<PAGE>
================================================================================
 
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549
                                        
                                   FORM 10-K
                                        
(Mark One)
[X]  Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934
     For the fiscal year ended December 28, 1997

                                       OR

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

                       Commission File Number:  0-21587
                                        
                               PJ AMERICA, INC.
            (Exact name of registrant as specified in its charter)
                                        
<TABLE> 
<CAPTION> 
<S>                                                       <C> 
           Delaware                                             61-1308435
(State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                            Identification Number)
</TABLE> 
                               9109 Parkway East
                          Birmingham, Alabama  35206
                   (Address of principal executive offices)

                                (205) 836-1212
             (Registrant's telephone number, including area code)
                                        
--------------------------------------------------------------------------------
                                        
Securities registered pursuant to Section 12(b) of the Act:
<TABLE> 
<CAPTION> 
                                                              (Name  of each exchange
     (Title of Each Class)                                      on which registered)
             None                                                      None
<S>                                                           <C> 
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value                                  The Nasdaq Stock Market
</TABLE> 
--------------------------------------------------------------------------------
     Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days:

     Yes  X                                                        No 
         ---                                                          ---

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

     As of February 13, 1998, there were 5,782,185 shares of the Registrant's
Common Stock outstanding.  The aggregate market value of the shares of
Registrant's Common Stock held by non-affiliates of the Registrant at such date
was $69,507,923 based on the last sale price of the Common Stock on February 9,
1998 as reported by the Nasdaq Stock Market.  For purposes of the foregoing
calculation only, all directors and executive officers of the Registrant have
been deemed affiliates.

                      DOCUMENTS INCORPORATED BY REFERENCE

     Portions of Part III are incorporated by reference from the Registrant's
Proxy Statement for the Annual Meeting of Stockholders to be held May 20, 1998.

================================================================================
<PAGE>
 
                               TABLE OF CONTENTS
                               -----------------

                                        


PART I
------
 

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


PART II
-------
 
     Item 5.   Market for Registrant's Common Equity
                and Related Stockholder Matters
     Item 6.   Selected Financial Data
     Item 7.   Management's Discussion and Analysis of
                Financial Condition and Results of Operations
     Item 8.   Financial Statements and Supplementary Data
     Item 9.   Changes in and Disagreements with Accountants on
                Accounting and Financial Disclosure

PART III
--------

     Item 10.  Directors and Executive Officers of the Registrant
     Item 11.  Executive Compensation
     Item 12.  Security Ownership of Certain Beneficial Owners
                and Management
     Item 13.  Certain Relationships and Related Transactions
 

PART IV
-------
 
     Item 14.  Exhibits, Financial Statement Schedules
                and Reports on Form 8-K
<PAGE>
 
                                    PART I


Item 1.  Business

General


     PJ America, Inc. (the "Company") is the largest franchisee of "Papa John's"
pizza delivery and carry-out restaurants.  At December 28, 1997, the Company
owned and operated 73 Papa John's restaurants in Alabama, Virginia, Ohio and
Texas.  In addition to its existing territories, the Company has entered into a
development agreement with its franchisor, Papa John's International, Inc.
("PJI"), to develop Papa John's restaurants in the Ventura, Kern, San Luis
Obispo, and Santa Barbara counties, as well as the northwestern portion of Los
Angeles County (the "California Counties").  Further, the Company has been
granted by PJI the rights to enter into development agreements for Papa John's
restaurants in the Vancouver, Canada area and Puerto Rico.  In addition, the
Company has an option, exercisable during 1998, to acquire the operations and
development rights for Papa John's restaurants in Utah from an affiliate of the
Company.  At December 28, 1997, PJI and its franchisees (including the Company)
operated 1,498 Papa John's restaurants in 41 states and the District of
Columbia.

Strategy

     The Company's objective is to become the leading chain of pizza delivery
restaurants in each of its targeted markets.  To accomplish this objective, the
Company has developed a strategy designed to achieve high levels of customer
satisfaction and repeat business, as well as to establish recognition and
acceptance of the Papa John's concept.  The key elements of the Company's
strategy include:

     Focused High Quality Menu.  Papa John's restaurants offer a focused menu of
high quality, value-priced pizza, breadsticks and cheesesticks, as well as
canned soft drinks.  Papa John's original, medium thick crust is made from fresh
dough (never frozen) produced in PJI's regional commissaries.  Every pizza is
prepared using real mozzarella cheese, pizza sauce made from fresh-packed
tomatoes (not concentrate), a proprietary mix of savory spices and a choice of
high quality meat and vegetable toppings in generous portions.  In October, 1996
the Company began offering thin crust pizza in all of its markets.

     Purchasing and Distribution.  PJI's commissary system supplies pizza dough
and other food and paper products twice weekly to each of its franchised
restaurants.  PJI currently operates nine regional commissaries across the
United States.  PJI also operates one distribution center in Dallas, Texas.  PJI
expects to open new commissaries and distribution centers as PJI and its
franchisees expand into new territories.  PJI's commissary system enables it to
closely monitor and control product quality and consistency, while lowering food
and operating costs for its franchisees. All Papa John's restaurants are equired
to purchase a proprietary mix of savory spices and dough from PJI. Franchisees
may purchase other goods from approved suppliers or PJI, which has negotiated
purchasing agreements with most of its suppliers. The Company

                                       1
<PAGE>
 
believes that these agreements enable it to benefit from volume discounts which
result in prices the Company believes are below those which it could otherwise
obtain. In addition, all the equipment, counters and smallwares required to open
a Papa John's restaurant are available from PJI. PJI also provides layout and
design services and recommends subcontractors, signage installers and telephone
systems to its franchisees. Although not required to do so, the Company
purchases substantially all of its food products and restaurant equipment from
PJI.

     In the second quarter of 1998, the Company expects to open its own
commissary in Puerto Rico to service its own restaurants. The Company expects to
be able to purchase product from PJI suppliers under the same terms and prices
as PJI's commissaries. This will be the first commissary in the Papa John's
system which will not be operated by PJI.

     The Company anticipates leasing the building for the commissary, and that
the capital investment for improvements and equipment to be approximately
$500,000.

     Commitment to Employee Training and Development. The Company is committed
to the development and motivation of its employees through on-going training
programs, incentive compensation and opportunities for advancement. The Company
offers financial and stock incentives to employees at various levels based on
the achievement of performance goals. The Company's growth also provides
significant opportunities for advancement. The Company believes these factors
create an entrepreneurial spirit throughout the organization, resulting in a
positive work environment and motivated, customer-oriented employees.

     Marketing Programs. The Company's restaurant-level marketing programs
target the delivery area of each restaurant, making extensive use of distinctive
print materials in direct mail and store-to-door couponing. Local marketing
efforts also include a variety of community-oriented activities with schools,
sports teams and other organizations. In markets in which the Company has a
significant presence, local marketing efforts are supplemented with radio and
television advertising. The Company anticipates expanding television advertising
in 1998, as the market penetration in all of its existing markets has increased.

Unit Economics

     The Company believes its unit economics are exceptional. The 46 restaurants
that were open throughout the entire 1997 fiscal year (excluding acquisitions of
other PJI franchisees in 1997) generated average sales of $773,000, average cash
flow (operating income plus depreciation) of $148,000 (or 19.2% of average
sales) and average restaurant operating income of $128,000 (or 16.7% of average
sales). Sales and profitability in the initial months of operations,
historically have been lower than for mature restaurants.

     The average cash investment, including franchise fees for the 11
restaurants (five free-standing ($250,000) and six in-line ($202,000)) opened
during the 1997 fiscal year, was approx-imately $225,000, exclusive of land and
pre-opening costs. The Company expects the average cash investment for
restaurants to be opened in 1998 to be approximately $250,000 ($300,000 for
free-standing and $200,000 for in-lines). The Company anticipates that the new
restaurants to be opened in 1998 will be in the Company's existing markets,
Puerto Rico and California.

                                       2
<PAGE>
 
Expansion and Site Selection

     The Company's growth strategy will focus on further developing the Papa
John's concept through (i) building out its existing markets; (ii) acquiring and
developing new territories; and (iii) strategically acquiring existing Papa
John's franchisee groups and territories, if available. The Company's objective
is to become the leading chain of pizza delivery restaurants in each of its
targeted markets. Through a market-by-market expansion strategy focused on
clustering restaurants, the Company seeks to increase consumer awareness and
take advantage of operational and advertising efficiencies. During fiscal 1997,
the Company opened 11 restaurants and acquired 16 restaurants. In 1998, the
Company expects to open approximately 18 additional restaurants. As part of its
overall growth strategy, the Company intends to supplement its new restaurant
development through acquisition of existing Papa John's franchisees.

     In addition to developing its existing territories, the Company has entered
into a development agreement with PJI to develop Papa John's restaurants in the
California Counties. Such agreement requires the Company to open three Papa
John's restaurants in 1998, five additional restaurants per year through 2004,
and four restaurants in 2005. PJI has also granted the Company the rights to
enter into development agreements for Papa John's restaurants in the Vancouver,
Canada area and Puerto Rico. California, Canada and Puerto Rico are new markets
for Papa John's restaurants. In addition, the Company has an option, exercisable
during 1998, to acquire the operations and development rights for Papa John's
restaurants in Utah from an affiliate of the Company, which currently owns and
operates nine restaurants. The development rights with respect to the Utah
territory provided for eight Papa John's restaurants to be opened by December
31, 1997, with an additional six restaurants to be opened in 1998, 1999 and
2000. There can be no assurance that the Company will exercise the option for
the Utah territory or that, if exercised, such restaurants will be developed.
PJI has waived its right of first refusal with respect to the Company's possible
acquisition of the Utah territory.

     The Company also has a right of first refusal with a term of five years
beginning September 1, 1996 to acquire from an affiliate of the Company the
operations and development rights for Papa John's restaurants in (i) Iowa,
including the Moline and Rock Island, Illinois areas (but excluding the Council
Bluffs area of Iowa), in which ten restaurants are currently open, and (ii) in
the Baton Rouge, Lafayette and Lake Charles, Louisiana areas, in which eight
restaurants are currently open. The development rights with respect to such
territories provide that a total of 20 additional Papa John's restaurants will
be opened through 2002. There are no agreements, however, with respect to the
Company's acquisition of such territories, and there can be no assurance that
such territories will be acquired. PJI has waived its right of first refusal
with respect to the Company's possible acquisition of the Iowa and Louisiana
territories described above. In addition, certain officers, directors and
stockholders of the Company own interests in Papa John's franchisees that
operate in certain areas in Michigan, Ohio and South Carolina. PJI has waived
its right of first refusal with respect to the Company's possible acquisition of
such franchisees.

     The Company devotes significant resources to the investigation and
evaluation of potential sites. The site selection process focuses on trade area
demographics, target population density, household income levels and competitive
factors. Management inspects each potential Company

                                       3
<PAGE>
 
restaurant location and the surrounding market before a site is approved. The
Company's restaurants are typically located in strip shopping centers or free-
standing buildings that provide visibility, curb appeal and accessibility. All
site selections must be approved by PJI. Papa John's restaurant design may be
configured to fit a wide variety of building shapes and sizes, thereby
increasing the number of suitable locations for Papa John's restaurants.

Menu


     Papa John's restaurants offer a focused menu of high quality, value-priced
pizza, breadsticks and cheesesticks, as well as canned soft drinks. All Papa
John's original medium thick crust pizzas are prepared using fresh dough (not
frozen) made from high protein wheat flour, real mozzarella cheese, pizza sauce
made with fresh-packed tomatoes (not concentrate), a proprietary mix of savory
spices and a choice of high quality meat and vegetable toppings in generous
portions. Fresh onions and green peppers are chopped daily at all restaurants
and are purchased from local produce suppliers. Each pizza is complemented by a
container of Papa John's special garlic sauce and two pepperoncinis. The Company
believes its focused menu helps create a strong identity among consumers and
simplifies operations, resulting in lower operating costs, improved food quality
and superior customer service. In October, 1996, the Company began offering a
thin crust pizza in all of its markets.
 
Marketing Programs

     The Company has restaurant-level marketing programs which target the
delivery area of each restaurant, making extensive use of distinctive print
materials in direct mail and store-to-door couponing. The Company tailors its
store-to-door coupons according to customer buying habits as tracked by the
Company's point-of-sale computer systems used in each restaurant. Local
marketing efforts also include a variety of community-oriented activities with
schools, sports teams and other organizations. The Company currently supplements
its local marketing efforts with a limited amount of radio and television
advertising. The Company believes that its marketing programs are cost-effective
and significantly increase Papa John's visibility among potential customers. The
Company's advertising expenditures as a percentage of restaurant sales for 1997
were 7.2%.

     The Company's restaurant-level marketing efforts are supported by print and
electronic advertising materials that are produced by the Papa John's Marketing
Fund, Inc. (the "Marketing Fund") for use by both PJI and its franchisees. The
required Marketing Fund contribution is established from time to time by the
governing board of the Marketing Fund and is currently 1.0% of restaurant sales.
The maximum required contribution for PJI franchisees is 1.5% of restaurant
sales and can be increased above 1.5% only upon approval by not less than 60.0%
of Marketing Fund members. In addition, PJI may require the Company to
participate in an advertising cooperative for its designated market area and to
contribute a minimum amount of restaurant sales for local advertising. PJI also
provides each of its franchisees with catalogs for uniforms and promotional
items and pre-approved, print marketing materials that can be ordered from PJI.

                                       4
<PAGE>
 
Restaurant Operations

     Management and Employees. A typical Company restaurant employs a restaurant
manager, two or three assistant managers and approximately 25 hourly employees,
most of whom work part-time. The restaurant manager is responsible for the day-
to-day operation of the restaurant and for the maintenance of Company
established operating standards. The Company seeks to hire experienced
restaurant managers and staff and motivate and retain them by providing
opportunities for advancement and performance-based financial incentives. In
addition, the Company established the 1996 Stock Ownership Incentive Plan, which
will enable the Company to provide long-term equity-based incentives for
corporate and restaurant management personnel. The Company believes that it has
a low managerial turnover rate in comparison to the quick service restaurant
industry and that this low turnover rate results in decreased training costs and
higher productivity.
 
     The Company employs area supervisors, each of whom has responsibility for
overseeing four to six Company restaurants. The Company also employs regional
operations directors who oversee area supervisors and managers within their
respective markets.

     Training. The Company has full-time training coordinators in the Alabama
and Virginia markets. In addition, PJI provides an on-site training team as
needed. Each regional area supervisor and restaurant manager is required to
complete PJI's two-week training program in which instruction is given on all
aspects of PJI's systems and operations. The program includes classroom
instruction and hands-on training at an operating Papa John's restaurant. In
addition, the Company has developed a specific education and safety program for
its delivery drivers.

     Point-of-Sale System. All of the Company's existing restaurants are
equipped with the Papa John's PROFIT System. The Company believes that this
technology increases speed and accuracy in order taking and pricing, reduces
paperwork and allows the restaurant manager to better monitor and control food
and labor costs. The point-of-sale system enhances restaurant-level marketing
capabilities through a database that provides information on customers and their
buying habits with respect to the Company's products. The Company anticipates
that in early 1998, polling capabilities will allow the Company to obtain
current restaurant reporting information, thereby improving the speed, accuracy
and efficiency of restaurant-level reporting.

     Reporting. Managers at restaurants prepare daily reports of sales, cash
deposits and operating costs. Physical inventories of all food and beverage
items are taken weekly. The Company's area supervisors prepare weekly profit and
loss statements for each of the restaurants. The Company believes that the
PROFIT System helps simplify and accelerate many of these reporting functions.

     Hours of Operation. The Company's restaurants are open seven days a week,
typically from 11:00 a.m. to 12:00 midnight Sunday through Thursday, and from
11:00 a.m. to 1:30 a.m. on Friday and Saturday.

                                       5
<PAGE>
 
Development and Franchise Agreements

     Franchise and Development Agreements. The Company has entered into
development agreements with PJI for the right to construct one or more Papa
John's restaurants pursuant to a development schedule within specified
geographic areas in Alabama, Virginia, Ohio and Texas. The Company has entered
into a development agreement with PJI to develop Papa John's restaurants in the
California Counties. In addition, PJI has granted the Company the rights to
enter into development agreements for Papa John's restaurants in the Vancouver,
Canada area and Puerto Rico.

     Generally, a franchise agreement is executed when the Company secures a
restaurant location. Each per restaurant development fee is typically credited
against PJI's franchise fee, which is payable to PJI upon signing the franchise
agreement for a specific location. The franchise fees payable with respect to
the Company's restaurants range between $10,000 and $18,500, depending upon the
date of execution of the development agreement. With respect to the California
Counties and the Vancouver and Puerto Rico territories, the Company expects to
pay PJI's standard franchise fee at the time the franchise agreement is entered
into, which is currently $20,000.

     Under each of the Company's franchise agreements, the Company pays PJI a
royalty fee of 4% of sales, PJI's current standard royalty fee. Under such
agreements, PJI may increase the royalty fee to 5% of sales after the agreement
has been in effect for between three to five years. In no event may the royalty
fee be increased to an amount greater than the royalty fee currently in effect
for new PJI franchisees.

     PJI's franchise agreements authorize the Company to use its trade names,
trademarks and service marks with respect to specific Papa John's restaurants.
PJI also provides general construction specifications, designs, color schemes,
signs, equipment, preparation methods for food and beverages, marketing
concepts, operations and financial control methods, management training,
technical assistance and materials. Each franchise agreement prohibits the
Company from transferring a franchise without the prior approval of PJI. PJI has
the contractual right to terminate a franchise agreement for a variety of
reasons, including a franchisee's failure to make payments when due or failure
to adhere to PJI's policies and standards. Many state franchise laws limit the
ability of a franchisor to terminate or refuse to renew a franchise.

     The development agreements, and each of the franchise agreements, prohibit
the Company, during the term of the agreements and for a two-year period
following their termination or expiration, from owning or operating any other
pizza delivery or take-out restaurant within ten to fifty miles of the franchise
granted or any other Papa John's franchise. In addition, the Company and its
senior executive officers have agreed through October 1999 not to operate any
restaurant concepts other than Papa John's without PJI's approval. Also, the
Company's directors (other than Messrs. Sherman, Schnatter and Hart) have agreed
not to be actively involved in the management of other restaurant concepts
during such period without PJI's consent.

                                       6
<PAGE>
 
     Existing Territories. In order for the Company to maintain its development
rights under the agreements to the Birmingham, Alabama area; the Norfolk,
Richmond and Virginia Beach, Virginia areas; East Texas; and the Akron, Ohio
area, the Company is required to open five more stores during 1998. Once the
Company completes this development schedule, it may open additional restaurants
in these territories subject to PJI's consent.

     Franchise Restaurant Development. PJI assists the Company in selecting
sites and developing restaurants. PJI provides the Company with the physical
specifications for typical restaurants, both for free-standing restaurants and
restaurants located in strip shopping centers. The Company procures virtually
all of the design plans, counters and equipment for its restaurants from PJI at
prices the Company believes are favorable. The Company is responsible for
selecting the location for its restaurants but must obtain PJI's approval of
each restaurant design and each location based on accessibility and visibility
of the site and targeted demographic factors, including population, density,
income, age and traffic. The Company is responsible for all costs and expenses
incurred in locating, acquiring and developing restaurant sites.

     Franchise Training and Support. Each regional operations director and area
supervisor must satisfactorily complete PJI's two-week training program and must
also devote his or her full business time and efforts to the operation of the
Company's restaurants. Each of the Company's restaurant managers report to an
area supervisor and are also required to complete PJI's two-week training
program.

     Franchise Operations. All Company restaurants are required to operate their
Papa John's restaurants in compliance with PJI's policies, standards and
specifications, including matters such as menu items, ingredients, materials,
supplies, services, fixtures, furnishings, decor and signs. The Company has full
discretion to determine the prices to be charged to its customers.

     Reporting. PJI collects weekly and monthly sales and other operating
information from the Company. The Company has agreements with PJI permitting PJI
to electronically debit the Company's bank accounts for the payment of
royalties, Marketing Fund contributions and purchases from PJI. This system
significantly reduces the resources needed to process payables.

Competition

     The restaurant industry is intensely competitive with respect to price,
service, location and food quality, and there are many well-established
competitors with substantially greater financial and other resources than the
Company. Such competitors include a large number of national and regional
restaurant chains, as well as local pizza restaurant operators. Some of the
Company's competitors have been in existence for a substantially longer period
than the Company and may be better established in the markets where the
Company's restaurants are, or may be, located. Within the pizza segment of the
restaurant industry, the Company believes that its primary competitors are the
national pizza chains, including Pizza Hut, Domino's and Little Caesar's. A
change in the pricing, marketing or promotional strategies or product mix of one
or more of these competitors could have a material adverse impact on the
Company's sales and earnings. In general, there is also active competition for
management personnel and real estate sites suitable for Papa John's restaurants.

                                       7
<PAGE>
 
     The restaurant business is often affected by changes in consumer tastes,
national, regional or local economic conditions, demographic trends, traffic
patterns and the type, number and location of competing restaurants. In
addition, factors such as inflation, increased food, labor and benefits costs
and the lack of experienced management and hourly employees may adversely affect
the restaurant industry in general and the Company's restaurants in particular.

Government Regulation

     The Company is subject to various Federal, state and local laws affecting
its business. Each Papa John's restaurant is subject to licensing and regulation
by a number of governmental authorities, which include health, safety,
sanitation, building and fire agencies in the state or municipality in which the
restaurant is located. Difficulties in obtaining or failures to obtain required
licenses or approvals can delay or prevent the opening of a new restaurant in a
particular area. The Company is also subject to Federal and state environmental
regulations, but these have not had a material effect on the Company's
operations.
 
     The Company's relationship with PJI is governed by the laws of several
states which regulate substantive aspects of the franchisor-franchisee
relationship. Substantive state laws that regulate the franchisor-franchisee
relationship presently exist or are being considered in a substantial number of
states and bills have been introduced in Congress (one of which is now pending)
which would provide for Federal regulation of substantive aspects of the
franchisor-franchisee relationship. These current and proposed franchise
relationship laws limit, among other things, the duration and scope of non-
competition provisions, the ability of a franchisor to terminate or refuse to
renew a franchise and the ability of a franchisor to designate sources of
supply.

     The Company's restaurant operations are also subject to Federal and state
laws governing such matters as wages, working conditions, citizenship
requirements and overtime. Some states have set minimum wage requirements higher
than the Federal level, and the Federal government recently increased the
Federal minimum wage. In September 1997, the second phase of an increase in the
minimum wage was implemented in accordance with the Federal Fair Labor Standards
Act of 1996. Significant numbers of hourly personnel at the Company's
restaurants are paid at rates related to the Federal minimum wage and,
accordingly, increases in the minimum wage increased labor costs at the
Company's restaurants. Other governmental initiatives such as mandated health
insurance, if implemented, could adversely affect the Company as well as the
restaurant industry in general. The Company is also subject to the Americans
With Disabilities Act of 1990, which, among other things, may require certain
minor renovations to its restaurants to meet federally-mandated requirements.
The cost of these renovations is not expected to be material to the Company.

     The Company has been granted by PJI the rights to enter into development
agreements for Papa John's restaurants in the Vancouver, Canada area and Puerto
Rico. The Company's ability to establish international operations is subject to
various risks, including changing political and economic conditions, currency
fluctuations, trade barriers, adverse tax consequences, and government
regulations relating to, among other things, the preparation and sale of food,
building

                                       8
<PAGE>
 
and zoning requirements, wages, working conditions, and the Company's
relationship with its employees. There can be no assurance that the Company will
be successful in establishing its international operations or that such risks
will not have a material adverse effect on the Company in the future.

Trademarks

     The Company's rights to use PJI's trademarks and service marks are
significant to the Company's business. PJI is the owner of the Federal
registration of the trademark "Papa John's." PJI has also registered "Pizza Papa
John's" and design as a trademark and a service mark. PJI owns Federal
registrations for the marks "Pizza Papa John's Delivering the Perfect Pizza!"
and design, "Call Your Papa," "Perfect Pizza Perfect Price," "Delivering the
Perfect Pizza!", "We Deliver Perfection," "The Official Pizza of Summer," and
"Pizza Papa John's Print Network." PJI has applied for the registration of
"Pizza Papa John's Better Ingredients, Better Pizza" and design, "Better
Ingredients, Better Pizza" and design, and miscellaneous design (Papa John's
logo). PJI is aware of the use by other persons in certain geographic areas of
names and marks which are the same as or similar to the Company's marks. It is
PJI's policy to pursue registration of its marks whenever possible and to
vigorously oppose any infringement of its marks.

Employees

     At February 13, 1998, the Company had approximately 2,000 employees of
which approximately 1,600 were restaurant employees, approximately 370 were
restaurant management and supervisory personnel and approximately 30 were
corporate personnel. Most restaurant employees are part-time and are paid on an
hourly basis. None of the Company's employees are currently represented by a
labor union, and the Company is not aware of any union organizing activity among
its employees. The Company believes that its relationship with its employees is
good.

Cautionary Statements

     Information provided in this Form 10-K under the captions "Business -
Strategy," "- Expansion and Site Selection," "- Franchise and Development
Agreements" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" contains, and from time to time the Company may
disseminate materials and make statements which may contain "forward-looking"
information, as that term is defined by the Private Securities Litigation Reform
Act of 1995 (the "Act"). These cautionary statements are being made pursuant to
the provisions of the Act and with the intention of obtaining the benefits of
the "safe harbor" provisions of the Act. The Company cautions investors that any
forward-looking statements made by the Company are not guarantees of future
performance and that actual results may differ materially from those in the
forward-looking statements as a result of various factors, including but not
limited to: (i) the ability to upgrade the Company's infrastructure to support
its operations and development plans, (ii) the ability of the Company, PJI and
PJI's franchisees to expand through the opening of new restaurants which may be
affected by the selection and availability of suitable restaurant locations,
negotiation of suitable leases or financing terms, constraints on

                                       9
<PAGE>
 
permitting and construction of restaurants, and the hiring, training and
retention of management and other personnel, (iii) the Company's ability to
acquire existing PJI's franchisees may be hindered by competition from PJI,
which has a right to approve and a right of first refusal with respect to the
sale of all Papa John's restaurants, (iv) the entering into development
agreements with PJI on terms acceptable to the Company for Papa John's
restaurants in Vancouver, Canada and the surrounding area; and Puerto Rico, (v)
the overall success of PJI, (vi) the restaurant industry is intensely
competitive with respect to price, service, location and food quality, and there
are many well established competitors with substantially greater financial and
other resources than the Company, PJI and PJI's franchisees and some of these
competitors have been in existence for a substantially longer period than the
Company, PJI and PJI's franchisees and may be better established in the markets
where restaurants operated by the Company, PJI or PJI's franchisees are, or may
be, located (vii) a change in the pricing or other marketing or impact on sales
and earnings at restaurants operated by the Company, PJI and PJI's franchisees,
(viii) increases in operating costs such as inflation, increased food costs,
increased labor and employee benefit costs and the availability of qualified
management and hourly employees, (ix) the availability of capital to the
Company, PJI and PJI's franchisees and (x) changes in governmental regulations,
including further increases in the minimum wage.

Item 2.  Properties

     At December 28, 1997, the Company operated 73 Papa John's restaurants.
Restaurants in Alabama, Virginia, Ohio and Texas were 20, 39, 9 and 5,
respectively.

     All but three of the Company's restaurants are located in leased space. The
initial terms of most of the Company's leases are three to five years and
provide for one or more options to renew for at least one additional term. The
Company's leases generally specify a fixed annual rent with fixed increases, or
increases based on changes in the Consumer Price Index, at various intervals
during the lease term. Generally, the leases are net leases which require the
Company to pay all or a portion of the cost of insurance, maintenance and
utilities.

     The Company leases approximately 7,000 square feet of corporate office
space collectively in Alabama, Virginia, Kentucky and Ohio.

Item 3.  Legal Proceedings

     The Company is involved in lawsuits and claims arising in the normal course
of business. In the opinion of management of the Company, although the outcomes
of these lawsuits and claims are uncertain, in the aggregate they will not have
a material adverse effect on the Company's business, financial condition or
results of operations.

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

     Not applicable.

                                      10
<PAGE>
 
                     EXECUTIVE OFFICERS OF THE REGISTRANT

     Set forth below are the current executive officers of the Company, together
with their ages, their positions with the Company and the year in which they
first became an officer of the Company:
<TABLE> 
<CAPTION> 
                                                                     First Elected
Name                    Age     Position                             Executive Officer
----                    ---     --------                             -----------------
<S>                     <C>     <C>                                  <C>
Richard F. Sherman       54     Chairman of the Board                      1991
Douglas S. Stephens      34     President, Chief Executive Officer         1991
D. Ross Davison          36     Vice President--Chief Financial            1996
                                 Officer and Treasurer
James S. Riekel          38     Vice President--Operations                 1993
</TABLE>
     Richard F. Sherman has served as a director and Chairman of the Board of
the Company or certain predecessors since 1991. Mr. Sherman is a private
investor who has been a franchisee and a consultant to PJI since 1991. From 1993
to present, Mr. Sherman has been a director of PJI. From 1987 to 1991, Mr.
Sherman was Chairman of the Board and President of Rally's Hamburgers, Inc. From
1984 to 1987, Mr. Sherman was President and a director of Church's Chicken, Inc.
From 1971 to 1984, Mr. Sherman was Group Executive Vice President and director
of Hardee's Food Systems, Inc. and its parent, Imasco USA, Inc. Mr. Sherman
serves on the board of directors of Taco Cabana, Inc., Hartz Restaurants, Inc.
and Reed's Jewelers, Inc.

     Douglas S. Stephens has served as a director, President and Chief Executive
Officer of the Company or certain predecessors since 1991. From 1989 to 1991,
Mr. Stephens was the Vice President of Information Systems for the Kentucky
Lottery Corporation. From 1986 to 1989, Mr. Stephens was a systems consultant
for Andersen Consulting, a division of Arthur Andersen, LLP, an international
professional services firm.

     D. Ross Davison has served as Vice President Chief Financial Officer and
Treasurer of the Company since 1996. From 1985 to 1996, Mr. Davison was with
Arthur Andersen, LLP, an international professional services firm, and his most
recent position was Senior Manager. From 1983 to 1985, Mr. Davison was with
Cotton and Allen, P.S.C., a certified public accounting firm. Mr. Davison is a
licensed Certified Public Accountant.

     James S. Riekel has served as Vice President Operations of the Company or
certain predecessors since 1992. From 1983 to 1992, Mr. Riekel was with Domino's
Pizza, Inc., where his most recent position was Regional Operations Director.

                                      11
<PAGE>
 
                                    PART II

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

Item 6.    Selected Financial Data

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

Item 8.    Financial Statements and Supplementary Data

Item 9.    Changes in and Disagreements with Accountants on
            Accounting and Financial Disclosure

           None

                                   PART III

Items 10 - 13.   Directors and Executive Officers of the Registrant; Executive
                  Compensation; Security Ownership of Certain Beneficial Owners
                  and Management; and Certain Relationships and Related
                  Transactions

     The information required by these items, other than the information set
forth in this Report under Part I, "Executive Officers of Registrant," is
omitted because the Company is filing a definitive proxy statement pursuant to
Regulation 14A not later than 120 days after the end of the fiscal year covered
by this Report which includes the required information. Such information is
incorporated herein by reference.

                                      12
<PAGE>
 
                                    PART II

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

     The Company's common stock has traded on the Nasdaq National Market System
under the trading symbol "PJAM" since October 25, 1996.  At February 9, 1998,
there were approximately 67 record holders of the Company's common stock.  The
following table sets forth the high and low sales prices of the Company's common
stock for the quarters indicated, as reported by the Nasdaq National Market
System:
<TABLE>
<CAPTION>
              1997
          Quarter Ended                           High            Low
          -------------                           ----            ---
<S>                                              <C>             <C>
          First Quarter                          $19.25          $14.00
          Second Quarter                         $18.88          $12.13
          Third Quarter                          $18.75          $15.13
          Fourth Quarter                         $17.88          $13.25
</TABLE>
<TABLE>
<CAPTION>
               1996
          Quarter Ended                           High            Low
          -------------                           ----            ---
<S>                                              <C>             <C>
          Fourth Quarter (from October 25, 1996) $22.25          $15.50
</TABLE> 
Since its initial public offering of common stock in October, 1996, the company
has not paid dividends on its common stock, and has no plans to do so in the
foreseeable future.

                                       13
<PAGE>
 
Item 6. Selected Financial Data (In thousands, except per share data)
<TABLE> 
<CAPTION> 
                                                                                  FOR THE YEARS ENDED (1)
                                                           --------------------------------------------------------------------
                                                              (2)            (2)            (2)(3)          (2)(3)
                                                            Dec. 26,       Dec. 25,        Dec. 31,        Dec. 29,    Dec. 28,
                                                              1993           1994            1995            1996        1997
                                                           --------------------------------------------------------------------
<S>                                                        <C>             <C>             <C>                     <C>

Restaurant sales                                             $3,127        $6,415          $16,744         $24,550      $48,128
Cost and expenses:
  Cost of sales                                               1,054         2,098            5,630           8,064       15,251
  Salaries and benefits                                         888         1,677            4,158           6,113       12,508
  Other operating expenses                                      772         1,481            3,820           5,833       11,535
  General and administrative expenses                           229           433              887           1,402        2,558
  Depreciation and amortization                                  79           172              393             628        1,302
                                                           --------------------------------------------------------------------
    Total costs and expenses                                  3,022         5,861           14,888          22,040       43,154
                                                           --------------------------------------------------------------------
Operating income                                                105           554            1,856           2,510        4,974
Other income (expense), net                                      (6)          (22)             (78)             11          864
                                                           --------------------------------------------------------------------
Income before income taxes                                       99           532            1,778           2,521        5,838
Provision for income taxes(4)                                    36           194              684             941        2,040
                                                           --------------------------------------------------------------------
  Net income (4)                                             $   63        $  338          $ 1,094         $ 1,580      $ 3,798
                                                           ====================================================================
  Net income per share - Basic                                                             $  0.52         $  0.61      $  0.71
                                                                                           ------------------------------------
  Net income per share - Diluted                                                           $  0.52         $  0.61      $  0.69
                                                                                           ====================================
  Weighted average shares outstanding - Basic                                                2,120           2,583        5,369
                                                                                           ------------------------------------
  Weighted average shares outstanding - Diluted                                              2,120           2,610        5,483
                                                                                           ====================================

Balance sheet data (end of period):
  Total assets                                               $  823        $ 1,655         $ 3,628         $23,614      $40,283
  Total debt, including current maturities                      300            427           1,071              70           --
  Stockholders' equity                                          435            995           1,885          21,518       36,807
</TABLE>

(1)  The Company operates on a 52-53 week year ending on the last Sunday in
     December each year. Fiscal 1995 as a 53 week year.

(2)  Includes the Alabama Group for the entire period presented. Fiscal 1996
     also includes the Virginia Group from the date of acquisition (October 30,
     1996), which was simultaneous with the closing of the IPO.

(3)  Fiscal 1995 and 1996 represent the results of operations of the Company
     restated to give retroactive effect to the merger with OPD on June 5, 1997,
     which was accounted for as a pooling of interests, as if the merger had
     occurred at the beginning of fiscal 1995.

(4)  Net income reflects a pro forma provision for income taxes assuming the
     Company's predecessors and OPD were C corporations rather than S
     corporations for each period.

                                      14
<PAGE>
 
Item 7.   Management's Discussion and Analysis of Financial Condition and
          Results of Operations

Introduction

     The Company is the largest franchisee of Papa John's pizza delivery and
carry-out restaurants. At December 28, 1997, the Company owned and operated 73
Papa John's restaurants in Alabama, Virginia, Ohio and Texas.

     The Company succeeded to the businesses of five PJI franchisees in the
Reorganization which was completed on October 30, 1996 concurrent with the
closing of the Company's IPO. The Reorganization was an exchange of non-monetary
assets by stockholders and has been accounted for at historical cost.

     On June 5, 1997, a subsidiary of the Company merged with OPD acquiring
eight Papa John's restaurants in the Akron, Ohio area. This transaction was
accounted for as a pooling of interests and accordingly, the financial
statements for 1995 and 1996 have been restated.

     The Company's restaurants operate under separate franchise agreements,
which generally have terms between five and ten years (with renewal options
between five and ten years) and require payment of monthly royalties equal to 4%
of restaurant sales. The Company also has entered into development agreements
with PJI to open a certain number of restaurants over a defined period of time
within specific geographic areas. The Company's development agreements generally
require it to pay a non-refundable fee per restaurant covered by the respective
agreements and which fee is typically credited against the initial franchise fee
that the Company is required to pay for each new restaurant opened. The Company
amortizes development and franchise fees over a 20-year period, beginning with
the opening of a restaurant.

     The Company's growth strategy focuses on further developing the Papa John's
concept through: (i) building out its existing markets; (ii) acquiring and
developing new territories; and (iii) strategically acquiring existing Papa
John's franchisee groups and territories, if available. The Company's market-by-
market expansion strategy has contributed to increases in comparable restaurant
sales, although there can be no assurance that comparable restaurant sales will
continue to be positive.

     The average cash investment for the 11 restaurants opened during 1997 was
$225,000, (five free-standing at $250,000 each and six in-line units at $202,000
each) exclusive of land and pre-opening costs, but including franchise fees. The
Company expects the cash investment for restaurants opened in 1998 to
approximate $250,000. Pre-opening costs are expensed as incurred.

     The Company believes its expansion strategy has contributed to obtaining
higher average restaurant sales than the Papa John's franchise system. Average
sales in 1997 were $773,000, compared to average sales in 1996 of $721,000.

     The Predecessor Companies operated as S corporations until October 29,
1996. As such, the earnings of the Predecessor Companies were taxed for federal
and state income tax purposes directly to the Predecessor Companies'
stockholders. Beginning October 30, 1996, the Company became subject to
corporate level income taxes (June 5, 1997 for OPD).

                                      15
<PAGE>
 
1997 Compared to 1996

     Restaurant Sales. Restaurant sales increased 96% to $48.1 million in 1997,
from $24.6 million in 1996. This increase was primarily due to a 108.7% increase
in the number of equivalent restaurants open during 1997 as compared to 1996
(acquisition of 25 Virginia restaurants on October 30, 1996). "Equivalent
restaurants" represents the number of restaurants open at the beginning of a
given period, adjusted for restaurants opened or acquired during the period on a
weighted average basis. Also, comparable sales increased 6.9% in 1997 over 1996,
for restaurants open throughout both years.

     Costs and Expenses. Cost of sales, which consists of food, beverage, and
paper costs, increased $7.2 million, but decreased as a percentage of restaurant
sales to 31.7% in 1997 from 32.8% in 1996. This percentage decrease is primarily
attributable to lower average cheese costs in 1997 as compared to 1996.

     Salaries and benefits, which consist of all store level employee wages,
taxes and benefits, increased $6.4 million, and increased as a percentage of
restaurant sales to 26.0% in 1997 from 24.9% in 1996. The increase in salaries
and benefits as a percentage of restaurant sales was primarily due to increases
in the minimum wage in October, 1996 and September, 1997, partially offset by
improved labor utilization.

     Other operating expenses include other restaurant level operating costs,
the material components of which are automobile mileage reimbursement for
delivery drivers, rent, royalties, utility expenses, and advertising expenses.
Other operating expenses increased $5.7 million, and increased as a percentage
of restaurant sales to 24.0% in 1997 compared to 23.8% in 1996. This percentage
increase is primarily due to the acquisition of the Virginia restaurants, which
historically have had higher other operating expenses as a percentage of
restaurant sales, partially offset by increased leverage of expenses as a result
of comparable restaurant sale increases and increased purchasing power.

     General and administrative expenses increased $1.2 million and decreased as
a percentage of restaurant sales to 5.3% in 1997 from 5.7% in 1996. The decrease
was primarily due to the leveraging of general and administrative expenses as a
result of increased sales, partially offset by additional corporate
infrastructure necessary to support planned growth.

     Depreciation and amortization increased by $.7 million, and increased
slightly as a percentage of restaurant sales to 2.7% in 1997 from 2.6% in 1996.
The dollar increase was primarily due to the addition of new and acquired
restaurants.

     Other Income (Expense). Other income (expense), consisting primarily of
investment income for 1997, increased $.9 million. The increase in investment
income was a result of earnings on funds received from the IPO in October, 1996
and the secondary stock offering in July, 1997. Investment balances are
considered available to fund growth and acquisitions.

                                       16
<PAGE>
 
1996 Compared to 1995

     Restaurant Sales. Restaurant sales increased 46.6% to $24.6 million in 1996
from $16.7 million in 1995. The increase was primarily due to a 60% increase in
the number of equivalent restaurants open during 1996 as compared to 1995. Also,
comparable sales increased 4.7% in 1996 over 1995.

     Cost and Expenses. Cost of sales increased $2.4 million, but decreased as a
percentage of restaurant sales to 32.8% in 1996 from 33.6% in 1995. This
percentage decrease was primarily attributable to the acquisition of the
Virginia restaurants on October 30, 1996, when cheese costs were below the
average for all of 1996. Average cheese costs throughout the first three
quarters of 1996 were higher than the comparable periods in 1995.

     Salaries and benefits increased $2.0 million, and increased slightly as a
percentage of restaurant sales to 24.9% in 1996 from 24.8% in 1995.

     Other operating expenses increased $2.0 million, and increased as a
percentage of restaurant sales to 23.8% in 1996 from 22.8% in 1995. This
percentage increase was primarily due to the acquisition of the Virginia
restaurants, which historically have had higher other operating expenses as a
percentage of restaurant sales.

     General and administrative expenses increased $.5 million, and increased as
a percentage of restaurant sales to 5.7% in 1996 from 5.3% in 1995. The dollar
and percentage increases were primarily due to executive relocation expenses and
the addition of restaurant supervisory and corporate support personnel.

     Depreciation and amortization increased by $.2 million, and increased as a
percentage of restaurant sales to 2.6% in 1996 from 2.4% in 1995. The dollar
increase was primarily due to the addition of new and acquired restaurants. The
percentage increase was primarily due to 1995 being a 53-week year.

     Other Income (Expense). Other income (expense), which consists primarily of
interest income and interest expense, increased $.1 million in 1996 from $.1
million of expense in 1995. The increase in other income was primarily due to
the payoff of Company debt, plus interest income earned on investments as a
result of the IPO.

Liquidity and Capital Resources

     The Company requires capital primarily for the development and acquisition
of new restaurants. Total capital expenditures for 1997 were approximately $4.0
million, primarily for the opening of restaurants. In addition, the Company
acquired 8 restaurants for cash from other Papa John's franchisees for $1.6
million.

     Cash provided by operating activities was $6.1 million, $3.6 million, and
$1.9 million in 1997, 1996, and 1995 respectively. The increases are primarily
the result of higher net income and depreciation and amortization.

                                      17
<PAGE>
 
Liquidity and Capital Resources (continued)

     The Company has financed its operations principally from cash provided by
operating activities and proceeds from bank borrowings and stockholder loans.
The Company received $19.2 million in net cash proceeds from its IPO in October,
1996. As a result of the IPO, the Company used approximately $2.0 million of the
IPO proceeds to fund final S corporation distributions to stockholders, $1.6
million to retire stockholder indebtedness, and $2.0 million to retire bank
indebtedness. The remaining net proceeds were used to fund capital expenditures
in 1996 or were held in various investments. The Company also received net
proceeds of $12.2 million from a secondary stock offering in July, 1997, which
were used to fund capital expenditures or were held in various investments.

     Capital expenditures are expected to be approximately $6.0 million for
1998. Approximately $4.5 million is expected to be for restaurant development
and existing restaurant improvements, $.5 million for commissary improvements
and equipment, and $1.0 million for general and administrative land, building,
and improvements. The Company also may acquire the operations of other Papa
John's franchisees if such operations become available on terms satisfactory to
the Company. Capital resources at December 28, 1997 include $28.0 million of
cash and investments. The Company plans to fund its capital expenditures through
1998 from available cash and cash generated from operations. The Company has not
sought and does not have any commitments for any credit facilities.

Impact of Inflation

     The Company does not believe inflation has materially affected earnings
during the past three years. Substantial increases in costs, particularly labor,
employee benefits or food costs, could have a significant impact on the Company
in the future.

Year 2000

     The Company does not expect the Year 2000 issue to have a material effect
on the Company's operations.

                                      18
<PAGE>

The following table sets forth the percentage relationship to restaurant sales
for certain income statement data for the Company:

<TABLE> 
<CAPTION> 
                                                  For the years Ended (1)
                                            -----------------------------------
                                              Dec. 31      Dec. 29,    Dec. 28,
                                             1995 (2)(3)  1996 (2)(3)    1997
                                            -----------------------------------
<S>                                         <C>           <C>          <C> 
Restaurant sales                              100.0%        100.0%      100.0%
Cost and expenses:  
  Cost of sales                                33.6          32.8        31.7
  Salaries and benefits                        24.8          24.9        26.0
  Other operating expenses                     22.8          23.8        24.0
  General and administrative expenses           5.3           5.7         5.3
  Depreciation and amortization                 2.4           2.6         2.7
                                            -----------------------------------
    Total costs and expenses                   88.9          89.8        89.7
                                            -----------------------------------
Operating income                               11.1          10.2        10.3
Other income (expense), net                    (0.5)            -         1.8
                                            -----------------------------------
Income before income taxes                     10.6          10.2        12.1
Provision for income taxes (4)                  4.1           3.8         4.2
                                            -----------------------------------
Net income (4)                                  6.5%          6.4%        7.9%
                                            =================================== 

                                                1995         1996        1997 
                                            -----------------------------------
Restaurant data - the Company (5):
  Percentage change in comparable 
   restaurant sales                             3.3%          4.7%        6.9%
  Average sale for restaurants open for
   full year (in thousands)                  $  727        $  721       $ 773
                                             ==================================
Number of restaurants:
  Beginning of year                              27            39          46
  Opened                                         12             7          11
  Acquired                                        -             -          16
                                             ----------------------------------
  End of year                                    39            46          73
                                             ==================================
</TABLE> 

(1) The Company operates on a 52-53 week year ending on the last Sunday in 
    December each year. Fiscal 1995 was a 53 week year.

(2) Includes the Alabama Group for the entire period presented. Fiscal 1996 also
    includes the Virginia Group from the date of acquisition (October 30, 1996),
    which was simultaneous with the closing of the IPO.

(3) Fiscal 1995 and 1996 represent the results of operations of the Company 
    restated to give retroactive effect to the merger with OPD on June 5, 1997, 
    which was accounted for as a pooling of interests, as if the merger had
    occurred at the beginning of fiscal 1995.

(4) Net income reflects a pro forma provision for income taxes assuming the 
    Company's predecessors and OPD were C corporations rather than S
    corporations for each period.

(5) Includes all restaurants included in the IPO as if they were operated by the
    Company for the entire period presented.

                                      19
<PAGE>
 
Item 8.  Financial Statements and Supplementary Data

             Index to Financial Statements and Supplementary Data
<TABLE>
<CAPTION>
                                                                                          Page
                                                                                          ----
<S>                                                                                       <C>
Audited Consolidated Financial Statements

Consolidated Balance Sheets as of December 29, 1996, and December 28, 1997.................21

Consolidated Statements of Income for the Years Ended December 31, 1995,
     December 29, 1996, and December 28, 1997..............................................22

Consolidated Statements of Stockholders' Equity for the Years Ended
     December 31, 1995, December 29, 1996, and December 28, 1997...........................23

Consolidated Statements of Cash Flows for the Years Ended December 31, 1995,
     December 29, 1996, and December 28, 1997..............................................24

Notes to Consolidated Financial Statements.................................................25

Report of Independent Auditors.............................................................40
</TABLE>
                                       20
<PAGE>
 
                       PJ AMERICA, INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS

<TABLE> 
<CAPTION> 
                                                             Dec. 29,   Dec. 28,
(In thousands, except per share data)                          1996       1997
                                                             -------------------
<S>                                                          <C>        <C> 
                                    ASSETS
                                    ------
Current assets:
   Cash and cash equivalents                                  $ 4,076   $ 6,674
   Inventories                                                    229       311
   Prepaid expenses and other                                     368       360
   Investments                                                 12,058     9,830
   Deferred income taxes                                          104       111
                                                              -----------------
      Total current assets                                     16,835    17,286
Investments                                                         -    11,402
Net property and equipment                                      5,936     9,419
Deferred franchise and development costs, net of
 accumulated amortization of $96 in 1996 and
 $149 in 1997                                                     759     1,308
 Other assets                                                      84       868
                                                              -----------------
      Total assets                                            $23,614   $40,283
                                                              =================
 LIABILITIES AND STOCKHOLDERS' EQUITY
 ------------------------------------
Current liabilities:
   Accounts payable                                           $   189   $   525
   Accrued expenses                                             1,766     2,420
   Current maturities of bank debt                                 70         -
                                                              -----------------
      Total current liabilities                                 2,025     2,945

Deferred income taxes                                              71       531

Stockholders' equity:
  Preferred stock ($1.00 par value per share; authorized
   1,000 shares, no shares issued and outstanding                   -         -
  Common stock ($.01 par value per share; authorized
   20,000 shares; issued and outstanding shares of
   5,032 in 1996 and 5,782 and 1997)                               50        58
  Additional paid-in-capital                                   20,029    32,197
  Retained earnings                                             1,439     4,552
                                                              -----------------
      Total stockholders' equity                               21,518    36,807
                                                              -----------------

      Total liabilities and stockholders' equity              $23,614   $40,283
                                                              =================
</TABLE> 
                           (See accompanying notes)

                                      21
<PAGE>
 
                       PJ AMERICA, INC. AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF INCOME

<TABLE> 
<CAPTION> 

                                                         For the Years Ended
                                                -------------------------------------
                                                 Dec. 31,       Dec. 29,     Dec. 28,
                                                  1995           1996         1997
                                                -------------------------------------
<S>                                             <C>             <C>          <C>
(In thousands, expect per share amounts)
Restaurant sales                                $ 16,744        $ 24,550     $ 48,128
Restaurant operating expenses:
  Cost of sales                                    5,630           8,064       15,251
  Salaries and benefits                            4,158           6,113       12,508
  Other operating expenses                         3,820           5,833       11,535
  Depreciation and amortization                      393             628        1,302
                                                -------------------------------------
                                                  14,001          20,638       40,596
                                                -------------------------------------
Restaurant operating income                        2,743           3,912        7,532
General and administrative expenses                  887           1,402        2,558
                                                -------------------------------------
Operating income                                   1,856           2,510        4,974
Other (expense) income                               (78)             11          864
                                                -------------------------------------
Income before income taxes                         1,778           2,521        5,838
Income tax expense                                     9             250        1,943
                                                -------------------------------------
Net income                                      $  1,769        $  2,271     $  3,895
                                                =====================================
Pro forma income data (unaudited) (Note 5)
Historical income before income tax expense     $  1,778        $  2,521     $  5,838
Pro forma income tax expense                         684             941        2,040
                                                -------------------------------------
Pro forma net income                            $  1,094        $  1,580     $  3,798
                                                =====================================
Pro forma net income per share:
  Basic                                         $   0.52        $   0.61     $   0.71
                                                =====================================
  Diluted                                       $   0.52        $   0.61     $   0.69
                                                =====================================
Weighted average shares outstanding:
  Basic                                            2,120           2,583        5,369
                                                =====================================
  Diluted                                          2,120           2,610        5,483
                                                =====================================
</TABLE> 

                           (See accompanying notes)

                                      22
<PAGE>

                       JP AMERICA, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                               Common Stock
                                             ----------------    Additional                    Total
                                             Shares               Paid-In      Retained    Stockholders'
                                             Issued    Amount     Capital      Earnings       Equity
                                             ------    ------    ----------    --------    -------------
                                                                   (In thousands)                       
<S>                                          <C>       <C>       <C>           <C>         <C>
Balance, December 25, 1994                        -      $ 2       $   447      $ 1,020       $ 1,469
    Net income                                    -        -             -        1,769         1,769
    S corporation distributions                   -        -             -       (1,354)       (1,354)
    Incorporation of Twice the Cheese             1        1             -            -             1
                                              -----      ---       -------      -------       -------
Balance, December 25, 1995                        1        3           447        1,435         1,885
    Net income                                    -        -             -        2,271         2,271
    S corporation distributions                   -        -             -       (4,099)       (4,099)
    Stock splits and changes in par       
      value and authorized shares             1,769       15           (15)           -             -
    Change in par value applicable to the     
      merger with Ohio Pizza Delivery           277        2            (2)           -             -
    Issuance of common stock              
      (net of issuance costs)                 1,755       18        19,224            -        19,242
    Acquisition of Virginia group             1,230       12           291        1,832         2,135
    Issuance of warrant to PJI                    -        -            84            -            84
                                              -----      ---       -------      -------       -------
Balance, December 25, 1995                    5,032       50        20,029        1,439        21,518
    Net income                                    -        -             -        3,895         3,895
    S corporation distributions - OPD             -        -             -         (782)         (782)
    Issuance of common stock                    
      (net of issuance costs)                   750        8        12,168            -        12,176
                                              -----      ---       -------      -------       -------
Balance, December 28, 1997                    5,782      $58       $32,197      $ 4,552       $36,807
                                              =====      ===       =======      =======       =======
</TABLE> 


                           (See accompanying notes)


                                      23

<PAGE>
 
                       PJ AMERICA, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOW

<TABLE> 
<CAPTION> 

                                                                         For the Years Ended
                                                                -------------------------------------
                                                                 Dec. 31,       Dec. 29,     Dec. 28,
                                                                  1995           1996         1997
                                                                -------------------------------------
<S>                                                             <C>             <C>          <C>
Operating activities:
Net income                                                      $  1,769        $  2,271     $ 3,895
Adjustments to reconcile net income to net cash provided
  by operating activities: 
Depreciation and amortization                                        393             628        1,302
Deferred income taxes                                                 --             (33)         453
Changes in operating assets and liabilities:
  Inventories                                                         (6)            (69)         (82)
  Prepaid expenses and other                                        (151)            130            8
  Accounts payable                                                   154            (143)         336
  Accrued expenses                                                  (146)            879          654
Other assets                                                          --              (6)         (35)
Deferred franchise and development costs                            (119)           (105)        (423)
                                                                -------------------------------------
Net cash provided by operating activities                          1,894           3,552        6,108

Investing Activities:
Purchases of property and equipment                               (1,079)         (1,280)      (4,039)
Purchases of investments                                              --         (12,058)     (50,550)
Proceeds from maturity of investments                                 --              --       41,376
Purchase of Virginia Group, net of cash acquired                      --             985           --
Acquisitions                                                          --              --       (1,621)
Other                                                                 46              81           --
                                                                -------------------------------------
Net cash used in investing activities                             (1,033)        (12,272)     (14,834)

Financing Activities:
Proceeds from bank borrowings                                        450           1,065           --
Proceeds from issuance of common stock                                --          19,242       12,176
Payments on bank borrowings                                         (127)         (2,423)         (70)
Issuance of (payments on) stockholder notes                          254          (1,496)          --
Distributions paid                                                (1,354)         (4,099)        (782)
Capital contributions                                                  1              --           --
                                                                -------------------------------------
Net cash provided (used) by financing activities                    (776)         12,289       11,324
                                                                -------------------------------------
Net increase in cash and cash equivalents                             85           3,569        2,598
Cash and cash equivalents at beginning of year                       422             507        4,076
                                                                -------------------------------------
Cash and cash equivalents at end of year                        $    507        $  4,076     $  6,674
                                                                =====================================
</TABLE> 

                           (See accompanying notes)

                                      24

<PAGE>
 
                       PJ AMERICA, INC. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.   Basis of Presentation, Description of Business, and Reorganization

Basis of Presentation

     The accompanying consolidated financial statements include the accounts of
PJ America, Inc. and its wholly-owned subsidiaries, PJ Cheese, Inc. and Ohio
Pizza Delivery Co. (the "Company").  All significant inter-company transactions
between the consolidated companies have been eliminated.  Prior to the Company's
initial public offering (the "Offering") and reorganization, the Company's
financial statements represented the combined financial position, results of
operations and cash flows of Extra Cheese, Inc. (Extra Cheese), Textra Cheese
Corp. (Textra) and Twice the Cheese, Inc. (Twice), collectively referred to
herein as the "Alabama Group."  Those financial statements excluded the combined
financial position of PJVA, Inc. and PJV, Inc., collectively referred to as the
"Virginia Group" prior to their acquisition on October 30, 1996 (See Note 6).
These consolidated financial statements have been restated to give retroactive
effect to the merger with Ohio Pizza Delivery Co. (OPD), on June 5, 1997, in a
transaction accounted for as a pooling of interests as if the merger had
occurred at the beginning of fiscal 1995.  (See Note 4).

     Extra Cheese, Textra, and Twice operated as S corporations through October
30, 1996, when their S corporation elections were terminated. As a result, they
were not subject to federal or state income tax before October 30, 1996.

     OPD operated as an S corporation from January 1, 1995 through June 5, 1997,
when its S corporation election was terminated. As a result, OPD was not subject
to federal or state income taxes before June 5, 1997. However, OPD was subject
to local income taxes.

     Pro forma information for the years ended December 31, 1995, December 29,
1996 and December 28, 1997 have been presented as if the Alabama Group and OPD
had been treated as C corporations rather than S corporations, with assumed
effective income tax rates of 36.5% and 41%, respectively.

Description of Business

     The Company operates pizza delivery and carry-out restaurants under the
trademark "Papa John's" in Alabama, Virginia, Texas and Ohio. At December 28,
1997, the Company operated 73 restaurants. In addition to the areas the Company
currently has restaurants, the Company holds franchise and development rights
for Ventura, Kern, San Luis Obispo and Santa Barbara counties in California;
Vancouver, Canada and the surrounding area; and Puerto Rico.

                                      25
<PAGE>
 
                       PJ AMERICA, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

                                        
1.   Basis of Presentation, Description of Business, and Reorganization
     (continued)

Reorganization

     The Company was formed in August, 1996 to succeed to the businesses of five
Papa John's International, Inc. (PJI) franchisees. Extra Cheese entered into an
Agreement dated June 10, 1996, as amended on July 10, 1996, and a Plan of Merger
with Twice, Textra, PJVA, Inc. and PJV, Inc., pursuant to which all such
corporations agreed to be merged into PJ Cheese, Inc. (PJ Cheese), a wholly-
owned subsidiary of Extra Cheese, in exchange for shares of common stock of
Extra Cheese. On October 30, 1996, concurrent with the completion of the
Offering (i) all such corporations merged into PJ Cheese; (ii) Extra Cheese
contributed to PJ Cheese all of the assets of Extra Cheese relating to its
restaurants, with PJ Cheese assuming all of Extra Cheese's liabilities relating
thereto; and (iii) Extra Cheese merged into the Company with the stockholders of
Extra Cheese receiving an aggregate of 3,000,000 shares of common stock of the
Company (the "Reorganization"). Accordingly, the Company is the parent of PJ
Cheese, and PJ Cheese owns all of the Papa John's restaurants which were owned
by Extra Cheese, Textra, Twice, PJVA, Inc. and PJV, Inc. (collectively, the
"Predecessor Companies").

     The Reorganization was an exchange of non-monetary assets by stockholders
and has been accounted for at historical cost.

2.   Significant Accounting Policies

Fiscal Year

     The Company's fiscal year ends on the last Sunday in December of each year.
The 1995 fiscal year consisted of 53 weeks.

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 amounts reported in the financial statements and
accompanying notes. Actual results could differ from these estimates.

Cash Equivalents

     Cash equivalents consist of highly liquid investments with a maturity of
three months or less at date of purchase. These investments are carried at cost,
which approximates fair value.

                                       26
<PAGE>
 
                       PJ AMERICA, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                                        

2.   Significant Accounting Policies (continued)

Inventories

     Inventories consist of food products, paper goods and supplies and are
stated at the lower of cost, determined under the first-in, first-out (FIFO)
method, or market. Virtually all of the Company's food products and supplies are
purchased from PJI.

Property and Equipment

     Property and equipment are stated at cost. Depreciation is provided using
the straight-line method over the estimated useful lives of the assets, which
range from three to seven years for restaurant and other equipment, and up to 20
years for buildings and improvements. Leasehold improvements are amortized over
the terms of the respective leases, including the first renewal period
(generally five to ten years). Normal repair and maintenance costs are expensed
as incurred.

Investments

     The Company determines the appropriate classification of investment
securities at the time of purchase and reevaluates such designation as of each
balance sheet date. All investment securities held by the Company have been
classified as held-to-maturity. Held-to-maturity investment securities are
stated at amortized cost with any amortization of premiums and accretion of
discounts included in interest income.

Development and Franchise Fees

     Development fees paid by the Company to PJI for the right to open a certain
number of restaurants in a geographic area are deferred and amortized to expense
on a pro rata basis as each restaurant is opened. Franchise fees are generally
paid when each restaurant is opened and are deferred and amortized. Deferred
development and franchise fees are amortized over a 20 year period using the
straight-line method beginning with the opening of each restaurant.

Advertising and Related Costs

     Advertising and related costs include restaurant activities such as mail
coupons, doorhangers, promotional items, and required contributions to PJI's
production fund (0.50% to 0.80% of restaurant sales). Such amounts are expensed
as incurred and were approximately $1.0 million, $1.5 million, and $3.5 million
in 1995, 1996, and 1997 respectively, and are included in other operating
expenses in the consolidated statements of income.

                                      27
<PAGE>
 
                       PJ AMERICA, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                                        

2.   Significant Accounting Policies (continued)

Goodwill

     Goodwill, which is included in other assets, represents the excess of cost
over fair value of assets acquired and is being amortized over 20 years using
the straight-line method. The Company assesses the recoverability of this
intangible asset by determining whether the amortization of the goodwill balance
over its remaining life can be recovered through undiscounted future operating
cash flows of the acquired operations. The amount of goodwill impairment, if
any, is measured based on projected discounted future operating cash flows using
a discount rate reflecting the Company's average cost of funds. Goodwill and
accumulated amortization at December 28, 1997 was $774,000 and $13,000,
respectively.

Stock-Based Compensation

     The Company follows the provisions of Accounting Principles Board Opinion
(APB) No. 25 for its stock-based compensation awards (see Note 13).

Income Taxes

     On October 29, 1996, the Predecessor Companies of PJ America, Inc.
terminated their status as S corporations and the Company became subject to
federal and state income taxes. Concurrently, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes,"
and accordingly, there was no cumulative effect of adopting SFAS No. 109, and
prior year financial statements were not restated. In accordance with the
provisions of SFAS No. 109, deferred income taxes reflect the temporary tax
consequences on future years of differences between the tax and financial
statement basis of assets and liabilities.

Pre-Opening Costs

     Pre-opening costs, which represent certain expenses incurred before a
restaurant opens, are expensed as incurred.

Net Income Per Share

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

                                      28
<PAGE>
 
                       PJ AMERICA, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                                        

2.   Significant Accounting Policies (continued)

Accounting Changes

     Effective January 1, 1996, the Company adopted SFAS No. 121, "Accounting
for the Impairment of Long Lived Assets and for Long Lived Assets to be Disposed
Of." The adoption of SFAS 121 had no impact on the Company.

Reclassifications

     Certain amounts in the 1995 and 1996 Consolidated Financial Statements have
been reclassified to conform with the 1997 presentation.

3.   Stock Offerings

     The Company completed the initial public offering of its common stock on
October 30, 1996, pursuant to which the Company sold 1,755,000 shares of its
common stock, including 135,000 shares exercised to cover underwriter over-
allotments, at an initial public offering price of $12.50 per share. Net
proceeds from the Offering (after deducting the underwriting discount of $1.5
million and expenses of $1.2 million) were $19.2 million. Such proceeds were
partially used to fully retire the outstanding balance owed to banks and
shareholders, pay S Corporation distributions, and for general corporate
purposes.

     In July 1997, the Company completed a secondary offering of its common
stock, pursuant to which the Company sold 750,000 shares of its common stock at
$17.75 per share. Net proceeds of the offering (after deducting the underwriting
discount of $.7 million and expenses of $.4 million) were $12.2 million.

4.   Business Combinations

     On June 5, 1997, PJAM Acquisition Subsidiary, a subsidiary of PJ America,
Inc. merged with OPD, based in Akron, Ohio, in a transaction accounted for as a
pooling of interests. Pursuant to the Agreement and Plan of Merger, dated as of
May 30, 1997, PJAM Acquisition Subsidiary was merged into OPD, with OPD
surviving the merger as a wholly-owned subsidiary of PJ America, Inc.

     Pursuant to a fixed formula price, the OPD shareholders received 276,610
shares of the Company's common stock in exchange for 100% of the common stock of
OPD. The total value of the transaction was approximately $4.6 million, based
upon the conversion value of $16.50 per common share agreed upon on May 20,
1997.

                                      29
<PAGE>
 
                       PJ AMERICA, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


4.   Business Combinations (continued)

     The exchange of shares was accounted for as a pooling of interests, and
accordingly, the accompanying consolidated financial statements have been
restated to include the accounts and operations of the acquired entity for all
periods presented. Separate results for the combining entities for the most
recent interim period prior to acquisition (three months ended March 30, 1997)
and for the years ended December 29, 1996 and December 31, 1995 are as follows
(amounts in thousands):
<TABLE>
<CAPTION>
                                           Dec. 31,        Dec. 29,         Mar. 30,
                                            1995            1996             1997
------------------------------------------------------------------------------------
                                                                         (Unaudited)
<S>                                        <C>             <C>              <C>
Restaurant sales:
   Previously reported                     $10,457         $16,846         $ 8,770
   OPD                                       6,287           7,704           1,836
------------------------------------------------------------------------------------
     Combined                              $16,744         $24,550         $10,606
------------------------------------------------------------------------------------
Pro forma net income:
   Previously reported                     $   640         $ 1,078         $   728
   OPD                                         454             502             117
------------------------------------------------------------------------------------
     Combined                              $ 1,094         $ 1,580         $   845
------------------------------------------------------------------------------------
</TABLE>
     On June 30, 1997, the Company purchased the assets of one Papa John's
restaurant and development rights for three additional Papa John's restaurants
in northern Ohio from another Papa John's franchisee. The purchase price
consisted of a cash payment of $.2 million and has been accounted for by the
purchase method of accounting.

     On September 22, 1997, the Company purchased the assets and assumed lease
obligations of seven Papa John's restaurants in Virginia from Williamsburg Pizza
Group, Inc., a Papa John's International franchisee. The total consideration
paid by the Company in the acquisition was approximately $1.4 million. The
acquisition was accounted for by the purchase method of accounting.

5.   Pro Forma Information (Unaudited)

     The Company terminated its status as an S corporation on October 29, 1996
(June 5, 1997 for OPD). Pro forma income taxes have been presented to reflect a
provision for federal, state, and local income taxes at an assumed effective
rate of 36.5% (41.0% for OPD).

     Pro forma net income per share is based on the weighted averaged number of
shares of common stock (Basic) and common stock equivalents (Diluted)
outstanding during the period.

                                       30
<PAGE>
 
                       PJ AMERICA, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


5.   Pro Forma Information (Unaudited) (continued)

The pro forma net income per share amounts were calculated assuming that the
number of shares of common stock in the Offering necessary to generate
sufficient proceeds to fund the payment of the Company's undistributed S
corporation earnings. A summary of the components of the weighted average shares
of common stock and equivalents outstanding during the periods indicated is as
follows (in thousands):
<TABLE>
<CAPTION>
                                                              1995          1996          1997
                                                    ------------------------------------------
<S>                                                          <C>           <C>           <C> 
Total number of common shares outstanding
 throughout the period                                       2,120         2,091         5,046
Weighted average number of common shares
 issued in connection with stock offerings                       -           492           323
                                                    ------------------------------------------
Weighted average shares - Basic                              2,120         2,583         5,369
Shares issuable upon net exercise of outstanding
 stock options and warrants                                      -            27           114
                                                    ------------------------------------------
Total weighted average shares - Diluted                      2,120         2,610         5,483
                                                    ==========================================
</TABLE>
                                      31

<PAGE>
 
                       PJ AMERICA, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

6.  Acquisition of Virginia Group - Pro Forma Information (Unaudited)

     Concurrent with the Reorganization, the Company acquired PJVA, Inc. and
PJV, Inc. (See Note 1).  The acquisition was accounted for at historical cost,
with the shareholders of PJVA, Inc. and PJV, Inc. receiving an aggregate of
1,230,000 shares of common stock of the Company.

     The following represents the unaudited pro forma results of operations for
the years ended December 31, 1995 and December 29, 1996 as if the Reorganization
and OPD merger had occurred at the beginning of the Company's fiscal year.  Pro
forma net income reflects an assumed corporate income tax rate of 36.5% for the
Company, and 41.0% for OPD.


<TABLE>
<CAPTION>
(In thousands, except per share amounts)                    1995              1996
                                                          ---------------------------
<S>                                                       <C>                 <C>
Restaurant sales                                          $29,386             $37,968                      
Restaurant operating expenses:                                                       
     Cost of sales                                          9,946              12,643
     Salaries and benefits                                  7,306               9,330
     Other operating expenses                               7,170               9,379
     Depreciation and amortization                            775               1,067
                                                          ---------------------------
                                                           25,197              32,419 
                                                          ---------------------------
Restaurant operating income                                 4,189               5,549                     
General and administrative expenses                         1,373               2,020 
                                                          ---------------------------
Operating income                                            2,816               3,529
Other expense, net                                           (233)               (124)
                                                          ---------------------------
Income before income taxes                                  2,583               3,405
Pro forma income tax expense                                  977               1,262
                                                          ---------------------------
Pro forma net income                                       $1,606              $2,143
                                                          =========================== 
Pro forma net income per share:
     Basic                                                  $0.47               $0.58
                                                          =========================== 
     Diluted                                                $0.47               $0.57
                                                          =========================== 
Weighted average shares outstanding:
     Basic                                                  3,402               3,722
                                                          =========================== 
     Diluted                                                3,402               3,749
                                                          =========================== 
</TABLE>

The pro forma information is not indicative of the results of operations that
actually would have been obtained if the transactions had occurred at the
beginning of the Company's fiscal year.  Additionally, the pro forma information
is not intended to be a projection of future results.


                                       32
<PAGE>
 
                       PJ AMERICA, INC. AND SUBSIDIARIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)
                                        


7.  Investments

     A summary of the Company's held-to-maturity securities as of December 28,
1997 follows (in thousands):


<TABLE>
<CAPTION>                                                      Gross                   Gross                      
                                    Amortized             Unrealized              Unrealized         Estimated 
                                         Cost          Holding Gains          Holding Losses        Fair Value 
--------------------------------------------------------------------------------------------------------------
<S>                                 <C>                <C>                    <C>                   <C>
U.S. Government Securities            $ 1,569                    $ 2                     $ -           $ 1,571
Municipal bonds                        19,663                     28                       -            19,691
                                    --------------------------------------------------------------------------
                                      $21,232                    $30                     $ -           $21,262 
                                    ==========================================================================
</TABLE> 
Approximately 46% of the Company's held-to-maturity securities will mature
within one year with the remainder maturing between one and three years.

8.  Net Property and Equipment

     Net property and equipment consists of the following (in thousands):

<TABLE>
<CAPTION>
                                                          December 29,       December 28,  
                                                             1996               1997      
                                                          -------------------------------
          <S>                                             <C>                <C>
          Land                                                  $  114            $   403
          Building and leasehold improvements                    3,599              5,068
          Restaurant equipment                                   4,603              6,931
          Construction in process                                   62                400
                                                          -------------------------------
                                                                 8,378             12,802
          Less accumulated depreciation                         (2,442)            (3,383)
                                                          -------------------------------
          Net property and equipment                           $ 5,936            $ 9,419
                                                          ===============================
</TABLE>

9.  Accrued Expenses

     Accrued expenses consists of the following (in thousands):

<TABLE>
<CAPTION>
                                                          December 29,       December 28,  
                                                             1996               1997      
                                                          -------------------------------
          <S>                                             <C>                <C>
          Salaries and wages                                    $  440             $  518
          Taxes, other than income                                 261                468
          Advertising and royalties                                265                256
          Other                                                    800              1,178
                                                          -------------------------------
                                                                $1,766             $2,420
                                                          ===============================
</TABLE>

                                       33
<PAGE>
 
                       PJ AMERICA, INC. AND  SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

10.  Income Taxes

     Concurrent with the Reorganization on October 30, 1996, the Predecessor
Companies (See Note 1) terminated their status as S corporations.  Accordingly,
the Company is now subject to federal and state income taxes.  At the date of
termination of its S corporation status, the Company recorded a net deferred tax
asset and corresponding credit to income tax expense for cumulative temporary
differences between the tax basis and the reported amounts of the Company's
assets and liabilities in the consolidated financial statements.  These
differences consisted primarily of deferred expenses and accumulated
depreciation on property and equipment.  At the date of termination of S
corporation status, the net differences equaled approximately $109,000 resulting
in a net deferred tax asset and corresponding credit to income tax expense of
approximately $40,000.

     Additionally, in connection with the termination of the Predecessor
Companies' S corporation status, distributions were made to their stockholders
of approximately $2.0 million, representing substantially all undistributed S
corporation earnings (as determined for tax reporting purposes) at the time of
termination. Prior to the termination of the Company's S corporation status,
distributions paid to stockholders in 1996 were approximately $1.4 million.

     Concurrent with the acquisition of OPD (See Note 4), OPD terminated their
status as an S corporation on June 5, 1997. OPD was previously only subject to
local income taxes. The differences between OPD's tax basis and financial
reporting basis were immaterial.

     A summary of income tax expense is as follows (in thousands):

<TABLE>
<CAPTION>
                                                1995           1996           1997
                                                ----           ----           ----
          <S>                                   <C>            <C>           <C>
          Current      
            Federal                              $-            $241          $1,372
            State and local                       9              42             118
          Deferred (federal and state)            -               7             453
          Deferred tax credit                     -             (40)              -
                                                -----------------------------------
          Income tax expense                     $9            $250          $1,943
                                                ===================================
</TABLE>

     Net deferred tax assets (liabilities) as of December 29, 1996 and December
28, 1997 are comprised of the following (in thousands):

<TABLE>
<CAPTION>
                                                                           1996      1997
                                                                           ----      -----
          <S>                                                              <C>       <C>
          Deferred tax assets - miscellaneous reserves and accruals        $104      $ 111
          Deferred tax liabilities - accelerated depreciation               (71)      (531)
                                                                           ---------------
          Net deferred tax assets (liabilities)                            $ 33      $(420)
                                                                           ===============
</TABLE>


                                       34
<PAGE>
 
                       PJ AMERICA, INC. AND  SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

                                        
10.    Income Taxes (continued)

The reconciliation of income tax computed at the U.S. federal statutory rate to
income tax expense is as follows (in thousands):

<TABLE>
<CAPTION>
                                                                  1995          1996          1997    
                                                                  ----          -----        ------
<S>                                                               <C>           <C>           <C>
Income tax expense at U.S. federal statutory rates                $ 605         $ 857        $1,985
Increases (decreases) resulting from:
Income tax expense from operations while S corporations            (605)         (593)         (125)
State and local income taxes - net                                    9            35           129
Tax exempt interest income                                            -           (10)         (115)
Deferred tax credit                                                                             (40)                -
Other                                                                 -             1            69
                                                                  ---------------------------------
Income tax expense                                                $   9          $250        $1,943
                                                                  =================================
</TABLE>


Income tax payments amounted to $10,000, $.2 million, and $1.5 million in 1995,
1996, and 1997 respectively.

11.    Related Party Transactions

Franchisor

     Under the terms of area development agreements between the Company and PJI,
the Company paid development fees ranging from $3,500 to $5,000 per restaurant.
Franchise fees ranging from $1,150 to $15,000 have been paid as each new
restaurant was opened. Royalties in the amount of 4% of restaurant sales are
paid monthly to PJI, and a monthly contribution of 0.50% to 0.80% of sales is
paid to the Marketing fund of PJI. The Company is required to buy certain
proprietary food products from PJI's commissary subsidiary and have elected to
buy substantially all other food products, supplies, marketing materials and
equipment from PJI or its subsidiaries.

     The Company's franchise and development agreements with PJI contain certain
requirements regarding the number of units to be opened in the future. Should
the Company fail to comply with the required development schedule or with the
requirements of the agreements for restaurants within areas covered by the
development agreements, PJI has the right to terminate the exclusive nature of
the Company franchises. The franchise agreements also provide PJI with
significant rights regarding the business and operations of the Company.
                                        
     In connection with the Company's Offering, the Company issued a warrant to
PJ USA (a subsidiary of PJI) to purchase 225,000 shares of common stock at
$11.25 per share. The warrant was issued in consideration for, among other
things, the rights to enter into development agreements for certain counties in
California; Vancouver, Canada and the surrounding


                                      35

<PAGE>
 
                       PJ AMERICA, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                                        

11.    Related Party Transactions (continued)

area; and Puerto Rico. The Company expects to pay all standard development and
franchise fees in connection with operating restaurants in these territories.
The warrant is exercisable in whole or in part at any time until October 30,
2001. The portion of the warrant discount attributable to the granting of the
various development rights, approximately $84,000, has been capitalized into
deferred franchise and development costs.

Affiliate Markets

     Certain officers and directors of the Company own equity interests in other
entities that franchise Papa John's restaurants. The Company also provides
management and operational supervision services to three related entities; PJ
Utah, LLC, PJ Louisiana, Inc., and PJ Iowa, LLC. Currently, the Company receives
monthly management fees of $20,000 from PJ Utah, $7,000 from PJ Louisiana, and
$2,500 from PJ Iowa. During 1997, the Company received $240,000 from PJ Utah,
$78,000 from PJ Louisiana, and $53,000 from PJ Iowa. Management fee income is
netted against general and administrative expenses in the consolidated
statements of income.

     PJ Utah, LLC holds the development and franchise rights for Papa John's
restaurants in Utah. The Company and PJ Utah, LLC have entered into an option
agreement granting the Company the option to acquire for cash the operations and
development rights for the franchised Papa John's restaurants in Utah. The
option is exercisable at any time during 1998, but expires December 31, 1998.
The purchase price of the option is equal to the aggregate amount invested in
the Papa John's restaurants, operations (including operating losses, if any) and
related matters in Utah by PJ Utah, LLC, including interest paid to a third
party and/or its members on any loans, an imputed yield on all equity invested
in PJ Utah, LLC equal to the "prime rate," as published in The Wall Street
Journal, plus $10,000 for each store that is open at the time the option is
exercised. The Company expects, but is not obligated, to exercise such option in
1998.

     The Company has obtained a right of first refusal to acquire franchise and
development rights for PJ Louisiana, Inc. and PJ Iowa, LLC. However, there is no
agreement or understanding between the Company and these entities or
stockholders to acquire such entities or their assets.

Stockholders

     Notes payable to stockholders were due on demand and carried interest at
7.0%. The notes payable were fully paid at the closing of the Offering in 1996.
Interest expense related to these notes was approximately $47,000 in 1995 and
$39,000 in 1996. Interest payments were approximately $4,000 in 1995 and $98,000
in 1996.


                                       36
<PAGE>
 
                       PJ AMERICA, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


11.  Related Party Transactions (continued)

     In connection with the Company's Offering, certain officers, directors and
former employees received approximately $250,000 for consulting services
provided to the Company with respect to the structuring, organization and
implementation of the Offering.

12.  Leases

     The Company leases office and retail space under operating leases with
terms generally ranging from three to five years and providing for at least one
renewal. Certain leases further provide that the lease payments may be increased
annually based on the Consumer Price Index. Future minimum lease payments are as
follows (in thousands):

<TABLE>
                           <S>                <C>
                           1998               $  845
                           1999                  764
                           2000                  584
                           2001                  417
                           2002                  223
                           Thereafter            367
                                              ------
                                              $3,200
                                              ======
</TABLE>
 
     Rent expense was approximately $.3 million, $.4 million, and $.9 million in
1995, 1996, and 1997, respectively.

13.  Stock Options

     In 1996, the Company adopted Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"). In accordance
with SFAS 123, the Company has elected to follow Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25") and
related Interpretations in accounting for its employee stock options because, as
discussed below, the alternative fair value accounting provided for under SFAS
123 requires the use of option valuation models that were not developed for use
in valuing employee stock options. Under APB 25, because the exercise price of
the Company's employee stock options equals or exceeds the market price of the
underlying stock on the date of grant, no compensation expense is recognized.

     The Company awards stock options under the PJ America, Inc. 1996 Stock
Ownership Incentive Plan (the "Incentive Plan") and the Papa John's
International, Inc. 1996 Non-Employee Directors Stock Option Plan (the
"Directors Plan"). Shares of common stock authorized for issuance are 600,000
under the Incentive Plan and 160,000 under the Directors Plan. Options granted
under both plans generally expire ten years from the date of grant and vest over
one to four year periods.


                                       37
<PAGE>
 
                       PJ AMERICA, INC. AND SUBSIDIARIES

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
                                        
13.    Stock Options (continued)

     The Incentive Plan also provides for awards of restricted stock, however
the Company has not granted any awards.

     Pro forma information regarding net income and earnings per share is
required by SFAS 123, which also requires that the information be determined as
if the Company had accounted for its employee stock options granted subsequent
to December 25, 1994 under the fair value method of that Statement. The fair
value for these options was estimated at the date of grant using a Black-Scholes
option pricing model with the following weighted-average assumptions for 1997
and 1996, respectively: risk-free interest rates of 6.0%; a dividend yield of
0%; volatility factors of the expected market price of the Company's common
stock of .48 and .49; and a weighted average expected life of the option of 4.0
years.

     The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair market value of its employee stock options.

     For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting periods. The Company's
unaudited pro forma information follows (in thousands, except per share
amounts):

<TABLE>
<CAPTION>
                                                   1996       1997
-------------------------------------------------------------------
<S>                                               <C>        <C>
Pro forma net income                              $1,022     $3,440
Pro forma earnings per share - basic                0.45       0.64
Pro forma earnings per share - diluted              0.45       0.63
 
</TABLE>



                                       38
<PAGE>
 
                       PJ AMERICA, INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  (Continued)


13.    Stock Options (continued)


     Information pertaining to options for 1997 and 1996 is as follows (number
of options in thousands):

<TABLE>
<CAPTION>
                                              1996                   1997
--------------------------------------------------------------------------------------------
                                                  Weighted-                      Weighted-
                                                    Avg.                            Avg.
                                     Options      Exercise         Options        Exercise
                                                    Price                           Price
---------------------------------------------------------------------------------------------
<S>                                 <C>         <C>            <C>              <C>
Outstanding  beginning of year            -             -              336         $12.50
Granted                                 336        $12.50              223         $14.18
Canceled                                  -             -               19         $15.42
---------------------------------------------------------------------------------------------
Outstanding -- end of year              336        $12.50              540         $13.15
=============================================================================================
Exercisable -- end of year                -        $12.50               83         $12.50
=============================================================================================
Weighted-average fair value
   of options granted during
   the year                             $5.63                        $6.29
==============================================================================
Weighted-average contractual life        10.0                          9.4
==============================================================================
</TABLE>

As of December 28, 1997, approximately 147,000 shares were available for future
issuance under the Incentive Plan and approximately 54,000 shares were available
for future issuance under the Directors Plan.

14.  Quarterly Data (Unaudited) in thousands, except per share data

<TABLE>
<CAPTION>
                        1st Quarter        2nd Quarter         3rd Quarter          4th Quarter
-------------------------------------------------------------------------------------------------------------
                        1996    1997       1996       1997        1996       1997       1996        1997
-------------------------------------------------------------------------------------------------------------
<S>                   <C>      <C>         <C>        <C>         <C>        <C>         <C>         <C>
Restaurant sales      $8,523   $10,606     $9,397     $11,985     $9,545     $11,890     $10,503     $13,647
Operating income         756     1,180        808       1,182        856       1,200       1,113       1,432
Net income               427       845        458         841        500         955         758       1,157
Net income per
 share - Basic           .12       .17        .13         .17        .14         .17         .17         .20
Net income per
 share - Diluted         .12       .16        .13         .16        .14         .17         .16         .20
</TABLE>

     All quarterly information presented above is as if the Reorganization
(i.e., acquisition of the Virginia Group) occurred at the beginning of the
Company's 1995 fiscal year (See Note 6).  For quarterly periods prior to the
third quarter of 1997, net income reflects a pro-forma provision for income
taxes assuming the Company predecessors and OPD were C corporations rather than
S corporations for each period.

                                       39
<PAGE>
 
                               ERNST & YOUNG LLP,
                         REPORT OF INDEPENDENT AUDITORS


Board of Directors and Stockholders
PJ America, Inc.

     We have audited the accompanying consolidated balance sheets of PJ America,
Inc. and Subsidiaries as of December 29, 1996 and December 28, 1997, and the
related consolidated statements of income, stockholders' equity, and cash flows
for the years ended December 31, 1995, December 29, 1996 and December 28, 1997.
These financial statements are the responsibility of the Companies' management.
Our responsibility is to express an opinion on these financial statements based
on our audits.

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

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of PJ America,
Inc. and Subsidiary, at December 29, 1996 and December 28, 1997, and the
consolidated results of their operations and their cash flows for the years
ended December 31, 1995, December 29, 1996 and December 28, 1997 in conformity
with generally accepted accounting principles.

                                           Ernst & Young LLP

Birmingham, Alabama
January 28, 1998


                                       40
<PAGE>
 
Item 9.  Changes in and Disagreements With Accountants on Accounting and
         Financial Disclosure


     Not applicable.


                                    PART III

                                        
Items 10, 11, 12 and 13.  Directors and Executive Officers of the Registrant;
     Executive Compensation; Security Ownership of Certain Beneficial Owners and
     Management; and Certain Relationships and Related Transactions.

     The information required by these items, other than information set forth
in this Form 10-K under Item I, "Executive Officers of Registrant," is omitted
because the Company is filing a definitive proxy statement pursuant to
Regulation 14A not later than 120 days after the end of the fiscal year covered
by this Form 10-K which includes the required information.  The required
information contained in the Company's proxy statement is incorporated herein by
reference.


                                       41
<PAGE>
 
                                    PART IV
                                        

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a)(1)  The following consolidated financial statements of PJ America, Inc. and
        Subsidiaries and the report of independent auditors are included in
        Item 8:
<TABLE>
<CAPTION>
                                                                                                   Page
                                                                                                   ----
<S>                                                                                                <C>
        Report of Independent Auditors........................................................       40
        Consolidated Balance Sheets as of December 29, 1996 and December 28, 1997.............       21
        Consolidated Statements of Income for the years ended December 31, 1995,
              December 29, 1996, and December 28, 1997........................................       22
        Consolidated Statements of Stockholders' Equity for the years ended
              December 31, 1995, December 29, 1996, and December 28, 1997.....................       23
        Consolidated Statements of Cash Flows for the years ended December 31, 1995,
              December 29, 1996, and December 28, 1997........................................       24
        Notes to Consolidated Financial Statements............................................       25
</TABLE>
(a)(2) Consolidated Financial Statement Schedules:

     All schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are not applicable and therefore have been omitted.

(a)(3)  Exhibits:

3.1       The Company's Certificate of Incorporation. Exhibit 3.1 to the
          Company's Registration Statements on Form S-1 (Registration No. 333-
          11253) is incorporated herein by reference.

3.2       The Company's By-laws. Exhibit 3.2 to the Company's Registration
          Statement on Form S-1 (Registration No. 333-11253) is incorporated
          herein by reference.

4         Specimen Stock Certificate. Exhibit 4 to the Company's Registration
          Statement on Form S-1 (Registration No. 333-11253) is incorporated
          herein by reference.

10.1      Form of Registration Rights Agreement. Exhibit 10.1 to the Company's
          Registration Statement on Form S-1 (Registration No. 333-11253) is
          incorporated herein by reference.

10.2      Form of 1996 Stock Ownership Incentive Plan. Exhibit 10.2 to the
          Company's Registration Statement on Form S-1 (Registration No. 333-
          11253) is incorporated herein by reference.

10.3      Form of Non-Employee Directors 1996 Stock Incentive Plan. Exhibit 10.3
          to the Company's Registration Statement on Form S-1 (Registration No.
          333-11253) is incorporated herein by reference.

                                       42
<PAGE>
 
10.4      Agreement relating to the Reorganization. Exhibit 10.4 to the
          Company's Registration Statement on Form S-1 (Registration No. 333-
          11253) is incorporated herein by reference.
          
10.5      Plan of Merger. Exhibit 10.5 to the Company's Registration Statement
          on Form S-1 (Registration No. 333-11253) is incorporated herein by
          reference.
          
10.6      Indemnification Agreement. Exhibit 10.6 to the Company's Registration
          Statement on Form S-1 (Registration No. 333-11253) is incorporated
          herein by reference.
          
10.7      Escrow Agreement. Exhibit 10.7 to the Company's Registration Statement
          on Form S-1 (Registration No. 333-11253) is incorporated herein by
          reference.
          
10.8      Warrant issued to PJI. Exhibit 10.8 to the Company's Registration
          Statement on Form S-1 (Registration No. 333-11253) is incorporated
          herein by reference.
          
10.9      Agreement between PJI and Extra Cheese, Inc. relating to certain
          Southern California counties; Puerto Rico; Vancouver, Canada; consent
          for this offering from PJI; the issuance of the warrant; and certain
          other matters. Exhibit 10.9 to the Company's Registration Statement on
          Form S-1 (Registration No. 333-11253) is incorporated herein by
          reference.
          
10.10     Development Agreement relating to the Utah territory. Exhibit 10.10 to
          the Company's Registration Statement on Form S-1 (Registration No. 
          333-11253) is incorporated herein by reference.
          
10.11     Development Agreement relating to the development of an aggregate of
          ten restaurants in Birmingham, Tuscaloosa and Auburn, Alabama. Exhibit
          10.11 to the Company's Registration Statement on Form S-1
          (Registration No. 333-11253) is incorporated herein by reference.
          
10.11(a)  First Amendment to the Alabama Development Agreement. Exhibit 10.11(a)
          to the Company's Registration Statement on Form S-1 (Commission File
          No. 333-11253) is hereby incorporated by reference.

10.11(b)  Second Amendment to the Alabama Development Agreement. Exhibit
          10.11(b) to the Company's Registration Statement on Form S-1
          (Commission File No. 333-11253) is hereby incorporated by reference.

10.11(c)  Third Amendment to the Alabama Development Agreement. Exhibit 10.11(c)
          to the Company's Registration Statement on Form S-1 (Commission File
          No. 333-11253) is hereby incorporated by reference.

                                       43
<PAGE>
 
10.12     Form of Franchise Agreement relating to the Birmingham, Tuscaloosa and
          Auburn, Alabama restaurants (e.g., Franchise Agreement dated February
          18, 1992, by and between Extra Cheese, Inc. and PJI at 2503 McFarland
          Blvd. W., Northport, Alabama 35476). Exhibit 10.12 to the Company's
          Registration Statement on Form S-1 (Registration No. 333-11253) is
          incorporated herein by reference.

10.13     Development Agreement relating to the development of an aggregate of
          four restaurants in Cullman, Jasper, Sylacauga and Talladega, Alabama.
          Exhibit 10.13 to the Company's Registration Statement on Form S-1
          (Registration No. 333-11253) is incorporated herein by reference.

10.14     Form of Franchise Agreement relating to the Cullman, Jasper, Sylacauga
          and Talladega, Alabama restaurants (e.g., Franchise Agreement dated
          August 14, 1995, by and between Extra Cheese, Inc. and PJI at 680
          Highway 78 West, Jasper, Alabama 35501). Exhibit 10.14 to the
          Company's Registration Statement on Form S-1 (Registration No. 333-
          11253) is incorporated herein by reference.

10.15     Development Agreement relating to the development of an aggregate of
          five restaurants in Longview, Lufkin and Nacogdoches, Texas. Exhibit
          10.15 to the Company's Registration Statement on Form S-1
          (Registration No. 333-11253) is incorporated herein by reference.

10.16     Form of Franchise Agreement relating to the East Texas restaurants
          (e.g., Franchise Agreement dated September 20, 1994, by and between
          Textra Cheese Corp. and PJI at 2702 North Street, Nacogdoches, Texas
          75961). Exhibit 10.16 to the Company's Registration Statement on Form
          S-1 (Registration No. 333-11253) is incorporated herein by reference.

10.17     Development Agreement relating to the Virginia development of an
          aggregate of 47 restaurants in Virginia Beach, Richmond and Norfolk,
          Virginia. Exhibit 10.17 to the Company's Registration Statement on
          Form S-1 (Registration No. 333-11253) is incorporated herein by
          reference.

10.17(a)  First Amendment to the Virginia Development Agreement. Exhibit
          10.17(a) to the Company's Registration Statement on Form S-1
          (Commission File No. 333-11253) is hereby incorporated by reference.

10.17(b)  Second Amendment to the Virginia Development Agreement. Exhibit
          10.17(b) to the Company's Registration Statement on Form S-1
          (Commission File No. 333-11253) is hereby incorporated by reference.

10.17(c)  Third Amendment to the Virginia Development Agreement. Exhibit
          10.17(c) to the Company's Registration Statement on Form S-1
          (Commission File No. 333-11253) is hereby incorporated by reference.

                                       44
<PAGE>
 
10.17(d)  Fourth Amendment to the Virginia Development Agreement. Exhibit
          10.17(d) to the Company's Registration Statement on Form S-1
          (Commission File No. 333-11253) is hereby incorporated by reference.

10.18     Form of Franchise Agreement relating to the Virginia restaurants (e.g.
          Franchise Agreement dated March, 31, 1994, by and between PJVA and PJI
          at 10054 Robious Road, Richmond, Virginia 23235). Exhibit 10.18 to the
          Company's Registration Statement on Form S-1 (Registration No. 333-
          11253) is incorporated herein by reference.

10.19     PJI's Waiver of Right of First Refusal (certain Utah, Iowa markets and
          other markets). Exhibit 10.19 to the Company's Registration Statement
          on Form S-1 (Registration No. 333-11253) is incorporated herein by
          reference.

10.20     The Company's Right of First Refusal relating to certain Iowa
          territories. Exhibit 10.20 to the Company's Registration Statement on
          Form S-1 (Registration No. 333-11253) is incorporated herein by
          reference.

10.21     The Company's Right of First Refusal relating to certain Louisiana
          territories. Exhibit 10.21 to the Company's Registration Statement on
          Form S-1 (Registration No. 333-11253) is incorporated herein by
          reference.

10.22     Option Agreement relating to the Utah territories. Exhibit 10.22 to
          the Company's Registration Statement on Form S-1 (Registration No. 
          333-11253) is incorporated herein by reference.

10.23     Employment Agreement with Mr. Davison. Exhibit 10.25 to the Company's
          Registration Statement on Form S-1 (Registration No. 333-11253) is
          incorporated herein by reference.

10.24     Agreement between PJI and PJ Utah, LLC relating to development rights
          to be granted with respect to the Utah territory. Exhibit 10.26 to the
          Company's Registration Statement on Form S-1 (Registration No. 333-
          11253) is incorporated herein by reference.

10.25     Agreement and Plan of Merger among PJ America, Inc., PJAM Acquisition
          Subsidiary, Inc., OPD Co., Roger P. Tennyson, Mary Ann Tennyson, Brian
          J. Tennyson, Jeanne K. Tennyson, John H. Schnatter, Charles Schnatter
          and Dan Holland dated May 30, 1997. Exhibit 2.1 to the Company's Form
          8-K dated June 19, 1997, is hereby incorporated by reference.

10.26     PJ America, Inc. Registration Rights Agreement dated June 5, 1997
          relating to the Agreement and Plan of Merger (OPD transaction).
          Exhibit 10.1 to the Company's Form 8-K dated June 19, 1997, is hereby
          incorporated by reference.

                                       45
<PAGE>
 
10.27     Letter dated June 18, 1997, from PJI to the Company relating to the
          development rights for Vancouver, Canada area. (Commission File No.
          333-30109) is hereby incorporated by reference.

10.28     Development Agreement relating to the development of 37 restaurants in
          the Ventura, Kern, San Luis Obispo, Santa Barbara and northwestern Los
          Angeles counties of California. (Commission File No. 333-30109) is
          hereby incorporated by reference.

10.29     Letter dated June 26, 1997, from PJI to the Company relating to the
          development rights for Puerto Rico. (Commission File No. 333-30109) is
          hereby incorporated by reference.

21        Subsidiaries of the Company:
          (a) PJ Cheese, Inc. an Alabama corporation
          (b) Ohio Pizza Delivery Co., Inc. an Ohio corporation
          (c) Pizza Caribe, Inc. a Puerto Rico corporation
          (d) Carribean Food Production, Inc., a Puerto Rico corporation

                                       46
<PAGE>
 
                                   SIGNATURES
                                        
               Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.


Date:  February 10, 1998      PJ AMERICA, INC.


                              By:    /s/  Douglas S. Stephens
                                 -----------------------------------------
                                          Douglas S. Stephens
                                        Chief Executive Officer
                                             and President
 
     Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.


Signature                        Title        
---------                        -----            


____________________________  Chairman of the Board     February 10, 1998

    Richard F. Sherman


____________________________  Chief Executive Officer,  February 10, 1998
    Douglas S. Stephens        President and Director


   /s/  D. Ross Davison        Vice President--         February 10, 1998
----------------------------    Chief Financial
        D. Ross Davison         Officer and Treasurer 
                                (Chief Financial and 
                                Accounting Officer)
 
____________________________  Director                  February 10, 1998
    Michael M. Fleishman


____________________________  Director                  February 10, 1998
      Martin T. Hart


____________________________  Director                  February 10, 1998
      Frank O. Keener


____________________________  Director                  February 10, 1998
     Stephen P. Langford


____________________________  Director                  February 10, 1998
     Charles W. Schnatter


                                       47