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 June 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 July  31,  1997,  Issuer  had
outstanding 5,341,321 shares of Common stock, par value $.001 per share.

                               Page 1 of 24 Pages
                             Exhibit Index - Page 15


<PAGE>



PART 1.  FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS

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



                                                                                June 30,1997          December 31,1996
                         ASSETS                                                ---------------       ------------------
<S>                                                                                   <C>                     <C>  
Current Assets:
 Cash                                                                   $            359,193  $                654,856
 United States Treasury Bills                                                              0                 1,006,170
 Accounts Receivable                                                                 201,057                   110,063
 Inventory                                                                            50,341                    74,272
 Prepaid Expenses and Other Current Assets                                            60,254                    77,131
                                                                        -------------------- -------------------------
     Total Current Assets                                               $            670,845  $              1,922,492

Fixed Assets, Net of Accumulated Depreciation                                      1,237,714                 1,239,478
Intangible Assets, Net of Accumulated Amortization                                   286,636                   300,699
Deferred Registration Costs                                                           65,286                         0
Security Deposits                                                                     50,365                    39,570
                                                                        -------------------- -------------------------
     TOTAL                                                              $          2,310,846  $              3,502,239
                                                                        ==================== =========================

                                           LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
 Stockholders' Loans                                                                  63,768                    87,468
 Capital Lease Obligations                                                            50,508                    51,918
 Unearned Franchise Fee Income                                                       335,625                   263,750
 Accounts Payable                                                                    333,087                   208,011
 Accrued Expenses                                                                    182,735                    60,323
                                                                        -------------------- -------------------------
     Total Current Liabilities                                          $            965,723  $                671,470

 Deferred Rent Payable                                                                13,519                    19,243
 Capital Lease Obligations, noncurrent                                               109,378                   132,926
                                                                        -------------------- -------------------------
     Total Liabilities                                                  $          1,088,620  $                823,639
                                                                        -------------------- -------------------------

Stockholders' Equity
 Preferred Stock $.001 par value;  1,000,000 shares
   authorized; no shares outstanding
 Common Stock  $.001 par value;  10,000,000  shares  authorized;
  4,932,021  and 4,923,757  shares  issued and  outstanding
  at June  30, 1997 and December 31, 1996,  respectively                               4,932                     4,924
 Additional Paid-In Capital                                                        4,348,436                 4,340,180
 Accumulated Deficit                                                             (3,108,642)               (1,629,004)
 Unearned Portion of Compensatory Stock                                             (22,500)                  (37,500)
                                                                        -------------------- -------------------------
     Total Stockholders' Equity                                                    1,222,226                 2,678,600
                                                                        -------------------- -------------------------
     TOTAL                                                              $          2,310,846  $              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>


                                                          Six Months Ended                     Three Months Ended
                                                  June 30, 1997      June 30, 1996*     June 30, 1997     June 30, 1996*
                                                  -------------      --------------     -------------     --------------
<S>                                                    <C>                <C>               <C>                 <C>   
REVENUES:
Product Sales by Company-Owned                         $881,415            $681,048          $424,841           $346,753
      Stores
Product Sales to Franchisees and Others                 334,126             198,290           183,843            111,668
Franchise Fees                                           60,000             185,500            60,000             65,500
Royalty Income                                           87,643              52,145            44,289             31,928
Interest Income                                          30,989              18,962            13,509             15,172
                                                    -----------         -----------          --------           --------
     Total Revenues                                   1,394,173           1,135,945           726,482            571,021
                                                      ---------           ---------           -------            -------

COSTS AND EXPENSES:
 Cost of Sales                                          701,710             461,879           343,054            256,157
 Selling, General and Administrative                  2,147,517           1,248,858         1,048,844            714,048
 Amortization of Debt Discount                                0             683,542                 0            257,059
        on Bridge Loan
 Interest Expense                                        24,584              58,370            11,616             27,818
                                                    -----------         -----------       -----------        -----------
     Total Costs and Expenses                         2,873,811           2,452,649         1,403,514          1,255,082
                                                      ---------           ---------         ---------          ---------

NET (LOSS)                                         $(1,479,638)        $(1,316,704)        $(677,032)         $(684,061)
                                                   ============        ============        ==========         ==========

Net (Loss) Per Common Share                             $(0.30)             $(0.38)           $(0.14)            $(0.17)
                                                        =======             =======           =======            =======

Weighted Average Common Shares
        Outstanding                                   4,930,606           3,490,433         4,932,021          3,980,865
                                                      =========           =========         =========          =========



-----------
<FN>

*    Reclassified to conform to current period presentation.
</FN>
</TABLE>


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

                                        3

<PAGE>



                              BIG CITY BAGELS, INC.
                        STATEMENT OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>


                                                                                  
                                                                                                             
                                                                                            Unearned Portion of           
                                       Common Stock        Additional                       Compensatory Stock
                                                            Paid-In       Accumulated                            
                                     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

Amortization of Compensatory Stock                                                                     15,000             15,000

Net Loss                                                                   (1,479,638)                                (1,479,638)
                                  -----------  ---------   ----------  ------------------  --------  ----------     -------------

BALANCE, June 30, 1997             4,932,021   $ 4,932    $ 4,348,436    $ (3,108,642)     15,000    $(22,500)      $  1,222,226
                                  ===========  =========   ==========  ==================  ========  ==========     =============
</TABLE>




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

                                        4

<PAGE>



                              BIG CITY BAGELS, INC.
                              CASH FLOWS STATEMENTS
                        FOR THE SIX MONTHS ENDED JUNE 30,

<TABLE>
<CAPTION>


                                                                                1997                 1996
                                                                                ----                 ----
<S>                                                                          <C>                  <C> 
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Loss                                                                     $(1,479,638)        $(1,316,704)
                                                                     --------------------  ------------------

Adjustments to Reconcile Net Loss to Net Cash Used in
Operating Activities:
   Depreciation and Amortization                                                  121,787              75,606
   Amortization of Debt Discount on Bridge Loans                                        0             683,542
   Issuance of Common Stock for Compensation                                       15,000                   0
   (Increase) Decrease in:
     Accounts Receivable                                                         (99,790)            (61,269)
     Inventory                                                                     23,931             (6,956)
     Notes Receivable                                                                   0            (20,000)
     Interest Receivable on U.S. Treasury Bills                                    21,135                   0
     Prepaid Expenses and Other Current Assets                                     16,877            (37,384)
   Increase (Decrease) in:
     Unearned Franchise Fee Income                                                 71,875             (1,750)
     Deferred Rent Payable                                                        (5,724)             (1,754)
     Accounts Payable                                                             125,076            (87,918)
     Accrued Expenses                                                             122,412             (4,738)
                                                                     --------------------  ------------------
Total Adjustments                                                                 412,579             537,379
                                                                     --------------------  ------------------
Net Cash Used in Operating Activities                                         (1,067,059)           (779,325)
                                                                     --------------------  ------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Acquisition of Franchise Store                                                (75,000)                   0
   Purchases of Fixed Assets                                                     (13,472)            (50,529)
   Increase in Security Deposits                                                 (10,795)             (2,500)
   Purchase of United States Treasury Bills                                     (243,880)                   0
   Sales of United States Treasury Bills                                        1,228,487                   0
                                                                     --------------------  ------------------
Net Cash Provided (Used) in Investing Activities                                  885,340            (53,029)
                                                                     --------------------  ------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Net Proceeds from Public Offering                                                    0           4,163,609
   Deferred Registration Costs                                                   (65,286)                   0
   Repayment of Bridge Loan                                                             0         (1,000,000)
   Proceeds from Bridge Loan                                                            0           1,000,000
   Repayment of Stockholder Loans                                                (23,700)           (347,121)
   Repayment of Notes Payable                                                    (24,958)            (77,803)
                                                                     --------------------  ------------------
Net Cash (Used) Provided by Financing Activities                                (113,944)           3,738,685
                                                                     --------------------  ------------------

NET INCREASE (DECREASE) IN CASH                                                 (295,663)           2,906,331
Cash, Beginning of Period                                                        $654,856             $37,991
                                                                     ====================  ==================
Cash, End of Period                                                              $359,193          $2,944,322
                                                                     ====================  ==================

</TABLE>

                            (Continued on next page)




                                        5

<PAGE>




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

<TABLE>
<CAPTION>




Supplemental Disclosure of Cash Flow Information:
                                                                                           1997                   1996
                                                                                           ----                   ----
<S>                                                                                          <C>                 <C>  
      Cash Paid During the Year for:
          Interest                                                      $                22,350   $             87,649
          Income Taxes                                                                    1,900                  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 six months  ended June 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").  Each Class A Warrant
                  entitles  the holder to purchase one share of Common Stock for
                  $4.50 during the three-year  period  commencing one year after
                  the Offering. Two Class B Warrants, together, will entitle 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 contain
                  registration rights and the Company registered such securities
                  simultaneously with 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 also (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)-         Common Stock Warrants

                  Effective  July 11,  1997,  the Company  reduced the  exercise
                  price of its Class A Warrants  and its Class B  Warrants.  The
                  Class A Warrants,  which were previously  exercisable at $4.50
                  per share, will be exercisable at $2.50 per share for a period
                  of 60 days, until September 8, 1997, subject to the discretion
                  of the Company to extend this special  exercise  period for up
                  to an  additional  30  days.  If  the  Class  A  Warrants  are
                  exercised  prior to the  expiration  of the  special  exercise
                  period,  the holder  thereof also will be 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 are
                  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 will be $2.50 per share until their expiration on May
                  6, 2000. If less than $2,000,000 of gross proceeds are 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
                  will be $4.50 after the  expiration  of the  special  exercise
                  period.

                  During the special exercise period,  each Class B Warrant will
                  entitle the holder to purchase  one share of Common  Stock for
                  $2.50 per share  and,  if so  exercised,  the  holder  will be
                  issued  a new  Class A  Warrant  upon  the  expiration  of the
                  special exercise  period.  After the expiration of the special
                  exercise period, two Class B Warrants,  together, will entitle
                  the  holder  to  purchase  one  share of  Common  Stock at the
                  original exercise price of $8.00.

(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.

(NOTE F)-         Shareholders' Commitments

                  Since  April 1, 1997,  the  Company  has not made the  $12,000
                  aggregate per month payments required under the terms of loans
                  made to the  Company  by Mark  Weinreb,  Stanley  Weinreb  and
                  Stanley Raphael ("Shareholder  Loans"). Mark Weinreb,  Stanley
                  Weinreb and  Stanley  Raphael  have  agreed to forego  monthly
                  repayment  of the  Shareholder  Loans  until  the  earlier  of
                  January 1, 1998 or such time as the  Company  has  $750,000 of
                  funds in bank  accounts,  money market funds and United States
                  Treasury Bills ("Liquidity Date"). In addition, until December
                  31, 1997,  each of Mark Weinreb,  Stanley  Weinreb and Stanley
                  Raphael have agreed to loan the Company,  at an interest  rate
                  of 12% per annum,  up to $100,000 if the Company has less than
                  $25,000  of funds in bank  accounts,  money  market  funds and
                  United States Treasury Bills.

                  In addition,  commencing  July 1, 1997, Mark Weinreb and Jerry
                  Rosner  have  agreed to permit the  Company to accrue  without
                  interest $3,500 of each of their respective salaries per month
                  until the earlier of January 1, 1998 or the Liquidity Date.

                  As of August 5, 1997,  the  Company's  funds have exceeded the
                  $750,000  threshold  described above,  thereby  obligating the
                  Company to resume  its  contractual  obligations  to repay the
                  Shareholder Loans and officers' salaries.

                                        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 six  months  ended  June 30,  1997,  were
$726,482 and $1,394,173,  respectively,  a 27% and 23% increase from revenues of
$571,021 and $1,135,945  for the three and six months ended June 30, 1996.  This
increase was attributable to gains in the following areas:  store and commissary
product sales,  royalty income and interest income. Store and commissary product
sales increased by $150,263 and $336,203,  respectively, a 33% and 38% increase,
to $608,684 and $1,215,541 for the three and six months ended June 30, 1997 from
$458,421 and  $879,338  for the three and six months  ended June 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 six months ended June 30, 1997 were $60,000 and
$60,000,  respectively,  as compared  with $65,500 and $185,500 of franchise fee
revenues for the three and six months ended June 30, 1996,  due to the fact that
more stores opened during the three and six months ended June 30, 1996.  Revenue
under franchise agreements generally is recognized when the franchise stores are
opened.  The Company has unearned  franchise  fee income of $335,625 at June 30,
1997,  compared to  $307,500 at June 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 $12,361 and
$35,498,  or 39% and 68%,  to $44,289  and  $87,643 for the three and six months
ended June 30, 1997, from $31,928 and $52,145 for the three and six months ended
June 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
1996.  Interest  income  for the three and six months  ended  June 30,  1997 was
$13,509 and $30,089,  respectively,  a 11%  decrease  and 63% increase  from the
interest  income for the three and six  months  ended  June 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 six months ended June 30, 1997, the Company entered into two
franchise  agreements and one new franchise area  development  agreement  (three
stores), none of which stores were opened by June 30,

                                        9

<PAGE>

1997,  as compared  with three  franchise  agreements  and two area  development
agreements (one  twelve-store  agreement and one three-store  agreement) for the
six months ended June 30, 1996.

         Cost of sales were $343,054 and $701,710,  representing  56% and 58% of
net sales for the three and six months ended June 30, 1997, compared to $256,157
and  $461,879,  or 56% and 53%, of net sales for the three and six months  ended
June 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
$86,897  and  $239,831,  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 $1,048,844 and
$2,147,517,  respectively,  for the three and six months  ended June 30, 1997, a
47% and 72% increase from $714,048 and  $1,248,858  for the three and six months
ended June 30,  1996.  This  increase  was  primarily a result of:  increases in
salaries of $142,204 and $327,474  from  $182,467 and $325,079 for the three and
six months  ended June 30, 1996 to $324,671  and  $652,553  for the three months
ended  June  30,  1997,  due to the  hiring  of  management  and  administrative
personnel;  and increases of $39,679 and $71,056 in rent; $44,505 and $79,425 in
advertising;  $19,222  and  $59,752 in  insurance;  and  $5,629  and  $75,305 in
professional   fees,  for  the  three  and  six  months  ended  June  30,  1997,
respectively, 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 three and six months ended June 30, 1996
was $257,059  and  $683,542,  respectively.  There was no  amortization  of debt
discount on Bridge Notes for the three and six months ended June 30, 1997.

         Interest expense decreased by $16,202 and $33,786, respectively, during
the three and six months ended June 30, 1997,  primarily due to the repayment of
the $1,000,000 of Bridge Notes in May 1996.

         The net losses for the three and six  months  ended June 30,  1997 were
$677,032 and  $1,479,638,  respectively,  compared to net losses of $684,061 and
$1,316,704 for the three and six months ended June 30, 1996. The reasons for the
current  period  loss  were  primarily  due to the  increases  in  officers  and
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 June 30, 1997 were $359,193,
compared to $1,661,026 at December 31, 1996.  This decrease was  attributable to
the Company funding its operating losses and the Company's acquisition of one of
its franchise stores.

         Accounts  receivable  increased  to  $201,057  at June 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  $50,341  at June 30,  1997,  from  $74,272 at
December 31, 1996, due to tighter inventory controls.

         Prepaid  expenses and other current assets as of June 30, 1997 have not
changed significantly compared to December 31, 1996.

                                       10

<PAGE>

         Shareholders'  loans decreased to $63,768 at June 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 $159,886 at June 30, 1997 from  $184,844 at December 31, 1996 as a
result of the Company making the required payments during this period.

         The combination of accounts payable and accrued  expenses  increased to
$515,822 at June 30, 1997 from $268,334 at December 31, 1996.  This increase was
primarily due to the growth of the Company.

         At June  30,  1997,  the  Company  had a  working  capital  deficit  of
approximately $295,000.

         The Company's  operating  activities used net cash of $1,067,059 during
the six months ended June 30, 1997,  as compared to net cash used in  operations
of  $779,325  for the  corresponding  period of the  prior  year.  The  $287,734
increase was primarily due to the increase of the Company's net loss,  which was
funded from the proceeds of the initial public offering.

         Effective July 11, 1997, the Company  reduced the exercise price of its
Class A Warrants  and its Class B  Warrants.  The Class A  Warrants,  which were
previously  exercisable  at $4.50 per share,  will be  exercisable  at $2.50 per
share  for a  period  of 60  days,  until  September  8,  1997,  subject  to the
discretion  of the Company to extend this special  exercise  period for up to an
additional  30  days.  If the  Class  A  Warrants  are  exercised  prior  to the
expiration  of the special  exercise  period,  the holder  thereof  also will be
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 are 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  will be $2.50 per share until their  expiration  on May 6, 2000.  If
less than  $2,000,000  of gross  proceeds  are 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 will
be $4.50 after the expiration of the special exercise period.

         During the special exercise  period,  each Class B Warrant will entitle
the holder to purchase  one share of Common Stock for $2.50 per share and, if so
exercised,  the holder will be issued a new Class A Warrant upon the  expiration
of the special  exercise  period.  After the expiration of the special  exercise
period, two Class B Warrants,  together, will entitle the holder to purchase one
share of Common Stock at the original exercise price of $8.00.

         Through July 31, 1997,  296,800 Class A Warrants have been exercised at
the reduced  exercise price,  from which the Company has received gross proceeds
of $742,000.

         In July 1997,  Unit Purchase  Options  entitling the holders thereof to
purchase  112,500 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.

         As described in (Note F), during the quarter  ended June 30, 1997,  the
Company took certain steps to reduce its cash flow requirements.  Since April 1,
1997, the Company has not made the $12,000 aggregate per month payments required
under the terms of the Shareholder Loans. Mark Weinreb, Stanley Weinreb and

                                       11

<PAGE>



Stanley  Raphael  agreed  to  continue  to  forego  monthly   repayment  of  the
Shareholder  Loans  until the  earlier  of  January  1, 1998 or such time as the
Company has  $750,000 of funds in bank  accounts,  money market funds and United
States Treasury Bills ("Liquidity Date"). In addition,  until December 31, 1997,
each of Mark Weinreb,  Stanley  Weinreb and Stanley  Raphael  agreed to loan the
Company, at an interest rate of 12% per annum, up to $100,000 if the Company has
less than  $25,000  of funds in bank  accounts,  money  market  funds and United
States Treasury Bills.

         Mark  Weinreb and Jerry  Rosner  agreed to permit the Company to accrue
without  interest,  commencing July 1, 1997,  $3,500 of each of their respective
salaries per month until the earlier of January 1, 1998 or the Liquidity Date.

         As of August 5, 1997,  the  Company's  funds have exceeded the $750,000
threshold  described  above,  thereby  obligating  the  Company  to  resume  its
contractual obligations to repay Shareholder Loans and officers' salaries.

         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 centralized its wholesale  business
         activity  for its  California  Company-owned  stores and  expects  this
         business  to  grow  due to an  increase  in name  recognition,  product
         acceptance and additional sales efforts.

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.

o        Making Acquisitions. The Company has completed the acquisition of three
         previously franchised stores in Scottsdale and Mesa, Arizona in October
         1996 and in Park City,  Utah in February 1997.  The Company  intends to
         acquire  other bagel stores or  complementary  types of retail  outlets
         which provide entry into new markets.

                                       12

<PAGE>



PART II. - OTHER INFORMATION

Item 2 - Changes in Securities

         (c)     Recent Sales of Unregistered Securities

                 None

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

         On July 1, 1997, the Company held its annual  meeting of  shareholders,
at which the Company's shareholders considered the election of directors and the
approval  of  an  amendment  to  the  Company's  Certificate  of  Incorporation.
Shareholders voted to elect Mark Weinreb, Jerry Rosner, Stanley Weinreb, Stanley
Raphael and Stephen J.  Drescher to serve as directors  for the ensuing year and
until their  successors are elected and qualified.  4,511,552  shares were voted
for and 9,200 shares were  withheld in Mark  Weinreb's  election  and  4,512,552
shares were voted for and 8,200 shares were withheld in each of Jerry  Rosner's,
Stanley  Weinreb's,  Stanley  Raphael's  and Stephen  Drescher's  election.  The
shareholders  also  voted  on the  approval  of an  amendment  to the  Company's
Certificate  of  Incorporation  to increase the number of shares of Common Stock
authorized for issuance  thereunder from 10,000,000 shares to 25,000,000 shares.
4,485,002   shares  were  voted  for  the  amendment  to  the   Certificate   of
Incorporation, 31,700 shares were voted against the amendment to the Certificate
of Incorporation  and 4,050 shares abstained from voting on the amendment to the
Certificate of  Incorporation.  No broker non-votes were cast in connection with
the amendment to the Certificate of Incorporation.

Item 6 - Exhibits and Reports on Form 8-K

         (a)     Exhibits

3.1.2   Amendment to Certificate  of  Incorporation  (Incorporated  by reference
        to Exhibit 3.1.2 of Amendment No. 1 to the Company's Registration
        Statement on Form SB-2 (No. 333- 29297))

10.10   Stock Option Agreement,  dated March 31, 1997, between the Company 
        and Mark Weinreb

10.10.1 Schedule of omitted  documents in the form of Exhibit  10.10,  including
        material detail in which such documents differ from Exhibit 10.10

27      Financial Data Schedule (6/30/97)

         (b)     Reports on Form 8-K

                 None

                                       13

<PAGE>



                                    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:   August 13, 1997         By: /s/ Mark Weinreb
                                    ------------------
                                    Mark Weinreb, Chairman, and Chief
                                      Executive Officer and Chief Financial
                                      Officer (and principal accounting officer)


                                       14

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EXHIBIT INDEX

    EXHIBIT
    NUMBER               DESCRIPTION                                       PAGE

     10.10               Stock Option Agreement, dated March 31, 1997,      16
                         between the Company and Mark Weinreb

     10.10.1             Schedule of omitted documents in the form of       23
                         Exhibit 10.10, including material detail in which
                         such documents differ from Exhibit 10.10

     27                  Financial Data Schedule (6/30/97)                  24


                                       15

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