<PAGE>


<PAGE>
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-Q

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

                      For Quarter Ended September 30, 1998

                          Commission File No. 0-18200

                      ARMANINO FOODS OF DISTINCTION, INC.
             -----------------------------------------------------
             (Exact name of registrant as specified in its charter)

          COLORADO                                       84-1041418
---------------------------------             --------------------------------
(State or other jurisdiction                  (I.R.S. Employer Identification
of incorporation or organization)                         Number)

                  30588 San Antonio Street, Hayward, CA 94544
               -------------------------------------------------
               (Address of principal executive office) (Zip Code)

Registrant's telephone number, including area code: (510) 441-9300

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for 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 -----

There were 10,127,369 shares of the Registrant's Common Stock outstanding as
of October 12, 1998.

<PAGE>

<PAGE>
                       PART I - FINANCIAL INFORMATION

                      ARMANINO FOODS OF DISTINCTION, INC.
                     Condensed Consolidated Balance Sheets
                                 (Unaudited)
     ASSETS
                                              September 30,   December 31,
                                                  1998            1997
                                              -------------   ------------
Current Assets:
  Cash and cash equivalents                    $   424,146    $   181,013
  Treasury bills, held to maturity               3,242,036      2,975,403
  Accounts receivable                              870,304      1,720,683
  Inventory                                      1,253,700      1,574,858
  Prepaid expenses                                 305,053        237,673
  Current deferred tax asset                       542,673        619,000
                                               -----------    -----------
     Total Current Assets                        6,637,912      7,308,630

Property and Equipment, Net                      4,795,059      5,070,557

Other Assets:
  Deposits                                          13,000         13,000
  Goodwill, net                                    511,938        543,438
                                               -----------    -----------
     Total Other Assets                            524,938        556,438
                                               -----------    -----------
     Total Assets                              $11,957,909    $12,935,625
                                               ===========    ===========

     LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
  Accounts payable and accrued expenses        $   689,706    $ 1,228,607
  Current portion of long-term debt                 67,391         67,797
  Line of credit payable                              -           287,439
                                               -----------    -----------
     Total Current Liabilities                     757,097      1,583,843

Deferred tax liability                             203,000        203,000

Long-term debt                                     153,528        203,384
                                               -----------    -----------
     Total Liabilities                           1,113,625      1,990,227

Contingent Liabilities                             155,000           -

Stockholders' Equity:
  Common stock                                  10,765,438     11,136,042
  Additional paid in capital                        22,311         22,311
  Accumulated deficit                              (98,465)      (212,955)
                                               -----------    -----------
     Total Stockholders' Equity                 10,689,284     10,945,398
                                               -----------    -----------
     Total Liabilities and Stockholders'
      Equity                                   $11,957,909    $12,935,625
                                               ===========    ===========

The accompanying notes are an integral part of these condensed financial
statements. The balances for December 31, 1997 were taken from the audited
financial statements at that date and condensed.

                                    2
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<PAGE>
                       ARMANINO FOODS OF DISTINCTION, INC.
                 Condensed Consolidated Statements of Operations
                For the Quarter Ended September 30, 1998 and 1997
                                 (Unaudited)

                                              September 30,  September 30,
                                                  1998           1997
                                              -------------  -------------
 
Net Sales                                      $ 2,836,209    $ 3,807,454
Cost of Goods Sold                               1,809,996      2,626,888
                                               -----------    -----------
     Gross Profit                                1,026,213      1,180,566

Operating Expenses:
  General and administrative                       298,273        417,428
  Salaries and wages                               192,213        196,372
  Commissions                                       91,523         67,451
  Advertising, demonstrations, promotions,
   and slotting allowances                         184,157        239,297
                                               -----------    -----------
     Total Operating Expenses                      766,166        920,548
 
Income From Operations                             260,047        260,018
Other Income                                        42,447         43,564
                                               -----------    -----------
Income From Continuing Operations Before
  Income Taxes                                     302,494        303,582
Current Tax Expense                                 25,950         81,967
Deferred Tax Expense                                95,048         39,466
                                               -----------    -----------
Income from Continuing Operations
  Before Extraordinary Loss                    $   181,496    $   182,149

Extraordinary (Loss) (net of income
  Taxes of $72,400)                               (108,600)          -
                                               -----------    -----------
Net Income                                     $    72,896    $   182,149
                                               -----------    -----------
Basic Earnings Per Share:
  Income from Continuing Operations            $       .02    $       .02
  Loss from an Extraordinary Item                     (.01)           .00
                                               -----------    -----------
Basic Earnings Per share                       $       .01    $       .02
                                               -----------    -----------
Weighted Average Common Shares
  Outstanding                                   11,109,103     11,244,769
                                                ==========     ==========
Diluted Earnings Per Share:
  Income from Continuing Operations            $       .02    $       .02
  Loss from an Extraordinary Item                     (.01)           .00
                                               -----------    -----------
Diluted Earnings Per Share                     $       .01    $       .02
                                               -----------    -----------
Weighted Average Common Shares
  Outstanding Assuming Dilution                 11,109,103     11,483,365
                                                ==========     ==========

The accompanying notes are an integral part of these condensed financial
statements.

                                     3
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<PAGE>
                       ARMANINO FOODS OF DISTINCTION, INC.
                 Condensed Consolidated Statements of Operations
              For the Nine Months Ended September 30, 1998 and 1997
                                 (Unaudited)

                                              September 30,  September 30,
                                                  1998           1997
                                              ------------   ------------

Net Sales                                      $10,325,714    $10,894,179
Cost of Goods Sold                               7,317,436      7,503,863
                                               -----------    -----------
     Gross Profit                                3,008,278      3,390,316

Operating Expenses:
  General and administrative                     1,118,568      1,163,070
  Salaries and wages                               751,476        843,056
  Commissions                                      292,821        246,923
  Advertising, demonstrations, promotions,
   and slotting allowances                         594,735        629,497
                                               -----------    -----------
     Total Operating Expenses                    2,757,600      2,882,546

Income From Operations                             250,678        507,770

Other Income                                       121,139        153,431
                                               -----------    -----------

Income From Continuing Operations Before
  Income Taxes                                     371,817        661,201

Current Tax Expense                                 29,250        178,967

Deferred Tax Expense                               119,477         85,517
                                               -----------    -----------
Income from Continuing Operations
  Before Extraordinary Loss                    $   223,090    $   396,717

Extraordinary (Loss) (net of income
  Taxes of $72,400)                               (108,600)          -
                                               -----------    -----------
Net Income                                     $   114,490    $   396,717

Basic Earnings Per Share:
  Income from Continuing Operations            $       .02    $       .03
  Loss from an extraordinary item                     (.01)           .00
                                               -----------    -----------
Basic Earnings Per share                       $       .01    $       .03
                                               -----------    -----------
Weighted Average Common Shares Outstanding      11,194,716     11,444,730
                                                ==========     ==========
Diluted Earnings Per Share:
  Income from Continuing Operations            $       .02    $       .03
  Loss from an extraordinary item                     (.01)           .00
                                               -----------    -----------
Diluted earnings per share                     $       .01    $       .03
                                               -----------    -----------
Weighted Average Common Shares Outstanding
  Assuming Dilution                             11,272,785     11,662,520
                                                ==========     ==========

The accompanying notes are an integral part of these condensed financial
statements.
                                       4
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<PAGE>
                       ARMANINO FOODS OF DISTINCTION, INC.
                Condensed Consolidated Statements of Cash Flows
             For the Nine Months Ended September 30, 1998 and 1997
                                 (Unaudited)

                                              September 30,  September 30,
                                                  1998           1997
                                              ------------   ------------
Cash Flows From Operating Activities:
  Net income                                   $   114,490    $   396,717
  Adjustment to reconcile net income to
   net cash provided by operations:
    Depreciation and amortization                  504,447        319,427
    Changes in assets and liabilities:
     Decrease in accounts receivable               850,379        652,014
     (Increase) Decrease in inventories            321,158       (308,285)
     Increase in prepaid expenses                  (67,380)      (148,281)
     Decrease in deferred tax assets                76,327         85,517
     Increase (Decrease)in accounts payable
      and accrued expenses                        (538,901)        61,454
     Increase in income taxes payable                 -           178,967
     (Decrease) in net liabilities
      of discontinued operations                      -           (75,145)
     Increase in contingent liabilities-
      extraordinary item                           155,000           -
                                               -----------    -----------
     Total Adjustments                           1,301,030        765,668
                                               -----------    -----------
Net Cash Provided By
  Operating Activities                           1,415,520      1,162,385

Cash Flows To Investing Activities:
  Decrease in deposits on future equipment
   purchases                                          -           464,610
  Capital expenditures                            (197,449)    (2,492,405)
  Purchase/Reduction of U.S. Treasury
   Bills, net                                     (266,633)     2,528,449
                                               -----------    -----------
     Net Cash Provided By (Used For)
      Investing Activities                        (464,082)       500,654
                                               -----------    -----------
Cash Flows From Financing Activities:
  Issuance of common stock                            -            13,356
  Purchase of Treasury stock                      (370,604)      (407,053)
  Payments on capital lease obligations            (50,262)       (18,381)
  Proceeds/(Payment) on short term borrowings     (287,439)          -
  Payments on note payable                            -           (32,073)
                                               -----------    -----------
Net Cash (Used For) Financing Activities:         (708,305)      (444,151)
                                               -----------    -----------

Net Increase In Cash and Cash Equivalents          243,133      1,218,888

Cash and Cash Equivalents Beginning of Period      181,013        742,856
                                               -----------    -----------

Cash and Cash Equivalents End of Period        $   424,146    $ 1,961,744
                                               ===========    ===========

The accompanying notes are an integral part of these condensed financial
statement.

                                       5
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<PAGE>
                        ARMANINO FOODS OF DISTINCTION, INC.
               Notes to Condensed Consolidated Financial Statements
                               September 30, 1998
                                  (Unaudited)

NOTE 1 - BASIS OF PRESENTATION

     The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information.  Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements.  In the opinion of management,
all adjustments, consisting of normal recurring accruals, considered necessary
for a fair presentation have been included.  It is suggested that these
condensed consolidated financial statements be read in conjunction with the
December 31, 1997 audited financial statements and notes thereto for Armanino
Foods of Distinction, Inc.  The results of operations for the periods ended
September 30, 1998 and 1997 are not necessarily indicative of the operating
results for the full year.

     The condensed consolidated financial statements include the accounts of
Armanino Foods of Distinction, Inc. ("Parent") and it's wholly-owned dormant
subsidiary AFDI, Inc.

     For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments (Treasury Bills) purchased with a maturity of
three months or less to be cash equivalents.

     The Company acquired a subsidiary (Alborough, Inc.) during May, 1996.
The Company recorded goodwill in the amount of $609,938 as part of the
purchase.  The Company is amortizing the goodwill over 15 years, on a straight
line basis.

     Earnings Per Share - The Company calculates earnings per share in
accordance with Statement of Financial Accounting Standards (SFAS) No. 128
"Earnings Per Share," which requires the Company to present basic and diluted
earnings per share.  The computation of basic earnings per share is based on
the weighted average number of shares outstanding during the periods
presented.  The computation of diluted earnings per shares is based on the
weighted average number of outstanding common shares during the year plus,
when their effect is dilutive, additional shares assuming the exercise of
certain vested and non-vested stock options and warrants, reduced by the
number of shares which could be purchased from the proceeds.

     The weighted average common shares and common equivalent shares
outstanding for purposes of calculating earnings (loss) per share was as
follows:

                                                September 30,  September 30,
                                                    1998           1997
                                                -------------  -------------

Weighted average common shares outstanding
used in basic earnings per share for the nine
months ending                                    11,194,716      11,444,730

Effect of dilutive stock options                     78,069         217,790
                                                 ----------      ----------

Weighted average common shares and potential
dilutive common equivalent shares outstanding
used in dilutive earning per share               11,272,785      11,662,520
                                                 ==========      ==========
                                    6
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<PAGE>
                        ARMANINO FOODS OF DISTINCTION, INC.
               Notes to Condensed Consolidated Financial Statements
                               September 30, 1998
                                  (Unaudited)

NOTE 1 - CONTINUED

     For the nine months ended September 30, 1998 the Company had 1,862,350
stock options that could potentially dilute earnings per share in the future
that were not included in the diluted computation because to do so would have
been antidilutive for the periods presented.

     The September 30, 1998 financial statements reflect that the shareholders
approved a 1 for 300 reverse stock split and a 300 for 1 forward stock split,
wherein in lieu of issuing the fractional share that resulted from the reverse
split to the shareholders of record of less than 300 shares, immediately prior
to the reverse split, the Company made a cash payment of $.95 per share, the
average daily closing price for the ten days prior to the June 16, 1998
effective date. (See Note 8)

NOTE 2 - INVENTORY

     Inventory is carried at the lower of cost or market with cost being
determined on the first-in, first-out method and consisted of the following at
September 30, 1998 and December 31, 1997:

                                September 30,      December 31,
                                    1998               1997
                                -------------      ------------

     Raw materials & supplies    $  459,816         $  666,007
     Finished goods                 793,884            908,851
                                 ----------         ----------
                                 $1,253,700         $1,574,858
                                 ==========         ==========

NOTE 3 - RELATED PARTY TRANSACTIONS

     The Company incurred $20,130 and $23,788 respectively, for the nine
months ended September 30, 1998 and 1997, in accounting and consulting fees to
Polly, Scatena, Gekakis & Co., an accounting firm, the managing partner of
which is also a stockholder and director of the Company.  Services provided by
the accounting firm are an extension of the internal accounting functions of
the Company, as well as management, business and systems consulting.

NOTE 4 - INCENTIVE COMPENSATION

     The Company has accrued $0 and $50,000 for the nine months ended
September 30, 1998 and September 30, 1997 respectively, for its management and
employee incentive compensation plans.  These amounts are based on achieving a
predetermined level of sales, net income and personal goals and objectives.
Accrued amounts are eligible for distribution only when the (1) predetermined
level of sales and net income and (2) personal goals and objectives are
achieved.





                                      7
<PAGE>


<PAGE>
                        ARMANINO FOODS OF DISTINCTION, INC.
               Notes to Condensed Consolidated Financial Statements
                               September 30, 1998
                                  (Unaudited)

NOTE 5 - PROPERTY AND EQUIPMENT

     Property and equipment consists of the following:

                                     September 30,      December 31,
                                         1998              1997
                                     -------------      ------------

     Furniture & Office Equipment     $  296,673         $  263,913
     Plant Machinery & Equipment       4,608,948          4,469,322
     Leasehold Improvements            1,891,986          1,873,381
                                      ----------         ----------
                                       6,797,607          6,606,616
     Accumulated Depreciation          2,002,548          1,536,059
                                      ----------         ----------
                                      $4,795,059         $5,070,557
                                      ==========         ==========

      The Company's property, plant and equipment is pledged as collateral on
a business line of credit.

NOTE 6 - LINE OF CREDIT

     As of September 30, 1998 and December 31, 1997, the Company had $0 and
$287,439 respectively outstanding on a $500,000 business line of credit.  The
line of credit accrues interest at prime plus .75%.  The line of credit
matures in September 1999, and is secured by the Company's accounts
receivable, inventory and equipment.

NOTE 7 - INCOME TAXES

     The Company accounts for income taxes in accordance with FASB Statement
109, "Accounting for Income Taxes."

     As of September 30, 1998 and December 31, 1997 the net deferred tax
assets and liabilities consisted of the following:

                                     September 30,      December 31,
                                        1998                1997
                                     -------------      ------------

     Current deferred tax asset       $  542,673          $  619,000
     Deferred Tax Liability             (203,000)           (203,000)

     Management estimates that the Company will generate adequate net profits
to offset net operating loss carryforwards prior to the expiration of the net
operating loss carryforwards.  Consequently, a deferred tax asset valuation
allowance has not been accrued.

NOTE 8 - STOCKHOLDERS' EQUITY

     As of September 30, 1998, the Company had 1,862,350 outstanding stock
options to purchase the Company's stock at prices ranging from $.925 to $1.14
per share to employees, directors and a consultant, expiring on January 28,
2000 through March 25, 2008.  During the nine months ended September 30, 1998,
the Company canceled 919,996 previously issued stock options, held by
employees, directors and a consultant and granted 1,447,350 stock options to

                                     8
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<PAGE>

                        ARMANINO FOODS OF DISTINCTION, INC.
               Notes to Condensed Consolidated Financial Statements
                               September 30, 1998
                                  (Unaudited)

NOTE 8 - CONTINUED

purchase common shares at $1.015 to $1.14 per share expiring on January 28,
2000 though March 25, 2008.  Also during the nine months ended September 30,
1998, 496,499 previously issued stock options were forfeited or expired.

     During the six months ended June 30, 1997, the Company  received $9,250,
from issuance of 10,000 shares at $.925 in connection with options exercised,
under the 1993 Stock Option Plan.

     In July 1998, the Company paid $127,669 to the holders of 134,388 shares
of the Company's common stock which were cancelled in conjunction with the 1
for 300 reverse and 300 for 1 forward stock splits, which were approved at the
May 1998 shareholder meeting.  The purpose of the stock splits was to reduce
cost of administering shareholder accounts and decreasing the amount of time
spent by the Company's management responding to shareholder requests.  The
stock splits decrease the cost by eliminating shareholders of record with less
than 300 shares, who accounted for less than 1% of the outstanding stock, but
accounted for approximately 85% of the total number of shareholders prior to
the reverse and forward stock splits.

     On September 4, 1998 the Company's board of directors approved a stock
buy-back plan to purchase $1,000,000 of the Company's stock on the open
market. As of September 30, 1998, the Company purchased 622,500 shares on the
open market for $624,691.

NOTE 9 - ACQUISITION OF SUBSIDIARY

     On May 20, 1996, the Company acquired all of the outstanding common stock
of Alborough, Inc., (dba Emilia Romagna), in a business combination accounted
for as a purchase.  Alborough, Inc. was primarily engaged in the manufacturing
of gourmet Italian foods.  The results of operations of Alborough, Inc. is
included in the accompanying financial statements since the date of
acquisition.  The total cost of the acquisition was $738,779, which exceeded
the fair market value of the net assets of Alborough, Inc. by $609,938.  The
excess is recorded as goodwill and is being amortized over 15 years.  The
purchase price could increase significantly depending upon the gross margin
attributable to sales made to certain specified customers over the 3-year
period subsequent to the consummation of the purchase agreement.  The
agreement between the parties provides that additional payments may be earned
by Alborough, Inc.'s former shareholders based on a percentage of gross margin
attributable to sales made to specified customers.  The sales must be made
during a specified period of time and subject to certain minimum sales levels
being achieved.  As of September 30, 1998, no additional payments have been
made to Alborough Inc.'s former shareholders as minimum sales to the specified
customers had not been achieved.  The Company does not anticipate that any
additional payments will need to be made.








                                    9
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<PAGE>
                        ARMANINO FOODS OF DISTINCTION, INC.
               Notes to Condensed Consolidated Financial Statements
                               September 30, 1998
                                  (Unaudited)

NOTE 10 - EXTRAORDINARY ITEM

     The Company entered into a sales representative agreement with Mass
Marketing Services in February 1994 under which Mass Marketing assisted
Armanino Foods in selling its product to "club stores" including Price Club
and Costco.  In January 1997 the Company, based on its view that Mass
Marketing had breached the Agreement which had contributed to the Company
losing its club store business, terminated the Agreement and paid Mass
Marketing approximately $23,380, estimated to be the equivalent of two months'
commissions.

     In 1997, Mass Marketing initiated a lawsuit in San Diego, California,
claiming that it had not breached the Agreement and demanding additional
termination payments as called for by the Agreement in the event of a
termination without cause.  The issue was submitted to arbitration in July
1998, and in September the arbitrator awarded Mass Marketing damages in the
total amount of $167,342.  Pending the Company's action to overturn the award,
which it considered erroneous, the parties settled the claim for $145,000.

     The Company has accrued $155,000 for the award including legal fees to be
incurred.  The total amount of $181,000, including legal fees incurred to
date, is classified as an extraordinary item for the quarter and nine months
ended September 30, 1998.




















                                      10
<PAGE>



<PAGE>
         ITEM II:  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                   CONDITION AND RESULTS OF OPERATIONS

QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1998 V. QUARTER AND NINE MONTHS
ENDED SEPTEMBER 30, 1997

     Net sales for the quarter ended September 30, 1998 were $2,836,209, as
compared to $3,807,454 for the quarter ended September 30, 1997.  For the nine
months ended September 30, 1998, net sales were $10,325,714 as compared to
$10,894,179 for the nine months ended September 30, 1997.  The decrease in
sales for the quarter and nine months is primarily attributable to lower sales
of the Company's meatball product line to a club-store customer.  The lower
sales of meatballs for the nine months were partially offset by five months of
sales of entree products to a co-pack customer.  Additionally increases in
sales of the pesto product line helped offset some of the meatball sales
decreases.  The increases in sales of the pesto product were the result of the
Company's focus on expansion of the customer base for this product line.  The
Company is presently developing entree products to support the sales effort in
this area.  As of September 30, 1998, the Company has not obtained significant
sales of the entree products, other than to its co-pack customer during the
five months ended May 31, 1998.

     Cost of goods sold as a percentage of net sales decreased from 69% for
the quarter ended September 30, 1997 to 63.8% for the quarter ended September
30, 1998. Cost of goods sold as a percentage of net sales increased from 68.9%
for the nine months ended September 30, 1997 to 70.9% for the nine months
ended September 30, 1998.  The decrease in this percentage for the current
quarter is due to the shift in the product mix due to lower meatball product
line sales which carried lower margins than both the pesto and the pasta
product lines.  For the nine months, cost of goods sold as a percentage of
sales increased primarily due to the costs associated with the entree product
line.  Although showing continuing improvement, the Company experienced higher
than expected costs in the production of these products for a co-pack
customer.  The combination of higher production costs and lower than expected
sales of the entree products, other than the co-pack customer, contributed to
the higher cost of goods sold percentage for the nine months ended September
30, 1998.

     Operating expenses as a percentage of net sales were approximately 27%
for the quarter ended September 30, 1998 as compared to 24.2% for the quarter
ended September 30, 1997.  Operating expenses for the first nine months of
1998 were 26.7% as compared to 26.5% for the first nine months of 1997.  The
increase in this percentage for the quarter and the nine months is primarily
due to lower sales experienced for these periods.  In absolute dollars,
general and administrative expenses decreased for the third quarter and nine
months of 1998 vs. 1997 primarily due to a decrease in consulting fees.  The
lower salaries expense was due to two positions being vacant during the third
quarter of 1998.  The increase in the dollar amount of commissions was
primarily due to assigning in-house accounts to a broker at the end of 1997.

     Net income from continuing operations was $181,496 for the quarter ended
September 30, 1998 compared to $182,149 for the quarter ended September 30,
1997.  Net income from continuing operations was $223,090 for the nine months
ended September 30, 1998 compared to $396,717 for the nine months ended
September 30, 1997.  The decrease in net income from continuing operations for
the quarter and nine months was due to higher costs involved with the entree
product line.  This had the biggest impact during the first and second
quarters of 1998.

                                    11
<PAGE>


<PAGE>
     Net income was $72,896 for the quarter ended September 30, 1998 compared
to $182,149 for the quarter ended September 30, 1997.  Net income was $114,490
for the nine months ended September 30, 1998 compared to $396,717 for the nine
months ended September 30, 1997.  The decrease in the third quarter and nine
months was primarily due to an extraordinary charge of $108,600 net of income
tax effect, as a result of a settlement of a lawsuit involving the termination
of a sales representation contract with the Company's former club store
broker.  Additionally, the net income for the nine months was lower due to
costs involved in manufacturing entree products for a co-pack customer.

LIQUIDITY AND CAPITAL RESOURCES

     At September 30, 1998, the Company had working capital of $5,880,815, an
increase of $156,028 from December 31, 1997.  Current assets included
$4,536,486 in cash and cash equivalents, U.S. treasury bills, and accounts
receivable.  Management believes that this level of working capital is
adequate to meet anticipated needs for liquidity.

     During the nine months ended September 30, 1998, cash provided by
operating activities of the Company amounted to $1,415,521.

     On September 8, 1998, the Company renewed its $500,000 business loan line
of credit with Wells Fargo Bank, in San Francisco, California.  This loan
provides for interest at prime plus .75% with a maturity date of September 10,
1999.  At September 30, 1998 the Company had $0 outstanding under this line.
The purpose of obtaining this line of credit is to afford the Company greater
cash liquidity and management of its cash investments.

     The Company had made deposits on manufacturing equipment and leasehold
improvements in the amount of $1,600,000 as of June 30, 1997.  The equipment
and leasehold improvements were placed in service during the third quarter of
1997 at the Hayward, California facility.

     On May 20, 1996, the Company purchased all of the outstanding stock of
Alborough, Inc. (dba Emilia Romagna).  The total cost of the acquisition was
$738,779 including professional fees paid in relation to the acquisition.
Additionally, the terms of the agreement include an "earn-out" formula which
provides for payments to Alborough shareholders over a three-year period based
on certain performance criteria established.  The purchase price could
increase significantly depending upon Alborough, Inc. meeting certain earnings
performance criteria over the 3-year period subsequent to the consummation of
the purchase agreement.  The agreement between the parties provides that
additional payments may be earned by Alborough, Inc. shareholders based on a
percentage of gross margin attributable to sales made to specified customers.
The sales must be made during a specified period of time and subject to
certain minimum sales levels being achieved.  As of September 30, 1998, the
Company has not incurred any additional cost due to this provision.

     On September 4, 1998 the Company's board of directors approved a stock
buy-back plan to purchase Company stock up to $1,000,000.  As of September 30,
1998, the Company paid approximately $243,000 for common stock purchased on
the open market.  The Company paid an additional $757,000 subsequent to
September 30, 1998, for the remaining stock purchases.

     The Company presently has no material commitments for capital
expenditures.





                                     12
<PAGE>


<PAGE>

YEAR 2000 COMPLIANCE

     In 1998, the Company began assessing the various issues relating to the
year 2000.  During 1998 the Company has upgraded its accounting application
software which has been certified by the manufacturer to be year 2000
compliant.  The accounting software includes sales order, inventory, accounts
receivable, accounts payable, general ledger as well as other modules.

     The Company is in the process of evaluating the information technology
systems.  An outside firm will be used for the initial evaluation and testing
of the Company's internal network of LAN's, the payroll processing system and
production related processing equipment.

     The Company has incurred approximately $2,000 on upgrading software.  It
is estimated that approximately $10,000 will be spent on evaluating and
testing current systems during the fourth quarter of 1998 and first quarter of
1999.  Additional costs would involve purchasing new computer equipment or
converting parts in processing equipment.  The Company will have estimates for
these additional costs by December 31, 1998.

     The Company is planning to review its external relationships in order to
determine the impact which may arise from its dealings with customers,
suppliers and service providers.

     The Company sells to approximately 250 customers.  One customer accounts
for approximately 22% of total sales.  The Company is in the process of
analyzing systems in order to implement Electronic Data Interchange.  At the
present time this customer would be the only trading partner with E.D.I.
transactions.  Contact is ongoing with this customer in order to insure that
they will be year 2000 compliant.  Surveys will be sent to the remaining
customers by March 31, 1999 to attempt to determine the extent of their
compliance with the year 2000 issues.  The Company does not expect a material
adverse affect from any single customer in this group.  However, if a large
number of customers in this group ceased operations, the Company would be
negatively impacted.  Management is unable to quantify this risk at this time.

     The Company has not yet initiated formal contingency planning processes
to mitigate the risk to the Company if any vendors or customers are not
prepared for the year 2000.  The Company intends to complete this process by
June 30, 1999.

     The Company anticipates completion of the year 2000 project by the end of
the second quarter of 1999.  There is considerable work remaining and
unforeseen difficulties may adversely affect the Company's ability to complete
its systems modifications correctly, completely, on time or within its cost
estimates.  Additionally, there can be no assurance that third parties that
the Company deals with will resolve their year 2000 issues completely and
timely.  Failure to complete the year 2000 project on time could have a
material adverse affect on future operating results and financial condition.












                                    13
<PAGE>


<PAGE>
                         PART II -OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

     On June 11, 1997, Mass Marketing Services filed a lawsuit in Superior
Court of San Diego County, California against the Company seeking  damages for
breach of contract, open book account and reasonable value of services
rendered.  The lawsuit arose after the Company terminated its sales
representation agreement with Mass Marketing.  Mass Marketing asserted that it
was entitled to an additional ten months of commissions payment under a non
solicitation provision and attorneys fees under the agreement.  The parties
agreed to arbitrate the dispute and the case was submitted to arbitration in
July 1998.  The arbitrator awarded Mass Marketing damages in the total amount
of $167,342.  Pending the Company's action to overturn the award, which it
considered erroneous, the parties settled the claim for $145,000.
 
ITEM 2.  CHANGES IN SECURITIES

     None
 
ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

     None

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

     None
 
ITEM 5.  OTHER INFORMATION

     None

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

     A.  EXHIBIT

         27 - Financial Data Schedule          Filed herewith
                                               electronically
     B.  REPORTS ON FORM 8-K - None








                                    14
<PAGE>


<PAGE>
                                  SIGNATURES

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

ARMANINO FOODS OF DISTINCTION, INC.



By: /s/ William J. Armanino        Dated: November 5, 1998
    William J. Armanino
    President
    Chief Executive Officer
    Chief Financial Officer
    Treasurer
 
<PAGE>
 
                                 EXHIBIT INDEX

     EXHIBIT                              METHOD OF FILING

27.  Financial Data Schedule         Filed herewith electronically