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                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549
                                        
                                   FORM 10-Q
                                        
(Mark One)

[X]  Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934

     For the quarterly period ended June 28, 1998

                                      OR

[ ]  Transition report pursuant to Section 13 or 15(d) of the Securities
     Exchange Act of 1934
 


                       Commission File Number:  0-21587
                                        
                               PJ AMERICA, INC.
            (Exact name of registrant as specified in its charter)
                                        
                                        
            Delaware                                         61-1308435
(State or other jurisdiction of                           (I.R.S. Employer
 incorporation or organization)                        Identification Number)


                               9109 Parkway East
                          Birmingham, Alabama  35206
                   (Address of principal executive offices)
                                        

                                (205) 836-1212
             (Registrant's telephone number, including area code)
                                        

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

     At July 24, 1998, there were 5,790,685 shares of the registrant's common
stock, par value $.01 per share.
<PAGE>
 
                       PJ AMERICA, INC. AND SUBSIDIARIES
                                        
                                     INDEX


<TABLE>
<CAPTION>
PART I.   FINANCIAL INFORMATION                                                         Page No.
                                                                                        --------


Item 1.   Financial Statements
<S>       <C>                                                                           <C>

          Condensed Consolidated Balance Sheets (Unaudited)
          June 28, 1998 and December 28, 1997                                               2


          Condensed Consolidated Statements of Income (Unaudited)
          Three Months and Six Months Ended June 28, 1998 and
          June 29, 1997                                                                     3


          Condensed Consolidated Statements of Cash Flows (Unaudited)
          Six Months Ended June 28, 1998 and June 29, 1997                                  4


          Notes to Condensed Consolidated Financial Statements (Unaudited)                  5


Item 2.   Management's Discussion and Analysis of Financial Condition and
          Results of Operations                                                             7


PART II.  OTHER INFORMATION


Item 4.   Submission of Matters to a Vote of Security Holders                               9


Item 6.   Exhibits and Reports on Form 8-K                                                  9
</TABLE>

<PAGE>
 
PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

                       PJ AMERICA, INC. AND SUBSIDIARIES
                     Condensed Consolidated Balance Sheets

<TABLE> 
<CAPTION> 

                                                     June 28,           December 28,
                                                       1998                 1997
                                                    (Unaudited)            (Note)
                                                    -----------         ------------
<S>                                                 <C>             <C>
(In thousands)
Assets
Current assets:
  Cash and cash equivalents                           $ 8,493             $ 6,674
  Inventories                                             372                 311
  Prepaid expenses and other                              289                 360
  Investments                                           2,829               9,830
  Deferred income taxes                                   151                 111
                                                      -------             -------
Total current assets                                   12,134              17,286

Investments                                            12,333              11,402
Net property and equipment                             13,282               9,419
Deferred franchise and development cost, net            2,642               1,308
Other assets                                            4,371                 868
                                                      -------             -------
Total assets                                          $44,762             $40,283
                                                      =======             =======
Liabilities and Stockholders' Equity
Current liabilities:
  Accounts payable                                    $   677             $   525
  Accrued expenses                                      3,364               2,420
  Notes payable                                           600                   -
                                                      -------             -------
Total current liabilities                               4,641               2,945

Deferred income taxes                                     721                 531

Stockholders' equity:
  Common stock                                             58                  58
  Additional paid-in capital                           32,332              32,197
  Retained earnings                                     7,010               4,552
                                                      -------             -------
Total stockholders' equity                             39,400              36,807
                                                      -------             -------

Total liabilities and stockholders' equity            $44,762             $40,283
                                                      =======             =======
</TABLE>



Note:  The condensed consolidated balance sheet at December 28, 1997 has been 
derived from the audited financial statements at that date but does not include 
all information and footnotes required by generally accepted accounting 
principles for complete financial statements.

See accompanying notes.

                                       2
  
<PAGE>
 
                       PJ AMERICA, INC. AND SUBSIDIARIES
                Condensed Consolidated Statements of Income
                                  (Unaudited)


<TABLE>
<CAPTION>
                                                                      Three Months Ended           Six Months Ended
                                                                     June 28,     June 29,        June 28,    June 29,
                                                                       1998         1997            1998        1997
                                                                     --------     --------        --------    --------
<S>                                                                  <C>          <C>             <C>         <C> 
(In thousands, except per share amounts)
Restaurant sales                                                      $16,499      $11,985         $30,717     $22,591

Restaurant operating expenses:
  Cost of sales                                                         5,222        3,825           9,707       7,198
  Salaries and benefits                                                 4,390        3,077           8,173       5,792
  Other operating expenses                                              3,877        2,899           7,236       5,380
  Depreciation and amortization                                           471          307             871         600
                                                                      -------      -------         -------     -------
                                                                       13,960       10,108          25,987      18,970
                                                                      -------      -------         -------     -------

Restaurant operating income                                             2,539        1,877           4,730       3,621
General and administrative expenses                                       855          715           1,575       1,280
                                                                      -------      -------         -------     -------
Operating income                                                        1,684        1,162           3,155       2,341


Other income                                                              241          168             513         324
                                                                      -------      -------         -------     -------

Income before income taxes                                              1,925        1,330           3,668       2,665
Income tax expense                                                        635          468           1,210         882
                                                                      -------      -------         -------     -------
Net income                                                            $ 1,290      $   862         $ 2,458     $ 1,783
                                                                      =======      =======         =======     =======

Net income per share - Basic                                          $  0.22                      $  0.42
                                                                      =======                      =======             
Net income per share - Diluted                                        $  0.22                      $  0.41
                                                                      =======                      =======             
Weighted average shares outstanding - Basic                             5,787                        5,785
                                                                      =======                      =======             
Weighted average shares outstanding - Diluted                           5,957                        5,933
                                                                      =======                      =======             

Pro forma information:
Income before income taxes                                                         $ 1,330                     $ 2,665
Pro forma income tax expense                                                           489                         979
                                                                                   -------                     -------
Pro forma net income                                                               $   841                     $ 1,686
                                                                                   =======                     =======

Pro forma net income per share - Basic                                             $  0.17                     $  0.33
                                                                                   =======                     =======
Pro forma net income per share - Diluted                                           $  0.16                     $  0.33
                                                                                   =======                     =======
Weighted average shares outstanding - Basic                                          5,054                       5,059
                                                                                   =======                     =======
Weighted average shares outstanding - Diluted                                        5,169                       5,180
                                                                                   =======                     =======
</TABLE> 
See accompanying notes.

                                       3
<PAGE>
 
                       PJ AMERICA, INC. AND SUBSIDIARIES
                Condensed Consolidated Statements of Cash Flows
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                                                Six Months Ended
                                                                          June 28,             June 29,
                                                                            1998                 1997
                                                                          --------             --------
<S>                                                                       <C>                  <C>
(In thousands)
Cash Flows from Operating Activities
  Net cash provided by operating activities                               $ 4,196             $ 2,321

Cash Flows from Investing Activities
  Acquisitions                                                             (5,734)                  -
  Purchases of property, equipment, franchise and development fees         (3,448)             (1,742)
  Maturity (Purchases) of investments                                       6,070                (378)
                                                                          -------             -------
    Net cash used in investing activities                                  (3,112)             (2,120)

Cash Flows from Financing Activities
  Proceeds from exercise of stock options                                     135                   -
  Proceeds from issuance of debt                                            1,000                   -
  Payments on borrowings                                                     (400)                (70)
  Distributions paid                                                            -                (781)
                                                                          -------             -------
    Net cash provided by (used in) financing activities                       735                (851)

Net increase (decrease) in cash and cash equivalents                        1,819                (650)
Cash and cash equivalents at beginning of period                            6,674               4,076
                                                                          -------             -------
Cash and cash equivalents at end of period                                $ 8,493             $ 3,426
                                                                          =======             =======
</TABLE> 
See accompanying notes.

                                       4
<PAGE>
 
                       PJ AMERICA, INC. AND SUBSIDIARIES
             NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                 (Unaudited)

June 28, 1998

Note 1 - Basis of Presentation

     The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with the instructions to Form 10-Q and Article 10 of
Regulation S-X. 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 three months and six months ended June
28, 1998 are not necessarily indicative of the results that may be expected for
the year ending December 27, 1998. For further information, refer to the
consolidated financial statements and footnotes thereto included in the PJ
America, Inc. Annual Report on Form 10-K for the year ended December 28, 1997.

     The accompanying unaudited condensed consolidated financial statements
include the accounts of PJ America, Inc. and its wholly-owned subsidiaries, (the
"Company"). All significant inter-company transactions between the consolidated
companies have been eliminated.

     Ohio Pizza Delivery (OPD), which was merged into the Company on June 5,
1997 operated as an S corporation from January 1, 1995 through June 5, 1997,
when its S corporation election was terminated. As a result, OPD was not subject
to federal or state income taxes before June 5, 1997. However, OPD was subject
to local income taxes.

     The Company adopted SFAS No. 128 Earnings per share in 1997. Net income per
share is based on the weighted average number of shares of common stock
outstanding (Basic) and common stock equivalents during the period (Diluted).

Note 2 - Common Stock Offering

     In July, 1997, the Company completed a public offering pursuant to which it
sold 750,000 shares of common stock at a price of $17.75 per share. This
offering resulted in net proceeds to the Company of $12.2 million.

Note 3 - Pro Forma Information - OPD

      OPD terminated its status as an S corporation on June 5, 1997. Pro forma
income taxes have been presented to reflect a provision for federal, state, and
local income taxes at an assumed effective rate of 41.0% for OPD.

Note 4 - Business Combinations

     In May, 1998, the Company acquired a 22 restaurant Papa John's territory in
Southern Louisiana, which included nine existing restaurants, five restaurants
under development, and development rights for eight additional restaurants. The
purchase price was $4.3 million in cash and a short term note payable to
sellers, plus the assumption of $1.4 million of debt which was immediately
retired. The above acquisition was with certain directors and officers,
including the Chairman of the Board and Chief Executive Officer. The above
business combination was accounted for by the purchase method of accounting,
whereby operating results subsequent to the acquisition date were included in
the Company's financial statements.

                                       5
<PAGE>
 
Note 5 - PJ Utah, LLC

     In April, 1998, the Company and PJ Utah, LLC amended the option agreement
pursuant to which the Company may acquire for cash the Papa John's restaurants
owned by PJ Utah and its development and franchise rights for Papa John's
restaurants in Utah. The option agreement was amended to extend the expiration
date from December 31, 1998 to December 31, 2000, and make the option
exercisable at any time during the period commencing at the earlier of March 29,
1999, or upon the Utah restaurants reaching certain revenue targets. Under the
amended agreement, the Company's option exercise price will now be calculated
primarily by reference to PJ Utah's restaurant revenues, but in no event may the
new exercise price exceed the exercise price as calculated under the original
agreement. The amended agreement also grants the owners of PJ Utah an option,
also expiring December 31, 2000, to sell the operations and rights of PJ Utah to
the Company at a price approximately equal to the original cost of PJ Utah's
real property and leasehold improvements, plus the depreciated cost of PJ Utah's
other property plus the aggregate losses, if any, incurred by PJ Utah after
March 30, 1998. This price also constitutes the minimum price at which the
Company may exercise its option. PJ Utah is substantially owned by certain 
officers and directors of the Company.

Note 6 - Central California Development Territory

     In April, 1998, the Company obtained additional Central California
development rights for 23 restaurants in exchange for relinquishing its option
to acquire the development rights in Vancouver, Canada.

                                       6
<PAGE>
 
               SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS

Certain statements in this Form 10-Q under "Management's Discussion and Analysis
of Financial Condition and Results of Operations" constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Company to be materially different from any future
results, performance or achievements expressed or implied by such forward-
looking statements. Such factors include, among others, the following:
competition; successful implementation of the Company's expansion strategy;
dependence on the success of the Papa John's system; success of operating
initiatives; advertising and promotional efforts; adverse publicity; acceptance
of new product offerings; availability, locations and terms of sites for store
development; changes in business strategy or development plans; availability and
terms of capital; food, labor and employee benefit costs; changes in government
regulations; regional weather conditions; and other factors referenced in this
Form 10-Q.

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

Results of Operations

     Restaurant Sales. Restaurant sales increased 38% to $16.5 million for the
three months ended June 28, 1998 from $12.0 million for the comparable period in
1997, and 36% to $30.7 million for the six months ended June 28, 1998, from
$22.6 million for the comparable period in 1997. These increases were primarily
due to a 44% and 40% increase in the number of equivalent restaurants open
during the three and six months ended June 28, 1998, respectively, as compared
to 1997. "Equivalent restaurants" represents the number of restaurants open at
the beginning of a given period, adjusted for restaurants opened or acquired
during the period on a weighted average basis. Also, comparable sales increased
4.1% and 5.0% in the three and six months ended June 28, 1998, respectively,
over the comparable periods in 1997.

     Costs and Expenses. Cost of sales, which consists of food, beverage and
paper costs, decreased as a percentage of restaurant sales to 31.6% for the
three and six months ended June 28, 1998, respectively, from 31.9% for the
comparable periods in 1997. This decrease is primarily attributable to a slight
shallowing of discounts, and lower meat topping prices, partially offset by
higher cheese prices.

     Salaries and benefits, which consist of all store level employee wages,
taxes, and benefits increased as a percentage of restaurant sales to 26.6% for
the three and six months ended June 28, 1998, respectively, from 25.7% and
25.6%, respectively, for the comparable periods in 1997. These increases in
salaries and benefits as a percentage of restaurant sales were primarily due to
the increase in minimum wage in September, 1997, and the increase in the
proportion of newer restaurants opened or acquired.

     Other operating expenses include other restaurant level operating costs,
the material components of which are automobile mileage reimbursement for
delivery drivers, rent, royalties, utility expenses, pre-opening expenses and
advertising expenses. Other operating expenses decreased as a percentage of
restaurant sales to 23.5% and 23.6% for the three and six months ended June 28,
1998, respectively, from 24.2% and 23.8%, respectively, for the comparable
periods in 1997. These decreases in other operating expenses as a percentage of
restaurant sales are primarily attributable to increased leverage of expenses
and increased purchasing power for various expenses.

                                       7
<PAGE>
  
     Depreciation and amortization was relatively consistent as a percentage of
restaurant sales at 2.9% and 2.8% for the three and six months ended June 28,
1998, respectively, as compared to 2.6% and 2.7%, respectively, for the
comparable periods in 1997.

     General and administrative expenses decreased as a percentage of restaurant
sales to 5.2% and 5.1% for the three and six months ended June 28, 1998,
respectively, from 6.0% and 5.7%, respectively, for the comparable periods in
1997. These decreases were primarily due to the OPD merger expenses of $124,000,
which were expensed in the second quarter of 1997.

     Other Income. Other income which consists primarily of investment income
increased $.1 million and $.2 million for the three and six months ended June
28, 1998, respectively. These increases in investment income were a result of
earnings on funds received from the secondary stock offering in July, 1997.
Investment balances are considered available to fund growth and acquisitions.

Liquidity and Capital Resources

     The Company requires capital primarily for the development and acquisition
of new restaurants. Capital expenditures (which include franchise and
development fees) of approximately $3.4 million for the six months ended June
28, 1998, were primarily funded by cash flow from operations.

     Cash flow from operations increased to $4.2 million for the six months
ended June 28, 1998 from $2.3 million for the comparable period in 1997,
primarily due to the higher level of net income for the six months of 1998.

     The Company has financed its operations principally from cash provided by
operating activities and proceeds from its recent stock offerings. The Company
received net proceeds of $12.2 million from a secondary stock offering in July,
1997, which were used to fund capital expenditures or were held in various
investments.

     Capital expenditures, excluding purchases of existing franchisees, are
expected to be approximately $6.0 million for all of 1998. Approximately $4.5
million is expected to be for restaurant development and existing restaurant
improvements, $.5 million for commissary improvements and equipment, and $1.0
million for general and administrative land, building, and improvements. In May,
1998, the Company acquired a 22 restaurant Papa John's territory in Southern
Louisiana, which included nine existing restaurants, five restaurants under
development and development rights for eight additional restaurants. The
acquisition purchase price utilized approximately $5.7 million in cash.

     The Company also may acquire the operations of other Papa John's
franchisees if such operations become available on terms satisfactory to the
Company. Capital resources at June 28, 1998 include $23.7 million of cash and
investments. The Company plans to fund its capital expenditures through 1998
from available cash and cash generated from operations. The Company has not
sought and does not have any commitments for any credit facilities.

                                       8
<PAGE>
  
PART II. OTHER INFORMATION

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

     The Company's annual meeting of stockholders was held on May 20, 1998 at
the Hyatt Regency, 320 West Jefferson Street, Louisville, Kentucky at 11:00 am
(EDT).

     At the meeting, the Company's stockholders elected Richard F. Sherman,
Frank O. Keener, and Douglas S. Stephens to serve as directors until the 2001
Annual Meeting of Stockholders. Mr. Sherman, Mr. Keener and Mr. Stephens
received affirmative votes of 4,784,470, 4,784,270, and 4,784,570, respectively,
and abstained votes 200, 400, and 100, respectively. The Company's other
directors continue to serve in accordance with their previous elections: through
1999 - Martin T. Hart and Michael M. Fleishman; and through 2000 - Stephen P.
Langford and Charles W. Schnatter.

     The Company's stockholders also ratified an amendment to the Company's 1996
Non-Employee Directors Stock Incentive Plan by a vote of 4,561,555 affirmative
to 219,150 negative and 3,965 abstention votes.

     The Company's stockholders also ratified the selection of Ernst & Young LLP
as the Company's independent auditors for the year ending December 27, 1998, by
a vote of 4,783,570 affirmative to 1,100 abstention votes.

Item 6. Exhibits and Reports on Form 8-K

     (a) Exhibits.

     Exhibit
     Number           Description  
     ------           -----------   

      11              Statement regarding Computation of Earnings per
                      Common Share                                          

      27              Financial Data Schedule which is submitted         
                      electronically to the Securities and Exchange       
                      Commission for information only and not deemed 
                      to be filed with the Commission  

     (b) Current Reports on Form 8-K


         There were no reports filed on Form 8-K during the quarterly period 
         ended June 28, 1998.

                                       9
<PAGE>
 
                                  SIGNATURES

     Pursuant to the requirements 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.

                                     PJ AMERICA, INC.

Date: July 24, 1998                               /s/ D. Ross Davison
                                     -------------------------------------------
                                                      D. Ross Davison
                                      Vice President, Chief Financial Officer
                                     and Treasurer (Principal Financial Officer)

                                       10