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

                                   FORM 10-QSB

   X     Quarterly  report under Section 13 or 15(d) of the Securities  Exchange
         Act of 1934 for the quarterly period ended March 31, 1998

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

State the number of shares outstanding of each of the issuer's classes of common
equity,  as of the latest  practicable  date:  At May 11,  1998,  the issuer had
outstanding 6,744,768 shares of Common stock, par value $.001 per share.




<PAGE>



PART 1: FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS

                      BIG CITY BAGELS, INC. AND SUBSIDIARY
                                 BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                             March 31, 1998          December 31,1997
                                                                          -------------------     --------------------- 
                         ASSETS
<S>                                                                                <C>                       <C>       
Current assets:
 Cash and cash equivalents.............................................            $2,928,326                $4,118,031
 Accounts receivable...................................................               187,575                   104,190
 Inventory.............................................................                48,807                    43,868
 Prepaid expenses and other current assets.............................               120,924                    41,133
                                                                        ---------------------     ---------------------
     Total current assets..............................................             3,285,632                 4,307,222

Fixed assets, net of accumulated depreciation..........................               605,142                   611,095
Intangible assets, net of accumulated amortization.....................               697,990                    23,267
Security deposits and other assets.....................................               290,563                   220,380
                                                                        ---------------------     ---------------------
     TOTAL.............................................................            $4,879,327                $5,161,964
                                                                        =====================     =====================

                      LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Capital lease obligations..............................................               $40,300                   $38,862
Unearned franchise fee income..........................................               253,500                   278,500
Accounts payable.......................................................               203,702                   287,138
Accrued expenses.......................................................               122,435                    74,206
                                                                        ---------------------     ---------------------
     Total current liabilities.........................................               619,937                   678,706

Deferred rent payable..................................................                 4,933                     7,795
Capital lease obligations, noncurrent..................................                46,605                    57,235
                                                                        ---------------------     ---------------------
     Total liabilities.................................................               671,475                   743,736
                                                                        ---------------------     ---------------------

Stockholders' equity:
Convertible  (redeemable)  preferred stock;  $.001 par value;  
 1,000,000 shares authorized; 265,000 shares issued and
 outstanding (liquidation value $3,312,500).............................                  265                       265
Common stock; $.001 par value; 25,000,000 shares
 authorized; 6,733,728 and 6,343,466 shares issued and
 outstanding at March 31, 1998 and December 31, 1997,
 respectively..........................................................                 6,734                     6,344
Additional paid-in capital.............................................            10,123,463                 9,677,189
Accumulated deficit....................................................           (5,922,610)               (5,258,070)
Unearned portion of compensatory stock................................                      0                   (7,500)
                                                                        ---------------------     ---------------------
     Total stockholders' equity........................................             4,207,852                 4,418,228
                                                                        ---------------------     ---------------------
     TOTAL.............................................................            $4,879,327                $5,161,964
                                                                        =====================     =====================
</TABLE>

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

                                       -2-

<PAGE>



                      BIG CITY BAGELS, INC. AND SUBSIDIARY
                            STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                        Three Months Ended
                                                        March 31, 1998                      March 31, 1997
                                                      ---------------                      --------------
<S>                                                           <C>                                <C>     
REVENUES:
Product sales by company-owned stores                         $696,840                           $456,574
Product sales to franchisees and others                        173,730                            150,283
Franchise fees                                                  60,500                                  0
Royalty income                                                  44,569                             43,354
Interest income                                                 39,687                             17,480
                                                      ----------------                   ----------------
     Total revenues                                          1,015,326                            667,691
                                                      ----------------                   ----------------

COSTS AND EXPENSES:
Cost of sales                                                  427,530                            358,656
Selling, general and administrative expenses                 1,248,934                          1,098,673
Interest expense                                                 3,402                             12,968
                                                      ----------------                   ----------------
     Total costs and expenses                                1,679,866                          1,470,297
                                                      ----------------                   ----------------

NET (LOSS)                                                  $(664,540)                         $(802,606)
                                                      ================                   ================

Basic and diluted net (loss) per common share                  $(0.10)                            $(0.16)
                                                      ================                   ================
Weighted average common shares outstanding                   6,686,700                          4,929,175
                                                      ================                   ================

</TABLE>



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

                                       -3-

<PAGE>



                      BIG CITY BAGELS, INC. AND SUBSIDIARY
                        STATEMENT OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                                                Unearned Portion of
                            Preferred Stock        Common Stock       Additional                Compensatory Stock
                            ----------------     -----------------     Paid-In    Accumulated   -------------------   
                            Shares    Amount     Shares     Amount     Capital     Deficit       Shares   Amount      Total
                            -------   ------    ---------   ------   ----------   -----------    ------  --------   ---------- 
<S>              <C>        <C>        <C>      <C>         <C>      <C>          <C>            <C>     <C>        <C>       
BALANCE, January 1, 1998    265,000    $265     6,343,466   $6,344   $9,677,189   $(5,258,070)   15,000  $(7,500)   $4,418,228

Issuance of common stock
 for acquisition of assets                        365,321      365      444,635                                        445,000

Shares issued as
compensation                                       24,941       25       26,475                                         26,500

Amortization of
compensatory stock                                                                                         7,500         7,500

Registration costs                                                      (24,836)                                       (24,836)

Net loss                                                                            (664,540)                         (664,540)
                         ---------    -----    ----------   ------  ------------ ------------    -------  -------    -----------

BALANCE, March 31, 1998   265,000      $265     6,733,728   $6,734  $10,123,463  $(5,922,610)    15,000       $0    $4,207,852
                         =========    =====    ==========   ======  ============ ============    =======  =======    ===========
</TABLE>




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

                                       -4-

<PAGE>


                      BIG CITY BAGELS, INC. AND SUBSIDIARY
                              CASH FLOWS STATEMENTS
                      FOR THE THREE MONTHS ENDED MARCH 31,
<TABLE>
<CAPTION>
                                                                                        1998                   1997
                                                                                        ----                   ----
<S>                                                                                  <C>                     <C>       
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss..................................................................            $(664,540)              $(802,606)
                                                                                 ---------------          --------------

Adjustments to reconcile net loss to net cash used in operating activities:
   Depreciation and amortization..........................................               47,217                  60,634
   Issuance of common stock for compensation and
   professional services..................................................               34,000                   7,500
   (Increase) Decrease in:
     Accounts receivable..................................................             (83,385)                  (5,720)
     Inventory............................................................              (4,939)                   6,431
     Interest receivable on U.S. Treasury bills...........................                   0                    5,542
     Prepaid expenses and other current assets............................             (79,791)                   2,599
   Increase (Decrease) in:
     Unearned franchise fee income........................................             (25,000)                  65,500
     Deferred rent payable................................................              (2,862)                  (2,862)
     Accounts payable.....................................................             (83,434)                  32,975
     Accrued expenses.....................................................              48,229                    9,411
                                                                                 --------------           -------------
Total adjustments.........................................................            (149,965)                 182,010
                                                                                 --------------           -------------
Net cash used in operating activities.....................................            (814,505)               (620,596)
                                                                                 --------------           -------------

CASH FLOWS FROM INVESTING ACTIVITIES:
   Acquisition of franchises..............................................                   0                 (75,000)
   Purchases of fixed and intangible assets...............................            (320,989)                (13,032)
   Sale of fixed assets...................................................              50,000                       0
   Increase in security deposits..........................................             (70,183)                (11,411)
   Purchase of United States Treasury bills...............................                   0                (243,880)
   Sales of United States Treasury bills..................................                   0                 250,000
                                                                                 --------------            ------------
Net cash used in investing activities.....................................            (341,172)                (93,323)
                                                                                 --------------            ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
   Registration costs.....................................................             (24,836)                      0
   Proceeds from loan payable.............................................                   0                 225,000
   Repayment of stockholder loans.........................................                   0                 (23,700)
   Repayment of notes payable.............................................              (9,192)                (15,024)
                                                                                 --------------            ------------
Net cash (used) provided by financing activities..........................             (34,028)                186,276
                                                                                 --------------            ------------

NET DECREASE IN CASH......................................................          (1,189,705)               (527,643)
Cash, beginning of period.................................................           $4,118,031               $654,856
                                                                                 ==============            ============
Cash, end of period.......................................................           $2,928,326               $127,213
                                                                                 ==============            ============

</TABLE>






                            (Continued on next page)


                                       -5-

<PAGE>



                      BIG CITY BAGELS, INC. AND SUBSIDIARY
                        CASH FLOWS STATEMENTS (CONTINUED)
                      FOR THE THREE MONTHS ENDED MARCH 31,





<TABLE>
<CAPTION>
Supplemental disclosure of non cash activities:

     Cash paid during the year for:                                                         1998              1997
                                                                                           -------           ------
<S>                                                                                         <C>               <C>         
         Interest...............................................................           $3,402           $12,633
         Income taxes...........................................................            5,650             1,900

In February 1997, the Company  acquired all of the assets of a franchise 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
                                                                                                         =============

                                                                                
     Assets purchased by the issuance of 365,321
     Shares of common stock.....................................................        $445,000
     Cash paid..................................................................         386,466
                                                                                     --------------

         Total amount attributed to fixed assets................................        $831,466
                                                                                     ==============

                                                                                
</TABLE>





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

                                       -6-

<PAGE>



                      BIG CITY BAGELS, INC. AND SUBSIDIARY
                          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 three months ended March 31,
                  1998  are  not  necessarily   indicative  of  the  results  of
                  operations for the full year ending  December 31, 1998.  These
                  statements  should be read in  conjunction  with the Company's
                  financial  statements  for the year ended  December  31,  1997
                  appearing in the Company's Annual Report on Form 10- KSB.

(NOTE B) -        Acquisitions and Sales:

                  In  January  1998,  BCNY,  a wholly  owned  subsidiary  of the
                  Company,  acquired  all the  assets of an  unaffiliated  bagel
                  store  located  in New  York  City.  The  purchase  price  was
                  $700,000  for which the  Company  paid the seller  $275,000 in
                  cash and  $425,000 by the  issuance  of 346,497  shares of the
                  Company's common stock at fair value ($425,000).

                  In February  1998,  BCNY  acquired  certain  equipment and was
                  assigned a lease of an unaffiliated  restaurant located in New
                  York  City.   The   purchase   price  was  $80,000  for  which
                  approximately   $50,000  is   attributable  to  the  equipment
                  purchased.  The Company paid $60,000 in cash and the remaining
                  $20,000  was paid by the  issuance  of  18,824  shares  of the
                  Company's common stock at fair value ($20,000).

                  In  February  1998,  the  Company  sold  the  franchise  store
                  repurchased during 1997 for $50,000 in cash,  representing the
                  carrying  value of the  franchise,  plus $5,147 for  inventory
                  located in the store.

(NOTE C) -        Loan Payable:

                  In February  and March 1997,  the  Company  borrowed  $225,000
                  against its investment in United States Treasury  Bills.  This
                  short term borrowing, used in operations,  enabled the Company
                  to maintain  its  investments  until  maturity.  This loan was
                  repaid in April 1997.

(NOTE D) -        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, 1998,  the directors of the
                  Company  were  granted  options to  purchase an  aggregate  of
                  40,000 shares of Common Stock at an exercise  price of $0.9375
                  per share.

                                       -7-

<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  months ended March 31,  1998,  were  $1,015,326,  a 52%
increase  from  revenues of $667,691  for the three months ended March 31, 1997.
This  increase  was  attributable  to gains in the  following  areas:  store and
commissary  product sales,  franchise fees,  royalty income and interest income.
Store and commissary product sales increased $263,713,  or approximately 43%, to
$870,570 for the three  months ended March 31, 1998 from  $606,857 for the three
months  ended  March  31,  1997.  This  increase  was  due  to the  maturing  of
Company-owned  retail store operations,  the acquisition of one new retail store
in January 1998, the growth of the wholesale  business and increased  commissary
sales to franchise stores.  There were $60,500 of franchise fee revenues for the
three months ended March 31, 1998,  as compared  with no franchise  fee revenues
for the three months ended March 31, 1997,  because two new franchise stores and
one store under a licensing  agreement  opened  during the 1998 period.  Revenue
under franchise agreements is generally recognized when the franchise stores are
opened.  The Company has unearned  franchise fee income of $253,500 at March 31,
1998,  compared to $329,250 at March 31,  1997.  Unearned  franchise  fee income
represents  non-refundable franchise fees which will be recognized as revenue as
the related franchise stores are opened.  Royalty income during both periods was
substantially  unchanged.  Interest  income for the three months ended March 31,
1998 was $39,687,  a 127% increase from the interest income for the three months
ended  March  31,  1997,  resulting  primarily  from  the cash  proceeds  of the
Company's  private  placement  of  preferred  stock in  December  1997,  and the
exercise of the  Company's  Class A Redeemable  Common Stock  Purchase  Warrants
("Class A Warrants"),  Class B Redeemable Common Stock Purchase Warrants ("Class
B Warrants")  and the Unit Purchase  Option,  which were deposited into interest
bearing accounts. See "--Liquidity and Capital Resources."

During the three months ended March 31,  1998,  the Company  entered into no new
franchise  agreements,  as compared to one franchise area development  agreement
(three stores) for the three months ended March 31, 1997. In September 1997, the
Company entered into a licensing  agreement with Total Petroleum Inc.,  pursuant
to which following a short trial, the licensee  intended to operate a minimum of
seven full  service Big City Bagels  stores.  The first store  opened in January
1998.  Soon  thereafter,  the  licensee was  acquired by another  company  which
notified  the Company (in  accordance  with the terms of the license  agreement)
that it does not intend to open any  additional  stores.  In January  1998,  the
Company  renegotiated  a  twelve-store  area  development  agreement that it had
entered  into in 1996  providing  for the  opening of stores in  Minnesota.  The
franchisee  has opened  four stores and now is not  required to open  additional
stores.  The franchisee  still operates its own commissary and may elect to open
new stores in the future. Management believes that these business decisions were
in the best  interest of the Company and does not believe this  reflects a trend
within its franchise  system.  Cost of sales were $427,530,  representing 49% of
net sales for the three months ended March 31, 1998  compared to $358,656 or 59%
for the three months  ended March 31,  1997.  The decrease in cost of sales as a
percentage of sales was primarily attributable to an increase in the mix between


                                       -8-

<PAGE>


sales  from  the   Company-owned   stores  and  sales  from  the  commissary  to
franchisees,  which generally  represents a higher gross profit percentage.  The
increase  in cost of sales of $68,874 was  primarily  due to  increased  product
sales  resulting from the additional  Company-owned  store  acquired,  increased
wholesale business and increased sales from the commissary to franchisees.

Selling,  general and  administrative  expenses  (SG&A) were  $1,248,934 for the
three months ended March 31, 1998, a 14% increase from  $1,098,673 for the three
months ended March 31, 1997.  This increase was primarily a result of: a $97,768
increase in salaries  from $418,632 for the three months ended March 31, 1997 to
$516,400 for the three months ended March 31, 1998,  due to the hiring of a part
time  chief  financial  officer  and  increases  in  management,  administrative
personnel and officers'  salaries;  and increases of $26,700 in rent and $29,505
in advertising.

Interest  expense  decreased  by $9,566  during the three months ended March 31,
1998,  substantially  due to the Company  retiring its debt  obligations  to its
shareholders.

The net loss for the three months ended March 31, 1998 was $664,540, compared to
a net loss of $802,606 for the three  months  ended March 31, 1997.  The primary
reason for the  decrease  in the current  period  loss was due to the  increased
revenues,  with better  margins,  realized in the three  months  ended March 31,
1998.

Liquidity and Capital Resources

Cash and cash  equivalents  at March  31,  1998  were  $2,928,326,  compared  to
$4,118,031 at December 31, 1997.  This decrease was  primarily  attributable  to
funding the Company's  operating  loss for the three months ended March 31, 1998
and for the purchase of two stores in New York City.

Accounts  receivable  increased to $187,575 at March 31, 1998,  from $104,190 at
December 31, 1997.  This  increase was  primarily due to increases in commissary
sales to franchisees and the Company's wholesale business.

Inventory  increased to $48,807 at March 31, 1998, from $ 43,868 at December 31,
1997, due to the purchase of another Company-owned store.

Prepaid  expenses and other  current  assets  increased to $120,924 at March 31,
1998 from $41,133 at December  31,1997,  due to the building of a new commissary
and  payments  made  toward  the  rent  and  design  work of the New  York  City
Company-owned store that will be opened later this year.

Fixed assets,  net of accumulated  depreciation,  decreased to $605,142 at March
31, 1998 from  $611,095  at  December  31,  1997,  resulting  from the sale of a
Company-owned  store and the normal  depreciation  of Company  assets during the
quarter ended March 31, 1998.

Intangible  assets,  net of accumulated  amortization,  increased to $697,990 at
March 31, 1998 from $23,267 at December 31,  1997,  resulting  from the goodwill
realized on the acquisition of a unaffiliated bagel store in New York City.

Security  deposits and other assets  increased to $290,563 at March 31,1998 from
$220,380 at December 31, 1997,  resulting  from the  acquisition of the New York
City bagel store, and the assignment of a lease to a restaurant.

The current and non-current  portion of capital lease  obligations  decreased to
$86,905 at March 31, 1998 from $ 96,097 at December 31, 1997, as a result of the
Company making the required payments during this period.

The combination of accounts payable and accrued  expenses  decreased to $326,137
at March 31,  1998 from  $361,344  at  December  31,  1997.  This  decrease  was
primarily due to the Company's ability to pay its bills in a more timely manner.

At March 31, 1998, the Company had  $2,665,695 of working  capital and a current
ratio of 5.3 to 1.

                                       -9-

<PAGE>



The Company's  operating  activities  used net cash of $814,505 during the three
months  ended March 31,  1998,  as compared  to net cash used in  operations  of
$620,596  for the  corresponding  period of the prior year.  This  increase  was
primarily  due to a pay  down of  accounts  payable,  additional  prepayment  of
assets,  a decrease of  collections  of accounts  receivable,  and a decrease in
unearned  franchise  fees,  partially  offset by a decrease in funds required to
support the Company's net loss.

Although the Company has no present need to raise additional  capital to support
its  existing  operations,  the  Company  does  believe  it will  need to obtain
financing from outside  sources to support its plans for growth.  The Company is
exploring its ability to obtain financing for potential acquisitions and for the
opening of new Company-owned stores.

The  Company's  plans to  increase  revenues,  reduce  costs and  implement  its
expansion strategy are as follows:

     Increase Revenues

     The Company  recently  expanded  its concept to include  more deli  product
     offerings,  including new sandwich menu items,  and has created a new store
     design  with a stronger  deli  emphasis.  The  Company  believes  that this
     expanded  concept will increase  retail sales by generating  more lunch and
     afternoon  business,  both from  increased  in-store  traffic  and  through
     catering and office delivery to commercial accounts. The Company's revenues
     would  increase as a result of  increases  in: (i) retail sales in Company-
     owned stores,  (ii) royalty  payments from franchises with increased retail
     sales and (iii)  commissary sales to franchises.  However,  there can be no
     assurance  that  the  Company's   expanded  concept  will  be  accepted  or
     successful.

     The Company  also  intends to increase  revenues  by  attracting  wholesale
     business. The Company has entered into an agreement with Northwest Airlines
     to be the  exclusive  supplier  of bagels  on  certain  domestic  Northwest
     flights.  The agreement is for a three-year term, although either party may
     terminate the agreement after the second year. The Company anticipates that
     this arrangement will generate approximately  $2,200,000 in revenues over a
     three-year   period   based   upon   Northwest's    currently   anticipated
     requirements.  There can be no  assurance  that the Company will be able to
     obtain  additional  wholesale  business  or  that  it  will be able to meet
     Northwest's  requirements.  If the Company is unable to service  Northwest,
     then  Northwest  may  terminate  the  agreement  and the  Company  will not
     generate revenues as anticipated.

     In order to increase revenues  generated by commissary sales, in March 1998
     the  Company  increased  its  prices  for  prepared  bagel  dough  sold  to
     franchises.  In addition, in April 1998 the Company increased retail prices
     in its  Company-owned  stores and has encouraged its  franchisees to do the
     same.

     The Company will make increased  efforts to promote its franchise  sales by
     the  Company's  visibility  in trade  and  business  publications.  Two new
     franchise  stores and one store under a licensing  agreement have opened in
     the first quarter of 1998.

     Reduce Costs

     The Company will be moving its Costa Mesa,  California  commissary to a new
     location in Ontario,  California,  which contains a cold storage  facility,
     thereby eliminating the need for a second facility for storage. The Company
     also recently  moved its west coast  corporate  offices to a smaller,  less
     expensive facility.

     The Company  believes  that it can  maintain  the  quality of its  products
     without having to prepare the dough  exclusively  in its own  commissaries.
     The Company has now  arranged for an  independent  supplier to supply bagel
     dough to certain Company-owned  stores,  franchises and wholesale accounts.
     The  Company  believes  that this will  enable it to supply more stores and
     wholesale  accounts  without  having  to  build  additional   commissaries.
     Although the Company is confident that independent  suppliers can serve the
     Company  well,  there can be no assurance  that the Company will be able to
     maintain  product  quality or engage and retain  acceptable  suppliers.  In


                                      -10-

<PAGE>


     addition,  since the Company will not be able to exercise direct day-to-day
     control over the  preparation or delivery of its products,  it could suffer
     from  variations in product  quality and delays in shipments.  In the event
     that the  independent  supplier  is unable to service the  Company's  needs
     sufficiently,   the  Company's  California   commissary  will  be  able  to
     adequately  supply  the  Company-owned  stores,  franchises  and  wholesale
     accounts.

     The Company has been  evaluating  the  desirability  of  discontinuing  the
     operations of the lower volume  stores that drain the Company's  resources.
     As part of this  process,  the Company sold its store located in Park City,
     Utah to an unaffiliated entity for $50,000.

     Expansion

     The Company plans to open additional Company-owned stores and acquire other
     bagel  stores or  complementary  retail  food  outlets  which will  enhance
     existing operations or provide entry into new markets. In January 1998, the
     Company  purchased  a bagel  store  located  in New  York  City  and has an
     exclusive  option to  purchase an  additional  store in New York City until
     January 1999. The Company entered into  consulting  agreements with the two
     former owners of this bagel store,  pursuant to which they agreed to assist
     the Company to operate this store and in opening  additional  stores in New
     York City. The Company  recently leased retail space in New York City where
     it intends to open another  Company owned store in June 1998. The Company's
     ability to make acquisitions and open new Company-owned  stores (other than
     the second New York City  store) is  dependent  upon its  ability to obtain
     financing from outside sources.  While the Company is exploring its ability
     to obtain such financing, there can be no assurance that it will be able to
     do so.

     The Company intends to open smaller satellite stores.  Such stores would be
     serviced by stores where baked goods would be prepared  and then  delivered
     to the satellite stores,  thereby eliminating the need for baking equipment
     in the satellite stores.  The satellite stores would sell these baked goods
     as well as sandwiches  and other  non-baked  items which can be prepared at
     the satellite  stores.  The Company  recently turned one of its Costa Mesa,
     California  stores  into a  satellite  store and  intends  to open  another
     satellite  store in Tustin,  California  in May 1998,  both of which are or
     will be serviced by the Company's other Costa Mesa, California store.

     Chief Financial Officer

     In February 1998, the Company hired a part-time  Chief  Financial  Officer.
     The Company believes that the increased day-to-day involvement of its Chief
     Financial Officer, who has provided the Company with consulting services in
     the past,  will provide it with a greater  degree of  financial  acumen and
     oversight relating to its operations and strategic planning.

                                      -11-

<PAGE>


PART II. - OTHER INFORMATION

Item 2 - Changes in Securities

     (c)  Recent Sales of Unregistered Securities

     During  the  three  months  ended  March 31,  1998,  the  Company  made the
following sales of unregistered securities:


<TABLE>
<CAPTION>


                                                            Consideration Received
                                                              and Description of                         If Option, Warrant
                                                             Underwriting or Other                         or Convertible
                                                              Discounts to Market     Exemption from     Security, Terms of
                                                               Price Afforded to       Registration         Exercise or
Date of Sale         Title of Security       Number Sold          Purchasers             Claimed             Conversion
-------------      -------------------      -------------   ----------------------    --------------    ---------------------
<S>                <C>                        <C>           <C>                           <C>          <C>
2/9/98             Common Stock                24,941       Consulting services            4(2)         N/A

2/12/98            Common Stock                18,824       Acquisition of equipment       4(2)         N/A

3/31/98            options to purchase         40,000       options granted - no           4(2)         exercisable for ten
                   Common Stock granted                     consideration received by                   years from date of
                   to directors                             Company until exercise                      grant at an exercise
                                                                                                        price of $0.9375  per
                                                                                                        share
------------------ ---------------------- ----------------- ----------------------- ------------------  --------------------
</TABLE>


Item 6 - Exhibits and Reports on Form 8-K

     (a)  Exhibits

          10.11     Stock option  agreement,  dated March 31, 1998,  between the
                    Company and Mark Weinreb.

          10.11.1   Schedule  of  omitted  documents  in the form of Exhibit
                    10.11,  including  material  detail in which such  documents
                    differ from Exhibit 10.11.

          27        Financial Data Schedule (3/31/98)

     (b)  Reports on Form 8-K

          None

                                      -12-

<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:    May 14, 1998            By:/s/ Mark Weinreb
                                  ----------------------------------------
                                   Mark Weinreb, Chairman, and Chief
                                     Executive Officer and Chief Financial
                                     Officer (and principal accounting officer)


                                                       -13-

<PAGE>



EXHIBIT INDEX

EXHIBIT
NUMBER        DESCRIPTION                                                  PAGE
---------     ------------                                                 ----
10.11         Stock option agreement, dated March 31, 1998,
              between the Company and Mark Weinreb...........................15

10.11.1       Schedule of omitted  documents  in the form of Exhibit  10.11,
              including material detail in which such documents differ
              from Exhibit 10.11.............................................22

27            Financial Data Schedule (3/31/98)..............................23


                                      -14-

<PAGE>