Securities and Exchange Commission
450 5th Street N. W.
Judiciary Plaza
Washington, D. C. 20549

Dear Sirs:

This Form 10-KSB/A is a first amendment to form 10-KSB filed on March 1, 1999
for the fiscal year ending November 30, 1998 and consists of the following 
corrections to item 7. FINANCIAL STATEMENTS:

         1.  Consolidated Balance Sheet; subtotal Noncurrent Liabilities;
             amount was $ 2,275,169; amount should be $ 2,275,669.

         2.  Note 4-Income Taxes; Deferred tax assets (liabilities); Net 
             operating loss carryforwards; was $1,647,245; amount should be
             $1,672,245.  

         3.  Consent was obtained from the predecessor auditors, however 
             their report was inadvertently omitted.  As a result we are
             including the financial statements in their entirety.

         4.   We have also corrected certain typographical errors within the
              financial statements.


                                                     Very truly yours,

                                                      
                                                     /s/ Joseph M. Merkin  
                                                     Joseph M. Merkin, Chief
                                                     Financial Officer and
                                                     Treasurer (Principal
                                                     Financial and Accounting  
                                                     Officer)
 
ITEM 7.   FINANCIAL STATEMENTS
------------------------------

The Consolidated Financial Statements and Reports of Independent Auditors
are included immediately following.


                      BAB HOLDINGS, INC.

               CONSOLIDATED FINANCIAL STATEMENTS AND
                   INDEPENDENT AUDITOR'S REPORTS

              YEARS ENDED NOVEMBER 30, 1998 AND 1997

<PAGE>

                         BAB HOLDINGS, INC.

              Years Ended November 30, 1998 and 1997


                          C O N T E N T S
                          ---------------

                                       Reference           Page

Independent Auditor's Reports                                

Consolidated Balance Sheets             Exhibit A            

Consolidated Statements of Operations   Exhibit B         

Consolidated Statements of
   Stockholders' Equity                 Exhibit C         

Consolidated Statements of 
   Cash Flows                           Exhibit D         

Notes to Consolidated Financial 
   Statements                                             

<PAGE>

                      INDEPENDENT AUDITOR'S REPORT
                      ----------------------------


Stockholders and Board of Directors 
BAB Holdings, Inc.

We have audited the accompanying consolidated balance sheet of BAB HOLDINGS, 
INC. as of November 30, 1998, and the  related  consolidated statements of 
operations, stockholders' equity and cash flows for the year then ended.  
These financial statements are the responsibility of the Company's 
management.  
Our responsibility is to express an opinion on these financial statements 
based on our audit.  The consolidated financial statements of BAB HOLDINGS, 
INC.  as of and for the year ended November 30, 1997, were audited by other 
auditors whose report dated February 27, 1998, expressed an unqualified 
opinion on those statements.
 
We conducted our audit in accordance with generally accepted auditing 
standards.  Those standards require that we plan and perform the audit to 
obtain reasonable assurance about whether the 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 audit provides 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  BAB 
HOLDINGS, 
INC. as of November 30, 1998, and the  consolidated results of its operations  
and its cash flows for the year then ended in conformity  with  generally 
accepted  accounting principles.

                              /s/ Blackman Kallick Bartelstein, LLP


Chicago, Illinois
February 6, 1999

<PAGE>

                     Report of Independent Auditors

 

The Shareholders and Board of Directors
BAB Holdings, Inc.

We have audited the accompanying consolidated balance sheet of BAB Holdings, 
Inc. as of November 30, 1997, and the related consolidated statements of 
operations, shareholders' equity, and cash flows for the year then ended.  
These financial statements are the responsibility of the Company's 
management.
Our responsibility is to express an opinion on these financial statements 
based on our audit.

We conducted our audit in accordance with generally accepted auditing 
standards.  Those standards require that we plan and perform the audit to 
obtain reasonable assurance about whether the 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 audit provides 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 BAB Holdings,
Inc. at November 30, 1997 and the consolidated results of its operations and 
its cash flows for the year then ended, in conformity with generally accepted 
accounting principles.

                                                                              
                                         ERNST & YOUNG LLP
Chicago, Illinois
February 27, 1998

<PAGE>

<TABLE>
<CAPTION>
                              BAB HOLDINGS, INC.

                          Consolidated Balance Sheets

                           November 30, 1998 and 1997

                                     ASSETS
                                     ------
                                                    1998         1997
                                                -----------   -----------
<S>                                             <C>          <C>        
Current Assets:
  Cash and cash equivalents, including 
   restricted cash of $218,646 in 1998
   and $285,442 in 1997                          $   700,162  $   389,896
  Receivables
     Trade accounts receivable, net of
      allowance for doubtful accounts of
      $341,000 in 1998 and $217,000 in 1997        1,181,282      988,992
     National Marketing Fund contributions
      receivable                                     309,633      382,432
     Notes receivable, net of allowance for
      doubtful accounts of $20,000 in 1998 
      and 1997                                       444,560      203,230
  Inventories                                        298,501      344,424
  Deferred franchise costs                            18,227       76,805
  Assets held for sale                                     -      170,500
  Prepaid expenses and other current assets          206,952      422,913
  Deferred income taxes                              431,719            -
                                                  ----------   ----------
          Total Current Assets                     3,591,036    2,979,192

Property and Equipment
  Leasehold improvements                           2,618,906    2,690,940
  Furniture and fixtures                             744,833      686,542
  Equipment                                        2,513,715    2,513,289
  Construction in progress                            68,543       80,830
                                                  ----------   ----------
                                                   5,945,997    5,971,601
  Less accumulated depreciation                   (1,743,800)    (882,693)
                                                  ----------   ----------
          Total Property and Equipment, Net        4,202,197    5,088,908

Notes Receivable                                   1,086,100      785,065
                                                  ----------   ----------
Intangibles
  Patents, trademarks and copyrights (Net of
   accumulated amortization of $90,374 in 1998
   and $56,025 in 1997)                              568,683      527,140
  Goodwill (Net of accumulated amortization
   of $164,806 in 1998 and $101,629 in 1997)       2,591,515    2,599,393
  Franchise contract rights (Net of accumulated
   amortization of $152,375 in 1998 and 
   $60,442 in 1997)                                1,919,909    2,011,842
  Other assets (Net of accumulated amortization
   of $235,056 in 1998 and $424,855 in 1997)         485,551      635,706
                                                  ----------   ----------
           Total Intangibles, Net                  5,565,658    5,774,081
                                                  ----------   ----------
                                                 $14,444,991  $14,627,246
                                                  ==========   ==========
</TABLE>

The accompanying notes are an intergral part of the consolidated financial
statements.

<PAGE>

<TABLE>
<CAPTION>
                     LIABILITIES AND STOCKHOLDERS' EQUITY
                     ------------------------------------
                                                    1998           1997                   
                                               ------------    ------------
<S>                                          <C>             <C>         
Current Liabilities
  Accounts payable                             $  1,014,734    $  1,603,661
  Accrued liabilities                               714,789         768,977
  Reserve for closed store expenses                  36,388         504,203
  Accrued professional and other services           214,972         227,895
  Unexpended National Marketing Fund 
   contributions                                    465,173         522,722
  Long-term debt due within one year                134,814          26,143
  Deferred franchise fee revenue                    360,500         642,000
                                               ------------    ------------
          Total Current Liabilites                2,941,370       4,295,601
                                               ------------    ------------
Noncurrent Liabilities
  Deferred revenue                                  263,996               -
  Deferred income taxes                             251,719               -
  Long-term debt (Net of portion included
   in current liabilities)                        1,759,954       1,676,895
                                               ------------    ------------
          Total Noncurrent Liabilities            2,275,669       1,676,895
                                               ------------    ------------
          Total Liabilities                       5,217,039       5,972,496
                                               ------------    ------------
Stockholders' Equity:
  Common stock - No par value; 20,000,000 
   shares authorized; 8,655,006 shares and
   7,981,630 shares issued, respectively;
   and 8,361,706 shares and 7,711,630 shares
   outstanding, respectively                     11,430,452      10,908,062
  Preferred stock - $0.01 par value; 3,880,000
   shares authorized; no shares issued  
   and outstanding                                        -              - 
  Series A Preferred stock - $25 par value;
   120,000 shares authorized; 60,000 shares and
   78,710 shares issued and outstanding, 
   respectively                                   1,548,731       1,862,035
  Treasury stock at cost, 293,300 shares and
   270,000 shares, respectively                     (36,067)        (17,500)
  Additional paid-in capital                      1,252,402       1,368,619
  Accumulated deficit                            (4,967,566)     (5,466,466)
                                               ------------    ------------
         Total Stockholders' Equity               9,227,952       8,654,750
                                               ------------    ------------
                                               $ 14,444,991    $ 14,627,246
                                               ============    ============
</TABLE>

<PAGE>
<TABLE>
<CAPTION>       
                               BAB HOLDINGS, INC.

                      Consolidated Statements of Operations

                      Years Ended November 30, 1998 and 1997
             
                                                   1998          1997 
                                               -----------    -----------
<S>                                         <C>             <C>
Revenues
  Net sales by Company-owned stores            $ 8,929,664    $ 9,846,020
  Royalty fees from franchised stores            3,178,262      2,367,220 
  Franchise and area development fees            1,104,000      1,005,545
  Licensing fees and other income                1,337,314        947,658
                                               -----------    -----------
            Total Revenues                      14,549,240     14,166,443

Operating Costs and Expenses
  Food, beverage, and paper costs                2,998,079      3,309,504
  Store payroll and other operating expenses     5,213,359      5,859,322
  Provision for impairments and store closures    (107,699)     1,836,981
  Selling, general and administrative expenses:
     Payroll-related expenses                    2,262,616      2,058,644
     Advertising and promotion                     532,678        603,373
     Professional service fees                     362,360        514,319
     Franchise-related expenses                    261,287        232,964
     Depreciation and amortization               1,180,259      1,490,329 
     Other                                       1,331,146      1,666,659  
                                               -----------    -----------
             Total Selling, General and          
               Administrative Expenses           5,930,346      6,566,288
                                               -----------    -----------
             Total Operating Costs                      
               and Expenses                     14,034,085     17,572,095
                                               -----------    -----------
Income (Loss) from Operations                      515,155     (3,405,652)

Interest Income                                    119,244         74,513

Interest Expense                                  (205,618)       (74,651)

Other Income                                        54,022          3,701
                                               -----------    -----------
Income (Loss) Before Taxes                         482,803     (3,402,089)

Provision (Benefit) for Income Taxes
  Current                                           16,039              -
  Deferred                                        (180,000)             -
                                               -----------    -----------
                                                  (163,961)             -
                                               -----------    -----------
Net Income (Loss)                                  646,764     (3,402,089)

Preferred Stock Dividends Accumulated             (147,864)      (648,197)   
                                               -----------    -----------
Net Income (Loss) Attributable to 
 Common Stockholders                           $   498,900    $(4,050,286)
                                               ===========    ===========

Income (Loss) per Share - Basic and Diluted    $      0.06    $     (0.55)
                                               ===========    ===========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

<PAGE>
<TABLE>
<CAPTION>
                             BAB HOLDINGS, INC.

               Consolidated Statements of Shareholders' Equity

                    Years Ended November 30, 1998 and 1997

                                             SERIES A
                         COMMON STOCK     PREFERRED STOCK      TREASURY STOCK
                        SHARES   AMOUNT   SHARES   AMOUNT    SHARES     
AMOUNT
                        ---------------   ---------------- --------- -------
<S>                  <C>        <C>        <C>     <C>      <C>        <C>
Balance as of 
  November 30, 1996  7,413,069 $ 9,218,522     --  $     --   
(270,000)$(17,500)
Issuance of Common
  Stock in 
  Acquisitions         458,219   1,441,355     --        --       --        -
-
Termination of Options
  Issued in Connection
  with Acquisition          --          --     --        --       --        -
-
Issuance of
  Preferred Stock           --          -- 87,710  1,558,519      --        -
-
Issuance of Warrants        --          --     --         --      --        -
-
Preferred Dividends
  Accumulated               --          --     --    510,668      --        -
-
Conversion of 
  Preferred to
  Common Stock         110,342     248,185 (9,000)  (207,152)     --        -
-
Net Loss                    --         --      --         --      --        -
-
                    ----------  ----------  ------ ----------  -------   ----
--
Balance as of
  November 30, 1997  7,981,630  10,908,062  78,710  1,862,035 
(270,000)(17,500)
Termination of 
  Options Issued in
  Connection with
  Acquisition               --          --      --         --       --     --
Purchase Of Treasury
  Stock                     --          --      --         --  
(23,300)(18,567)
Preferred Dividends
  Accumulated               --          --      --    147,864       --      -
-
Preferred Dividends
  Paid                      --          --      --    (19,995)      --      -
-
Conversion of Preferred
  to Common Stock      673,376     522,390 (18,710)  (441,173)      --      -
-
Net Income                  --          --      --         --       --      -
-
                    ---------- -----------  ------ ---------- --------  -----
-
Balance as of
  November 30, 1998  8,655,006 $11,430,452  60,000 $1,548,731 
(293,300)$(36,067)
                    ========== ===========  ====== ========== ========  
=======
</TABLE>
                       (WIDE TABLE CONTINUED FROM ABOVE)

<TABLE>
<CAPTION>

                                   ADDITIONAL                                  
                                    PAID-IN      ACCUMULATED                    
                                    CAPITAL        DEFICIT         TOTAL       
                                  -----------    -----------    -----------
<S>                                <C>           <C>            <C>
Balance as of November 30, 1996    $1,010,167   $(1,416,180)    $ 8,795,009
Issuance of Common Stock
   in Acquisitions                         --            --       1,441,355
Termination of Options Issued
   in Connection with Acquisition    (125,000)           --        (125,000)
Issuance of Preferred Stock           386,956            --       1,945,475
Issuance of Warrants                  137,529      (137,529)             --
Preferred Dividends Accumulated            --      (510,668)             --
Conversion of Preferred to
   Common Stock                       (41,033)           --              --
Net Loss                                   --    (3,402,089)     (3,402,089)
                                  -----------    -----------    -----------
Balance as of November 30, 1997     1,368,619    (5,466,466)      8,654,750
Termination of Options Issued
  in Connection with Acquistions      (35,000)           --         (35,000)
Purchase of Treasury Stock                 --            --         (18,567)
Preferred Dividends Accumulated            --      (147,864)             --
Preferred Dividends Paid                   --            --         (19,995)
Conversion of Preferred to
   Common Stock                       (81,217)           --              --
Net Income                                          646,764         646,764
                                  -----------    ----------     -----------
Balance as of November 30, 1998   $ 1,252,402   $(4,967,566)    $ 9,227,952
                                  ===========    ===========    ===========
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

<PAGE>

<TABLE>
<CAPTION>
                                BAB HOLDINGS, INC.

                      Consolidated Statements of Cash Flows

                      Years Ended November 30, 1998 and 1997

                                                         1998         1997
                                                     -----------   ----------
<S>                                                   <C>          <C>
Cash Flows from Operating Activities
  Net income (loss)                                  $   646,764   
$(3,402,089)
                                                     -----------    ---------
-
  Adjustments to reconcile net income (loss) to net
   cash provided by (used in) operating activities
     Depreciation and amortization                     1,180,259     
1,490,329
     Provision for impairment and closure                      -     
1,836,981
     Deferred preopening store cost                            -      
(240,927)
     Deferred revenue                                    350,000             
-
     Benefit for deferred income taxes                  (180,000)            
-
     Gain on sale of property and equipment              (10,393)            
-
     (Increase) decrease in
         Trade accounts receivable                      (207,290)     
(432,604)
         National Marketing Fund contributions
          receivable                                      72,799      
(245,779)
         Inventories                                      45,923      
(211,614) 
         Deferred franchise costs                         58,578       
(21,319)
         Notes receivable                               (491,003)     
(138,632) 
         Prepaid expenses and other assets               386,461      
(215,653)
         Amounts due from affiliate                            -       
(88,653)
      Increase (decrease) in
         Accounts payable                               (588,927)      
176,318
         Accrued professional and other services         (12,923)     
(178,331)
         Reserve for closed store expenses              (467,815)            
-
         Accrued liabilities                            (140,192)       
75,157
         Unexpended National Marketing Fund             
          franchisee contributions                       (57,549)     358,840
         Deferred franchise fee revenue                 (281,500)      17,600
                                                       ----------    --------
-
         Total Adjustments                              (343,572)    
2,181,713
                                                       ----------    --------
-
         Net Cash Provided by (Used in)
          Operating Activities                           303,192    
(1,220,376)
                                                       ---------     --------
-
</TABLE>

The accompanying notes are an integral part of the consolidated financial
statements.

<PAGE>

<TABLE>
<CAPTION>
                               BAB HOLDINGS, INC.

                Consolidated Statements of Cash Flows (continued)

                     Years Ended November 30, 1998 and 1997

                                                        1998           1997
                                                    ------------   ----------
--
<S>                                                 <C>           <C>        
Cash Flows from Investing Activities
  Purchases of property and equipment               $   (198,295)  
$(3,679,705)
  Sale of property and equipment                          33,484        
57,400
  Purchase of MFM                                              -      
(115,551)
  Purchase of trademarks                                 (75,892)      
(16,236)
  Purchases of other assets                                    -      
(120,000)
  Loan disbursements                                     (13,263)      
(74,201)
  Loan repayments                                        138,900        
77,748
  Other                                                  (31,029)       
56,440
                                                     -----------   ----------
-
         Net Cash Used in Investing Activities          (146,095)   
(3,814,105)
                                                     -----------   ----------
-
Cash Flows from Financing Activities
  Borrowing on line of credit                            337,500     
1,675,975
  Debt repayments                                       (145,769)     
(364,037)
  Proceeds from issuance of preferred stock                    -     
2,192,750
  Payment of preferred stock issuance costs                    -      
(247,275)
  Other                                                  (38,562)        
3,671 
                                                     -----------   ----------
-
          Net Cash Provided by Financing Activities      153,169     
3,261,084
                                                     -----------   ----------
-
Net Increase (Decrease) in Cash and Cash Equivalents     310,266    
(1,773,397)

Cash and Cash Equivalents, Beginning of Year             389,896     
2,163,293
                                                     -----------    ---------
-
Cash and Cash Equivalents, End of Year               $   700,162    $  
389,896
                                                     ===========    
==========
</TABLE>

The accompanying notes are an integral part of the consolidated financial 
statements.

<PAGE>

                            BAB HOLDINGS, INC.

               Notes to Consolidated Financial Statements

                  Years Ended November 30, 1998 and 1997

------------------------------------------------------------------------

NOTE 1 - BASIS OF PRESENTATION

BAB Holdings, Inc. (the Company) is an Illinois corporation incorporated 
on November 25, 1992. The Company has four wholly owned subsidiaries: 
BAB Operations, Inc. (Operations); BAB Systems, Inc. (Systems); 
Brewster's Franchise Corporation (BFC); and My Favorite Muffin Too, Inc. 
(MFM).   Systems was incorporated on December 2, 1992, and was primarily 
established to franchise "Big Apple Bagels" specialty bagel retail 
stores.   Systems has a wholly owned subsidiary, Systems Investments, 
Inc. (Investments), which was created to operate the first Company-owned 
"Big Apple Bagels" store which, until December 1995, also operated as 
the franchise training facility.   Investments also owned a 50% interest 
in a joint venture which operated a franchise satellite store.   During 
fiscal 1997, the stores operated by Investments and by the joint venture 
were sold and are currently operating as franchised stores.   As of 
November 1998, Investments was dissolved and merged into the parent company, 
Systems.  Operations was formed on August 30, 1995, primarily to operate 
Company-owned stores, currently "Big Apple Bagels" and "Brewster's Coffee" 
concept stores, including one which currently serves as the franchise 
training
facility.   BFC was established on February 15, 1996, to franchise 
"Brewster's
Coffee" concept coffee stores.   MFM, a New Jersey corporation, was acquired 
on May 13, 1997. MFM franchises and operates Company-owned "My Favorite 
Muffin" concept muffin stores.


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation
---------------------------

The consolidated financial statements include the accounts of the 
Company and its direct and indirect wholly owned subsidiaries.   All 
intercompany accounts and transactions have been eliminated in 
consolidation.   

Cash Equivalents
----------------

The Company classifies as cash equivalents all highly liquid investments,
primarily composed of money market mutual funds, certificates of deposit 
and government agency notes, which are convertible to a known amount of 
cash and carry an insignificant risk of change in value.

Inventories
-----------

Inventories are valued at the lower of cost, determined on a first-in, 
first-out (FIFO) basis, or market.

Depreciation and Amortization
-----------------------------

Leasehold improvements and equipment are stated at cost, less 
accumulated depreciation.  Depreciation is calculated on the straight-
line method over the estimated useful lives of the assets.  Estimated 
useful lives for the purposes of depreciation are:  leasehold 
improvements - ten years or term of lease if less; machinery, equipment 
and fixtures - five to seven years.

The Company's intangible assets consist primarily of patents, 
trademarks, copyrights, organization costs, contract rights, 
noncompetition agreements and goodwill.  Organization costs are 
primarily incorporation fees and legal fees associated with initial 
Uniform Franchise Offering Circulars related to operations and are being 
amortized over five years.   Patents, trademarks and copyrights are 
being amortized over 17 years.  Franchise contract rights acquired in 
the MFM acquisition are amortized over 20 years.  Contract rights 
allocated to license agreements assumed by the Company in the 
acquisition of Strathmore Bagels Franchise Corporation are being 
amortized over 8.5 years, the remaining life of the contract.   
Noncompetition agreements are amortized over the term of the agreements, 
which is six years.   Goodwill recorded as a result of acquisitions is 
being amortized over 40 years.  Amortization expense recorded in the 
accompanying consolidated statements of operations for the years ended 
November 30, 1998 and 1997 was $326,089 and $549,640, respectively.

Stock Options
-------------

The Company uses the intrinsic method to account for stock options 
granted for employees and directors.  No compensation expense is 
recognized for stock options because the exercise price of the option is 
at least equal to the market price of the underlying stock on the grant 
date.  Stock options granted as consideration in purchase acquisitions 
have been recorded as an addition to additional paid-in capital in the 
accompanying balance sheet based on the fair value of such options on 
the date of the acquisition.

Revenue Recognition
-------------------

Royalty fees from franchised stores represent a fee of 5% of net retail 
sales of franchised units.  Royalty revenues are recognized on the 
accrual basis. 

The Company recognizes franchise fee revenue upon the opening of a 
franchise store.   Direct costs associated with the franchise sales are 
deferred until the franchise fee revenue is recognized.   These costs 
include site approval, construction approval, commissions, blueprints, 
purchase of cash registers, and training costs.

Area development agreement revenue is recognized on a pro rata basis as 
each store covered by the agreement opens.   At the termination of an 
agreement, any remaining deferred franchise and area development 
agreement revenue is recognized as such amounts are not refundable.

In addition to Company-operated and franchised stores, the Company acts 
as licensor of "Big Apple Bagels" units owned and operated primarily by 
Host Marriott Services (Host Marriott).  Included below in "licensed 
units" are those units located primarily in airport and travel plazas.  
In fiscal 1998 and 1997, the Company opened additional units pursuant to 
other licensing arrangements.  The Company derives a licensing fee from 
certain sales at these units as well as a sales commission from the sale 
of par-baked bagels to these units by a third-party commercial bakery.

Stores which have been opened, and unopened stores for which an 
agreement has been executed at November 30, 1998 or 1997, or area 
development fees collected are as follows (excluding six Company-owned 
stores which were closed subsequent to year end [see Note 12]):

<TABLE>
<CAPTION>
                                         1998     1997
                                         ----     ----
   <S>                                   <C>      <C>
   Stores opened:
      Company-owned                        22       28
      Franchisee-owned                    194      182
      Licensed                             77       47
                                         ----     ----
                                          293      257
   Unopened stores:
      Franchise agreement                  15       25
      Area development agreement           19       28
                                         ----     ----
                                           34       53
                                         ----     ----
                                          327      310
                                         ====     ====
</TABLE>
			
Advertising Costs
-----------------

The Company expenses advertising costs as incurred.  Advertising expense 
was $331,004 and $339,496 in 1998 and 1997, respectively.  Included in 
advertising expense was $53,593 and $55,733 in 1998 and 1997, 
respectively, related to the Company's franchise operations.

Income (Loss) Per Share
-----------------------

The Company adopted Statement of Financial Accounting Standards (SFAS) 
No. 128, "Earnings Per Share" during the first quarter of 1998.  This 
standard prescribes the methods of calculating basic and diluted 
earnings per share and requires dual presentation of these amounts on 
the face of the income statement.  Unlike primary earnings per share, 
basic earnings per share excludes any dilutive effects of options, 
warrants, and convertible securities.  Diluted earnings per share is 
very similar to the previously reported fully diluted earnings per 
share of $.53 in 1997.  All earnings per share amounts for all periods have
been presented, and where necessary, restated to conform to the SFAS No. 128
requirements.
 
Fair Value of Financial Instruments
-----------------------------------

The Company evaluates its various financial instruments based on current 
market interest, rates relative to stated interest rates, length to 
maturity, and the existence of a readily determinable market price.   
Based on the Company's analysis, the fair value of financial instruments 
recorded on the consolidated balance sheet as of November 30, 1998, 
approximates their carrying value.

New Accounting Standards
------------------------

In June 1997, SFAS No. 130, "Reporting Comprehensive Income" and SFAS 
No. 131, "Disclosures about Segments of an Enterprise and Related 
Information" were issued.  SFAS No. 130 establishes standards for the 
reporting of comprehensive income and its components in a financial 
statement presentation. SFAS No. 130 separates comprehensive income into 
net income and other comprehensive income, but does not change the 
measurement and presentation of net income.  Other comprehensive income 
includes certain changes in the equity of the Company which are 
currently recognized and presented separately in the Consolidated 
Statements of Stockholders' Equity, such as the change in the Cumulative 
Translation Adjustment account.  SFAS No. 130 is effective for the 
Company beginning in fiscal 1999.

SFAS No. 131 establishes new standards for the way companies report 
information about operating segments and requires that those enterprises 
report selected information about operating segments in the financial 
reports issued to stockholders.  SFAS No. 131 is effective for the 
Company beginning in fiscal 1999.

Use of Estimates
----------------

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

Reclassifications
-----------------

Certain 1997 amounts have been reclassified to reflect the 1998 
presentation.


NOTE 3 - RESTRICTED CASH

Systems established the National Marketing Fund (Fund) during 1994.  
Franchisees are required to contribute to the Fund based on their net 
sales and in turn are reimbursed for a portion of media advertising 
placed in their local markets up to a maximum equal to the amount they 
contributed.  As of November 30, 1998 and 1997, the Fund's cash balance 
was $184,804 and $256,678, respectively.

Both franchised and Company-owned MFM stores are required to contribute 
to the MFM National Marketing Fund (MFM Fund) based on their net sales.  
These monies are then used in the production and creation of advertising 
materials and media placement.  As of November 30, 1998 and 1997, the 
MFM Fund's cash balance was $33,842 and $8,764, respectively.

Systems was required by certain states to maintain franchise and area 
development fees in escrow accounts until the related franchise stores 
commence operations.  As of November 30, 1998 and 1997, these accounts 
totaled $ 0 and $20,000, respectively.


NOTE 4 - INCOME TAXES

The reconciliation of the income tax provision (benefit) computed at the
federal statutory rate of 34% and the benefit for income taxes is as follows:
<TABLE>
<CAPTION>
                                            1998         1997
                                         -----------   ---------
<S>                                     <C>          <C>
Income tax provision (benefit)
 computed at federal statutory rate      $  164,153  $(1,156,710)
State income taxes (benefit), net
  of federal tax benefit                     23,261     (163,913)
Permanent differences on debt
  financing obtained                         (1,748)      (1,748)
Other adjustments                            18,529       22,584
Valuation allowance without income
  tax benefit                              (368,156)   1,299,787
                                          ----------   ---------
Benefit for Income Taxes                 $ (163,961) $         -
                                          ==========   =========
</TABLE>

Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial 
reporting 
purposes and the amounts used for income tax purposes.

Deferred tax assets (liabilities) are as follows:

<TABLE>
<CAPTION>
                                              1998         1997
                                           ----------    --------
<S>                                        <C>          <C>
Franchise fee revenue                      $   20,638  $  216,615 
Franchise costs                                52,745      32,102
National Marketing Fund net contributions      71,737      99,638
Allowance for uncollectible accounts          129,125     108,392
Net operating loss carryforwards            1,672,245   1,617,089
Valuation allowance                        (1,514,771) (1,882,927)
                                            ---------   ---------
     Total Deferred Tax Assets                431,719     190,909
                                            ---------   ---------
Depreciation                                 (249,263)   (171,017)
Start-up costs                                      -     (17,807)
Other                                          (2,456)     (2,085)
                                            ---------   ---------
     Total Deferred Tax Liabilities          (251,719)   (190,909)
                                            ---------   ---------
                                            $ 180,000   $       -
                                            =========   =========
</TABLE>

As of November 30, 1998, the Company has cumulative net operating loss 
carryforwards expiring between 2008 and 2013 for U.S. federal income tax 
purposes of approximately $4,308,000.  The net operating loss 
carryforwards are subject to limitation in any given year as a result of 
the Company's initial public offering and may be further limited if 
certain other events occur.  A valuation allowance has been established 
for $1,514,771 of the deferred tax benefit related to those loss 
carryforwards for which it is considered more likely than not that the 
benefit will not be realized.


NOTE 5 - LONG-TERM OBLIGATIONS

Long-term debt consisted of the following:
<TABLE>
<CAPTION>
                                              1998          1997
                                           ---------     ---------
<S>                                       <C>           <C>
Secured line of credit payable to
   bank, due December 31, 1998,
   at an interest rate of prime
   plus 1%                                $1,877,465    $1,657,975
Capital lease obligations,
   various rates                              17,303        31,220
Unsecured note payable, principal
   payments due monthly at an 
   interest rate of 10%                            -        13,843
                                           ---------     ---------
                                           1,894,768     1,703,038
Less: current portion                       134,814        26,143
                                           ---------     ---------
Long-Term Debt, Net of Current Portion    $1,759,954    $1,676,895
                                           =========    ==========
</TABLE>

The Company had a secured $2 million line-of-credit facility (Line) with 
a bank which expired December 31, 1998.   Maximum borrowing under the 
Line was limited to 80% of accounts receivable under 90 days and 40% of 
original cost of equipment, furniture and fixtures.   Interest was 
payable monthly at prime plus 1% (8.75% as of November 30, 1998), with 
principal due upon maturity on December 31, 1998.   As of November 30, 
1998, the Company had borrowed $1,877,465 on the Line.

In December 1998, the Company repaid $127,465 and replaced the Line with a
$1.75 million line-of-credit facility with a bank which expires December 
31, 1999.  Maximum borrowing under the Line is limited to 75% of 
accounts receivable under 90 days and 40% of the original cost of 
equipment, furniture and fixtures.  Interest is payable monthly at prime 
plus 1% (8.75% as of January 1, 1999), with principal due upon maturity 
on December 31, 1999.  The line of credit is secured by substantially 
all of the assets of the Company and requires, among other things, that 
the Company maintain minimum net worth of $8 million and a compensating 
cash balance of $250,000.

As of November 30, 1998, annual maturities on long-term obligations are 
due as follows: $134,814 in 1999 and $1,759,954 in 2000.    Interest 
paid for the years ended November 30, 1998 and 1997 was $202,312 and 
$55,188, respectively.

In February 1997, Systems entered into an agreement with a finance 
company to provide financing to qualifying franchisees for the purpose 
of adding second or subsequent units.   The program is administered by 
the finance company; however, Systems has the final right of approval 
over individual applicants.   Systems has provided a guarantee of 
borrowings up to a maximum of 10% of the total amount financed in each 
12-month period under the program.   As of November 30, 1998, $1,040,458 
has been advanced to franchises under this program.


NOTE 6 - LEASE COMMITMENTS

The Company rents its office and Company-owned store facilities under 
leases which require it to pay real estate taxes, insurance and general 
repairs and maintenance on these leased facilities. Rent expense for the 
years ended November 30, 1998 and 1997 was $936,895 and $955,693, 
including contingent rental expense of $41,646 and $26,600, less 
sublease income of $106,606 and $46,109, respectively.  As of November 
30, 1998, future minimum annual rental commitments under leases, net of 
sublease income of $253,965 in 1999, $226,968 in 2000, $97,338 in 2001, 
$36,000 in 2002 and $3,000 in 2003, are as follows:
 
           Year Ending November 30:
                              1999     $    665,773
                              2000          505,887
                              2001          477,122
                              2002          246,401
                              2003          241,801
                        Thereafter          535,089
                                       ------------
                                       $  2,672,073
                                       ============

	
NOTE 7 - NONCASH TRANSACTIONS

In January 1997, the Company forgave notes and other receivables 
totaling approximately $486,000 from a franchisee, Just Bagels, Inc. 
(JBI) and acquired three stores for conversion to Company-owned units 
(see Note 11).

In April 1997, the Company issued 25,611 shares of common stock valued 
at approximately $94,000, forgave royalties owed totaling approximately 
$42,000, and assumed liabilities of approximately $36,000 in connection 
with the purchase of one franchised store.   In August 1997, this store 
was sold to a franchisee for approximately $235,000, consisting of two 
notes receivable from the purchaser, approximately $46,000 which was 
paid in October 1997 and approximately $189,000, due in monthly payments 
through August 2004, with interest at 8.5% (see Note 11).

In May 1997, the Company terminated an option to purchase 75,000 shares 
of common stock which had been originally issued in a previous 
acquisition and subsequently, in a separate transaction, assigned to 
Hawaiian Bagel Factory, Inc. (HBF).  HBF entered into an option to 
purchase the master franchise rights of the state of Hawaii from Systems 
in exchange for the assignment of the option to purchase the Company's 
common stock, valued at $125,000, and a note receivable for $75,000, 
which is due and payable in five annual installments of principal and 
interest beginning May 1999 and  bears interest at 9% per annum.

In May 1997, Systems repurchased the franchise rights for the western 
provinces of Canada from the master franchisor in exchange for the 
discharge of a note receivable, plus interest accrued thereon, totaling 
approximately $165,000.

In May 1997, the Company acquired MFM by exchanging 432,608 shares of 
common stock plus cash for 150 shares of MFM common stock (see Note 11).

In January 1998, the Company sold the assets of one Company-owned store 
to a franchisee in exchange for approximately $30,000 in cash and a note 
receivable for $177,000.  The note bears interest at a rate of 8.5% and 
interest payments were made through August 1998.  Thereafter, monthly 
payments of principal and interest are due until March 1, 2003 when the 
entire unpaid balance of principal and interest is due in full.

In November 1998, the Company acquired from a franchisee its option to 
purchase the Company's 100,000 shares of common stock which had been 
issued in a previous acquisition.  In exchange, the Company canceled a 
total of $35,000 of royalties and other receivables owed to its 
subsidiaries by the franchisee. 


NOTE 8 - STOCKHOLDERS' EQUITY

In April 1997, the Company completed the sale of 87,710 shares of $25 
Series A Convertible Preferred Stock (the Preferred Stock) in a private 
placement to institutional investors.  The Preferred Stock carries an 8% 
annual dividend payable in cash or, at the option of the Company, in 
shares of common stock, provided that during a Conversion Suspension 
Period (defined below), dividends will accrue at a rate of 15% per 
annum.  Dividends are payable only when shares are converted to shares 
of common stock.  The holders have no voting rights and have a 
liquidation preference of $25, plus accrued dividends, out of assets of 
the Company available for distribution to stockholders.

Commencing August 1, 1997 through July 31, 1999, subject to certain 
extensions, the stockholders may elect to convert each Preferred Stock 
share into common shares as determined by dividing the $25 purchase 
price by the lesser of $5.64 or 85% of the average closing bid price of 
the common stock for the 30 trading days immediately preceding the 
conversion date.   In addition, if the Company engages in an 
underwritten public offering, for any holder who has given notice of 
participation in such offering, the conversion rate shall be 85% of the 
public offering price if less than the amount calculated in the 
immediately preceding sentence.  

A Conversion Suspension Period takes effect if the closing bid price of 
the common stock is less than $2.325 for 30 consecutive trading days.   
The Conversion Suspension Period continues until the first trading day 
thereafter that the closing bid price for the common stock has exceeded 
$2.325 for 30 consecutive trading days provided, however, that a 
Conversion Suspension Period shall not continue for more than 60 days in 
any period of 365 days.  The Company is not required to recognize or 
accept any  conversion of Preferred Stock during a Conversion Suspension 
Period.   During any Conversion Suspension in Period, the Company, at 
its option, may redeem any or all of the Preferred Stock by payment to 
the holders of $28.75 per share, plus all accrued and unpaid dividends.   
The Company entered a Conversion Suspension Period during November 1997 
through January 1998.  During January 1999, the Company entered into a 
Conversion Suspension Period.

Preferred dividends in the amount of $648,197 accumulated during fiscal 
1997, which includes $386,956 attributable to the 15% discount available 
to holders of the Preferred Stock in acquiring common stock upon 
ultimate conversion and $137,529 attributable to the value of two-year 
warrants issued to each preferred stockholder to purchase two shares of 
common stock for each share of Preferred Stock.  Preferred dividends of 
$147,864 accumulated during fiscal 1998.

During fiscal 1997, holders elected to convert 9,000 shares of Preferred 
Stock plus dividends accrued thereon into 110,342 shares of common 
stock.  During fiscal 1998, holders elected to convert 18,710 shares of 
Preferred Stock plus dividends accrued thereon into 673,376 shares of 
common stock.   The common shares issued upon conversion include shares 
issued in payment of preferred dividends on 10,306 shares of Preferred 
Stock.  The Company elected to pay accrued dividends in cash of 
approximately $20,000 upon conversion of the remaining 8,404 shares of 
Preferred Stock. 


NOTE 9 - EARNINGS PER SHARE

The computation of basic and diluted earnings (loss) per share is as 
follows:
<TABLE>
<CAPTION>
                                             1998          1997
                                          -----------   -----------
<S>                                       <C>           <C>
Numerator:
  Net income (loss)                       $   646,764   $(3,402,089)
  Preferred stock dividend accumulated       (147,864)     (648,197)
                                          -----------   -----------
  Numerator for basic earnings (loss)
   per share - income (loss) 
   attributable to common stockholders        498,900    (4,050,286)
  
  Effect of dilutive securities:
  Preferred stock dividend accumulated        147,864             -
                                          -----------   -----------
  Numerator for diluted earnings (loss)
   per share - income (loss)
   attributable to common stockholders    $   646,764   $(4,050,286)
                                          ===========   ===========

Denominator:
  Denominator for basic earnings (loss)
   per share - weighted average shares      8,101,080     7,420,811

  Effect of dilutive securities:
  Convertible preferred stock               2,407,159             -
                                           ----------    ----------
  Denominator for diluted earnings (loss)
   per share - weighted average shares     10,508,239     7,420,811
                                           ==========    ==========

Basic and diluted earnings (loss)
 per share                                 $     0.06    $    (0.55)
                                           ==========    ==========
</TABLE>
 
The exercise of options and warrants outstanding during the years ended 
November 30, 1998 and 1997 and the conversion of convertible securities 
outstanding during the year ended November 30, 1997 is not assumed as 
the result is antidilutive to the reported loss per share.


NOTE 10 - STOCK OPTIONS PLANS

On September 20, 1995, the Company adopted and received stockholder 
approval of the 1995 Long-Term Incentive and Stock Option Plan (the 
Incentive Plan), which permits the issuance of options, stock 
appreciation rights, and restricted stock awards to employees and 
nonemployee officers, directors, and agents of the Company.   The 
Incentive Plan reserves 570,000 shares of Common Stock for grant and 
provides that the term of each award be determined by the Board or a 
committee of the Board.  Under the terms of the Incentive Plan, options 
granted may be either nonqualified or incentive stock options.  
Incentive stock options must be exercisable at not less than the fair 
market value of a share on the date of grant (110% of fair market value 
if the options are owned by a 10% or greater stockholder) and may be 
granted only to employees.  The Incentive Plan will terminate on 
September 19, 2005, unless terminated sooner by action of the Board.

Options are exercisable for a period of up to ten years from the 
respective exercise date.  Options issued terminate immediately 
following an optionee's termination of employment or, in some 
circumstances, one to three months after termination or up to 12 months 
in the case of the death of the employee.

Additionally, on September 20, 1995, the Company adopted and received 
stockholder approval of the 1995 Outside Directors Stock Option Plan 
(the Directors Plan), which permits the issuance of nonqualified options 
to nonemployee members of the Board.

The Directors Plan reserves 30,000 shares of common stock for grant.   
The Directors Plan provides for a grant of options to purchase 2,000 
shares upon initial election to the Board and for annual grants 
thereafter, upon reelection, of options to purchase 1,000 shares.

Options granted are immediately exercisable for a period of ten years 
from the date of grant at an exercise price per share equal to the fair 
market value of a share on the date of grant.   Upon termination of the 
directorship, the options remain exercisable for periods of varying 
lengths based on the nature of the option and the reason for 
termination.   The Directors Plan will terminate on September 19, 2005, 
unless terminated sooner by action of the Board.

Activity under the Incentive Plan and Directors Plan during the two 
years ended November 30, 1998, is as follows:

<TABLE>
<CAPTION>
	                                  						             
                                                     Weighted-
                                    Number of      Average Option
                                      Shares       Price Per Share
                                    ----------    ---------------
<S>                                 <C>           <C>  
Outstanding as of November 30, 1996   297,000           $6.27
Granted                                 4,000           $2.53
Exercised                                   -             -
Canceled                               (3,000)          $2.67
                                      -------
Outstanding as of November 30, 1997   298,000           $6.25
Granted                               151,545           $1.32
Exercised                                   -             -
Canceled                              (25,980)          $2.12
                                      -------
Outstanding as of November 30, 1998   432,565           $4.74
                                      =======
</TABLE>

The Company has adopted the disclosure-only provisions of Financial 
Accounting Standards Board Statement No. 123, "Accounting and Disclosure 
of Stock-Based Compensation" (SFAS No.123).  Accordingly, no employee 
compensation expense has been recognized for the Incentive Plan or for 
the Directors Plan.   Had employee compensation expense for the Company's 
plan been determined based on the fair value at the grant date for 
awards in fiscal years 1998 and 1997 consistent with provisions of SFAS 
No. 123, the Company's net income (loss) and net income (loss) per share 
would have been as follows:
<TABLE>
<CAPTION>
                                            1998          1997
                                         -----------  ----------
<S>                                      <C>          <C>
Net income (loss) attributable to 
   common stockholders:
      As reported                        $   498,900  $(4,050,286)
      Pro forma                          $    89,973  $(4,388,032)
Basic income (loss) per share:
      As reported                        $      0.06  $     (0.55)
      Pro forma                          $      0.01  $     (0.59) 
Diluted income (loss) per share:		
      As reported                        $      0.06  $     (0.55)
      Pro forma                          $      0.01  $     (0.58)
</TABLE>

The fair value of each option grant is estimated using the Black-Scholes 
Option-Pricing Model with the following weighted-average assumptions for 
1998 and 1997, respectively: risk-free interest rates of 5.0% and 6.17%; 
dividend yield of 0.0%; expected volatility of .89 and .69; and a 
weighted-average expected life of the option of 5.20 years and 8.07 
years.

Information on options outstanding under the Incentive Plan and the 
Directors Plan as of November 30, 1998, is as follows:
<TABLE>
<CAPTION>
                                                       Weighted-
                                   Weighted-Average     Average
        Range of      Number of       Remaining        Exercise
    Exercise Price     Options     Contractual Life     Price
    --------------     -------     -----------------  --------
    <C>               <C>          <C>                <C>
    $0.70 - $1.00       79,000            4.54         $0.72
    $2.00 - $2.75       68,565            5.53         $2.15
    $4.17 - $4.83       13,500            7.28         $4.39
    $6.37 - $7.01      262,500            5.21         $6.65
</TABLE>

NOTE 11 - BUSINESS COMBINATIONS

During 1997, the Company completed several acquisitions which were 
accounted for using the purchase method of accounting.

During 1997, the Company acquired and sold several stores.  Stores 
purchased are operated as Company-owned units for a period of time prior 
to the ultimate resale as a franchised unit.

In January 1997, the Company completed the acquisition of JBI and its 
affiliate, franchisees of the Company, operating a total of four stores 
in Southern California.  The total purchase price paid was $770,000, 
including $120,000 related to a noncompetition agreement with the former 
JBI owner. In October 1997, management closed one of the stores, and it 
closed the remaining three stores in January 1998.  All of the long-
lived assets associated with this purchase were considered impaired as 
of November 30, 1997 (see Notes 7 and 12).

In May 1997, the Company acquired MFM.  At the time of acquisition, 
MFM had five Company-owned and 60 franchised units in operation, and its 
1996 revenues exceeded $2.7 million.   The Company acquired MFM by 
exchanging 432,608 shares of the Company's common stock, restricted as 
to transfer until January 1, 1999, and $259,000 in cash in exchange for 
150 shares of MFM stock.   The Company assumed all assets, including 
approximately $143,000 in cash, and liabilities of MFM.   The Company 
borrowed approximately $356,000 on its credit facility to repay MFM bank 
debt and other borrowings assumed in the acquisition.

On a pro forma basis, had the above acquisitions occurred at December 1, 
1996, revenue for the fiscal year ended November 30, 1997, would have 
been $15,421,000.   Net loss for fiscal 1997 would have been $3,500,000 
or a net loss per share of $0.54.

NOTE 12 - IMPAIRMENT OF LONG-LIVED ASSETS AND STORE CLOSURES

The provision recorded as of November 30, 1997 consisted of the 
following:

   Impairment of long-lived assets                $1,009,867
   Closed-store operating leases and 
      other store closing costs                      504,203
   Impairment of goodwill and other 
      intangible assets associated 
      with impaired long-lived assets                322,911
                                                   ---------
                                                  $1,836,981
                                                   =========

For purposes of determining impairment, management, in certain 
circumstances, groups long-lived assets on a geographic market or store 
level as appropriate.   Such review included, among other criteria, 
management's estimate of future cash flows for the geographic market or 
store.    If the estimated future cash flow (undiscounted and without 
interest charges) were not sufficient to recover the carrying value of 
the long-lived assets, including associated goodwill, of the market or 
store, such assets were determined to be impaired and were written down 
to fair value.   Fair value was determined based on current market 
selling prices of such assets.   Management's judgment is inherent in 
the estimated fair value determinations and, accordingly, actual results 
could vary significantly from such estimates.   The estimated fair value 
of impaired long-lived assets which totaled approximately $171,000 was 
recorded as other current assets as of November 30, 1997.  During fiscal 
1998, the assets were sold to third parties and no significant gains or 
losses were incurred.

The seven stores identified as impaired incurred operating losses during 
the fiscal year ended November 30, 1997, of approximately $555,000.   
One store was closed by November 30, 1997, and the remaining six stores 
were closed during the first quarter of fiscal 1998.  The six stores 
closed during fiscal 1998 incurred operating losses of approximately 
$90,000 which are included in the results of Company-owned store 
operations.

The reserve for closed-store expense, established on November 30, 1997, 
includes an amount for the noncancelable operating lease payments after 
the expected closure date, net of estimated sublease income.  At 
November 30, 1998, the Company has entered into agreements terminating 
the contractual lease obligations associated with the stores closed.  
The final payments to be made pursuant to these agreements will be 
completed in February 1999.  At November 30, 1998, the reserve for 
closed store leases is approximately $36,000.

NOTE 13-SUBSEQUENT EVENTS

On February 1, 1999, the Company purchased certain assets of a related 
group of entities doing business as Jacobs Bros. Bagels (Jacobs Bros.), 
a chain operating retail bagel stores the Chicago, Illinois area.  The 
assets acquired include eight retail locations and a central commissary 
facility in exchange for $950,000 in cash and warrants to acquire 
500,000 shares of the Company's common stock.  The warrants provide for 
the purchase of 275,000 shares and 225,000 shares of common stock at an 
exercise price of $1.25 and $1.50 per share, respectively.  The warrants 
are first exerciseable on February 1, 2000 and expire on January 31, 
2006.    Further, the Company entered into noncompetition agreements 
with two principals of Jacobs Bros. totaling $210,000 to be paid over 
varying periods.  Finally, the Company issued 160,000 shares of the 
Company's common stock to the investment bankers.

In January 1999, the Company received a commitment from a finance 
company for various secured loans totaling $1,350,000 to be used for the 
purpose of acquiring the assets identified above and for the 
refurbishment and conversion of the units acquired to Big Apple Bagels 
concept stores.  Principal and interest are payable monthly over a 
period of seven years and  are secured by the assets acquired from 
Jacobs Bros. and all improvements made thereon.  In February 1999, the 
Company borrowed $1,100,000 pursuant to this commitment.