U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

 X   Quarterly report pursuant to section 13 or 15(d) of the Securities Exchange
---  Act of 1934 for the quarterly period ended September 30,1997

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

     For the transition period from __________to__________

                         Commission File 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 of                       (I.R.S. Employer
    Incorporation of Organization)                       Identification No.)

                     99 Woodbury Road, Hicksville, NY 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) has filed all  reports  required  to be filed by
Section 13 or 15 (d) of the Exchange Act during the  preceding 12 months (or for
such shorter period that the registrant was required to file such reports),  and
(2) has been subject to such filing requirements for the past 90 days. Yes X No

State the number of shares outstanding of each of the issuer's classes of common
equity,  as of the latest  practicable  date:  At November 13, 1997,  Issuer had
outstanding 6,343,466 shares of Common stock, par value $.001 per share.

                               Page 1 of 15 Pages
                             Exhibit Index - Page 14


<PAGE>



PART 1.  FINANCIAL INFORMATION
ITEM 1.  Financial Statements

                              BIG CITY BAGELS, INC.
                                 BALANCE SHEETS

<TABLE>
<CAPTION>




                                                                           September 30,1997          December 31,1996
                                                                    ------------------------ -------------------------
<S>                                                                              <C>                            <C>   
                         ASSETS
Current Assets:
 Cash                                                               $             1,827,170  $                654,856
 United States Treasury Bills                                                             0                 1,006,170
 Accounts Receivable                                                                175,969                   110,063
 Inventory                                                                           59,751                    74,272
 Prepaid Expenses and Other Current Assets                                           67,988                    77,131
                                                                    ------------------------ -------------------------
     Total Current Assets                                           $             2,130,878  $              1,922,492

Fixed Assets, Net of Accumulated Depreciation                                     1,192,659                 1,239,478
Intangible Assets, Net of Accumulated Amortization                                  289,604                   300,699
Security Deposits                                                                    53,029                    39,570
                                                                    ------------------------ -------------------------
     TOTAL                                                          $             3,666,170  $              3,502,239
                                                                    ======================== =========================

                                           LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
 Stockholders' Loans                                                $                21,813  $                 87,468
 Capital Lease Obligations                                                           49,764                    51,918
 Unearned Franchise Fee Income                                                      278,500                   263,750
 Accounts Payable                                                                   219,260                   208,011
 Accrued Expenses                                                                    47,080                    60,323
                                                                    ------------------------ -------------------------
     Total Current Liabilities                                      $               616,417  $                671,470

 Deferred Rent Payable                                                               10,657                    19,243
 Capital Lease Obligations, noncurrent                                               97,817                   132,926
                                                                    ------------------------ -------------------------
     Total Liabilities                                              $               724,891  $                823,639
                                                                    ------------------------ -------------------------

Stockholders' Equity
 Preferred Stock $.001 par value;   1,000,000 shares
   authorized; no shares outstanding
 Common Stock  $.001 par value;  25,000,000  shares  authorized;
   5,768,871  and 4,923,757 shares issued and outstanding at
   September 30,1997 and December 31,1996, respectively                               5,769                     4,924
 Additional Paid-In Capital                                                       6,579,000                 4,340,180
 Accumulated Deficit                                                             (3,628,490)               (1,629,004)
 Unearned Portion of Compensatory Stock                                             (15,000)                  (37,500)
                                                                    ------------------------ -------------------------
     Total Stockholders' Equity                                                   2,941,279                 2,678,600
                                                                    ------------------------ -------------------------
     TOTAL                                                          $             3,666,170  $              3,502,239
                                                                    ======================== =========================
</TABLE>

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

                                        2

<PAGE>



                              BIG CITY BAGELS, INC.
                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>


                                                             Nine Months Ended                    Three Months Ended
                                                               September 30,                         September 30,
                                                         1997                1996              1997               1996
<S>                                                      <C>                 <C>                 <C>               <C>  
REVENUES:
Product Sales by Company-Owned                $       1,279,682   $       1,033,914   $       398,267   $        352,864
      Stores
Product Sales to Franchisees and Others                 506,901             303,350           172,775            105,062
Franchise Fees                                          151,000             271,000            91,000             85,500
Royalty Income                                          124,679              89,031            37,036             36,886
Interest Income                                          37,804              50,340             6,815             31,378
                                             ------------------ ------------------- -----------------  -----------------
     Total Revenues                                   2,100,066           1,747,635           705,893            611,690
                                             ------------------ ------------------- -----------------  -----------------
COSTS AND EXPENSES:
 Cost of Sales                                        1,052,944             713,390           351,234            251,511
 Selling, General and Administrative                  3,013,432           2,098,392           865,915            849,534
 Amortization of Debt Discount                                0             683,542                 0                  0
        on Bridge Loan
 Interest Expense                                        33,176              64,566             8,592              6,196
                                             ------------------ ------------------- -----------------  -----------------
     Total Costs and Expenses                         4,099,552           3,559,890         1,225,741          1,107,241
                                             ------------------ ------------------- -----------------  -----------------
NET (LOSS)                                          $(1,999,486)        $(1,812,255)        $(519,848)  $       (495,551)
                                             ================== =================== =================  =================
Net (Loss) Per Common Share                   $           (0.39) $            (0.46) $          (0.10)  $          (0.10)
                                             ================== =================== =================  =================
Weighted Average Common Shares
        Outstanding                                   5,065,823           3,933,079         5,331,848          4,808,750
                                             ================== =================== =================  =================

</TABLE>

-----------
*    Reclassified to conform to current period presentation.


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

                                        3

<PAGE>



                              BIG CITY BAGELS, INC.
                        STATEMENT OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>


                                                                                   
                                                                                                     
                                                                                                    
                                             Common Stock           Additional                     Unearned Portion of
                                                                     Paid-In        Accumulated    Compensatory Stock               
                                        Shares         Amount        Capital          Deficit      Shares      Amount      Total
<S>                                      <C>             <C>           <C>             <C>           <C>        <C>         <C>
BALANCE, January 1, 1997               4,923,757    $   4,924    $   4,340,180   $  (1,629,004)    15,000    $ (37,500) $ 2,678,600

Issuance of Common Stock for
Acquisition of Franchise Store             8,264            8            8,256                                                8,264

Common Stock Issued                      724,350          724        1,690,677                                            1,691,401
Upon Exercise of Warrants

Common Stock Issued
Upon Exercise of the
Unit Purchase Option                     112,500          113          539,887                                              540,000

Amortization of Compensatory Stock                                                                              22,500       22,500

Net Loss                                                                            (1,999,486)                          (1,999,486)
                                      -----------      --------  -------------   --------------   ---------    -------- ------------

BALANCE, September 30, 1997            5,768,871     $  5,769    $   6,579,000   $  (3,628,490)    15,000 $    (15,000) $ 2,941,279
                                      ===========      ========  =============   ==============   =========    ======== ============

</TABLE>


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

                                        4

<PAGE>



                              BIG CITY BAGELS, INC.
                              CASH FLOWS STATEMENTS
                     FOR THE NINE MONTHS ENDED SEPTEMBER 30,

<TABLE>
<CAPTION>



                                                                               1997                 1996
                                                                               ----                 ----
<S>                                                                            <C>                  <C>  
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss                                                                     $(1,999,486)        $(1,812,255)
                                                                     --------------------  ------------------
Adjustments to Reconcile Net Loss to Net Cash Used in
Operating Activities:
   Depreciation and Amortization                                                  182,645             121,786
   Amortization of Debt Discount on Bridge Loans                                        0             683,542
   Issuance of Common Stock for Compensation                                       22,500                   0
   (Increase) Decrease in:
     Accounts Receivable                                                          (65,906)            (74,867)
     Inventory                                                                     14,521              (9,803)
     Notes Receivable                                                                   0             (40,000)
     Interest Receivable on U.S. Treasury Bills                                    21,135                   0
     Prepaid Expenses and Other Current Assets                                      9,143             (32,292)
   Increase (Decrease) in:
     Unearned Franchise Fee Income                                                 14,750             (67,250)
     Deferred Rent Payable                                                         (8,586)             (5,264)
     Accounts Payable                                                              11,249            (103,933)
     Accrued Expenses                                                             (13,243)            (27,252)
                                                                     --------------------  ------------------
Total Adjustments                                                                 188,208             444,667
                                                                     --------------------  ------------------
Net Cash Used in Operating Activities                                          (1,811,278)         (1,367,588)
                                                                     --------------------  ------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Acquisition of Franchise Store                                                 (75,000)                  0
   Purchases of Fixed and Intangible Assets                                       (32,244)            (61,929)
   Increase in Security Deposits                                                  (13,459)             (1,365)
   Purchase of United States Treasury Bills                                      (243,880)           (978,800)
   Sales of United States Treasury Bills                                        1,219,691                   0
                                                                     --------------------  ------------------
Net Cash Provided (Used) in Investing Activities                                  855,108          (1,042,094)
                                                                     --------------------  ------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Net Proceeds from Public Offering                                                    0           4,163,609
   Net Proceeds from Exercise of Warrants                                       1,691,402                   0
   Proceeds from Exercise of Unit Purchase Option                                 540,000                   0
   Repayment of Bridge Loan                                                             0          (1,000,000)
   Proceeds from Bridge Loan                                                            0           1,000,000
   Repayment of Stockholder Loans                                                 (65,655)           (347,121)
   Repayment of Notes Payable                                                     (37,263)            (82,617)
                                                                     --------------------  ------------------
Net Cash Provided by Financing Activities                                       2,128,484           3,733,871
                                                                     --------------------  ------------------

NET INCREASE IN CASH                                                            1,172,314           1,324,189
Cash, Beginning of Period                                                         654,856              37,991
                                                                     ====================  ==================
Cash, End of Period                                                            $1,827,170          $1,362,180
                                                                     ====================  ==================
</TABLE>

                                                     (Continued on next page)



                                        5

<PAGE>




                              BIG CITY BAGELS, INC.
                        CASH FLOWS STATEMENTS (CONTINUED)
                     FOR THE NINE MONTHS ENDED SEPTEMBER 30,

<TABLE>
<CAPTION>




Supplemental Disclosure of Cash Flow Information:
                                                                                           1997                  1996
                                                                                           ----                  ----
<S>                                                                                        <C>                   <C>   
      Cash Paid During the Year for:
          Interest                                                                     $   32,510           $   89,519
          Income Taxes                                                                      3,500                1,925

In February 1997, the Company acquired all of the assets of a franchisee for the
following:
          Forgiveness of Outstanding Accounts Receivable                               $    8,796
          Issuance of 8,264 Shares of Common Stock                                          8,264
                                                                                       ----------
                                                                                           17,060
          Cash Paid                                                                        75,000
                                                                                       ----------
                        Total Amount Attributed to Fixed Assets                        $   92,060
                                                                                       ==========

</TABLE>


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

                                        6

<PAGE>



                              BIG CITY BAGELS, INC.
                          NOTES TO FINANCIAL STATEMENTS

(NOTE A) -        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 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 nine months ended  September
                  30,  1997 are not  necessarily  indicative  of the  results of
                  operations for the full year ending  December 31, 1997.  These
                  statements  should be read in  conjunction  with the Company's
                  financial  statements  for the year ended  December  31,  1996
                  appearing in the Company's Annual Report on Form 10-KSB.

(NOTE B) -        Bridge Financing:

                  In January  1996,  the Company  completed a bridge  financing,
                  pursuant  to which it issued (i) an  aggregate  of  $1,000,000
                  principal amount of promissory  notes,  which bear interest at
                  the rate of 8% per annum  ("Bridge  Notes") and (ii) the right
                  to receive upon the completion of the company's initial public
                  offering ("Offering") an aggregate of 500,000 bridge units and
                  500,000  Class B  Redeemable  Common Stock  Purchase  Warrants
                  ("Class B Warrants").  Each bridge unit consisted of one share
                  of  common  stock  and one  Class A  Redeemable  Common  Stock
                  Purchase  Warrant ("Class A Warrant").  As originally  issued,
                  each Class A Warrant entitled the holder to purchase one share
                  of  Common  Stock  for  $4.50  during  the  three-year  period
                  commencing one year after the Offering.  As originally issued,
                  two  Class  B  Warrants,  together,  entitled  the  holder  to
                  purchase  one share of  common  stock  for  $8.00  during  the
                  three-year  period commencing one year after the completion of
                  the Offering.  The bridge units and Class B Warrants have been
                  valued  at  $684,000  and have  been  accounted  for as a debt
                  discount  increasing the effective  interest rate on the notes
                  to 169%. The Bridge Notes were repaid with the proceeds of the
                  Offering. See (Note D).


(NOTE C) -        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  10,000  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, 1997,  the directors of the
                  Company  were  granted  options to  purchase an  aggregate  of
                  50,000  shares of Common Stock at an exercise  price of $5.375
                  per share.


                                        7

<PAGE>



(NOTE D)    -     Exercise of Common Stock Warrants

                  Effective  July 11,  1997,  the Company  reduced the  exercise
                  price of its Class A Warrants and its Class B Warrants  during
                  a special  exercise  period which  expired on October 8, 1997.
                  The Class A Warrants,  which were  originally  exercisable  at
                  $4.50 per  share,  were  exercisable  at $2.50 per  share.  In
                  addition,  if the Class A Warrants were exercised prior to the
                  expiration of the special exercise period,  the holder thereof
                  also was issued a new Class A Warrant upon the  expiration  of
                  the  special  exercise  period.  If an  aggregate  of at least
                  $2,000,000 of gross  proceeds was derived from the exercise of
                  the Class A Warrants during this special exercise period, then
                  the  exercise  price of the  Class A  Warrants  which  are not
                  exercised  and the new  Class A  Warrants  would be $2.50  per
                  share  until  their  expiration  on May 6, 2000.  If less than
                  $2,000,000 of gross  proceeds was derived from the exercise of
                  the Class A Warrants during this special exercise period, then
                  the  exercise  price of the Class A  Warrants  which  were not
                  exercised and the new Class A Warrants will be $4.50 after the
                  expiration of the special exercise period.

                  During the special  exercise  period,  an aggregate of 798,945
                  Class A  Warrants  were  exercised,  from  which  the  Company
                  derived gross proceeds of $1,997,362.50.  Although  $2,000,000
                  of gross  proceeds was not received by the Company  during the
                  special  exercise  period,  the Company  determined on October
                  14,1997 to permanently  reduce the exercise price of the Class
                  A Warrants  to $2.50 per  share,  which  price will  remain in
                  effect until the Class A Warrants  expire on May 6, 2000. This
                  exercise price reduction also applies to the additional  Class
                  A Warrants  issued to  holders  of Class A Warrants  that were
                  exercised during the special exercise period.

                  In addition,  during this special exercise period, the company
                  modified  the exercise  provisions  of the Class B Warrants so
                  that each Class B Warrant  entitled the holder to purchase one
                  share  of  Common  Stock  for  $2.50  per  share  and,  if  so
                  exercised,  the  holder  would be issued a new Class A Warrant
                  upon the expiration of the special exercise period. No Class B
                  Warrants were exercised during the special exercise period.

                  On November 5,1997,  the Company further modified the exercise
                  provisions  of the Class B  Warrants  ( for a  limited  period
                  expiring  on  November  14,1997)  so that each Class B Warrant
                  entitled  the holder to purchase one share of Common Stock for
                  $1.00 per share and,  if so  exercised,  the  holder  would be
                  issued a new Class A Warrant. By November 12,1997, all 500,000
                  Class B Warrants  were  exercised,  from which the Company has
                  received gross proceeds of $500,000.

(NOTE E)        - Exercise of the Underwriter's Unit Purchase Options

                  In July 1997, options ("Unit Purchase Options")  entitling the
                  holders thereof to purchase 112,500 units ("Units"), each Unit
                  consisting  of one  share  of  Common  Stock  and one  Class A
                  Warrant,  for $4.80 per Unit,  were  exercised in full and the
                  Company  received  gross  proceeds  of  $540,000.  All  of the
                  actions  described  in  (Note D) and  (Note  E) were  effected
                  pursuant to a public offering  registered under the Securities
                  Act of 1933.





                                        8

<PAGE>



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 Company  expects," "will  continue," "is
anticipated,"  "estimated"  or similar  expressions  are  intended  to  identify
"forward-looking  statements"  within  the  meaning  of the  Private  Securities
Litigation Reform Act of 1995. Readers are cautioned not 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.

Results of Operations

         Revenues for the three and nine months ended  September 30, 1997,  were
$705,893 and $2,100,066,  respectively,  a 15% and 20% increase from revenues of
$611,690 and $1,747,635 for the three and nine months ended  September 30, 1996.
This increase was  attributable  to gains in store and commissary  product sales
and royalty income. Store and commissary product sales increased by $113,116 and
$449,319,  respectively,  a 25% and 34% increase, to $571,042 and $1,786,583 for
the three and nine months ended  September 30, 1997 from $457,926 and $1,337,264
for the three and nine months ended September 30, 1996. This increase was due to
the maturing of Company-owned  retail store  operations,  the acquisition of two
new retail stores in the latter part of 1996, the  acquisition of one new retail
store in the first  quarter of 1997,  the growth of the  wholesale  business and
increased  commissary sales to franchise stores.  Franchise fee revenues for the
three and nine  months  ended  September  30, 1997 were  $91,000  and  $151,000,
respectively,  as compared  with $85,500 and $271,000 of franchise  fee revenues
for the three and nine months ended  September  30,  1996,  due to the fact that
more stores opened during the nine months ended September 30, 1996.  Included in
the $91,000 of franchise  revenue for the three months ended  September 30, 1997
is an $81,000  franchise fee related to an area  development  agreement that was
terminated.  Revenue under franchise agreements generally is recognized when the
franchise  stores are opened.  The Company has unearned  franchise fee income of
$278,500 at  September  30, 1997,  compared to $242,000 at  September  30, 1996.
Unearned  franchise fee income  represents  non-refundable  franchise fees which
will be  recognized  as  revenue as the  related  franchise  stores are  opened.
Royalty  income  increased by $150 and  $35,648,  or .4% and 40%, to $37,036 and
$124,679 for the three and nine months ended  September  30, 1997,  from $36,886
and $89,031 for the three and nine months ended September 30, 1996. This was due
to the maturing of operations of existing  franchise stores and the commencement
of operations of new franchise  stores that opened in 1997.  Interest income for
the three and nine  months  ended  September  30,  1997 was $6,815 and  $37,804,
respectively,  a 78% and 25% decrease from the interest income for the three and
nine months ended  September 30, 1996.  Interest  income  resulted from the cash
proceeds  of the  Company's  initial  public  offering  in May 1996,  which were
deposited into interest bearing accounts.

         During the nine months ended  September 30, 1997,  the Company  entered
into two franchise agreements and two new franchise area development  agreements
(one three-store agreement and one seven-store

                                        9

<PAGE>



agreement), and a location license agreement (one seven-store agreement) none of
which stores were opened by September 30, 1997, as compared with three franchise
agreements and two area  development  agreements  (one  twelve-store  agreement,
which was terminated in September 1997, and one  three-store  agreement) for the
nine months ended September 30, 1996.

         Cost of sales were $351,234 and $1,052,944, representing 62% and 59% of
net sales for the three and nine months ended  September  30, 1997,  compared to
$251,511  and  $713,390,  or 55% and 53%,  of net  sales  for the three and nine
months ended  September 30, 1996.  The increase in cost of sales as a percentage
of sales was primarily  attributable to an increase in sales from the commissary
to the  franchisees  and  increased  sales from the  wholesale  business,  which
generally  represent a lower gross  profit  percentage.  The increase in cost of
sales of $99,723 and  $339,554,  respectively,  was  primarily  due to increased
store  revenues  resulting  from  the  additional  stores  acquired,   increased
wholesale business and increased sales to franchisees.

         Selling,  general and administrative  expenses (SG&A) were $865,915 and
$3,013,432,  respectively,  for the three and nine months  ended  September  30,
1997, a 2% and 44% increase from $849,534 and  $2,098,392 for the three and nine
months ended September 30, 1996. The increase was primarily due to the hiring of
management and administrative personnel; which resulted in increases in salaries
of  $336,791,  from  $549,194 for the nine months  ended  September  30, 1996 to
$885,985 for the nine months ended September 30, 1997, and increases of $109,548
in  rent;  $30,302  in  advertising;   $55,897  in  insurance;  and  $73,163  in
professional  fees,  for the nine months ended  September  30,  1997,  that were
mandated by a growing business.

         Amortization of debt discount on the promissory  notes ("Bridge Notes")
issued in January  1996 in  connection  with the  Company's  $1,000,000  private
financing ("Bridge  Financing") for the nine months ended September 30, 1996 was
$683,542.  There was no  amortization  of debt  discount on Bridge Notes for the
nine months ended September 30, 1997.

         Interest  expense   increased  by  $2,396  and  decreased  by  $31,390,
respectively,  during the three and nine months ended  September  30, 1997.  The
increase in the three months was  primarily  due to equipment  financing and the
decrease  for  the  nine  months  was  primarily  due  to the  repayment  of the
$1,000,000 of Bridge Notes in May 1996.

         The net losses for the three and nine months ended  September  30, 1997
were $519,848 and  $1,999,486  respectively,  compared to net losses of $495,551
and  $1,812,255  for the three and nine months ended  September  30,  1996.  The
reasons  for the current  period loss were  primarily  due to the  increases  in
operating salaries, rent, advertising,  insurance,  professional fees, delivery,
and depreciation expenses.

Liquidity and Capital Resources

         In May 1996,  the Company  completed its initial  public  offering,  at
which time it  received  net  proceeds  of  approximately  $4,100,000,  of which
$1,000,000  was used to repay the Bridge Notes and $375,000 of which was used to
repay a portion of shareholder loans.

         Cash and  United  States  Treasury  Bills at  September  30,  1997 were
$1,827,170  compared to  $1,661,026  at December  31,  1996.  This  increase was
attributable  to the  exercise  of the Unit  Purchase  Options  and the  Class A
Warrants,  described  in (Note D) and  (Note E) and  offset  by cash used in the
Company's operations.

         Accounts  receivable  increased to $175,969 at September 30, 1997, from
$110,063 at December 31, 1996.  This  increase was primarily due to increases in
commissary sales to franchisees and the Company's wholesale business.

         Inventory  decreased to $59,751 at September 30, 1997,  from $74,272 at
December 31, 1996, due to tighter inventory controls.
         Prepaid expenses and other current assets as of September 30, 1997 have
not changed significantly compared to December 31, 1996.

                                       10

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         Shareholders'  loans  decreased to $21,813 at  September  30, 1997 from
$87,468 at December 31, 1996.  This decrease was  attributable  to the scheduled
repayment of these loans.

         The  current  and  noncurrent  portion  of  capital  lease  obligations
decreased to $147,581 at September  30, 1997 from  $184,844 at December 31, 1996
as a result of the Company making the required payments during this period.

         Accounts payable and accrued expenses as of September 30, 1997 have not
changed significantly compared to December 31, 1996.

         At September 30, 1997,  the Company had  $1,514,461 of working  capital
and a current ratio of 3.5 to 1.

         The Company's  operating  activities used net cash of $1,811,278 during
the nine  months  ended  September  30,  1997,  as  compared to net cash used in
operations of $1,367,588  for the  corresponding  period of the prior year.  The
$443,690  increase was  primarily due to the increase of the Company's net loss,
which was funded from the proceeds of the initial public offering.

         As  described  in (Note D) and  (Note E) of the  financial  statements,
during the period  commencing  on July 11,1997  through  November 12, 1997,  the
Company has derived  gross  proceeds of  $3,037,362.50  from the exercise of the
Company's Class A Warrants, Class B Warrants and Unit Purchase Options.

         The Company believes that its working capital is sufficient to fund its
existing  operations  through 1998. The Company is evaluating  several potential
acquisitions  and is  currently  negotiating  terms.  No  definitive  agreements
relating to acquisitions  have been executed.  The Company  anticipates  that it
will pursue external financing to fund cash requirements for acquisitions.

         The Company  anticipates  increasing  revenues  and thereby  generating
operating cash flow in the future by implementing the following actions:

o        Increasing Product Sales. The Company intends to open new Company-owned
         retail stores and expects  increased  sales from its  commissary to new
         franchise stores.  The Company has increased its wholesale business and
         expects this  business to grow due to an increase in name  recognition,
         product  acceptance and  additional  sales  efforts.  In addition,  the
         Company  has plans to develop  stores  with a  stronger  deli and bread
         concept  offering new core sandwich menu items as well as expanding its
         variety of Bagel Pockets.

o        Expanding  Franchise  Operations.  The Company will continue to utilize
         capital to increase  franchise  sales by  advertising  in national  and
         regional  publications and business  magazines.  The Company expects to
         increase  its  franchise  sales  by  opening  or  acquiring  additional
         Company-owned  flagship stores in markets that would generate  interest
         for experienced  multi-store  developers to enter into area development
         agreements.  The  Company  is  working  to develop a new "look" to it's
         stores  with an  expanded  deli and  bread  concept.  Along  with a new
         advertising  campaign,  the Company believes it will have more to offer
         prospective franchisees than other available bagel/deli concepts.

o        Making Acquisitions. The Company intends  to acquire other bagel stores
         or complementary types of  retail outlets which  provide entry into new
         markets.



PART II.  OTHER INFORMATION
ITEM 1.    Legal Proceedings

                                       11

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         On July 29,  1997,  in the  Superior  Court of Los  Angeles  County,  a
lawsuit was commenced by Michael Schweid,  et al, against Victor Saab and George
Saab,  et al, former  franchisees  of the Company,  and the Company,  seeking an
unspecified  amount of damages for property  damage and  business  interruptions
resulting  from a fire which  partially  destroyed a shopping  mall in which the
former franchisees' store was located. Victor Saab was subsequently convicted of
arson and insurance  fraud. The Company believes the lawsuit against the Company
is without merit.  The Company's  insurance  carrier has assumed defense of this
matter and has moved to dismiss the lawsuit.

         On  September  24,  1997,  in the  Arizona  Superior  Court,  County of
Maricopo,  a lawsuit  was  commenced  by 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, against
the  owners of the mall,  the  former  franchisee  and the  Company,  seeking an
unspecified  amount of damages.  Plaintiff's  claim is based upon a provision in
their lease which they assert  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.  As a
result of events that caused the  Company to be unable to  economically  operate
the store,  it was closed on October 23,  1997.  The Company  believes it has no
liability in this matter and that it is the obligation of the owner to indemnify
the  Company for these  claims.  The Company  also  believes  that the owner has
breached its obligations to the Company under its lease.

ITEM 2 - Changes in Securities and Use of Proceeds

         (a)     Pursuant to an offering  registered under the Securities Act of
                 1993,  the  Company  has  modified  the  terms  of its  Class A
                 Redeemable   Common  Stock   Purchase   Warrants  and  Class  B
                 Redeemable  Common Stock Purchase Warrants (all of which latter
                 warrants were  subsequently  exercised on November 12, 1997) as
                 described in (Note D) to the financial statements.

         (b)     Not applicable

         (c)     None

         (d)     Not applicable

ITEM 5.  Other Information

Mesa, Arizona Store

         On October 23, 1997, the Company closed its Mesa,  Arizona retail store
because of events  that  resulted in the Company  being  unable to  economically
operate the store.


ITEM 6 - Exhibits and Reports on Form 8-K

         (a)     Exhibits
                  27.    Financial Data Schedule (9/30/97)

         (b)     Reports on Form 8-K
                 None

                                       12

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                                    SIGNATURE


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



                                    Big City Bagels, Inc.
                                    (Registrant)


Dated:   November 14, 1997          By:  /s/ Mark Weinreb
                                  ----------------------------------------------
                                    Mark Weinreb, Chairman, and Chief
                                      Executive Officer and Chief Financial
                                      Officer (and principal accounting officer)


                                       13

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EXHIBIT INDEX

EXHIBIT
NUMBER                   DESCRIPTION                                   PAGE


     27                  Financial Data Schedule (9/30/97)              15


                                       14

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