<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 September 27, 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
                  (Issuer's telephone number, including area code)


Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 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.                            [X] Yes          [ ] No

As of November 10, 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>
<CAPTION>
                                                                      Page No.
                                                                      --------
<S>                                                                   <C>
PART I - FINANCIAL STATEMENTS

     Item 1.   Consolidated Financial Statements

          Consolidated Balance Sheets at September 27, 1998
            (unaudited), and December 28, 1997                              3

          Consolidated Statements of Operations for the
            Thirty-Nine Weeks and Thirteen Weeks Ended
            September 27, 1998 and September 28, 1997, (unaudited)          4

          Consolidated Statements of Cash Flows
            for the Thirty-Nine Weeks Ended September 27, 1998
            and September 28, 1997, (unaudited)                             5

          Notes to Unaudited Consolidated Financial Statements              6

     Item 2.   Management's Discussion and Analysis or 
               Plan of Operation                                            9

PART II  -  OTHER INFORMATION

     Item 5.   Other Information                                           17

     Item 6.   Exhibits                                                    19

SIGNATURES                                                                 20
</TABLE>


                                       2

<PAGE>

PART I.   FINANCIAL STATEMENTS
Item  1.  Consolidated Financial Statements

                          NEW YORK BAGEL ENTERPRISES, INC.
                            CONSOLIDATED BALANCE SHEETS
                      SEPTEMBER 27, 1998 AND DECEMBER 28, 1997

<TABLE>
<CAPTION>
                                                   September 27,   December 28,
               Assets                                  1998           1997 (a)
               ------                              -------------   ------------
                                                    (Unaudited)
<S>                                                <C>             <C>
Cash and cash equivalents                          $     283,434   $    872,949
Accounts receivable                                      127,196        171,068
Inventories                                              375,339        349,937
Income tax receivable                                     17,983        484,957
Prepaid expenses and other current assets                167,166        169,156
Property and equipment available for sale                 86,648        193,256
                                                   -------------   ------------
   Total current assets                                1,057,766      2,241,323

Property and equipment, net                            6,700,990     10,281,696
Goodwill, net                                            807,606      1,220,441
Other assets                                             242,850        357,001
                                                   -------------   ------------
   Total assets                                    $   8,809,212   $ 14,100,461
                                                   -------------   ------------
                                                   -------------   ------------

   Liabilities and Stockholders' Equity
   ------------------------------------ 

Current installments on long-term debt             $   1,886,528   $  2,490,858
Accounts payable                                         415,515        715,453
Accrued payroll and benefits                             133,627        292,321
Accrued liabilities                                    1,300,359        539,143
Current portion of deferred franchise fees                17,000         35,000
                                                   -------------   ------------
   Total current liabilities                           3,753,029      4,072,775

Long-term debt, less current installments                 28,750         28,750
Deferred rents payable                                   117,844         99,201
Other liabilities                                        230,017        133,724
                                                   -------------   ------------
   Total liabilities                                   4,129,640      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                                   (8,739,898)    (3,671,433)
Treasury stock, at cost, 10,400 shares at
 June 28, 1998                                           (17,974)           -  
                                                   -------------   ------------
   Total stockholders' equity                          4,679,572      9,766,011
                                                   -------------   ------------
   Total liabilities and stockholders' equity      $   8,809,212   $ 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
                     THIRTY-NINE WEEKS AND THIRTEEN WEEKS ENDED
                     SEPTEMBER 27, 1998 AND SEPTEMBER 28, 1997
                                      (Unaudited)

<TABLE>
<CAPTION>
                                                       Thirty-Nine                    Thirteen Weeks
                                                       Weeks Ended                        Ended
                                                 Sept. 27,      Sept. 28,        Sept. 27,       Sept. 28,
                                                    1998           1997           1998             1997
                                               ------------    ------------    ------------    ------------  
<S>                                            <C>             <C>             <C>             <C>
Revenues:                                      
  Sales from Company-owned restaurants         $ 14,602,482    $ 13,758,705    $  4,719,134    $  4,753,958  
  Franchise revenues                                115,776         349,775          18,511          60,705  
                                               ------------    ------------    ------------    ------------  
      Total revenues                             14,718,258      14,108,480       4,737,645       4,814,663  


Costs and expenses:
  Cost of sales                                   5,192,535       4,463,507       1,793,730       1,592,755   
  Restaurant operating expenses                   8,282,222       7,381,975       2,755,408       2,773,109   
  General and administrative expenses             1,077,918       1,267,250         340,569         553,367   
  Depreciation and amortization                     751,991         699,013         251,853         265,701   
  Provision for impairments and closures          4,374,197       3,557,733       3,268,472       3,557,733   
                                               ------------    ------------    ------------    ------------  
      Total costs and expenses                   19,678,863      17,369,478       8,410,032       8,742,665   

      Operating loss                             (4,960,605)     (3,260,998)     (3,672,386)     (3,928,002)  
  Interest income (expense), net                   (107,860)        102,369         (36,641)          7,084   
                                               ------------    ------------    ------------    ------------   
      Loss before income taxes                   (5,068,465)     (3,158,629)     (3,709,027)     (3,920,918)  
Income tax expense (benefit)                            -        (1,032,226)            -        (1,324,947)  
                                               ------------    ------------    ------------    ------------   
      Loss before cumulative
        effect of accounting change              (5,068,465)     (2,126,403)     (3,709,027)     (2,595,971)  
Cumulative effect of accounting change, net
  of income tax benefit of $80,782                      -          (129,041)            -               -
                                               ------------    ------------    ------------    ------------   
Net loss                                       $ (5,068,465)   $ (2,255,444)   $ (3,709,027)   $ (2,595,971)  
                                               ------------    ------------    ------------    ------------   
                                               ------------    ------------    ------------    ------------   
Loss per share - basic and diluted:
  Loss before cumulative effect
    of accounting change                       $      (1.09)   $      (0.45)   $      (0.80)   $      (0.56)  
  Cumulative effect of accounting change                -             (0.03)            -               -  
                                               ------------    ------------    ------------    ------------   
Net loss                                       $      (1.09)   $      (0.48)   $      (0.80)   $      (0.56)  
                                               ------------    ------------    ------------    ------------   
                                               ------------    ------------    ------------    ------------   
Weighted average number of shares
  outstanding-basic and diluted                   4,659,318       4,667,500       4,657,100       4,667,500   
</TABLE>

   See accompanying notes to unaudited consolidated financial statements.

                                       4
<PAGE>
                             NEW YORK BAGEL ENTERPRISES, INC.
                          CONSOLIDATED STATEMENTS OF CASH FLOWS
            THIRTY-NINE WEEKS ENDED SEPTEMBER 27, 1998 AND SEPTEMBER 28, 1997
                                       (UNAUDITED)

<TABLE>
<CAPTION>
                                                                       Thirty-Nine Weeks        
                                                                             Ended              
                                                                     Sept. 27,     Sept. 28,    
                                                                        1998          1997      
                                                                    ------------  ------------  
<S>                                                                 <C>           <C>
Cash flows from operating activities:
  Net loss                                                          $(5,068,465)  $(2,255,444)  
  Adjustments to reconcile net loss to net
    cash provided by operating activities:
      Depreciation and amortization                                     751,991       699,013    
      Provision for impairments and closures                          4,374,197     3,557,733    
      Cumulative effect of accounting change, net of
        income tax benefit                                                  -         129,041    
      Increase (decrease) in cash resulting from changes
        in listed items, net of effect from acquisitions:
          Deferred income taxes                                             -      (1,140,144)   
          Inventory                                                     (25,402)      (59,091)   
          Income taxes receivable                                       466,974      (210,382)   
          Property and equipment available for sale                     106,608
          Prepaid expenses and other current assets                       1,990      (292,985)   
          Accounts receivable                                            43,872        97,690    
          Deferred costs                                                 18,643         9,425    
          Other assets                                                  (14,046)     (167,093)   
          Accounts payable                                             (299,938)      352,825    
          Accrued liabilities and other liabilities                    (387,435)       19,375    
          Deferred franchise fees                                       (18,000)      (39,000)   
                                                                    -----------   -----------    
              Net cash provided by (used in)operating activities        (49,011)      700,963    

Cash flows from investing activities:
  Additions to property, plant and equipment                         (1,618,200)   (5,679,499)   
  Acquisitions, net of cash acquired                                        -      (1,381,908)   
  Purchase of investment securities available for sale                      -      (7,244,552)   
  Proceeds from sales and maturities of investment
    securities available for sale                                           -      11,510,414    
  Note receivable                                                           -             -      
  Proceeds from sale-leaseback transactions                           1,700,000           -      
                                                                    -----------   -----------    
              Net cash provided by (used in) investing activities        81,800    (2,795,545)   

Cash flows from financing activities:
  Proceeds from issuance of long-term debt                              670,000       700,000    
  Principal payments on long-term debt                               (1,274,330)          -      
  Debt issuance costs                                                                 (13,459)   
  Bank overdraft                                                                      320,369    
  Decrease in distributions payable                                         -        (164,194)   
  Purchase of treasury stock                                            (17,974)          -      
                                                                    -----------   -----------    
              Net cash provided by (used in) financing activities      (622,304)      842,716    
                                                                    -----------   -----------    
              Net decrease in cash                                     (589,515)   (1,251,866)   

Cash at beginning of period                                             872,949     1,305,130    
                                                                    -----------   -----------    
Cash at end of period                                               $   283,434   $    53,264    
                                                                    -----------   -----------    
                                                                    -----------   -----------    
</TABLE>

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 September 27, 1998, the Company has 45
     Company-owned restaurants primarily located in Oklahoma, Kansas, Colorado,
     Texas and Tennessee and 19 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 pre-opening cost over the initial 12-months
     of a restaurant's operation. Under the new method, the Company expenses
     such restaurant pre-opening 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 thirty-nine weeks ended September 28,
     1997 is to decrease such amounts $(2,053), ($131,094) 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
     financial statement of operations for the thirty-nine week period ended
     September 28, 1997.  The accompanying unaudited consolidated financial
     statements for the thirty-nine weeks ended September 28, 1997 have been
     restated to reflect adoption of the new accounting policy.


                                       6
<PAGE>

 (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 the 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 exceeds 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 $0 and $585,000 for the thirteen
     weeks and thirty-nine weeks ended September 27, 1998 respectively,
     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
     judgement is inherent in the estimated fair value determination 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 $3,268,472 and $3,789,197 for the thirteen weeks and 
     thirty-nine weeks ended September 27, 1998, include the costs of writing 
     down the carrying amount of restaurant assets to estimated fair value
     less costs of disposal aggregating $2,230,332 and $2,702,593 for the 
     thirteen weeks and the thirty-nine weeks ended September 27, 1998 
     respectively, 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 $1,038,140 and 
     $1,086,604 for the thirteen weeks and the thirty-nine weeks ended 
     September 27, 1998, respectively.
     
     The Company has entered into a joint venture agreement whereby the Company
     will contribute certain restaurant equipment and leasehold improvements of
     up to seven of its restaurant locations to the joint venture entity and the
     other party to the joint venture will contribute cash (up to a stipulated
     amount per restaurant) to convert such restaurant locations to a new
     concept called "Atomic Burrito."  The Company will have a 40% ownership
     interest in the resulting joint venture entity.  Of the aforementioned
     seven restaurant locations to be converted to the Atomic Burrito concept,
     the locations of two restaurants are stipulated in the joint venture
     agreement and the remaining five locations will be selected by the other
     party to the joint venture by January 1, 1999 from a list of twelve
     restaurant locations included in the joint 


                                       7
<PAGE>

     venture agreement.  The other party to the joint venture will oversee the
     restaurant conversion and the day-to-day operations of the Atomic Burrito
     restaurants once opened.  Furthermore, the other party to the joint venture
     can elect to convert only three additional restaurants, instead of the 
     aforementioned five, by payment of a nominal amount to the Company.  The 
     joint venture agreement also calls for the opening of one Atomic Burrito 
     restaurant in a location for which the Company currently holds an option 
     to lease.

     During the thirteen weeks ended September 27, 1998, the Company closed two
     restaurants and decided to close an additional eighteen restaurants and a
     support facility.  The two locations specified in the joint venture
     agreement and the twelve locations listed in the joint venture agreement
     from which the other party is to select five locations (three locations if
     such party elects to make the nominal payment to the Company) to be
     converted to Atomic Burrito restaurants are locations for which the Company
     has closed or decided to close restaurants during the thirteen weeks ended
     September 27, 1998.
     
     Because (i) the carrying value of restaurant assets and the net present
     value of remaining noncancelable lease payments net of estimated sublease
     income vary significantly from location to location and (ii) the
     determination of exactly which closed restaurant locations will be
     converted to Atomic Burrito is that of the other joint venture party and
     not the Company (such determination to be made by January 1, 1999), the
     Company is unable to estimate at this time the individual costs of every
     component of the Company's decision to close the twenty restaurants and one
     support facility.
     
     The Company recorded store closure costs for the thirteen weeks ended
     September 27, 1998 based upon the minimum of such costs which the Company
     will incur from the aforementioned restaurant closures (i.e. the provision
     for store closure costs is based upon the assumption that the other party
     to the joint venture agreement will select the locations which will result
     in the lowest store closure cost to the Company).  After the restaurant
     locations which will be converted have been selected, the Company may need
     to record additional store closure costs applicable to the aforementioned
     restaurant closings in the fourth quarter of 1998 and such additional costs
     could range from $0 to $1.3 million depending upon which locations are
     selected for conversion by the other party to the joint venture.

(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 


                                       8
<PAGE>

     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 September 27, 1998,
     there are 379,600 options outstanding at a weighted average exercise price
     of $5.09, which may become dilutive in the future.
     
     
     ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
               OPERATION
     
          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, ABILITY TO SUCCESSFULLY CONVERT
     CERTAIN RESTAURANTS TO ATOMIC BURRITO RESTAURANTS AND PARTICIPATE AS A 
     JOINT VENTURE PARNTER, ACCEPTANCE OF NEW PRODUCT OFFERINGS, COMPETITION,
     MANGEMENT 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 


                                       9
<PAGE>

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

<TABLE>
<CAPTION>
                                                    Thirty-Nine Weeks            Thirteen Weeks       
                                                          Ended                      Ended            
                                                 Sept. 27,      Sept. 28,    Sept. 27,    Sept. 28, 
                                                    1998        1997 (1)       1998         1997
                                                  --------      --------    --------      --------    
<S>                                               <C>           <C>         <C>           <C>         
Revenues:
Sales from Company-owned restaurants                99.2%         97.5%        99.6%         98.7%    
Franchise revenues                                   0.8           2.5          0.4           1.3     

Total revenues                                     100.0%        100.0%       100.0%        100.0%    

Cost and expenses:
  Cost of sales (2)                                 35.6%         32.4%        38.0%         33.5%    
  Restaurant operating expenses (2)                 56.7          53.7         58.4          58.3     
  General and administrative expenses                7.3           9.0          7.2          11.5     
  Depreciation and amortization                      5.1           5.0          5.3           5.5     
  Provision for impairments and closures            29.7          25.2         69.0          73.9     

Operating income (loss)                            (33.7)        (23.1)       (77.5)        (81.6)    
Interest income (expense), net                      (0.7)          0.7         (0.8)          0.1     
Income tax expense (benefit)                         0.0          (7.3)         0.0         (27.5)    
Cumulative effect of accounting change               0.0           0.9          0.0           0.0     
  Net earnings (loss)                              (34.4)        (16.0)       (78.3)        (53.9)    
</TABLE>

(1)  As restated for the change in accounting principle.  See Note 3 to
     unaudited consolidated financial statements.


                                      10
<PAGE>

(2)  As a percentage of sales from Company-owned restaurants.   


THIRTEEN WEEKS ENDED SEPTEMBER 27, 1998
COMPARED TO THIRTEEN WEEKS ENDED SEPTEMBER 28, 1997

     Total revenues decreased by $100,000, or 1.6%, to $4.7 million for the
period ended September 27, 1998 compared to $4.8 million for the period ended
September 28, 1997, primarily due to a decrease in income from franchise
revenues.

     Sales from Company-owned restaurants were consistent with the same period
for 1997.  Sales decreased $35,000, or 0.7%, to $4.7 million for the period 
ended September 27, 1998 compared to $4.7 million for the period ended September
28, 1997.  The Company experienced a 15.0% decline in same store sales during 
the third quarter of 1998 compared to the same period in 1997.  This decline of
same store sales was offset by the addition of 14 new restaurants in new 
markets. The decline in same store sales is primarily attributed to the 
following: (i) increased competition, (ii) increased development within certain
markets, and (iii) the maturation of the bagel industry.  The Company is 
focusing on operational issues and new product offerings.  At September 27, 
1998 the Company had 45 Company-owned restaurants compared to 43 restaurants 
at September 28, 1997.

     Franchise revenues and royalties decreased by $42,000, or 69.5%, to $18,000
for the period ended September 27, 1998 compared to $60,000 for the period ended
September 28, 1997. The overall decrease is due to the discontinuance of royalty
revenue recognition on certain franchise restaurants due to collectibility
concerns and no new franchises have been introduced since 1997.  As a result of
the above activity, management expects franchise revenues to continue to
decline.  There were 19 franchised restaurants as of September 27, 1998 as
compared to 28 restaurants at September 28, 1997.

     Cost of sales increased by $200,000, or 12.6%, to $1.8 million for the
period ended September 27, 1998 compared to $1.6 million for the period ended
September 28, 1997.  As a percentage of Company-owned restaurant sales, cost of
sales increased to 38.0% for the period ended September 27, 1998 from 33.5% for
the period ended September 28, 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.  In addition, a large portion of the increase is due
to the increased cost of butterfat related items.  Butterfat is used in cream
cheese, cheese, and other dairy products.  Butterfat prices doubled during the
quarter. 

     Restaurant operating expenses decreased by $18,000, or 0.6%, to $2.7
million for the period ended September 27, 1998 compared to $2.7 million for the
period ended September 28, 1997. Such decrease is primarily due to the Company's
concerted effort to reduce controllable expenses. As a percentage of 
Company-owned restaurant sales, restaurant operating expenses increased to 
58.4% for the period ended September 27, 1998 from 58.3% for the period ended 
September 28, 1997.  

     General and administrative expenses decreased $213,000 or 38.5%, to
$341,000 for the period ended September 27, 1998 compared to $553,000 for the
period ended September 28, 1997 primarily as a reduction in management staff. 
The Company repositioned middle management area restaurant managers into the
restaurants during the third quarter of 1998.

                                      11
<PAGE>

     Depreciation and amortization decreased by $14,000, or 5.2%, to $252,000
for the period ended September 27, 1998 compared to $266,000 for the period
ended September 28, 1997.  As a percentage of total revenues, depreciation and
amortization decreased to 5.3% for the period ended September 27, 1998 from 5.5%
for the period ended September 28, 1997.  This nominal decrease is primarily the
result of the closing of certain restaurants, the impairing of other
restaurants, and the recognition of the sale-leaseback transactions that
occurred during 1998.
     
     A provision for impairment and restaurant closures of $3.3 million was
recorded for the period ended September 27, 1998. The Company closed two 
under-performing restaurants during the period resulting in restaurant 
closure cost of $198,000. The restaurant closures relate to two restaurants 
in which an impairment provision had been recorded during the first quarter 
of 1998. Management continuously assesses whether or not to close 
under-performing restaurants. During the thirteen weeks ended September 27, 
1998 the Company identified a total of 18 additional restaurants for closure 
that are not profitable and are not cash flow positive. 

     The Company has entered into a joint venture agreement whereby the Company
will contribute certain restaurant equipment and leasehold improvements of up to
seven of its restaurant locations to the joint venture entity and the joint
venture partner will contribute cash (up to a stipulated amount per restaurant)
to convert such restaurant locations to the new "Atomic Burrito" concept.  The
Company has a 40% ownership interest in the joint venture entity.  Of the seven
restaurant locations to be converted to the Atomic Burrito concept, two
restaurant locations are stipulated in the joint venture and the remaining five
locations will be selected by the joint venture partner by January 1, 1999
from a list of twelve restaurant locations included in the joint venture
agreement.  The joint venture partner will oversee the restaurant conversion and
the day-to-day operations of the Atomic Burrito restaurants once opened. 
Furthermore, the joint venture partner can elect to convert only three
additional restaurants, instead of the aforementioned five, by payment of a
nominal amount to the Company.  The joint venture agreement also calls for the
opening of one Atomic Burrito restaurant in a location for which the Company
currently holds an option to lease.

     During the thirteen weeks ended September 27, 1998, the Company closed two
restaurants and decided to close an additional eighteen restaurants and a
support facility.  The two locations specified in the joint venture agreement
and the twelve locations listed in the joint venture agreement from which the
joint venture partner is to select five locations (three locations if such party
elects to make the nominal payments to the Company) to be converted to Atomic
Burrito restaurants are locations for which the Company has closed or decided to
close restaurants during the thirteen weeks ended September 27, 1998.

     Because (i) the carrying value of restaurant assets and the net present
value of remaining noncancelable lease payments net of estimated sublease income
vary significantly from location to location and (ii) the determination of
exactly which closed restaurant locations will be converted to Atomic Burrito is
that of the joint venture partner and not the Company (such determination to be
made by January 1, 1999), the Company is unable to estimate at this time the
individual costs of every component of the Company's decision to close the
twenty restaurants and one support facility.


                                      12
<PAGE>
     
     The Company recorded restaurant closure costs for the thirteen weeks 
ended September 27, 1998 based upon the minimum of such costs which the 
Company will incur from the above restaurant closures (i.e. the provision for 
restaurant closure costs is based upon the assumption that the joint venture 
partner will select the locations which will result in the lowest restaurant 
closure cost to the Company).  After the restaurant locations which will be 
converted have been selected for conversion, the Company may need to record 
additional store closure costs applicable to the aforementioned restaurant 
closings during the fourth quarter of 1998 and such additional costs could 
range from $0 to $1.3 million depending upon which locations are selected for 
conversion by the joint venture partner.

     Net interest expense increased by $44,000, or 617.2%, to $37,000 for the 
period ended September 27, 1998 compared to net interest income of $7,000 for 
the period ended September 28, 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 September 28, 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.

THIRTY-NINE WEEKS ENDED SEPTEMBER 27, 1998
COMPARED TO THIRTY-NINE WEEKS ENDED SEPTEMBER 28, 1997

     Total revenues increased by $600,000, or 4.3%, to $14.7 million for the 
period ended September 27, 1998 compared to $14.1 million for the period 
ended September 28, 1997, primarily due to an increase in the number of 
Company-owned restaurants in new markets.

     Sales from Company-owned restaurants increased $800,000, or 6.1%, to 
$14.6 million for the period ended September 27, 1998 compared to $13.8 
million for the period ended September 28, 1997.  This increase is largely 
the result of 13 additional Company-owned restaurants being open for an 
entire year during the period subsequent to September 28, 1997.  Such 
increase has been offset somewhat by the closing of nine Company-owned 
restaurants since the third quarter of 1997.  Because of the addition of 
restaurants into established markets, the Company experienced a 14.9% 
decrease in same store sales during the first thirty-nine weeks of 1998 
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) the maturation of the bagel industry. The Company 
is focusing on operational issues and new product offerings.  At September 
27, 1998 the Company had 45 Company-owned restaurants compared to 43 
restaurants at September 28, 1997.

     Franchise revenues decreased by $234,000, or 66.9%, to $116,000 for the 
period ended September 27, 1998 compared to $350,000 for the period ended 
September 28, 1997.  Franchise and development fees decreased $69,000, or 
59.0%, to $48,000 for the period ended September 27, 1998 as compared to 
$116,000 for the comparable period in 1997 and royalty revenue decreased by 
$166,000, or 70.8%, to $68,000 for 1998 compared to $234,000 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 
September 28, 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, 

                                       13
<PAGE>

management expects franchise revenues to continue to decline.  There were 19 
franchised restaurants as of September 27, 1998 as compared to 28 
restaurants at September 28, 1997.

     Cost of sales increased by $700,000, or 16.3%, to $5.2 million for the 
period ended September 27, 1998 compared to $4.5 million for the period ended 
September 28, 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 35.6% for the period ended September 27, 1998 from 
32.4% for the period ended September 28, 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.  In addition, a large 
portion of the increase is due to the increased cost of butterfat related 
items.  Butterfat is used in cream cheese, cheese, and other dairy products.  
Butterfat prices doubled during the third quarter of 1998. Prices of the 
Company's commodities (meat, flour and other bakery ingredients) have 
generally remained fairly stable during the comparable periods. 

     Restaurant operating expenses increased by $900,000, or 12.2%, to $8.3 
million for the period ended September 27, 1998 compared to $7.4 million for 
the period ended September 28, 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 
56.7% for the period ended September 27, 1998 from 53.7% for the period ended 
September 28, 1997.  Such increase is primarily due to: (i) the increase in 
direct labor costs of 3.0% from 26.9% in 1997 to 29.9% in 1998 and (ii) the 
increase in occupancy costs (rent and utilities) of 2.9% from 9.7% in 1997 to 
12.6% in 1998.  These increases are attributable to the increase in the 
minimum wage rate, the decrease in the same-store sales as discussed above 
and certain of the Company's new restaurant developments in which sales 
levels have not matured.

     General and administrative expenses have decreased $200,000, or 14.9%, 
to $1.0 million for the period ended September 27, 1998 compared to  $1.2 
million for the period ended September 28, 1997. This decrease is primarily 
as a result of the reduction in management staff. The Company repositioned 
middle management area restaurant managers into the restaurants during the 
third quarter of 1998.
 
     Depreciation and amortization increased by $53,000, or 7.6%, to $752,000 
for the period ended September 27, 1998 compared to $699,000 for the period 
ended September 28, 1997.  As a percentage of total revenues, depreciation 
and amortization increased to 5.1% for the period ended September 27, 1998 
from 5.0% for the period ended September 28, 1997.  This increase is 
primarily the result of the significant addition of capital expenditures to 
develop Company-owned restaurants for the period subsequent to September 28, 
1997.  Such increase is offset by the closing of certain restaurants, the 
impairing of other restaurants, and the recognition of the sale-leaseback 
transactions that occurred during February and August 1998. 

     A provision for impairment and restaurant closures of $4.4 million was 
recorded for the period ended September 27, 1998. The Company closed four 
under-performing restaurants during the period resulting in restaurant 
closure cost of $719,000.  The restaurant closures relate to two restaurants 
in which an impairment provision of $585,000 had been recorded during the first
quarter of 1998 as well as an additional restaurant that was closed during the 
first quarter. The remaining costs relate to the additional 18 restaurants the 


                                       14
<PAGE>

Company identified for closure during the thirteen weeks ended September 27, 
1998 discussed above.

     Net interest expense increased by $210,000, or 205.4%, to $108,000 for 
the period ended September 27, 1998 compared to net interest income of 
$102,000 for the period ended September 28, 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 September 28, 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 $1.6 million and $5.7 million for 
the thirty-nine week periods ended September 27, 1998 and September 28, 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 $(49,000) and $701,000 for the periods ended September 27, 1998 and 
September 28, 1997, respectively. 

     Based on its contemplated limited expansion plans, the Company estimates 
that its capital expenditures for development of Company-owned restaurants 
will be approximately $200,000 during the remainder of 1998.  The Company 
expects that proceeds from its Credit Facility, sale-leaseback transactions 
and cash provided by operating activities will provide sufficient funds to 
finance its capital expenditures through 1998.

     The Company has incurred operating losses.  While the Company is taking 
corrective measures including the decision made during September, 1998 to 
close 18 unprofitable restaurants, there is no assurance that future 
operating losses will not be incurred and that the Company might have to seek 
additional financing.  Such additional financing is not committed at this 
time.

     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 thirty-nine week period ended 
September 27, 1998 amounted to $670,000 and were used to fund new restaurant 
development. In addition, the Company repaid $1.3 million of borrowings from 
the Credit Facility during the thirty-nine week period ended September 27, 
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. The proceeds from the Credit Facility (which are 
classified as a current liability at September 27, 1998) were primarily used 
for acquisition of long-lived assets such as property and equipment. During 
August 1998 the Company refinanced the Credit Facility for an additional 
year, which now matures in September 1, 1999.  The note is amortized over a 
seven year period requiring monthly payments of principal and interest of 
$26,000.  As of September 27, 1998, the Company had $1.9 million of outstanding
borrowings pursuant to the Credit Facility.  The Company was not in 
compliance with certain restrictive covenants contained in the Credit 
Facility which require specified financial ratios in August 1998 when such 
debt was refinanced and continues not to be in compliance. However, the 
Company does not believe 

                                       15
<PAGE>

such noncompliance will adversely impact liquidity although there is no 
assurance of such.  The Company is current on all payments due under 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 a then 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 sales 
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. 

     During August 1998, the Company entered into an agreement to sell and 
lease back two restaurant sites with an entity owned by two members of the 
Board of Directors. The sale-leaseback transactions include two owned 
restaurant locations in which the Company sold such properties to such entity 
for approximately $900,000 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 $274,000 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 sales 
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.  As of  September 27, 1998, the 
Company had purchased 10,400 shares of Common Stock for $17,974.

     FINANCIAL CONDITION.  Total assets at September 27, 1998 are $8.8 
million as compared to $14.1 million as of December 29, 1997.  Cash and cash 
equivalents have decreased by approximately $590,000 primarily due to capital 
expenditures for new restaurant development.  Income tax receivable has also 
decreased as refunds for 1997 have been received from the Internal Revenue 
Service.  Property and equipment reflects an approximate $5.1 million 
decrease despite significant new capital expenditures due to the provision 
for impairments and closures related to twenty one restaurants and the 
sale-leaseback of four previously owned restaurant locations.  Current 
liabilities have decreased approximately $320,000 primarily as a result of 
repayments of certain term loans with the Bank but offset by the additional 
accrual for liabilities applicable to restaurant closures.  Stockholders' 
equity has 

                                       16
<PAGE>

decreased $5.1 million due to the net loss for the thirty-nine week period 
ended September 27, 1998, which loss is primarily due to the $4.4 million 
provision for impairments and closures.


YEAR 2000 COMPLIANCE

     The Company's Year 2000 issues involve (i) its restaurant point of sale 
function, (ii) its outsourced payroll function, (iii) its 
financial/management reporting function and (iv) its vendors.

     The Company believes its point of sale equipment is Year 2000 compliant 
and has been informed by the software and hardware provider that Year 2000 
compliant software will be available to the Company during 1999.  Also, the 
Company believes that it has sufficient manual back-up procedures that the 
Company could rely upon to continue operations, if required to do so.  The 
Company has been informed by the provider of its outsourced payroll services 
that such services are Year 2000 compliant.  The Company currently utilizes 
data processing services from an entity controlled by a director of the Company
in connection with the Company's financial/management reporting function.  
Independent of the Year 2000 issue, the Company is considering installing its 
own data processing capabilities during 1999.  If it proceeds, the Company 
estimates the cost of a new data processing system, which would be Year 2000 
compliant, to be less than $100,000. If the Company elects not to implement a 
new system, the Company anticipates continuing to utilize data processing 
services from the aforementioned entity. The Company has been informed by 
such entity that Year 2000 compliant services will be available during 1999.  
The costs of becoming Year 2000 compliant, other than cost related to the 
possible implementation of a new internal data processing system, are not 
expected to be material.

     The Company purchases products and services from various vendors.  If 
the Company is not able to acquire such products and services due to any 
vendor's inability to address the Year 2000 issue, the Company could incur a 
disruptive effect on its business.  However, the key providers of such 
products and services are generally large and sophisticated entities, and the 
Company does not expect to incur a material disruption to its business from 
the Year 2000 issue.  Beginning in November 1998, the Company is going to 
circulate a questionnaire to its large vendors to determine their status 
regarding addressing the Year 2000 issue. 

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.  The Company appealed the potential delisting from the 
Nasdaq National Market and appeared at a hearing before a committee on 
September 3, 1998.  As of the preparation of this report, there has been no 
word received from Nasdaq as to the outcome of the hearing.  If Nasdaq denies 
the Company's continued listing on the Nasdaq National Market, the Company 
intends to pursue 

                                       17
<PAGE>

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.  Until the results of the hearing are made final, 
there will be no change in the Company's listing.

     The Company has entered into a joint venture agreement whereby the 
Company will contribute certain restaurant equipment and leasehold 
improvements of up to seven of its restaurant locations to the joint venture 
entity and the joint venture partner will contribute cash (up to a stipulated 
amount per restaurant) to convert such restaurant locations to the new 
"Atomic Burrito" concept.  The Company has a 40% ownership interest in the 
joint venture entity.  Of the seven restaurant locations to be converted to 
the Atomic Burrito concept, two restaurants locations are stipulated in the 
joint venture and the remaining five locations will be selected by the other 
joint venture partner by January 1, 1999 from a list of twelve restaurant 
locations included in the joint venture agreement.  The joint venture partner 
will oversee the restaurant conversion and the day-to-day operations of the 
Atomic Burrito restaurants once opened. Furthermore, the joint venture 
partner can elect to convert only three additional restaurants, instead of 
the aforementioned five, by payment of a nominal amount to the Company.  The 
joint venture agreement also calls for the opening of one Atomic Burrito 
restaurant in a location for which the Company currently holds an option to 
lease.








                                       18
<PAGE>

Item 6.       (a)  Exhibits

<TABLE>
<CAPTION>
     EXHIBIT NO.                   EXHIBIT DESCRIPTION
     -----------                   -------------------
<S>                 <C>
     10.1           Joint Venture Agreement by and between New York Bagel
                    Enterprises, Inc. and Western Country Clubs, Inc. dated     
                    October 27, 1998.
                         
     10.2           First Amendment to Loan Agreement dated August 24, 1998
                    by New York Bagel Enterprises, Inc., Lots A' Bagels, Inc. 
                    and NationsBank, N.A.

     10.3           Form of Agreement of Purchase and Sale by and between New 
                    York Bagel Enterprises, Inc. and Commercial Equity, Inc. 
                    (filed as Exhibit 10.9 to Form 10-K for the annual period
                    ended December 28, 1997), incorporated herein by reference.

     10.4           Schedule of Agreements of Purchase and Sale by and between
                    New York Bagel Enterprises, Inc. and Commercial Equity, Inc.

     10.5           Form of Lease between Commercial Equity, Inc., as Lessor, 
                    New York Bagel Enterprises, Inc., as Lessee (filed as
                    Exhibit 10.4 to Form 10-Q for the quarter period ended 
                    September 28, 1997), incorporated herein by reference.

     10.6           Schedule of Leases by and between New York Bagel
                    Enterprises, Inc. and Commercial Equity, Inc.
     
     10.7           Promissory Note dated August 24, 1998 of New York Bagel
                    Enterprises, Inc. and Lots A' Bagel, Inc. payable to the
                    order of NationsBank, N.A.
     
     27             Financial Data Schedule.
</TABLE>

                                       19
<PAGE>
                                       
                                   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 12th day of November, 1998.


                            NEW YORK BAGEL ENTERPRISES, INC.
                         
                         
                            By: /s/ ROBERT J. GERESI
                                -------------------------------
                                Robert J. Geresi
                                Chief Executive Officer
                                and President
                         
                           By:  /s/ RICHARD R. WEBB
                                -------------------------------
                                Richard R. Webb
                                Chief Financial Officer,
                                Secretary and Treasurer






                                       20