<PAGE>
                                    UNITED STATES
                          SECURITIES AND EXCHANGE COMMISSION
                                Washington, D.C. 20549

                                     FORM 10-QSB

(Mark One)

[X]  QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934
     For the quarterly period ended    March 29, 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 0-21205

                           NEW YORK BAGEL ENTERPRISES, INC.
          (Exact name of small business issuer as specified in its charter)

           Kansas                                        73-1369185
(State or other jurisdiction of                       (I.R.S. Employer
incorporation or organization)                       Identification No.)

                                   300 I.M.A. Plaza
                                250 North Water Street
                              Wichita, Kansas 67202-1213
                (Address of principal executive offices and zip code)

                                    (316) 267-7373
                 (Registrant's telephone number, including area code)


Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities 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 filings requirements for the past 90 days.
                            [x] Yes        [ ] No

As of May 11, 1998, there were 4,657,100 shares of the registrant's Common Stock
outstanding.

Transitional Small Business Disclosure Format (check one):  [ ] Yes      [x] No
<PAGE>
 
                           NEW YORK BAGEL ENTERPRISES, INC.

                                        INDEX
<TABLE>
                                                                    Page No.
                                                                    --------
<S>                                                                  <C>
PART I - FINANCIAL INFORMATION             

    Item 1.    Consolidated Financial Statements

         Unaudited Consolidated Balance Sheets at March 29, 1998
             and December 28, 1997                                      3

         Unaudited Consolidated Statements of Operations for the 
             Thirteen weeks ended March 29, 1998 and
             March 30, 1997                                             4

         Unaudited Consolidated Statements of Cash Flows
             for the Thirteen weeks ended March 29, 1998
             and March 30, 1997                                         5

         Notes to Unaudited Consolidated Financial Statements           6

    Item 2.  Management's Discussion and Analysis of Financial
             Condition and Results of Operations                        8

PART II - OTHER INFORMATION                                            13

    Item 5.  Other Information

    Item 6.  Exhibits

         (a)  Exhibit 27 - Financial Data Schedule

         (b)  Exhibit 27.1 - Restated Financial Data Schedule

SIGNATURES                                                             13
</TABLE>
                                  2
<PAGE>

PART I.   FINANCIAL INFORMATION
Item 1.   Consolidated Financial Statements

                           NEW YORK BAGEL ENTERPRISES, INC.
                             CONSOLIDATED BALANCE SHEETS
                         MARCH 29, 1998 AND DECEMBER 28, 1997

<TABLE>
                                                   March 29,          December 28,
                   Assets                            1998                1997(a)
                   ------                          ---------          ------------
                                                  (Unaudited)             
<S>                                              <C>                 <C>
Cash and cash equivalents                        $    41,768         $   872,949
Accounts receivable                                  187,123             171,068
Inventories                                          404,604             349,937
Income tax receivable                                180,484             484,957
Prepaid expenses and other current assets            189,823             169,156
Property and equipment available for sale            208,993             193,256
                                                 -----------         -----------
            Total current assets                   1,212,795           2,241,323
Property and equipment, net                        9,329,238          10,281,696
Goodwill, net                                      1,210,028           1,220,441
Other assets                                         255,877             357,001
                                                 -----------         -----------
                                                 $12,007,938         $14,100,461
                                                 -----------         -----------
                                                 -----------         -----------
    Liabilities and Stockholders' Equity
    ------------------------------------
Current installments of long-term debt           $ 1,795,678         $ 2,490,858
Accounts payable                                     481,063             715,453
Accrued payroll and benefits                         413,116             292,321
Accrued liabilities                                  536,998             539,143
Current portion of deferred franchise fees            17,000              35,000
                                                 -----------         -----------
            Total current liabilities              3,243,855           4,072,775
Long-term debt, less current installments             28,750              28,750
Deferred rents payable                               109,261              99,201
Other liabilities                                    100,481             133,724
                                                 -----------         -----------
            Total liabilities                      3,482,347           4,334,450
                                                 -----------         -----------
Stockholders' equity:
   Class A common stock, $.01 par value.
   Authorized 30,000,000 shares; issued
   and outstanding 4,667,500 shares.                  46,675              46,675
Additional paid in capital                        13,390,769          13,390,769
Accumulated deficit                               (4,893,879)         (3,671,433)
Treasury stock, at cost, 10,400 shares at 
 March 29, 1998                                      (17,974)               --  
                                                 -----------         -----------
            Total stockholders' equity             8,525,591           9,766,011
                                                 -----------         -----------
                                                 $12,007,938         $14,100,461
                                                 -----------         -----------
                                                 -----------         -----------
</TABLE>

(a)  The balance sheet at December 28, 1997 has been derived from the audited 
     financial statements at that date but does not include all of the 
     information and footnotes required by generally accepted accounting 
     principles for complete financial statements.

See accompanying notes to unaudited consolidated financial statements.

                                    3
<PAGE>

                           NEW YORK BAGEL ENTERPRISES, INC.
                        CONSOLIDATED STATEMENTS OF OPERATIONS
                THIRTEEN WEEKS ENDED MARCH 29, 1998 AND MARCH 30, 1997
                                     (Unaudited)
<TABLE>
                                                        Thirteen Weeks
                                                            Ended
                                                  March 29,           March 30, 
                                                    1998               1997(a)   
                                                  ---------           ---------
<S>                                              <C>                 <C>
Revenues:                                                                       
   Sales from Company-owned restaurants          $4,761,687          $4,289,602 
   Franchise revenues                                79,928             185,047 
                                                -----------          ----------
        Total revenues                            4,841,615           4,474,649 
                                                -----------          ----------
Costs and expenses:                                                             
   Costs of sales                                 1,621,373           1,363,774 
   Restaurant operating expenses                  2,658,572           2,140,571 
   General and administrative expenses              390,252             369,759 
   Depreciation and amortization                    252,523             191,296 
   Provision for impairments and closures         1,105,725                --
                                                -----------          ----------
        Total costs and expenses                  6,028,445           4,065,400 
                                                -----------          ----------
        Operating income (loss)                  (1,186,830)            409,249 
Interest income (expense), net                      (35,616)             60,642 
                                                -----------          ----------
        Earnings (loss) before income taxes      (1,222,446)            469,891 
Income tax expense                                     --               180,606 
                                                -----------          ----------
        Earnings (loss) before cumulative 
          effect of accounting change            (1,222,446)            289,285 
Cumulative effect of accounting change, net                                     
  of income tax benefit of $80,782                     --              (129,041)
                                                -----------          ----------
Net earnings (loss)                             $(1,222,446)         $  160,244 
                                                -----------          ----------
                                                -----------          ----------
Earnings (loss) per share - basic and diluted:                                  
   Earnings (loss) before cumulative effect                                     
     of accounting change                       $      (.26)         $      .06 
   Cumulative effect of accounting change              --                  (.03)
                                                -----------          ----------
   Net earnings (loss)                          $      (.26)         $      .03 
                                                -----------          ----------
                                                -----------          ----------
                                                                                
Weighted average number of shares 
  outstanding-basic and diluted                   4,663,753           4,667,500
</TABLE>

(a) As restated for the change in accounting principle. See Note 3.

See accompanying notes to unaudited consolidated financial statements. 

                                      4
<PAGE>

                          NEW YORK BAGEL ENTERPRISES, INC.
                        CONSOLIDATED STATEMENTS OF CASH FLOWS
                THIRTEEN WEEKS ENDED MARCH 29, 1998 AND MARCH 30, 1997
                                     (Unaudited)
<TABLE>
                                                                      Thirteen Weeks
                                                                          Ended
                                                              March 29,              March 30,
                                                                1998                  1997(a)
                                                             -----------            -----------
<S>                                                          <C>                    <C>
Cash flows from operating activities: 
   Net earnings (loss)                                       $(1,222,446)           $   160,244 
   Adjustments to reconcile net earnings (loss) to net 
     cash provided by operating activities:                                                              
       Depreciation and amortization                             252,523                191,296 
       Provision for impairments and closures                  1,105,725                   --     
       Cumulative effect of accounting change, net of 
         income tax benefit                                         --                  129,041 
       Increase (decrease) in cash resulting from changes 
         in listed items, net of effects from acquisitions:
            Deferred income taxes                                   --                      912 
            Inventory                                            (54,667)                (3,057)
            Income taxes receivable                              304,473                 87,783 
            Property and equipment available for sale            (15,737)                  --     
            Prepaid expenses and other current assets            (20,667)                 2,274 
            Accounts receivable                                  (16,055)              (149,619)
            Other assets                                         (13,395)               (45,179)
            Accounts payable                                    (234,390)              (198,396)
            Accrued liabilities and other liabilities             47,003                100,761 
            Income taxes payable                                    --                   78,925 
            Deferred franchise fees                              (18,000)               (33,000)
                                                             -----------            -----------
                Net cash provided by operating activities        114,367                321,985 
                                                             -----------            -----------
Cash flows from investing activities:
   Additions to property, plant and equipment                 (1,032,394)            (1,452,525)
   Acquisitions, net of cash acquired                               --                 (470,826)
   Purchase of investment securities available for sale             --               (4,095,964)
   Proceeds from sales and maturities of investment
      securities available for sale                                 --                5,843,117 
   Proceeds from sale-leaseback transactions                     800,000                   --  
                                                             -----------            -----------
                Net cash used in investing activities           (232,394)              (176,198)
                                                             -----------            -----------
Cash flows from financing activities:                                                               
   Proceeds from issuance of long-term debt                      450,000                   --      
   Principal payments on long-term debt                       (1,145,180)                  --      
   Decrease in distributions payable                                --                 (146,978)
   Purchase of treasury stock                                    (17,974)                  --      
                                                             -----------            -----------
                Net cash used in financing activities           (713,154)              (146,978)
                                                             -----------            -----------
                Net decrease in cash                            (831,181)                (1,191)
Cash at beginning of period                                      872,949              1,305,130
                                                             -----------            -----------
Cash at end of period                                        $    41,768            $ 1,303,939
                                                             -----------            -----------
                                                             -----------            -----------
</TABLE>

(a) As restated for the change in accounting principle. See Note 3.

See accompanying notes to unaudited consolidated financial statements. 

                                        5
<PAGE>

                           NEW YORK BAGEL ENTERPRISES, INC.
                 NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(1)  OPERATIONS

     The Company owns and franchises New York Bagel and Lots A' Bagels
restaurants that provide a wide variety of bagels that are made from scratch,
boiled and baked in the traditional "New York style."  Breakfast menu items
include a wide variety of bagels and custom-blended cream cheeses, gourmet
coffees, muffins and croissants.  Lunch and dinner items include an assortment
of bagel delicatessen sandwiches, prepared salads, cookies and soft drinks.  As
of March 29, 1998, the Company has 45 Company-owned restaurants primarily
located in Oklahoma, Kansas, Colorado, Texas and Tennessee and 23 franchised
restaurants located throughout the United States.

(2)  BASIS OF PRESENTATION

     The accompanying unaudited consolidated financial statements are for
interim periods and consequently, do not include all disclosures required by
generally accepted accounting principles for annual financial statements.  It is
suggested that the accompanying unaudited consolidated financial statements be
read in conjunction with the annual consolidated financial statements included
in the Company's 1997 Form 10-K for the period ended December 28, 1997.  In the
opinion of management of the Company, the accompanying unaudited consolidated
financial statements reflect all adjustments (all of which were of a normal
recurring nature) necessary to present fairly the consolidated financial
position of the Company and the results of its operations and its cash flows for
the interim periods.  The results of the interim period are not necessarily
indicative of the results of the full year.

(3)  CHANGE IN ACCOUNTING PRINCIPLE

     Effective September 28, 1997, the Company changed its accounting policy on
restaurant preopening costs.  In prior periods, the Company initially
capitalized and then amortized preopening costs over the initial 12-months of a
restaurant's operation. Under the new method, the Company expenses such
restaurant preopening costs as incurred.  Management believes the change is
preferable to obtain a better matching of expenses with revenues.  The effect of
adopting the accounting change on earnings (loss) before cumulative effect of
accounting change, net earnings (loss), and net earnings (loss) per share for
the thirteen weeks ended March 30, 1997 is to increase (decrease) such amounts
$30,230, ($98,811) and ($0.03), respectively.  The change is considered a
cumulative effect-type accounting change and, accordingly, the cumulative effect
as of the beginning of fiscal 1997 has been reported in the accompanying 
unaudited consolidated statement of operations for the thirteen-week period 
ended March 30, 1997.  The accompanying unaudited consolidated financial 
statements for the thirteen weeks ended March 30, 1997 have been restated to 
reflect adoption of the new accounting policy.

                                       6
<PAGE>

                           NEW YORK BAGEL ENTERPRISES, INC.
           NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED


(4)  IMPAIRMENT OF LONG-LIVED ASSETS AND STORE CLOSURES

     Long-lived assets and certain identifiable intangibles are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable.  Recoverability of assets to
be held and used (including associated goodwill) is measured by a comparison of
the carrying amount of an asset to estimated future net cash flows (undiscounted
and without interest charges) expected to be generated by the asset.  If such
assets are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets exceed the
fair value of the assets.  Assets to be disposed of are reported at the lower of
the carrying amount or fair value less costs to sell.

     For purposes of determining impairment, the Company groups long-lived
assets at a market level due to the bakery-satellite relationship which, in
management's estimation, results in the market level as the lowest level for
which there are cash flows that are largely independent of the cash flows of
other groups of assets.

     The impairment charge, which amounted to $585,000 for the thirteen weeks
ended March 29, 1998, represents a reduction of the carrying value of the
impaired assets to estimated fair value.  Such impairment charge relates to
long-lived restaurant assets.  The primary indicators of impairment are
continued operating losses or sufficient negative trends that management
determines impairment is probable.  Estimated fair values were determined by
using a combination of discounted estimated future cash flows and valuation
multiples recently used by the Company in actual acquisitions.  Management
judgment is inherent in the estimated fair value determinations and,
accordingly, actual results could vary from such estimates.

     Store closure costs are recognized when a decision is made to close a
restaurant within the next twelve months.  Store closure costs, which amounted
to $520,725 for the thirteen weeks ended March 29, 1998, include the costs of
writing down the carrying amount of a restaurant's assets to estimated fair
value less costs of disposal aggregating $472,261, and the net present value of
any remaining noncancelable lease payments after the expected closure date net
of estimated sublease income considered by management to be probable aggregating
$48,464.

(5)  NET EARNINGS PER SHARE

     In 1997, the Financial Accounting Standards Board issued SFAS No. 128, 
EARNINGS PER SHARE (Statement 128) which replaces the prior accounting 
standard regarding computation and presentation of earnings per share. 
Statement 128 requires a dual presentation of basic earnings per share (based 
on the weighted average number of common shares outstanding) and diluted 
earnings per share which reflects the potential dilution that could occur if 
contracts to issue securities (such as stock options) were exercised. The 
Company adopted Statement 128 as of December 28, 1997 and, accordingly, 
earnings per share data for all periods presented has been computed in 
accordance with Statement 128. For all periods presented, there are no 
differences between net earnings (loss) and outstanding shares utilized in 
the computation of basic and diluted earnings per share.

    Options to purchase common stock were not included in the computation of 
diluted earnings (loss) per share because the options' exercise price was 
greater than the average market price of the common shares during such period 
so the effect would not be dilutive. As of March 29, 1998, there are 425,000 
options outstanding at a weighted average exercise price of $5.10 which may 
become dilutive in the future.
                                      7
<PAGE>
 
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
         CONDITION AND RESULTS OF OPERATIONS

         SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

         THIS FORM 10-QSB INCLUDES STATEMENTS THAT ARE "FORWARD-LOOKING 
STATEMENTS" WITHIN THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, 
AS AMENDED AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS 
AMENDED, INCLUDING STATEMENTS REGARDING THE COMPANY'S EXPECTATIONS, HOPES, 
BELIEFS, INTENTIONS OR STRATEGIES REGARDING THE FUTURE.  ALL STATEMENTS, 
OTHER THAN STATEMENTS OF HISTORICAL FACTS, INCLUDED IN THIS FORM 10-QSB 
REGARDING THE COMPANY'S FINANCIAL POSITION, BUSINESS STRATEGY AND OTHER PLANS 
AND OBJECTIVES FOR FUTURE OPERATIONS, ARE FORWARD-LOOKING STATEMENTS.  ALL 
FORWARD-LOOKING STATEMENTS INCLUDED IN THIS FORM 10-QSB ARE BASED ON 
INFORMATION AVAILABLE TO THE COMPANY ON THE DATE HEREOF, AND THE COMPANY 
ASSUMES NO OBLIGATION TO UPDATE SUCH FORWARD-LOOKING STATEMENTS.  ALTHOUGH 
THE COMPANY BELIEVES THAT THE ASSUMPTIONS AND EXPECTATIONS REFLECTED IN SUCH 
FORWARD-LOOKING STATEMENTS ARE REASONABLE, IT CAN GIVE NO ASSURANCE THAT SUCH 
EXPECTATIONS WILL PROVE TO HAVE BEEN CORRECT OR THAT THE COMPANY WILL TAKE 
ANY ACTIONS THAT MAY PRESENTLY BE PLANNED.  CERTAIN IMPORTANT FACTORS THAT 
COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THE COMPANY'S 
EXPECTATIONS ARE DISCLOSED IN THE "RISK FACTORS" SECTION OF THE COMPANY'S 
FORM 10-K ANNUAL REPORT, WHICH INCLUDE, WITHOUT LIMITATION, THE COMPANY'S 
ABILITY TO DEVELOP, CONSTRUCT, ACQUIRE OR FRANCHISE ADDITIONAL RESTAURANTS IN 
ACCORDANCE WITH THE COMPANY'S DEVELOPMENT SCHEDULE, CHANGES IN BUSINESS 
STRATEGY OR DEVELOPMENT PLANS, AVAILABILITY AND TERMS OF CAPITAL, ACCEPTANCE 
OF NEW PRODUCT OFFERINGS, COMPETITION, MANAGEMENT OF QUARTER TO QUARTER 
EARNINGS, INCREASES IN OPERATING COSTS AND CHANGES IN GOVERNMENT REGULATION.  
ALL SUBSEQUENT WRITTEN OR ORAL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO THE 
COMPANY OR PERSONS ACTING ON ITS BEHALF ARE EXPRESSLY QUALIFIED IN THEIR 
ENTIRETY BY SUCH FACTORS.

OVERVIEW

         The Company's revenues are derived from sales from Company-owned
restaurants and franchise revenues, which consist of royalties from franchised
restaurant sales as well as franchise and development fees.

         Cost of sales include food, paper and beverage costs associated with
Company-owned restaurants. Restaurant operating expenses consist primarily of
labor costs, rent, advertising, utilities, maintenance and insurance associated
with Company-owned restaurants.  General and administrative expenses include
corporate and administrative salaries, accounting, legal and direct costs
associated with franchise operations.

                                    8
<PAGE>

RESULTS OF OPERATIONS

     The following table sets forth the percentage relationship of certain
operating statement data to total revenues, except as otherwise indicated:

<TABLE>
                                                           Thirteen Weeks
                                                                Ended
                                                         March 29,  March 30,
                                                           1998      1997(1)
                                                         ---------  ---------
<S>                                                        <C>       <C>
Revenues:
    Sales from Company-owned restaurants                     98.4%     95.9%
    Franchise revenues                                        1.6       4.1
                                                            -----     -----
                    Total revenues                          100.0%    100.0%

Costs and expenses:
    Cost of sales (2)                                        34.0%     31.8%
    Restaurant operating expenses (2)                        55.8      49.9
    General and administrative expenses                       8.1       8.3
    Depreciation and amortization                             5.2       4.3
    Provision for impairments and closures                   22.8      --  

Operating income (loss)                                    (24.5)       9.1
Interest income (expense), net                               (.7)       1.4
Income tax expense                                           --         4.0
Cumulative effect of accounting change                       --         2.9
                    Net earnings (loss)                    (25.2)       3.6
</TABLE>

------------------------
(1)  As restated for the change in accounting principle. See Note 3 to 
     unaudited consolidated financial statements.
(2)  As a percentage of sales from Company-owned restaurants.

THIRTEEN WEEKS ENDED MARCH 29, 1998
COMPARED TO THIRTEEN WEEKS ENDED MARCH 30, 1997

     Total revenues increased by $367,000, or 8.2%, to $4.8 million for the 
period ended March 29, 1998 compared to $4.5 million for the period ended 
March 30, 1997, primarily due to an increase in the number of Company-owned 
restaurants open.

     Sales from Company-owned restaurants increased $472,000, or 11.0%, to 
$4.8 million for the period ended March 29, 1998 compared to $4.3 million for 
the period ended March 30, 1997.  This increase is largely the result of 
opening 16 additional Company-owned restaurants during the period subsequent 
to March 30, 1997.  Such increase has been offset somewhat by the closing of 

                                   9
<PAGE>

seven Company-owned restaurants during the last quarter of 1997 and the first 
quarter of 1998. In addition, the Company experienced a 14.6% decrease in 
same restaurant sales during the first quarter of 1998 as compared to the 
same period in 1997.  Such decline is primarily attributed to the following:  
(i) increased competition, (ii) increased development within certain markets, 
and (iii) restaurant manager/operational issues.  The Company is focusing on 
operational issues and new product offerings.  At March 29, 1998, the Company 
had 45 Company-owned restaurants compared to 36 restaurants at March 30, 1997.

     Franchise revenues decreased by $105,000, or 56.8%, to $80,000 for the 
period ended March 29, 1998 compared to $185,000 for the period ended March 
30, 1997.  Franchise and development fees decreased $48,000, or 54.5%, to 
$41,000 during the first quarter of 1998 as compared to $89,000 for the 
comparable period in 1997 and royalty revenue decreased by $57,000, or 59.5%, 
to $39,000 for 1998 compared to $96,000 for 1997.  The overall decrease is 
primarily due to the decrease in new restaurant development within the 
franchise program as well as the closing or disenfranchising of 14 franchise 
restaurants during the period subsequent to March 30, 1997.  Franchise 
royalty revenue has also decreased due to the discontinuance of royalty 
revenue recognition on certain franchise restaurants due to collectibility 
concerns.  As a result of the above activity, management expects franchise 
revenues to continue to decline.  There were 23 franchised restaurants as of 
March 29, 1998 as compared to 32 restaurants at March 30, 1997.

     Cost of sales increased by $258,000, or 18.9%, to $1.6 million for the 
period ended March 29, 1998 compared to $1.4 million for the period ended 
March 30, 1997, primarily due to the increase in Company-owned restaurant 
sales discussed above.  As a percentage of Company-owned restaurant sales, 
cost of sales increased to 34.0% for the period ended March 29, 1998 from 
31.8% for the period ended March 30, 1997, primarily as a result of certain 
markets that incur higher food costs as a result of utilizing frozen-dough 
bagels and pre-packaged cream cheeses.  Prices of the Company's commodities 
(meat and cheese, flour and other bakery ingredients) have generally remained 
fairly stable during the comparable periods.

     Restaurant operating expenses increased by $518,000, or 24.2%, to $2.7 
million for the period ended March 29, 1998 compared to $2.1 million for the 
period ended March 30, 1997, primarily due to the increase in Company-owned 
restaurant sales discussed above.  As a percentage of Company-owned 
restaurant sales, restaurant operating expenses increased to 55.8% for the 
period ended March 29, 1998 from 49.9% for the period ended March 30, 1997.  
Such increase is primarily due to: (i) the increase in direct labor costs of 
1.7% from 27.7% in 1997 to 29.4% in 1998 and (ii) the increase in occupancy 
costs (rent and utilities) of 3.3% from 9.1% in 1997 to 12.4% in 1998.  These 
increases are attributable to the increase in the minimum wage rate, the 
decrease in same-store sales as discussed above and certain of the Company's 
new restaurant development in which sales levels have not matured.

     General and administrative expenses have remained fairly consistent for 
the thirteen week periods ended March 29, 1998 and March 30, 1997.

                                    10
<PAGE>

     Depreciation and amortization increased by $61,000, or 32.0%, to $253,000
for the period ended March 29, 1998 compared to $191,000 for the period ended
March 30, 1997.  As a percentage of total revenues, depreciation and
amortization increased to 5.2% for the period ended March 29, 1998 from 4.3% for
the period ended March 30, 1997.  This increase is primarily the result of the
significant addition of capital expenditures to develop and acquire additional
Company-owned restaurants for the period subsequent to March 30, 1997.  Such
increase is offset, to a certain extent, by certain restaurants that are open
but were impaired in 1997 whereby depreciation and amortization has been
completely or significantly reduced.

     A provision for impairment and restaurant closures of $1.1 million was
recorded for the period ended March 29, 1998.  The impairment charge, which
amounted to $585,000, represents a reduction of the carrying value of property
and equipment for one operating market (two restaurants) to estimated fair
value.  Such charge was a result of increased operating losses primarily due to
declining sales levels.  In addition, the Company closed two under-performing
restaurants during the period resulting in restaurant closure costs of $521,000.
The majority of the aforementioned restaurant closure costs relate to a 
single restaurant.  Such restaurant was opened November 1, 1997, but due to 
operating losses and negative cash flow experienced since opening, management 
made the decision during March 1998 to close the restaurant.  The other 
restaurant closure related to a restaurant in which an impairment provision 
had been recorded during the third quarter of 1997. As disclosed in the 
accompanying notes to the unaudited consolidated financial statements, 
long-lived assets and certain identifiable intangibles are reviewed for 
impairment whenever events or changes in circumstances indicate that the 
carrying amount of an asset may not be recoverable. Management also 
continuously assesses whether or not to close underperforming restaurants. 
Accordingly, while at this time, the Company is not aware of any restaurants 
for which a provision for impairment should be recorded which has not been so 
recorded in the accompanying unaudited consolidated financial statements and 
management has not currently made a decision to close any restaurants other 
than those restaurants for which store closure costs have been recorded in the 
accompanying unaudited consolidated financial statements, additional 
provisions of impairment and closures may be required from time-to-time 
including in the near term.

     Net interest expense increased by $96,000, or 158.7%, to $36,000 for the
period ended March 29, 1998 compared to net interest income of $61,000 for the
period ended March 30, 1997.  The increase in interest expense is due to the
borrowings from a bank that were initiated in September 1997.  In addition,
during the period ended March 30, 1997 the Company still had a portion of the
proceeds from its initial public offering invested in interest-bearing
securities as such proceeds had not yet been expended.


LIQUIDITY AND CAPITAL RESOURCES

     The Company requires capital primarily for the development of new
restaurants.  Capital expenditures totaled $1.0 million and $1.9 million for the
thirteen-week periods ended March 29, 1998 and March 30, 1997, respectively. 
The Company has funded its capital expenditures with proceeds from its Credit
Facility and sale-leaseback transactions discussed below and cash flows from
operating activities.  Cash flows from operating activities were $114,000 and
$322,000 for the periods ended March 29, 1998 and March 30, 1997, 
respectively. The reduction in cash flows from operating activities results 
from the Company's significant reduction in operating income for the quarter 
ended March 29, 1998.

     Based on its contemplated expansion plans, the Company estimates that its
capital expenditures for development of Company-owned restaurants will be 
approximately $400,000 during the remainder of 1998.  The Company expects 
that proceeds from its Credit Facility or refinancing of such facility and 

                                     11
<PAGE>

cash provided by operating activities will provide sufficient funds to 
finance its capital expenditures through 1998.

     CREDIT FACILITY.  As previously disclosed in the Company's 1997 Form 
10-K, the Company has a loan agreement with a revolving line of credit and 
term loan facilities (the "Credit Facility") with NationsBank, N.A. (the 
"Bank"). Borrowings from term loans during the thirteen-week period ended 
March 29, 1998 amounted to $450,000 and were used to fund new restaurant 
development.  In addition, the Company repaid $1.1 million of borrowings from 
the Credit Facility during the thirteen-week period ended March 29, 1998 
primarily with the proceeds of the sale-leaseback transactions discussed 
below and available cash.  The Credit Facility is secured by substantially 
all of the Company's assets and matures on September 30, 1998. The proceeds 
from the Credit Facility (which are classified as a current liability at March 
29, 1998) were primarily used for acquisition of long-lived assets such as 
property and equipment. The Company will be required to refinance $1.0 million 
of the outstanding balance of such notes payable when such notes come due in 
September 1998, although the Company does not currently have a commitment 
from the Bank or any other institution to refinance such notes payable. As of 
March 29, 1998, the Company has $1.8 million of outstanding borrowings 
pursuant to the Credit Facility.

     SALE-LEASEBACK TRANSACTIONS.  During February 1998, the Company entered 
into agreements to sell and lease back two restaurant sites with an entity 
owned by an officer of the Company and a significant stockholder, both of 
whom are Directors.  The sale-leaseback transactions include two owned 
restaurant locations in which the Company sold such properties to such entity 
for approximately $800,000 and leased back over a 15-year period.  The leases 
will be accounted for as operating leases. As a result of the sale-leaseback 
transactions, the Company incurred a loss of $277,000 which has been deferred 
for financial reporting purposes and is included within leasehold 
improvements and is being amortized over the term of the related leases. The 
Company believes that the terms and conditions of both the real estate sale 
and the related lease back were fair and reasonable and were on terms at 
least as favorable as would be available from non-affiliated parties.  The 
Company utilized the proceeds to fund new restaurant development and to 
reduce borrowings under the Credit Facility.

     STOCK REPURCHASE PROGRAM.  During January 1998, the Company's Board of 
Directors approved a plan to repurchase up to 1.0 million shares of the 
Company's Common Stock (the "Stock Repurchase Program").  Purchases pursuant 
to the Stock Repurchase Program are to be made from time to time in the open 
market or directly from stockholders at prevailing market prices.  The Stock 
Repurchase Program is anticipated to be funded with internally generated cash 
and borrowings under the Credit Facility or the refinancing of the Credit 
Facility. As of March 29, 1998, the Company had purchased 10,400 shares of 
Common Stock for $17,974.

     FINANCIAL CONDITION.  Total assets at March 29, 1998 are $12.0 million 
as compared to $14.1 million as of December 29, 1997.  Cash and cash 
equivalents have decreased by approximately $800,000 primarily due to capital 
expenditures for new restaurant development.  Income tax receivable has also 
decreased as a partial refund for 1997 was received from the Internal Revenue 
Service in March 1998. Property and equipment reflects an approximate $1.0 
million decrease despite significant new capital expenditures due to the 
provision for impairments and closures related to three restaurants and the 
sale-leaseback of two previously owned restaurant locations.  Current 
liabilities have decreased approximately $800,000 primarily as a result of 
repayments of certain term loans with the bank.  Stockholders' equity has 
decreased $1.2 million due to the net loss for the thirteen-week period ended 
March 29, 1998, which loss is primarily due to the $1.1 million provision for 
impairments and closures.

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<PAGE>

YEAR 2000 COMPLIANCE

     The Company is currently taking actions to provide that its computer
systems are capable of processing the Year 2000.  The gross costs associated
with this are not expected to be material and are being expensed as incurred.


PART II.  OTHER INFORMATION

Item 5.  Other Information

     On April 17, 1998, the Company was notified by the Nasdaq Stock 
     Market, Inc. (Nasdaq) that it has failed to maintain the appropriate 
     market value of public float that is required to maintain the Company's 
     listing on the Nasdaq National Market. No delisting action is currently 
     being taken as the Company has until July 17, 1998 in which to regain 
     compliance. If such compliance cannot be regained, the Company intends 
     to pursue listing under the Nasdaq SmallCap Market. To the extent the 
     Nasdaq SmallCap Market listing is not achievable, the Company's common 
     stock would then be traded over the counter.

Item 6.   Exhibits

          (a)  Exhibit 27 - Financial Data Schedule.

          (b)  Exhibit 27.1 - Restated Financial Data Schedule.


                             SIGNATURES


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, this 13th day of May, 1998.

                              NEW YORK BAGEL ENTERPRISES, INC.


                              By:   /s/ ROBERT J. GERESI 
                                    ------------------------------
                                    Robert J. Geresi
                                    Chief Executive Officer
                                     and President


                              By:   /s/ JON H. CRAMER 
                                    ------------------------------
                                    Jon H. Cramer
                                    Chief Financial Officer,
                                     Secretary and Treasurer

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