<PAGE>   1

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   FORM 10-QSB

 X   Quarterly report Section 13 or 15 (d) of the Securities Exchange Act of
---  1934 for the quarterly period ended June 30, 1999
                                         -------------

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

     For the transition period from                 to
                                    ---------------    ---------------

                         Commission File number 0-28058


                              BIG CITY BAGELS, INC.
                              ---------------------
        (Exact Name of Small Business Issuer as Specified in its Charter)



               New York                                 11-3137508
     ----------------------------                       ----------
     (State or Other Jurisdiction                     (IRS Employer
          of Incorporation)                         Identification No.)



                  99 Woodbury Road, Hicksville, New York 11801
                  --------------------------------------------
                    (Address of Principal Executive Offices)


                                 (516) 932-5050
                                 --------------
                 (Issuer's Telephone Number Including Area Code)



              ----------------------------------------------------
              (Former Name, Former Address and Former Fiscal Year,
                         if Changed Since Last Report)


     Check whether the issuer: (1) filed all reports required to be filed by
     Section 13 or 15 (d) of the Exchange Act during the past 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
        ---   ---

     State the number of shares outstanding of each of the issuer's class of
     common equity, as of the latest practicable date: At August 12 , 1999, the
     issuer had outstanding 16,643,691 shares of Common stock, par value $.001
     per share.


<PAGE>   2
PART 1: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS

                      BIG CITY BAGELS, INC. AND SUBSIDIARY
                                 BALANCE SHEETS
<TABLE>
<CAPTION>

                                                                                  June 30, 1999        December 31, 1998
                                                                                  -------------        -----------------
<S>                                                                               <C>                    <C>
ASSETS
Current Assets:
 Cash and cash equivalents                                                        $     69,754           $    902,122
 Accounts receivable                                                                    70,994                177,396
 Inventory                                                                              29,848                 49,403
 Prepaid expenses and other current assets                                             142,119                 50,753
                                                                                  ------------           ------------
   Total current assets                                                                312,715              1,179,674

 Fixed assets, net of accumulated depreciation                                         397,867                537,392
 Intangible assets, net of accumulated amortization                                      4,956                 35,784
 Security deposits and other assets                                                     81,891                179,557
                                                                                  ------------           ------------
   TOTAL                                                                          $    797,429           $  1,932,407
                                                                                  ============           ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
 Capital lease obligations                                                        $     77,383           $     65,089
 Unearned franchise fee income                                                         111,000                201,000
 Accounts payable                                                                      249,812                348,761
 Accrued expenses                                                                       49,275                 50,394
 Obligation on abandon lease                                                                 0                 28,586
 Store purchase deposit                                                                105,000                 55,000
                                                                                  ------------           ------------
   Total current liabilities                                                           592,470                748,830

 Obligation on abandon lease, noncurrent                                                     0                215,876
 Capital lease obligations, noncurrent                                                       0                 12,294
                                                                                  ------------           ------------
   Total liabilities                                                                   592,470                977,000
                                                                                  ------------           ------------
Stockholders' equity:
 Convertible (redeemable) preferred stock; $.001 par value;
 1,000,000 shares authorized; 0 and 247,504 shares issued and
 outstanding at June 30, 1999 and December 31, 1998, respectively
 (liquidation value $0 and $3,093,800, respectively)                                        0                     247
 Common stock; $.001 par value; 25,000,000 shares authorized;
 7,964,504 and 1,511,107 shares issued and outstanding at
 June 30, 1999 and December 31, 1998, respectively                                       7,964                  1,511
 Additional paid in capital                                                         10,325,651             10,127,706
 Accumulated deficit                                                               (10,064,032)            (9,094,711)
 Treasury stock (65,279 and 132,579 shares at cost, respectively)                      (64,624)               (79,346)
                                                                                  ------------           ------------
   Total stockholders' equity                                                          204,959                955,407
                                                                                  ------------           ------------
   TOTAL                                                                          $    797,429           $  1,932,407
                                                                                  ============           ============
</TABLE>

   The accompanying notes are an integral part of the financial statements.
<PAGE>   3
                      BIG CITY BAGELS, INC. AND SUBSIDIARY
                            STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
                                                                     Six Months Ended                     Three Months Ended
                                                                     ----------------                     ------------------

                                                             June 30, 1999      June 30, 1998      June 30, 1999     June 30, 1998
                                                             -------------      -------------      -------------     -------------

<S>                                                          <C>                <C>                <C>               <C>
REVENUES
Product sales by company owned stores                        $   307,209        $  1,358,023       $   103,149       $   661,183
Product sales to franchisees and others                          365,575             359,960           132,574           186,230
Franchise fees                                                    90,000             124,500            30,000            64,000
Royalty income                                                   109,292             101,405            56,806            56,836
Gain on settlement of abandoned lease                            212,846                               212,846
Interest and other income                                         12,441              84,148             4,361            44,461
                                                             -----------        ------------       -----------       -----------
   Total revenues                                              1,097,363           2,028,036           539,736         1,012,710
                                                             -----------        ------------       -----------       -----------

COSTS AND EXPENSES:
Cost of sales                                                    411,680             845,647           149,135           418,117
Selling, general and administrative                            1,427,176           2,649,745           698,321         1,400,811
Interest expense                                                   6,452               7,929             2,946             4,527
Loss on sale of assets                                             2,503                                     -
Write-off of intangible assets                                         -             572,195                 -           572,195
                                                             -----------        ------------       -----------       -----------
   Total costs and expenses                                    1,847,811           4,075,516           850,402         2,395,650
                                                             -----------        ------------       -----------       -----------

NET (LOSS)                                                   $  (750,448)       $ (2,047,480)      $  (310,666)      $(1,382,940)
                                                             ===========        ============       ===========       ===========

Basic and diluted net (loss) per common share                $     (0.11)       $      (1.51)      $     (0.04)      $     (0.98)
                                                             ===========        ============       ===========       ===========

Weighted average common shares outstanding                     6,615,191           1,360,308         7,899,225         1,414,979
                                                             ===========        ============       ===========       ===========

</TABLE>

   The accompanying notes are an integral part of the financial statements.
<PAGE>   4
                      BIG CITY BAGELS, INC. AND SUBSIDIARY
                       STATEMENT OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>

                                            Preferred Stock          Common Stock          Additional          Treasury Stock
                                            ---------------          ------------           Paid-In            --------------
                                           Shares     Amount      Shares       Amount       Capital         Shares       Amount
                                           ------     ------      ------       ------       -------         ------       ------
<S>                                      <C>          <C>      <C>           <C>         <C>               <C>          <C>
BALANCE, January 1, 1999                  247,504     $ 247    1,511,107     $ 1,511     $ 10,127,706      (132,579)    $(79,346)

Cancellation of treasury stock                                   (67,300)        (67)         (14,655)       67,300       14,722

Preferred stock converted to
common stock                             (247,504)     (247)   5,994,336       5,994           (5,747)

Stock dividends                                                  526,361         526          218,347

Net loss                                        -         -            -           -                -             -            -
                                         --------     -----    ---------     -------     ------------       -------     --------
Balance June 30, 1999                           -     $   -    7,964,504     $ 7,964     $ 10,325,651       (65,279)    $(64,624)
                                         ========     =====    =========     =======     ============       =======     ========
<CAPTION>

                                            Accumulated
                                              Deficit         Total
                                              -------         -----
<S>                                       <C>               <C>
BALANCE, January 1, 1999                  $ (9,094,711)    $ 955,407

Cancellation of treasury stock                                     0

Preferred stock converted to
common stock                                                       0

Stock dividends                               (218,873)            0

Net loss                                      (750,448)     (750,448)
                                          ------------     ---------
Balance June 30, 1999                     $(10,064,032)    $ 204,959
                                          ============     =========
</TABLE>



    The accompanying notes are an integral part of the financial statements.
<PAGE>   5
                      BIG CITY BAGELS, INC. AND SUBSIDIARY
                             CASH FLOWS STATEMENTS
                       FOR THE SIX MONTHS ENDED JUNE 30,

<TABLE>
<CAPTION>

                                                                   1999              1998
                                                                   ----              ----
<S>                                                          <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss                                                     $  (750,448)       $(2,047,480)
                                                             -----------        -----------
Adjustments to reconcile net loss to net cash used
 in operating activities:
 Depreciation and amortization                                    37,075             99,887
 Gain on settlement of abandoned lease                          (212,846)                 -
 Write off of intangible assets                                        -            572,195
 Loss(gain) on sale of assets                                      2,503            (11,981)
 Issuance of common stock for compensation and
 professional services                                                 -             34,000
 Provision for bad debt                                           70,000                  -
 (Increase) Decrease in:
   Accounts receivable                                            36,402           (103,181)
   Inventory                                                      19,555            (16,889)
   Prepaid expenses and other current assets                     (91,366)           (55,452)
 Increase (Decrease) in:
   Unearned franchise fee income                                 (90,000)           (65,000)
   Deferred rent payable                                               -             (5,724)
   Accounts payable                                             (114,911)            12,148
   Accrued expenses                                               (1,119)           116,417
                                                             -----------        -----------
 Total adjustments                                              (344,707)           576,420
                                                             -----------        -----------
 Net cash used in operating activities                        (1,095,155)        (1,471,060)
                                                             -----------        -----------
CASH FLOWS FROM INVESTING ACTIVITIES:

 Purchase of fixed and intangible assets                         (34,663)          (634,515)
 Proceeds from sale of stores                                    271,000            136,818
 Proceeds from store purchase deposit                             50,000                  -
 Decrease in security deposits                                     5,450             83,448
                                                             -----------        -----------
Net cash provided (used) in investing activities                 291,787           (414,249)
                                                             -----------        -----------
CASH FLOWS FROM FINANCING ACTIVITIES:

 Registration costs                                                    -            (31,723)
 Repayment of capital lease obligation                           (29,000)                 -
 Repayment of notes payable                                            -            (18,715)
                                                             -----------        -----------
Net cash used by financing activities                            (29,000)           (50,438)
                                                             -----------        -----------

NET DECREASE IN CASH                                            (832,368)        (1,935,747)
Cash, beginning of period                                        902,122          4,118,031
                                                             -----------        -----------
Cash, end of period                                          $    69,754        $ 2,182,284
                                                             ===========        ===========

</TABLE>

    The accompanying notes are an integral part of the financial statements.
                            (Continued on next page)
<PAGE>   6
                      BIG CITY BAGELS, INC. AND SUBSIDIARY
                       CASH FLOWS STATEMENTS (CONTINUED)
                       FOR THE SIX MONTHS ENDED JUNE 30,

Supplemental disclosures of non cash activities:

<TABLE>
<CAPTION>

                                                              1999              1998
                                                              ----              ----
<S>                                                       <C>              <C>
 Cash paid during the year for:
  Interest                                                $     559        $     7,929
  Income taxes                                                4,946              5,650



 In January and March 1999, the Company sold all of the assets of three retail stores for the following:

   Net sales price                                        $ 278,938
   Less: liabilities assumed                                 (7,938)
                                                          ---------
           Proceeds from sale                             $ 271,000
                                                          =========

 Assets purchased by the issuance of 73,064
  shares of common stock                                                   $   445,000
  Cash paid                                                                    386,466
                                                                           -----------
  Total amount attributable to fixed assets                                $   831,466
                                                                           ===========
</TABLE>

    The accompanying notes are an integral part of the financial statements.
<PAGE>   7


                      BIG CITY BAGELS, INC. AND SUBSIDIARY
                          NOTES TO FINANCIAL STATEMENTS


(NOTE A)-      MERGER

               On July 1, 1999, the Company completed its merger with
               VillageNet, Inc. ("VillageNet") and Intelligent Computer
               Solutions, Inc. ("ICS"), for 8.6 million shares of Common
               Stock and 508,152 shares of Class B Preferred Stock.

               The transaction will be accounted for as an acquisition of the
               Company and ICS by VillageNet as the former shareholders of
               VillageNet own a majority of the shares of the combined
               companies as of the completion of the transaction. In addition,
               as the Company is discontinuing its bagel business, (see Note
               B) the reverse acquisition of the Company will be treated as a
               purchase with the issuance of common stock and options to
               purchase common stock to the pre-merger shareholders and
               option holders of Big City in exchange for the net assets of
               Big City, valued at fair value of the net assets acquired and
               to be sold. The acquisition of ICS will be accounted for as a
               purchase with the securities issued as consideration for ICS
               valued at $2,577,524 based on the opinion of an independent
               appraiser. Subsequent to this report on Form 10-Q, the
               historical financial statements of the Company will be those
               of VillageNet and will include the operations of ICS and Big
               City from July 1, 1999. The accompanying financial statements
               of the Company herein are those of Big City Bagels, Inc.


 (NOTE B)-     THE COMPANY AND BASIS OF PRESENTATION

               The Company operates and franchises retail bagel stores and
               sells its products wholesale to commercial accounts and food
               service operators.

               The Company has experienced recurring losses from operations
               since inception. The Company is implementing plans to reduce
               its operating losses and negative cash flows. Those plans
               include selling the remaining company-owned stores and
               evaluating the desirability of discontinuing its
               commissary/wholesale operations that require the use of the
               Company's resources. There is no assurance, however, that the
               Company's efforts will ultimately be successful. The
               consolidated financial statements have been prepared assuming
               that the company will continue as a going concern. The
               financial statements do not include any adjustments based on
               the realizability of the Company's assets or the amounts and
               classification of liabilities that might result from the
               outcome of this uncertainty.

               The information herein is unaudited. However, in the opinion
               of management, such information reflects all adjustments
               (consisting only of normal recurring accruals) necessary to
               make the financial statements not misleading. Additionally, it
               should be noted that the accompanying financial statements do
               not purport to contain complete disclosures in conformity with
               generally accepted accounting principles.

               The results of operations for the three and six months ended
               June 30, 1999 are not necessarily indicative of the results of
               operations for the full year ending December 31, 1999. These
               statements should be read in conjunction with the Company's
               Annual Report on Form 10-KSB.

               One June 23, 1998, the Company effected a one-for-five reverse
               stock split of the Company's common stock (the "Reverse
               Split"). All per-share data and references to number of shares
               have been retroactively restated in these financial
               statements. The Reverse Split affected the holder of each
               class of warrants and options outstanding insofar as the
               exercise price of each warrant was




<PAGE>   8


                  adjusted upward by a factor of five and the number of shares
                  of common stock issuable upon exercise of each warrant were
                  reduced by a factor of five.


(NOTE C)-         SALES

                  In January and March 1999, the Company sold all the assets of
                  three of its company-owned stores for net proceeds of
                  $181,000, $80,000 and $7,938 respectively, net of selling
                  costs.

(NOTE D)-         CONVERSION OF PREFERRED STOCK

                  During the quarter ended March 31, 1999, all 247,504 shares of
                  preferred stock outstanding as of December 31, 1998 were
                  converted into 6,520,697 shares of the Company's common stock
                  including 526,361 shares for cumulative stock dividends
                  aggregating $218,347.

(NOTE E)-         COMMON STOCK OPTIONS

                  Pursuant to the Company's 1996 Performance Equity Plan ("1996
                  Plan"), on March 31st of each calendar year during the term of
                  the 1996 Plan, assuming there are enough shares then available
                  for grant under the 1996 Plan, each person who is then a
                  director of the Company will be awarded stock options to
                  purchase 2,000 shares of common stock at the fair market value
                  thereof (as determined in accordance with the 1996 Plan), all
                  of which options are immediately exercisable as of the date of
                  grant and have a term of ten years. These are the only awards
                  which may be granted to a director of the Company under the
                  1996 Plan. On March 31, 1999, the directors of the Company
                  received this automatic grant of options to purchase an
                  aggregate of 10,000 shares of common stock at an exercise
                  price of $0.9375 per share.



<PAGE>   9


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

The following discussion and analysis should be read in conjunction with the
Company's financial statements and the notes thereto. The discussion of results,
causes and trends should not be construed to imply any conclusion that such
results or trends will necessarily continue in the future.

FORWARD-LOOKING STATEMENTS

When used in the Form 10-QSB and in future filings by the Company with the
Securities and Exchange Commission, the words or phrases "will likely result,",
"management expects" or the "the Company expects," "will continue," "is
anticipated," "estimated" or similar expressions are intended to identify
"forward-looking statements" within the meaning of the Section 21E of the
Securities Exchange Act of 1934, as amended. Readers are cautioned to place
undue reliance on any such forward-looking statements, each of which speak only
as of the date made. Such statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from
historical earnings and those presently anticipated or projected. The Company
has no obligation to publicly release the result of any revisions which may be
made to any forward-looking statements to reflect anticipated or unanticipated
events or circumstances occurring after the date of such statements.

MERGER

On July 1, 1999, the Company completed its merger with VillageNet, Inc.
("VillageNet") and Intelligent Computer Solutions, Inc. ("ICS"). For accounting
purposes, the transaction will be accounted for as a reverse acquisition where
the Company and ICS will be treated as the acquired companies and VillageNet as
the acquiring company. While the combined company will continue to be named Big
City Bagels, Inc., the combined company will treat VillageNet`s historical
financial statements as the historical financial statements of the combined
companies. Big City Bagels businesses will be consolidated into the combined
company's financial statements beginning on the date of the merger. The
following discussions, however, relate only to the historical financial results
of Big City Bagels since the merger took place subsequent to the end of the
second quarter.

RESULTS OF OPERATIONS

Revenues for the three and six months ended June 30,1999, were $539,736 and
$1,097,363, respectively, a 47% and 46% decrease from revenues of $1,012,710 and
$2,028,036 for the three and six months ended June 30, 1998. This net decrease
was primarily attributable to reduction in store revenues and interest income as
a result of the Company selling and closing unprofitable Company-owned retail
stores; however, the Company had other income of $212,846 related to the gain on
the settlement of an abandoned lease. Store sales decreased by $558,034 and
$1,050,814, or approximately 84% and 77%, to $103,149 and $307,209 for the three
and six months ended June 30, 1999 from $661,183 and $1,358,023 for the three
and six months ended June 30, 1998. This decrease was primarily due to the
Company selling and closing unprofitable Company-owned retail stores. Commissary
product sales decreased to $132,574 and increased to $365,575 for the three and
six months ended June 30, 1999, a decrease of $53,656 and an increase of $5,615
or approximately 29% and 2% from $186,230 and $359,960 for the three and six
months ended June 30, 1998. This decrease was primarily attributable to
decreased sales to franchise stores and wholesale clients. However, on June 7,
1999, one of the Company's wholesale clients, Northwest Airlines, Inc.
("Northwest"), terminated the agreement between Northwest and the Company.
During the year ended December 31, 1998 and the six months ended June 30, 1999,
approximately $300,000 and $165,000 of the Company's revenues, respectively,
were generated by Northwest.

There were $30,000 and $90,000 of franchise/license fee revenues for the three
and six months ended June 30, 1999, as compared with $64,000 and $124,500 of
franchise fee revenues for the three and six months ended June 30, 1998. The
Company recognized $30,000 of a non-refundable license fee for the three months
ended June 30, 1999, when the licensee failed to open additional stores as
required in the license agreement. Two new franchise stores opened during the
first quarter of 1999. Revenue under franchise agreements is generally
recognized when the franchise stores are opened. The Company has unearned
franchise fee income of $111,000 at June 30, 1999,


<PAGE>   10


compared to $213,500 at June 30, 1998. Unearned franchise fee income represents
non-refundable franchise fees which will be recognized as revenue as the related
franchise stores are opened. During the six months ended June 30, 1999, the
Company entered into no new franchise agreements. There was royalty income of
$109,292 for the six months ended June 30, 1999, as compared with $101,405 for
the six months ended June 30, 1998. This increase of $7,887 was primarily due to
the commencement of operations of new franchise stores.

Interest income for the three and six months ended June 30, 1999 was $4,361 and
$12,441, respectively, a 85% and 82% decrease from the interest income for the
three and six months ended June 30, 1998. This decrease in interest income
resulted from reductions in the Company's cash balances due to the Company's
need to fund its operations.

The Company had previously recorded a charge of $244,462 as a loss on an
abandoned lease and when the Company settled the lease and a related lawsuit
$212,846 of such amount was reversed and recovered as income in the three months
ended June 30, 1999.

Cost of sales were $149,134 and $411,679, representing 63% and 61% of net
product sales for the three and six months ended June 30, 1999, compared to
$418,117 and $845,647 or 49% and 49% of net product sales for the three and six
months ended June 30, 1998. The increase in cost of sales as a percentage of
sales was primarily attributable to an increase in the percentage of sales from
the commissary/wholesale business, which generally represents a lower gross
profit percentage. The decrease in cost of sales of $268,983 and $433,968, for
the three and six months ended June 30, 1999 was primarily due to the Company
selling and closing four of its Company-owned retail stores.

Selling, general and administrative expenses (SG&A) were $698,321 and $1,427,176
for the three and six months ended June 30, 1999, a 50% and 46% decrease from
$1,400,811 and $2,649,745 for the three and six months ended June 30, 1998. This
reduction was primarily a result of a $490,401 and $802,049 decrease in salaries
and wages, a $135,000 and $171,741 decrease in rent and a $60,674 and $137,396
decrease in advertising for the three and six months ended June 30,1999, due to
the Company selling and closing some of its retail stores, reducing corporate
personnel and discontinuing advertising expenses relating to franchising.
However, there was an increase of $132,436 and $206,016 in professional fees for
the three and six months ended June 30,1999, primarily attributable to the
expenses related to the acquisition merger with VillageNet, Inc. and Intelligent
Computer Solutions, Inc. There was an increase in bad debt of $70,000 for the
three months ended June 30, 1999.

The net loss for the three and six months ended June 30, 1999 were $310,666 and
$750,448 compared to a net loss of $1,382,940 and $2,047,480 for the three and
six months ended June 30, 1998. The primary reason for the decrease in the
current period loss was due to the Company selling or closing unprofitable
Company-owned stores, reducing personnel and recovery of prior write-off of
lease abandonment.

LIQUIDITY AND CAPITAL RESOURCES

Cash and cash equivalents at June 30, 1999 were $69,754, compared to $902,122 at
December 13, 1998. This decrease was primarily attributable to the Company
funding its operating losses and acquisition merger costs for the six months
ended June 30, 1999.

Accounts receivable decreased to $70,994 at June 30, 1999, from $177,396 at
December 31, 1998. This decrease was primarily due to an increase in the
allowance for doubtful account.

Inventory decreased to $29,848 at June 30, 1999 from $49,403 at December 31,
1998, primarily due to the sales of Company-owned retail stores.

Prepaid expenses and other current assets increased to $142,119 at June 30, 1999
from $50,753 at December 31, 1998, due to primarily an increase in prepaid
insurance.


<PAGE>   11


Fixed assets, net of accumulated depreciation, decreased to $397,867 at June 30,
1999 from $537,392 at December 31, 1998, as a result of the sale of
Company-owned stores and the normal depreciation of Company assets during the
six months ended June 30, 1999.

Intangible assets, net of accumulated amortization, decreased to $4,956 at June
30, 1999 from $35,784 at December 31, 1998, resulting from the sale of the
Company-owned New York City store.

Security deposits and other assets decreased to $81,891 at June 30, 1999 from
$179,557 at December 31, 1998, primarily from the sale of the Company-owned New
York City store and the sale of a lease at another New York City location.

The combination of accounts payable and accrued expenses decreased to $299,087
at June 30, 1999 from $399,155 at December 31, 1998. This decrease was primarily
due to the payment of acquisition related fees and suppliers.

At June 30, 1999, the Company had $(279,755) of negative working capital and a
current ratio of 0.5 to 1.

The Company's operating activities used net cash of $1,095,155 during the six
months ended June 30, 1999, as compared to net cash used in operations of
$1,471,060 for the corresponding period of the prior year. This decrease was
primarily due to the reduction of the Company's net loss.

During the quarter ended March 31, 1999, all 247,504 shares of the Company's
convertible preferred stock still outstanding were converted into 6,520,697
shares of common stock, including 526,361 shares issued in payment of cumulative
stock dividends aggregating $218,347.

In June 1998, management determined that the Company's business of operating
Company-owned retail stores no longer provided the opportunity for growth or
profitability. Accordingly, to reduce costs and losses and to replenish capital
needed for operations, the Company decided to sell Company-owned stores,
preferably to new or existing franchisees, or to close stores that could not be
timely sold. To date, the Company has sold or closed all of its Company-owned
stores except for two in California. The Company expects to sell or close its
remaining stores by the end of August 1999. To further reduce costs, in March
1999, the Company relocated its commissary to a facility in Santa Ana,
California that it shares with an existing baked goods manufacturing business.

Although the Company may maintain its core business as a franchiser and operator
of a commissary that supplies retail stores and wholesale accounts with bagel
products, the Company recognized that this remaining core business would not
generate sufficient revenues to achieve profitability. On May 21, 1999, the
Company entered into an Agreement and Plan of Reorganization and Merger, with
Intelligent Computer Solutions, Inc. (ICS) and VillageNet, Inc. (VillageNet).

VillageNet, founded in June 1995, is a community-oriented Internet service
provider specializing in educational and family-based Internet services with a
local emphasis on business advertising and shopping, chat rooms and
parent/student/teacher interaction.

ICS, founded in October 1994, is a systems-integration firm specializing in
network design, implementation and maintenance and providing Internet/intranet
messaging and security products.


As a result of the business combination with VillageNet and ICS, the Company
will require additional working capital. The Company intends to obtain
additional working capital through the issuance of convertible debt and through
the private placement of equity securities. However, there can be no assurance
that the Company will be able to do so, that the terms available to the Company
in such a financing will be favorable to the Company or that the proceeds of
such financing will provide sufficient working capital for more than a limited
period of time. The Company has completed a bridge financing to which it issued
an aggregate of $400,000 principal amount of promissory notes, which bear
interest at the rate of 8% per annum.


<PAGE>   12


OTHER MATTERS

General

On July 1, 1999, Big City Bagels, Inc. ("Company"), BCB Acquisition Corp. I
("BCB I") and BCB Acquisition Corp. II ("BCB II" and, together with the Company
and BCB I, the "Big City Parties") consummated the transactions contemplated by
the Agreement and Plan of Reorganization and Merger with Intelligent Computer
Solutions, Inc. ("ICS"), VillageNet, Inc. ("VillageNet") and each of the
shareholders of ICS and VillageNet (collectively, the "Shareholders" and,
together with ICS and VillageNet, the "Target Corporation Parties"), dated May
21, 1999 and as amended on June 28, 1999 (the "Merger Agreement"). The Merger
Agreement provided for the merger (the "Merger") of BCB I and BCB II with and
into ICS and VillageNet, respectively, for the separate corporate existence of
BCB I and BCB II to cease and for ICS and VillageNet to be the surviving
corporations of the Merger, continuing after the Merger as wholly-owned
subsidiaries of the Company.

YEAR 2000 COMPLIANCE

Many computer systems currently in use were design to use only two digits in the
date field and thus may experience difficulty processing dates beyond the Year
1999. Consequently, some computer hardware and software will need to be modified
prior to the Year 2000 to remain functional. The Company's own systems are Year
2000 compliant, which means that the systems will accurately process date/time
date regardless of whether the date is in the twentieth century to the
twenty-first century.

The Company is also in the process of assessing its vendors, utilizes, banks and
others with whom it does business to determine whether the failure of any of the
foregoing to be Year 2000 compliant would have a material adverse effect on the
Company. Management believes that the likelihood of such adverse effect is
immaterial. The Company's operations utilize relatively little electronic data
interchange with vendors and other third parties. However, to the extent that
such third parties, particularly utilities and banks, may not be Year 2000
compliant, the Company may be adversely affected, although the magnitude of such
effect cannot be estimated. The cost to the Company of makings its third-party
Year 2000 compliance assessment is not expected to be material.



<PAGE>   13


PART II. OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

On September 24, 1997, in the Arizona Superior Court, County of Maricopa, Earl
and Linda Fraley (dba "Xtremely Xpresso"), owners of a store in a shopping mall
in which a Big City Bagels store, formerly franchised and subsequently
Company-owned, was located, commenced a lawsuit against the landlord (the owners
of the mall), the former franchisee and the Company, seeking an unspecified
amount of damages. Plaintiff's claim that their lease prohibits the owner from
leasing space to other tenants who sell substantial amounts of coffee products,
and therefore, prohibited the owner from leasing space for the Big City Bagels
store. On December 1, 1998, the court granted the Company's motion for summary
judgment and found that the claims against the Company were without merit. On
May 4, 1999 the plaintiff filed an appeal to have the summary motion reversed.
The Company intends to vigorously defend the appeal and believes that it has no
liability in this matter.

On June 25, 1999 the Company reached a settlement agreement with Mercado Del
Lago LLC, owners of a shopping center in which a Big City store , formally
franchised and subsequently Company-owned , was located. Pursuant to the
settlement the Company agreed to pay Mercado Del Lago $29,000.

On June 30,1999, in the Colorado District Court, County of Arapahoe, USA Capital
LLC, lessors of equipment, commenced a lawsuit against the Company, Girardi-Riva
Enterprises, Inc., Richard V. Riva and Thomas V. Girardi (a former franchisee)
seeking damages in the amount of $82,806 plus attorney's fees and court costs.
The Company had assumed the leases from the former franchisee with Girardi-Riva
Enterprises, Inc. as guarantors. Plaintiff claims that the Company is in default
of its lease by not making the required lease payments. The Company intends to
vigorously defend the claim asserted by the plaintiff.



ITEM 2.    CHANGES IN SECURITIES AND USE OF PROCEEDS

None

ITEM 5.    OTHER INFORMATION

On July 7, 1999 Big City Bagels, Inc. changed ticker symbol from BIGC to VILN.

ITEM 6.    EXHIBITS AND REPORTS ON FORM 8-K

     (a) EXHIBITS
         3.1  Certificate of Incorporation, as amended through July 1, 1999.
         27   Financial Data Schedule (6/30/99)

     (b) REPORTS ON FORM 8-K

         Form 8-K filed July 1, 1999, relating to the acquisition by the Company
         of Intelligent Computer Solutions, Inc. and VillageNet, Inc.



<PAGE>   14


                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this export to be signed on its behalf by the
undersigned thereunto duly authorized.

                               Big City Bagels, Inc.
                               ---------------------
                               (Registrant)

Dated: August 20, 1999         By: /s/ Peter Keenan
       ---------------                 ------------
                               Peter Keenan, President

                               By: /s/ Edilberto Enriquez
                                       ------------------
                               Edilberto Enriquez, Treasurer and Chief Financial
                               Officer




<PAGE>   15


                                Index to Exhibits

3.1      Certificate of Incorporation, as amended through July 1, 1999

27       Financial Data Schedule