US SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

(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

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

                                    33-76422
                                    --------
                            (Commission file number)

                       Linda's Diversified Holdings, Inc.
        (Exact name of small business issuer as specified in its charter)

                                    Delaware
         (State or other jurisdiction of incorporation or organization)

                                   22-3280395
              (Incorporation or organization identification number)

                      11 Commerce Drive, Cranford, NJ 07016
                    (Address of principal executive offices)

                                 (908) 276-2080
                           (Issuer's telephone number)

                   Linda's Flame Roasted Chicken, Incorporated
              (Former name, former address and former fiscal year,
                         if changed since last report)


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


                      APPLICABLE ONLY TO CORPORATE ISSUERS


State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: November
14, 1996

             Class A Common Stock, $.001 par value: 2,065,000 shares
             Class B Common Stock, $.001 par value: 800,000 shares





    Transitional Small Business Disclosure Format (Check one): Yes ( ) No (X)

<PAGE>
PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

               LINDA'S DIVERSIFIED HOLDINGS, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)

                                                   September 30,    December 31,
                                                       1996             1995
                                                   -------------    ------------
     ASSETS

CURRENT ASSETS:                           
  Cash and equivalents                              $ 1,015,713     $   558,013
  Short term cash investments                             -             721,000
  Inventories                                             9,720          19,078
  Retail loans receivable                                35,349            -
  Notes receivable, current portion                      14,139         167,313
  Prepaid expenses and other current assets             281,306         110,814
                                                    -----------     ------------
       Total Current Assets                           1,356,227       1,576,218
                                                    -----------     ------------

PROPERTY AND EQUIPMENT, NET                             720,731         967,217
                                                    -----------     ------------
OTHER ASSETS:
  Restricted cash                                       162,500            -
  Notes receivable, less current portion                123,626         113,204
  Intangible assets, net                                 44,153          50,101
  Deposits and other assets                              93,476          34,439
                                                    -----------     ------------
                                                        423,755         197,744
                                                    -----------     ------------

                                                    $ 2,500,713     $ 2,741,179
                                                    ===========     ============
  
     LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Long term debt, current portion                   $    51,156     $    45,387
  Accounts payable and accrued expenses                 258,588         191,526
  Accrued payroll and payroll taxes                      27,495          41,831
  Sales tax payable                                       5,596           7,638
  Deferred franchise fees                                90,000          75,000
                                                    -----------     ------------
       Total Current Liabilities                        432,835         361,382
                                                    -----------     ------------

LONG TERM LIABILITIES:
  Long term debt, less current portion                   15,449          54,635
  Deferred rent                                          43,033          63,123
                                                    -----------     ------------
                                                         58,482         117,758
                                                    -----------     ------------
COMMITMENTS

STOCKHOLDERS' EQUITY:
  Preferred stock $.001 par value; 2,500,000
    shares authorized; none issued                        -                -
  Common stock, Class A, $.001 par value;
    15,000,000 shares authorized; 2,065,000
    shares issued and outstanding                         2,065           1,265
  Common stock, Class B, $.001 par value;
    800,000 shares authorized; 800,000
    shares issued and outstanding                           800             800
  Capital in excess of par value                      7,096,358       5,442,847
  Accumulated deficit                                (5,089,827)     (3,182,873)
                                                    -----------     ------------
       Total Stockholders' Equity                     2,009,396       2,262,039
                                                    -----------     ------------

                                                    $ 2,500,713     $ 2,741,179
                                                    ===========     ============
                         

          See accompanying notes to consolidated financial statements.
<PAGE>
               LINDA'S DIVERSIFIED HOLDINGS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                          Nine Months Ended                   Three Months Ended 
                                                             September 30,                        September 30,                    
                                            ------------------------------------    ------------------------------------------------
                                                  1996                  1995                 1996                      1995
                                            ------------------   ---------------    -------------------         --------------------


<S>                                         <C>                  <C>                <C>                         <C>
REVENUES:
  Restaurant sales, net                     $     886,308        $     1,896,244         $   275,271                 $     644,217
  Franchise royalties                              21,411               -                      6,953                          -
  Franchise fee income                             40,000                 25,000              15,000                          -
  Contractor lead fees                             17,250               -                      2,750                          -
  Contract fee income                              13,841               -                     11,685                          -
  Loan origination fees                             7,500               -                        -                            -
                                            -----------------    ---------------    -------------------         --------------------
                                                  986,310              1,921,244             311,659                      644,217
                                            -----------------    ---------------    -------------------         --------------------


COSTS AND EXPENSES:
  Restaurant Operations:
    Food and paper costs                           364,554               839,935             114,001                      294,210
    Restaurant labor and related expenses          307,155               718,123              80,158                      272,066
    Operating expenses                              67,293               127,562              16,106                       45,724
    Occupancy expenses                             185,560               332,359              40,097                      125,586
    Depreciation and amortization                   98,439               114,007              31,749                       43,977
    Preopening costs                                  -                   69,261                 -                            -
  Loan Operations:
    Payroll and related expenses                   344,748                 -                 129,202                          -
    Media and advertising costs                    338,512                 -                  81,906                          -
    Operating expenses                             219,209                 -                  74,618                          -
  Corporate and Franchising:
    General and administrative                     743,773             1,255,511             231,077                      371,307
    Restructuring charge                           266,987                95,000                 -                         95,000

                                           ------------------   ----------------    -------------------         --------------------
                                                 2,936,230             3,551,758             798,914                    1,247,870
                                           ------------------   ----------------    -------------------         --------------------
LOSS FROM OPERATIONS                            (1,949,920)           (1,630,514)           (487,255)                    (603,653)

OTHER INCOME (EXPENSE):
  Interest and other income                         54,350               104,457              19,043                       26,757
  Interest expense                                 (11,384)              (20,102)             (3,277)                      (6,792)
                                           ------------------   ----------------    -------------------         --------------------
                                                    42,966                84,355              15,766                       19,965
                                           ------------------   ----------------    -------------------         --------------------


NET LOSS                                      $ (1,906,954)         $ (1,546,159)      $    (471,489)               $    (583,688)
                                           ==================   ================    ===================         ====================



NET LOSS PER SHARE                            $      (0.92)         $      (0.96)      $       (0.20)               $       (0.36)
                                           ==================   ================    ===================         ====================


WEIGHTED AVERAGE NUMBER OF
            SHARES OUTSTANDING                   2,076,333             1,615,000           2,415,000                    1,615,000
                                           ==================   ================    ===================         ====================
</TABLE>

          See accompanying notes to consolidated financial statements.

<PAGE>

               LINDA'S DIVERSIFIED HOLDINGS, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>

                                                                                   Nine Months Ended
                                                                                     September 30,
                                                                           --------------------------------
                                                                                 1996            1995
                                                                           ---------------  ---------------


<S>                                                                          <C>            <C> 
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net loss                                                                $(1,906,954)   $(1,546,159)
     Adjustments to reconcile net loss to net cash
       flows from operating activities:
          Depreciation and amortization                                           98,439        114,007
          Restructuring charge                                                   266,987         95,000
          Changes in operating assets and liabilities:
             Inventories                                                           9,358           (846)
             Prepaid expenses and other current assets                          (170,492)        17,335
             Restricted cash                                                    (162,500)          --
             Deposits and other assets                                           (53,089)        (7,616)
             Accounts payable and accrued expenses                                67,062          9,678
             Accrued payroll and payroll taxes                                   (14,336)        (3,827)
             Sales tax payable                                                    (2,042)         3,199
             Deferred franchise fees                                              15,000           --
             Deferred rent                                                       (20,090)        17,323
                                                                             -----------    -----------
                      Net cash flows used in operating activities             (1,872,657)    (1,301,906)
                                                                             -----------    -----------


CASH FLOWS FROM INVESTING ACTIVITIES:
     Proceeds from redemption of cash investments                                721,000      2,357,295
     Acquisition of cash investments                                                --       (2,151,228)
     Funds advanced under notes receivable                                      (240,525)          --
     Funds advanced under retail loans receivable                               (506,459)          --
     Proceeds from notes receivable                                              383,277           --
     Proceeds from sale of retail loans receivable                               471,110           --
     Acquisition of property and equipment                                      (118,940)      (740,470)
                                                                             -----------    -----------
                      Net cash flows from investing activities                   709,463       (534,403)
                                                                             -----------    -----------


CASH FLOWS FROM FINANCING ACTIVITIES -
     Proceeds from sale of common stock, net of expenses                       1,654,311           --
     Payments of long-term debt                                                  (33,417)       (32,219)
                                                                             -----------    -----------
                      Net cash flows from (used in) financing activities       1,620,894        (32,219)
                                                                             -----------    -----------


NET CHANGE IN CASH AND EQUIVALENTS                                               457,700     (1,868,528)

CASH AND EQUIVALENTS, Beginning of period                                        558,013      2,126,646
                                                                             -----------    -----------

CASH AND EQUIVALENTS, End of period                                          $ 1,015,713    $   258,118
                                                                             ===========    ===========


SUPPLEMENTAL INFORMATION:
     Interest paid                                                           $    11,384    $    20,103
                                                                             ===========    ===========

Noncash financing activity:
     Discounted note payable issued as part of restaurant acquisition cost   $      --      $    52,144
                                                                             ===========    ===========
     Equipment obtained under capitalized leases payable                     $      --      $    46,037
                                                                             ===========    ===========
</TABLE>

          See accompanying notes to consolidated financial statements.

<PAGE>

               LINDA'S DIVERSIFIED HOLDINGS, INC. AND SUBSIDIARIES
                   Notes to consolidated financial statements
                                   (Unaudited)


(1)  The consolidated balance sheet at the end of the preceeding fiscal year has
     been derived from the audited  consolidated  balance sheet contained in the
     Company's Form 10-KSB and is presented for comparative purposes.  All other
     financial  statements are unaudited.  All adjustments which are of a normal
     and recurring nature and in the opinion of management  necessary for a fair
     presentation,  have been  included.  The results of operations  for interim
     periods are not  necessarily  indicative of the  operating  results for the
     full year. Footnote  disclosures  normally included in financial statements
     prepared in accordance with generally accepted  accounting  principles have
     been omitted in accordance  with the published rules and regulations of the
     Securities and Exchange Commission. These consolidated financial statements
     should  be read in  conjunction  with the  financial  statements  and notes
     thereto  included in the  Company's  Form 10-KSB for the most recent fiscal
     year.

(2)  In August  1996,  the  Company  effected a name  change for its  restaurant
     operating entities from Linda's Flame Roasted Chicken to Linda's Rotisserie
     & Kitchen to better reflect the Company's  newly  introduced  expanded menu
     offerings, including turkey meat loaf and roast beef meals.


     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
     ------------------------------------------

     Principles of Consolidation - The consolidated financial statements include
     ---------------------------
     the accounts of Linda's  Diversified  Holdings,  Inc. and its  wholly-owned
     subsidiaries.  All significant intercompany  transactions and balances have
     been eliminated in consolidation.

     Franchise  Related Income and Deferred  Franchise Fees - In connection with
     ------------------------------------------------------
     its franchising  operations,  the Company receives initial  franchise fees,
     royalties  and  advertising  fees from its  franchisees.  Initial  fees are
     recognized  when  the  franchisee  commences   operations.   Royalties  and
     advertising fees, as defined in the underlying  franchise  agreements,  are
     recognized  in the  period  that the  related  franchise  store  revenue is
     generated.

     In March  1996,  the  Company  signed a  multi-unit  franchise  development
     agreement under which the franchisee will open up to 18 Linda's  Rotisserie
     & Kitchen restaurants,  the first of which opened in Flemington, New Jersey
     on September 28, 1996.  Under this agreement,  the Company receives initial
     franchise fees with respect to each individual  store,  and recognizes such
     income as each such store commences operations.

     Cash  Equivalents - The Company  considers  highly liquid debt  instruments
     -----------------
     with maturities of three months or less to be cash equivalents.

     Property and  Equipment - Property and  equipment  are stated at cost.  The
     -----------------------
     Company provides for depreciation under the straight-line method based upon
     the estimated useful life of five to twelve years for equipment.  Leasehold
     improvements are amortized over the life of the lease.

     Restricted  Cash - In connection with  regulatory  banking  requirements in
     ----------------
     certain states,  National Home Guaranty is required to post mortgage surety
     bonds  which are  collateralized  by  irrevocable  letters of  credit.  The
     collateralization underlying these bonds is shown as restricted cash in the
     September 30, 1996 financial statements.

                                      - 5 -
<PAGE>

               LINDA'S DIVERSIFIED HOLDINGS, INC. AND SUBSIDIARIES
                   Notes to consolidated financial statements
                                   (Unaudited)

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

Results of Operations
---------------------

OVERVIEW
--------

The  Company  is a holding  corporation  consisting  of  restaurant  operations,
restaurant  franchising,   and  home-equity  loan  operations.   The  restaurant
entities,  operating  under the name  Linda's  Rotisserie  &  Kitchen  (formerly
Linda's Flame Roasted Chicken),  consist of five  restaurants,  two of which are
Company-owned and operated, and three of which are franchised. Additionally, the
Company has sold an additional four  franchises,  three in New Jersey and one in
New York, two of which are expected to open later in 1996.  The loan  operations
are conducted through National Home Guaranty ("NHG"), a wholly-owned  subsidiary
which  commenced  operations  in April 1996,  providing  both  conventional  and
federally-guaranteed  financing for homeowners and lead-generation  services for
contractors  with respect to  home-improvement  services in the  low-to-moderate
income housing markets.  In April 1996, NHG was approved by the US Department of
Housing and Urban Development to originate  federally-guaranteed  Title I loans.
NHG is  currently  a  licensed  lender in seven  states  including  New  Jersey,
Massachusetts,  Rhode Island, Delaware, Maryland, New Hampshire and Connecticut,
and also  operates in  Pennsylvania  and New York which do not require a special
license.

RESTAURANT OPERATIONS
---------------------

Gross  restaurant  sales for the nine months ended  September 30, 1996 decreased
$1,194,000 (56%) as compared to the same period in 1995.  Comparable store gross
sales (for locations  opened at least one year) decreased  $127,000  (17%).  The
total  sales  decreases  were  due  to the  Company  having  five  Company-owned
locations  through the third  quarter of 1995  compared  with three and two such
locations  through  the second and third  quarters  of 1996,  respectively.  The
Company closed a restaurant in October 1995,  franchised a second  restaurant in
December  1995,  and closed a third  restaurant in June 1996. The Company closed
these  stores to reduce its losses and preserve  its working  capital.  The same
store  sales  decreases  were due to the  Company's  prior year Buy 1 Get 1 Free
chicken meal  promotion  which ran for six weeks in August and September of 1995
which  temporarily  increased  volume at all of the  Company's  locations in the
prior year.  Additional  decreases in sales were due to the increased saturation
of, and intense  competition from,  similar restaurant  concepts  throughout New
Jersey.

Gross  restaurant  sales for the three months ended September 30, 1996 decreased
$496,000 (63%) as compared to the same quarter of 1995.  Comparable  store gross
sales decreased $53,000 (19%).

Food and paper costs collectively decreased, for the nine months ended September
30, 1996  compared to the same period in 1995 to $365,000  (39% of gross  sales)
from  $840,000  (40% of  gross  sales),  respectively.  These  costs  increased,
however, for the three months ended September 30, 1996 and 1995 to $114,000 (39%
of  gross  sales)  from  $294,000  (37%  of  gross  sales),  respectively,   due
essentially to higher poultry costs which were at a ten-year high.

Year to date food cost percentage decreases were attributable to several factors
including,  the increased sales from Company's new oversized gourmet  sandwiches
which have lower food costs than other meal items, and the re-engineering of the
Company's  menu. The Company has also  introduced new items including roast beef
and turkey meat loaf meals,  which the Company  expects to help lower food costs
further.

                                      - 6 -
<PAGE>

               LINDA'S DIVERSIFIED HOLDINGS, INC. AND SUBSIDIARIES
                   Notes to consolidated financial statements
                                   (Unaudited)

Year to date paper cost decreases were  attributable to the Company's  phase-out
of some of its  higher-priced  branded paper products.  The Company has retained
certain high exposure  branded  components  such as take-out  container lids and
carry-out  bags since  these  items carry high  visibility  within the  take-out
segment of the business.  The non-branded paper products retain the same quality
level as the branded products.

Restaurant labor and related expenses  decreased to $80,000 (28% of gross sales)
for the quarter  ended  September 30, 1996 as compared to $272,000 (35% of gross
sales) for the third quarter of 1995.  This  decrease is due to the closing,  in
June  1996,  of the  Company's  Livingston,  New Jersey  location  which had its
highest labor costs,  as well as the Company's  continued  focus on  correlating
hourly  labor to  projected  sales.  Restaurant  labor for the nine months ended
September  30, 1996  decreased  from the same period of 1995 to $307,000 (33% of
gross  sales from  $718,000  (34% of gross  sales).  This  smaller  decrease  as
compared  to the  decrease  in the  current  quarter  was  impacted by the first
quarter of 1996 in which the Northeast  experienced  extreme  winter  conditions
during which the restaurants had to be staffed for potential  rather than actual
sales, such sales having been negatively impacted due to several snow storms.

Operating  expenses,  including  such  items as  local  promotion,  repairs  and
maintenance and store supplies,  amounted to $16,000 (6% of gross sales) for the
third  quarter of 1996  compared  to $46,000  (6% of gross  sales) for the third
quarter  of  1995.  Similarly,  operating  expenses  for the nine  months  ended
September 30, 1996 and 1995 were $67,000 (7% of gross sales) and $128,000 (6% of
gross sales), respectively.

Occupancy costs,  including such fixed and recurring items as rent,  common area
maintenance charges and utilities,  amounted to $40,000 (14% of gross sales) and
$126,000  (16% of gross sales) for the  quarters  ended  September  30, 1996 and
1995, respectively.  This percentage decrease is due primarily to the closing of
the Company's store in Livingston, NJ which had high occupancy costs relative to
its sales.  Year to date occupancy  costs were $186,000 (20% of gross sales) and
$332,000  (16% of gross sales) for the nine months ended  September 30, 1996 and
1995,  respectively.  This  increase as a percentage  of sales  results from the
fixed nature of such  expenses  which will  increase as a percentage of sales as
sales decrease.

Depreciation and amortization  decreased to $98,000 (11% of gross sales) for the
nine months ended  September  30, 1996 from $114,000 (5% of gross sales) for the
same period in 1995.  This decrease is attributable to the fact that the Company
had equipment and leasehold  improvements  at two additional  locations in 1995,
one store of which was closed, and one of which was franchised.  For the quarter
ended  September  30, 1996,  these  expenses  decreased to $32,000 (11% of gross
sales) from $44,000 (6% of gross sales) for the same quarter of 1995.

Preopening costs for 1995 of $69,000  represented  expenses related to the grand
opening of the Company's  restaurants  in Livingston  and Summit,  New Jersey in
January 1995 and June 1995, respectively,  including various training,  payroll,
promotion  and start-up  costs.  No  preopening  expenses  were  incurred by the
Company during 1996.

RESTAURANT FRANCHISING

The Company's  franchising  operations are administered  through its subsidiary,
Linda's Chicken  International.  As of September 30, 1996, three franchises were
opened. The first in Colonia, New Jersey, began operations in December 1995. The
second, a free-standing prototype in Westwood, New Jersey, opened in April 1996.
The third  location  opened in  Flemington,  New Jersey on  September  28, 1996.
Franchise  royalty  income,  amounted  to  $21,000  for the  nine  months  ended
September 30, 1996. There was no such revenue in the comparable period of 1995.


                                     - 7 -

<PAGE>

               LINDA'S DIVERSIFIED HOLDINGS, INC. AND SUBSIDIARIES
                   Notes to consolidated financial statements
                                   (Unaudited)


The Company  maintains an advertising  fund to be used for regional  advertising
expenditures which benefit all locations. Franchisees are required to contribute
a percentage of their net sales to this fund.  The Company also  contributes  to
the fund promotional rebates received from suppliers.  As of September 30, 1996,
this fund had excess revenue over expenditures for the first nine months of 1996
approximating $12,000.

Expenses  related  to the  franchising  operation,  consisting  of such items as
franchise support personnel, legal fees and advertising, are included in general
and administrative expenses in the Company's financial statements,  and amounted
to $143,000 and $175,000 for the nine months ended  September 30, 1996 and 1995,
respectively.


LOAN OPERATIONS
---------------

The Company's loan  operations are conducted  through its  subsidiary,  National
Home Guaranty ("NHG"). These operations include providing low-to-moderate income
homeowners with a single source for both home  improvement  loans  (conventional
and federally-guaranteed) and qualified contractors.  Initially, NHG intended to
provide essentially  federally-guaranteed loans, but has expanded to now include
both  federally-guaranteed  and convential  loans.  NHG derives its revenue from
referral  lead  fees  received  from  participating  contractors,   as  well  as
administrative  fees representing a percentage of each completed  contract.  The
Company  additionally  can derive  revenue from loan  participation  by means of
receiving a premium from a third-party  buyer of such loans, or loan origination
fees from a borrower.

NHG first began receiving  revenue in May 1996 which resulted from the Company's
test marketing  efforts.  Gross revenue for the period ended  September 30, 1996
totalled $39,000 including $17,000 in contractor lead fees, $14,000 in completed
contract fee income, and $8,000 in loan origination fees. The Company recognizes
income from lead fees at the time the lead is provided  to the  contractor,  and
contract fee income when the related contract is completed.

NHG  experienced  charges  of  $286,000  during the third  quarter of 1996,  and
$902,000  from  commencement  of  operations  through  September  30,  1996,  as
described  below,  relating  to the test  marketing  and  other  start-up  costs
associated with the commencement of its operations.

Payroll  and  related  expenses,  consisting  of  management,  customer  service
representatives,  credit  analysts and  processors,  totalling  $345,000 (38% of
total expenses) for commencement of operations through September 30, 1996. While
management labor is a fixed expense, NHG has the ability to correlate the amount
of its other  operations  personnel to the loan request volume it receives.  All
customer  service  representatives  are paid  hourly,  and  some  are  part-time
employees.

Media and advertising  costs,  consisting of media time bought on television and
radio, as well as the production and  distribution  of direct mail  advertising,
and the  production  of both the  television  and  radio  commercials,  totalled
$339,000 (38% of total expenses) for the period ended September 30, 1996. Due to
initially  disappointing results from its test advertising campaign,  NHG worked
with media  consultants on redesigning  and refocusing its commercials to better
attract its target markets. These new commercials continue to be tested in NHG's
core markets.  The Company  expects media costs to be the single largest expense
item in future operations and to have a significant  impact on the generation of
future revenues.

                                      - 8 -

<PAGE>

               LINDA'S DIVERSIFIED HOLDINGS, INC. AND SUBSIDIARIES
                   Notes to consolidated financial statements
                                   (Unaudited)


Operating  expenses,  consisting of expenses  necessary to operate the Company's
main  office in New Jersey and its branch  office in  Massachusetts,  as well as
legal and  consulting  fees and  expenses  related  to  obtaining  licenses  and
permits,  totalling  $219,000  (24% of  total  expenses)  for the  period  ended
September  30,  1996.  Typically,  most of  these  expenses  are of a fixed  and
recurring  nature  and will  decrease  as a  percentage  of  revenue  as revenue
increases.


CORPORATE
---------

General and  administrative  expenses  decreased  to $744,000 for the first nine
months of 1996 from  $1,256,000 in the comparable  period of 1995.  This is as a
result of continued  reductions  in overhead as a result of the  elimination  of
several corporate  positions.  Similarly,  general and  administrative  expenses
decreased to $231,000 for the quarter ended  September 30, 1996 from $371,000 in
the same quarter of 1995.  While the Company  anticipates  that cost containment
will continue to take place in this expense category, general and administrative
expenses  will continue to represent a large  percentage  of revenues  until the
Company's  subsidiaries  can develop gross revenue  volume  sufficient to absorb
these costs.

The  restructuring  charge of $267,000  represents the costs associated with the
Company's closing of its restaurant in Livingston, NJ on June 29, 1996.

Interest  income  decreased to $54,000  from  $104,000 for the nine months ended
September 30, 1996 and 1995, respectively, and decreased to $19,000 from $27,000
for the quarters  ended  September 30, 1996 and 1995,  respectively.  Investment
earnings are  principally  from the Company's  investments in short-term  United
States government-backed obligations. This source of income has decreased as the
Company has expended  funds which were  invested in 1995 on the expansion of its
operations.


Liquidity and Capital Resources
-------------------------------

Current assets at September 30, 1996 were  $1,356,000  compared to $1,576,000 at
December  31,  1995 and  current  liabilities  were  $433,000  at June 30,  1996
compared to $361,000 at December 31, 1995.  The  Company's  restaurants  sell to
consumers in what are substantially all cash transactions.  Any credit and debit
card business  transacted is electronically  credited to the Company's  accounts
within  48 hours.  The  Company's  debt at  September  30,  1996,  consisted  of
obligations owed under capitalized leases for point-of-sale terminals at each of
the  restaurants  totalling  $44,000.  Additionally,  the Company  issued a note
payable,  with a  remaining  balance  of  $23,000  at  September  30,  1996,  in
conjunction  with its  acquisition of the restaurant in Summit,  NJ. The Company
currently has no bank borrowings.

The Company requires capital  principally to expand the operations of NHG and to
develop new franchisees for its existing  restaurant  franchising  program.  The
capital  required for a new  restaurant  site which is to be  franchised  is the
responsibility  of a potential  franchisee  who is required to provide the funds
necessary to build-out a site. The Company is aggressively  pursuing franchisees
to provide for future  expansion of the  Company's  restaurant  business and the
increasing  of  market  share,  and due to  limited  cash  resources,  does  not
currently intend to open additional  company-owned  restaurants.  In addition to
allowing for expansion with minimal Company capital, franchising also provides a
weekly  flow of income into the Company  via  management  royalties,  as well as
allowing for the offsetting of regional advertising  expenses,  through required
franchisee  contributions to a regional  advertising fund. Funds for NHG will be
used  primarily to continue to refocus its  commercials  and buy media time,  as
well as further expand its operations into other metropolitan areas.

                                      - 9 -

<PAGE>

               LINDA'S DIVERSIFIED HOLDINGS, INC. AND SUBSIDIARIES
                   Notes to consolidated financial statements
                                   (Unaudited)


The Company's  franchising  operation currently has seven franchisees,  three of
which have stores  which are  currently  open,  and two of which are expected to
open  later  in  1996.  Because  of the  increased  emphasis  on  the  Company's
franchising  program,  the Company  expects that its future results will be more
significantly  affected  by the success or failure of its  franchising  program.
Additionally,  the Company  expects that future  results  will be  significantly
affected by the success or failure of NHG.

The Company had provided  temporary  construction  financing to a franchisee for
the  construction  of the  free-standing  restaurant  in  Westwood,  NJ  under a
promissory  note  dated  August  29,  1995,  and  advanced  to  this  franchisee
approximately $375,000. This loan was repaid in full in September 1996.

Through the test period ended September 30, 1996, NHG had closed loans totalling
$506,000,  of which $471,000 had been sold to a third-party lender. Thus, retail
loans receivable amounted to $35,000 at September 30, 1996. The Company sold all
such retail loans in October 1996.

The Company  anticipates that the current trend of losses will continue through,
at least,  the first quarter of 1997. NHG, whose business is based upon the home
improvement industry, is expected to experience a decrease in potential revenues
during  the winter  months due to a  significant  slowdown  in home  improvement
requests and  contractor  ability to complete  projects  during  adverse  winter
weather in the Northeast,  the primary area where NHG currently  lends. In order
to offset the seasonal  decreases  expected in its  business in the future,  the
Company has applied to become a licensed lender in Florida.  The Company is also
initiating  lending  activities  in other  southeastern  states to  improve  its
ability to generate loan volume during the winter. License application processes
are  lengthy,  however,  and there is no  assurance  as to when the Company will
actually  obtain the requisite  licenses in Florida or any other state. In order
to improve its  liquidity  and provide  additional  working  capital  during the
start-up phase of NHG's business,  the Company requires, and is actively seeking
additional  financing  through a private  placement of debt or equity.  Based on
initial  contacts,  the Company  believes  that such  financing  can be secured.
However,  there can be no  assurance  of  success.  The  Company  believes  that
additional funding will be required for it to meet its cash requirements for the
next twelve months.


Forward-Looking Information May Prove Inaccurate
------------------------------------------------

This report contains  forward-looking  statements and information that are based
on  management's  beliefs  as well  as  assumptions  made  by,  and  information
currently  available  to,  management.  When  used in this  document,  the words
"anticipate",  "believe",  "estimate",  "expect"  and  similar  expressions  are
intended to  identify  forward-looking  statements.  Such  statements  involve a
number of risks and  uncertainties.  Among the factors  that could cause  actual
results to differ materially are the following:  business  conditions and growth
in the industry, general economic conditions, product development,  competition,
government  regulations,  rising costs for food and paper supplies,  the risk of
franchising, and all the risks associated with start-up businesses as it relates
to the  activities of NHG, and the risk factors  listed from time to time in the
Company's SEC reports,  included but not limited to the  Company's  Registration
Statement filed on Form S-3 on July 24, 1996.

                                     - 10 -

<PAGE>

               LINDA'S DIVERSIFIED HOLDINGS, INC. AND SUBSIDIARIES
                   Notes to consolidated financial statements
                                   (Unaudited)

Part II.  OTHER INFORMATION

Item 1.  Legal Proceedings

           None.

Item 2.  Changes in Securities

           None.

Item 3.  Defaults upon Senior Securities

           None.

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

           None.

Item 5.  Other Information

           None.

Item 6.  Exhibits and Reports on Form 8-K

          a)   Exhibits:  Exhibit 27 (Financial  Data Schedule for Third Quarter
               of 1996)

          b)   Reports on Form 8-K

               No  reports on Form 8-K have been filed  during the  quarter  for
               which this report is filed.



                                   SIGNATURES

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


                                    Linda's Diversified Holdings, Inc.
                                        (Registrant)



November 13, 1996                   /s/ Peter Weissbrod
                                    --------------------------------------------
                                    Peter Weissbrod, President
                                    (Principal Executive Officer)



November 13, 1996                   /s/ Gregory Finkelstein
                                    --------------------------------------------
                                    Gregory Finkelstein, Treasurer
                                    (Principal Financial and Accounting Officer)

                                     - 11 -