  equity as of
the month end preceding the closing of the merger and the assigned  value of the
Allstate  common  stock  issued in the merger.  Allstate  expects the total cash
amount will be at least  $1,900,000.  Because Value Partners holds more than 50%
of the outstanding Allstate common stock and has agreed to approve the merger by
written consent,  approval and adoption of the merger agreement is assured. Each
of the  directors  of Allstate  has also agreed to approve the merger by written
consent.

9. Securities  Available for Sale.  Allstate's  investments in marketable equity
securities  are  classified  as  available-for-sale.  Investments  classified as
available-for-sale  are  measured at market value and net  unrealized  gains and
losses are recorded as a component of stockholders' equity until realized. These
shares have a market  value on September  30, 2000 of  $236,000.  The shares are
subject  to  restrictions  on  sale or  transfer  according  to Rule  144 of the
Securities Act of 1933.


10.  Comprehensive  Income.  SFAS  No.  130,  Reporting   Comprehensive  Income,
establishes  standards for reporting and display of comprehensive income and its
components   (revenues,   expenses,   gains,  and  losses)  in  a  full  set  of
general-purpose  financial  statements.  This statement  requires that all items
that are recognized  under  accounting  standards as components of comprehensive
income be reported  in a financial  statement  that is  displayed  with the same
prominence as other  financial  statements.  The following  table  discloses the
components of Allstate's comprehensive income:

<TABLE>
<CAPTION>

                                                 Three months ended September       Nine months ended September 30,
                                                              30,
<S>                                          <C>               <C>                <C>              <C>
                                                    2000              1999               2000             1999
           ---------------------------------- ----------------- ------------------ ----------------- ---------------

           Net Income (loss)                           $48,505       $(1,847,894)      $(353,318)     $(15,437,931)
           Other comprehensive income:
            Unrealized gain on securities
            available for sale received in
            settlement of advance                                                      1,156,000
           Unrealized gain (loss) on
           securities available for sale             (144,000)
                                              -      ---------       -------------
                                                                               -       (924,000)                  -
                                                                               --      ---------                  -
           Comprehensive income                      ($95,495)       $(1,847,894)      $(121,318)       $(15,437,931)
                                                     =========       ============     =============     =============

</TABLE>

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 Allstate which represent Allstate's current expectations
or beliefs,  including,  but not limited to,  statements  concerning  Allstate'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,


                                       10
<PAGE>

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 Allstate to continue its growth
strategy,  competition,  and regulatory  restrictions  relating to potential new
activities,  certain of which are beyond Allstate'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.  Through  its  offering of  advances  secured by  accounts  receivable,
inventory,  machinery and equipment  ("Asset-Based Lending" or "ABL"),  Allstate
provides  its  clients  with the  ability to expand  their  working  capital and
acquire  productive  business assets.  Allstate has ceased to offer financing to
new clients and is not increasing its facilities to existing  clients.  Prior to
the sale of its  factoring  business in October 1999,  Allstate  also  purchased
accounts receivable ("Purchased Receivables") at a discount with recourse to the
seller.

Allstate's  clients do not  typically  qualify for  traditional  bank  financing
because they are either too new, too small,  undercapitalized,  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 Allstate's
business.

Allstate'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  Allstate's  subsidiaries  is  currently
engaged in business which could have a material effect on Allstate.

Liquidity  and  Capital  Resources.  Allstate's  requirement  for  capital  is a
function of the level of its  investment  in  receivables.  Allstate  funds this
investment  through  internally  generated funds.  Allstate also has outstanding
approximately  $266  thousand  in  aggregate  principal  amount  of  convertible
subordinated  notes due in  September  2003.  Allstate  believes  funds from the
collection of impaired assets will be sufficient to finance  Allstate's  funding
requirements for the remainder of the fiscal year.  Allstate's expenses,  net of
provision for recovery,  continue to exceed  revenues,  although costs have been
reduced.

Impact of Inflation.  Management  believes that inflation has not had a material
effect on  Allstate's  income,  expenses or  liquidity  during the three or nine
month periods ending September 30, 2000 and 1999. Allstate's advances receivable
bear  interest  primarily  at fixed  rates,  and its notes  payable are at fixed
rates.  Therefore, an environment of rising or falling interest rates would have
little adverse affect on Allstate's net interest spread.





                       THIS SPACE INTENTIONALLY LEFT BLANK


                                       11
<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 September 30,            Nine Months ended September 30,
                                       2000                  1999                  2000                 1999
----------------------------------------------------------------------------------------------------------------------
                                          %  of                 %  of                %  of                 %  of
                                   ($000)  Revenue       ($000)  Revenue       ($000)  Revenue       ($000)  Revenue
<S>                                <C>    <C>            <C>    <C>            <C>     <C>          <C>    <C>

Earned discounts and interest          71      43.0%        593      94.6%       288      50.3%      2,805      88.7%
Fees and other revenue                 93      57.0%         35       5.6%       284      49.7%        359      11.3%

TOTAL REVENUE                         164     100.0%        628    100.0%        572     100.0%      3,164     100.0%

EXPENSES
Compensation and fringe
 benefits                             113      68.5%        523      83.4%       398      69.6%      1,787      56.5%
General and administrative            307     186.1%        563      89.8%       850     148.6%      2,318      73.3%
Interest expense                      170     103.0%        320      51.0%       517      90.4%      1,031      32.6%
Provision for credit losses
 (recovery)                          (474)   (287.3%)       800     127.6%      (839)   (146.7%)     9,176     290.0%
Restructuring Charge                    0                   259      41.3%         0                   259       8.2%

TOTAL EXPENSES                        116      70.3%       2,465     393.1%       926     161.7%     14,571    460.5%

INCOME (LOSS) BEFORE INCOME
TAX EXPENSE                            48      29.7%     (1,837)   (293.1%)      (354)     -61.7%   (11,407)  (360.5%)


INCOME TAX EXPENSE                      0       0.0%         10       1.6%         0       0.0%      4,031     127.4%


NET INCOME (LOSS)                      48      29.7%     (1,847)   (294.7%)      (354)    (61.7%)   (15,438)   487.9%)
</TABLE>

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

The  following  tables break 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
                                                 September 30,2000                 September 30,1999
                                                 -----------------                 -----------------

            Type of Revenue                   Earned Revenue    Percent         Earned Revenue   Percent
            ---------------                       -------       -------            -------       -------
<S>                                             <C>          <C>                <C>            <C>

Discount on purchased invoices                            -          -             $288,910       46.1
Earnings on advances receivable                    $70,807        43.0              303,601       48.4
Fees and other revenue                             93,686        57.0                34,736        5.5
                                                   --------      ----                ------        ---

Total revenue                                     $164,493        100.0             $627,247       100.0
                                                 ==========      =====             ========       =====
</TABLE>


                                       12
<PAGE>

<TABLE>
<CAPTION>



                                                              For the Nine Months Ended,
                                                 September 30, 2000               September 30, 1999
                                                 ------------------               ------------------
                                                   Earned
            Type of Revenue                       Revenue      Percent      Earned Revenue      Percent
            ---------------                       -------      -------             -------      -------
<S>                                             <C>           <C>          <C>               <C>
Discount on purchased invoices                          -           -              $982,183        31.0
Earnings on advances receivable                   $287,735       50.3             1,823,061        57.6
Fees and other revenue                             284,233       49.7                359,182       11.4
                                                   -------       ----                -------       ----

Total revenue                                     $571,968      100.0            $3,164,426       100.0
                                                  ========      =====            ==========       =====
</TABLE>


Total revenue  decreased by $463 thousand and $2.6 million,  or 73.8% and 81.9%,
in the three and  nine-month  periods  ended  September 30, 2000 versus the same
periods in 1999.  Within total  revenue,  Allstate had no discounts on purchased
invoices in 2000 due to the sale of the factoring business. Earnings on advances
receivable  decreased by $233 thousand and $1.5  million,  or 76.7% and 84.2% in
the three and nine months  ending  September 30, 2000 versus the same periods in
1999. The decrease in earnings on advances was  attributable  to the decrease in
the outstanding balances of advances receivable.

Fees and other  revenue  increased  $60  thousand or 169.7% in the three  months
ended  September 30, 2000  compared to the similar  period in 1999 and decreased
$75  thousand  or 20.9%,  for the nine  months as compared to the like period in
1999.  Fee income  related to the  factoring  business and to new  facilities or
renewals  decreased  due to the lower  level of direct  business,  while the fee
Allstate  expects to collect over time based on the performance of the Purchased
Receivables sold in 1999 increased.

Compensation  and Fringe  Benefits.  Comparing  the three and nine month periods
ending  September 30, 2000 and 1999,  compensation  and fringe  benefits fell by
$410  thousand  and  $1.4  million,   respectively,  or  78.4%  and  77.7%.  The
differences  in  each  period  were  due  primarily  to a  decreased  number  of
employees.

General and Administrative  Expense.  Total general and administrative  expenses
during the three and nine month  periods  ended  September 30, 2000 fell by $256
thousand and $1.5 million,  or 45.5% and 63.3%,  compared with the corresponding
periods in 1999,  respectively.  All  categories  of  expense  were lower due to
Allstate's significantly reduced operations.

Interest  Expense.  Interest  expense fell by $150 thousand,  or 46.9%,  for the
three months ending September 30, 2000 compared with the corresponding period in
1999. For the nine months ending September 30, 2000,  interest was $514 thousand
lower, or 49.9%. 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 and the supplemental  working capital loan. The savings on
interest due to the  decrease in the amount of debt  outstanding  was  partially
offset in the three and nine month  periods  ending  September  30, 2000 because
Allstate is subject to the penalty rate of 14% per annum on the Allstate Notes.

Provision for Credit Losses  (Recovery).  During the three and nine months ended
September  30, 2000,  Allstate had  charge-offs  of $0 and $3.5  million,  while
recovering  $600 thousand and $624 thousand (both net of participant  portion of
$119 thousand),  respectively. During the three and nine months ending September
30, 1999,  Allstate had  charge-offs  of $11  thousand and $96  thousand,  while
recovering  $39  thousand  and $217  thousand.  During the three  months  ending
September  30, 2000,  Allstate  also  collected  $179  thousand in excess of the
allocated  reserve on an impaired asset. To account for that collection,  and to
adjust the amount of unallocated reserves in light of the decrease in the amount
of receivables at September 30, 2000, Allstate recorded a provision for recovery
(negative loss  provision) of $474 thousand for the three months ended September
30, 2000. At $565 thousand, the allowance was 14.1% of total receivables (net of
participations  and  unearned  income),  exclusive of life  insurance  policies,
outstanding  as of September 30, 2000.  At September 30, 2000,  $376 thousand of
the  allowance  was allocated to  non-performing  accounts.  At June 30,2000 the
comparable figures were $438 thousand, or 14.0%, with $172 thousand allocated to
non-performing.

Allstate 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,  Allstate believes the allowance
for credit losses is adequate in light of the risks inherent in the portfolio at
September 30, 2000. Allstate carefully monitors the portfolio, but deterioration
in one or more clients could have a material adverse effect on Allstate.


                                       13
<PAGE>

Receivables. Receivables consist of the following, at the dates indicated.

<TABLE>
<CAPTION>

                                                           September 30, 2000            December 31,1999
      --------------------------------------- ------------------------------ -----------------------------
<S>                                                       <C>                           <C>
      Invoices and insurance claims                                $196,556                      $234,445
      ---------------------------------------
        Less: unearned discount                                    (13,953)                      (13,953)
      ---------------------------------------
      Life insurance policies (net)                               1,528,823                     1,889,962
                                                                  ---------                     ---------
      ---------------------------------------
      Total purchased receivables                                $1,711,426                    $2,110,454
                                                                 ==========                    ==========
      ---------------------------------------
      Advances receivable                                        $2,301,301                   $10,073,989
      ---------------------------------------
        Less: participation                                               -                     (744,623)
                                                                -----------                   -----------
      Total advances receivable                                  $2,301,301                    $9,329,366
                                                                 ==========                    ==========
</TABLE>



Non-performing  receivables  included within the above totals were $804 thousand
at September 30, 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  Allstate's  receivables.  See Note 4 to the  unaudited
financial  statements.  Allstate has adopted a policy to generally  restrict the
size of any one new client to a maximum of $500  thousand,  and has  reduced the
size of the existing clients who were over that limit. Allstate has entered into
a loan  participation  in the  amount  of $850  thousand  which  is  managed  by
Harbourton.  Additionally,  subsequent to September 30 Allstate  entered into an
additional loan participation of $1.2 million with Harbourton. Although Allstate
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 Allstate.

Uncertainties and Subsequent  Events.  See Note 8 to the unaudited
financial statements.


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 2. - CHANGES IN SECURITIES AND USE OF PROCEEDS
Effective with the Notes  Conversion on October 26, 2000 the following  sections
of the  Indenture  dated as of September 14, 1998,  for the Allstate  Notes were
deleted in their entirety:
 Section 3.8 Limitation on Dividends
 Section 3.9 Limitations on Liens
 Section 3.10 Limitation on Line of Business
 Section 3.12 Limitations on Sale-Leaseback transactions
 Section 3.13 Limitation on Dividends
 Section 3.14 Authorized  Indebtedness to Consolidated Tangible Net Worth
 Section 3.15 Net  Non-Earning  Assets Over Average  Assets
 Section 3.16 Earnings to Debt Coverage
 Section 3.17 Limitation on Transactions  with Related Persons
 Section 3.18  Fundamental  Modification
 Section 3.19  Maintenance  of Properties,  Etc.
 Section 3.20 Comply With  Material  Agreements
 Section 3.21 ERISA
 Section 10.2  Directors
 In  addition,  Article  13 of  the  Indenture, Subordination, was modified to
 call for the Allstate Notes to be generally subordinated to all other senior
 debt.

ITEM 3. - DEFAULTS UPON SENIOR SECURITIES
The  Company  has  defaulted  in the  payment  of  interest  on its  convertible
subordinated  notes due September  30, 2003. On October 26, 2000,  notes with an
aggregate principal amount of $4,331,000,  together with $578,970 of accrued but
unpaid  interest at a negotiated  default rate of 12.5% simple,  were  converted
into  5,168,388  shares of newly issued  Allstate  common  stock.  The remaining
$266,000 of notes were brought current.


                                       14
<PAGE>


ITEM 4. -SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At a meeting of shareholders  on August 8, 2000, all of the directors  listed in
the proxy  statement  dated July 11,2000  nominated by  management  for one year
terms were elected. There was no opposition to management's nominations.
The following are the results of voting on proposals  considered at the meeting,
by the respective  number of votes for,  against or withheld for directors;  and
for, against or abstain, along with broker non votes, for other proposals.
<TABLE>
<CAPTION>
<S>                                                  <C>           <C>          <C>            <C>
                                                         For          Against      Withhold
Proposal  1.- Voting for all directors nominated:        2,154,617        77,800        92,199
                                                                                                     Broker
                                                         For          Against       Abstain         Non-Vote
Proposal 3.-  Approve the 2000 Stock plan                1,421,527        95,272         2,718            712,900
Proposal 4.- Approve the 2000 Restricted Stock
Plan for Non-Employee Directors                          1,418,687        97,612         3,218            712,900
Proposal 5.- Ratify the appointment of McGladrey
& Pullen, LLP as independent  auditors
                                                         2,215,399        13,000         4,018            712,900
</TABLE>
<TABLE>
<CAPTION>

Proposals  2a,  2b,2c,and  2d were  adjourned  to August 28. At the  adjournment
meeting the results of voting on the proposals considered at the meeting were:

<S>                                                 <C>           <C>            <C>             <C>
                                                                                                    Broker
                                                         For          Against       Abstain         Non-Vote
Proposal 2a.- Approve reincorporation in Delaware
                                                         1,642,033        71,600         2,498            516,533
Proposal  2b.-  Approve a provision  in the  Delaware
charter  restricting  the transfer of securities.
                                                         1,641,733        71,400         2,998            516,533
Proposal 2c.- Approve an increase in the number
of authorized shares of common stock from 10
million to 20 million                                    1,620,273        93,960         2,398            516,033
Proposal 2d.-Approve provisions in the Delaware
bylaws restricting shareholder proposals and
nominations                                              1,628,473        85,260         2,398            516,533
</TABLE>

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

ITEM 6(b). - REPORTS ON FORM 8-K None.

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

ALLSTATE FINANCIAL CORPORATION


Date:

         /s/ David W. Campbell
         David W. Campbell
         Chief Executive Officer


Date:    November 14, 2000

         /s/ C. Fred Jackson
         C. Fred Jackson
         Chief Financial Officer