UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                               FORM 10-KSB/A No. 1

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

             For the fiscal year ended December 31, 1997

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

             For the transition period from         to

                          Commission File No. 33-39759

                             CRESCENT CAPITAL, INC.
              (Exact name of Small Business Issuer in its charter)

         DELAWARE                                       13-3645694
(State or Other Jurisdiction of             (I.R.S. Employer Identification
Incorporation or Organization)                            No.)

                            6701 Democracy Boulevard
                                    Suite 300
                               Bethesda, MD 20817
               (Address of principal executive offices) (Zip Code)

                                 (301) 530-1708
                (Issuer's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

                                      NONE

Securities registered pursuant to Section 12(g) of the Act:

                          Common Stock, $.01 par value
                                (Title of Class)
<PAGE>

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

             Check if disclosure of  delinquent  filers  pursuant to Item 405 of
Regulation  S-B is not  contained  in  this  form,  and no  disclosure  will  be
contained, to the best of issuer'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.
             Yes  X    No

            State issuer's revenues for its most recent fiscal year.
                                   $28,360,981

             As of April 1, 1998,  the  aggregate  market  value of the Issuer's
Common Stock held by non-affiliates of the Issuer was $246,960.

             As of April 1, 1998,  there were 545,800 shares  outstanding of the
Issuer's Common Stock.
<PAGE>
                                TABLE OF CONTENTS

ITEM                                                                      PAGE
                                     PART I

1.       Description of Business............................................ 4
2.       Description of Properties..........................................13
3.       Legal Proceedings..................................................13
4.       Submission of Matters to a Vote of
         Security Holders...................................................14

                                     PART II

5.       Market for the Issuer's Common
         Equity and Related Stockholder
         Matters............................................................15
6.       Management's Discussion and Analysis
         of Financial Condition and Results
         of Operations......................................................17
7.       Financial Statements and Supplementary
         Data...............................................................21
8.       Changes in and Disagreements with
         Accountants on Accounting and Financial
         Disclosure.........................................................21

                                    PART III

9.       Directors, Executive Officers, Promoters and Control Persons
         Compliance with Section 16a of the Exchange Act....................23
10.      Executive Compensation.............................................24
11.      Security Ownership of Certain Beneficial
         Owners and Management..............................................26
12.      Certain Relationships and Related
         Transactions.......................................................27
13.      Exhibits and Reports on Form 8-K...................................28
         Signatures.........................................................30

                                       3
<PAGE>
                                     PART I

Item 1.  Description of Business

Introduction

Crescent  Capital,  Inc. (the "Company") was incorporated  under the laws of the
State of Delaware on January 15, 1991. The Company was formed for the purpose of
seeking business ventures, either through the acquisition of existing businesses
or the acquisition of assets to establish subsidiary businesses for the Company.

From  incorporation  through  December 29, 1993,  the  Company's  only  business
activity has been the  acquisition of funds from the sale of common stock to its
sole  officer and  director and from the public  offering of its  securities  in
January  1992 and the entry  into a  non-binding  Letter of Intent to  acquire a
majority interest in Dansmith Corporation, a North Carolina company.
The transaction was later abandoned.

On December  29,  1993,  the Company  entered  into a Loan and Exchange of Stock
Agreement with  International  Franchise Systems,  Inc.  ("Domino's UK") and its
parent, Woodland Limited Partnership ("Woodland") and on June 30, 1994, Domino's
UK became a wholly owned subsidiary of the Company.  In January,  1995, Domino's
UK completed an initial public offering of its securities and as a result of the
offering,  18.6% of the common  stock of  Domino's UK is owned by the public and
81.4% by the Company.  Since its  acquisition  of Domino's UK, the operations of
the Company have consisted substantially of the operations of Domino's UK.

The Loan and Exchange of Stock Agreement

Pursuant  to the  terms  of the  Loan  and  Exchange  of  Stock  Agreement  (the
"Agreement") dated December 29, 1993, by and among the Company,  Domino's UK and
Woodland,  the Company loaned $400,000 to Domino's UK repayable on or before the
later of (I) ninety (90) days from  December 29,  1993,  or (ii) in the event of
the Exchange (defined below) did not occur,  ninety (90) days after the Exchange
was last  scheduled  to occur.  Interest is payable at an annual rate of 8%. The
loan was secured by a pledge by Domino's UK of all of the issued and outstanding
stock of Domino's  Pizza Group Limited,  Domino's UK's wholly owned  subsidiary,
and a pledge by Woodland of all of the issued and outstanding  stock of Domino's
UK, its wholly owned subsidiary.

The Agreement obligated the Company and Domino's UK to enter into an exchange of
stock (the  "Exchange")  whereby  Woodland  would exchange all of the issued and
outstanding  stock of Domino's'UK,  consisting of 315,000 shares of common stock
and  2,000,000  shares of Class B common  stock  ("Class B  stock"),  a class of
voting stock  convertible on a one-for-one  basis into common stock, for 315,000
shares of the Company's common stock and 2,000,000 shares of the Company's Class
B convertible common stock.

The Exchange  was  completed  on June 30, 1994 and as a result,  Woodland  owned
315,000 shares of the outstanding common stock and 2,000,000 shares of the Class
B stock of the Company.  The Class B stock is convertible on a one-for-one basis
for common stock and otherwise has the same rights,  including voting rights, as
the common stock.  Woodland  subsequently  purchased  9,990 Units.  As a result,
Woodland  controls  approximately  92% of the  voting  shares  of  Crescent.  In
September  1995,  the Company  completed an exchange  offer pursuant to which it
issued  874,000  shares  of  Class A  Common  Stock  in  exchange  for  warrants
exercisable for the purchase of 1,748,040 shares of Class A Common Stock.



Business of the Company and International Franchise Systems, Inc.

International  Franchise  Systems,  Inc.  and  its  subsidiaries  (collectively,

                                       4
<PAGE>

"Domino's UK") have the exclusive right to own,  operate and franchise  Domino's
Pizza  stores  ("Domino's  Stores") in the United  Kingdom,  and the Republic of
Ireland ("the Territory")  pursuant to a master franchise agreement (the "Master
Agreement")  with Domino's Pizza  International,  Inc.  ("DPII),  a wholly owned
subsidiary of Domino's Pizza, Inc.  ("Domino's).  The Company also has the right
to operate a fresh pizza dough production facility and wholesale supply business
(the  "Commissary")  for all  Domino's  Stores in the  Territory  pursuant to an
agreement with Domino's (the "Commissary Agreement").

In December  1993,  Domino's UK acquired the United  Kingdom  subsidiary  of the
U.S.-based  parent company of Domino's  Pizza,  Inc.,  which  included  existing
operations,  the rights as subfranchisor to 77 franchise agreements for Domino's
Stores,  assets relating to the Commissary,  and assets relating to the existing
franchise  operation.  As of December  28,  1997,  Domino's UK had 154  Domino's
Stores opened as well as two distribution centers and a commissary.  At year end
1997, it was the largest  Domino's  franchisee in Europe and the fourth  largest
Domino's  franchisee  outside  the  United  States.  Domino's  UK is a  Delaware
corporation, incorporated on October 22, 1993.

Business Objectives and Strategy

Domino's  UK's mission is to maintain its status as the leading  pizza  delivery
brand  in the  marketplace  and to  continue  to  build  stockholder  value.  To
accomplish this,  Domino's UK has developed a strategy  designed to achieve high
levels of  customer  satisfaction  and  repeat  business,  as well as to enhance
recognition of the Domino's name and concept in the Territory.
The key elements of Domino's UK's strategy include:

New Store Locations

Domino's  UK believes  that the  location  of a Domino's  Store is an  essential
element of success. Domino's UK's development of the Territory is based on store
locations  that are  strategically  located in areas that satisfy  Domino's UK's
demographic  criteria.  The stores are positioned in high visibility  areas with
prominent signage and brightly lit interiors to attract attention.

Franchise System

Domino's UK is committed to developing a strong  franchise  system by attracting
experienced  operators  and  business  people who adhere to  Domino's  UK's high
standards.   Domino's  UK  devotes   significant   resources  to  providing  its
franchisees  with  assistance in  marketing,  site  selection,  store design and
employee training.

High Quality Menu

Domino's Stores offer a menu of high quality  pizzas.  Pizzas are prepared using
fresh dough, real mozzarella  cheese, a propriety mix of tomato sauce and spices
and other high quality ingredients and toppings. Other menu items include garlic
bread, cole slaw, chicken wings, ice cream and soft drinks. IFS has expanded its
menu in limited ways to increase market penetration and average spend per order.

Efficient Operating System

Domino's UK believes that its  operating  systems,  store layout and  designated
delivery areas result in lower  in-store cost,  improved food quality and higher
customer  service.  Domino's UK's  Commissary  and  distribution  system provide
consistency and efficiencies of scale in dough  production.  This eliminates the
need  for  each  store to  order  food  from  third  party  vendors  and  commit
substantial labor and other resources to dough production.  To ensure consistent
food quality,  each franchisee must purchase all food and supplies from Domino's
UK or its approved suppliers.

Training and Development

Domino's UK operates a training  program for store personnel and new franchisees

                                       5
<PAGE>

to improve store  operations and the management of each  franchisee's  business.
Domino's UK has revised the standard  Domino's  training program to make it more
appropriate and relevant to operations in the Territory.

Targeted Marketing

Domino's UK's marketing programs target the delivery area of each store,  making
extensive use of coupons, leaflets and direct mail promotions.  Domino's UK also
uses radio to  advertise  its  product  and name.  The local  marketing  efforts
include more effective  involvement  with  community  oriented  activities  with
sports teams,  schools and other  organizations.  Domino's UK is implementing an
in-store  computer system that enables better  tracking of customer  preferences
and targets its marketing based on these preferences.  Domino's UK works closely
with franchisees on local marketing efforts. Domino's UK promoted both the brand
and selected new pizza products on television in 1997.

The Domino's Store System

Domino's opened its first store in 1960 and today is the world's leader in pizza
delivery, with over 5,952 company-owned and franchised stores as of December 31,
1997. It had system-wide  revenues of approximately $3.2 billion for fiscal year
1997.

Domino's has developed a pizza store format and operating  system which includes
a recognized  design,  decor and color scheme for store buildings;  uniforms for
store personnel; signage; service format; quality and uniformity of products and
services offered;  procedures for inventory and management  control;  a delivery
system;  and Domino's  trademarks  (collectively,  the "Domino's  System").  All
Domino's  Stores are  required to be operated in  accordance  with the  Domino's
System.

Domino's  Stores feature  carryout  services and delivery  services to customers
located  within a prescribed  service  area.  The service area for each Domino's
Store is established to enable the store to deliver a pizza within 30 minutes of
the customer's  order.  Domino's Stores offer a substantially  similar core menu
including various types of pizza and soft drinks.  In the Territory,  other menu
items include cole slaw, garlic bread and ice cream. Pizza accounts for the most
significant  amount of  system-wide  sales.  Prices for Domino's  menu items are
determined by the various  operators of Domino's  Stores and,  accordingly,  may
vary throughout the Territory.

Relationship With Domino's Pizza, Inc.

Master Franchise Agreement

Domino's UK acquired  the rights to the  Territory  from DPII in December  1993.
Since that time,  the  relationship  between  Domino's UK and  Domino's has been
governed principally by the Master Agreement.  The initial term of the agreement
runs from December 31, 1995 through December 31, 2006. According to the terms of
the initial  agreement,  Domino's  UK shall have opened and  operating a minimum
number of Domino's Stores in accordance with the following yearly schedule:

                                       6
<PAGE>
                    Year                                             Minimum(1)
                   Ended                                              Total
                  December 31                                        Stores

                    1998                                               168
                    1999                                               192
                    2000                                               217
                    2001                                               227
                    2002                                               252
                    2003                                               277
                    2004                                               297
                    2005                                               317
                    2006                                               337

(1)      Does not include non-traditional Domino's Pizza stores.

If Domino's UK does not meet the development schedule, within one hundred-eighty
(180) days after  written  notice of such failure is provided by DPII,  DPII may
terminate  Domino's UK's  exclusive  right to operate and  franchise  additional
Domino's Stores in the Territory. To date, the Company has exceeded the required
schedule.

If Domino's UK is in compliance  with the Master  Agreement at the expiration of
the  Initial  Term,  Domino's  UK will have the option to extend  its  exclusive
development  rights for an additional  10-year period,  provided Domino's UK and
DPII agree to a minimum  development  schedule  for the renewal  term.  If after
expiration  of the  Initial  Term (or any  renewal  term),  Domino's UK fails to
exercise its option to renew its exclusive  development  rights,  or the parties
are unable to agree to a minimum development schedule for the renewal term, then
Domino's  UK would  continue  to have the  right to  operate  its  then-existing
Company-owned  Domino's  Stores  and to  maintain  and  continue  its rights and
obligations,  and  act as  subfranchisor,  with  respect  to all  then  existing
franchised  Domino's Stores. In such event,  Domino's UK would generally have no
further right to operate or grant franchises for additional  Domino's Stores and
DPII would have the right to  proceed  (or the right to grant a third  party the
right  to  proceed)  with  further  development  of the  Territory,  subject  to
territorial rights granted under then- existing franchise agreements.

Domino's UK is required  to pay DPII a one-time  store  opening fee for each new
Domino's Store, whether Company-owned or franchised.  Domino's UK has passed and
will  continue  to pass  the  cost  through  to the  franchisees  in the case of
franchised  stores. In addition,  Domino's UK must pay to DPII a monthly royalty
fee equal to a certain  percentage  of each Domino's  Store's gross sales.  This
royalty fee is payable to DPII  irrespective of the profitability of Domino's UK
or the Domino's  Store,  and  irrespective  of Domino's  UK's ability to collect
royalties from  franchisees.  This royalty fee as reduced in accordance with the
Stock Purchase Agreement discussed below, escalates each year until it reaches a
maximum of 3% in 2003.  Domino's  UK's  payments  to DPII are to be made in U.S.
dollars.

DPII and Domino's UK entered into a Stock Purchase Agreement as of May 26, 1997,
("SPA") whereby  Domino's UK agreed to sell to DPII 300,000 shares of its common
stock in consideration for royalty  concessions under the Master Agreement.  The
SPA provides that DPII may not sell, transfer or otherwise dispose of its shares
before May 26, 2001 and any  transferee  receiving  stock in  violation  of this
prohibition  will have no rights  with  respect to the  shares.  The SPA further
provides  for put and call  options on the common  shares at an agreed upon base
purchase  price of $1,200,000  adjusted to reflect  changes in the common stock,
such as, stock splits and dividends.

The Master  Agreement  cannot be assigned by Domino's UK without DPII's consent.
In  addition,   the  agreement   prohibits   Domino's  Pizza  Group  Limited,  a
majority-owned  subsidiary  of  Domino's  UK,  ("DP  Group")  and Colin and Gail
Halpern (as indirect  controlling  shareholders  of DP Group) from  transferring
control of Domino's UK without DPII's prior written consent. For the term of the
Master Franchise  Agreement,  DP Group and Colin and Gail Halpern are restricted
from having an interest in, being  employed  by,  advising or assisting  another
business in the pizza or pizza store business in the Territory.



                                        7
<PAGE>

Under  certain  circumstances  of  default  by  Domino's  UK  under  the  Master
Agreement,  DPII has the right to terminate the Master Agreement.  If the Master
Agreement   is   terminated,   Domino's  UK  would  be  subject  to  a  one-year
non-competition covenant in the delivery or carryout pizza business. Should this
occur,  DPII would have the right (but not the  obligation) to purchase,  at the
then-current fair market value, all of Domino's UK's rights and interests as the
subfranchisor  of Domino's  Stores and all of the assets of each Domino's  Store
owned by  Domino's  UK. The fair  market  value  would be  determined  by mutual
agreement of Domino's UK and DPII,  or in the absence of such  agreement,  by an
appraiser.  Under certain  circumstances of default by Domino's under the Master
Agreement,  Domino's UK has the right to terminate the agreement and continue as
an independent pizza operation, including the operation of the Commissary.


Commissary Agreement

Pursuant to the  agreement  with DPII  relating to the  Commissary  ("Commissary
Agreement"),  DPII has agreed to provide  Domino's UK, on an ongoing basis,  all
information  and  materials  necessary  to make  Domino's UK  familiar  with the
methods  used to  operate  and manage a Domino's  Commissary.  Domino's  UK must
maintain  the  confidentiality  of such  information  and,  subject  to  limited
exceptions,  cannot use it in any other business. The Commissary Agreement has a
term  co-extensive  with the Master  Agreement,  with  termination  and  default
provisions  and  restrictions  on  transfers   substantially  similar  to  those
contained in the Master Agreement.

Geographic Concentration/Expansion

As of December 31, 1997,  Domino's UK had 154 Domino's  Stores in the Territory.
Thirty-five were located in greater London,  two were in Northern  Ireland,  two
were in the Republic of Ireland,  three were in Scotland,  and one was in Wales,
with the remainder of the stores located throughout England.

The Company currently has two distribution  centers. The original center, opened
in 1985, is located in the Company's  Milton  Keynes  headquarters.  In November
1996, the Company opened a second distribution center in the north of England to
service the franchisees in Ireland, Scotland and Wales. As of December 1997 this
second distribution center was servicing 25 stores.

In February  1998, the Company began  construction  on a new facility to replace
the Company's  current  administrative  offices and Commissary in Milton Keynes.
The new facility,  also in Milton Keynes,  is scheduled for completion in August
1998.  National  Westminster  Bank has agreed to finance 65% of the construction
costs with a loan of  (pound)1.9  million  bearing a base plus 1 3/4% rate and a
15-year   term.   The  Company  has  a  commitment   to  finance  an  additional
(pound)500,000  for a five year period as a capital lease and corresponds to the
cost of the equipment  for the  Commissary.  The Company  expects to finance the
remainder of the building  costs out of cash flow from  operations  and from the
proceeds from the sale of 15% of the UK subsidiary,  DP Group,  to Nigel Wray in
June 1997.

In 1995, the Company signed an exclusive agreement with Total Oil Great Britain,
a subsidiary of the multinational Total Oil, to open non-traditional stores with
the opening of the first  Domino's  franchise  within a gas station  convenience
store.  Currently there are six Domino's  franchises  operating in these service
stations.  The Company has also  entered into an  arrangement  with  Alldays,  a
British  convenience store company, to establish Domino's delivery stores on the
premises of Alldays Stores.  The Company currently has nine Domino's  franchises
operating in Allday's Stores.  The Company  believes that these  non-traditional
stores   have   generated   additional   product   awareness   by   providing  a
phone-in/pick-up service to customers in areas where delivery is not available.

Expansion

Domino's  UK believes  that the  location  of a Domino's  Store is an  essential
element of success.  The site  selection  process  involves an  evaluation  of a

                                       8
<PAGE>

variety  of  factors,  including  demographics  (such  as  population  density);
specific site  characteristics  (such as visibility,  accessibility  and traffic
volume);  proximity  to  activity  centers  (such as office  or retail  shopping
districts and apartment,  hotel and office complexes);  competition in the area;
construction or renovation  costs,  and lease terms and conditions.  Domino's UK
will inspect and approve  proposed  sites for each  Domino's  Store prior to the
execution  of a  franchise  agreement  or lease.  All sites are  subject  to the
approval  of  Domino's  and the store must  generally  be  approved by the local
planning board. Planning board approval can take approximately six months.

To promote  restaurant  growth and  increase  the  presence  of  Domino's in the
Territory,  the Company has  established a very  successful  Dealer  Development
Program whereby  experienced and talented restaurant managers in the Domino's UK
system  who lack  start-up  capital  can enter  into the  Domino's  system  with
financial support from the Company.  Those who qualify make a good faith payment
of $7,500 while the Company invests the remaining capital to build and equip the
restaurant. The individual then operates the restaurant with full responsibility
for  operations,  marketing and financial  management.  There are currently five
Dealer Development units in the system.

Store Operations

Menu

Domino's Stores offer a substantially  similar core menu including  high-quality
pizza, garlic bread and soft drinks.  Other menu items include cole slaw and ice
cream. Domino's UK also continuously test-markets pizzas with specialty toppings
and adds those items to the regular menu if they prove  popular.  Pizza accounts
for  approximately  85% of Domino's  Stores' sales in the Territory.  Prices for
Domino's menu items are determined by  franchisees  and,  accordingly,  may vary
throughout the Territory.

Store Design

A typical  Domino's Store in the Territory  ranges from 800 to 1,200 square feet
and is designed to  facilitate  a smooth flow of food orders  through the store.
The layout includes specific areas for order taking and pizza preparation.  This
results in simplified operations, increased efficiency, and improved consistency
and  quality of food  products.  The  interior  of each store has a red and blue
color scheme and includes a bright menu board and carryout  customer  area.  The
exterior  typically  includes a Domino's sign with the Domino's logo. The design
for  a  Domino's  Store  must  comply  with  specified  Domino's  standards  and
specifications. However, these requirements are flexible enough to allow a store
to be  configured  to fit a wide variety of building  shapes and sizes,  thereby
increasing the number of suitable locations.

Domino's UK currently  estimates that once the site has the appropriate  council
planning  approval,  approximately  30-60  days is  required  to open a Domino's
Store.  Domino's UK currently  estimates the cost of opening a Domino's Store to
be between  (pound)90,000  ($148,000) and (pound)120,000  ($198,000),  including
leasehold improvements,  furniture, fixtures, equipment and opening inventories,
but  excluding  lease  payments  and the  franchise  fee.  Such  estimates  vary
depending on the size of the proposed store and the extent of required leasehold
improvements.

Delivery Service

Approximately 85% of the sales made by stores in the Territory are delivered.  A
delivery area is designed for each store to deliver a pizza within approximately
30 minutes of the time an order is placed. In defining a delivery area, Domino's
UK takes into  consideration  the least  favorable  driving  conditions,  strict
compliance  with all laws,  regulations  and rules of the road, and due care and
caution  in the  operation  of  delivery  vehicles.  Deliveries  throughout  the
Territory are  generally  made on mopeds owned by the  franchisee  and driven by
store  employees.  Domino's UK provides  training to franchisees on safe driving
and moped safety.

Store Personnel

A typical  Domino's  Store  employs a store  manager,  an assistant  manager and

                                       9
<PAGE>

approximately 14 hourly employees,  most of whom work part-time.  The manager is
responsible for the day-to-day operation of the store and for the maintenance of
operating standards.  Domino's UK and franchisees seek to hire experienced store
managers and staff and motivate and retain them by providing  opportunities  for
advancement and performance-based financial incentives.

Reporting and Oversight

Franchisees   provide  Domino's  UK  with  weekly  reports   containing  certain
information  including  the  amount of  royalty  sales,  the number of pizzas of
various  sizes  sold and the  number  of  pizzas  that  were  late.  Pizzas  are
considered  to be late if they are  removed  from the oven more than 21  minutes
after an order is taken.

Domino's UK maintains  financial,  accounting  and  management  controls for its
company owned Domino's Stores through the use of centralized accounting systems,
detailed budgets and computerized  management information systems. This includes
an accounting  system that provides each Domino's Store's daily sales,  expenses
and cash position.

Domino's UK has selected and continues to install  computer  systems in Domino's
Stores.  The system begins with the taking of orders and follows  through to the
management of  deliveries.  The system  generates  all of the daily,  weekly and
monthly  reports and maintains a customer  database that aids in the achievement
of  significant  sales  through  target  marketing.  The systems are  installed,
maintained,  and supported by Domino's  Pizza Group Ltd. ("DP Group").  To date,
the Company has installed  the system in 130 stores.  The Company has a computer
staff  that  trains  franchisees  in the use of these  in-store  computers.  The
Company has also formed a user group of franchisees  to facilitate  feedback and
to discuss new developments.

Franchise Program

General

Domino's UK believes that the success of the Domino's System,  together with the
relatively low initial capital investment per Domino's Store, allows Domino's UK
to  attract  franchisees  with  significant  business  experience.  Domino's  UK
considers its franchisees to be a vital part of its continued growth.  There can
be no assurance that Domino's UK will be able to attract a sufficient  number of
qualified franchisees to meet the development schedule in the Master Agreement.

Approval

Franchisees  are approved on the basis of the applicant's  business  background,
restaurant operating experience and financial resources.

Franchise Agreements

Each franchisee must comply strictly with the Domino's System and its standards,
specifications  and  procedures.  The  franchise  agreement  sets forth  various
requirements  regarding signage,  equipment,  menu, service,  hygiene,  hours of
operation and communications.

Under  Domino's UK's current  standard  franchise  agreement,  the franchisee is
required  to  pay,  at  the  time  of  signing  the   franchise   agreement,   a
non-refundable fee of either (pound)8,000 ($13,163) or (pound)18,000  ($29,172),
depending  upon  whether  the  franchisee  is an  existing  franchisee  or a new
franchisee of Domino's Stores. Generally, a franchise agreement is executed when
a  franchisee  secures a location.  Domino's  UK's  current  standard  franchise
agreement provides for a term of 10 years (with one ten-year renewal option) and
payment  to  Domino's  UK of a  royalty  fee of 5.5%  of  sales.  The  franchise
agreement gives Domino's UK the right to terminate a franchisee for a variety of
reasons,  including a franchisee's  failure to make payments when due or failure
to adhere to Domino's UK's policies and standards.

                                       10
<PAGE>

Franchise Store Development

Domino's UK furnishes each  franchisee  with  assistance in selecting  sites and
developing  stores.  Domino's  UK provides  its  franchisees  with the  physical
specifications  for typical  stores.  Domino's UK will  generally  present store
locations to franchisees for their approval and franchisees  must obtain Company
approval  of their  store  design.  Each  location  is  selected on the basis of
accessibility  and  visibility  of the site and  targeted  demographic  factors,
including population,  density,  income, age and traffic pattern. While Domino's
UK assists in the design and  planning of each store and assists the  franchisee
in acquiring the equipment needed for each location at competitive  prices,  the
franchisee  is  responsible  for all  costs  associated  with  the  purchase  of
equipment.

Franchise Training and Support

Every franchisee is required to have a principal  operator  approved by Domino's
UK who satisfactorily  completes Domino's UK's training program. Each manager of
a  franchised  store is required to complete  Domino's  UK's  training  program.
Multi-unit  franchisees are encouraged to hire a full-time training  coordinator
to train  new  employees  for  their  stores.  Domino's  UK  maintains  constant
communication with its franchisees, relaying operating and marketing information
through quarterly newsletters and posters for products and recruitment. Domino's
UK also conducts a quarterly  operations  advisory  meeting.  Every eight weeks,
Company  representatives  visit  all  stores  and  prepare  a  standards  report
detailing each store's operations.

Franchise Operations

All franchisees are required to operate their Domino's Stores in compliance with
Domino's UK's policies, standards and specifications,  including matters such as
menu, ingredients,  materials, supplies, services, fixtures,  furnishings, decor
and signs.  Each  franchisee  has full  discretion to determine the prices to be
charged to its customers.

Franchisee Advisory Group

Domino's  UK has  instituted  a  Franchisee  Advisory  Group for the  purpose of
assisting Domino's UK with the development of new ideas. The Franchisee Advisory
Group  is  composed  of up to eight  members,  all of whom  are  franchisees  of
Domino's  UK. The  members  serve at the  discretion  of  Domino's UK and advise
Domino's  UK on matters  such as store  design and menu,  operation,  marketing,
safety and competition in local markets.

Purchasing; Commissary and Distribution Operations

Domino's and Domino's UK set quality standards for all products used in Domino's
Stores in the Territory.  Domino's UK provides fresh dough and substantially all
of the other food products and supplies to  franchisees  through its  Commissary
and distribution facilities. In order to ensure product quality and consistency,
all stores are required to make all  purchases  through the  Commissary  or from
suppliers approved by Domino's and Domino's UK.

Domino's UK has begun  construction on a new Commissary and distribution  center
in Milton Keynes which is scheduled for completion in August 1998. This facility
will replace  Domino's UK's existing  Commissary.  Domino's UK believes that the
new facility will provide adequate room for expansion.  Domino's UK operates the
Commissary as a separate  profit  center.  The  Commissary  negotiates  purchase
contracts  for virtually  all of the  ingredients  and supplies used in Domino's
Stores. When possible,  Domino's UK enters into one-year,  fixed-price contracts
for products purchased for the Commissary.  Certain products, such as mushrooms,
are purchased at market prices due to the volatile nature of the prices of those
products.  The  Commissary  produces  pizza dough that it delivers  fresh to the
stores.

Virtually every store orders products  through the Commissary on a regular basis
and is billed by  Domino's  UK for the  purchases.  The  Commissary  employs  an

                                       11
<PAGE>

individual who is responsible for quality  control and quality  assurance and an
employee who is responsible for  distribution.  Products are delivered to stores
on a daily basis in refrigerated trucks that are owned or leased by Domino's UK.

All of the  equipment,  counters  and  smallwares  needed to open and  operate a
Domino's  Store can be purchased  from  Domino's UK.  Domino's UK also  provides
layout and design services and recommends  contractors,  signage  installers and
telephone  systems  to  its  franchisees.   Although  not  required  to  do  so,
substantially all of Domino's UK's franchisees  purchase most of their equipment
from Domino's UK or specified suppliers.

Advertising and Promotion

The franchise  agreement provides that each franchisee must contribute a monthly
advertising and promotion fee of 4% of its royalty sales to a fund  administered
by Domino's UK to be used for advertising, sales promotion and public relations.
Domino's UK is  responsible  for using the proceeds of the  advertising  fund to
develop  and  implement   advertising  and  promotional  plans,   materials  and
activities on behalf of the Domino's Stores in the Territory.  All  advertising,
promotional plans, materials and activities are subject to Domino's approval.

Domino's  UK's  principal  method of  promotion  is through  leaflets  which are
distributed  to the homes and places of  business  within each  store's  service
area. These leaflets  generally announce  promotional  prices, new menu items or
include special coupons.  The leaflets are generally designed by Domino's UK and
can be customized by each store. The customizing is facilitated  through the use
of a single print shop that  provides  printing  services to Domino's UK and the
franchisees.  Domino's UK also uses local radio advertising and cable television
for  advertising.  During  1997,  the  Company  began  advertising  on  national
television  throughout  Great Britain to further develop brand  recognition.  In
1998, Domino's UK intends to expand its marketing to include not only television
advertising,  but also  promotions  with  Hollywood  video rentals and new movie
releases.

Domino's UK is installing an in-store computer system in many franchisee stores.
This system provides data that enables  franchisees to better track  information
such as location of customers, the frequency with which each customer orders and
the response to a particular coupon or other promotion. Domino's UK believes the
system  will  enable  Domino's  UK to do better  target  marketing,  improve the
effectiveness of its marketing and reduce the cost of its marketing effort.

Trademarks

Domino's UK is authorized to use such  trademarks,  service marks and such other
marks as Domino's may  authorize  from time to time for use in  connection  with
Domino's  Stores  (collectively,   the  "Domino's  Trademarks").   Domino's  has
represented to Domino's UK that, to the best of its knowledge, Domino's owns all
of the rights,  title and interests to the Domino's  Trademarks used by Domino's
UK. Any events or  conditions  that  negatively  affect the Domino's  Trademarks
could have a material adverse effect on Domino's UK.

Foreign Currency and Exchange

Domino's UK converts  United  States  dollars,  as needed,  into British  pounds
sterling for use in the  Territory.  Revenues  from  operations in the Territory
will be maintained in  pound-denominated  accounts,  although they may be freely
converted into foreign currencies,  at then-current official exchange rates, for
purposes of paying for foreign goods,  payment of royalties and for repatriation
of profits. Domino's UK anticipates that it will continue to leave a substantial
portion of the profits of its operation, if any, in the Territory for use in its
business.  There are  presently  no  limitations  on  Domino's  UK's  ability to
repatriate  profits.  The exact  amount of  profits,  if any,  that  Domino's UK
repatriates at a given time will depend on, among other  factors,  Domino's UK's
financial condition, results of operations and capital requirements. Domino's UK
will be subject to risks from exchange rate  fluctuations.  Domino's UK may seek
to limit its  exposure  to the risk of  currency  fluctuations  by  engaging  in
hedging or other transactions.


                                       12
<PAGE>

United States and United Kingdom Income Taxes

Pursuant to United  States tax laws,  if Domino's  UK's  subsidiaries  organized
under the laws of the United  Kingdom  are not engaged in business in the United
States,  such  subsidiaries  will not be subject to United States taxation.  Any
earnings of these United Kingdom subsidiaries,  when paid to Domino's UK (or, in
certain cases, deemed paid, even though not distributed, under certain technical
provisions of the Internal  Revenue Code),  would be included by Domino's UK for
United States Federal income tax purposes.  However, Domino's UK would receive a
credit against Federal income tax liability that otherwise would result from any
deemed or actual  distributions  from its United Kingdom  subsidiaries,  for any
United Kingdom corporate taxes paid by such United Kingdom subsidiaries on these
distributions,   as  well  as  for  any  United  Kingdom  dividend  and  royalty
withholding  taxes imposed  directly on Domino's UK.  Because the United Kingdom
corporation  tax rate (presently 31 percent of taxable income) is lower than the
United States corporate tax rate,  Domino's UK does not anticipate being subject
to  significant  United  States  Federal  income  tax on either  distributed  or
undistributed earnings of its United Kingdom subsidiaries.

Under United Kingdom tax law, when a United Kingdom  corporation pays a dividend
to a shareholder,  it must also pay Advance Corporate Tax (referred to herein as
"ACT") with respect to that dividend. The ACT is presently set at 25% of the net
amount  of the  dividends  paid  (which is  equivalent  to 20% of the sum of the
dividend plus the ACT).  The paying  corporation  can normally  apply the ACT it
pays with respect to dividends paid by it in any  accounting  period as a credit
against its corporation tax liability for the accounting  period.  To the extent
that the ACT cannot be fully applied as such a credit,  any unapplied amount may
be carried back six years or carried forward indefinitely.

Under the  combined  effect of current  United  Kingdom  tax law and the current
United  States-United  Kingdom Tax Treaty  relating to income and capital  gains
taxes, if Domino's UK's United Kingdom  subsidiary pays it a dividend,  Domino's
UK will  receive in addition to the  dividend a tax credit  equal to one-half of
the ACT paid by the  subsidiary  with  respect  to that  dividend.  Subject to a
United  Kingdom  withholding  tax calculated as a percentage of the aggregate of
the dividend received and such tax credit,  which the treaty limits, in the case
of a dividend paid to a United States  corporation  holding not less than 10% of
the  subsidiary's  voting stock,  to no more than 5%. On November 25, 1997,  the
United Kingdom government  pronounced proposals which abolish the requirement to
account for ACT in respect of dividends paid on or after April 6, 1999.

Competition in the U.K. Pizza Business

Pizza has proven to be a  particular  success in the  United  Kingdom.  Although
there are several  large pizza  operators in the U.K.,  the market is fragmented
with well over 2,000  small  units.  The Company  believes  that the two largest
operators  in the  Territory  are Pizza Hut with  approximately  104  stores and
Perfect Pizza with approximately 148 stores dedicated to home delivery.

Domino's UK also competes for  qualified  franchisees  with many other  business
concepts, including international,  national and regional restaurant chains such
as McDonalds,  Kentucky Fried Chicken and Burger King. There can be no assurance
that  Domino's  UK will be able to  attract a  sufficient  number  of  qualified
franchisees to satisfy its obligations under the Master Agreement.

Employees

As of December 31, 1997, Domino's UK employed 212 persons of whom 117 were store
employees,  51 were  corporate  personnel  and 44 were employed in Domino's UK's
Commissary and distribution  center. Most store employees work part-time and are
paid on an hourly  basis.  None of  Domino's  UK's  employees  are  covered by a
collective bargaining agreement.

Government Regulation

Domino's UK is subject to various British, European and local laws affecting its

                                       13
<PAGE>

business. Each of Domino's UK's stores is subject to licensing and regulation by
a number of governmental authorities,  which include health, safety, sanitation,
building and fire  agencies in the  municipality  in which the store is located.
Difficulties  in obtaining or failure to obtain  required  licenses or approvals
could  delay or prevent  the opening of a new store in a  particular  area.  The
Commissary and  distribution  facility are licensed and subject to regulation by
national  and local  health and fire codes,  and the  operation of its trucks is
subject to certain  regulations.  Domino's UK is also  subject to  environmental
regulations,  though  these  have not had a  material  effect on  Domino's  UK's
operations.

Domino's  UK is subject to  British  and  European  Union  regulations  over the
franchiser-franchisee relationship. These regulations limit, among other things,
the duration and scope of non-competition provisions,  exclusive territories and
restrictions on sources of supply.

Domino's UK's store  operations are also subject to British,  European Union and
local laws  governing  such matters as wages,  working  conditions,  citizenship
requirements  and  overtime.  Domino's  UK's hourly  personnel are paid at rates
ranging from  (pound)3 to (pound)8 and,  accordingly,  further  increases  could
increase  Domino's UK's labor costs. New European  Community  regulations  could
materially increase Domino's UK's and franchisees' cost of operations.

Item 2.  Description of Properties

In the Territory,  DP Group maintains its place of business at Unit 10, Maryland
Road, Tongwell, Milton Keynes, England. There are three leased spaces associated
with DP Group's  administrative  offices and the  Commissary.  The leases (for a
total of approximately  20,000 square feet) cover a period of two to five years,
with options that allow for early  release  from the  commitments,  at a rate of
$194,889 per year.

Domino's  UK is  constructing  a new  site on  which  it is  building  a  larger
Commissary and distribution  center. The Company  anticipates  completion of the
project in August  1998.  DP Realty  Limited,  a wholly owned  subsidiary  of DP
Group,  has a total of 115  leases.  DP Realty  Limited  enters the lease on new
properties  as a service to  franchisees,  enabling  them to secure  longer rent
obligations. The Company then subleases the store space to each franchisee. This
practice allows the Company to ensure the franchisee  maintains the image of the
brand.  DP  Realty  Limited  obtains  a markup  on the  sublease  to  cover  the
administrative  costs. The Company currently subleases 108 of the 115 properties
to franchisees.  In 1997, the margin  generated from the subleases less the cost
of the leased properties was approximately $83,000.

The Company  has a one year lease for its U.S.  office  that is  renewable.  The
total rent payable by the Company is approximately $1,000 per month.

                                       14
<PAGE>


Item 3.  Legal Proceedings

The Company is not a party to any litigation or  governmental  proceedings  that
management  believes  would  result in  judgments  or fines  that  would  have a
material adverse effect on Domino's UK.

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

No matters were submitted to a vote of the holders of the Company's Common Stock
during the fourth quarter of the Company's fiscal year ended December 28, 1997.


                                       15
<PAGE>
                                     PART II

Item 5.  Market for the Issuer's Common Equity and Related Stockholder Matters

Market Information

The Company's  Class A Common Stock has never been listed and no trading  market
has ever developed.


Dividends

The Company  has not paid any cash  dividends  on its Common  Stock and does not
intend to pay cash dividends on its Common Stock for the foreseeable future. The
Company intends to retain future earnings to finance future developments.


Number of Stockholders

As of April 1, 1998, there were 20 record holders of the Company's Common Stock.
The Company  believes  that there are in excess of 20  beneficial  owners of the
Company's Common Stock.


                                       16
<PAGE>


Item 6. Management's  Discussion and Analysis of Financial Condition and Results
of Operations

Introduction

The  Company,  through its  subsidiary  International  Franchise  Systems,  Inc.
("Domino's UK") has the exclusive right to own,  operate and franchise  Domino's
Stores in the United  Kingdom and  Northern  Ireland.  Domino's  UK's  principal
business consists of franchise and royalty fees, the sale and support of Company
owned Domino's Pizza stores,  the sale of food,  non-food  products and in-store
computer systems to franchisees, and rental income from the sublease of delivery
stores.  These  sources of revenue  represent  the total  revenue  earned by the
Company.

The Company  had 154  Domino's  stores  opened by December  28,  1997.  New unit
openings of traditional delivery stores increased from 21 in 1996 to 27 in 1997.
The increase in store  openings is the result of: (i) enhanced  awareness of the
Domino's  brand  through  trade  exhibitions  and  industry  publications;  (ii)
additional store openings by existing  franchisees;  and (iii)  partnership with
Allday's (a British  convenience  store chain).  The Company continues to select
"high street" locations that provide enhanced  visibility,  adequate parking and
late night operating hours.

In June, 1997 the Company agreed to sell up to a 20% interest in its Domino's UK
operation for approximately $4.5 million to British  businessman Nigel Wray. Mr.
Wray paid Domino's UK  approximately  $3 million for 15% of its shares in the UK
subsidiary and holds an option to invest in DP Group for an additional 5% of new
shares for a price of $1.5  million.  The Company plans to use the proceeds from
the sale to fund expansion of Domino's UK and Domino's UK.

The Company  purchased  three Haagen Dazs ice cream parlors in 1995. The Company
decided  in June 1996 that  operating  and  accumulating  more  parlors  was not
consistent with its primary mission. As a result, one store was sold back to the
master  franchiser  in  September  1996.  The Company  disposed of the other two
stores in December 1997. The revenue and costs from these stores are reported in
discontinued operations.

The Company opened a sit down restaurant,  Pizzazz, in December 1995 to increase
further  awareness of the Domino's brand. The restaurant was closed in June 1996
after the Company determined that it wished to discontinue this line of business
as the success of the concept would require too much management  attention to be
redirected  from the  Company's  primary  business.  The Company  subleased  the
property  commencing  April 1997 and terminating at the expiration of the lease,
in December 2010.

Results of Operations

The Company  realized net income of $1,632,782  for the year ended  December 31,
1997 primarily due to the  nonrecurring  income from the sale of DP Group shares
to Nigel Wray ($2,163,038),  increased systemwide sales of 35% which resulted in
higher royalty and commissary income, and the opening of 27 new units.  Minority
interest  share of the  income  was  $735,538.  This  compared  to a net loss of
$123,222 for the same period last year.  Gross margins  increased from the prior
year  by  $2,123,616.   Income  from   continuing   operations,   excluding  the
non-recurring  income and the adjustment  for minority  interest was $549,881 in
1997 as compared to $488,672 in 1996 or an increase of 13%.


                                       17
<PAGE>
The following  tables set forth the percentage  relationships  to total revenue,
unless  otherwise  indicated,  of  certain  income  statement  data and  certain
restaurant data for the years 1997 and 1996.
<TABLE>
<CAPTION>
                                                         December 28, 1997       December 29, 1996
INCOME STATEMENT DATA
Revenues:
<S>                                                             <C>                        <C>  
Company Owned Stores                                            11.6%                      15.6%
Franchise Royalties                                             14.0%                      13.9%
Franchise Fees                                                   1.8%                       2.4%
Commissary Sales                                                59.7%                      57.6%
Property Rentals                                                 7.9%                       6.4%
Other Income                                                     5.0%                       4.1%
                                                              -------                   --------
Total Revenues                                                 100.0%                     100.0%

Costs and Expenses:
Company Owned Stores(1)                                         94.6%                      92.1%
Commissary Expenses(1)                                          86.5%                      90.0%
Franchise Support, G&A(2)                                       18.5%                      15.5%
Depreciation/Amortization(2)                                     2.7%                       3.3%
                                                              --------                  --------
Total Costs and Expenses                                        97.4%                      97.9%

Operating Income                                                 2.6%                       2.1%
Other Income(2)                                                  8.6%                       0.3%
                                                              -------                    -------
Income from Continuing Operations                               11.2%                       2.4%
                                                              =======                    =======

Notes:
(1)     As a percentage of respective revenues
(2)     As a percentage of total revenues

RESTAURANT DATA
Percentage Increase in Comparable
Restaurant Sales                                                  11%                        14%
Average Annual Sales for Company Owned
Stores Open for Full Year                                    $820,000                   $655,000

Number of Company Owned Stores:
Beginning of Year                                                  11                         10
Opened                                                              -                          2
Acquired                                                            2                          2
Sold                                                               (2)                        (3)
                                                              -------                    -------
End of Year                                                        11                         11

Number of Franchised Stores:
Beginning of Year                                                 116                         93
Opened                                                             27                         22
Acquired from Company                                               2                          3
Sold to Company                                                    (2)                        (2)
                                                              -------                    -------
End of Year                                                       143                        116
                                                              -------                    -------
Total Stores End of Year                                          154                        127
                                                              =======                    =======
</TABLE>

                                       18
<PAGE>
Comparison of Fiscal 1997 to Fiscal 1996

Revenues
Total  revenue for the fiscal  year ended  December  28, 1997 was $28.4  million
versus $22.8 million for the fiscal year 1996. This represents a 25% increase in
total revenue.  System-wide  sales increased from $55.0 million in 1996 to $72.1
million in 1997 or an increase of 31%.

Sales by company owned stores remained constant at $3.3 million. The consistency
in  revenues  was  primarily  the  result of the timing of the  acquisition  and
disposal of units and different trading levels of the stores acquired/disposed.

Royalty fees increased  37.9% to $4.0 million in 1997 from $2.9 million in 1996.
The increase was primarily due to a same store  comparable sales increase of 11%
versus 1996 and the opening of 27 new delivery stores.

Franchise and other fees  decreased to $507,000 in 1997 or a decrease of 2% over
1996 when fee revenues were $517,000.  The Company  increased fees attributed to
new stores  openings but  experienced a decrease in fees because more new stores
were opened by existing  franchisees which reduced  franchise  training fees and
support.

Commissary sales increased 38.5% net of intercompany sales to $16.9 million from
$12.2 million in 1996.  This increase of 38.5% is primarily due to new stores in
the system and the increase in comparable store sales.

The  increase in other  sales to $1.4  million  from  $831,000 is related to the
Company's expansion of computer sales to franchisees.

Cost and Expense

For the fifty-two week period ended December 28, 1997,  gross margins  increased
from $6.0 million in 1996 to $7.6 million in 1997,  or an increase from 26.5% to
26.8% of total  revenues.  This increase was  principally  related to consistent
margins throughout the year on the sale of commissary  products and better gross
margins on computer sales and franchise and other fees.

The  Company-operated  pizza  delivery  stores are either  staffed  with Company
personnel or are operated under a Dealer Development  Program.  Under the Dealer
Development  Program,  the  store is  operated  under a third  party  management
contract where the Company receives a fixed percentage of sales. In those cases,
the  Company  records  revenue  but does not  record  cost of food,  labor,  and
delivery expense  associated with the store. In the Company operated stores, the
Company was able to maintain  food costs as a  percentage  of sales at 25.5% for
both 1997 and 1996.  In total,  cost and expense at the  Company-operated  pizza
delivery stores increased as a percentage of revenue from 92.1% in 1996 to 94.6%
in 1997.  The increase is attributed to new corporate  owned store  openings and
acquiring two under performing stores from franchisees.

The Commissary  expenses  include the cost of sales,  warehousing and packaging,
and  distribution  expenses  associated  with food sales,  non-food  sales,  and
equipment sales.  These expenses decreased as a percentage of revenue from 90.0%
in 1996 to 86.5% in 1997. This decrease is primarily due to improved controls to
ensure that Commissary pricing was adjusted for raw material price fluctuations.

Franchise support, general and administrative expenses increased as a percentage
of revenues from 15.5% to 18.2% as the Company increased franchise support staff
to serve  existing  stores and to prepare for  continuing  new store  growth and
expanding  market share. The Company's market share has increased from 5% to 12%
in the last four years.

Depreciation and  amortization  decreased as a percentage of revenues to 2.7% in
1997 from 3.3% in 1996. The expense decreased primarily as a result of increased

                                       19
<PAGE>

revenues and lower capital expenditures in 1997 versus 1996.

Net Other Income increased to $2,444,421 from $183,577 in 1996. This increase is
primarily  related  to the  interest  earned on the  lending of funds to related
parties  ($247,925)  and  the  gain  (2,163,038)  on sale  of a  portion  of the
investment in subsidiaries.

Liquidity and Capital Resource

The  Company's  net working  capital at December 28, 1997 was $3.1  million,  an
increase from $1.4 million on December 29, 1996.  Total current assets were $9.1
million at December 28, 1997 versus $7.2  million on December 28, 1996.  Current
liabilities  increased by $0.1 million in 1997 to $6.0 on December 28, 1997 from
$5.9 million in 1996.

The primary  increases in current  assets  related to cash which  increased as a
result of the  expanding  business  and the sale of shares  to Nigel  Wray.  The
increase in current  liabilities relates to decreases in accounts payable offset
by increases in value-added taxes payable, and accrued expenses.

The following table  represents the net funds provided and/or used in operating,
financing, and investment activities for both periods:
<TABLE>
<CAPTION>
                                                              (Thousands)
                                            December 30 - December 28,          January 1 - December 29,
                                                      1997                                1996
Net Cash Provided/(used) from
<S>                                                  <C>                                  <C>   
Continuing Operations                                $2,239                               $1,193
Net Cash (used) for Discontinued Operations            (223)                                (653)
Net Cash (used) from Investing                         (755)                                (464)
Net Cash provided/(used) by Financing                   820                                 (307)
</TABLE>

The  Company  generated  approximately   $2.2million  in  cash  from  continuing
operations and utilized cash of $23,000 in discontinued operations.  The Company
had a net profit of  approximately  $1.6 million for the year ended December 28,
1997.  Trade  accounts  receivable and  franchisee  loans and other  receivables
increased from the prior year by $532,000,  prepaid and accrued income decreased
by $599,745,  and inventories increased $150,000.  Accounts payables and accrued
and other payables decreased by $78,000,  and value added taxes and income taxes
payable increased by $627,000.  The Company anticipates that it will continue to
generate  positive  cash flow from  operations  in 1998 as a result of improving
profits of the  Company,  the opening of  additional  stores,  and  reduction of
administrative expenses as a percentage of sales.

The Company  utilized  $759,000 and $464,000 in investing  activities for fiscal
years  1997 and 1996,  respectively.  The  Company  requires  capital to open or
acquire stores, the acquisition of new commissary equipment and delivery trucks,
or the enhancement of corporate  systems and facilities.  The Company spent $3.2
million in 1997 versus $1.3 million in 1996 in property and  equipment  and land
for the new Commissary.  The Company  anticipates that it will need $6.2 million
to open three new corporate  stores and invest in  Commissary  equipment and the
new facility in 1998.  The Company also  believes it will collect  approximately
$1.7 million of the receivable from its parent, Woodland Limited Partnership, in
1998. Cash utilized for financing  activities during the year ended December 28,
1997 was $0.8 million.  Proceeds of a loan to DP Group from National Westminster
Bank totaled $1.5 million. Repayments of debt totaled $550,860 and capital lease
payments totaled $97,000.

The Company has a commitment on office space at its Corporate office until June,
1998.  The Company's UK subsidiary  has its principle  office in Milton  Keynes,
England,  and leases 115 Domino's store  properties.  Estimated annual operating
lease payments for the next five years range each year between $2.52 million and

                                       20
<PAGE>

$2.86  million  and  approximately  $21  million  for all of the years  combined
subsequent to 2002 for a total of $34.8  million.  The Company  collects  rental
income from the sublease of the Domino store properties that total approximately
$32.1  million.  The  Company  does not  believe  that the net  exposure is $2.6
million because the total minimum future rental income as calculated assumes the
subleases are for the initial ten year period of the franchise  agreement  only.
The Company  believes that the  franchisees  will exercise the renewal option of
the franchise agreement.

The Company has lease obligations under capital leases for commissary  equipment
and motor vehicles. As of December 28, 1997, and the next two years, the Company
has decreasing annual  obligations which range from $108,000 down to $25,000 per
year. The net present value of these obligations total approximately $188,000.

The  Company's  anticipated  debt  payment  through  December  27,  1998 will be
approximately  $200,000. In the following three years, annual principal payments
are expected to be approximately $218,000, $200,000, and $138,000.

The  Company  believes  it can  meet its  short-term  liquidity  needs  from the
projected cash to be generated from  operations and collection of its receivable
from the parent company of approximately $2.4 million.  The Company's  long-term
liquidity  needs  will also be met by cash  generated  from  operations,  and if
necessary,  supplemented  by debt financing or additional  equity  funding.  The
Company currently has a commitment from National Westminster Bank to finance the
commissary.  The loan  commitment is  approximately  $4.0  million.  The Company
anticipates it will spend $6.2 million to open additional  corporate  stores and
acquire  commissary  equipment in 1998. The Company is not obligated to open any
additional  Company  owned  stores by December  1998 under the Master  Franchise
Agreement.  If the company's plans change, or its assumptions or estimates prove
to be inaccurate,  the Company may require additional funds to achieve increased
sales.  If such  funds are  unavailable,  the  Company  will have to reduce  its
operations to a level more consistent with its available funding.

Inflation

              The primary inflationary factor affecting the Company's operations
is the  cost of  food.  As the  cost of food  has  increased,  the  Company  has
historically  been able to offset these increases through economies of scale and
improved operating procedures,  although there is no assurance that such offsets
will continue. To date, inflation has not had a material effect on the Company's
operations.


Item 7.  Financial Statements and Supplementary Data

         See the  Financial  Statements  and  Supplementary  Data  listed in the
accompanying  Index to Financial  Statements  and  Schedules on Page F-1 herein.
Information  required  by other  schedules  called for under  Regulation  S-X is
either not  applicable  or is  included  in the  financial  statements  or notes
thereto.


Item  8.  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
Financial Disclosures

Moore  Stephens,  P.C. was  previously  the principal  accountants  for Crescent
Capital,  Inc. On May 19, 1998, that firms appointment as principal  accountants
was  terminated.  The  decision  to  terminate  was  approved  by the  board  of
directors.  On May 19,  1998,  the Company  appointed  Wayne P.  Hickey,  CPA to
replace Moore Stephens,  P.C. as Independent  auditor for the Company for fiscal
year ended December 31, 1997. The decision to appoint Mr. Hickey was approved by
the board of directors.  In  connection  with the audits of the two fiscal years
ended December 31, 1996, and the subsequent  interim period through December 10,
1997,  there were no  disagreements  with Moore Stephens,  P.C. on any matter of
accounting principles or practices,  financial statement disclosure, or auditing
scope or procedures,  which  disagreements if not resolved to their satisfaction
would have caused them to make reference in connection with their opinion to the
subject of the disagreement.

The  audit  reports  of  Moore  Stephens,  P.C.  on the  consolidated  financial

                                       21
<PAGE>

statements of Crescent  Capital,  Inc. and  subsidiaries as of and for the years
ended  December  29, 1996 and  December  31,  1995,  did not contain any adverse
opinion or  disclaimer  of opinion,  not were they  qualified  or modified as to
uncertainty, audit scope, or accounting principles.

The  Company  has agreed to provide  indemnification  to Moore  Stephens,  P.C.,
subject to certain conditions,  for legal and other costs that might be incurred
in  defending  itself  in the  event  of  threatened  or  actual  litigation  in
connection with the issuance of its auditors  report on the financial  statement
of the Company.

                                       22
<PAGE>

                                    PART III

Item 9.  Directors, Executive Officers, Promoters and Control Persons;
         Compliance with Section 16(a) of the Exchange Act

The Director and Executive Officer, his age, his principal occupation during the
past  five  years or more,  and  directorships  of each in public  companies  in
addition to the Company, are as follows:

Colin  Halpern,  age 60,  has  served as  President,  Secretary,  Treasurer  and
Director of the Company since January 1991. He also currently serves as Chairman
of the Board of International  Franchise  Systems,  Inc,  Director of Celebrated
Group Plc., and President,  Chief Executive Officer and Chairman of the Board of
Directors of NPS Technologies Group, Inc., all of which are public companies. He
has held  these  positions  since  July  1994,  January  1998 and  August  1983,
respectively.  Mr. Halpern serves as President and Chairman of the Board for Red
Hot Concepts,  a public holding company that operates Chili's restaurants in the
United  Kingdom.  He also served as President from June 1994 to August 1996, and
is  serving  again as  President  since May 1997.  Mr.  Halpern  also  served as
Executive Vice President of Lafayette  Industries  from January 1992 to December
1996.  From  1985 to the  present,  Mr.  Colin  Halpern  has also  served as the
Chairman of Universal  Services  Group,  Inc. Mr. Colin Halpern was formerly the
Chairman and Chief Executive  Officer of DRC Industries,  Inc., a company which,
from November 1975 through October 1985, had a Budget  Rent-A-Car master license
agreement for the New York metropolitan  area,  including  LaGuardia and John F.
Kennedy Airports.

In June 1991,  the SEC sought and received,  and NPS  Technologies  Group,  Inc.
("NPS")  consented to the entering of, an order against NPS and its officers and
employees that required NPS to file certain  periodic  reports with the SEC that
had not been timely filed and  permanently  restrained and enjoined NPS and such
officers and employees from failing to file in proper form with the SEC accurate
and  complete  reports  required  to be filed by NPS  pursuant  to the rules and
regulations  of the SEC. Mr. Colin Halpern is the President and Director of NPS,
which is currently  inactive.  Since June 1991, certain of NPS' reports have not
been timely  filed by NPS and other  reports have not been filed in proper form.
The SEC has taken no  further  action  against  NPS or any of its  officers  and
employees.


Item 10. Executive Compensation

Summary Compensation Table

The  following  table sets forth the  aggregate  cash  compensation  paid by the
Company for the fifty-two  weeks ended December 31, 1997 to the Chief  Executive
Officer.

<TABLE>
<CAPTION>
                                                                Long-Term Compensation
                      Annual Compensation(1)         Awards
                                    Other   Restricted   Securities
Name and               Salary      Annual      Stock     Underlying     All           Other
Principal           Compensation    Bonus   Compensation  Award(s)    Options     Compensation
Position      Year        ($)        ($)        ($)         ($)         (#)            ($)     
<S>           <C>        <C>          <C>        <C>         <C>         <C>            <C>
Colin Halpern 1997       48,000       0          0           0           0              0
President     1996       48,000       0          0           0           0              0
              1995       14,000       0          0           0           0              0
</TABLE>

(1) Excludes  certain  perquisites and other amounts,  which,  for any executive
officer did not  exceed,  in the  aggregate  the lesser of $50,000 or 10% of the
total annual salary and bonus for such executive officer.

Stock Option Grants

No Stock Options or Stock Appreciation Rights were granted by the Company during

                                       23
<PAGE>

fiscal year 1997. The Company `s Chief Executive  Officer did not hold any stock
options or stock appreciation rights as of December 31, 1997.


Item 11. Security Ownership of Certain Beneficial Owners and Management

         The table  below sets  forth  certain  information  as of April 1, 1998
regarding the beneficial ownership,  as defined in regulations of the Securities
and Exchange Commission,  of Common Stock of (i) each person who is known to the
Company to be the beneficial owner of more than 5% of the outstanding  shares of
the  Company's  Common Stock,  (ii) each director of the Company,  and (iii) all
directors  and  executive  officers  as a group.  On April 1,  1998,  there were
545,800 shares of the Company's Class A Common Stock and 2,000,000 shares of the
Company's Class B Common Stock  outstanding.  Unless  otherwise  specified,  the
named beneficial owner has sole voting and investment  power. The information in
the table below was furnished by the persons listed.  "Beneficial  Ownership" as
used herein has been  determined in accordance with the rules and regulations of
the  Securities  and  Exchange  Commission  and  is  not  to be  construed  as a
representation  that any of such  shares are in fact  beneficially  owned by any
person.
<TABLE>
<CAPTION>
Names and Address of                   Amount and Nature of                      Percentage of
  Beneficial Owner                     Beneficial Ownership                          Class
                                         Class A   Class B                      Class A   Class B
<S>                                      <C>       <C>                          <C>         <C> 
Woodland Limited Partnership(1)          332,860   2,000,000                    60.99%      100%
1200 18th Street, NW
Washington, DC  20036

Colin Halpern(1)                              0          0                         0          0

All directors and officers
as a group (1 person)                         0          0                         0          0
</TABLE>

(1) Woodland Limited Partnership, a limited partnership, of which Woodland Group
  Corporation is the General Partner,  owns  substantially  all of the Company's
  issued  and  outstanding  shares  of  Common  Stock.  Woodland  Group is owned
  one-third by Mrs. Gail Halpern. Gail Halpern is the wife of Colin Halpern. Jay
  Halpern and Nancy Gillon are the children of Gail and Colin Halpern. By reason
  of their ownership of the outstanding stock of Woodland Group Corporation, Mr.
  Halerpn,  Ms.  Gillon  and Mrs.  Halpern  may be deemed  to have a  beneficial
  interest in the shares of the Company owned by Woodland  Limited  Partnership.
  Messrs.  Halpern, Ms. Gillon and Mrs. Halpern disclaim beneficial ownership of
  such securities.

Item 12. Certain Relationships and Related Transactions

The Company has entered into several  transactions with affiliates.  The Company
believes  that the terms of the  transactions  with  affiliates  are on terms at
least as favorable as could have been obtained from unaffiliated  third parties.
The Company will require that in the future,  transactions  with affiliates will
continue to be made on terms the Company  believes  are at least as favorable as
those obtainable from unaffiliated third parties.

                                       24
<PAGE>
Woodland Limited Partnership

Woodland Limited Partnership ("Woodland") is a partnership controlled by members
of  Mr.  Colin  Halpern's  family.   Woodland  owns  approximately  92%  of  the
outstanding voting stock of Crescent Capital, Inc.  ("Crescent"),  the holder of
approximately  67% of the voting stock of the Company.  Mr. Colin Halpern is the
President and sole  director of Crescent.  Through its ownership of the stock of
Crescent,  Woodland is able to control the election of  directors  and any other
matter submitted for shareholder approval.

Advances to Colin Halpern

The  Company  has  advanced  funds from time to time to Mr.  Colin  Halpern.  At
December  28, 1997,  the total amount due to the Company from Mr. Colin  Halpern
was $148,573 reflecting an increase of $23,557 from December 31, 1996.


Item 13. Exhibits and Reports on Form 8-K

         (a) Exhibits
     *    Incorporated by reference from the Company's Registration Statement on
          Form S-1 declared effective on November 25, 1991; File No. 33-39759.

     **   Incorporated  by reference  from the Company's  current Report on Form
          8-K dated December 29, 1993.

         (b) Reports on Form 8-K

         None

                                       25
<PAGE>
                                   SIGNATURES


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


                                     CRESCENT CAPITAL, INC.



                                     By:/s/ Colin Halpern
                                         Colin Halpern, President


                                     Date:  July 8, 1998


In accordance with the requirements of the Securities Exchange Act of 1934, this
report has been signed  below by the  following  persons on behalf of the issuer
and in the capacities and on the dates indicated.

/s/Colin Halpern                     President,                  July 8, 1998
Colin Halpern                        Chairman of the Board


                                       26
<PAGE>

CRESCENT CAPITAL, INC.
INDEX

Independent Auditor's Report..................................       F-2.....F-3

Consolidated Balance Sheet as of December 31, 1997............       F-4.....F-5

Consolidated Statements of Operations for the years ended December 31,
1997 and 1996.................................................       F-6.....

Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1997 and 1996 ...................................       F-7.....

Consolidated Statements of Cash Flows for the years ended December 31,
1997 and 1996 ................................................       F-8.....F-9

Notes to Consolidated Financial Statements....................      F-10....F-26


                                       F-1
<PAGE>
                          INDEPENDENT AUDITOR'S REPORT

To the Stockholders and Board of Directors of
   Crescent Capital, Inc.


                  I have  audited  the  consolidated  balance  sheet of Crescent
Capital,  Inc. and its  subsidiaries  as of December  31, 1997,  and the related
consolidated statements of income, retained earnings, and cash flows for each of
the year then ended.  These financial  statements are the  responsibility of the
Company's  management.  My  responsibility  is to  express  an  opinion on these
financial statements based on my audit.

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

                  In my opinion,  based on my audit, the consolidated  financial
statements  referred to above  present  fairly,  in all material  respects,  the
financial position of Crescent Capital, Inc. and its subsidiaries as of December
31, 1997, and the results of their  operations and their cash flows for the year
then ended in conformity with generally accepted accounting principles.


                                             WAYNE P. HICKEY
                                             Certified Public Accountant

Bohemia, New York
May 19, 1998
                                       F-2
<PAGE>
                          INDEPENDENT AUDITOR'S REPORT


To the Stockholders and Board of Directors of
   Crescent Capital, Inc.


                  We have audited the accompanying consolidated balance sheet of
Crescent  Capital,  Inc. and its  subsidiaries  as of December 31, 1996, and the
related  consolidated  statements of operations,  stockholders'  equity and cash
flows for the fifty-two week period ended December 31, 1996. These  consolidated
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audit.

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

                  In our opinion, the consolidated financial statements referred
to above present fairly, in all material  respects,  the consolidated  financial
position of Crescent Capital, Inc. and its subsidiaries as of December 31, 1996,
and the  consolidated  results of their operations and their  consolidated  cash
flows for the fifty-two week period ended December 31, 1996, in conformity  with
generally accepted accounting principles.


                                          MOORE STEPHENS, P.C.
                                          Certified Public Accountants

Cranford, New Jersey
March 6, 1997

                                       F-3
<PAGE>
CRESCENT CAPITAL, INC.
CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1997.
<TABLE>
<CAPTION>
                                                                                        December 31,        December 31,
                                                                                           1 9 9 7             1 9 9 6
<S>                                                                                   <C>                 <C>            
Assets:
Current Assets:
   Cash and Cash Equivalents                                                          $     2,575,876     $       657,880
   Trade Accounts Receivable [Net of Allowance of $166,939]                                 2,050,094           2,278,638
   Franchise Loans                                                                            707,009           1,008,990
   Inventories                                                                              1,015,651             865,131
   Prepaid Expenses and Other Current Assets                                                  306,716             778,834
   Due from a Related Party                                                                 1,687,762           1,471,997
   Due from Officer                                                                           148,573             125,016
   Other Receivables                                                                          611,690              51,475
                                                                                      ---------------     ---------------

   Total Current Assets                                                                     9,103,371           7,237,961
                                                                                      ---------------     ---------------

Property and Equipment - At Cost                                                            7,132,961           4,443,747
Less:  Accumulated Depreciation:                                                            1,697,143           1,020,205
                                                                                      ---------------     ---------------

   Property and Equipment - Net                                                             5,435,818           3,423,542
                                                                                      ---------------     ---------------

Other Assets:
   Deposits                                                                                   308,318             637,562
   Deferred Offering Costs                                                                    100,000             100,000
   Intangible Assets - Net                                                                  1,079,741           1,107,953
   Net Assets of Discontinued Operations                                                           --                  --
                                                                                      ---------------     ---------------

   Total Other Assets                                                                       1,488,059           1,845,515
                                                                                      ---------------     ---------------

   Total Assets                                                                       $    16,027,248       $  12,507,018
                                                                                      ===============     ===============
</TABLE>

The  Accompanying  Notes are an Integral  Part of these  Consolidated  Financial
Statements.

                                       F-4
<PAGE>
CRESCENT CAPITAL, INC.
CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1997.
<TABLE>
<CAPTION>
                                                                                          December 31,        December 31,
                                                                                            1 9 9 7             1 9 9 6
<S>                                                                                   <C>                 <C>            
Liabilities and Stockholders' Equity:
Current Liabilities:
   Trade Accounts Payable                                                             $     2,691,247     $     3,704,523
   Accrued Expenses and Other Payables                                                      1,920,684           1,186,168
   Taxes Payable                                                                            1,042,354             415,771
   Obligations Under Capital Leases                                                           111,604             217,691
   Current Portion of Long Term Debt                                                          200,629             321,621
   Related Party Payable                                                                           --              29,785
                                                                                      ---------------     ---------------
   Total Current Liabilities                                                                5,966,518           5,875,559
                                                                                      ---------------     ---------------

Long-Term Liabilities:
   Long-Term Debt                                                                           1,438,409             392,262
   Obligations Under Capital Leases                                                            76,843              67,877
                                                                                      ---------------     ---------------

   Total Long-Term Liabilities                                                              1,515,252             460,240
                                                                                      ---------------     ---------------

Commitments and Contingencies                                                                      --                  --
                                                                                      ---------------     ---------------

Minority Interest                                                                           3,415,973           2,015,233
                                                                                      ---------------     ---------------

Stockholders' Equity:
   $.01 Par Value, Preferred Stock, 1,000,000 Shares Authorized,
     No Shares Issued and Outstanding                                                              --                  --
   $.001 Par Value, Class A Common Stock - 5,000,000 Shares
     Authorized, 545,800 Shares Issued 494,057 Shares Outstanding                                 546                 546

   $.001 Par Value, Convertible Class B Common Stock -
     2,000,000 Shares Authorized, Issued and Outstanding                                        2,000               2,000

   Additional Paid-in Capital                                                               6,209,214           6,209,214

   Retained Earnings                                                                        1,177,971             322,246

   Cumulative Foreign Currency Translation Adjustment                                         288,194             250,400

   Note Receivable for Stock, Including Accrued Interest                                   (1,972,275)         (1,852,275)

   Treasury Stock                                                                            (776,145)           (776,145)
                                                                                      ----------------    ----------------

   Total Stockholders' Equity                                                               5,129,505           4,155,986
                                                                                      ---------------     ---------------

   Total Liabilities and Stockholders' Equity                                         $    16,027,268       $  12,507,018
                                                                                      ===============     ===============
</TABLE>
The  Accompanying  Notes are an Integral  Part of these  Consolidated  Financial
Statements.
                                       F-5
<PAGE>
CRESCENT CAPITAL, INC.
CONSOLIDATED STATEMENT OF OPERATIONS AS OF DECEMBER 31, 1997
 and DECEMBER 31, 1996.
<TABLE>
<CAPTION>
                                                                                                   Years ended
                                                                                                   December 31,
                                                                                          1 9 9 7             1 9 9 6
<S>                                                                                   <C>                 <C>            
Revenues:
   Sales by Company-Owned Stores                                                      $     3,297,210     $     3,319,001
   Commissary Sales                                                                        16,943,678          12,241,320
   Royalty Sales                                                                            3,960,780           2,941,971
   Rental Income                                                                            2,227,129           1,364,434
   Franchise Fees                                                                             506,974             516,780
   Computer Sales                                                                           1,375,494             828,828
   Management Fees from Related Party/Other Income                                             49,716              25,000
                                                                                      ---------------     ---------------

   Total Revenues                                                                          28,360,981          21,237,334
                                                                                      ---------------     ---------------

Cost of Revenues:
   Company-Owned Stores                                                                     2,116,317           2,067,747
   Food, Packaging and Distribution                                                        14,649,036          10,796,422
   Other Operating Expenses                                                                 4,000,654           2,901,077
                                                                                      ---------------     ---------------

   Total Cost of Revenues                                                                  20,766,007          15,764,976
                                                                                      ---------------     ---------------

   Gross Margin                                                                             7,594,974           5,472,358

General and Administrative Expenses                                                         6,029,120           4,474,062
Loss on Sale of Fixed Assets                                                                   67,078                  --

Depreciation and Amortization                                                                 755,916             693,201
                                                                                      ---------------     ---------------

   Operating Income                                                                           742,860             305,095
                                                                                      ---------------     ---------------

Other Income [Expense]:
   Interest Income from Related Party                                                         247,925             233,014
   Interest Income                                                                            142,435              69,017
   Interest Expense                                                                          (108,977)           (118,454)
   Sale of Investment in Subsidiary                                                         2,163,038                  --
                                                                                      ---------------     ---------------

   Total Other Income                                                                       2,444,421             183,577
                                                                                      ---------------     ---------------

Minority Interest in Income from Continuing Operations
   of Subsidiary                                                                             (735,538)             41,943
                                                                                      ---------------     ---------------

   Income Before Tax                                                                        3,187,281             530,615

Income Taxes                                                                                  656,362                  --
                                                                                      ---------------     ---------------

   Income from Continuing Operations                                                        1,795,381             530,615
                                                                                      ---------------     ---------------

Discontinued Operations:
   [Loss] from Discontinued Operations after Taxes (Note 8)                                  (162,599)           (653,837)

   Net [Loss] Income                                                                  $     1,632,782     $      (123,222)
                                                                                      ===============     ================

Earnings [Loss] Per Share:
   Income from Continuing Operations                                                  $              .71  $           .21
   Loss from Discontinued Operations                                                                (.08)            (.26)
                                                                                      ------------------  ---------------

   Net [Loss] Income Per Share                                                        $              .64  $          (.05)
                                                                                      ==================  ===============

   Weighted Average Number of Shares Outstanding                                            2,545,800           2,528,269
                                                                                      ===============     ===============
</TABLE>
The  Accompanying  Notes are an Integral  Part of these  Consolidated  Financial
Statements.

                                      F-6
<PAGE>
CRESCENT CAPITAL, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>

                                                                                  Cumulative
                                                                                   Foreign      Common
                                           Common Stock    Additional             Currency    Stock of the    Note       Total
                                      Number of             Paid-in    Retained  Translation Parent Held by Receivable Stockholders'
                                        Shares      Amount  Capital    Earnings  Adjustments a Subsidiary   For Stock   Equity
<S>                                    <C>           <C>     <C>           <C>          <C>       <C>      <C>           <C>      
  Balance - December 31, 1995           2,545,200     2,545   6,230,593     445,468      31,622       --   (1,500,000)    5,210,228

Accrued Interest on Note                                                                                     (352,275)     (352,275)

Additional Offering Costs from 2nd Phase
  Sale of Stock of Subsidiary                  --        --     (21,379)         --          --       --           --       (21,379)

Issuance of Common Stock on
  Exercise of Warrants                        600         1          --          --          --       --           --             1

Common Stock Issued to Subsidiary              --        --          --          --          -- (776,145)          --      (776,145)

Foreign Currency Translation Adjustment        --        --          --          --     218,778       --           --       218,778

Net [Loss] for the year ended
  December 31, 1996                            --        --          --    (123,222)         --       --           --      (123,222)
                                        ---------   -------  ----------  ----------    -------- --------  -----------    ----------

  Balance - December 31, 1996           2,545,800  $  2,546  $6,209,214    $322,246    $250,400 (776,145) $(1,852,275)   $4,155,986
                                        =========   =======  ==========  ==========    ======== ========  ===========    ==========

Minority Interest Adjustment                   --        --          --    (577,057)         --       --           --      (577,057)

Net Profit for the Year Ended
  December 31, 1997                            --        --          --   1,632,782          --       --           --     1,632,782

Accrued Interest on Note                       --        --          --          --          --       --     (120,000)     (120,000)

Foreign Currency Translation Adjustment        --        --          --          --      37,794       --           --        37,794
                                        ---------   -------  ----------  ----------    -------- --------  -----------    ----------

  Balance - December 31, 1997           2,545,800   $ 2,546  $6,209,214  $1,377,971    $288,194 (776,145) $(1,972,275)   $5,129,505
                                        =========   =======  ==========  ==========    ======== ========  ===========    ==========
</TABLE>

Foreign Currency Translation:
The  functional  currency for the  Company's  foreign  operations is the British
pound sterling. The translation from British pound sterling into U.S. dollars is
performed for balance sheet accounts  using current  exchange rates in effect at
the balance  sheet date and for revenue  and expense  accounts  using a weighted
average exchange rate during the period. The gains or losses resulting from such
translation  are  included  in   stockholders'   equity.   Equity   transactions
denominated in British pound  sterling have been  translated  into U.S.  dollars
using the effective rate of exchange at date of issuance.

The  Accompanying  Notes are an Integral  Part of these  Consolidated  Financial
Statements.

                                      F-7
<PAGE>
CRESCENT CAPITAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                                              Fifty-two weeks ended
                                                                                        December 31,         December 31,
                                                                                           1 9 9 7              1 9 9 6
<S>                                                                                   <C>                 <C>             
Operating Activities:
   Net Income (Loss) Before Minority Interest After Tax                               $     2,592,285     $      (530,615)
                                                                                      ---------------     ----------------
   Adjustments to Reconcile Net Income (Loss) to Net Cash (Used for) Provided by
     Operating Activities:
     Depreciation and Amortization                                                            921,342             917,546
     Loss from Discontinued Operations                                                             --             631,341
     Gain on Sale of Subsidiary Stock                                                      (2,163,038)                 --
     Recovery of Bad Debts                                                                         --             (46,230)
     (Loss) on Disposal of Property and Equipment                                              67,078            (306,057)
   Changes in Assets and Liabilities:
     (Increase)/Decrease in:
       Trade Accounts and Other Receivables                                                   530,525             (61,787)
       Inventories                                                                           (150,520)           (174,788)
       Prepaid Expenses and Accrued Income                                                    352,120            (653,488)
       Other Assets                                                                          (230,971)           (206,176)
     Increase (Decrease) in:
       Trade Accounts Payable                                                              (1,040,025)            320,797
       Accrued Expenses                                                                       734,525             334,994
       Other Payables and Accrued Interest                                                         --             300,802
       Taxes Payable                                                                          626,583              79,244
                                                                                      ---------------     ---------------

     Net Cash Provided by Continuing Operations                                             2,239,903           1,035,472
                                                                                      ---------------           ---------
     Net Cash (Used) by Discontinued Operations                                              (223,965)           (653,837)
                                                                                      ----------------           ---------
   Net Cash - Operating Activities - Forward                                                2,015,939             381,635
                                                                                      ---------------     ---------------

Investing Activities:
   Proceeds from Sale of Subsidiary Stock                                                   3,125,063                  --
   Purchase of Property and Equipment and Capitalized Costs                                (3,253,569)         (1,294,141)
   Cost of Disposal of Subsidiary Stock                                                      (664,873)                 --
   Proceeds on Disposal of Property and Equipment                                             390,542             700,855
   Advances to Officer                                                                       (125,557)                 --
   Payments by Officer                                                                        102,000              43,135
   Advances to Parent Company                                                                (981,203)           (440,000)
   Payments by Parent Company                                                                 765,439             609,532
   Payments/Advances to Related Parties                                                       (29,785)                 --
   Payments by Related Parties                                                                     --                  --
   (Increase) Decrease in Restricted Cash                                                          --             200,000
   Purchase of Intangible Assets                                                              (82,708)            (64,223)
                                                                                      ----------------    ----------------
   Net Cash - Investing Activities - Forward                                                 (754,651)           (244,842)
                                                                                      ----------------    ---------------

Financing Activities:
   Deferred Offering Costs                                                                         --            (100,000)
   Proceeds from Sale of Common Stock                                                           6,500                  --
   Purchase Shares for Treasury Stock                                                         (14,000)                 --
   New Bank Loans                                                                           1,475,914             187,920
   Repayment of Debt                                                                         (550,860)           (281,504)
   Capital Lease Payments                                                                     (97,121)           (213,178)
                                                                                      ----------------    ---------------
   Net Cash - Financing Activities - Forward                                          $       820,433     $      (406,762)
</TABLE>
The  Accompanying  Notes are an Integral  Part of These  Consolidated  Financial
Statements.

                                       F-8
<PAGE>
CRESCENT CAPITAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                                              Fifty-two weeks ended
                                                                                        December 28,         December 29,
                                                                                           1 9 9 7              1 9 9 6
<S>                                                                                   <C>                 <C>             
   Net Cash - Operating Activities - Forwarded                                        $     2,015,939     $       381,635

   Net Cash - Investing Activities - Forwarded                                               (754,651)           (244,842)

   Net Cash - Financing Activities - Forwarded                                                820,433            (406,762)

   Effect of Exchange Rate Changes on Cash                                                   (163,726)             55,486
                                                                                      ----------------    ---------------

   Net Increase (Decrease) in Cash and Cash Equivalents                                     1,917,995            (214,483)

   Cash and Cash Equivalents - Beginning of Periods                                           657,880             872,363
                                                                                      ---------------     ---------------

   Cash and Cash Equivalents - End of Periods                                         $     2,575,875     $       657,880
                                                                                      ===============     ===============

Supplemental Disclosures of Cash Flow Information:
   Cash paid during the periods for:
     Interest                                                                         $       108,977     $        50,904
     Income Taxes                                                                     $            --     $            --

Supplemental Disclosures of Non-Cash Investing and Financing Activities:
   Acquisition of Equipment Under Capital Lease                                       $        84,696     $        81,719
   Receipt of Parent Company Stock in Payment of Related Party
     Note for Assignment of Consulting Agreements                                     $            --     $       776,145
   Write Down of Parent Company Stock to Market                                       $       388,073     $            --
</TABLE>

The  Accompanying  Notes are an Integral  Part of These  Consolidated  Financial
Statements.

                                       F-9
<PAGE>
CRESCENT CAPITAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) Organization and Business

Corporate  Structure  -  Crescent  Capital,   Inc.   ("Crescent"),   a  Delaware
corporation,  was  incorporated  in  January  1991 for the  purpose  of  seeking
business ventures,  either through the acquisition of existing businesses or the
acquisition of assets to establish subsidiary businesses.

In  December  1993,  International  Franchise  Systems,  Inc.  ("IFS")  became a
subsidiary  of  Crescent.  At  December  28,  1997,  Crescent  owned  67% of the
Company's common stock while the remaining 33% is publicly traded.

IFS was  incorporated in Delaware on October 22, 1993. IFS owns 85% of the stock
of  Domino's  Pizza  Group  Limited  ("DP  Group"),   a  United  Kingdom  ("UK")
corporation  headquartered in Milton Keynes,  England. DP Group owns 100% of the
stock of DP Realty  Limited  ("DP  Realty"),  DPGS  Limited  ("DPGS"),  Livebait
Limited ("Livebait"), and DP Group Developments Ltd., each a UK corporation with
headquarters at Milton Keynes, England.

Since its acquisition of IFS, Crescent's operations have consisted substantially
of IFS's operations.  Crescent and IFS (including its wholly owned subsidiaries)
are referred to as the "Company".

Description and Nature of Business - The principal  purpose of the Company is to
be a holding  company for the  exclusive  right to own,  operate  and  franchise
Domino's Pizza Stores in the U.K., and the Republic of Ireland (the "Territory")
pursuant to a Master Franchise  Agreement  ("MFA") (See Note 17A). The Company's
multi-national  operations include the ownership and operation of Domino's Pizza
Stores,  the  sale of  commissary  food  products,  supplies  and  equipment  to
franchisees  and the  development  of new  franchises.  As of December 28, 1997,
there  were 154  stores  operating,  143 of which  were  franchised  and 11 were
Company-owned.  As of December 29, 1996, there were 127 stores operating, 116 of
which were franchised and 11 were Company-owned.

(2) Summary of Significant Accounting Policies

Cash and Cash  Equivalents - Cash  equivalents  are comprised of certain  highly
liquid investments with a maturity of three months or less when purchased.

Accounts  Receivable  -  Substantially  all  accounts  receivable  are due  from
franchisees  for commissary and small wares  equipment  purchases and royalties.
Credit  is  extended  based  on an  evaluation  of  the  franchisee's  financial
condition. The Company has a security interest in the franchise stores and their
assets as collateral.  The Company considers its accounts receivable to be fully
secured.

Franchisee  Loans -  Franchisee  loans  consist  of  loans  issued  for in store
computer purchases,  new loans for equipment  purchases,  or loans acquired from
Dominos Pizza International, Inc. which were issued to the original franchisees.
The Company has a security  interest in the franchise stores and their assets as
collateral. The Company considers their franchisee loans to be fully secured.

Inventories  -  Inventories,  which  consist  primarily  of  food  products  and
equipment for resale to franchises,  are stated at the lower of cost, determined
by the first-in, first-out basis or market value.

Property and Equipment and  Depreciation  - Property and equipment are stated at
cost. Depreciation is computed primarily using the straight-line method over the
estimated useful lives of the assets,  which range from 3 to 7 years.  Leasehold
improvements are amortized using the straight-line method over the lesser of the
term of the related lease or the estimated useful lives of the improvements.

Master Franchise  Agreement - The MFA is stated at cost that includes associated
professional  costs.  One-third of the cost of the MFA has been allocated to the
exclusive development rights under the MFA

                                      F-10
<PAGE>
CRESCENT CAPITAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #2

(2) Summary of Significant Accounting Policies (Continued)

and is being  amortized  over a  ten-year  period and the  expiring  date of the
agreement is the year 2003. The remaining  two-thirds of the cost of the MFA has
been allocated to the right to operate as sub-franchisor in the Territory and is
being  amortized  over  a  twenty-year  period.  Amortization  expense  for  the
fifty-two  weeks ended  December  28, 1997 and December 29, 1996 was $79,559 and
$72,000, respectively (See Note 17A).

Consulting  Agreements  -  The  Company  had  entered  into  various  consulting
agreements  which  were being  amortized  over the life of the  agreements.  The
Company assigned these assets to Woodland Limited  Partnership  ("Woodland"),  a
related  party,  at their  net book  value on April  1,  1996  (See  Note  17C).
Amortization  expense  for the  fifty-two  weeks  ended  December  28,  1997 and
December 29, 1996 was $-0- and $51,563, respectively.

Rights to Store  Leases - The rights to store  leases are stated at cost and are
being amortized over a ten-year period (the average length of the remaining term
under the leases) under the straight-line  method.  Amortization expense for the
fifty-two  weeks ended  December  28, 1997 and  December 29, 1996 is $14,419 and
$13,439, respectively.

Store Franchise Agreement - The Store Franchise Agreement represents the cost of
the franchise fees paid for  corporate-owned  stores.  The cost of the franchise
fees range from $4,650 to $12,400 per store.  These costs are amortized over the
term of the franchise agreements,  which is ten years.  Amortization expense for
the fifty-two  weeks ended December 28, 1997 and December 29, 1996 is $8,306 and
$7,210, respectively.

Store  Development  Costs - Store development  costs,  which represent  expenses
incurred before a new store opens,  including design and construction costs, are
amortized on a straight-line  basis over three years.  Amortization  expense for
the fifty-two  weeks ended December 28, 1997 and December 29, 1996 is $7,345 and
$30,075, respectively.

Goodwill -  Goodwill  represents  the  excess of the price paid for a  corporate
store  over the fair  value  attributed  to the  assets  acquired,  and is being
amortized using the straight-line  method over ten years.  Amortization  expense
for the fifty-two  weeks ended December 28, 1997 and December 29, 1996 is $1,293
and $1,253, respectively.

Revenue  Recognition - Revenue from commissary sales is recognized upon shipment
of  products  and  company-owned  store sales are  recognized  at point of sale.
Franchise fees consist of initial  franchise fees which are recognized in income
when the Company has substantially completed its obligations under the franchise
agreement.  This  generally  occurs upon the opening of a franchise  location at
which time the Company has completed its  obligation to assist with the location
and design of the new store and the  training of staff.  Royalty fees are earned
on sales by franchisees  and is recognized as revenue when the related sales are
made. Rental income, which consists of rent paid under subleases (See Note 7) is
recognized  ratably  over the lease  period.  Other  operating  income  consists
primarily of computer system sales which is recognized at point of installation.

Advertising Costs - Advertising costs are expensed as incurred and are offset by
a fee of 4% of royalty sales by  franchisees,  which amount must be spent on the
franchise's behalf for various advertising programs. If advertising costs exceed
the fees received at a given point,  a receivable to the  franchisor is recorded
from the franchisee on the Company books for the amounts still due. Similarly if
at a given point,  more fees are received than have been expended,  a payable to
the  franchisee  is recorded.  This amount is included in other  receivables  or
other payables.

                                      F-11
<PAGE>
CRESCENT CAPITAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #3

(2) Summary of Significant Accounting Policies (Continued)

Principles of Consolidation - The consolidated  financial statements include the
accounts of the  Company  and its  wholly-owned  subsidiaries.  All  significant
intercompany accounts and transactions have been eliminated.

Earnings  (Loss) Per Share - Earnings  (loss) per share of common stock is based
on the  weighted  average  number of common  shares  outstanding  for the period
presented.  Common stock  equivalents are included in the computation when their
effect  is  considered  dilutive.  Fully  diluted  earnings/(loss)  per share is
calculated  in  accordance  with  FAS128,  taking into account the impact of any
additional  common  stock  that  would  have been  outstanding  if the  dilutive
potential common stock had been issued.

  Foreign  Currency  Translation  - The  functional  currency for the  Company's
  foreign operations is the British pound sterling. The translation from British
  pound sterling into U.S. dollars is performed for balance sheet accounts using
  current exchange rates in effect at the balance sheet date and for revenue and
  expense accounts using a weighted average exchange rate during the period. The
  gains or losses  resulting from such translation are included in stockholders'
  equity.  Equity  transactions  denominated in British pound sterling have been
  translated  into U.S.  dollars using the effective rate of exchange at date of
  issuance.

Impairment  - Certain  long-term  assets of the  Company  are  reviewed at least
annually as to whether their  carrying  value has become  impaired,  pursuant to
guidance  established  in  SFAS  No.  121,  "Accounting  for the  Impairment  of
Long-Lived Assets."  Management  considers assets to be impaired if the carrying
value  exceeds  the  future   projected  cash  flows  from  related   operations
(undiscounted and without interest  charges).  If impairment is deemed to exist,
the assets will be written down to fair value or projected discounted cash flows
from  related   operations.   Management  also   re-evaluates   the  periods  of
amortization to determine whether  subsequent  events and circumstances  warrant
revised estimates of useful lives. As of December 28, 1997,  management  expects
these assets to be fully recoverable.

Stock Options Issued to Employees - The Company  adopted SFAS No. 123 on January
1, 1996 for financial  note  disclosure  purposes and will continue to apply the
intrinsic value method of Accounting Principles Board ("APB") Opinion No. 25 for
financial reporting purposes.

Use of Estimates - The  preparation of financial  statements in conformity  with
generally accepted  accounting  principles requires management to make estimates
and assumptions  that affect the reported  amounts of assets and liabilities and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.

Reclassification  - Certain items in the prior year's financial  statements have
been reclassified to conform with the current year's presentation.

(3) Significant Risks and Uncertainties

(A)  Concentrations of Credit Risk - Cash - The Company had  approximately  $1.9
million on deposit at National  Westminster  Bank,  Plc, a U.K. bank at December
28, 1997.  Neither the bank nor the UK government  insures the deposits  under a
program similar to the Federal  Deposit  Insurance  Corporation.  Thus, the $1.9
million is subject to loss due to credit  risk.  The  Company  does not  require
collateral in relation to cash credit risk.

(B) Concentrations of Credit Risk - Receivables - The Company routinely assesses
the financial  strength of its franchisees  and, based upon factors  surrounding
the credit risk of its franchisees,  establishes an allowance for  uncollectable
accounts and, as a consequence, believes that its accounts

                                      F-12
<PAGE>
CRESCENT CAPITAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #4

receivable  credit risk exposure beyond such allowances is limited.  The Company
has a security interest in franchised stores and their assets are collateral for
the receivable.

(C) DPII  Relationship  - Due to the  nature of  franchising  and the  Company's
agreements  with DPII,  the success of the Company is in part dependent upon the
overall success of DPII,  including DPII's financial  condition,  management and
marketing  success,  and the  successful  operation  of  stores  opened by other
franchisees.

(D) Potential Loss of Exclusive Development Rights - The Company's business plan
is dependent on its exclusive development rights under the MFA. The MFA requires
that the Company have opened and operating a minimum  number of Domino's  stores
in accordance with a specified  yearly  schedule.  The Company was obligated for
the year ended December 28, 1997 to have a total of 146 delivery  stores opened.
As of that date, the Company had 154 stores  opened,  of which 148 were delivery
stores, including 11 of which were Company owned. There can be no assurance that
the  Company  will be  successful  in  opening  the  number of  Domino's  Stores
required,  or that new Domino's  stores opened by the Company or its franchisees
will be operated  profitably.  Furthermore,  there can be no assurance  that the
Company will be able to renew the MFA beyond  December  31, 2006.  If the MFA is
not renewed, the Company would lose its exclusive development rights.

(E) Operations in a Foreign Country - The Company is subject to numerous factors
relating  to  conducting  business  in a  foreign  country  (including,  without
limitation,  economic,  political and currency risks), any of which could have a
significant impact on the Company's operation.

The  Company's  U.K.  operating  subsidiary,   DP  Group,  is  subject  to  U.K.
corporation tax on its profits.  The Company has used and expects DP Group to be
able to  continue  to use  the tax  loss  carryforwards  previously  held by its
predecessor  and  carried  over to DP Group to  offset  some of its  future  tax
payments. However, there can be no guarantee that DP Group will be profitable to
be able to continue to use the carryforward tax losses.

Currently,  DP Group's operations are subject to the laws and regulations of the
Territory and the European Union,  including such laws and regulations  relating
to antitrust and trade regulation.  The failure by DP Group to comply with these
laws may cause the Company to be unable to enforce its franchise agreements with
franchisees. The Company and its franchisees are also subject to U.K. government
and local  laws and  regulations  generally.  Store  operations  are  subject to
health,  sanitation,  employment and safety  standards  imposed by the European,
national  and  local  authorities.  These  regulations  and  any  new  laws  and
regulations  could have a significant  financial  impact on the operation of the
Company owned and franchised stores.


(4) Property and Equipment

The following details the composition of property and equipment:
<TABLE>
<CAPTION>
                                                                Cost           Depreciation            Net
<S>                                                        <C>               <C>                <C>           
Land and Buildings                                         $    2,079,183    $         1,522    $    2,077,661
Equipment, Fixtures and Furnishings                             2,473,404          1,074,573         1,398,831
Capital Leases                                                    710,479            298,520           411,959
Leasehold Improvements                                          1,745,603            265,793         1,479,810
Motor Vehicles                                                    124,292             56,735            67,557
                                                           --------------    ---------------    --------------
   Totals                                                  $    7,132,961    $     1,697,143    $    5,435,818
   ------                                                  ==============    ===============    ==============
</TABLE>

                                      F-13
<PAGE>
CRESCENT CAPITAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #5

(4) Property and Equipment (Continued)

Depreciation  expense  for the  fifty-two  weeks  ended  December  28,  1997 and
December 29, 1996 was $810,422 and $533,195, respectively.

(5) Intangible Assets

Intangible assets, at December 28, 1997, consists of the following:
<TABLE>
<CAPTION>
                                                                                Write-offs
                                                             Accumulated            and
                                           Cost             Amortization        Assignments            Net
<S>                                    <C>                 <C>               <C>                <C>           
Master Franchise Agreement             $    1,200,698      $      320,183    $            --    $      880,515
Rights to Store Leases                        144,188              41,509                 --           102,679
Store Franchise Agreement                      49,362               6,754                 --            42,608
Store Development                              79,675              31,871              3,535            44,269
Goodwill                                       13,163               3,493                 --             9,670
                                       --------------      --------------    ---------------    --------------
   Totals                              $    1,487,086      $      403,810    $         3,535    $    1,079,741
   ------                              ==============      ==============    ===============    ==============
</TABLE>

(6) Long-Term Debt

Long-term debt consists of the following:
<TABLE>
<CAPTION>
                                                                                   December 28,
                                                                                      1 9 9 7
<S>                                                                               <C>      
Note Payable to Domino's Pizza International, Inc. for the
   Master Franchise Agreement                                                     $            --
Loans Payable to National Westminster Bank                                              1,639,038
                                                                                  ---------------

Total                                                                                   1,639,038
Less:  Current Portion                                                                    200,629
   Long-Term                                                                      $     1,438,409
   ---------                                                                      ===============
</TABLE>

The  note  payable  to  Domino's  Pizza  International,  Inc.  for  the  MFA was
originally  for  $650,000  of which  $300,000  was paid on January  17, 1995 and
$350,000  is  payable  in  installments  of  approximately  $29,000  for  twelve
consecutive  quarters beginning on January 1, 1995, with interest at the rate of
8% per annum payable on the installment  dates.  Total  installment  payments of
$116,667 were made as of December 28, 1997.  The note has been  completely  paid
off.

The Company has various loans payable to National  Westminster  Bank ("NatWest")
of $1,639,038 at December 28, 1997.  The loans are payable over terms of 3 to 15
years in aggregate monthly  installments of approximately  $25,950.  Interest on
one loan is 9.75% per annum and the second loan  carries  interest at 9.875% per
annum while the other  loans bear  interest at the bank's base rate plus 3%. The
Company  has  secured a 15-year  mortgage  on the  purchase  of land for the new
commissary. This loan carries an interest rate of 8.75%. The bank's base rate at
December 28, 1997 was 5.5%. The obligations to NatWest are secured by all of the
assets  of  DP  Group,  DP  Realty,   DPGS,  and  DP  Group   Developments  Ltd.
Additionally,  the  Chairman  of the  Company has  personally  guaranteed  these
obligations to a maximum of approximately $42,000.

                                      F-14
<PAGE>
CRESCENT CAPITAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #6

 (6) Long-Term Debt (Continued)

The following are maturities of long-term debt for the next fourteen years:

     December
       1998                                                       $   200,629
       1999                                                           218,183
       2000                                                           200,087
       2001                                                           138,214
       2002                                                            85,540
       Over 2002                                                      796,385
                                                                   ----------
         Total                                                     $1,639,038
                                                                   ==========

(7) Leases

The Company is the lessee of motor  vehicles and equipment  under capital leases
expiring in various years through 1999. The assets and liabilities under capital
leases are  recorded at the present  value of the minimum  lease  payments.  The
assets are  depreciated  over the shorter of their  related lease terms or their
estimated productive lives.  Depreciation of assets held under capital leases is
included in depreciation expense.

Following  is a summary of property  held under  capital  leases at December 28,
1997:

Equipment and Motor Vehicles                         $        710,479
Less:  Accumulated Depreciation                               298,520
                                                     ----------------

   Net                                               $        411,959
   ---                                               ================


Minimum  future lease  payments under capital leases as of December 28, 1997 for
each of the next five years and in the aggregate are:

  Year Ended
  December                                                       Amount
    1998                                                           111,604
    1999                                                            79,692
    2000                                                            21,460
    2001                                                                --
    2002                                                                --
    Subsequent to 2002                                                  --
                                                           ---------------
    Total Minimum Lease Payments                               $   212,756
    Less:  Amount Representing Interest                             24,308
                                                           ---------------

    Present Value of Net Minimum Lease Payment             $       188,448
    ------------------------------------------             ===============

                                      F-15
<PAGE>
CRESCENT CAPITAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #7

(7) Leases (Continued)

Interest rates on capitalized leases vary from 3% to 8% and are imputed based on
the lower of the Company's  incremental  borrowing rate at the inception of each
lease or the lessor's implicit rate of return.

The Company has a one-year  operating  lease for its U.S. office that expires on
June 30, 1998 and is renewable year-to-year.

The Company leases land and buildings, office equipment and motor vehicles under
operating leases expiring in various years through 2022.

The Company leases store properties directly,  through a subsidiary,  DP Realty,
and then  subleases the  properties to  franchisees.  At December 28, 1997,  the
Company had operating leases for  approximately  115 stores with periods ranging
from 10 to 25  years,  of which  108  were  also  subject  to  subleases  to the
franchisees and the balance are used for Company-owned stores. The subleases are
for an initial ten year period,  consistent with the franchisee  period,  with a
subsequent ten year renewal period. Total minimum future rental income, as shown
below,  from  subleases  to be  received  in  the  future  under  non-cancelable
subleases  assumes the  subleases  are for the  initial  ten year  period  only,
although the Company  believes  that the  franchisees  will exercise the renewal
option on substantially all subleases. Also included below is the minimum future
rental  payments and sublease  rental income for the building  where the Pizzazz
restaurant was located (See Notes 8 and 17D).

Minimum future rental payments and sublease  rental income under  non-cancelable
operating leases and subleases,  respectively,  having remaining terms in excess
of one year as of  December  28, 1997 for each of the next five years and in the
aggregate are as follows:
<TABLE>
<CAPTION>
                                                                            Operating
Year ending                                                                  Leases         Subleases
December
<S>                                                                      <C>               <C>      
    1998                                                                     2,857,008         2,518,138
    1999                                                                     2,823,414         2,510,323
    2000                                                                     2,781,389         2,481,186
    2001                                                                     2,682,864         2,467,131
    2002                                                                     2,654,706         2,467,131
    Subsequent to 2002                                                      21,056,121        19,657,529
                                                                       ---------------  ----------------
    Total Minimum Future Rentals                                       $    34,855,502  $     32,101,438
    ----------------------------                                       ===============  ================
</TABLE>

Rent expense for the  fifty-two  weeks ended  December 28, 1997 and December 29,
1996 was $2,354,765 and $1,889,624,  respectively. The rental income received on
subleases for the fifty-two  weeks ended December 28, 1997 and December 29, 1996
was $2,227,129 and $1,639,953, respectively.

                                      F-16
<PAGE>
CRESCENT CAPITAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #8

(8) (A) Discontinued Operations - Pizzazz Concept

On May 31,  1996,  the  Company's  Board of  Directors  approved  the  Company's
recommendation  to discontinue  the  development of the Pizzazz  concept and the
operation of the Pizzazz restaurant.  The primary purpose for the closure of the
restaurant  and the  cessation  of the  concept  development  was to ensure that
management's  time was not  redirected  from the primary focus of developing the
Domino's  brand and  delivery  store  franchise  network.  On June 3, 1996,  the
Company closed the restaurant.  The Company  continues to have an obligation for
the property under the lease that expires in fifteen years. The Company has been
able to  secure a  subtenant  for the  property  beginning  in April  1997.  The
sublease runs concurrent with the Company's  lease. The income from the sublease
is  approximately  $130,000.  The  annual  cost of the  lease  is  approximately
$87,000.

The results of operations of Pizzazz were treated as discontinued  operations in
the  accompanying  financial  statements  and are  presented  net of any related
income tax expense.  The prior year results of operations  and statement of cash
flows have been  reclassified  to conform to this  method of  presentation.  The
discontinued  Pizzazz  concept had net property and  equipment of $575,671 as of
December 28, 1997. These assets have been reclassified as rental assets from the
start of the sublease agreement.  The loss from discontinued operations consists
of:
<TABLE>
<CAPTION>
                                                                               1997                 1996
<S>                                                                    <C>              <C>             
Revenues                                                               $        96,250  $        103,874
Cost of Sales                                                                       80           170,583
Operating Expenses                                                             248,919           429,362
Estimated Closing Costs                                                             --           135,270
                                                                       ---------------  ----------------
Net Before Taxation Effects                                            $      (152,749) $       (631,341)
The taxation benefit from the losses was:                                       41,853                --
                                                                       ---------------  ----------------

Total                                                                         (110,896)         (631,341)
                                                                       ================ =================
</TABLE>

The  Company  is  obligated  under a  15-year  lease on the  building  where the
restaurant was located.  However it is  anticipated  that a sublease will offset
these expenses (See Note 17D).

(8) (B) Discontinued Operations -Haagen Dazs

In August 1995, the Company  entered into an agreement with an unrelated  entity
to  purchase  all of the assets and  operating  rights of three  Haagen Dazs ice
cream parlors for approximately $140,000. The Company,  however, sold one Haagen
Dazs parlor back to the master  franchisor in the UK because the Company  feels,
at this time, that  management's  attention and resources must be focused on the
core business of delivery  pizza  stores.  The Company sold the other two Haagen
Dazs units in December 1997. The results of operations for the Haagen Dazs units
have been  treated as  discontinued  operations  for the  fifty-two  weeks ended
December 28, 1997:

<TABLE>
<CAPTION>
                                                                             1997              1996
<S>                                                                    <C>              <C>             
Revenues                                                               $       816,158  $      1,532,361
Cost of Sales                                                                  551,732           967,653
Operating Expenses                                                             335,642           587,204
                                                                       ---------------  ----------------
Net Before Taxation Effects                                            $       (71,216) $       (22,496)
---------------------------
The taxation benefit from the losses was:                                       19,513                --
                                                                       ---------------  ----------------

Total                                                                          (51,703)         (22,496)
                                                                       ================ ================
</TABLE>
                                      F-17
<PAGE>
CRESCENT CAPITAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #9

(8) (B) Discontinued Operations -Haagen Dazs (Continued)

The Statements of Operations and Cash Flows for the year ended December 29, 1996
has been  reclassified  to reflect  the  treatment  of the Haagen Dazs income as
discontinued operations.

(9) Fair Value of Financial Instruments

Generally  accepted  accounting  principles require disclosing the fair value of
financial  instruments to the extent practicable for financial instruments which
are  recognized  or  unrecognized  in the balance  sheet.  The fair value of the
financial instruments disclosed herein is not necessarily  representative of the
amount  that  could be  realized  or  settled,  nor does the fair  value  amount
consider the tax consequences of realization or settlement.

In assessing the fair value of these financial  instruments,  the Company used a
variety of methods  and  assumptions,  which were based on  estimates  of market
conditions and risks existing at that time. For certain  instruments,  including
cash and cash  equivalents,  trade  receivables  and trade  payables and officer
advances,  it was estimated that the carrying amount approximated fair value for
the  majority  of these  instruments  because  of their  short  maturities.  For
long-term investment in marketable securities,  fair value is estimated based on
current quoted market price.

Management  estimates  that the carrying  value of its long-term  debt,  related
party debt and amounts due from parent  approximate  its fair value  because the
applicable interest rates approximates the current market rates.

(10) Related Party Transactions

Woodland Limited Partnership ("Woodland") is a partnership controlled by members
of Mr. Colin  Halpern's  family.  Mr.  Halpern is the  President of Crescent and
Chairman of the Board of IFS.

As of December 28, 1997, Woodland owns 92% of the shares of Crescent.

In connection with the issuance to Woodland of shares of IFS stock, IFS accepted
a note  receivable  for  $1,500,000  from  Woodland  at 8% per annum.  This note
receivable was transferred to Crescent  pursuant to a Loan and Exchange of Stock
Agreement  between  Crescent,  IFS and Woodland.  Accrued  interest on this note
receivable at December 31, 1997 was $472,275.

As  of  December  28,  1997,  Crescent  owns  4,700,000  restricted  shares,  or
approximately  67%,  of IFS's  outstanding  stock.  As a result  of the  capital
structures of the Company and Crescent,  Woodland has indirect voting control of
the  Company  and,  consequently,  can  elect  the  Company's  entire  Board  of
Directors,  determine the vote on any matter submitted for shareholder  approval
(including increasing the Company's authorized capital stock and authorizing any
merger, sale of assets or dissolution of the Company),  and,  generally,  direct
the affairs of the Company.

At December 31, 1997,  $1,943,700  was due from  Woodland for funds  transferred
between  companies.  These funds are to be repaid on a short-term basis and bear
interest  at 8% per annum.  Included  in  prepaid  and other  assets  this bears
accrued interest receivable of $240,939.

Mr. Halpern is the President and Chairman of the Board of Red Hot Concepts, Inc.
("Red Hot"). The Chief Financial  Officer of International  Franchise Systems is
also the Chief  Financial  Officer of Red Hot.  The charge for his  services  is
allocated between the two companies.

                                      F-18
<PAGE>
CRESCENT CAPITAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #10

(10) Related Party Transactions (Continued)

The Company has advanced funds to Mr.  Halpern.  At December 28, 1997, the total
amount due to the Company is approximately $148,573. This amount is being offset
through reimbursements due to Mr. Halpern.

Mr. Halpern's son is an attorney with a law firm that provides legal services to
the Company. Legal expense incurred with this firm for the fifty-two weeks ended
December 28, 1997 was $135,108.

(11) Investment in Marketable Securities of Parent Company

In September 1996, IFS received from Woodland, 51,743 shares of Crescent Class A
Common Stock in payment of Woodland's  interest  bearing note for the assignment
of the three consulting agreements (See Note 17C). IFS classifies its investment
in Crescent  as  available  for sale  securities  pursuant to SFAS No. 115.  The
number of shares to be received in payment of the Woodland loan of $776,145, was
estimated using the market value of Crescent's shares on the open market.  IFS's
intention is to hold these securities for a least a twelve month period.  In the
consolidated financial statements, these shares are presented as Treasury Stock.

(12) Income Taxes and Provision for Income Taxes

The current year taxation charge consists of the following:
                                   1997            1996
                                     $               $

Continuing Operations
- United States                  182,000                 0
- United Kingdom                 474,362                 0
                               ---------         ---------
                                $656,362                $0

Discontinued Operations
- United States                        0                 0
- United  Kingdom                (61,366)                0
                               ---------         ---------
                                $(61,366)               $0

Total Income Tax Charge         $594,996                $0
                               =========         =========

Rate Reconciliation:

The following is an analysis of the differences  between United States statutory
income tax rate and the Company's effective tax rates on continuing operations.

<TABLE>
<CAPTION>
                                                                                 %
<S>                                                                                 <C> 
United States statutory income tax rate                                             35.0
Permanent differences                                                                5.1
Utilization of net operating losses carried forward
of UK operations                                                                    (4.3)
Net US operating losses utilized against extraordinary income                       11.8
Other operating unprovided timing differences                                       (1.9)
Difference in effective tax rate of UK operations                                    1.9
                                                                       -----------------
Effective tax rate on continuing activities                                         20.2
                                                                       =================
</TABLE>
                                      F-19
<PAGE>
CRESCENT CAPITAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #11

(12) Income Taxes and Provision for Income Taxes (Continued)

Pursuant to United  States tax laws,  if the  Company's  subsidiaries  organized
under the laws of the UK are not  engaged  in  business  in the  United  States,
profits of such  subsidiaries  will not be subject  to United  States  taxation,
until  distributed  as dividends.  The Company  however,  would receive a credit
against its UK federal income tax liability that would otherwise result from any
distributions  from its  subsidiaries  for any UK corporate taxes paid by its UK
subsidiaries on these distributions,  as well as for any UK dividend and royalty
withholding taxes imposed directly on the Company.

The Company through its UK subsidiary is a tax payer in the United Kingdom.  The
Company's  estimated tax liability for the 1997 tax year is $413,000.  There are
tax losses  available to  carryforward  indefinitely  against  future UK profits
amounting to $210,980.


(13) Gain on Sale of Portion of Investment in Subsidiary
<TABLE>
<CAPTION>
                                                                                1997              1996
<S>                                                                      <C>             <C>
Profit on Sale of 15% of the
investment in Domino's Pizza Group (UK)                                      2,163,038                 0
Taxation Thereof                                                              (182,000)                0
                                                                       ---------------- ----------------
Gain After Taxation                                                          1,981,038                 0
                                                                       ===============  ================
</TABLE>

$1.1 million of net  operating  losses  brought  forward in the US were utilized
against this income for taxation purposes.


(14) Stock Transactions

In connection with units sold in prior years,  the underwriter  received options
originally  exercisable  through  November  25, 1996 to purchase  8,000 units at
$9.00 per unit. Each unit consists of one share of common stock,  twelve Class A
warrants, and twelve Class B warrants.  Each redeemable Class A warrant entitled
the holder to purchase  one share of common  stock at a price of $5.00 per share
exercisable  through August 25, 1995. Each redeemable  Class B warrant  entitled
the holder to purchase one share of common stock at the price of $6.00 per share
exercisable  through August 25, 1995. On September 19, 1995,  Crescent completed
its tender  offer for its Class A Warrants  and Class B Warrants  by  exchanging
86,800 shares of Class A common stock in exchange for a total of 868,000 Class A
Warrants  and 868,000  Class B  Warrants.  In  addition,  38,400  Warrants  were
exercised  in  exchange  for  38,400  shares of stock.  The  gross  proceeds  in
connection with the exercise of the Warrants was $192,000. In February 1996, the
6,000 Class A Warrants and 6,000 Class B Warrants were  exchanged for 600 shares
of Class A common  stock  valued at $.001  par  value.  At  December  31,  1996,
Crescent had no outstanding Class A Warrants or Class B Warrants.

                                      F-20
<PAGE>
CRESCENT CAPITAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #12

(15) Stock Transactions of Subsidiary

On December 30, 1994, the Company completed the first phase of an initial public
offering (the "Offering") of its common stock. The Company sold 1,017,681 units,
each unit  consisting of one share of common stock and two common stock purchase
warrants,  at an initial public offering price of $5 per unit. Net proceeds from
the first phase of the Offering (after deducting the  underwriting  discounts of
$585,167 and expenses of $883,673)  were  $3,619,565.  On January 17, 1995,  the
Company  completed the second phase of its initial  public  offering and sold an
additional  59,643  units.  Net  proceeds  from these  additional  units  (after
deducting  the  underwriting  discounts of $76,210 and expenses of $44,855) were
$177,150.  Additional  costs for both the first and second phase relating to the
offering of $244,831 were paid during 1995 reducing paid-in capital.

On May 12, 1995,  the Company  issued  237,500  shares of common stock valued at
$350,000 in connection with entering into a four year consulting agreement.

On June 5, 1995,  the Company  issued  237,500  shares of common stock valued at
$475,000 in connection with entering into a five year consulting agreement.

During October 1995, the Company issued 475,000 shares of common stock valued at
$1,900,000  and received cash of  $1,781,250 in connection  with entering into a
five year consulting agreement (See Notes 11 and 17C).

During July 1997,  the Company issued 300,000 shares of common stock valued at a
market price of $300,000 to DPII with put/call  provisions that can be exercised
in May 2001 at a cost of $1.2 million.  This was in connection to a modification
of the franchise  agreement  that altered the royalty rate,  store opening costs
and development  schedule.  This was recorded on the Company's books and records
at a par value of $3,000 (See Note 17A).

In December 1997,  three  employees of the Company who were issued share options
under the 1997 Stock Plan,  exercised their options. The Company purchased these
shares (7,000) as Treasury Stock.

(16) Stock Options and Warrants

(A)  Stock  Options  - In  order  to  attract,  retain  and  motivate  employees
(including officers), directors and consultants who perform substantial services
for or on  behalf  of the  Company,  the  Company  adopted  the  1995  and  1996
Non-Employee Directors Stock Option Plans, the 1994 Stock Incentive Plan and the
1995  Consultants  and Advisors Stock Incentive Plan (the "Director  Plan",  the
"Stock Plan" and the "Consultants Plan", respectively).

The 1994 Stock Plan was terminated  effective  December 31, 1996 and replaced by
the 1997 Stock Plan. Pursuant to the 1997 Stock Plan, officers and key employees
of the Company are eligible to receive  awards of stock options (with or without
limited stock appreciation rights).  Options granted under the Stock Plan may be
"incentive  stock options"  ("ISO"),  or non-qualified  stock options  ("NQSO").
Limited Stock Appreciation  Rights ("LSARs") may be granted  simultaneously with
the grant of an option  or (in the case of NQSOs) at any time  during  its term.
The Company's  acting  president and chief financial  officer was granted an ISO
for 15,000  shares at $1.25 per share on March 8, 1996 and for 75,000  shares at
$.50 per share on January 28, 1997,  which  approximated the market value of the
shares on that date.  Both option grants become  exercisable  at the rate of 33%
per year and are generally exercisable over a ten-year period.

The 1995 Director Plan was terminated  effective  December 31, 1996. At the same
time, the 1996 Director Plan was declared void and replaced by the 1997 Director
Plan (See Note 15A). Under the

     F-21
<PAGE>
CRESCENT CAPITAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #13

(16) Stock Options and Warrants (Continued)

1997 Directors Plan, only NQSOs can be granted.  The 1995  Consultants  Plan was
amended,  effective April 29, 1997 to make additional shares available for grant
under  that  plan.  Under  this  Plan,  either  stock or NQSOs can be granted to
eligible consultants and advisors.

The Company has  reserved  800,000  shares of the Common  Stock for  issuance of
awards  under the 1997 Stock  Plan,  300,000  shares of Common  Stock  under the
Director  Plan and 250,000  shares of Common  Stock under the  Consultants  Plan
(subject to anti-dilution and similar adjustments).

The 1997  Stock  Plan,  1997  Director  Plan and the 1995  Consultants  Plan (as
amended) are administered by a committee (the  "Committee"),  established by the
Company's  Board of Directors.  Subject to the provisions of the 1997 Stock Plan
and the 1995 Consultants Plan (as amended), the Committee determines the type of
award, when and to whom awards will be granted, and the number of shares covered
by each award, the terms, provisions and kind of consideration payable (if any),
with  respect to awards.  The  Committee  has sole  discretionary  authority  to
interpret each of the Plans and to adopt rules and regulations  related thereto.
Under  the 1997  Director  Plan,  any  nonemployee  member  of the the  Board of
Directors is automatically granted a NQSO for 5,000 shares on the first business
day of January, April, July and October of each year.

An option may be granted under the 1997 Stock Plan and the 1995 Consultants Plan
(as amended) on such terms and  conditions  as the  Committee  may approve,  and
generally  may be  exercised  for a period  of up to 10  years  from the date of
grant. Generally,  options will be granted under the Stock Plan with an exercise
price equal to the "Fair  Market  Value" (as defined in the Plan) on the date of
grant. The exercise price for options granted under the Consultants Plan may not
be less than 60% "Fair  Market  Value"  (as  defined in the Plan) on the date of
grant.  In the case of ISOs granted  under the Stock Plan,  certain  limitations
will apply with respect to the aggregate value of option shares which can become
exercisable  for the first  time  during  any one  calendar  year,  and  certain
additional  limitations will apply to "Ten Percent  Stockholders" (as defined in
the Stock Plan).  The Committee may provide for the payment  resulting  from the
exercise of the option in cash,  by delivery of other  common  stock having fair
market value equal to such option price or by a combination thereof.

An option  granted  under the 1997 Stock Plan or the 1995  Consultants  Plan (as
amended) shall be  exercisable  at such time or times as the  Committee,  in its
discretion,  shall  determine,  except that no stock option shall be exercisable
after the expiration of ten years (five years in the case of an incentive  stock
option granted to a "Ten Percent  Employee",  as defined in the Stock Plan) from
the date of the grant.  The Stock Plan contains special rules governing the time
of exercise in the case of death,  disability or other termination of employment
and also provides for acceleration of the exercisability of options upon certain
events  involving a change in control of the Company.  Options granted under the
1997 Director Plan are exercisable one year after the grant is made for a period
of nine years.  The Director Plan also contains  special  exercise  rules in the
event of death or other termination.

The Company's  Board of Directors may at any time and from time to time suspend,
amend,  modify or terminate the Plans.  However,  to the extent  required by the
Securities Exchange Act of 1934 or other applicable law, no such amendment shall
be  effective  unless  approved  by the  holders of a majority of the issued and
outstanding  securities of the Company  entitled to vote.  In addition,  no such
change may  adversely  affect any option  previously  granted,  except  with the
written  consent  of the  optionee  or be made to extent  inconsistent  with the
Securities laws or other applicable law.

                                      F-22
<PAGE>
CRESCENT CAPITAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #14

(16) Stock Options and Warrants  (Continued)

Information  pertaining to options as of December 28, 1997 and for the year then
ended is as follows:
<TABLE>
<CAPTION>
                                                                                                       Remaining
                                                                                                      Contractual
                                                                                    Exercisable          Life
                                                    Common       Exercise Prices       Stock          of Options
                                                    Shares          Per Share         Options         Outstanding
<S>                                                   <C>        <C>                  <C>            <C>      
Options Outstanding - January 1, 1996                    40,000     $5.94               40,000         8.5 years
Options Granted                                          65,000   0.63-1.25                 --      9.25-9.5 years
                                                    -----------   ---------      -------------     ---------------
Options Outstanding - January 1, 1997                   105,000   0.63-5.94             40,000      8.25-8.5 years
Options Granted                                         514,000     .50-2.25            96,333         9.5 years
Options Exercised                                        (7,000)      .50                   --                --
Options Canceled                                       (135,000)        --                  --                --
                                                    -----------   ---------      -------------     ----------------
Options Outstanding - December 31, 1997                 477,000   $.50-5.94            141,333     8.25 - 9.5 years
                                                    ===========   =========      =============     ================
</TABLE>

At the 1997 grant dates,  the weighted  average fair value of the above  options
was $.80. No compensation  cost was recognized in income.  The weighted  average
exercise  price for  options  outstanding  at  December  28, 1997 was $0.893 per
share.

Had  compensation  cost been  determined on the basis of fair value  pursuant to
SFAS No. 123, net income and earnings per share would have been as follows:
<TABLE>
<CAPTION>
                                        For the Fifty-Two Weeks Ended
                                     December 28,            December 29,
                                       1 9 9 7                  1 9 9 6
<S>                               <C>                      <C>             
Net (Loss) Income:
   As Reported                            $2,346,084          $(139,808)
                                  ==================        ===========

   Pro Forma                              $2,326,001          $(183,008)
                                  ==================        ===========

(Loss) Earnings Per Share:
   As Reported                                  $.34             $(.02)
                                  ==================        ===========

   Pro Forma                                    $.34             $(.03)
                                  ==================        ===========
</TABLE>

The fair  value  used in the pro  forma  data was  estimated  by using an option
pricing model which took into account as of the grant date,  the exercise  price
and the expected life of the option,  the current price of the underlying  stock
and its expected  volatility,  expected dividends on the stock and the risk-free
interest rate for the expected term of the option.  The following is the average
of the data used for the following items.

          Risk-Free             Expected              Expected       Expected
        Interest Rate             Life               Volatility      Dividends

1997        6.63%                5 Years               139.4%           --
1996        6.63%               10 Years               81.99%           --

(B)  Common  Stock  Purchase  Warrants - As of  December  28,  1997,  there were
1,077,324 Class B warrants  outstanding,  which were issued on December 30, 1994
as part of a public  offering.  Holders of each Class B warrant are  entitled to
purchase one share of common  stock at $10.00 per share until  December 9, 1999.
No warrants were exercised  during the fifty-two week periods ended December 28,
1997 or December 29, 1996.

                                      F-23
<PAGE>
CRESCENT CAPITAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #15

(16) Stock Options and Warrants  (Continued)

In connection with the public offering, the Company granted 107,732 unit options
to  Patterson  Travis,  Inc.,  the  Company's   Underwriter,   as  part  of  the
Underwriting  Agreement dated September 9, 1994. The exercisable  price of these
options is $8.25 per unit.

(17) Operations by Geographic Area

The summary of financial  information for the Company's operations by geographic
area is as follows:
<TABLE>
<CAPTION>

For the fifty-two weeks ended December 28, 1997:
                                                        United
                                 United States          Kingdom            Eliminations        Consolidated
<S>                             <C>                  <C>                  <C>                  <C>         
Revenue                         $    441,804         $ 28,360,981         $   (441,804)        $ 28,360,981
Income Before Taxes             $  1,013,178         $  1,732,299         $    441,804         $  3,187,281
Net Income                      $    537,443         $  1,095,339         $         --         $  1,632,782
Assets                          $  5,885,188         $ 11,179,130         $ (1,037,070)        $ 16,027,248
Liabilities                     $    437,863         $  6,691,379         $ (1,132,724)        $  5,996,518
Company's Investment in
Foreign Subsidiaries            $  1,683,863         $         --         $ (1,683,863)        $         --

For the fifty-two weeks ended December 29, 1996:
                                                        United
                                 United States          Kingdom            Eliminations        Consolidated
Revenue                         $    500,534         $ 21,897,463         $   (527,064)        $ 22,769,695
Operating Profit (Loss)         $   (815,207)        $  1,097,806         $         --         $    282,599
(Loss) from Discontinued
Operations                      $         --         $   (441,938)        $         --         $   (441,938)
Net (Loss) Income               $   (610,457)        $    445,292         $         --         $   (123,222)
Assets                          $ 12,233,157         $ 10,817,767         $ (9,807,906)        $ 12,507,018
Liabilities                     $  2,086,404         $  6,815,156         $ (2,565,761)        $  6,335,799
Company's Investment in
   Foreign Subsidiaries         $  1,981,016         $         --         $ (1,981,016)        $         --
</TABLE>

(18) Commitments and Contingencies

(A) Master  Franchise  Agreement  - The  relationship  between  the  Company and
Domino's Pizza  International,  Inc.("DPII") is governed principally by the MFA.
The MFA  requires  that during the 10-year  period  ending  December  2006,  the
Company  shall open and  operate a minimum  number of Domino's  pizza  stores in
accordance with a yearly schedule.  If the Company does not meet the development
schedule,  Domino's may terminate the Company's  exclusive  right to operate and
franchise additional Domino's Stores in the Territory. The Company was obligated
for the year ended  December  28,  1997 to have a total of 146  delivery  stores
opened.  As of that date,  the Company  had 154 stores  opened of which 148 were
delivery stores, including 11 that were Company owned.

If the Company is in  compliance  with the MFA at the  expiration of the initial
term,  the  Company  will have the  option to extend its  exclusive  development
rights for an additional 10-year period,  provided the Company and DPII agree to
a minimum  development  schedule for the renewal term. There can be no assurance
that the Company  will be  successful  in opening the number of Domino's  Stores
required.  If after  expiration of the initial term (or any renewal  term),  the
Company fails to exercise its option to renew its exclusive  development rights,
or the parties are unable to agree to a minimum development

                                      F-24
<PAGE>
CRESCENT CAPITAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #16

(18) Commitments and Contingencies (Continued)

schedule for the renewal term, then the Company would continue to have the right
to operate its then existing  Company-owned  Domino's Stores and to maintain and
continue its rights and obligations,  and act as subfranchisor,  with respect to
all then existing  franchised  Domino's Stores. The Company would generally have
no further right to operate or grant  franchises for additional  Domino's Stores
and DPII would have the right to  proceed  (or the right to grant a third  party
the right to proceed)  with further  development  of the  Territory,  subject to
territorial rights granted under then-existing franchise agreements.

The Company is required  to pay DPII a one-time  store  opening fee for each new
Domino's Store, whether Company-owned or franchised. The Company expects to pass
this cost  through  to the  franchisees  in the case of  franchised  stores.  In
addition,  the  Company  must pay to  Domino's a monthly  royalty fee equal to a
certain  percentage  of each Domino's  Store's gross sales.  This royalty fee is
payable to  Domino's  irrespective  of the  profitability  of the Company or the
Domino's Store, and irrespective of the Company's  ability to collect  royalties
from franchisees. The Company's payments to DPII are to be made in United States
dollars.

Under  certain  circumstances  of default by the Company under the MFA, DPII has
the right to terminate the MFA. If the MFA is  terminated,  the Company would be
subject to a one-year non-  competition  covenant in the  delivery,  carryout or
sit-down pizza  business and DPII would have the right (but not the  obligation)
to purchase,  at the then-current fair market value, all of the Company's rights
and interests as the  subfranchisor  of Domino's Stores and all of the assets of
each  Domino's  Store  owned by the  Company.  The fair  market  value  would be
determined by mutual agreement of the Company and DPII,

or in the absence of such agreement by an appraiser. Under certain circumstances
of default by DPII under the MFA,  the  Company has the right to  terminate  the
agreement  and  continue  as  an  independent  pizza  operation,  including  the
operation of the fresh pizza dough  production  facility and wholesale  business
(the "Commissary").

DPII and IFS entered into a Stock Purchase Agreement as of May 26, 1997, ("SPA")
whereby  IFS  agreed  to sell to DPII  300,000  shares  of its  common  stock in
consideration  for  royalty  concessions  under the  Master  Agreement.  The SPA
provides  that DPII may not sell,  transfer or  otherwise  dispose of its shares
before May 26, 2001 and any  transferee  receiving  stock in  violation  of this
prohibition  will have no rights  with  respect to the  shares.  The SPA further
provides  for put and call  options on the common  shares at an agreed upon base
purchase  price of $1,200,000  adjusted to reflect  changes in the common stock,
such as, stock splits and dividends.

The Master  Agreement  cannot be  assigned  by IFS without  DPII's  consent.  In
addition, the agreement prohibits Domino's Pizza Group Limited, a majority-owned
subsidiary  of IFS,  ("DP  Group")  and  Colin  and Gail  Halpern  (as  indirect
controlling  shareholders of DP Group) from transferring  control of IFS without
DPII's prior written consent. For the term of the Master Franchise Agreement, DP
Group and Colin and Gail  Halpern are  restricted  from  having an interest  in,
being employed by, advising or assisting  another business in the pizza or pizza
store business in the Territory.

(B)  Employment  Agreement  - In  August  1994,  the  Company  entered  into  an
employment agreement with its then President and now Chairman of the Board for a
salary of $96,000 per year. The initial term of the agreement expired on January
31, 1996.  The salary was adjusted at the  discretion of the Board of Director's
Compensation Committee to $180,000 per year.

(C) Consulting  Agreements - In May, June and October 1995, the Company  entered
into three  consulting  agreements with terms of 4, 5 and 5 years  respectively,
issuing 950,000 shares of common stock as compensation for these agreements (See
Note 17C). Consulting expense of $943,750 was to

                                      F-25
<PAGE>
CRESCENT CAPITALK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Sheet #17

be  amortized  over  the  terms  of  these  agreements.  The  Company  was  also
responsible  for  out-of-pocket  expenses  incurred and a monthly  advisory fee.
During the years ended  December 28, 1997 and  December  29,  1996,  the Company
recognized $0 and $51,563,  respectively, of consulting expense related to these
agreements. These consulting agreements were assigned to Woodland in the form of
an interest bearing note at the net book value of $776,145 on April 1, 1996 (See
Note 11).

(D) Pizzazz Lease  Commitment - In connection with the Pizzazz  restaurant,  the
Company had entered into a 15-year  operating lease,  expiring December 24, 2010
(See Note 7).

(19) New Authoritative Accounting Pronouncements

The FASB has issued SFAS No. 125,  "Accounting  for  Transfers  and Servicing of
Financial Assets and  Extinguishment of Liabilities."  SFAS No. 125 is effective
for  transfers  and  servicing  of  financial  assets  and   extinguishment   of
liabilities  occurring  after  December 31,  1997.  Earlier  application  is not
allowed.

The  provisions  of SFAS No.  125  must be  applied  prospectively;  retroactive
application is prohibited. Adoption on January 1, 1998 is not expected to have a
material  impact on the Company.  The FASB deferred some  provisions of SFAS No.
125, which are not expected to be relevant to the Company.

The FASB issued Statement of Financial  Accounting  Standards  ("SFAS") No. 129,
"Disclosure of Information  about Capital  Structure" in February 1997. SFAS No.
129  does  not  change  any  previous   disclosure   requirements,   but  rather
consolidates existing disclosure requirements for ease of retrieval.

SFAS No. 130 "Reporting Comprehensive Income" and SFAS No. 131 "Disclosure About
Segments  of an  Enterprise  and  Related  Information"  both  clarify  existing
reporting  requirements  and in certain cases expand the disclosure.  Neither is
expected to have a material impact on the Company.

(20) Subsequent Events

On  March  11,  1998,  the  Company  received  an  offer  from  IFS  Acquisition
Corporation,  an affiliate of Crescent  Capital,  Inc.,  the  Company's  largest
shareholder,  to  participate  in a  merger  which  would  result  in all of the
shareholders  other than Crescent  Capital,  Inc.  receiving $2.80 per share for
each  share of the  Company's  stock.  The  Board of  Directors  named a Special
Committee  of  directors,  comprised  of Bernard  Goldman and David  Coffer,  to
consider the offer. The Special Committee hired legal and financial advisors and
is considering  the offer.  On April 17, 1998, the Special  Committee  announced
that an agreement had been reached on the financial terms of the merger and that
the public  shareholders  would  receive $3.60 per share if the  transaction  is
completed.  The proposed  merger is subject to, among other things (i) execution
of  a  definitive  merger  agreement   containing   customary   representations,
warranties, covenants and conditions (including a financial condition), and (ii)
compliance  with  all  applicable  regulatory  and  governmental   requirements.
Accordingly,  there  can be no  assurance  that  the  proposed  merger  will  be
consummated.

                               . . . . . . . . . .

                                      F-26