SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549

                                 FORM 10-KSB

     |X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
         EXCHANGE ACT OF 1934 [FEE REQUIRED] 

     |_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
         EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

                 For the Fiscal Year Ended November 30, 1998
                                           -----------------
                        Commission File Number 0-12706
                                               -------

                                TUBBY'S, INC.
            ------------------------------------------------------
            (Exact name of registrant as specified in its charter)

                 New Jersey                              22-2166602
                 ----------                              ----------
     (State or other jurisdiction of                (I.R.S. Employer 
      incorporation or organization)               Identification No.)

     6029 East Fourteen Mile Road, Sterling Heights, Michigan 48312-5801
-----------------------------------------------------------------------------

       Registrant's telephone number, including area code 810/978-8829
                                                          ------------------
         Securities registered pursuant to Section 12(g) of the Act:

                         Common Stock $.01 Par Value
                         ---------------------------
                               (Title of Class)

     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 |_|

     Indicate by check mark if disclosure of delinquent filers pursuant to
     Item 405 of Regulation S-B is not contained herein, and will not be
     contained, to the best of registrant's knowledge, in definitive proxy or
     information statements incorporated by reference in Part III of this
     Form 10-KSB or any amendment to this Form 10-KSB.

     The aggregate market value of the voting stock held by non-affiliates of
     the Registrant based upon the closing sale price of the common stock on
     February 19, 1999, as reported on the NASDAQ SmallCap Market was
     approximately $882,635. Shares of common stock held by each officer and
     by each person who owns 5% or more of the outstanding common stock have
     been excluded in that such persons may be deemed to be affiliates. This
     determination of affiliate status is not necessarily a conclusive
     determination for other purposes.

     Issuer's revenues for its most recent fiscal year:       $7,365,983

     As of February 19, 1999, there were 2,583,114 shares of the registrant's
common stock outstanding.


                                      1

<PAGE>

                                    PART I

     ITEM 1.      DESCRIPTION OF BUSINESS
     -------      -----------------------

     Introduction

     Tubby's, Inc., the Registrant, and its subsidiaries, are referred to
     herein as the "Company" or "Tubby's." 

     Business Development

     Tubby's was founded in 1968 in Metropolitan Detroit, Michigan. The
     Company began by selling submarine sandwiches from a small store. The
     Company enjoyed success and growth and in 1977 began the sale of
     franchises of its submarine sandwich concept. In 1990, the Company,
     through a reverse merger, acquired the rights to the Stuff-Yer-Face
     Restaurants which operated primarily in New Jersey.

     The Company develops, operates, franchises and services a system of
     restaurants which prepare and serve a comprehensive menu of submarine
     sandwiches and related items. Tubby's submarine sandwiches are all
     prepared to order and many of its sandwiches are cooked on a grill.
     These restaurants are franchised or owned and operated as company
     stores. The Submarine sandwich shops are located in Michigan, Ohio,
     Arizona, Nebraska, Missouri, and Ontario,Canada.

     The Company also franchises and services a line of restaurants known as
     Stuff-Yer-Face. These restaurants are casual, sit-down, full service
     restaurants offering a line of "stuffed pizza" products known as
     "Stromboli". These restaurants create a casual and distinctive
     atmosphere by emphasizing the humorous "Stuff-Yer-Face" name and service
     by friendly waiters and waitresses. Consistent with the Stuff-Yer-Face
     name, portions are large.

     With an eye to the future, the Company sold its first Development Agent
     Agreement ("DA Agreement") in April, 1996. A DA Agreement confers the
     right to qualified persons to operate as an independent agent, on a
     non-exclusive basis, to develop and service the Company's franchised
     stores in a specific geographical area. The DA agrees that during the
     term of the agreement he will diligently perform his obligations on
     behalf of the Company to identify and assist prospective franchisees and
     to perform site acquisition services and supervision of franchisees
     operating Tubby's Sub Shop restaurants located in the territory. At
     November 30, 1998 the Company had nine active DA Agreements representing
     a potential of an additional 297 Tubby's Sub Shops over the next twenty
     years. Stores that are expected to result from the implementation of DA
     Agreements are the contractual responsibility of the Development Agents
     ("DAs"). Tubby's anticipates that these agreements will be fulfilled on
     a timely basis as stipulated in their respective contracts.

     In February of 1998 the Company launched a new subsidiary named
     SUBperior Distribution Systems, Inc. ("SDS"). SDS was formed by
     management to become its distributor of food and restaurant supplies to
     the franchised and Company-owned Tubby's Sub Shops. All purchasing and
     distribution decisions are made by SDS personnel while the warehousing
     and actual distribution are handled, under a negotiated contract, by an
     unaffiliated company experienced with institutional food/paper product
     distribution.

     In December 1998, the Company and Interfoods of America, Inc.
     ("Interfoods") entered into a proposed merger agreement which is subject
     to, among other things, approval by the shareholders of both parties.
     Under the terms of the proposed merger, Tubby's shall issue to
     Interfoods one new share of common stock (after giving effect to a
     planned one for five reverse stock split by Tubby's) for each two shares
     of outstanding Interfoods stock. The surviving corporation (Tubby's)
     will have approximately 3,300,000 outstanding shares (of which Tubby's
     shareholders will own approximately nineteen percent). Simultaneously
     with the merger, the surviving corporation (Tubby's) shall change its
     name to Interfoods of America, Inc. and shall sell all of Tubby's
     pre-merger assets to a related entity, the principals of which include
     certain members of Tubby's current management, for $2,500,000.

                                      2

<PAGE>

     The continuing strategy to sell DA Agreements, in addition to single
     store Tubby's Sub Shop franchises, has resulted in the following
     achievements in 1998 and expected store openings:

     Store Openings in 1998:
o        Six new single franchised stores opened in 1998.
o        Four stores opened pursuant to DA Agreements in 1998.

     First and Second Quarters of 1999:
o        Twelve new franchised stores are expected to be opened in the first 
         and second quarters of 1999. Of these stores, nine are pursuant to DA
         Agreements.

     Closed and Reacquired Stores:
o        Nine franchisee owned Tubby's Sub Shop were closed in 1998.
o        One Company-owned Tubby's Sub Shop was closed in 1998.

     As of November 30, 1998, a total of eighty-eight restaurants were in
     operation consisting of two Stuff-Yer-Face restaurants, three Tubby's
     Express restaurants, (of which one was owned by the Company), and
     eighty-three Tubby's Sub Shop restaurants, (of which two were owned by
     the Company). In the first and second quarters of 1999, twelve new
     franchisee owned Tubby's Sub Shop restaurants are expected to open.

     Expansion is an important part of Tubby's growth plans. The Company
     carefully studies possible locations and evaluates those potential sites
     based on a variety of criteria including traffic patterns, population,
     availability of drive-thru permits and other relevant criteria. The
     following table shows a summary of the Company's franchise activity and
     Company store activity over the last five years:
<TABLE>
<CAPTION>
                                                                Fiscal Year Ended November 30,
     Tubby's/Tubby's Express/SYF Restaurants                 1998    1997     1996    1995     1994
                                                             ----    ----     ----    ----     ----
                                         <S>                  <C>      <C>       <C>    <C>       <C>
                                                 Opened       10       16        7      10        7
                                                 Closed       10        2        2       3        1
                                          Ending Number       88       88       74      69       62
                                          Company-owned        3        4        5       2        6
</TABLE>

     This Business Development section contains forward-looking statements
     that involve uncertainties. Actual results could differ materially from
     those in the forward-looking statements, due to a number of
     uncertainties, including but not limited to, those discussed below and
     in "Management's Discussion & Analysis of Financial Condition & Results
     of Operation."

     Products

     Tubby's restaurants offer a uniform menu which includes over twenty
     different submarine and pita sandwiches cooked to order, along with
     french fries, onion chips and breaded mushrooms, potato chips, soup, and
     a full line of Pepsi-Cola soft drinks. Some restaurants also offer a
     line of premium ice cream that is sold in cones, desserts and take home
     packaging.

     The Company's submarine sandwiches are all prepared to order and many of
     the products, including its line of steak sandwiches, chicken sandwiches
     etc., are cooked when ordered. The Company's sandwiches are offered in
     different sizes from a length of six inches to a length in excess of
     five feet. Sandwiches in excess of twelve inches are generally ordered
     for parties, picnics and social events. The "party sub" is offered at
     all stores on an advance order basis, only. In 1998 the Company
     introduced a new catering menu which includes a variety of sandwich
     platters, party salads, and fresh-baked cookie platters. Tubby's menu is
     offered for carry out, on-site consumption and, where available,
     delivery.

     The Stuff-Yer-Face ("SYF") restaurants offer a menu featuring a
     specialty sandwich called a "Stromboli." A Stromboli is a closed
     sandwich with the bread freshly baked around a favorite filling selected
     by the customer together with cheeses, tomato sauce, onions and peppers.
     The Stromboli fillings, which customers may select in any combination,
     include meatballs, sausage, pepperoni, veal, steak, chicken 

                                      3

<PAGE>

     and shrimp. The "Vegetaboli (R)" is a meatless "Boli" with fillings
     selected by the customer including eggplant, mushroom, broccoli and
     spinach. The sandwiches may be prepared in any combination of meat and
     vegetables. Management is of the opinion that wrapping the dough around
     the fillings improves the taste of the Stromboli over pizza through a
     steaming process which occurs inside the Stromboli. The steaming process
     permits the vegetables to retain flavor and crispness, meats to remain
     tender and juicy, and cheeses and sauce to blend together to create a
     fine flavor while also permitting the dough to crisp and brown. "Boli"
     sandwiches are served in two sizes: "Large", and a smaller size Boli,
     the "Baby Boli (R)."

     The Stuff-Yer-Face restaurants also serve hamburgers, steak sandwiches,
     and pizzas together with side orders which include, among other things,
     French fries, onion rings, and fried mozzarella sticks. The restaurants
     also serve "Lite-Stuff"(R), consisting of a variety of fresh salads and
     club sandwiches. One location serves alcoholic beverages. Each of the
     present Stuff-Yer-Face restaurants are sit-down, full service
     restaurants utilizing waitress and waiter service. Beverages and side
     orders are served while the customer's order is being prepared. When the
     order is ready, each customer is served at his table by the waiter or
     waitress. Each restaurant also accommodates phone orders for take out
     sales.

     Franchising

     The Company franchises all of its restaurant concepts, including the
     Tubby's Sub Shop and Stuff-Yer-Face concepts.

     The Company believes that customer satisfaction is critical to the
     long-term success of the Company and emphasizes quality, proven, well
     trained entrepreneurs in its Franchisee selection process. All potential
     Franchisees are carefully screened by top members of the Management team
     who all participate in the Franchisee approval process.

     Franchises for Tubby's Sub Shops restaurants have been offered since
     1977. Tubby's management is continuing its efforts to expand Tubby's and
     Stuff-Yer-Face restaurants both through selling single unit franchises
     and through locating qualified DAs and implementing DA Agreements.

     A Tubby's Franchisee is responsible to supply sufficient capital for
     construction, remodeling and equipment costs required to bring a
     location to the standard specifications of a Tubby's store. SubLine Co.
     ("SubLine"), a subsidiary of Tubby's, may, at the option of the
     Franchisee, construct the restaurant, provide leasehold improvements and
     supply the necessary equipment. Alternately, the Franchisee may purchase
     the required construction drawings from the Company and do the work
     himself. Regardless of how constructed, all restaurants must meet the
     Company's specifications before they are allowed to enter the system.

     The License Agreement gives the Franchisee the right to use Tubby's
     trademarks, service marks and methods of operation to operate a Tubby's
     restaurant at a specific location that is approved by Tubby's. The
     initial term of a Tubby's Franchise Agreement is ten (10) years with the
     Franchisee generally having the option to renew. The initial license
     fee, which is payable upon execution of the Franchise Agreement is
     $15,000 for a traditional location. For non-traditional sites, such as
     convenience store locations, the Franchise fee is $8,000. Persons who
     commit to the construction of more than one franchise could have a
     reduced up-front franchise fee. The initial franchise fee compensates
     Tubby's for various services provided by Tubby's to Franchisees, such as
     management and operations training, review of restaurant site selection,
     restaurant design assistance, specifications and equipment lists,
     assistance in locating suppliers and operating assistance during the
     initial opening of a restaurant. New Tubby's License Agreements require
     the Franchisee to pay Tubby's a weekly royalty equal to the greater of
     $125 per restaurant or six percent (6%) (as of January, 1996) of the
     Franchisee's adjusted gross weekly sales. Previously, Tubby's Licensing
     Agreements required the franchisee to pay Tubby's a weekly royalty equal
     to the greater of $125 per restaurant or four percent (4%) of the
     Franchisee's adjusted gross weekly sales. Most of the already existing
     Franchise Agreements require the Franchisee to pay Tubby's a weekly
     advertising fee equal to the greater of $100 per restaurant or three and
     one-half percent (3 1/2%) of the Franchisee's adjusted gross weekly
     sales. Those advertising fees are used to pay for shared production and
     media advertising costs and other promotional costs. The Franchise
     Agreement further requires the Franchisee, among other things, to 

                                      4

<PAGE>

     comply with Tubby's standards and procedures of operation along with
     menu and food quality specifications, to purchase supplies from Tubby's
     approved sources, and to permit inspections and audits by Tubby's.

     DA Agreements require franchisees to pay a licensing fee, similar to
     those described above, to the Company. Upon receipt of a licensing fee,
     however, the Company is required to pay a commission to the DA of 50% of
     the amount collected. Similarly, the receipt of royalty payments by the
     Company from stores licensed under a DA Agreement also require that a
     commission be paid to the DA of 28% of the royalty fee if collected at a
     rate under 6% of sales and 40% of the royalty fee if collected at a rate
     of 6% or higher of sales.

     Franchised restaurants are operated in accordance with uniform standards
     required of all Franchisees. These standards include such items as
     selection, quality, preparation and approval of menu items, signage,
     decor, equipment, uniforms, suppliers, hours of operation, cleanliness,
     appearance, etc. All standards are developed by the Company and
     implemented in conjunction with its Franchisees.

     The Company offers ongoing Franchisee support as well as scheduled and
     unscheduled site inspections. All services are designed to ensure
     customer satisfaction, efficient franchise operation and compliance with
     the Company's standards.

     In addition to the above standards, the Company also has financial
     reporting requirements. These requirements include weekly/monthly sales
     reporting and royalty and advertising payments, monthly financial
     statement submission and the maintenance of books and records that will
     allow the Company to audit those records if it so desires. The Company
     has the right to terminate a Franchise Agreement if the Franchisee fails
     to meet the requirements imposed by the above standards.

     Training

     The Company emphasizes Franchisee training as a means of ensuring the
     quality and value of the products delivered to its customers, and the
     profitability and long-term sales growth to the Company. Training is an
     essential part of the Franchisee experience. In order to enter the
     Tubby's system, a Franchisee is required to complete an extensive
     training program as part of the orientation process.

     Tubby's provides a complete course of instructions relating to the
     operations, methods, and other related procedures, with emphasis placed
     on the preparation and serving of the specialty food items that are
     characteristic of its restaurants. Salaries, expenses of travel, food
     and lodging for a Franchisee and his/her representative are at the
     Franchisee's own expense. The training program consists of a minimum of
     150 hours of in-store operations, under direct supervision of qualified
     personnel, in addition to classroom sessions at Tubby's corporate
     offices.

     After successfully completing the training program, Tubby's provides
     assistance to new franchisees by providing a member of Tubby's staff to
     the Franchisee's location for at least three days out of the first nine
     weeks of operation.

     Tubby's may charge a fee for the training described above. However, it
     is only obligated to provide such training for a Franchisee's first
     location. Additional training is available at a fee, as is assistance at
     a subsequent location.

     Tubby's commitment to training is not limited to the initial training
     provided at the time a Franchisee enters the system. The Company offers
     training and education to its Franchisees on an ongoing basis. This
     training includes restaurant operation, management training, equipment
     training and marketing assistance. The Company emphasizes continued
     training as part of its Franchisee support program.

                                      5

<PAGE>

     Supplies

     As of February 2, 1998, the Company initiated operation of its SUBperior
     Distribution Systems, Inc. ("SDS") subsidiary that sells food and
     proprietary items to its Franchisees. The Company also maintains an
     approved supplier list and the Franchisees are able to select the
     approved supplier of their choice. The Company believes that its new
     subsidiary, SDS, provides its franchised and Company owned Tubby's Sub
     Shops with uniform and consistently high quality products at equivalent
     or lower prices than previously charged.

     The Franchisees are also required to purchase fixtures and equipment
     meeting Tubby's specifications from suppliers that are approved by
     Tubby's. The approval of suppliers is based upon the quality of the
     items they supply and their conformity with specifications established
     by Tubby's.

     SubLine is an approved supplier of certain equipment that has been
     specially manufactured for use in Tubby's restaurants. SubLine also acts
     as a broker for several approved suppliers of machinery, equipment and
     food products that are sold to Tubby's Franchisees and others. Although
     Tubby's Franchisees are not required to purchase any equipment from
     SubLine or utilize SubLine's brokerage services, Tubby's believes that
     many of them do so because the costs of utilizing SubLine's services are
     often less than the prices charged by other sources. One reason why
     SubLine is able to offer competitive prices is that, when it acts as a
     broker, it can often obtain volume discounts for the items that are sold
     to Tubby's Franchisees. SubLine will make a profit on equipment it
     purchases and resells. It does not make a profit in connection with the
     assistance it offers regarding leasehold improvements.

     Advertising

     Tubby's Franchisees are generally required to pay advertising fees equal
     to the greater of $100 per week or 3 1/2% of total weekly adjusted gross
     sales of that Franchisee's restaurant. Those funds are administered by
     Tubby's Sub Shop Advertising Co., a subsidiary of the Company, and are
     used to pay for shared production and media advertising costs as well as
     other promotional costs. Marketing and promotion is voted on by an
     advertising council. This council is made up of Franchisees and
     employees of the Company and works with the Company in setting
     advertising programs and the timing of those programs.

     The Company has historically emphasized local print media, direct mail,
     television and radio as its form of advertising. Such advertising is
     generally cost prohibitive for an individual Franchisee, but can be cost
     effective when included with other Franchisees. All funds received for
     advertising are spent for advertising purposes only, except for a
     portion which is retained by the Company to cover administrative costs.

     The Company has two full time employees devoted exclusively to the
     process of marketing and advertising for its Franchisees on both an
     individual and on a system wide basis. As a result of the efforts of
     these people, and the efforts of the Advertising Council, the Company
     has expanded and refined its marketing efforts and in 1999 will continue
     its advertising campaign.

     Competition

     The restaurant business is highly competitive and is often affected by
     changes in taste and eating habits of the public, by local and national
     economic conditions affecting spending habits and by population and
     traffic patterns. Tubby's believes that the quality and price of food
     products offered are the principal means of competition in the
     restaurant industry. Also of importance are site location, quality and
     speed of service, advertising and attractiveness of facilities.

     Tubby's competes with restaurant chains and other restaurants serving a
     variety of quick service products. Some of Tubby's competitors operate
     more restaurants and have greater financial resources, greater name
     recognition and more experienced operational organizations than Tubby's.
     In an effort to obtain greater name recognition in new markets outside
     of the metropolitan Detroit area, the Company has participated in
     numerous national industry trade shows. Additionally, the Company now
     places advertisements in leading industry publications as well as on the
     Internet. Although Tubby's believes it can operate favorably, 

                                      6

<PAGE>

     it may be at a competitive disadvantage with respect to chains with
     greater name recognition and marketing capability. Furthermore,
     competition for management, other key operating personnel and restaurant
     sites could increase as Tubby's operations expand and as the general
     economy improves.

     As a result of the standards Tubby's has set for its franchisees, it
     competes with other franchisors for high quality, well capitalized
     franchisees. Tubby's management considers the amount of the initial
     investment required of the franchisee, the perceived potential for
     business success, return on investment, assistance provided by the
     franchisor and the franchisor's name recognition and reputation to be
     the most significant competitive factors in franchising. The Company
     believes that the present economy will intensify this competition.

     Trademarks and Service Marks

     The Company has registered trademark and service marks including
     "Tubby's", "Boli's" and the "Stuff-Yer-Face" names and logos. These
     trademarks and service marks, as well as others, are registered with the
     United States Patent and Trademark Office and are of material importance
     to the Company.

     Seasonal Operation

     Although weather can be a factor in the sales of the Company's products,
     the Company does not consider this business to be seasonal.

     Regulation

     The Company is subject to Federal Trade Commission regulations and
     several state laws which regulate the offer, sale and licensing process
     of Franchisors. In addition to the FTC, most states have laws which
     regulate and control the Franchisor/Franchisee relationships.

     Many states also have laws regulating franchise operations, including
     registration and disclosure requirements in the offer and sale of
     franchises and the application of statutory standards regulating
     franchise relationships. Tubby's believes it is operating in substantial
     compliance with applicable laws and regulations governing its
     operations.

     Each of the restaurants operated by Tubby's Franchisees is subject to
     licensing and regulation by the health, sanitation, safety, fire
     department and in the case of Stuff-Yer-Face Franchisees serving
     alcoholic beverages, the alcoholic beverage control agencies in the
     state or municipality where located. Difficulties or failures in
     obtaining the required licensing or approval could result in delays or
     cancellations in the opening of new restaurants.

     Federal and state environmental regulations have not had a material
     effect on the operations of Tubby's or its Franchisees, but more
     stringent and varied requirements of local governmental bodies with
     respect to zoning, land use and environmental factors could delay
     construction of new restaurants.

     Tubby's and its Franchisees are also subject to the Fair Labor Standards
     Act, which governs such matters as minimum wage, overtime and other
     working conditions. A significant portion of the food service personnel
     employed by Tubby's Franchisees are paid at rates related to the federal
     minimum wage, and accordingly, increases in the minimum wage increase
     the labor cost incurred by Tubby's Franchisees.

     In addition to the above rules and regulations, Tubby's Company stores
     are subject to state and local laws governing such items as health,
     sanitation, licensing, etc. All stores are subject to local inspection
     and ongoing permit approval. Local inspections govern items that Tubby's
     believes are essential to providing a quality customer experience and
     bringing customers back after their initial visit. Tubby's works hard to
     comply with these laws and regulations.

                                      7

<PAGE>

     Customers

     The Company is not dependent on a single customer.

     Backlog

     Company-owned restaurants have no backlog orders.

     Research and Development

     The Company works hard to ensure that the menu meets the needs of its
     customers. Research and development efforts are done in conjunction with
     suppliers, franchisees and the general public. New products, if
     approved, are introduced via a variety of marketing programs. While the
     Company considers research and development to be essential to the
     successful long-term operation of the Company, its expenditures in this
     area at this time are not material.

     Employees

     As of November 30, 1998, the Company employed fourteen people in the
     management and administration of the corporation. In addition, the
     Company owned two Tubby's Sub Shop restaurants, and one Tubby's Express
     store. These stores employ thirty-one people, including related store
     managers. None of Tubby's employees are covered by collective bargaining
     agreements. The Company considers its employee relations to be good.

     ITEM 2.      PROPERTIES
     -------      ----------

     The Company leases approximately 9,000 square feet in an office building
     which it uses as its headquarters and warehouse under a five year lease.
     Tubby's believes that these facilities offer sufficient space to allow
     it to conduct its business affairs. As of January, 1998, the Company had
     notified the lessor of its corporate headquarters building that,
     pursuant to its lease, it intended to exercise its option to purchase
     the building at a contract price of $425,000. Also refer to Item 3 Legal
     Proceedings for a discussion of the status since January 1998

     The Company owns one parcel of real estate. That parcel is leased to a
     Franchisee. All of the Company's real estate has been pledged as
     collateral on outstanding mortgage loans.

     The Company leases all its Company stores including its Stuff-Yer-Face
     and Tubby's Express locations. These leases are for various terms and
     various expiration dates.

     ITEM 3.      LEGAL PROCEEDINGS
     -------      -----------------

     In January 1998, the Company entered into a release and settlement
     agreement with Patrick J. McCourt (McCourt), minority shareholder of
     McTub Company, In connection with the litigation between the Company and
     McCourt. The agreement required the Company to pay McCourt the sum of
     $200,000 which constitutes repayment of the principle of a term note
     dated in October 1993. Also, in connection with the agreement, the
     Company paid McCourt $65,000 for his 49% interest in McTub Company. The
     agreement discharges and releases the Company from any and all claims
     with McCourt.

     On August 14, 1998, the Company commenced a civil action against Walter
     Lasko in the circuit court for the county of Macomb. The Complaint
     asserts claims for specific performance, equitable estoppel and unjust
     enrichment in connection with Mr. Lasko's refusal to honor the option to
     purchase the office building where its headquarters are located. The
     Company originally entered into a five year lease with an option to
     purchase the office building prior to the expiration of the lease. The
     Defendant claims that the Company failed to strictly comply with the
     written option to purchase by failing to provide a timely written notice
     that it was exercising the option. At this time, the Company is awaiting
     a trial date and intends to 

                                      8

<PAGE>

     vigorously pursue its claim to specifically enforce the Defendant's
     obligation to sell the office building to the Company.

     On September 18, 1998, the Company commenced a civil action against Sun
     Valley Foods Company and Greg Tartarian, its President, individually in
     the circuit court for the Count of Macomb. The Complaint asserts claims
     for breach of contract, reimbursement for overpayments, fraudulent
     misrepresentation, and reimbursement for damaged and/or missing
     inventory. In the fall of 1997, the Company entered into a warehousing
     and distribution contract with Sun Valley and these claims arose out of
     Sun Valley's failure to perform pursuant to that contract. At present,
     the parties are attempting to resolve these claims through negotiating a
     possible settlement. The Defendants have been granted an extension of
     the deadline for answering the Complaint. At this time, the Company
     intends to pursue settlement negotiations and, if not successful, to
     vigorously pursue these claims through trial or arbitration.

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

     There is no information required to be reported hereunder.

                                   Part II

     ITEM 5.      MARKET FOR REGISTRANT'S COMMON EQUITY & RELATED 
     -------      ----------------------------------------------- 
                  STOCKHOLDER MATTERS
                  -------------------

     The following table sets forth the high and low stock prices for the
     Company's $.01 par value common stock as reported by NASDAQ for the
     fiscal years indicated.

     The following quotations do not include retail mark-ups, markdowns or
     commissions and represent prices between dealers and not necessarily
     actual transactions. The past performance of the Tubby's, $.01 par value
     common stock is not necessarily indicative of future performance.
<TABLE>
<CAPTION>

                           1998                                 1997
                           ----                                 ----
                  High       Low                          High       Low
                  ----       ---                          ----       ---
<S>               <C>        <C>        <C>              <C>         <C>
     Quarter 1    $3 1/8     $1 7/8     Quarter 1        $5          $2  1/2
     Quarter 2     2 3/8      1 5/8     Quarter 2         4  3/8      2  3/16
     Quarter 3     2          11/16     Quarter 3         4  3/8      2 13/16
     Quarter 4     1 1/4      10/16     Quarter 4         4  1/16     2   1/2
</TABLE>

     As of February 19, 1999, the approximate number of shareholders of
     record of the Company was 7,000. The Company has never paid cash
     dividends on its common stock. Payment of dividends is within the
     discretion of the Company's Board of Directors and depends, among other
     factors, on earnings, capital requirements and the operating and
     financial condition. At the present time, the Company's anticipated
     financial capital requirements will be such that it intends to follow a
     policy of retaining earnings in order to finance the development of its
     business.

     ITEM 6.      MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION 
     -------      --------------------------------------------------------- 
                  & RESULTS OF OPERATIONS
                  -----------------------

     The following discussion and analysis should be read in conjunction with
     the Consolidated Financial Statements and Notes thereto (see Item 7).
     This section contains forward-looking statements that involve
     uncertainties. Actual results could differ materially from those in the
     forward-looking statements, due to a number of uncertainties, including
     but not limited to, those discussed below and in the "Business" section.

                                      9

<PAGE>

     Financial Overview

     Tubby's and its consolidated subsidiaries experienced an increase in
     1998 Total Revenues of $3,810,297 or 107.2%. The increase in revenues is
     primarily attributable to revenues generated by the new distribution
     subsidiary, SUBperior Distribution Systems, Inc.(SDS). Other significant
     changes in revenues include a 16.2% decrease in Food sales, a 14%
     increase in Monthly Franchise fees, a 32% decrease in equipment sales,
     and a 76.6% decrease in Commissions and other fees.

     Total Costs and Expenses increased by $4,000,678, or 114.4%, primarily
     due to the costs of products sold by the new distribution subsidiary.
     Other significant changes in Costs and Expenses include a 37.4% increase
     in operating expenses, a 23.2% decrease in cost of food sales and a
     27.5% decrease in cost of equipment sales.

     Other income decreased by 30.5% primarily due to a 35.5% decrease in
     interest income which was related to the use cash as working capital for
     the SUBperior Distribution Systems, Inc. start up.

     The Company had a net loss before taxes of $31,207, in 1998 versus net
     income before taxes of $202,799 in 1997.

     Results of Operations - Comparison of the years ended November 30, 1998
     and 1997

     Tubby's and its consolidated subsidiaries experienced an increase in
     1998 Total Revenues of $3,810,297 or 107.2%. The Company had a loss
     before taxes of $31,207 in 1998 versus income before taxes of $202,799
     in 1997 which is a 115.4% decrease. Net Loss after taxes was $31,207 in
     1998 versus net income after taxes of $107,499 in 1997.

     The increase in revenues is attributable to revenues generated by the
     new distribution subsidiary, SDS, of $4,397,578, a decrease in Food
     sales of $151,082, or 16.2%, an increase in Monthly Franchise fees of
     $110,339, or 14%, a decrease in Equipment and restaurant sales of
     $184,116, or 32% and a decrease in Commissions and other fees of
     $367,589, or 76.6%.

     The revenues of the distribution subsidiary represent revenues generated
     since the launch of SDS on February 2, 1998. SDS product sales continued
     to grow each month as the franchisees became familiar and comfortable
     with the new distribution system.

     The decrease in Food sales revenues is primarily attributable to one
     Company owned restaurant that was closed in June 1998 due to a lease
     non-renewal. The Food sales attributable to this restaurant was $210,846
     in the seven months it operated in 1998 compared to $383,849 in twelve
     months of 1997.

     The increase in Monthly Franchise fees is a result of improved Food
     sales system-wide. The Company believes that this overall increase in
     food sales is the result of the strong Detroit area economy as well as
     the increased efforts of the Marketing Director in advertising and
     marketing Tubby's Submarine Shops and their products.

     The decrease in the Equipment and restaurant sales revenue is a result
     of opening 10 stores in 1998 as compared to 16 stores in 1997. The trend
     toward building the lower cost non-traditional Tubby's Sub Shops rather
     than the traditional Tubby's Sub Shop continues. In 1997 seven of the
     ten new stores were of the non-traditional type. In addition, many of
     the new franchisees, particularly the growing number of out-of-state
     stores, are electing to handle store construction/improvements on their
     own rather than using the Subline Company, reducing purchases from
     Subline to equipment only.

     Commissions and other fees are comprised of marketing rights, material
     sales, rental income of existing Company owned franchisee operated
     Tubby's Sub Shops, and , in 1997, vendor rebates. The decrease of
     $367,589, or 76.6%, relates primarily to vendor rebates. In 1998 vendor
     rebates are classified as a reduction in cost of SDS products sold,
     whereas in 1997 vendor rebates of $364,629 are included in Commissions
     and other fees.

                                      10

<PAGE>

     The Costs of SDS Product Sales were $3,402,997 during the ten months of
     operation in 1998 with a gross margin of $ 994,581, or 22.6%. Management
     continues to believe strongly in the value of SDS and it's ability to
     provide its franchised and Company-owned Tubby's Sub Shops with uniform
     and consistently high quality products at equivalent or lower prices
     than previously charged.

     Operating expenses increased in 1998 by $881,817 or 37.4%. Incremental
     operating expenses of SDS which began operations in February 1998
     represents approximately $703,000 of the increase. The largest portion
     of the SDS operating expenses is the cost of warehousing and
     distribution of $592,000. Advertising, promotional, and various
     marketing expenses increased by $138,000 in 1998 as the Company expanded
     its marketing efforts in regions where Tubby's are located. Commissions
     paid to Development Agents increased by $68,000. The Company anticipates
     continued increases in commissions paid to DA's as the DA agreements are
     fulfilled over the next twenty years. Salaries increased by $147,000, or
     23.6%. The increase in salaries included additional staffing related to
     SDS operation, full year salaries for the staff positions in purchasing
     and marketing which were filled in April 1997 and July 1997,
     respectively, and annual merit increases. Expenses related to Franchise
     Development decreased by approximately $115,000, or 67.6%, primarily due
     to attendance at fewer trade shows.

     The Cost of Food sales at Company-owned stores decreased by $155,018, or
     23.2% primarily due to the closing of one store in June 1998 due to
     lease non-renewal. The gross margin for 1998 was 34% compared to 28.3%
     in 1997. Company-owned stores absorb certain costs that franchised
     stores do not, including costs related to training new franchisees.

     The Costs of Equipment and Restaurant Sales decreased by $129,118, or
     27.5%. The gross margin for 1998 was 12.8% compared to 18.3% in 1997.
     The decrease in margin is due to increased price competition in
     equipment sales. The company has taken steps to reduce the operating
     expenses related to the sale of equipment and restaurant construction
     and expects improved financial results in 1999.

     Other Income (Expense) decreased by $43,625, or 30.5% in 1998 as
     compared to 1997. This decrease was primarily due to a decrease in
     interest income of $38,479 or 35.5% in 1998 because the Company utilized
     its excess funds to provide short term funding for SDS inventory and
     accounts receivable.

     Liquidity and Capital Resources

     Working capital was $1,436,657 in 1998 compared to $1,177,481 in 1997.

     Cash and Equivalents decreased by $172,033 when compared to 1997. This
     decrease is composed of the following significant cash flows:

     Net Cash Flows Used by Operating Activities was $84,098 in 1998.

     Operating Activities Creating Significant Cash Inflows:
o        Non-cash adjustments to the Net Loss included Depreciation and
         Amortization for 1998 of $136,704.
o        Provision for doubtful accounts was $71,896.
o        Accounts payable increased by $272,769 as a result of the new SDS
         operations.

     Operating Activities Creating Significant Cash Out Flows:
o        Net Loss of $31,207.
o        Accounts receivable increased by $282,479 as a result of the new SDS
         operations.
o        Inventories increased by $228,861 also as a result of SDS operations.
o        Prepaid expenses increased by $16,409.

                                      11

<PAGE>

     Net Cash Flows Provided By Investing Activities Was $140,716 in 1998.

     Cash Flows From Investing Activities:
o        Net Proceeds From Sale Of Property and Equipment of $156,502.
o        Payments on Notes receivable of $92,508.

     Cash Used In Investing Activities:
o        Purchases of Property and Equipment of $37,525.
o        Acquisition of McTub 49% Minority Interest of $65,000.

     Cash Flows Used in Financing Activities Was $228,651

     Cash Used In Financing Activities:
o    Payments of Long-Term Debt of $228,651 which is comprised of the
     repayment of the note to McCourt (refer to Item 3 Legal proceedings) and
     to principal reduction on notes owed by the Company.

     The Company has identified several items which will impact cash flow and
     the liquidity of the Company during 1999. Those items are:

     Items Creating Cash Inflows

o        The Company anticipates the construction and opening of as many as
         twelve new restaurants in the first two quarters of 1999. These
         stores have elected to contract construction or improvements
         themselves rather than using the Subline Company to do it. If these
         restaurants open as planned, the Company may realize operating
         income from the sale of equipment of about $4,500 from each store.
         The Company will also receive initial licensing fees, and ongoing
         monthly royalty and advertising fees. Reduced fees are derived from
         stores that are opened pursuant to DA Agreements.

     Items Creating Cash Outflows

o    In January, 1998, pursuant to its corporate headquarters lease, the
     Company notified its landlord of their intention to purchase the
     building at the contract price of $425,000. The Company has a confirmed
     bank commitment for funding the entire purchase. The terms of the
     commitment are 100% financing at a fixed rate of 8.25% for five years
     with a fifteen year amortization. After five years, a new commitment
     will be required.

o    In December 1998, the Company and Interfoods of America, Inc.
     ("Interfoods") entered into a proposed merger agreement which is subject
     to, among other things, approval by the shareholders of both parties.
     Under the terms of the proposed merger, Tubby's shall issue to
     Interfoods one new share of common stock (after giving effect to a
     planned one for five reverse stock split by Tubby's) for each two shares
     of outstanding Interfoods stock. The surviving corporation (Tubby's)
     will have approximately 3,300,000 outstanding shares (of which Tubby's
     shareholders will own approximately nineteen percent). Simultaneously
     with the merger, the surviving corporation (Tubby's) shall change its
     name to Interfoods of America, Inc. and shall sell all of Tubby's
     pre-merger assets to a related entity, the principals of which include
     certain members of Tubby's current management, for $2,500,000. The cash
     flow impact of this agreement includes Tubby's portion of merger costs
     such as legal, accounting and other professional fees which is limited
     to $50,000 by the agreement.

     As a result of the above sources and uses of cash and the expected
     continued cash flows, the Company believes it has sufficient liquidity
     to meet the needs of the Company in 1999. The Company maintains a
     $250,000 lines of credit with a local financial institution to meet
     short term financial needs. There were no borrowings under this
     agreement at November 30, 1998.

                                      12

<PAGE>

     Year 2000 Costs

     The Company, like most owners of computer hardware and software, will be
     required to modify certain portions of its hardware and software so that
     it will function properly in the year 2000. The Company is evaluating
     its system as to year 2000 compliance. Most of the Company's hardware is
     year 2000 compliant. The Company has no custom programmed software.
     Certain purchased software packages will need to be upgraded to the year
     2000 compliant versions. The Company has received a letter of assurance
     from the unrelated company that handles SDS warehousing and distribution
     that their system is year 2000 compliant. The Company plans to contact
     other third party vendors to evaluate their year 2000 complinace status.
     Management believes that year 2000 costs will be immaterial, however,
     due to the complexities involved, management cannot provide assurances
     that the year 2000 issue will not have an impact on the Company's
     operation.


     Impact of Inflation

     The Company does not believe inflation has had a material impact on
     earnings during the past several years. The Company has demonstrated an
     ability to manage its assets, adjust retail prices, and use long-term
     debt for real estate holdings - made less expensive by inflation - and
     take such other steps as necessary to mitigate the effects of inflation.


     Recent Accounting Pronouncements

     In June 1997, the Financial Accounting Standards Board issued SFAS No.
     131 "Disclosures about Segments of an Enterprise and Related
     Information." This statement is effective for financial periods
     beginning after December 15, 1997 and requires comparative information
     for earlier years to be restated. Management has not determined the
     impact, if any, this statement may have on future financial statement
     disclosures.

     Additionally, SFAS 130, "Reporting Comprehensive Income" was issued in
     June 1997, Statement of Position (SOP) 98-5, "Reporting on the Cost of
     Start-Up Activities", was issued in April 1998 and SFAS 133, "Accounting
     for Derivative Instruments and Hedging Activities", was issued in June
     1998. These statements are effective in fiscal 1999 and 2000 and are not
     expected to have a material impact on the consolidated financial
     statements.

                                      13

<PAGE>

     ITEM 7.      FINANCIAL STATEMENTS
     -------      --------------------

                     TUBBY'S, INCORPORATED & SUBSIDIARIES
                         CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

                                                                     November 30,
                                                                 1998           1997
                                                                 ----           ----
ASSETS
Current Assets
<S>                                                            <C>          <C>       
         Cash and equivalents                                  $  692,196   $  864,229
         Certificate of deposit                                   111,199      105,430
         Accounts receivable - trade, less allowance
          for doubtful accounts of $59,580 and $36,740            702,990      443,810
         Inventories                                              328,280       99,419
         Prepaid expenses and other                                93,289       76,832
         Notes receivable                                          59,721       66,217
                                                               ----------   ----------
Total Current Assets                                            1,987,675    1,655,937
                                                               ----------   ----------

Property and Equipment
         Land                                                     187,684      325,347
         Building and improvements                                689,514      663,753
         Equipment                                                498,354      527,265
         Furniture and fixtures                                   140,815      138,394
         Vehicles                                                  11,509       15,009
                                                               ----------   ----------

                                                                1,527,876    1,669,768
         Less accumulated depreciation                            861,659      773,576
                                                               ----------   ----------
Net Property and Equipment                                        666,217      896,192
                                                               ----------   ----------

Other Assets
         Notes receivable, less allowance for doubtful
            accounts of $20,000 and $0                            408,733      543,342
         Goodwill, less amortization of $112,370 and $81,118      263,666      229,918
                                                               ----------   ----------
Total Other Assets                                                672,399      773,260
                                                               ----------   ----------
Total  Assets                                                  $3,326,291   $3,325,389
                                                               ==========   ==========

<FN>

See accompanying summary of accounting policies and notes to
consolidated financial statements.
</TABLE>

                                      14

<PAGE>
<TABLE>
<CAPTION>


                     TUBBY'S, INCORPORATED & SUBSIDIARIES
                         CONSOLIDATED BALANCE SHEETS

                                                                   November 30,
 LIABILITIES  AND  STOCKHOLDERS'  EQUITY                      1998             1997
                                                              ----             ----
<S>                                                        <C>            <C>        
Current Liabilities
         Accounts payable                                  $   379,176    $   106,407
         Accrued liabilities
         --Compensation                                         20,738         19,887
         --Other                                                24,695         16,153
         Deferred revenue                                      114,954        115,489
         Long-term debt due in one year                         11,455        220,520
                                                           -----------    -----------
Total Current Liabilities                                      551,018        478,456
Deferred Revenue                                                40,000         60,867
Long Term Debt, less amounts due in one year                   120,346        139,932
                                                           -----------    -----------
Total Liabilities                                              711,364        679,255
                                                           -----------    -----------

Stockholders' Equity
         Common stock, $.01 par value, 6,000,000 shares
            authorized, 2,583,114 issued and outstanding        25,832         25,832
         Additional paid in capital                          3,485,844      3,485,844
         Retained earnings (deficit)                          (896,749)      (865,542)
                                                           -----------    -----------
Total Stockholders' Equity                                   2,614,927      2,646,134
                                                           -----------    -----------

Total Liabilities and Stockholders' Equity                 $ 3,326,291    $ 3,325,389
                                                           ===========    ===========


<FN>

See accompanying summary of accounting policies and notes to
consolidated financial statements.
</TABLE>

                                      15

<PAGE>
<TABLE>
<CAPTION>


                     TUBBY'S, INCORPORATED & SUBSIDIARIES
                    CONSOLIDATED STATEMENTS OF OPERATIONS


                                                    Year Ended November 30,
CONSOLIDATED  STATEMENTS  OF  OPERATIONS            1998              1997
                                                    ----              ----
<S>                                               <C>            <C>      
     Revenues
         Product sales                            $ 4,397,578    $      --
         Franchise fees
         --Monthly                                    896,298        785,959
         --Initial                                    139,501        132,543
         Food sales                                   779,918        931,000
         Advertising fees                             649,118        650,909
         Equipment and restaurant sales               391,311        575,427
         Commissions and other fees                   112,259        479,848
                                                  -----------    -----------
Total Revenues                                      7,365,983      3,555,686
                                                  -----------    -----------

Costs and Expenses
         Cost of product sales                      3,402,997           --
         Operating expenses                         3,239,755      2,357,938
         Cost of food sales                           512,836        667,854
         Cost of equipment and restaurant sales       341,197        470,315
                                                  -----------    -----------
Total Costs and Expenses                            7,496,785      3,496,107
                                                  -----------    -----------
Operating Income (Loss)                              (130,802)        59,579
                                                  -----------    -----------

Other Income (Expense)
         Interest income                               69,951        108,430
         Interest expense                             (13,829)        (9,572)
         Loss on sale of fixed assets                  (5,546)          --
         Miscellaneous                                 49,019         44,362
                                                  -----------    -----------
Total Other Income                                     99,595        143,220
                                                  -----------    -----------
Income (Loss) Before Taxes on Income                  (31,207)       202,799
Taxes on Income                                          --           95,300
                                                  -----------    -----------
Net Income (Loss)                                     (31,207)       107,499
                                                  ===========    ===========
Basic and Diluted Earnings (Loss) Per Share              (.01)           .04
                                                  ===========    ===========
Weighted Average Common Shares Outstanding          2,583,114      2,604,720
                                                  ===========    ===========

<FN>

See accompanying summary of accounting policies and notes to
consolidated financial statements.
</TABLE>

                                      16

<PAGE>
<TABLE>
<CAPTION>

                     TUBBY'S, INCORPORATED & SUBSIDIARIES
               CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY



                                            COMMON                       ADDITIONAL        RETAINED
                                            STOCK                        PAID-IN           EARNINGS
                                            SHARES         AMOUNT        CAPITAL            (DEFICIT)        TOTAL
                                            ------         ------        ---------          ---------        -----
<S>                                        <C>             <C>           <C>                <C>               <C>       
      Balance, at December 1, 1996         2,583,114       $25,832       $3,485,844         $(973,041)       $2,538,635
      Net Income                                  --            --               --           107,499           107,499
                                           ---------       -------       ----------         ----------        ----------


     Balance, at November 30, 1997         2,583,114        25,832        3,485,844          (865,542)         2,646,134
     Net loss                                     --            --               --           (31,207)           (31,207)
                                           ---------       -------       ----------         ----------        ----------

     Balance, at November 30, 1998         2,583,114       $25,832       $3,485,844         $(896,749)        $2,614,927
                                           =========       =======       ==========         ==========        ==========


<FN>

See accompanying summary of accounting policies and notes to
consolidated financial statements.
</TABLE>

                                      17

<PAGE>
<TABLE>
<CAPTION>

                     TUBBY'S, INCORPORATED & SUBSIDIARIES
                    CONSOLIDATED STATEMENTS OF CASH FLOWS


                                                             Year Ended November 30,
                                                                1998          1997
                                                                ----          ----
<S>                                                           <C>          <C>      
     Cash Flows From Operating Activities
         Net income (loss)                                    $ (31,207)   $ 107,499
         Adjustments to reconcile net income (loss) to net
            cash provided by (used in) operating activities
              Depreciation and amortization                     136,704      135,468
              Provision for doubtful accounts                    71,896         --
              Loss on sale of fixed assets                        5,546         --
              Taxes on income                                      --         95,300
         Increase (Decrease) In Cash Due to Changes In
           Accounts receivable                                 (282,479)    (198,543)
           Inventories                                         (228,861)       3,386
           Prepaid expenses and other                           (16,457)      59,195
           Accounts payable                                     272,769      (83,522)
           Accrued liabilities                                    9,393        1,660
           Deferred revenue                                     (21,402)      49,356
                                                              ---------    ---------

Net Cash (Used In)Provided By Operating Activities              (84,098)     169,799
                                                              ---------    ---------

Cash Flows From Investing Activities
         Increase in certificate of deposit                      (5,769)      (5,813)
         Net proceeds from sale of property and equipment       156,502        5,000
         Purchase of property and equipment                     (37,525)     (69,020)
         Payments on notes receivable                            92,508       52,912
         Acquisition of partnership Interest                    (65,000)          --
                                                              ---------    ---------
Net Cash Provided by (Used In) Investing Activities             140,716     (16,921)
                                                              ---------    ---------

Cash Flows From Financing Activities
         Payments on long-term debt                            (228,651)    (232,143)
         Proceeds from long-term debt                              --        150,000
                                                              ---------    ---------
Net Cash Used In Financing Activities                          (228,651)     (82,143)
                                                              ---------    ---------

Net Increase (Decrease) in Cash and Cash Equivalents           (172,033)      70,735
Cash and Equivalents, at beginning of period                    864,229      793,494
                                                              ---------    ---------

Cash and Equivalents, at end of period                        $ 692,196    $ 864,229
                                                              =========    =========

<FN>

See accompanying summary of accounting policies and notes to
consolidated financial statements.
</TABLE>

                                      18

<PAGE>

                     TUBBY'S, INCORPORATED & SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                              NOVEMBER 30, 1998


     1.  SUMMARY  OF  ACCOUNTING  POLICIES

     Principles of Consolidation
     The accompanying consolidated financial statements include the accounts
     of Tubby's Inc., and its wholly-owned subsidiaries (the "Company" or
     "Tubby's"). Intercompany balances and transactions have been eliminated.

     Nature of Operations
     The Company's revenue is derived from: (1) franchise and advertising
     fees for the rights to operate sit down and carry-out restaurants
     specializing in submarine sandwiches, hamburgers or steak sandwiches,
     pizzas or ice cream; (2) distribution of food and restaurant supplies to
     franchisees; (3) food sales at Company owned stores; (4) equipment sales
     to franchisees; and (5) vendor commissions and rebates. The Company and
     its franchisees operate restaurants in Michigan, Ohio, New Jersey,
     Arizona, Missouri, Nebraska and the province of Ontario Canada.
<TABLE>
<CAPTION>

     Number of Restaurants in Operation:               November 30,    
                                                    ---------------    
                                                    1998       1997
                                                    ----       ----
<S>                                                  <C>         <C>
      Operated by Franchisees
            Beginning of year                        84          68
            Franchises opened                        10          16
            Franchises closed                        (9)         (0)
            End of year                              85          84

     Operated by the Company
           Beginning of year                          4           6
             Stores opened                            0           0
             Stores sold                              0          (2)
             Stores closed                           (1)          0
             End of year                              3           4
</TABLE>

     Concentrations of Credit Risk
     Financial instruments which potentially subject the Company to
     concentrations of credit risk consist principally of cash and
     equivalents, and accounts and notes receivable. At times such cash and
     equivalents in banks are in excess of the respective financial
     institution's FDIC insurance limit. The Company attempts to minimize
     credit risk by reviewing all franchisees' credit history before
     extending credit and by monitoring franchisees' credit exposure on a
     continuing basis. The Company establishes an allowance for possible
     losses on accounts and notes receivable, when necessary, based upon
     factors surrounding the credit risk of specific customers, historical
     trends and other information.

     Fair Values of Financial Instruments
     The carrying amounts of cash and equivalents, certificates of deposit,
     accounts receivable, accounts payable and accrued expenses approximate
     fair value because of the short maturity of these items.

     The carrying amounts of the long-term debt issued pursuant to the
     Company's credit agreements and notes receivable approximate fair value
     because the interest rates on these instruments approximate market
     rates.

                                      19

<PAGE>

     Use of Estimates
     In preparing financial statements in conformity with generally accepted
     accounting principles, management is required to make estimates and
     assumptions that affect (1) the reported amounts of assets and
     liabilities and the disclosure of contingent assets and liabilities as
     of the date of the financial statements, and (2) revenues and expenses
     during the reporting period. Actual results could differ from these
     estimates.

     Cash and Equivalents and Certificate of Deposit
     Cash and equivalents consist of cash, certificates of deposit, money
     market funds, U.S. Treasury bills and commercial paper with maturity
     dates not exceeding three months.

     Certificates of deposit with maturity dates exceeding three months are
     separately classified on the balance sheet.

     Inventories
     Inventories include food, restaurant supplies and equipment held for
     resale to franchisees. Inventories are stated at the lower of cost or
     market, with cost determined by the first-in, first-out method for food
     and restaurant supplies and specific identification methods for
     equipment.

     Property and Equipment
     Property and equipment are stated at cost. Depreciation is computed over
     the useful lives of the assets ranging from 5 to 40 years, using the
     straight-line method. Depreciation expense was $106,843 and $122,395 in
     1998 and 1997, respectively.

     Goodwill
     Goodwill represents the excess of the cost of companies acquired over
     the fair value of their net assets at acquisition. The Company is
     amortizing goodwill over periods ranging from three years to forty
     years.

     The Company reviews goodwill for impairment based upon the estimated
     undiscounted cash flows over the remaining life of the goodwill. If
     necessary, impairment will be measured based on the difference between
     discounted future cash flows and the net book value of the related
     goodwill.

     Revenue Recognition
     Monthly franchise fees are recognized based on the franchisees' sales as
     earned, except where collection is not deemed probable. Advertising fees
     are recognized as related expenses are incurred.

     Initial franchise fees and fees from Area Development Agreements
     ("ADA's") are deferred until the Company has substantially met its
     obligations under the franchise agreement, which is generally at the
     time the store is opened. Deferred revenues under ADA's are recognized
     as revenue on a pro rata basis as each store opens.

     The Company recognizes product sales at the time of shipment.

     Advances under vendor rebate agreements are deferred and recognized as
     revenue over the term of the agreements.

     Advertising Costs
     The Company expenses the cost of advertising as incurred. Advertising
     expense was approximately $650,000 in both 1998 and 1997.

     Taxes on Income
     Deferred income taxes are recognized for the tax consequences of
     temporary differences between the financial reporting bases and the tax
     bases of the Company's assets and liabilities. Valuation allowances are
     established when necessary to reduce deferred tax assets to the amount
     expected to be realized. 

                                      20

<PAGE>

     Income tax expense is the tax payable for the period and the change
     during the period in deferred tax assets and liabilities.

     Earnings Per Share
     In 1997, the Financial Accounting Standards Board issued Statement of
     Financial Accounting Standards (SFAS) No. 128 "Earnings per Share." SFAS
     No. 128 replaced the previously reported primary and fully diluted
     earnings per share with basic and diluted earnings per share. Unlike
     primary earnings per share, basic earnings per share excludes any
     dilutive effects of options, warrants, and convertible securities.
     Diluted earnings per share is very similar to the previously reported
     fully diluted earnings per share. All earnings per share amounts for all
     periods have been presented, and where necessary, restated to conform to
     the SFAS 128 requirements. The following table presents the earnings per
     share calculations:
<TABLE>
<CAPTION>

For the Year Ended November 30,                                         1998          1997
                                                                        ----          ----
<S>                                                               <C>            <C>        
Numerator for Basic and Diluted Earnings per Share
    Net income (loss)                                             $   (31,207)   $   107,499

Denominator
 Denominator for basic earnings per share -
    weighted average shares                                         2,583,114      2,583,114

 Effect of dilutive securities stock options                             --           21,606

 Dilutive Potential Common Stock
  Denominator for diluted earnings per share -
      adjusted weighted average shares and assumed  conversions     2,583,114      2,604,720

Basic Earnings (Loss) Per Share                                   $      (.01)   $       .04

Diluted Earnings (Loss) Per Share                                 $      (.01)   $       .04
</TABLE>

     As a result of the net loss in 1998, no stock options were included in
     the computation of diluted earnings per share.

     Options to purchase 60,467 shares of common stock at prices ranging from
     $3.60 to $8.40 in 1997, were outstanding, but were not included in the
     computation of diluted earnings per share because the option's exercise
     price was greater than the average market price of the common shares.

     In January 1998, the Company declared a one for ten reverse stock split.
     As a result, the amount of outstanding shares was reduced from
     25,831,131 to 2,583,114. In connection with the reverse stock split, the
     Company amended its Articles of Incorporation to reduce the number of
     shares authorized from 60,000,000 to 6,000,000. Retroactive effect has
     been given to all share and per share data contained in the consolidated
     financial statements.

     Long-lived Assets
     The Company reviews the carrying values of its long-lived assets for
     possible impairment whenever events or changes in circumstance indicate
     that the carrying amount of the assets may not be recoverable. The
     Company evaluates whether impairment exists on the basis of undiscounted
     future cash flows from operations before interest for the remaining
     useful life of the assets. Any long-lived assets held for disposal are
     reported at the lower of these carrying amounts or fair value less costs
     to sell.

     Recent Accounting Pronouncements
     In June 1997, the Financial Accounting Standards Board issued SFAS No.
     131 "Disclosures about Segments of an Enterprise and Related
     Information." This statement is effective for financial periods
     beginning after December 15, 1997 and requires comparative information
     for earlier years to be restated. Management has not determined the
     impact, if any, this statement may have on future financial statement
     disclosures.

                                      21

<PAGE>

     Additionally, SFAS 130, "Reporting Comprehensive Income" was issued in
     June 1997. Statement of Position (SOP) 98-5, "Reporting on the Cost of
     Start-Up Activities", was issued in April 1998 and SFAS 133, "Accounting
     for Derivative Instruments and Hedging Activities", was issued in June
     1998. These statements are effective in fiscal 1999 and 2000 and are not
     expected to have a material impact on the consolidated financial
     statements.

     Reclassifications
     Certain 1997 balances have been reclassified for purposes of comparison
     to the 1998 balances.

     2.  INVENTORIES

         Inventories at November 30, 1998 and 1997 are summarized as follows:
<TABLE>
<CAPTION>

                                                      1998              1997
                                                      ----              ----
<S>                                              <C>              <C>         
          Food and restaurant supplies           $   297,475      $     28,989
          Equipment                                   30,805            70,430
                                                      ------            ------

                                                 $   328,280      $     99,419
                                                    ========           =======
</TABLE>

     3.  NOTES RECEIVABLE

     Notes receivable consisted of the following at November 30, 1998 and
1997.
<TABLE>
<CAPTION>

                                                                                         1998              1997
                                                                                         ----              ----
                  <S>                                                                    <C>               <C>     
                  Note receivable, due in monthly installments
                     with interest at 10%, collateralized by a second
                     mortgage on property, maturing in 2007                              $307,663          $330,296

                  Various notes receivable, due in monthly installments with
                     interest at various interest rates up to 10%,
                     collateralized by equipment,
                     maturing through 2001                                                180,791           279,263
                                                                                         --------          --------

                                                                                          488,454           609,559
                  Less: Amounts due within one year                                        59,721            66,217
                        Allowance for doubtful accounts                                    20,000                --
                                                                                         --------          --------

                  Total Notes Receivable - Noncurrent                                    $408,733          $543,342
                                                                                         ========          ========
</TABLE>

     The Company's recorded investment in impaired loans totaled $60,000,
     with $20,000 of related credit loss allowance. The Company's recorded
     investment in impaired loans totaled $43,000 in 1997, with no related
     credit loss allowance in 1997. The average recorded investment in
     impaired loans during 1998 was approximately $51,000 with no related
     interest income recognized. The average recorded investment in impaired
     loans during 1997 was $43,000; this balance was completely reduced in
     1998 by payments of approximately $33,000 with the remaining balance
     being written off. Interest income on impaired loans is recognized only
     when payments are received. Interest income recognized in 1997 was
     approximately $21,000.

     4.  REVOLVING CREDIT AGREEMENT

     The Company has entered into a $250,000 line-of-credit with a bank with
     interest payable at the bank's prime rate plus one-half percent (8.25%
     at November 30, 1998). Short-term borrowings are due on demand and are
     secured by a blanket lien on all assets of the Company and a pledged
     $100,000 certificate of deposit. No borrowings were outstanding under
     the line-of-credit at November 30, 1998 and 1997.

                                     22

<PAGE>
     5.  LONG-TERM  DEBT

     Long-term debt consisted of the following at November 30, 1998 and 1997.
<TABLE>
<CAPTION>

                                                                                1998              1997
                                                                                ----              ----
<S>                                                                         <C>               <C>    
        Mortgage notes payable in equal monthly installments of
        $1,930 through March, 2002, at which
        time a balloon payment is due; with interest
        payable at 9.25%                                                        131,801           142,084

        Note payable - stockholder (see Note 14)                                     --           200,000

        Other                                                                        --            18,368
                                                                            -----------       -----------
                                                                                131,801           360,452
        Less amounts due within one year                                         11,455           220,520
                                                                            -----------       -----------
                                                                            $   120,346       $   139,932
                                                                            ===========       ===========
</TABLE>

     The Company has pledged substantially all of its property and equipment
as collateral for repayment of debt.

     Annual maturities of long-term debt are as follows:
<TABLE>

                                    <S>                        <C>     
                                    1999                       $ 11,455
                                    2000                         12,560
                                    2001                         13,772
                                    2002                         94,014
                                                               --------
                                                               $131,801
                                                               ========
</TABLE>

     6.  RELATED  PARTIES

     Peter T. Paganes and Robert M. Paganes are directors, officers, and
     shareholders of the Company and J. Thomas Paganes, their brother, is
     a shareholder of the Company. These shareholders own approximately 24%
     of the Company's outstanding common stock. They each own and operate
     franchised stores. The following is a summary of activity with these
     stockholders and their restaurants as of and for the years ended 
     November 30, 1998 and 1997.

<TABLE>
<CAPTION>
                                                                  1998             1997
                                                                  ----             ----
                  <S>                                        <C>                <C>
                  Product sales, franchise 
                    and advertising fees                     $  867,809         $ 156,412

                  Accounts receivable                            55,922            29,191

                  Interest income                                    --             1,431
</TABLE>

     7.  INCOME  TAXES

     Significant components of deferred tax assets and liabilities consisted
     of the following at November 30, 1998 and 1997.
<TABLE>
<CAPTION>

     Deferred Tax Assets and Liabilites                                                     1998               1997
     -----------------------------------                                                    ----               ----
                  <S>                                                                    <C>               <C>     
                  Net operating loss carry-forwards                                      $531,000          $513,000
                  Deferred revenue                                                         71,000            78,000
                  Depreciation                                                             27,000            24,000
</TABLE>

                                      23

<PAGE>
<TABLE>
                  <S>                                                                   <C>               <C>     
                  Allowance for doubtful accounts                                         27,000             12,000
                  Installment sale                                                       (25,000)           (27,000)
                  Change to Accrual Method-Section 481(a) adjustment                     (20,000)           (30,000)
                  Other                                                                  (23,000)             1,000
                                                                                        --------          --------- 

                  Net Deferred Tax Asset                                                 588,000            589,000

                  Valuation allowance on net deferred tax asset                         (588,000)          (589,000)
                                                                                        --------          --------- 
                  Deferred Taxes                                                        $     --          $      --
                                                                                        ========          =========
</TABLE>

     The following reconciles the expected income tax rate to the effective
income tax rate.
<TABLE>
<CAPTION>

                                                                              1998              1997
                                                                              ----              ----
                  <S>                                                       <C>                 <C>  
                  Income taxes at federal statutory rate                    (34.0)%             34.0%
                  Tax expense resulting from utilization of NOLs                --              47.0
                  Valuation allowance adjustment                             (1.1)             (40.9)
                  Non-deductible goodwill and entertainment
                     expenses                                                44.1                8.3
                  Other                                                      (9.0)              (1.4) 
                                                                             -----            ------
                  Effective Tax Rate                                         00.0%              47.0%
                                                                             =====              ==== 
</TABLE>

     The Company has acquired net operating loss carry-forwards of
     approximately $670,000 which are available to offset future taxable
     income. However, to the extent such loss carry-forwards are utilized to
     reduce future taxable income, the related tax benefit will first be
     credited to goodwill until fully eliminated and then to income. In 1997,
     the Company had taxable income of approximately $288,000 which when
     utilizing the loss carry-forwards resulted in a reduction of goodwill of
     $95,300. Utilization of these losses is limited based on the taxable
     income generated by the activity that generated these losses and the
     carry-forwards expire beginning in 1999.

     The Company also has net operating loss carry-forwards for tax purposes
     of approximately $892,000 relating to losses incurred subsequent to the
     above mentioned acquisition which expire from 2006 through 2009.

     As a result of the proposed merger discussed in Note 14 of the
     consolidated financial statements, the availability of the net operating
     loss carry-forwards may be limited.

     8.  STOCK  OPTION  PLAN

      The Company has stock option plans under which key employees may be
     granted options to purchase a specific number of shares of the Company's
     stock with option prices approximating market prices at the date of
     grant. Options are subject to the terms of each plan.

     The Company applies Accounting Principles Board Opinion No. 25 in
     accounting for its stock option plans. Accordingly, no compensation cost
     has been recognized for the Plan. Had compensation expense for the
     Company's stock option plans been determined based on the fair value at
     the grant dates consistent with the method of SFAS No. 123, the
     Company's net income and net income per share would have been the
     following pro forma amounts:
<TABLE>
<CAPTION>

                                                                         1998              1997
                                                                         ----              ----
                  <S>                                                <C>               <C>    
                  Net Income (Loss)
                  As reported                                        $   (31,207)       107,499
                  Pro forma                                              (43,963)        52,277

                  Earnings Per Share
                  As reported
                            Basic                                           (.01)            .04
</TABLE>

                                      24

<PAGE>
<TABLE>

                <S>                                                    <C>               <C>
                  Diluted                                                   (.01)            .04
                Pro forma
                  Basic                                                     (.02)            .02
                  Diluted                                                   (.02)            .02
</TABLE>

     As of November 30, 1998, 283,383 shares were reserved under the
     Incentive Stock Option Plan and 83,300 were reserved under the
     non-statutory Incentive Stock Option Plan. A summary of the options
     under both plans is as follows:
<TABLE>
<CAPTION>

                                                                                  Weighted Average
                                                                        Shares     Exercise Price
                                                                        ------     --------------
<S>                                                                       <C>         <C>  
     Incentive Stock Option Plan
     Outstanding, at December 1, 1996
         (60,467 exercisable)                                             60,467      $3.10
         Granted                                                          13,500       3.30

     Outstanding, at November 30, 1997
         (60,467 exercisable at weighted average 
          exercise price of $3.10)                                        73,967       3.20
         Forfeited                                                       (37,000)      2.70

     Outstanding at November 30, 1998
         (36,967 exercisable)                                             36,967       3.60

-----------------------------------------------------------------------------
<CAPTION>


                                                                                  Weighted Average
                                                                        Shares     Exercise Price
                                                                        ------     --------------
<S>                                                                       <C>         <C>  
     Non-Statutory Incentive Option Plan
     Outstanding at December 1, 1996
         (20,000 exercisable)                                             20,000      $ 3.60
         Granted                                                          20,500        1.60

     Outstanding at November 30, 1997
         (20,000 exercisable at weighted average 
          exercise price of $3.60)                                        40,500      $ 2.60
         Forfeited                                                       (12,000)       1.50

     Outstanding at November 30, 1998
         (28,500 exercisable)                                             28,500       $3.05
</TABLE>

     The fair value of each option granted is estimated on the date of grant
     using the Black-Scholes option pricing model with the following
     weighted-average assumptions for grants in 1997: dividend yield of 0%;
     expected volatility of 74%; risk free interest rate of 6.2%; and
     expected lives of 3.3 years.

     The weighted average grant date fair value options granted in 1997 was
     $2.00. No options were granted in 1998.

     The following is a summary of stock options outstanding at November 30,
1998:
<TABLE>
<CAPTION>


                                                                            Options Outstanding and Exercisable
                                                                             Weighted Average         Weighted
                                                                                    Remaining           Average
                                                                                  Contractual          Exercise
     Price Range                                              Number              Life (Years)          Price
     -----------                                              ------              ------------          -----
     <S>                                                      <C>                     <C>                <C> 
     Incentive Stock Option Plan
     $ 3.10 -4.40                                             36,833                  6.0                3.60
        8.40                                                     134                  2.0                8.40
                                                              ------                  ---                ----
                                                              36,967                  6.0              $ 3.60
</TABLE>

                                      25

<PAGE>
<TABLE>

     <S>                                                      <C>                     <C>                <C> 
     Non-Statutory Plan
     $  1.50 - 1.90                                            8,500                  8.5              $ 1.75
         3.60                                                 20,000                  2.0                3.60
                                                              ------                  ---              ------
                                                              28,500                  4.0              $ 3.05

</TABLE>

     9.   EMPLOYEE BENEFIT PLAN

     In 1997, the Company implemented a 401(k) plan covering substantially
     all full-time employees. The Company matches each employee's
     contribution up to a predetermined limit. The Company's contribution
     expense amounted to approximately $3,000 in 1998 and 1997.


     10. OPERATING  LEASES

     The Company leases buildings, equipment, and restaurant space under
     various operating leases. The future minimum rental payments, under all
     operating leases containing minimum annual rental payments, are as
     follows:
<TABLE>

                  <S>                <C>    
                  1999               $56,513
                  2000                44,795
                  2001                29,256
                                   ---------
                                   $ 130,564
</TABLE>

     Total rent expense under the operating leases was approximately $102,000
     and $120,000 for 1998 and 1997, respectively.


     11. COMMITMENT AND CONTINGENCY

     In connection with the distribution of food and restaurant supplies to
     franchisees, the Company entered into an agreement effective November 1,
     1998 with an unaffiliated entity that is experienced with multiple
     location institutional food distribution to provide warehouse and
     distribution services for the Company. Minimum annual billings to the
     Company for these services must be $425,000. Failure to generate the
     volume necessary to achieve such annual billings will constitute a
     termination of the agreement. In connection with such termination or if
     the agreement is terminated without cause by the Company prior to
     September 1, 2002, the Company agrees to pay the unaffiliated entity the
     following amounts based on specific termination dates:

o        Prior to September 1, 1999                -   $ 225,000
o        September 1, 1999  -  August 31,  2000    -   $ 150,000
o        September 1, 2000  -  August 31, 2001     -   $  75,000
o        September 1, 2001  -  August 31, 2002     -   $  50,000


     12. Supplemental Disclosure of Cash Flow Information

     Cash paid for interest during 1998 and 1997 amounted to $13,829 and
     $17,572, respectively. No amounts were paid for income taxes in 1998 and
     1997.

     During 1997, the Company exchanged property and equipment for a note
     receivable totaling $85,000.

                                      26

<PAGE>

     13. LITIGATION SETTLEMENT

o        In January 1998, the Company entered into a release and settlement
         agreement with Patrick J. McCourt (McCourt), minority shareholder of
         McTub Company, in connection with the litigation between the Company
         and McCourt. The agreement required the Company to pay McCourt the
         sum of $200,000 which constitutes repayment of the principle of a
         term note dated in October 1993. Also, in connection with the
         agreement, the Company paid McCourt $65,000 for his 49% interest in
         McTub Company resulting in an increase in goodwill during 1998. The
         agreement discharged and released the Company from any and all
         claims with McCourt.

o        During 1998, the Company exercised its option to purchase the
         building that houses its corporate headquarters for a total cost of
         $425,000. However, the seller claimed that the Company failed to
         strictly comply with the written option to purchase. As a result,
         the Company commenced a civil action against the seller to enforce
         the seller's obligation to sell the building to the Company and is
         awaiting a trial date. If the Company prevails in its litigation, it
         expects to finance the cost of the building.

14.      SUBSEQUENT EVENTS

In December 1998, the Company and Interfoods of America, Inc. (Interfoods)
entered into a proposed merger agreement which is subject to, among other
things, approval by the shareholders of both parties. Under the terms of the
proposed merger, Tubby's shall issue to Interfoods one new share of common
stock (after giving effect to a planned one for five reverse stock split by
Tubby's) for each two shares of outstanding Interfoods stock. The surviving
corporation (Tubby's) will have approximately 3,300,000 shares (of 
which Tubby's shareholders will own approximately nineteen percent).
Simultaneously with the merger, the surviving corporation (Tubby's) shall
change its name to Interfoods of America, Inc. and shall sell all of Tubby's
pre-merger assets to a related entity, the principals of which include
certain members of Tubby's current management, for $2,500,000.

                                      27

<PAGE>

              REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS





     The Board of Directors
     Tubby's, Inc. and Subsidiaries
     Sterling Heights, Michigan

     We have audited the accompanying consolidated balance sheets of Tubby's,
     Inc. and Subsidiaries as of November 30, 1998 and 1997, and the related
     consolidated statements of operations, stockholders' equity, and cash
     flows for the years then ended. These financial statements are the
     responsibility of the Company's management. Our responsibility is to
     express an opinion on these financial statements based on our audits.

     We conducted our audits in accordance with generally accepted auditing
     standards. Those standards require that we 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. We believe that our audits
     provide a reasonable basis for our opinion.

     In our opinion, the consolidated financial statements referred to above
     present fairly, in all material respects, the financial position of
     Tubby's, Inc. and Subsidiaries at November 30, 1998 and 1997, and the
     results of its operations and its cash flows for the years then ended in
     conformity with generally accepted accounting principles.



                                                  BDO Seidman, LLP


     Troy, Michigan
     January 22, 1999

                                      28

<PAGE>


     ITEM 8.      CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING 
     -------      ---------------------------------------------------------- 
                  AND FINANCIAL DISCLOSURE
                  ------------------------

     There is no information required to be reported hereunder.

     ITEM 9.      DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
     -------      --------------------------------------------------

     All of the executive officers of Tubby's as of February 19, 1999, are
     shown below. Each of the executive officers has a term of office until
     the June, 1999 Board of Directors meeting.

               NAME/ AGE                   POSITION HELD WITH REGISTRANT
               ---------                   -----------------------------
         Robert M. Paganes/42            President and Chief Executive Officer
         Peter T. Paganes/56             Vice President
         Vincent J. Tatone/42            Secretary
         Theresa M. Borto, CPA/39        Chief Financial Officer

     Messrs. Paganes are brothers and shareholders of the Company. There are
     no other relationships among the executive officers.

     Robert M. Paganes was a founder of Tubby's Sub Shops, Inc. which was
     formed in December, 1977. Mr. Paganes has been an Officer and Director
     of Tubby's, Inc. since May of 1986. Since 1979, Mr. Paganes has also
     been an owner and operator of Tubby's Submarine Shop franchises in the
     Detroit, Michigan area. From 1990 through June 9, 1994 Mr. Paganes was
     Vice President and Secretary of the Company. On June 10, 1994, Mr.
     Paganes was appointed President and on August 12, 1994, he was appointed
     Chief Executive Officer for the Company.

     Peter T. Paganes has been a Vice President and Director of Tubby's, Inc.
     since May, 1986. In May, 1990, Mr. Paganes was appointed as Vice
     Chairman of the Board of the Company. Mr. Paganes was a founder of
     Tubby's Sub Shops, Inc., which was incorporated in December 1977. Mr.
     Paganes has also been an owner and operator of Tubby's Submarine Shop
     franchises in the Detroit, Michigan area since 1973. On August 12, 1994
     Mr. Paganes was elected as Chairman of the Board of the Company.

     Vincent J. Tatone was appointed to the Board of Directors of the Company
     in January, 1993. Mr. Tatone graduated, cum laude, from the University
     of Detroit Law School in 1985. After serving a two year appointment as a
     law clerk at the Michigan Supreme Court, Mr. Tatone engaged in the
     private practice of law. Mr. Tatone became General Counsel to the
     Company in April, 1994, and was elected as Secretary of the Company on
     August 12, 1994.

     Theresa M. Borto was appointed Chief Financial Officer of Tubby's, Inc.
     in May 1998. She has a bachelor of arts degree in accounting from
     Michigan State University. Ms. Borto is a CPA with seventeen years
     management experience. Prior to her employment at Tubby's, Ms. Borto was
     the Chief Financial Officer for CAM Administrative Services, Inc.

     ITEM 10.     EXECUTIVE COMPENSATION
     --------     ----------------------

     Executive Compensation:

     The following table sets forth compensation awarded to, earned by or
     paid to the Company's president and Chief Executive Officer. No other
     officer of the Company earned a salary and bonus of more than $100,000
     during the Company's fiscal year ending November 30, 1998. The Company
     did not grant any options, restricted stock awards or stock appreciation
     rights, nor pay compensation that would qualify as "All Other
     Compensation", nor did the Company make payments to any Executive
     Officer earning an

                                     29

<PAGE>
     annual salary or bonus in excess of $100,000, which may be categorized
     as "Other annual Compensation" or "LTIP Payouts", during the Company's
     fiscal year ended November 30, 1998.

               Name and Principal Position        Fiscal Year    Salary($)
               ---------------------------        -----------    ---------
          Robert M. Paganes, 
            President & Chief Executive Officer   1998           76,000

     No Stock options were granted to the above-named Executive Officer
     during the fiscal year ended November 30, 1998.

     Compensation of Directors:

     A fee of $250 per meeting attended was paid to each independant,
     non-employee Director for their services as such for the fiscal year
     ended November 30, 1998. The Total amount paid to independant Directors
     as a group was $1,250.

     ITEM 11.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
     --------     ---------------------------------------------------
                  MANAGEMENT
                  ----------

     Set forth below is certain information concerning management and other
     persons who are known by the Company to own beneficially more than 5% of
     the Company's Common stock, $0.01 par value, on November 30, 1998.

                                        Amount and Nature        Percent of
        Name of Beneficial Owner         of Ownership(1)          Class(2)
        ------------------------        -----------------        ----------

     Robert M. Paganes ...............       260,541                10.1%
     6029 E. Fourteen Mile Road              President
     Sterling Heights, MI 48312              Director

     Peter T. Paganes ................       173,400                 6.7%
     6029 E. Fourteen Mile Road              Vice President
     Sterling Heights, MI 48312              Director

     Vincent J. Tatone ...............       50,000                  3.1%(2)
     6029 E. Fourteen Mile Road              Secretary
     Sterling Heights, MI 48312              Director

     Ronald Boraks ...................       0                       0.0%(4)
     38345 W. Ten Mile Road                  Director
     Farmington Hills, MI 48335

     J. Thomas Paganes ...............       187,738                 7.3%
     38633 Moravian                          Shareholder
     Mt. Clemens, MI 48043

     All Executive Officers and
     Directors as a Group (5 persons).       671,679                26.0%

-------

(1)  The nature of ownership is sole voting and investment power unless
     otherwise indicated.

(2)  As of February 19, 1998.

(3)  Pursuant to the rules of the Securities and Exchange commission, the
     Company's common stock which is not outstanding but which is subject to
     options is deemed to be outstanding for the purpose of computing the
     percentage of outstanding common stock owned by the optionee, but not
     deemed to be outstanding for the purpose of computing the percentage
     owned by any other person.

(4)  Less than 1%.

                                     30


<PAGE>

     ITEM 12.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
     --------     ----------------------------------------------

     Peter T. Paganes and Robert M. Paganes are directors, officers and
     shareholders of the Company and J. Thomas Paganes, their brother, is a
     shareholder of the Company. They each own and operate franchised stores.

     Amounts included in Accounts Receivable
       at November 30, 1998 ..........................      $ 55,922

     Amounts included in Revenues for the year ended
       November 30, 1998 .............................      $867,809

     Prior to January 1, 1993, the above persons had an exemption from paying
     royalties on their stores. Effective January 1, 1993, this exemption was
     limited to previously existing stores and was discontinued until such
     time as these persons were not employed by the Company. Each of the
     above persons is in full compliance with all personal obligations to the
     Company as of November 30, 1998.

     As of November 30, 1998, there were no officers and directors, or other
     related parties, of the Company that had any remaining balances
     regarding loans from the Company and/or credits for loans made to the
     Company.

     The following table summarizes the amounts due as of November 30, 1998
     from all stores owned by officers, directors or other related parties of
     the Company:

                                                            Amounts Due from
                                             Number of          Stores at
          Name                           Franchises Owned   November 30, 1998
          ----                           ----------------   -----------------

Robert M. Paganes .....................         2                $17,476
Peter T. Paganes ......................         1                $ 8,601
                                               --                -------
     Amounts due from Officers
       and Directors ..................         3                $26,077
J. Thomas Paganes .....................         3                $29,845
                                               --                -------
     Amounts Due from Officers,
       Directors and other related
       parties ........................         6                $55,922
                                               ==                =======

                                     31




<PAGE>

     ITEM 13.     EXHIBITS AND REPORTS ON 8K
     --------     --------------------------
<TABLE>
<CAPTION>

                                                                                                                  Page

         <S>      <C>                                                                                            <C>
         (a)      Documents filed as a part of this report:

         (1)      Financial Statements:

                  Consolidated Balance Sheets as of November 30, 1998 and 1997....................................14, 15

                  Consolidated Statements of Operations for the Years Ended
                  November 30, 1998 and 1997..........................................................................16

                  Consolidated Statements of Stockholders' Equity for the
                  Years Ended November 30, 1998 and 1997..............................................................17

                  Consolidated Statements of Cash Flows for the Years Ended
                  November 30, 1998 and 1997..........................................................................18

                  Notes to Consolidated Financial Statements..........................................................19

                  Report of Independent Certified Public Accountants..................................................28

                  (b) Reports on Form 8-K

                  No reports were filed on form 8-K during the last quarter
                  of the period covered by this report.

                  (c)Exhibits:

                  Name/Type of Exhibit
                  10       Material Contract - Clark Foodservice, Inc.
                  21       Subsidiaries of the registrant
                  23       Consent of independent certified public accountants
</TABLE>

                                      32

<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.


                                TUBBY'S, INC.


                                  Robert M. Paganes                  
                                --------------------------           
                                By:      Robert M. Paganes
                                Its:     President & Chief Executive Officer


                                  Theresa M. Borto
                                --------------------------           
                                By:      Theresa M. Borto
                                Its:     Chief Financial Officer



     PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934,
     THIS REPORT HAS BEEN SIGNED BY THE FOLLOWING PERSONS ON BEHALF OF THE
     REGISTRANT AND IN THE CAPACITIES AND ON THE DATE INDICATED.

<TABLE>
<CAPTION>

     SIGNATURE               TITLE                                                  DATE
     ---------               -----                                                  ----

      <S>                    <C>                                                   <C>  
      Peter T. Paganes       Chairman of the Board, Vice-President                 02/26/99  

      Robert M. Paganes      President, Chief Executive Officer, Director          02/26/99  

      Vincent J. Tatone      Secretary, Director                                   02/26/99  

      Ronald D. Boraks       Director                                              02/26/99  
</TABLE>

                                      33