SECURITIES AND EXCHANGE COMMISSION
                     Washington, D.C. 20549

                          FORM 10-QSB/A
(Mark One)

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended:   September 30, 1996
 
       OR

[ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from           to         

Commission file number: 0-24736                                   
                                                          
 
  Famous Sam's Group, Inc., f/k/a U.S. Flywheel Systems, Inc.
(Exact name of small business issuer as specified in its charter)

            Nevada                          88-0361701
(State or other jurisdiction of          (I.R.S. employer         
incorporation or organization)         identification number)     


   8351 East Broadway, Tucson, Arizona             85710          
(Address of principal executive offices)         (Zip Code)       
     

Issuer's telephone number, including area code: (520) 296-1110

Indicate by check mark whether the issuer (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days.  Yes     X       No        

Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:  As of
November 20, 1996, there were approximately 1,083,813 shares
outstanding.
<PAGE>
Item 1.  Financial Statements

                    FAMOUS SAM'S GROUP, INC.
                 (a development stage company)
                         BALANCE SHEET

                            September 30, 1996  December 31, 1995
                                (unaudited)  
ASSETS:
Current Assets                                    
  Cash                           $29,770             $18,413
  Accounts Receivable             70,017              69,101
  Prepaid expenses                 6,000               4,255
     Total Current Assets        105,787              91,769

Fixed assets (at cost):
  Furniture, equipment,
    and leasehold improvements   270,765             107,226
  Less: Accumulated Depreciation(100,907)             68,258
     Net Fixed assets            169,858              38,968

Other Assets:
  Trademark, logos, franchise 
     organizational expenses     143,750              1,178
  Deposits and other assets       13,271             93,702
     Total Other Assets          157,021             94,880

     Total Assets               $432,666           $225,617

     LIABILITIES AND EQUITY (DEFICIT)
Current Liabilities:
  Current portion of long-term 
       debt                  $    44,029            $19,619
  Accounts payable 
    and accrued expenses         122,404             34,202
  Deferred franchise fees         37,500             37,500
     Total Current Liabilities   203,933             91,321

  Total Long-Term Debt           390,933            173,893

Stockholders' Equity (Deficit):
  Preferred stock, $.01 par value per
  share, 1,000,000 shares authorized,
  no shares issued

Common Stock, $.001 par value 
    per share,10,000,000 shares 
    authorized, 1,083,813
  shares issued and outstanding    1,000              2,000
  Additional paid-in-capital       1,000                -   

Retained Earnings (Deficit)     (162,200)           (41,597)

     Total Stockholders' 
        Equity (Deficit)       (162,200)             (39,597)
     Total Liabilities 
       and Equity (Deficit)    $432,666             $225,617




The accompanying notes form an integral part of these statements.
                    FAMOUS SAM'S GROUP, INC.
                 (a development stage company)
                                
                    STATEMENTS OF OPERATIONS
                          (Unaudited)
                                
                     3 Months       3 Months      9 Months        9 Months     
                      Ended          Ended          Ended           Ended
                     Sep. 30,      Sep. 30,        Sep. 30,        Sep. 30, 
                      1996           1995            1996            1995
Revenues:
  Franchise fee      $      0    $    25,000       $ 34,250       $ 92,500
  Franchise royalties 151,612        120,949        437,084        324,676
  Franchise advertising22,765         27,505         79,560         78,215
  Entertaining fees and 
     other income      25,325         34,416         82,464         87,917

     Total revenues   199,702        207,870        633,358        583,308


Expenses:
  Advertising          59,204         56,739        180,692        194,397
  Salaries and wages   62,973         46,857        168,703        130,631
  Office expenses      27,400         43,974        101,123        109,878
  Rent                 12,978         11,060         34,818         33,273
  Professional fees    12,565         15,736         46,761         31,223
  Insurance            19,024          8,933         37,610         29,387
  Interest expenses    13,428          7,264         31,685         18,341
  Legal & accounting   17,592          2,985         31,629         12,772
  Taxes and licenses    9,423         10,799         49,005         25,460
  Depreciation & 
    amortization       16,354          2,970         35,940          8,323

     Total expenses   250,941        207,317        717,966        593,685

  Income (Loss) 
    before taxes    $(51,239)          $553       $(84,608)      $(10,377)

Income taxes - Note 2

Net Income (Loss)   $(51,239)          $553       $(84,608)      $(10,377)

  Net Income (Loss)
     per common share  $(.06)         $(.11)


  Weighted average shares 920,278     781,585














The accompanying notes form an integral part of these statements.
                    FAMOUS SAM'S GROUP, INC.
                  (a development stage company)
                    STATEMENT OF CASH FLOWS
                  Increase (Decrease) in Cash
                          (Unaudited)

                                 9 Months Ended 9 Months Ended
                                  Sep. 30, 1996 Sep. 30, 1995

CASH FLOWS FROM OPERATING ACTIVITIES

Net income (loss)                   $ (84,608)   $ (10,377)
                                                        
Adjustments to reconcile net income
 (loss) to net cash provided by
 (used in) operating activities:
   Depreciation and amortization      35,940        8,323
Changes in assets and liabilities:
   Accounts receivable                 1,164      (20,434)
   Prepaid expenses                    2,386       10,259
   Refundable deposits                82,284      (55,670)
   Accounts payable                   54,692       (2,255)
   Accrued expenses                  (43,921)      15,601
   Income taxes                          (50)           0

   Total adjustments                 132,495      (44,176)

Net cash provided by
 (used in) operating activities       47,887      (54,553)

CASH FLOWS FROM INVESTING ACTIVITIES

Purchases of assets                 (164,181)     (20,233)
Purchases of miscellaneous assets   (151,096)           0
Loans (made) repaid                  123,617        3,217

Net cash provided by
 (used in) investing activities     (191,660)     (17,016)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from loans                  311,727      196,665
Principal payments on loans         (202,477)     (85,270)
Prior period adjustment               45,875            0

Net cash provided by
 (used in) financing activities      155,125      111,395

Net increase (decrease) in cash       11,352       39,826

Cash at beginning of period           18,413       23,896




The accompanying notes form an integral part of these statements.
                     FAMOUS SAM'S GROUP, INC.
                  NOTES TO FINANCIAL STATEMENTS
                        SEPTEMBER 30, 1996


1. ORGANIZATION

The accompanying unaudited consolidated financial statements have
been prepared in accordance with generally accepted accounting
principles for interim financial information and with the
instructions to Form 10-QSB and Item 310 (b) of Regulation S-B. 
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for
complete financial statements.  In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included.  Operating
results for the nine months ended September 30, 1996, are not
necessarily indicative of the results that may be expected for the
year ended December 31, 1996.   The unaudited consolidated
financial statements should be read in conjunction with
consolidated financial statements and footnotes thereto included in
the Company's Form 10-KSB for the year ended December 31, 1995.

The accompanying consolidated financial statements include the
accounts of Famous Sam's Group, Inc. ("Famous Sam's Group"), and
Famous Sam's Franchise Corporation ("FSFC").  (Famous Sam's Group
and FSFC are collectively referred to herein as the "Company.") 
All material intercompany balances and transactions have been
eliminated.

On July 23, 1996, Famous Sam's Group, acquired all of the
outstanding shares of FSFC, then a privately-held Arizona
Corporation, in a stock for stock exchange.  Under the terms of
this transaction, the shareholders of FSFC were given 700,000
shares (70%) of the common stock of Famous Sam's Group ("Common
Stock") in exchange for 100% of the capital of FSFC.  As a result,
the acquisition has been accounted for as a reverse acquisition
under APB 16.  As a result of the acquisition, the Company is now
primarily engaged in the sale of "Famous Sam's" restaurant/bar
franchises.  The corporation's offices are located in Tucson,
Arizona.  

The information presented has been prepared in accordance with the
requirements of APB16 and assumes the acquisition of FSFC occurred
at January 1, 1996. 

2. SUMMARY OF SIGNIFICANT ACCOUNTING PRINCIPLES

Revenue Recognition - Franchise  agreements outline the contractual
obligations of both the franchisee and franchisor, including
compensation to FSFC for the authorization to operate a Famous
Sam's restaurant/bar and for the use of trademarks.

Franchise Fee - These fees are paid as a purchase price for the
right to operate a Famous Sam's franchise. Prospective franchisees
are evaluated and initial requirements for purchase of the
franchise, such as the acquisition of a liquor license and the
franchisees financial condition, are evaluated prior to receipt of
the franchise fee.  The franchise fee compensates the franchisor
for reserving the franchise's general territory and covers
franchisor's expenses related to the granting of the franchise. 
The fee is generally nonrefundable.  The franchisor may terminate
an agreement because of difficulties in establishing the franchise,
such as the inability to obtain a suitable location or obtain a
firm commitment for financing. When the franchiser terminates under
those conditions, 50% of the initial franchise fee is refundable. 
The fee is generally recognized in the period received: however,
where significant franchise terms have not been finalized, the
refundable portion of the fee is deferred.

Royalties and Advertising Fees - Royalties and advertising fees are
computed on a percentage of the franchisee's gross liquor, food and
beverage sales.  These fees are remitted monthly and are recognized
as income in the same period as franchisee sales.

Property and Equipment - Property and equipment are carried at
cost. Depreciation on property and equipment are computed using the
straight-line method over the useful lives of the assets, which
range from five to seven years.      

Income Taxes - Deferred income taxes are provided to give effect to
timing differences between pretax accounting income and net taxable
income for federal income tax reporting purposes.  There were no
significant differences between pretax accounting income and net
taxable income for the periods ended September 30, 1996.  There is
no income tax accrual due to the current year's loss.

Trademarks - The cost of registering and developing trademarks and
logos are capitalized and amortized over a period of five years.
Costs to modify basic trademarks and logos for specific events or
advertising campaigns are expensed as incurred.

Organization Costs - Organization costs are capitalized and
amortized over a period of five years.

3. ACCOUNTS RECEIVABLE

Accounts receivable at September 30, 1996, are summarized as
follows:

     Franchise royalties                           $  55,065
     Advertising fees                                  6,901
     Miscellaneous reimbursements                      8,051

     Total                                         $  70,017

4.   OTHER ASSETS

Other assets include capitalized costs expended for the
registration and development of trademarks and logos, voluntary
contributions by FSFC for improvements to existing franchises, and
refundable deposits.

These assets are summarized as follows:

  Trademark and logos                               $ 10,836
  Franchise improvements                              11,883
  Organization costs                                 150,000
  
                                                      22,719
  Accumulated amortization                            28,969
                                 
     Net other assets                              $ 143,750

5.   LONG-TERM DEBT

Long-term debt at September 30, 1996, is summarized as follows:

  Note payable to relatives of the stockholders and 
  other individuals, bearing interest at the rate of 
  10.00% annually, payments of interest only, until 
  January, 1998, unsecured                         $ 295,406

  Note payables to stockholders, interest at
  the rate of 10.00% annually, payments of
  $ 2,921 monthly including interest,  due
  January 31, 1998                                    81,448



  Capital lease obligations,  interest  at
  various   rates,   payable  in  monthly
  installments of $1,300 through March 2000           58,108 
                                                     434,962

  Less: Current Maturities                          (44,029)
                                                            
  Total Long-Term Debt                             $ 390,933

6.   LEASE OBLIGATIONS

FSFC leases its offices from the majority shareholder of Famous
Sam's Group on a month-to-month basis. During the nine months ended
September 30, 1996, the amount of the lease payment was equal to
the amount required by the stockholder to repay the loans secured
against the building.  The amount of the rent payments was $34,818
for the period ended September 30, 1996.

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

Liquidity and Capital Resources:  Capital resources from operations
during the three and nine months periods ended September 30, 1996,
were primarily provided by franchise royalties ($151,612 and
$437,084, respectively), franchise advertising ($22,765 and
$79,650, respectively), and entertainment fees and other income
($25,325 and $82,464, respectively).  Franchise fees also
contributed, but to a much lesser extent, in the respective amounts
of $0 and $34,250 to income from operations.  Capital resources
were further provided from an increase in accounts payable of
$88,202.  During the first nine months of 1996, net cash of $47,887
was generated by operations.

Capital resources were also provided from the incurrence of debt in
the amount of $311,727 during the first nine months of 1996,
although $202,477 of this amount was used to repay previous debt
which had been incurred.  A prior period adjustment of $45,875,
along with the foregoing, resulted in $155,125 being generated from
financing activities.

The foregoing resulted in an increase in cash of $11,352 during the
first nine months of the current year, after taking into account
the uses discussed immediately above.

Results of Operations:  

Famous Sam's Acquisition

In May, 1996, Famous Sam's Group entered into a letter of intent
with FSFC, which was immediately followed by a formal agreement
(the "Reorganization Agreement").  Pursuant to the Reorganization
Agreement, Famous Sam's Group agreed to acquire all of the
outstanding capital stock of FSFC in exchange for 700,000
post-split shares of Common Stock.  Prior to closing under the
Reorganization Agreement, Famous Sam's Group was required to (i)
change its name, (ii) change its domicile,  (iii) reverse split its
Common Stock, (iv) bring itself current in the filing of reports
with the Securities and Exchange Commission, (v) file all the
reports required by federal and state regulatory and taxing
authorities, (vi) transfer all assets in trust for the benefit of
its shareholders prior to the reorganization and (vii) satisfy all
liabilities then outstanding.  FSFC, under the Reorganization
Agreement, was required to produce a business plan that, within one
year of closing, reasonably projected assets of $4,000,000 or more
and a net tangible book value of at least $2,000,000.  FSFC was
further required under the Reorganization Agreement to provide
audited and unaudited financial statements allowing for compliance
by the Company following closing with the rules and regulations of
the Commission.  All conditions to closing were met and closing
occurred on July 23, 1996.  In connection with the acquisition, the
Company incurred costs of $150,000, all of which were capitalized
during the third quarter.

Company Operations

Franchise royalties increased $30,663 (25.35%) to $151,612 from
$120,949 and $112,408 (34.62%) to $437,084 from $324,676 during the
three and nine month periods ended September 30, 1996, as compared
to the comparable periods of 1995, due to the increase in number of
existing franchised operations in 1996 as compared to 1995 and due
to the maturing sales base of previously existing franchises. 
Franchise advertising and entertaining fees and other income
remained fairly constant during the three and nine months ended
September 30, 1996, as compared to the comparable periods of 1995. 
Franchise fees fell $25,000 to $0 (100%) and $58,250 (62.97%) to
$34,250 from $92,500 during the respective three and nine month
periods of 1996 as compared to their 1995 counterparts, due to the
Company having to update its franchise sales packages and not being
able to solicit franchise sales as a result.  These packages have
now been updated and franchise sales solicitations have begun
again.  Management anticipates closing several franchise sales in
the final quarter of 1996.  The Company, therefore, suffered a
slight decrease in revenues to $199,702 from $207,870 during the
third quarter, but, in spite of the foregoing, the nine month
period revenues increased to $633,358 from $583,308, although by
not as much as would have occurred had the franchise sales packages
been available for distribution.

Advertising fees, office expenses, professional fees and rent
remained fairly constant during the three and nine months ended
September 30, 1996, as compared to the comparable periods of 1995. 
Salaries and wages increased $16,116 (34.39%) to $62,973 from
$46,857 and $38,072 (29.14%) to $168,703 from $130,631 during the
first three and nine months of 1996, respectively, as compared to
1995.  Also, insurance expenses increased $10,091 (112.96%) to
$19,024 from $8,933 and $8,223 (27.98%) to $37,610 from $29,387,
interest expense increased $6,164 (84.85%) to $13,428 from $7,264
and $13,344 (72.75%) to $31,685 from $18,341, legal and accounting
expenses increased $14,607 (489.34%) to $17,592 from $2,985 and
$18,857 (147.64%) to $31,629 from $12,772, and depreciation and
amortization increased $13,384 (450.64%) to $16,354 from $2,970 and
$27,617 (331.81%) to $35,940 from $8,323.  Tax and license expenses
remained fairly constant during the three months ended September
30, 1996, as compared to the comparable period of 1995 and
increased $23,545 (92.47%) to $49,005 from $25,460 for the nine
periods being compared.  These increases occurred primarily as a
result of the Company's relocation to new corporate headquarters,
the expansion of its franchise support base to accommodate further
franchise sales and the update of its franchise sales documents, as
well as the registration by FSFC in additional states to sell
franchises.  The foregoing resulted in increases of $43,624
(21.04%) to $250,941 from $207,317 and $124,281 (20.93%) to
$717,966 from $593,685 in total expenses for the three and nine
month periods ended September 30, 1996, as compared to 1995.

The result of the foregoing was a loss of $51,239 and $84,608
during the three and nine month periods ended September 30, 1996 as
compared to a $553 net income and a loss of $10,377 during 1995. 
Management is presently negotiating for the sales of several
additional franchises and for the sale of an area development
network, many of which are expected to occur in the final quarter
of 1996, the result of which will, if consummated, significantly
improve the operating results of the Company for the year as a
whole.

On September 30, 1996, the Company, indirectly through a
wholly-owned subsidiary, entered into a management agreement with
a corporation owned by two executive officers and members of the
Board of Directors of the Company to manage a franchised operation
of FSFC in Tucson, Arizona, the assets and liabilities of which had
just been purchased from an unaffiliated third-party.  The
agreement may be terminated by either party at any time and
entitles the Company to retain all revenues generated by the
business during the term of the agreement, and, correspondingly,
requires the Company to pay all expenses, liabilities and
obligations incurred in the purchase and operations of the
business.

On October 7, 1996, the Company, indirectly through another
wholly-owned subsidiary, entered into a management contract with an
unaffiliated corporation to manage a second franchised operation in
Tucson, Arizona.  The agreement has a four-year term, and entitles
the Company to retain all revenues and, correspondingly, to pay all
expenses, liabilities and obligations incurred in the operation of
the business.  The agreement further obligates the Company to
assume the payment of two promissory notes in the original
principal amount of $150,000.  The Company, during, but prior to
the end of the term of the agreement, may purchase the business by
paying off the foregoing notes and paying $25,000 to the owners
of the business.  If the option is exercised during the term of the
agreement and sold by the Company prior to December 31, 1997, the
owner shall also be entitled to receive as additional payment under
the option 25% of the net profit realized on the resale. The
Company may purchase this business at the end of the term of the
Agreement by paying $25,000 to the owners. <PAGE>
                  

PART II - OTHER INFORMATION

Item 1.  Litigation

No material legal proceedings to which the Company or Famous Sam's
(or any officer or director of the Company or Famous Sam's, or any
affiliate or owner of record or beneficially of more than five
percent of the common stock of the Company, to management's
knowledge) is a party or to which the property of the Company or of
Famous Sam's is subject is pending and no such material proceeding
is known by management of the Company or of Famous Sam's to be
contemplated.

Item 2.  Change in Securities

This item is not applicable to the Company for the period covered
by this report.

Item 3.  Defaults Upon Senior Securities

This item is not applicable to the Company for the period covered
by this report.

Item 4.  Submission of Matters to a Vote of Security Holders

There were no meetings of security holders during the period
covered by this report; thus, this item is not applicable.

Item 5.  Other Information

There is no additional information which the Company is electing to
report under this item at this time.

Item 6.  Exhibits and Reports on Form 8-K

A)   Management Agreement by and between Dino of Tucson, Inc., and
Alpha Sam's, Inc. dated September 30, 1996.

B)   Management Agreement by and between SWAR, Inc., and Beta
Sam's, Inc. dated October 7, 1996.

C)   Form 8-K dated July 23, 1996.
<PAGE>
                           SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized this 11th day of December, 1996.

FAMOUS SAM'S GROUP, INC.
(Registrant)

By:   /s/ Gerald Ross                        
  Gerald Ross 
  Chief Executive Officer


By:   /s/ Sandra Ross                       
  Sandra Ross
     Chief Financial Officer


By:   /s/ Gerald Ross                        
  Gerald Ross, Director


By:   /s/ Sandra Ross                       
  Sandra Ross, Director


By:   /s/ Thomas VanBuskirk         
  Thomas VanBuskirk, Director


                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                      *   *   *   *   *  *
<PAGE>
                            EXHIBIT A

                      MANAGEMENT AGREEMENT 
                             BETWEEN


           DINO OF TUCSON, INC., AND ALPHA SAM'S, INC.

                     dated September 30, 1996<PAGE>
                       

                     MANAGEMENT AGREEMENT

     This agreement is made this 30th day of September, 1996, by
and between DINO of TUCSON,INC. ("Dino"), an Arizona corporation,
and ALPHA SAM'S, INC. ("Alpha Sam's"), an Arizona corporation.

     WHEREAS, the parties have entered into an agreement on or
prior to September 30, 1996 under which Alpha Sam's has agreed to
manage and operate a restaurant and bar operation ("Subject
Business") owned by Dino, Inc., located at 5801 South Palo Verde,
Tucson, Arizona, and doing business as Famous Sam' #7, and 

     WHEREAS, the parties desire that Alpha Sam's take late
immediate possession of Subject Business and commence management of
the Subject Business, and

     WHEREAS, the parties desire to reduce their agreement to
writing, the parties agree as follows:

     1.   Alpha Sam's shall take possession and control of the
Subject Business on the 30th day of September, 1996, and begin to
manage and operate the business under the terms and conditions
contained herein.  At present, Ed McGuire will oversee the
day-to-day operations of the Subject Business.

     2.   Alpha Sam's shall have the right to retain all gross
revenues received from its operation of the Subject Business during
the term of this Agreement. Alpha Sam's will assume all expenses,
liabilities and obligations incurred relating to the operation of
the Subject Business, including, but not limited to, rent payments,
taxes, franchise royalty payments, note obligations assumed by Dino
in acquiring the Subject Business from Dos Pallesos/Al Ballesteros,
utilities, labor and any other expenses related to the normal and
regular operation of the Subject Business.

     3.   This agreement will remain in effect until the parties
mutually agree to terminate the agreement.  This agreement may also
be terminated upon Dino's sale of the Subject Business to a third
party.

DINO OF TUCSON, INC.,                      ALPHA SAM'S, INC., 
   an Arizona corporation                  an Arizona corporation




By:   /s/ Gerald Ross                   By:   /s/ Gerald Ross     
    Gerald Ross, President                 Gerald Ross, President
<PAGE>
                            EXHIBIT B

                      MANAGEMENT AGREEMENT 
                             BETWEEN


                 SWAR, INC. AND BETA SAM'S, INC.

                      dated October 7, 1996<PAGE>
                       
                      MANAGEMENT AGREEMENT
                    (with Option to Purchase)

     This agreement is made this 7th day of October, 1996, by and
between SWAR, INC., an Arizona corporation, and BETA SAM'S, INC.,
an Arizona corporation.

     WHEREAS, the parties have entered into an agreement on or
prior to October 7, 1996 whereby Beta Sam's, Inc., will take over
management of a restaurant and bar operation ("Subject Business")
owned by SWAR, Inc., located at 2480 West Ruthrauff, Tucson,
Arizona and doing business as Famous Sam's #3, and

     WHEREAS, the parties desire that Beta Sam's, Inc., take over
possession and control of the Subject Business at 9:00 a.m. on
Tuesday, October 8, 1996 ("Date of Possession") and manage and
operate the Subject Business under the terms and conditions
contained herein, and 

     WHEREAS, the parties desire to reduce their agreement to
writing, the parties agree as follows:

     1.   Beta Sam's, Inc., shall take over possession and control
of the Subject Business at 9:00 a.m. on Tuesday, October 8, 1996.

     2.   Beta Sam's, Inc., shall retain all gross revenues derived
during the term of this Agreement resulting from its management and
operation of the Subject Business.  Beta Sam's, Inc., will assume
all expenses, liabilities and obligations incurred relating to the
operation of the Subject Business, including, but not limited to,
rent payments, taxes, franchise royalty payments, utilities, labor
and any other expenses related to the normal operation of the
Subject Business.  Such expenses are limited to those incurred
after Beta Sam's, Inc. takes over possession and control of the
Subject Business.

     3.   Beta Sam's, Inc., will assume the Goetz and Rothman
Notes, totaling approximately ONE HUNDRED FIFTY THOUSAND and NO
CENTS ($150,000.00), payable in monthly installments of
approximately THREE THOUSAND TWO HUNDRED SEVENTY-FIVE DOLLARS and
NO CENTS ($3,750.00).  Beta Sam's, Inc., will not assume any other
obligations, either past or future, incurred by (1) SWAR, Inc., its
affiliates, designees or assignees, (2) Al Ballesteros, and/or Dos
Pallesos, Inc., or any other entity through which Al Ballesteros
operated or managed the Subject Business, or (3) David Wilber, or
any entity through which David Wilber operated, managed or
exhibited any control over the Subject Business.

     4.   Beta Sam's, Inc., will operate the Subject Business for
a maximum of four (4) years from the date that its takes control
and possession of the Subject Business.  At the end of the
four-year period, Beta Sam's, Inc., at its sole discretion, will
either return control and management of the Subject Business to
SWAR, Inc., or its designee or successor, or will pay SWAR, Inc.,
or its designee or successor, a total of  TWENTY-FIVE THOUSAND
DOLLARS and NO CENTS ($25,000.00) to purchase the Subject Business
outright.

     5.   Beta Sam's, Inc., also is granted the right to purchase
the Subject Business at any time during the term of this Agreement. 
If Beta Sam's, Inc., elects to exercise its option to purchase the
Subject Business during the term of this Agreement, the purchase
price will be TWENTY-FIVE THOUSAND DOLLARS and NO CENTS
($25,000.00), plus any balances on the above referenced Goetz and
Rothman Notes.  Further, should Beta Sam's, Inc., elect to exercise
its option to purchase the Subject Business during the term of this
Agreement and thereafter resells the Subject Business prior to
December 31, 1997, SWAR, Inc., or its designee or successor, shall
be entitled to 25 % of the net profit realized by Beta Sam's, Inc.,
on the sale.  The net profit shall be defined as the resale price,
less the following: (1) any and all amounts paid on the Goetz and
Rothman Notes, (2) the $25,000.00 paid by Beta Sam's, Inc., to
exercise its option to purchase the Subject Business during the
term of this Agreement, upon closing of the sale from SWAR, Inc.,
to Beta Sam's, Inc., this Management Agreement will terminate
immediately.

     6.    During the term of this Agreement, SWAR, Inc., will
maintain ownership of the Subject Business.  However, Beta Sam's
Inc., will use its own Federal, State and City Tax Identification
Numbers for the payment of taxes.  Further, Beta Sam's, Inc., will
have all utilities changed into its own name.  All vendor billings
from the Date of Possession forward, during the term of this
Agreement will be Beta Sam's, Inc.'s responsibility and will be
secured by a corporate guarantee.  All insurance policies covering
the Subject Business will name SWAR, Inc., as an "additionally
insured". 

   7.   SWAR, Inc. will be held harmless from any liability or
obligation incurred by Beta Sam's Inc., in connection with Beta
Sam's Inc.'s operation and management of the Subject Business
during the term of this Agreement.

     8.   Within five (5) days of the Date of Possession, Beta
Sam's, Inc. will pay to SWAR, Inc., its pro-rata share of the rent
for October, 1996, provided that as of the Date of Possession,
SWAR, Inc.,has paid October's rent in full.

     9.   During the period of time that Beta Sam's, Inc. is
operating and managing the Subject business under the terms of this
Agreement, Beta Sam's, Inc., agrees to operate and manage the
Subject Business under the same terms and conditions as SWAR, Inc.,
is obligated under the terms of its Franchise Agreement.  If Beta
Sam's, Inc., exercises its option to purchase the Subject Business
either during the term of the Agreement or at its completion, it is
contemplated that Famous Sam's Franchise Corporation will terminate
the Franchise Agreement.  By signing this Agreement, SWAR, Inc.,
agrees and consents to the immediate termination of its Franchise
Agreement with Famous Sam's Franchise Corporation upon Beta Sam's,
Inc.'s exercise of its option to purchase the Subject Business.

     10.  At the change of possession of all existing inventory,
the till set-up and unit change fund monies being used by the
Subject Business will become the property of Beta Sam's, Inc.  At
the expiration of this Agreement, if Beta Sam's, Inc., does not
elect to exercise its option to purchase the Subject Business, a
like amount of monies and inventory will be returned to SWAR, Inc.,
or its designee or successor.

     11.  The parties acknowledge that, on or about February 28,
1996.  Al Ballesteros signed what purports to be a Management
Agreement with SWAR, Inc., related to the management of the Subject
Business.  The parties to the present Agreement do not express any
opinion concerning the validity or enforceability of that document. 
Further, Al Ballesteros agrees that he will not seek to enforce any
rights that he may derive from the February 28, 1996, agreement,
against Beta Sam's, Inc.  Further, by signing this Agreement, Al
Ballesteros agrees that he will not take any action, either
directly or indirectly, personally, or through an agent, that would
in any way impede, restrict or otherwise hinder Beta Sam's, Inc.'s
ability to perform its obligations under the terms of this
Agreement.

     12.  This Agreement shall be binding and inure to the benefit
of the parties hereto and their respective legal representatives,
successors and assigns.

     13.  No delay or failure by either party to exercise any right
hereunder, and no partial or single exercise of any right, shall
constitute a waiver of that or any other right, unless otherwise
expressly provided herein.

     14.  Headings in this Agreement are for convenience only and
shall not be used to interpret or construe its provisions.

     15.  This Agreement shall be governed by and construed in
accordance with the laws of the State of Arizona.

     16.  This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.

     17.  Time is of the essence in the performance of this
Agreement.

     18.  This Agreement supersedes all prior agreements and
constitutes the entire agreement between the parties hereto with
regard to the subject matter hereof.

     19.  All notices hereunder shall be in writing and delivered
either personally or by certified mail, postage prepaid and
addressed to the parties at the following addresses:

     SWAR Corporation                Beta Sam's Corporation
     c/o Al Phillips                 8351 East Broadway, Suite 101
     Secretary - Treasurer          Tucson, Arizona 85710
     1030 West Antelope Creekway
     Tucson, Arizona 85737

SWAR, Inc., an Arizona corporation   BETA SAM'S, INC., an Arizona 
                                       corporation





By:  /s/ Albert L. Phillips            By:   /s/ Gerald Ross      
      Albert L. Phillips,                 Gerald Ross, President
     Secretary-Treasurer

                                   

                                   ADALBERTO BALLESTEROS,
                                   a married man, individually,

     

                                   /s/ Adalberto Ballesteros      
      <PAGE>
                            EXHIBIT C

                            FORM 8-K 

                       dated July 23, 1996<PAGE>
               

               SECURITIES AND EXCHANGE COMMISSION
                                
                    Washington, D.C.  20549
                                
                                
                           FORM 8-KSB
                                
                                
                         CURRENT REPORT
                                
               Pursuant to Section 13 or 15(d) of
              the Securities Exchange Act of 1934
                                
                                
                                
                                                                  
                            July 23, 1996                         
                            (Date of Report)
                                
                                
                       Famous Sam's Group, Inc.                   
     (Exact name of registrant as specified in its charter)
                                
                                
                                
                                                                  
                               Nevada                             
         (State or other jurisdiction of incorporation)



               0-24736                       88-0361701           
    (Commission File Number) (IRS Employer Identification Number)


              8351 East  Broadway, Tucson, AZ  85710              
  (Address of principal executive offices including zip code)
                                
                                                                  
                          (602) 296-1110                          
      (Registrant's telephone number including area code)


                                                                  
                    U.S. Flywheel Systems, Inc.                   
  (Former name or former address, if changed since last report)
<PAGE>
Item 1.  Change in Control of Registrant.

Acquisition of Famous Sam's Franchise Corporation as a Wholly-Owned
Subsidiary:

In May, 1996, Famous Sam's Group, Inc., a Nevada corporation  (the
"Company"), which was formerly a California corporation known as
U.S. Flywheel Systems, Inc., entered into a letter of intent with
Famous Sam's Franchise Corporation, an Arizona corporation ("Famous
Sam's"), which was followed on May 17, 1996, by a formal agreement
(the "Reorganization Agreement").  Pursuant to the Reorganization
Agreement, the Company agreed to acquire all of the outstanding
capital stock of Famous Sam's in exchange for 700,000 post-split
shares of Common Stock.  Prior to closing under the Reorganization
Agreement, the Company was required to (i) change its name, (ii)
change its domicile, (iii) reverse split its Common Stock, (iv)
bring itself current in the filing of its reports with the U.S.
Securities and Exchange Commission, (v) file all of the reports
required by federal and state regulatory and taxing authorities,
(vi) transfer all assets in trust for the benefit of its
shareholders and (vii) satisfy all liabilities.  Famous Sam's,
under the Reorganization Agreement, was required, prior to closing,
to either produce a balance sheet as of a recent date showing that,
after closing, the Company, on a consolidated basis with Famous
Sam's, had assets of $4,000,000 or more and a net tangible book
value of at least $2,000,000, or, in the alternative, produce a
business plan which reasonably allowed for the foregoing within one
year after closing.  The latter of these alternative was met. 
Famous Sam's was further required under the Reorganization
Agreement and prior to closing to provide audited and unaudited
financial statements allowing for compliance by the Company
following closing with the rules and regulations of the Commission. 
These were also provided.

Due to the full and timely compliance with the foregoing conditions
precedent, the closing occurred on July 23, 1996, pursuant to the
mutual instruction of the Company and Famous Sam's.  The closing
resulted in the issuance of an additional 700,000 shares of the
"restricted" common stock of the Company to Gerald and Sandra Ross,
as well as the appointment of a new board of directors and
executive officers of the Company.

New Directors and Executive Officers:

The following table sets forth all current directors and executive
officers of the Company and Famous Sam's, as well as their ages:


       NAME                       AGE          POSITION WITH      
                                               COMPANY AND 
                                              FAMOUS SAM'S (1)

Gerald Ross (2)                62         Director, President and 
                                              Chief Executive     
                                           Officer of the Company,
                                           and Director, 
                                           Chief Executive Officer
                                            and President of      
                                             Famous Sam's

Sandra Ross (2)               56        Director, Chief Financial 
                                       and Accounting Officer, 
                                          Treasurer and 
                                         Secretary of the Company 
                                         and Director, Treasurer
                                            and Secretary         
                                            of Famous  Sam's

Thomas Van Buskirk            48         Director of the Company
                                          and Vice-President of 
                                              Famous Sam's

Robert Plotkin                42         Director of Beverage 
                                     Management and Training
                                           Coordinator of 
                                             Famous Sam's

John King                      45   Systems Analyst and 
                                       Construction Project
                                     Coordinator for FamousSam's 

(1) No current director has any arrangement or understanding
whereby they are or will be selected as a director or nominee.
(2) Mr. and Mrs.  Ross are husband and wife.

The executive officers will hold office until the next annual
meeting of shareholders and until his or her successor has been
duly elected and qualified.  All officers are elected by the Board
of Directors at its annual meeting immediately following the
shareholders' annual meeting and hold office until their death or
until they earlier resign or are removed from office.  There are no
written or other contracts providing for the election of directors
or term of employment of executive officers, all of whom serve on
an "at will" basis.

The Board of Directors currently consists of three members, Mr. and
Mrs. Ross and Mr. Van Buskirk.  The Company did not, as of the date
of this report, have any standing audit, nominating or compensation
committees, or any committees performing similar functions,
although a compensation committee will be formed concurrent with
the adoption of the incentive stock option plan discussed below. 
The board will meet periodically throughout the year as necessity
dictates.

Profiles of Directors and Executive Officers

Gerald Ross is a founder of Famous Sam's, and has been a director
and the President and Chief Executive Officer of the corporation
since its inception on February 11, 1987.  He became a director and
the President and Chief Executive Officer of the Company on July
23, 1996, concurrent with its acquisition of Famous Sam's.  Prior
to founding the Company, Mr. Ross acquired Sam's Tavern in Tucson,
Arizona, and from this bar and restaurant developed the current
prototype of the concept which Famous Sam's is now franchising.  He
has over 25 years' experience in the bar and hospitality industry. 
Mr. Ross received a Bachelor's Degree in Theatre Arts from the
University of Arizona in Tucson, Arizona, in 1956.

Sandra Ross is also a founder of Famous Sam's, and has been a
director and the Treasurer and Secretary of the corporation since
its inception.  She became a director and the Chief Financial and
Accounting Officer, Treasurer and Secretary of the Company on July
23, 1996.   Mrs.  Ross has over 20 years of experience in the area
of her responsibilities with the Company and Famous Sam's.  She
previously served as President of the Tucson, Arizona, chapter of
the B'nai B'rith National woman's organization.

Thomas Van Buskirk has been employed by Famous Sam's since June,
1993, and currently serves as Vice-President.  He became a director
of the Company on July 23, 1996.  In his capacity as
Vice-President, Mr. Van Buskirk oversees all aspects of Famous
Sam's franchise operations.  From May, 1991, through November,
1995, Mr. Van Buskirk purchased, opened, operated and then sold a
Famous Sam's franchise in Tucson.  Prior to May, 1991, Mr. Van
Buskirk was a consultant to the restaurant industry, and he also
owned, operated and/or developed several other independent and
franchised restaurants.  He has over 20 years of experience in his
current capacities with Famous Sam's.

Robert Plotkin has been employed by Famous Sam's since November,
1993, as the Director of Beverage Management and as the Training
Coordinator.  Mr. Plotkin has over 20 years of experience in the
hospitality industry, and previously owned and directed a state
accredited vocational school which taught bar tending.  He is
presently, and has been since 1988, the editor and owner of P.S.D.
Publishing Company, which offers a number of books and other
publications, including, by way of example,"The Professional Guide
to Bartending." Mr. Plotkin is also a nationally syndicated
columnist for 43 trade journals in the hospitality area.  He has
also served as a National Director of the American Bartender's
Association and has conducted numerous lectures on beverage
management.


John King has been employed as Systems Analyst and Construction
Project Coordinator for Famous Sam's since 1989.  In the first of
these capacities, he oversees all in-house computer equipment and
their maintenance, and is responsible for polling sales information
on a daily basis from each franchisee.  In addition, Mr. King acts
as a programmer/analyst and creates custom applications when and as
necessary.  In the second of these capacities, Mr. King coordinates
the development of the physical facility for each new franchise. 
This encompasses all phases of development, including construction
and the purchase of equipment and fixtures.  Mr. King has
approximately 19 years of experience in these areas.  Mr. received
an Associates of Electronics from Pima Community College in Tucson,
Arizona, in 1988.

Present Security Ownership of Management and Certain Others:

Based upon information which has been made available to the Company
by its stock transfer agent, the following table sets forth, as of
the close of business on July 23, 1996, the shares of Common Stock
owned by each current director, by directors and executive officers
as a group and by each person known by the Company to own more than
5% of the outstanding Common Stock:

Title of Class     Name and Address    Number of Shares  Percent of Class (1) 
                of Beneficial Owner

Common Stock    Gerald and Sandra Ross (2)   700,000                70%

Directors and Executive Officers as a Group  700,000                70%
 (one in number):                                           

(1)   Based on approximately 1,000,000 shares of common stock
issued and outstanding on July 23, 1996.
(2)   These shares are owned by Mr. and Mrs.  Ross as joint tenants
with rights of survivorship.

Present Capital Structure:

The Company's equity capitalization consists of two classes of
stock, common and preferred.   There are 10,000,000 shares of
Common Stock, par value $.001 per share, and 1,000,000 shares of
Preferred Stock, par value $.01 per share, which are authorized to
be issued.

All outstanding shares of Common Stock are fully paid for and
nonassessable.  A holder of Common Stock is entitled to one vote
per share on all matters submitted for action by the stockholders. 
A quorum for the transaction of business at any meeting of the
holders of Common Stock is one-third of the shares outstanding. 
All shares of Common Stock are equal to each other with respect to
the election of directors; therefore, the holders of more than 50%
of the outstanding Common Stock present at a meeting at which a
quorum is present and at which directors are being elected can, if
they choose to do so, elect all of the directors.  Thus, the
holders of as little as 16.51% of the outstanding Common Stock
could elect directors. The terms of the directors are not
staggered.  Directors are elected annually to serve until the next
annual meeting of stockholders and until their successor is elected
and qualified.  There are no preemptive rights to purchase any
additional shares of Common Stock or other securities of the
Company, nor is cumulative voting applicable to the election of the
Board of Directors.  The shares of Common Stock have those dividend
rights prescribed by the laws of the State of Nevada, are not
convertible into any other security, do not have sinking fund
provisions applicable to them and are not subject to redemption or
to any restrictions on transfer.

As of July 23, 1996, the transfer ledgers maintained by the
Company's stock transfer agent, including individual participants
in security position listings, indicated that there were
approximately 1,000,000 shares of Common Stock issued and
outstanding.  There were held approximately 2,218 shareholders on
that date.

The Articles of Incorporation vest the Board of Directors with the
authority to divide the Preferred Stock into series and to fix and
determine the relative rights and preferences of the shares of any
preferred series established to the full extent permitted by the
laws of the State of Nevada and the Articles of Incorporation with
respect to, among other things, (a) the number of shares to
constitute a series and the distinctive designation thereof, (b)
the rate and preference of dividends, if any, the time of payment
of dividends, whether dividends are cumulative and the date from
which any dividends begin accruing, (c) whether shares may be
redeemed and, if so, the redemption price and the terms and
conditions of redemption, (d) the liquidation preferences payable
in the event of involuntary or voluntary liquidation, (e) sinking
fund or other provisions, if any, for the redemption or purchase
of shares, (f) the terms and conditions upon which shares may be
converted, if convertible, and (g) voting rights, if any.  The
Company, as of July 23, 1996, had no Preferred Stock outstanding.

There are no issued or outstanding options, warrants or calls
entitling any person to purchase any shares of Common Stock or
other securities of the Company.

On July 29, 1996, the Company plans to adopt an Incentive Stock
Option Plan (the "Plan") for the benefit of all employees of the
Company and its subsidiaries.  The plan will be administered by a
committee formed by members of the Board of Directors.  The Plan
may issue options to acquire up to 500,000 shares of Common Stock
to eligible employees at the fair market value for the stock at the
date of grant.  Neither the grant to or exercise of the option by
an employee will be subject to taxation.  Correspondingly, no
deduction accrues to the Company for the grant or exercise of an
option.  The shares acquirable upon exercise of an option will be
registered under the Securities Act.  The term of the Plan will
expire on July 29, 2007.

Fidelity Transfer Company, 1800 South West Temple, Suite 301, Salt
Lake City, Utah 84115 has been engaged by the Company to serve as
the transfer agent for the Common Stock.

No dividends have been declared on the Common Stock by the Company
since inception, and no dividends are planned in the foreseeable
future; however, there are no restrictions at present on the
declaration or payment of dividends.
 
Business of Famous Sam's:

Number of Master and Direct Franchises.  Famous Sam's Franchise
Corporation was founded on February 11,1987, by Gerald and Sandra
Ross, and began franchising in November of that year.  Presently,
Famous Sam's is the largest franchisor of the family-oriented
neighborhood and sports bar concept in Arizona, with 28 franchises
in Arizona, which include eleven in the Tucson metropolitan area,
nine in the Phoenix metropolitan area, one in Marana, one in Yuma,
one in Sierra Vista, one in Nogales, and one in Casa Grande.  The
first franchise outside of Arizona will open on July 24th in
Albuquerque, New Mexico.  Presently, there are 29 Famous Sam's
franchises, 26 of which are in operation and three of which are in
the site selection and/or development process.

In March of 1995, Famous Sam's sold a master franchise to the
Phoenix, Arizona, metropolitan area, which allows the master
franchisee to sell franchises in that geographical area until March
of 2000.  As of the date of this report eleven franchises under
this agreement had been sold, with eight now being in operation. 
This franchisee is required to sell a minimum of 20 franchises
during the five year period ended March, 2000.

Marketing and Sales Focus.  Famous Sam's is now focusing its
marketing in Arizona and New Mexico, with immediate plans to expand
to Southern California, through the use of (i) master franchises to
develop multiple locations in major metropolitan areas and (ii)
direct franchise sales in the smaller towns.  Each master franchise
encompasses the right  to sell up to and/or no less than a
negotiated number of franchises within the master franchised area
during a specified period of time.  The master franchisee then
licenses individual stores to independent franchisees and is
ultimately responsible for the support of his territory.  In turn,
Famous Sam's supports the master franchisee.  Master franchises
provide Famous Sam's with two sources of revenue: (i) a one-time
master franchise fee; and (ii) ongoing royalty payments based on
sales of food and beverages in the area.  Franchises sold directly
by Famous Sam's also provide two sources of revenue: (i) a one-time
franchise fee; and (ii) ongoing royalty payments based on sales of
food and beverage.  Famous Sam's is called upon in all instances
to provide store development services, including site selection,
training and ongoing business expertise.  Marketing and advertising
services on behalf of the franchisees are provided in a cooperative
effort by the master franchisee and Famous Sam's when a master
franchise is involved, and solely by Famous Sam's when no master
franchise is involved.  Ultimately, however, the franchisee is in
business for himself, and the system which Famous Sam's employs
allows for the independence of the franchisee to be creative and
innovative in meeting the needs of the local customers.  The
corporate motto is "With Famous Sam's, you are in business for
yourself, but not by yourself."  Famous Sam's also provides
franchisees with group purchasing power in their food, beverage and
other sales areas.

The Franchise Concept.  The Famous Sam's franchise provides a no
frills, good value, family and neighborhood meeting place which
serves alcohol responsibly.  The principal focus is on blue collar
working people, young professionals and young families, all of whom
are typically located in suburban areas and smaller towns.

Famous Sam's features a full bar of alcoholic beverages, a wide
variety of beer and wine, a substantial food menu, including hot
and cold sandwiches, salads, burgers, limited entrees and, in some
locations, pizza.  Beverages and food are moderately priced and are
prepared using recipes and procedures developed by Famous Sam's. 
Entertainment includes sporting events on the big screen,
pay-per-view (which may include the exclusive, city-wide broadcast
of major boxing events), live music, and a billiards and dart room,
among other forms of entertainment.  Also, an in-house graphics
department at Famous Sam's allows each franchisee to purchase and
sell Famous Sam's shirts, T-shirts, caps and other miscellaneous
merchandise, and allows the individual production for each
franchisee of promotional point-of-sale items such as banners and
posters.

Properties:

The Company, as of the date of this report, owned no real or
personal property, tangible or intangible, other than its ownership
of all of the issued and outstanding common shares of Famous Sam's. 
Conversely, the Company had no liabilities which had not either
been paid in their entirety or fully provided for. 

Famous Sam's presently leases its offices from Gerald Ross, a
director and executive officer of the Company and Famous Sam's, at
what management believes is a competitive commercial rate.  The
facility houses the executive offices of the Company and of Famous
Sam's and the training facilities of Famous Sam's.  The premises
encompass 12,000 square feet, of which 9,000 are being used by the
Company and Famous Sam's for executive offices and 3,000 of which
are being used as the training center.  These offices are located
at 8351 E.  Broadway, Tucson, Arizona 85710.  The telephone number
at this address is (520) 296-1110.

Item 2.  Acquisition or Disposition of Assets.

See Item 1, above.

Item 3.  Bankruptcy or Receivership.

Not Applicable.

Item 4.  Changes in Registrant's Certifying Accountant.

Not Applicable.

Item. 5.  Other Events.

None.

Item 6.  Resignation of Registrant's Directors.

Not Applicable.

<PAGE>
Item 7.  Financial Statements, Pro Forma Financial Information and
Exhibits.

                         ROBERT E. HINSKE
                   Certified Public Accountant
               4626 East Fort Lowell Road, Suite A
                      Tucson, Arizona  85712
            (520) 795-7195         FAX (520) 795-1202

                   Independent Auditor's Report

Board of Directors
Famous Sam's Franchise Corporation
Tucson, Arizona

I have audited the accompanying balance sheets of Famous Sam's
Franchise Corporation as of December 31, 1995, 1994 and 1993, and
the related statements of operations and retained earnings
(deficit), and cash flows for the years then ended.  These
financial statements are the responsibility of the Company's
management.  My responsibility is to express an opinion on these
financial statements based on my audits.

I conducted my audit in accordance with generally accepted auditing
standards.  Those standards require that I plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation.  I believe that my audit provides a
reasonable basis for my opinion.

In my opinion, the financial statements referred to in the first
paragraph present fairly, in all material respects, the financial
position of Famous Sam's Franchise Corporation as of December 31,
1995, 1994 and 1993, and the results of its operations and its cash
flows for the years then ended, in conformity with generally
accepted accounting principles.

/s/ Authorized Representative
Tucson, Arizona
June 10, 1996





<PAGE>
                FAMOUS SAM'S FRANCHISE CORPORATION

                         TUCSON, ARIZONA











                   AUDITED FINANCIAL STATEMENTS

      For the years ending December 31, 1995, 1994 and 1993
























                                
                                
                                
                                
                                
                        ROBERT E. HINSKE
                  Certified Public Accountant
              4626 East Fort Lowell Road, Suite A
                     Tucson, Arizona  85712
<PAGE>
FAMOUS SAM'S CORPORATION
Balance Sheet
December 31, 1995, 1994, and 1993


                             1995         1994       1993

                    ASSETS

Current Assets:
  Cash                         18,413     $23,896      $14,228
  Accounts receivable - 
       Note 3                 69,101        2,760       36,074
  Current portion - 
      notes receivable         8,829       13,746
  Prepaid expenses             4,255       17,972

         Total current assets 91,769       93,457       64,048

Fixed assets (at cost):
  Furniture, equipment and leasehold 
    improvements             107,226       75,304       74,662
  Less accumulated 
    depreciation              68,258       58,781       48,723

  Net fixed assets            38,968       16,523       23,939

Other assets:
  Trademark, logos and
    franchise improvements 
      - Note 5                 1,178        3,554        5,931
Notes receivable               7,276
Loans to related parties 
   - Note 4                  124,718      113,718
Deposits and other assets     93,702        1,890           645

         Total other assets   94,880      130,162       127,570

                            $225,617     $240,142     $217,557

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
  Current portion of 
     long-term debt - 
      Note 6                $19,619      $30,169      $37,497
    Accounts payable 
     and accrued expenses    34,202       62,500        8,750
  Deferred franchise fees    37,500       69,836       32,786

    Total current 
     liabilities             91,321      162,505       79,033

Long-term debt - Note 6     173,893      118,732      160,066

Contingencies - Note 10


Stockholders' equity:
  common stock, $10 par value, 
    1,000,000 shares authorized,
    200 shares issued and outstanding2,000        2,000    2,000
Retained earnings (deficit)        (41,597)     (43,095)  (23,542)

     Total stockholders' equity    (39,597)    (41,095)  (21,542)

                                  $225,617    $240,142   $217,557







































See notes to the financial statements.<PAGE>
FAMOUS SAM'S CORPORATION
Statements of Cash Flows
For the Years Ended December 31, 1995, 1994 and 1993

                                1995           1994         1993

Cash Flows Provided (Used) by Operations:
  Net income (loss)         $1,498            ($19,553)     $1,104
  Adjustments to reconcile 
    net income to net cash 
    provided by operating 
     activities:
  Depreciation and 
     amortization           11,854             12,435     15,257
  Changes in assets and 
    liabilities:
    (Increase) in accounts 
     receivable            (26,341)           (6,686)    (2,357)
    (Increase) decrease 
      in prepaid expenses   13,717           (17,972)
    Increase (decrease) in 
       accounts payable  
      and accrued expenses   4,033            (7,328)    16,475
    Increase (decrease) in 
     deferred revenues     (25,000)           53,750
Net cash provided by 
   operating activities    (20,239)          14,646      30,479

Cash Flows Provided (Used) for Investing Activities:
   Repayments of loan 
    to franchisee            8,829           12,193      11,037
   Acquisition of 
    fixed assets           (31,922)            (642)     (2,496)
   Payment of deposits     (91,812)          (1,245)          
   Loans to related 
    parties                 (7,483)         (11,000)    (43,208)

Net cash used for 
    investing activities  (122,388)            (694)   (34,667)

Cash flows Provided (Used) for Financing Activities:
   Additional borrowings-
     long-term debt        226,665            87,000    55,000
   Principal repayments-
     long-term debt        (89,521)          (91,284)  (37,705)
Net cash provided (used) 
   for financing activities 137,144           (4,284)   17,295

Net increase (decrease) 
  in cash                 (5,483)              9,668    13,107

Cash - beginning of year  23,896              14,228     1,121

Cash - end of year     $18,413              $23,896    $14,228

Summary of non-cash investing and financing activities:

   Effective December 31, 1995, the company and the shareholders
agreed to offset the note receivable from the shareholders in the
amount of $132,201 against the notes payable to the shareholders in
the amount of $246,269 (Note 6).





See notes to the financial statements.<PAGE>
FAMOUS SAM'S CORPORATION
Statements of Operations and Retained Earnings (Deficit) 
For the Years Ended December 31, 1995, 1994 and 1993

                              1995           1994        1993 

Revenues:
  Franchise fees         $141,240           $77,500    $12,500
  Franchise Royalties     446,315           366,817    324,229
  Advertising fees        104,757            94,827     87,467
  Entertainment fees 
    and other income      111,262          82,001       16,341

         Total revenues   803,574         621,144      440,537

Expenses:
  Advertising and 
    promotion             222,975         145,232      120,257
  Salaries and wages      183,845         157,702      103,972
  Office expenses         152,491         116,977       66,637
  Rent                     52,338          52,798       39,075
  Professional fees        49,126          24,617        5,695
  Insurance                39,738          37,566       22,830
  Interest expense         26,595          22,209       20,656
  Legal and accounting     21,483          25,043       35,096
  Commissions              21,000          32,316
  Payroll taxes            17,092          13,803        9,642
  Depreciation and 
    amortization           11,854          12,435       15,257

         Total expenses   798,537         640,698      439,117

  Income (loss) before taxes and 
    extraordinary item    5,037          (19,553)       1,420

Income taxes - Note 8     4,472             316

        Income (loss) 
         before 
          extraordinary 
          item             565        (19,553)         1,104

Extraordinary item-tax 
   benefit from 
   utilization of 
   net operating loss      933 

       Net income (loss) 1,498         (19,553)        1,104

Retained earnings (deficit):
    Beginning of year   (43,095)       (23,542)      (24,646)

    End of year        ($41,597)      ($43,095)     ($23,542)

See notes to the financial statements.<PAGE>
FAMOUS SAM'S FRANCHISE CORPORATION
Notes to Financial Statements
December 31, 1995, 1994 and 1993     

1.  Organization

Famous Sam's Corporation was incorporated in Arizona on February
11, 1987.  Its principal business activity is the sale of "Famous
Sam's" restaurant/bar franchises.  The corporation's offices are
located in Tucson, Arizona.  In August, 1994, the name of the
company was changed to Famous Sam's Franchise Corporation.

The shareholders of Famous Sam's Franchise Corporation own several
businesses.  None of these business entities have been combined in
the accompanying financial statements.  

2.  Summary of Significant Accounting Principles

Revenue recognition - Franchise agreements outline the contractual
obligations of both the franchisee and franchiser including
compensation to Famous Sam's Franchise Corporation for the
authorization to operate a Famous Sam's restaurant/bar, and for the
use of trademarks.

Franchise fees - These fees are paid as a purchase price for the
right to operate a Famous Sam's franchise.  Prospective franchisees
are evaluated and initial requirements for purchase of the
franchise, such as the acquisition of a liquor license and the
franchisee's financial condition are evaluated prior to receipt of
the franchise fee.  The franchise fee covers primarily the cost of
leasing, training and leasehold improvements.  The fee is generally
nonrefundable.  The franchiser may terminate an agreement because
of difficulties in establishing the franchise, such as the
inability to obtain a suitable location or obtain a liquor license. 
When the franchiser terminates an agreement under these conditions,
50% of the fees are nonrefundable.  The fee is generally recognized
as income in the period received, however, where significant
franchise terms have not been finalized, the refundable portion of
the fee is deferred.

Royalties and advertising fees - Royalties and advertising fees 
are computed on a percentage of the franchisee's gross liquor, food
and  beverage sales.  These fees are remitted monthly and are
recognized as income in the same period as the franchisee sales.

Property and equipment - Property and equipment is recorded at
cost.  Depreciation is provided on the straight-line method over
the estimated useful lives of the assets, which range from five to
seven years.

Income taxes - Deferred income taxes are provided to give effect to
timing differences between pretax accounting income and net taxable
income for Federal income tax reporting purposes.  There were no
significant difference between pretax accounting income and net
taxable income for the years ended December 31, 1995, 1994 and
1993.

Other assets

Trademarks - The cost of registering and developing trademarks and
logos is capitalized and amortized over a period of five years. 
Costs to modify basic trademarks and logos for specific advertising
campaigns are expensed as incurred.

Franchise improvements - Amounts contributed by Famous Sam's for
improvements to existing franchises are capitalized and amortized
over a period of five years.  Costs to start-up new franchises are
expensed in the period in which they are incurred.

3.  Accounts receivable

Accounts receivable at December 31 are summarized as follows:

                            1995              1994          1993

   Franchise royalties    $51,449         32,489         28,808
   Advertising fees        11,202          8,343          6,317
   Miscellaneous 
     reimbursements         6,450          1,928            949

               Total      $69,101         42,760         36,074   
                           _______         ______         ______

4.  Advances to related parties

During the year ended December 31, 1993, the Company made cash
advances to and payments on behalf of the shareholders and various
entities owned by the shareholders.  None of these transactions
included terms for repayment or for the payment of interest.  Since
these payments were made in cash, no imputed interest has been
included in the financial statements.  The balance of these
advances was $113,718 at December 31, 1993. Effective January 1,
1994, these advances, and an additional advance of $11,000 were
converted to a note receivable.  This note was due on demand and
bore interest at the rate of 6% per year.  Effective December 31,
1995, the shareholders and the company agreed to offset the balance
of this note and accrued interest, in the amount of $132,201,
against the balance of the loans from the stockholders (Note 6). 

5.  Other Assets

Other assets include capitalized costs for registration and
development of trademarks and logos, as well as voluntary
contributions by Famous Sam's Franchise Corporation for
improvements to existing franchises.  These costs are summarized as
follows:

                          1995              1994          1993

 Trademark and logos       $10,836         10,836         10,836
 Franchise improvements     11,883         11,883         11,883
                            22,719         22,719         22,719
 Accumulated amortization   21,541         19,165         16,788

     Net other assets      $ 1,178          3,554          5,931
                            _______        ______         ______

6.  Long-term debt

Long-term debt at December 31 is summarized as follows:

                                 1995         1994        1993

Notes payable to relatives of
the stockholders, bearing 
interest at the rate of 10% 
annually, interest only 
payments of $583 monthly, until 
January, 1998, unsecured      $70,000        45,000      45,000

Note payable to individuals, 
bearing interest at the rate of 
10% annually, payments of $3,936 
monthly, including interest, 
until October, 1995 at which 
time the remaining balance is 
due, unsecured                 75,027        147,040     ------

Note payables to stockholders,
interest at the rate of 10%
annually, payments of $2,410
monthly including interest 
through December, 2000,
unsecured (Note 4)           114,270           68,451    ------

Capital lease obligation, interest
at the rate of 18.53% annually,
payable in monthly installments of
$242 through December, 2000,
secured by telephone equipmenmt  9,242      ------       ------

Note payable to former franchisee, 
interest at the rate of 10% 
annually, payable in monthly 
installments of $879, until 
January, 1994, unsecured       193,512      188,568       192,852
     Less current portion       19,919       69,836        32,786
          Net long-term debt   $173,893       118,732       160,066
                              ________      ________     _______

The following is a summary of maturities of long-term debt:

Year ended December 31,       

1996          $19,619
1997           21,800
1998           94,236
1999           26,956
2000           30,901 

Effective December 31, 1995, the relatives of the shareholders
entered into agreements to modify the terms oftheir notes, to
extend the maturity date of the notes to January 1, 1998 from
September, 1996.  All other terms of the notes remained unchanged.

7.  Lease obligations

The Corporation leases its offices from the sole shareholder on a
month to month basis.  During the year ended December 31, 1995 the
amount of the lease payment was equal to the amount required by the
stockholder to repay the loans on the building.  The amount of the
annual rent payments were $48,859, $42,546 and $31,517 in 1995,
1994 and 1993, respectively.    

The Corporation also leases equipment and vehicles under the terms
of operating leases.  Monthly lease payments totaled $13,660,
$10,252 and $2,544 in 1995, 1994 and 1993, respectively.  Future
payments under this lease will be $11,501, $7,738, $2,496, $2,496
and $1,248 in 1996, 1997, 1998, 1999 and 2000, respectively.  Other
equipment is leased on a short term basis, as needed by the
company.

The company also leases a telephone system under the terms of a
capital lease.  The following is an analysis of this equipment:

          Furniture and equipment              $9,43              
          Less accumulated amortization         1,011
                                               $8,426
                                                ______

The following is a schedule, by years, of future minimum lease
payments under this lease:

          Year ending
          December 31,                   Amount
          1996                            $2,904
          1997                             2,904
          1998                             2,904
          1999                             2,904
          2000                             2,420
                                          14,036
Less amount representing  interest         4,794
                                          $9,242
                                         _________

Amortization of the equipment has been included in depreciation
expense in the accompanying financial statements.

8.  Income taxes

There are no significant differences between the normally expected
income tax expense and the actual income tax expense, other than
the effect of the state income taxes for the years ended December
31, 1994 and 1993. The following is a reconciliation of the
normally expected income tax expense, computed by applying the
expected Federal tax rate of 15% to pretax accounting income, and
the actual income tax expense for the year ended December 31, 1995:

          Normally expected tax expense               $  756
               Non-deductible expenses for
                 Federal income tax purposes           2,291
               State income tax, net of Federal
                 income tax benefit                    1,425
          Actual income tax expense                   $4,472
                                                        ____

Components of income tax expense are as follows:
                                  1995         1994       1993

       Federal income taxes     $2,795          -           192
       State income taxes        1,425          -           121
                                $4,472          -           316
                                ______         ___       _____

9.  Related party transactions

During 1993, the shareholders of Famous Sam's Franchise Corporation
and the original Famous Sam's bar and restaurant agreed to separate
their business investments.  As a result of this agreement, each of
the shareholders became the sole shareholder of one of the
corporations.  This transaction had no effect on the financial
statements of the company.

As described in Note 6, various relatives of the shareholders have
made cash advances to the corporation.  During 1996, an additional
$55,000 was loaned to the corporation by these individuals.  The
terms of these notes were modified in June, 1996, to be effective
on the date of the advances, to extend the due dates to January 1,
1998.  All other terms and conditions of the notes were unchanged.

In January, 1996, the company moved its corporate offices and
training facilities to a new building.  This building is owned by
the shareholders of the corporation.  The corporation began paying
rent on this building in January, 1996.

As described in Note 10, the corporation has guaranteed various
personal loans of the shareholders. 

10. Contingencies

Basic disclosure document -  Pursuant to Federal Trade Commission
Rules and Regulations, franchisers are required to deliver a Basic
Disclosure Document to all prospective franchisees which includes
certain information about the franchiser, its officers and its
operations, as well as certain financial statements.  Between the
period April 1, 1993 and September 1, 1994, Famous Sam's Franchise
Corporation distributed Basic Disclosure Documents to prospective
franchisees that did not contain all required financial statements. 
The Federal Trade Commission can impose penalties for failure to
comply with this requirement.  To date, no penalties have been
assessed or threatened.

Loan guarantees - The corporation was a guarantor of three loans
made by relatives of the shareholders to the shareholders,
personally.  The proceeds of these loans were used to acquire the
building which was used for the corporate offices through December,
1995.  These loans called for combined monthly payments of $1,337,
including interest at the rate of 10% annually, matured in
December, 1995 and were unsecured.  The total outstanding balance
of these notes was $28,964 at December 31, 1993.  These loans were
repaid in full during 1994.

11. Deposits

As described in Note 10, the company moved its offices and training
facility into a new building in January, 1996.  The costs of
improvements made to this building by the company and deposits for 
furniture and equipment have been recorded as deposits at December
31, 1995.  These deposits totalled $91,536 at December 31, 1995. 
The balance of this account consisted of security deposits for
equipment under operating leases (Note 7) and utilities, in the
total amount of $2,166.
























                       FINANCIAL STATEMENTS

                          March 31, 1996




                         ROBERT E. HINSKE
                   Certified Public Accountant
               4626 East Fort Lowell Road, Suite A
                      Tucson, Arizona  85712
           (520) 795-7195           FAX (520) 795-1202





Board of Directors
Famous Sam's Franchise Corporation
Tucson, Arizona


I have compiled the accompanying balance sheet of Famous Sam's
Franchise Corporation as of March 31, 1996, and the related
statements of operations and retained earnings (deficit) and cash
flows for the three months then ended, in accordance with
Statements on Standards for Accounting and Review Services issued
by the American Institute of Certified Public Accountants.

A compilation is limited to presenting in the form of financial
statements information that is the representation of management. 
I have not audited or reviewed the accompanying financial
statements and, accordingly, do not express an opinion or any other
form of assurance on them.





June 18, 1996




<PAGE>
FAMOUS SAM'S CORPORATION
Balance Sheet
March 31, 1996
(See Accountant's Compilation Report)

ASSETS

Current Assets:
    Cash                                   $17,846
    Accounts receivable                     66,129
    Prepaid expenses                           412
         Total current assets               84,387

Fixed assets (at cost):
    Furniture, equipment and 
       leasehold improvements              233,214
    Less accumulated depreciation           76,188
          Net fixed assets                 157,026

Other assets:
    Trademark, logos and 
         franchise improvements - Note 5       785
     Deposits and other assets               2,165
         Total other assets                  2,950

                                           $244,363

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
    Current portion of long-term debt 
         - Note 6                           $20,489
     Accounts payable and accrued expenses   35,856
      Deferred franchise fees                25,000
         Total current liabilities           81,345

Long-term debt - Note 6                     189,549

Contingencies - Note 10
Stockholders' equity:
    Common stock, $10 par value,
         1,000,000 shares authorized,
         200 shares issued and outstanding   2,000
      Retained earnings (deficit)          (28,531)

           Total stockholders' equity      (26,531)

Total Liabilities and Stockholder's Equity $244,363

See notes to the financial statements.                            
                                                                  
           <PAGE>
FAMOUS SAM'S CORPORATION
Statement of Operations and Retained Earnings (Deficit)
For the Three Months Ended March 31, 1996
(See Accountant's Compilation Report)

Revenues:
   Franchise fees                           $21,750
   Franchise royalties                      140,640
   Advertising fees                          28,902
   Entertainment fees and other income       20,853

        Total revenue                       212,145

Expenses:
   Advertising and promotion                 47,003
   Salaries and wages                        53,463
   Office expenses                           32,606
   Rent                                      14,678
   Professional fees                         13,359
   Insurance                                 10,688
   Interest expense                           5,555
   Legal and accounting                       2,700
   Payroll taxes                              5,379
   Depreciation and amortization              8,322
        Total expenses                      193,753

           Income before taxes               18,392

Income taxes - Note 8                         5,325

         Net income                          13,067

Retained earnings (deficit):   
    Beginning of year                       (41,598)

     End of year                           ($28,531)

See notes to the financial statements.<PAGE>
FAMOUS SAM'S CORPORATION
Statement of Cash Flows
For the Three Months Ended March 31, 1996
(See Accountant's Compilation Report)

Cash Flows Provided (Used) by Operations:
   Net income (loss)                                $13,067
   Adjustments to reconcile net income to
    net cash provided by operating activities:
       Depreciation and amortization                  8,322
    Changes in assets and liabilities:
         Decrease in accounts receivable              2,972
         Decrease in prepaid expenses                 3,843
         Increase in accounts payable
             and accrued expenses                     1,654
     Decrease in deferred revenues                  (12,500)

Net cash provided by operating activities            17,358

Cash Flows Provided (Used) for Investing Activities:
    Acquisition of fixed assets                     (34,451)
Net cash used for investing activities              (34,451)

Cash Flows Provided (Used for Financing Activities:
   Additional borrowings-long-term debt              25,000
   Principal repayments -long-term debt              (8,474)
Net cash provided (used) for 
   financing activities                              16,526
Net increase (decrease) in cash                        (567)

Cash - beginning of year                             18,413

Cash - end of year                                  $17,846











See note to the financial statements.<PAGE>
FAMOUS SAM'S FRANCHISE CORPORATION
Notes to Financial Statements
March 31, 1996     

1.  Organization

Famous Sam's Corporation was incorporated in Arizona on February
11, 1987.  Its principal business activity is the sale of "Famous
Sam's" restaurant/bar franchises.  The corporation's offices are
located in Tucson, Arizona.  In August, 1994, the name of the
company was changed to Famous Sam's Franchise Corporation.

The shareholders of Famous Sam's Franchise Corporation own several
businesses.  None of these business entities have been combined in
the accompanying financial statements.  

2.  Summary of Significant Accounting Principles

Revenue recognition - Franchise agreements outline the contractual
obligations of both the franchisee and franchiser including
compensation to Famous Sam's Franchise Corporation for the
authorization to operate a Famous Sam's restaurant/bar, and for the
use of trademarks.

Franchise fees - These fees are paid as a purchase price for the
right to operate a Famous Sam's franchise.  Prospective franchisees
are evaluated and initial requirements for purchase of the
franchise, such as the acquisition of a liquor license and the
franchisee's financial condition are evaluated prior to receipt of
the franchise fee.  The franchise fee covers primarily the cost of
leasing, training and leasehold improvements.  The fee is generally
nonrefundable.  The franchiser may terminate an agreement because
of difficulties in establishing the franchise, such as the
inability to obtain a suitable location or obtain a liquor license. 
When the franchiser terminates an agreement under these conditions,
50% of the fees are nonrefundable.  The fee is generally recognized
as income in the period received, however, where significant
franchise terms have not been finalized, the refundable portion of
the fee is deferred.

Royalties and advertising fees - Royalties and advertising fees 
are computed on a percentage of the franchisee's gross liquor, food
and  beverage sales.  These fees are remitted monthly and are
recognized as income in the same period as the franchisee sales.

Property and equipment - Property and equipment is recorded at
cost.  Depreciation is provided on the straight-line method over
the estimated useful lives of the assets, which range from five to
seven years. 

Income taxes - Deferred income taxes are provided to give effect to
timing differences between pretax accounting income and net taxable
income for Federal income tax reporting purposes.  There were no
significant difference between pretax accounting income and net
taxable income for the years ended March 31, 1996.

Other assets

Trademarks - The cost of registering and developing trademarks and
logos is capitalized and amortized over a period of five years. 
Costs to modify basic trademarks and logos for specific advertising
campaigns are expensed as incurred.
Franchise improvements - Amounts contributed by Famous Sam's for
improvements to existing franchises are capitalized and amortized
over a period of five years.  Costs to start-up new franchises are
expensed in the period in which they are incurred.

3.  Accounts receivable

Accounts receivable at March 31 are summarized as follows:


          Franchise royalties                  $51,487
          Advertising fees                      10,214
          Miscellaneous reimbursements           4,428

          Total                                $66,129
                                               ______

4.  Advances to related parties

During the year ended December 31, 1993, the Company made cash
advances to and payments on behalf of the shareholders and various
entities owned by the shareholders.  None of these transactions
included terms for repayment or for the payment of interest.  Since
these payments were made in cash, no imputed interest has been
included in the financial statements.  The balance of these
advances was $113,718 at December 31, 1993. Effective January 1,
1994, these advances, and an additional advance of $11,000 were
converted to a note receivable.  This note was due on demand and
bore interest at the rate of 6% per year.  Effective December 31,
1995, the shareholders and the company agreed to offset the balance
of this note and accrued interest, in the amount of $132,201,
against the balance of the loans from the stockholders (Note 6).

5.  Other Assets

Other assets include capitalized costs for registration and
development of trademarks and logos, as well as voluntary
contributions by Famous Sam's Franchise Corporation for
improvements to existing franchises.  These costs are summarized as
follows:

          Trademark and logos                   $10,836
          Franchise improvements                 11,883
                                                 22,719
          Accumulated amortization               21,934

               Net other assets                 $   785
                                                _______           
   

6.  Long-term debt

Long-term debt at March 31 is summarized as follows:

Notes payable to relatives of the stockholders,
bearing interest at the rate of 10% annually,
payments of $1,389 monthly, until 
January, 1998, unsecured                     $ 93,805

Note payables to stockholders, interest at 
the rate of 10% annually, payments of $2,410
monthly including interest through December, 2000,
unsecured (Note 4)                            107,294


Capital lease obligation, interest at the 
rate of 18.53% annually, payable in monthly 
installments of $242 through December, 2000,
secured by telephone equipment                  8,939
                                              210,038
     Less current portion                      20,489
          Net long-term debt                 $189,549
                                             ________

The following is a summary of maturities of long-term debt:

          Year ended December 31,                                 
    

          1996                               $13,032
          1997                                21,800
          1998                               118,041
          1999                                26,956
          2000                                30,901
 
Effective December 31, 1995, the relatives of the shareholders
entered into agreements to modify the terms of their notes, to
extend the maturity date of the notes to January 1, 1998 from
September, 1996.  All other terms of the notes remained unchanged.

7.  Lease obligations

The Corporation leases its offices from the sole shareholder on a
month to month basis.  During the three months ended March 31, 1996
the amount of the lease payment was equal to the amount required by
the stockholder to repay the loans on the building.  The amount of
the these rent payments were $13,104 for the period ended March 31,
1996.   

The Corporation also leases equipment and vehicles under the terms
of operating leases.  Monthly lease payments totaled $1,574 for the
three months ended March 31, 1996.  Future payments under these
leases will be $9,927, $7,738, $2,496, $2,496 and $1,248 in 1996,
1997, 1998, 1999 and 2000, respectively.  Other equipment is leased
on a short term basis, as needed by the company.

The company also leases a telephone system under the terms of a
capital lease.  The following is an analysis of this equipment:

          Furniture and equipment                $9,437
          Less accumulated amortization           1,311
                                                 $8,126
                                                 ______


The following is a schedule, by years, of future minimum lease
payments under this lease:

          Year ending
          December 31,                          Amount
               1996                             $2,178
               1997                              2,904
               1998                              2,904
               1999                              2,904
               2000                              2,420
                                                13,310
     Less amount representing interest           4,371
                                                $8,939
                                                ______

Amortization of the equipment has been included in depreciation
expense in the accompanying financial statements. 

8.  Income taxes

The following is a reconciliation of the normally expected income
tax expense, computed by applying the expected Federal tax rate of
25% to pretax accounting income, and the actual income tax expense
for the three months ended March 31, 1996:

     Normally expected tax expense                $4,598
        Non-deductible expenses for
         Federal income tax purposes                 636
         Graduated tax rates                      (1,207)
         State income tax, net of Federal
                 income tax benefit                1,298
          Actual income tax expense               $5,325
                                                  ______

Components of income tax expense are as follows:

     Federal income taxes                        $3,595
               State income taxes                 1,730

                                                 $5,325
                                                 ______

9.  Related party transactions

During 1993, the shareholders of Famous Sam's Franchise Corporation
and the original Famous Sam's bar and restaurant agreed to separate
their business investments.  As a result of this agreement, each of
the shareholders became the sole shareholder of one of the
corporations.  This transaction had no effect on the financial
statements of the company.

As described in Note 6, various relatives of the shareholders have
made cash advances to the corporation.  During 1996, an additional
$55,000 was loaned to the corporation by these individuals.  The
terms of these notes were modified in June, 1996, to be effective
on the date of the advances, to extend the due dates to January 1,
1998. All other terms and conditions of the notes were unchanged.

In January, 1996, the company moved its corporate offices and
training facilities to a new building.  This building is owned by
the shareholders of the corporation.  The corporation began paying
rent on this building in January, 1996.

As described in Note 10, the corporation has guaranteed various
personal loans of the shareholders.
 
10. Contingencies

Basic disclosure document -  Pursuant to Federal Trade Commission
Rules and Regulations, franchisers are required to deliver a Basic
Disclosure Document to all prospective franchisees which includes
certain information about the franchiser, its officers and its
operations, as well as certain financial statements.  Between the
period April 1, 1993 and September 1, 1994, Famous Sam's Franchise
Corporation distributed Basic Disclosure Documents to prospective
franchisees that did not contain all required financial statements. 
The Federal Trade Commission can impose penalties for failure to
comply with this requirement.  To date, no penalties have been
assessed or threatened.


                            SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, Registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly authorized.


FAMOUS SAM'S GROUP, INC.
(Registrant)


By: /s/ Gerald Ross                           
       Gerald Ross, President and
             Chief Executive Office

Date: July 23, 1996