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New York Bagel Enterprises Inc · S-1/A · On 7/26/96

Filed On 7/26/96 · SEC File 333-05785 · Accession Number 912057-96-15590

  As Of               Filer                 Filing     On/For/As Docs:Pgs              Issuer               Agent

 7/26/96  New York Bagel Enterprises Inc    S-1/A                 23:331                                    912057

Pre-Effective Amendment to Registration Statement (General Form) · Form S-1
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: S-1/A       Pre-Effective Amendment to Registration Statement     91    529K 
                          (General Form)                                         
 2: EX-3.3      Articles of Incorporation/Organization or By-Laws     10     38K 
 3: EX-4.1      Instrument Defining the Rights of Security Holders     2     13K 
 4: EX-5        Opinion re: Legality                                   1     11K 
 5: EX-9.1      Voting Trust Agreement                                26     81K 
 6: EX-10.2     Material Contract                                      2±    15K 
 7: EX-10.3     Material Contract                                      2±    15K 
 8: EX-10.4     Material Contract                                      2±    15K 
 9: EX-10.5     Material Contract                                      2±    15K 
10: EX-10.6     Material Contract                                      2±    15K 
11: EX-10.7     Material Contract                                      2±    15K 
12: EX-10.8     Material Contract                                      2±    15K 
13: EX-10.9     Material Contract                                      2±    15K 
14: EX-10.10    Material Contract                                    160    490K 
15: EX-10.11    Material Contract                                      6     24K 
16: EX-10.12    Material Contract                                      6     23K 
17: EX-10.13    Material Contract                                      3     14K 
18: EX-10.14    Material Contract                                      2±    15K 
19: EX-10.15    Material Contract                                      2±    15K 
20: EX-10.16    Material Contract                                      2±    15K 
21: EX-10.17    Material Contract                                      2±    15K 
22: EX-23.1     Consent of Experts or Counsel                          1      8K 
23: EX-23.2     Consent of Experts or Counsel                          1     10K

S-1/A · Pre-Effective Amendment to Registration Statement (General Form)
Document Table of Contents

Page	(sequential)	\|	(alphabetic)	Top
			Alternative Formats (RTF, XML, et al.) Additional Information Adjustments Benefits of Offering to Certain Stockholders Business Capitalization Certain Anti-Takeover Matters Certain Transactions Competition Convertible Debenture Description of Capital Stock Development Agreement Dilution Distributions Dividend Policy Exhibits and Financial Statement Schedules Expansion Strategy Experts Franchise Agreement Franchise Program Government Regulation Indemnification of Directors and Officers Independent Auditors' Report Index to Financial Statements Leases Legal Matters Management Management's Discussion and Analysis of Financial Condition and Results of Operations Notes to Combined Financial Statements Offering, The Other Expenses of Issuance and Distribution Overview Preferred Stock Principal and Selling Stockholders Prospectus Summary Purchasing and Distribution Quarterly Financial Data Recent Sales of Unregistered Securities Registration Statement Reorganization Risk Factors Robert J. Geresi S Corporation Distributions Selected Combined Financial Data Shares Eligible for Future Sale Stockholder Guarantees Stock Options Term of Office The Offering Trademarks and Service Marks Undertakings Underwriting Use of Proceeds 1996 Incentive Plan
1	1st Page
"	Registration Statement
"	Robert J. Geresi
6	Prospectus Summary
7	The Offering
10	Risk Factors
"	Competition
12	Benefits of Offering to Certain Stockholders
"	Government Regulation
13	Trademarks and Service Marks
"	Preferred Stock
14	Shares Eligible for Future Sale
15	S Corporation Distributions
"	Dividend Policy
16	Use of Proceeds
17	Dilution
18	Capitalization
19	Selected Combined Financial Data
20	Management's Discussion and Analysis of Financial Condition and Results of Operations
"	Overview
24	Quarterly Financial Data
26	Business
27	Expansion Strategy
31	Purchasing and Distribution
32	Franchise Program
"	Development Agreement
"	Franchise Agreement
36	Management
37	Term of Office
39	1996 Incentive Plan
40	Stock Options
41	Adjustments
42	Principal and Selling Stockholders
43	Certain Transactions
"	Reorganization
"	Leases
44	Stockholder Guarantees
"	Distributions
"	Description of Capital Stock
45	Convertible Debenture
46	Certain Anti-Takeover Matters
48	Underwriting
49	Legal Matters
"	Experts
"	Additional Information
51	Index to Financial Statements
52	Independent Auditors' Report
57	Notes to Combined Financial Statements
84	Item 13. Other Expenses of Issuance and Distribution
"	Item 14. Indemnification of Directors and Officers
85	Item 15. Recent Sales of Unregistered Securities
"	Item 16. Exhibits and Financial Statement Schedules
87	Item 17. Undertakings

S-1/A 1st Page of 91 TOC Top Previous Next Bottom Just 1st
 Sponsored Ads...







AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JULY 26, 1996 

                                                      REGISTRATION NO. 333-05785

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------

AMENDMENT NO. 1 
TO
FORM S-1

REGISTRATION STATEMENT
UNDER 
THE SECURITIES ACT OF 1933
------------------------

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

                                                        · Enlarge/Download Table
                                                                                                   
             KANSAS                          5812                           73-1369185             
(State or other jurisdiction of  (Primary Standard Industrial  (I.R.S. Employer Identification No.)
 incorporation or organization)  Classification Code Number)                                       

300 I.M.A. PLAZA
250 NORTH WATER STREET
WICHITA, KANSAS 67202-1213
316-267-7373
(Address, including zip code, and telephone number, including area code, of 
registrant's principal executive offices) 
--------------------------

ROBERT J. GERESI
CHIEF EXECUTIVE OFFICER 
NEW YORK BAGEL ENTERPRISES, INC.
300 I.M.A. PLAZA
250 NORTH WATER STREET
WICHITA, KANSAS 67202-1213
316-267-7373
(Name, address, including zip code, and telephone number, including area code,
of agent for service) 
--------------------------

COPIES OF COMMUNICATION TO: 

                                                                · Download Table
                                                                          
           GREGORY B. KLENDA, ESQ.               RICHARD F. DAHLSON, ESQ. 
KLENDA, MITCHELL, AUSTERMAN & ZUERCHER, L.L.C.   JACKSON & WALKER, L.L.P. 
               1600 EPIC CENTER                901 MAIN STREET, SUITE 6000
            301 NORTH MAIN STREET                DALLAS, TEXAS 75202-3797 
          WICHITA, KANSAS 67202-4888                   214-953-6000       
                 316-267-0331                                             

--------------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS 
PRACTICABLE AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
--------------------------

    If  any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to  Rule 415 under the Securities Act  of
1933, check the following box. / /                                              

    If  this Form  is filed  to register  additional securities  for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list  the  Securities  Act  registration statement  number  of  the  earlier
effective registration statement for the same offering. / /                     

    If  this Form  is a post-effective  amendment filed pursuant  to Rule 462(c)
under the Securities Act,  check the following box  and list the Securities  Act
registration  statement number  of the earlier  effective registration statement
for the same offering. / /                                                      

    If delivery of the prospectus is expected  to be made pursuant to Rule  434,
please check the following box. / /                                             
--------------------------

    THE  REGISTRANT HEREBY  AMENDS THIS REGISTRATION  STATEMENT ON  SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A  FURTHER  AMENDMENT  WHICH SPECIFICALLY  STATES  THAT  THIS  REGISTRATION
STATEMENT  SHALL THEREAFTER BECOME EFFECTIVE IN  ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT  OF 1933  OR UNTIL  THE REGISTRATION  STATEMENT SHALL  BECOME
EFFECTIVE  ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.                                                                  

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

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CROSS-REFERENCE SHEET 
PURSUANT TO ITEM 501(B) OF REGULATION S-K 

                                                        · Enlarge/Download Table

ITEM NUMBER OF FORM S-1 AND TITLE OF ITEM                                          PROSPECTUS CAPTION                  
----------------------------------------------------------------  -----------------------------------------------------
                                                                                                                       
       1.  Forepart of the Registration Statement and Outside                                                          
            Front Cover Page of Prospectus......................  Outside Front Cover Page                             

       2.  Inside Front and Outside Back Cover Pages of                                                                
            Prospectus..........................................  Inside Front Cover Page; Additional Information;     
                                                                   Outside Back Cover Page                             

       3.  Summary Information, Risk Factors and Ratio of                                                              
            Earnings to Fixed Charges...........................  Prospectus Summary; Risk Factors                     

       4.  Use of Proceeds......................................  Prospectus Summary; Risk Factors; S Corporation      
                                                                   Distributions; Use of Proceeds; Management's        
                                                                   Discussion and Analysis of Financial Condition and  
                                                                   Results of Operation                                

       5.  Determination of Offering Price......................  Outside Front Cover Page; Risk Factors; Underwriting 

       6.  Dilution.............................................  Risk Factors; Dilution                               

       7.  Selling Security Holders.............................  Outside Front Cover Page; Prospectus Summary; Risk   
                                                                   Factors; Principal and Selling Stockholders;        
                                                                   Underwriting                                        

       8.  Plan of Distribution.................................  Outside Front Cover Page; Underwriting               

       9.  Description of Securities to Be Registered...........  Description of Capital Stock                         

      10.  Interests of Named Experts and Counsel...............  Legal Matters; Experts                               

      11.  Information with Respect to the Registrant...........  Prospectus Summary; Risk Factors; S Corporation      
                                                                   Distributions; Dividend Policy; Use of Proceeds;    
                                                                   Dilution; Capitalization; Selected Combined         
                                                                   Financial Data; Management's Discussion and Analysis
                                                                   of Financial Condition and Results of Operations;   
                                                                   Business; Management; Principal and Selling         
                                                                   Stockholders; Certain Transactions; Description of  
                                                                   Capital Stock; Shares Eligible for Future Sale;     
                                                                   Combined Financial Statements                       

      12.  Disclosure of Commission Position on Indemnification                                                        
            for Securities Act Liabilities......................                            *                          

------------------------                                                        
*   Item is inapplicable or the answer thereto is in the negative and is omitted
from the Prospectus.                                                            

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INFORMATION   CONTAINED  HEREIN  IS  SUBJECT   TO  COMPLETION  OR  AMENDMENT.  A
REGISTRATION STATEMENT  RELATING TO  THESE SECURITIES  HAS BEEN  FILED WITH  THE
SECURITIES  AND EXCHANGE  COMMISSION. THESE SECURITIES  MAY NOT BE  SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR  TO THE TIME THE REGISTRATION STATEMENT  BECOMES
EFFECTIVE.  THIS  PROSPECTUS  SHALL  NOT  CONSTITUTE AN  OFFER  TO  SELL  OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE  SECURITIES
IN  ANY STATE IN WHICH SUCH OFFER,  SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.   

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SUBJECT TO COMPLETION, DATED JULY 26, 1996

2,000,000 SHARES

[LOGO]                                                                    
NEW YORK BAGEL ENTERPRISES, INC.
COMMON STOCK

    Of the 2,000,000 shares of Common Stock offered hereby, 1,800,000 shares are
being sold  by New  York Bagel  Enterprises, Inc.  (the "Company")  and  200,000
shares  are  being sold  by certain  stockholders of  the Company  (the "Selling
Stockholders"). See "Principal and Selling  Stockholders." The Company will  not
receive any proceeds from the sale of Common Stock by the Selling Stockholders. 

    Prior  to this  offering, there  has been  no public  market for  the Common
Stock. It is currently anticipated that  the initial public offering price  will
be  between $10.00 and $12.00 per share. For information relating to the factors
to  be  considered  in  determining  the  initial  public  offering  price,  see
"Underwriting."  The Common  Stock has been  approved for listing  on the Nasdaq
National Market under the symbol "NYBE," subject to notice of issuance.         

    SEE "RISK FACTORS" APPEARING ON  PAGES 7 TO 11  FOR A DISCUSSION OF  CERTAIN
FACTORS  THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK
OFFERED HEREBY.                                                                 
--------------------- 
THESE SECURITIES  HAVE  NOT  BEEN  APPROVED OR  DISAPPROVED  BY  THE  SECURITIES
AND  EXCHANGE COMMISSION OR ANY STATE  SECURITIES COMMISSION NOR HAS THE  
COMMISSION OR  ANY  STATE  SECURITIES COMMISSION  PASSED  UPON  THE   
ACCURACY  OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION    
TO THE CONTRARY IS A CRIMINAL OFFENSE.

                                                                · Download Table

                                                                    PROCEEDS TO 
                                PRICE    UNDERWRITING  PROCEEDS TO    SELLING   
                              TO PUBLIC    DISCOUNT     COMPANY(1)  STOCKHOLDERS
                                                                                
Per Share....................     $           $             $            $      
Total (2)....................     $           $             $            $      

(1) Before deducting estimated expenses of this offering of $700,000, payable by
the Company.                                                            

(2) The Company  and the Selling  Stockholders have granted  the Underwriters  a
    30-day  option  to purchase  up to  an additional  300,000 shares  of Common
    Stock, solely to cover over-allotments,  if any. See "Principal and  Selling
    Stockholders"  and "Underwriting." If the  Underwriters exercise this option
    in full,  the total  Price  to Public,  Underwriting Discount,  Proceeds  to
    Company  and Proceeds to Selling Stockholders will be $         , $        ,
$        and $        , respectively.                                   

------------------------

    The shares of Common Stock are  offered severally by the Underwriters  named
herein  subject to receipt and acceptance by  them and subject to their right to
reject any  order  in  whole  or  in part.  It  is  expected  that  certificates
representing  the shares will be  ready for delivery at  the offices of Rauscher
Pierce Refsnes, Inc., Dallas, Texas, on or about         , 1996.                

RAUSCHER PIERCE REFSNES, INC.                                J.C. BRADFORD & CO.

------------------

THE DATE OF THIS PROSPECTUS IS         , 1996 

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[Photograph depicting front facade and side of building, and outside seating of 
a Company restaurant.]

[Photograph depicting a selection of the Company's bagel delicatessen 
sandwiches, drinks and other food items.] 

[Photograph depicting the interior with table and booth seating of a Company
restaurant.]

[Photograph depicting products with Company logo.]

[United States map designating cities with Company-owned restaurants, franchised
restaurants, Company-owned restaurants under development and franchised 
restaurants under development.] 

[Photograph depicting product sack with Company logo and a selection of bagels
and cream cheeses.] 

[Photograph depicting the interior front order counter with menu board and bagel
display case of a Company restaurant.]

    IN  CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL  ABOVE THAT  WHICH MIGHT  OTHERWISE  PREVAIL IN  THE OPEN  MARKET.  SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.                     

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PROSPECTUS SUMMARY

    THE  FOLLOWING SUMMARY INFORMATION IS QUALIFIED  IN ITS ENTIRETY BY THE MORE
DETAILED INFORMATION  AND COMBINED  FINANCIAL  STATEMENTS, INCLUDING  THE  NOTES
THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. UNLESS OTHERWISE INDICATED, ALL
INFORMATION  CONTAINED IN THIS  PROSPECTUS (I) REFLECTS  A 1.4-FOR-1 STOCK SPLIT
EFFECTED ON JUNE 4, 1996, (II)  REFLECTS THE REORGANIZATION AND ACQUISITIONS  AS
DESCRIBED  HEREIN, (III) REFLECTS  THE CONVERSION ON A  ONE-FOR-ONE BASIS OF THE
CLASS B COMMON STOCK INTO CLASS A  COMMON STOCK AND THE RECLASSIFICATION OF  THE
CLASS  A COMMON  STOCK INTO COMMON  STOCK, AND  (IV) ASSUMES NO  EXERCISE OF THE
UNDERWRITERS' OVER-ALLOTMENT OPTION.                                            

    THIS PROSPECTUS CONTAINS FORWARD-LOOKING  STATEMENTS THAT INVOLVE RISKS  AND
UNCERTAINTIES.  THE COMPANY'S  ACTUAL RESULTS  MAY DIFFER  MATERIALLY FROM THOSE
DISCUSSED IN THE  FORWARD-LOOKING STATEMENTS.  FACTORS THAT MIGHT  CAUSE SUCH  A
DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN "RISK FACTORS."  

THE COMPANY 

    The  Company owns and franchises 50 quick-service New York Bagel restaurants
in 16 states that serve generous portions of fresh, high quality food with fast,
friendly service  at  an attractive  price-value  relationship. New  York  Bagel
restaurants  provide a selection of  up to 20 varieties  of bagels that are made
from scratch, boiled and baked throughout  the day in the traditional "New  York
style."  Breakfast menu  items include  a variety  of bagels  and custom-blended
cream  cheeses,  breakfast  bagel  sandwiches,  gourmet  coffees,  muffins   and
croissants.  Lunch and dinner items include  an assortment of bagel delicatessen
sandwiches, prepared  salads,  cookies  and soft  drinks.  The  restaurants  are
generally open Monday through Saturday from 6:30 a.m. to 8:00 p.m. and on Sunday
from  8:00 a.m. to 5:00 p.m.  Management believes that Company-owned restaurants
typically generate approximately 40% of their  sales before 11:00 a.m., with  an
average  ticket of approximately $3.00 during  such period and $4.00 thereafter.
Time studies performed on a periodic basis by the Company show that, on average,
breakfast customers are served within three  minutes of placing their order  and
lunch and dinner customers are served within five minutes.                      

    The  Company opened its first restaurant in  1986 and has grown by expanding
its base of  Company-owned restaurants and  selectively adding franchisees.  The
Company  has  developed  18 of  its  20 Company-owned  restaurants  in Oklahoma,
Kansas, Tennessee  and Texas.  In addition  to developing  new restaurants,  the
Company  acquired two  bagel restaurants  in December 1995,  one of  which was a
franchised New York Bagel restaurant. The Company commenced franchising the  New
York  Bagel  concept  in 1993  and  currently  has 20  franchisees  operating 30
restaurants in 15 states. The Company intends to continue expanding its  concept
and  contemplates  having  28  to  30  Company-owned  and  45  to  50 franchised
restaurants in operation by the end of 1996 and 45 to 50 Company-owned and 70 to
80 franchised restaurants by the end of 1997.                                   

    The Company  believes that  consumption of  bagels has  increased in  recent
years  as  consumers have  discovered  that bagels  are  a healthier,  lower fat
alternative to  other quick-service  foods  and are  a suitable  substitute  for
sandwich   breads.  Management  believes  that   the  market  for  retail  bagel
restaurants is fragmented and underserved,  and that the Company can  capitalize
on  the  demand for  fresh bagels  by expanding  the New  York Bagel  concept in
targeted markets.                                                               

    The Company presently targets mid-sized and smaller metropolitan markets, as
management believes  these  markets  typically  contain  fewer  competing  bagel
restaurants  and  more  favorable  lease  and  labor  environments  than  larger
metropolitan markets. In  each of  its targeted  markets, the  Company seeks  to
establish  a  strong  market presence  by  employing a  multiple  store strategy
involving a bakery restaurant  which produces bagels for  itself and for one  or
more  nearby satellite restaurants. In addition  to opening new restaurants, the
Company intends to  pursue selective  acquisitions of local  and regional  bagel
operations  with an established market presence. By entering underserved markets
and opening multiple restaurants, the Company hopes to maximize market share and
establish brand awareness. The Company and its franchisees have implemented this
bakery/satellite restaurant combination 15 times.                               

3 

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    By employing a  multiple store  strategy, the  Company focuses  not only  on
generating  attractive unit level economics, but also on the economic returns of
each target market. The Company's approach  to opening new restaurants has  been
to  minimize  its  required  investment  by  leasing  substantially  all  of its
locations. The Company  believes that bakery  restaurants can be  opened for  an
initial  investment,  including  leasehold  improvements,  furniture,  fixtures,
equipment, initial working  capital and pre-opening  expenses, of  approximately
$250,000,  with  satellite  restaurants  requiring  approximately  $150,000.  By
averaging these initial investment amounts within markets, the Company  believes
it  achieves attractive returns on investment.  During 1995 and the period ended
June 30, 1996, average sales per Company-owned restaurant opened throughout each
period were  $559,000 and  $293,000, respectively.  During 1995  and the  period
ended  June 30, 1996, the Company's restaurant  level cash flow margin was 17.1%
and 18.9%, respectively.                                                        

    The Company believes that the location, layout and design of its restaurants
contribute to  the success  of  its operations.  The Company's  restaurants  are
typically  located  in  strip  shopping  centers,  free-standing  buildings  and
downtown  business   districts  that   provide  visibility,   curb  appeal   and
accessibility.  A variety of  factors are considered in  selecting sites for the
Company's restaurants,  including  population density,  traffic  patterns,  area
demographics  and  competition.  The  Company's  restaurants  are  configured to
facilitate a smooth  flow of  dine-in and  carry-out traffic  while retaining  a
casual  cafe atmosphere.  The Company's prototypical  unit is  decorated in rich
colors and  dark woods  and contains  a  mixture of  booth, table  and  barstool
seating  and,  where  available,  outdoor seating.  Exposed  ceilings  with drop
lighting and a combination of tile and carpeted flooring are used to enhance its
comfortable ambiance.  Walls  are  covered  with  black  and  white  photographs
depicting  classic New York scenes. The flexibility of its restaurant design and
layout allow  its  restaurants  to  be  configured to  fit  a  wide  variety  of
locations, thereby increasing the number of suitable sites.                     

    Management   believes  that  comprehensive  training  is  essential  to  the
efficiency and consistency of its operations. Accordingly, the Company  conducts
an extensive 90-day training program for its restaurant managers and franchisees
that  is  comprised  of  approximately  ten  days  of  classroom  instruction on
administration, record keeping and inventory  control and approximately 80  days
of  on-site instruction on baking and food preparation at the Company's training
facility in Oklahoma City,  Oklahoma. In addition, the  Company provides a  team
for  on-site  assistance  during  the  initial ten  days  of  operation  at each
Company-owned restaurant and at a franchisee's initial franchised restaurant.   

    The Company's executive offices are located  at 300 I.M.A. Plaza, 250  North
Water  Street, Wichita,  Kansas 67202-1213,  and its  telephone number  is (316)
267-7373.                                                                       

THE OFFERING

                                                        · Enlarge/Download Table
                                                                                           
Common Stock offered by the Company.............. 1,800,000 shares                         
Common Stock offered by the Selling                                                        
 Stockholders.................................... 200,000 shares                           
Common Stock to be outstanding after this                                                  
 offering (1).................................... 4,600,000 shares                         
Use of Proceeds.................................. To repay bank indebtedness, finance the  
                                                  development of Company-owned restaurants,
                                                  for possible acquisitions of bagel       
                                                  restaurants, and for working capital and 
                                                  general corporate purposes.              
Nasdaq National Market Symbol.................... NYBE                                     

------------------------                                                        
(1) Excludes (i) 400,000 shares of Common Stock reserved for issuance under  the
    Company's  1996 Incentive Plan,  of which options  to acquire 271,000 shares
    are outstanding as of the date of this Prospectus and (ii) 19,320 shares  of
    Common  Stock  issuable upon  conversion  of the  Convertible  Debenture, as
    defined herein. See "Management -- 1996 Incentive Plan" and "Description  of
Capital Stock -- Convertible Debenture."                                

4 

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SUMMARY FINANCIAL AND RESTAURANT DATA 
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 

                                                        · Enlarge/Download Table

                                                                                                        TWENTY-SIX 
                                                              YEAR ENDED DECEMBER 31,      SIX MONTHS   WEEKS ENDED
                                                          -------------------------------  ENDED JUNE    JUNE 30,  
                                                            1993       1994     1995 (1)    30, 1995     1996 (2)  
                                                          ---------  ---------  ---------  -----------  -----------
                                                                                                 (UNAUDITED)       
                                                                                                                   
STATEMENT OF OPERATIONS DATA:                                                                                      
Total revenues..........................................  $   3,561  $   5,822  $   7,359   $   3,539   $   5,190  
Operating income........................................         99        647        666         394         676  
Earnings before income taxes............................         85        594        626         374         512  
Net earnings............................................         76        597        619         374         512  
Pro forma to reflect income taxes (3):                                                                             
  Net earnings..........................................                        $     380               $     311  
  Net earnings per share................................                        $    0.13               $    0.10  
Pro forma weighted average shares outstanding (in                                                                  
 thousands) (4).........................................                            2,978                   2,978  
RESTAURANT DATA:                                                                                                   
System-wide sales (5)...................................  $   3,581  $   7,260  $  13,232   $   5,623   $  10,544  
Company-owned restaurants (6):                                                                                     
  Average period sales per restaurant...................        470        524        559         279         293  
  Average period sales per restaurant (excluding limited                                                           
   hour restaurants) (7)................................        513        604        635         316         322  
  Same restaurant sales increase........................       21.0%      19.0%       9.8%       13.9%        5.1% 
Number of restaurants open at end of period:                                                                       
  Company-owned.........................................          9         12         15          12          20  
  Franchised............................................          2          9         25          16          30  
                                                          ---------  ---------  ---------  -----------  -----------
    Total...............................................         11         21         40          28          50  
                                                          ---------  ---------  ---------  -----------  -----------
                                                          ---------  ---------  ---------  -----------  -----------



                                                                   JUNE 30, 1996                                   
                                                          -------------------------------                          
                                                                                   AS                              
                                                                     PRO FORMA  ADJUSTED                           
                                                           ACTUAL       (8)        (9)                             
                                                          ---------  ---------  ---------                          
                                                                    (UNAUDITED)                                    
                                                                                                                   
BALANCE SHEET DATA:                                                                                                
Working capital (deficit)..............................................  $    (872)   $  (1,124)     $   12,775    
Total assets...........................................................      4,002        4,002          17,717    
Total debt.............................................................      3,930        3,930              86    
Stockholders' equity (deficit).........................................     (1,066)      (1,341)         16,373    

------------------------                                                        
(1) The  Company acquired two restaurants in December 1995. If such transactions
    had occurred on January 1, 1995,  "Total revenues," "Net earnings" and  "Net
    earnings  per share" would have  been approximately $8,761,000, $224,000 and
    $0.08, respectively, for the  year ended December 31,  1995, on a pro  forma
    basis.  The pro  forma results  do not  necessarily reflect  what would have
    occurred if  the  acquisitions  had  been  made  at  the  beginning  of  the
    respective  periods or the  results that may  occur in the  future. See "Pro
    Forma  Condensed  Combined  Statement   of  Operations"  and   "Management's
    Discussion  and Analysis of Financial Condition and Results of Operations --
Overview."                                                              

(2) Effective January 1, 1996, the Company elected to change its fiscal year end
    from a calendar year  end to a  52/53 week fiscal year,  ending on the  last
Sunday of the year, which consists of four 13-week periods.             

(3) Reflects a pro forma adjustment assuming the Company had been treated as a C
    corporation  rather than as an S corporation for income tax purposes for the
    periods presented. See "S Corporation Distributions" and Note 2(i) of  Notes
to Combined Financial Statements.                                       

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(4) See Note 2(i) of Notes to Combined Financial Statements.                    

(5) Reflects  total sales of  Company-owned restaurants and  sales of franchised
    restaurants as reported by franchisees or derived by the Company from  other
data reported by franchisees.                                           

(6) Reflects  restaurants  open  throughout the  entire  period  indicated. Same
    restaurant sales  reflects  restaurants that  were  open during  the  entire
period indicated and the entire corresponding prior period.             

(7) Limited  hour restaurants  are typically  open Monday  through Friday during
    business hours. As of June 30,  1996, there were five Company-owned  limited
hour restaurants and three franchised limited hour restaurants.         

(8) Gives  effect  to  (i)  an  accrual  for  the  distribution  of  $184,000 to
    stockholders as if the  Company had terminated its  S corporation status  at
    June 30, 1996 and made a distribution to the stockholders in connection with
    their  estimated  federal and  state income  tax  obligations, and  (ii) the
    establishment of a deferred tax liability in the estimated amount of $91,000
arising from the termination of the Company's S corporation status.     

(9) As adjusted to reflect the sale of 1,800,000 shares of Common Stock  offered
    by  the Company  hereby and  the application  of the  estimated net proceeds
therefrom. See "Use of Proceeds" and "Capitalization."                  

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RISK FACTORS

    IN   ADDITION  TO  THE  OTHER  INFORMATION  CONTAINED  IN  THIS  PROSPECTUS,
PROSPECTIVE INVESTORS SHOULD  CONSIDER THE FOLLOWING  FACTORS IN EVALUATING  THE
COMPANY  AND ITS BUSINESS  BEFORE PURCHASING ANY  OF THE SHARES  OF COMMON STOCK
OFFERED HEREBY.                                                                 

    EXPANSION.  As of June 30, 1996, there were 50 New York Bagel restaurants in
operation, consisting  of 20  Company-owned and  30 franchised  restaurants.  In
addition,   there  were  four  Company-owned  restaurants  and  four  franchised
restaurants in various stages  of development. By the  end of 1996, the  Company
contemplates having approximately 28 to 30 Company-owned and 45 to 50 franchised
restaurants  in operation.  The Company expects  to have approximately  45 to 50
Company-owned and 70  to 80 franchised  restaurants in operation  by the end  of
1997.  The Company intends to  use a significant portion  of the net proceeds of
this offering to develop additional  Company-owned restaurants. There can be  no
assurance  that the Company will be able  to open all of its planned restaurants
or that, if  opened, such restaurants  can operate profitably.  The opening  and
success of New York Bagel restaurants will depend on various factors, not all of
which  are within the  control of the Company,  including customer acceptance of
the Company's concept in  new markets, the availability  of suitable sites,  the
negotiation  of acceptable lease or purchase terms for new locations, permit and
regulatory compliance, the ability to meet construction schedules, the financial
and other capabilities of  the Company and its  franchisees, the ability of  the
Company  to successfully manage this anticipated expansion and to hire and train
personnel, and general economic and business conditions. Furthermore, because of
the Company's relatively small restaurant base, an unsuccessful restaurant could
have a more significant  adverse effect on the  Company's results of  operations
than would be the case for a company with a larger restaurant base.             

    The Company's expansion will also require the implementation and integration
of  enhanced  operational  and  financial  systems  and  additional  management,
operational and financial  resources. Failure to  implement and integrate  these
systems  and add  these resources  could have a  material adverse  effect on the
Company's results  of  operations  and  financial condition.  There  can  be  no
assurance  that  the Company  will be  able to  manage its  expanding operations
effectively or that it will  be able to maintain  or accelerate its growth.  The
Company  experienced growth in revenues and net income in 1995 and in the period
ended June 30, 1996. There can be no assurance that the Company will continue to
experience growth  in,  or  maintain  its present  level  of,  revenues  or  net
earnings.  See "Management's Discussion and  Analysis of Financial Condition and
Results of Operations" and "Business -- Expansion Strategy."                    

    DEPENDENCE ON FRANCHISEES.  The Company  realizes a portion of its  revenues
from   initial  franchise  fees   and  continuing  royalty   payments  from  its
franchisees. If  the Company's  franchisees  encounter business  or  operational
difficulties,  the Company's revenues from royalties will be adversely affected.
Such difficulties may also negatively impact  the Company's ability to sell  new
franchises.  Consequently, the  Company's financial  prospects are significantly
related to the success of its franchised restaurants, over which the Company has
limited direct operational control. There can  be no assurance that the  Company
will  be  able to  successfully attract  new franchisees  or that  the Company's
franchisees will be able to successfully operate existing or develop and operate
additional New York Bagel restaurants. See "Business -- Expansion Strategy"  and
"Business -- Franchise Program."                                                

    COMPETITION.  The quick-service restaurant industry is intensely competitive
and   characterized  by  relatively  low  barriers  to  entry.  New  York  Bagel
restaurants compete against  many well  established, quick-service  restaurants,
local  food establishments, supermarkets  and convenience stores,  many of which
have greater  product  and  name  recognition and  larger  financial  and  other
resources   than  the  Company.  An  increase  in  the  number  of  competitors,
particularly bagel restaurants  or delicatessens, in  the Company's  territories
could  have  an  adverse  impact  on the  Company's  results  of  operations and
expansion plans. See "Business -- Competition."                                 

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    LIMITED COMBINED OPERATING HISTORY.   Although the  business of the  Company
began in 1986, the Company commenced operations as a combined entity in December
1995  and, as  a result,  has a  limited combined  operating history  upon which
investors may base their evaluation of the Company's performance. As a result of
the Company's limited combined  operating history, period-to-period  comparisons
of  operating results may not be meaningful and results of operations from prior
periods may not be  indicative of future  results. See "Management's  Discussion
and Analysis of Financial Condition and Results of Operations."                 

    RESTAURANT   INDUSTRY.    The  Company   and  the  restaurant  industry  are
significantly affected by factors such as changes in local, regional or national
economic  conditions,  changes  in  consumer  tastes  and  concerns  about   the
nutritional  quality of quick-service foods. Multi-unit food service chains such
as the  Company  can  also  be substantially  adversely  affected  by  publicity
resulting  from  food  quality,  illness, injury  or  other  health  concerns or
operating  issues  stemming  from  one   restaurant  or  a  limited  number   of
restaurants.  In addition, factors  such as increases in  food, labor and energy
costs, the  availability  and cost  of  suitable restaurant  sites,  fluctuating
insurance rates, state and local regulations and the availability of an adequate
number  of  hourly-paid  employees  can  also  adversely  affect  the restaurant
industry.                                                                       

    DEPENDENCE ON KEY PERSONNEL.   The Company's future  success will be  highly
dependent  on the continued  efforts of senior management.  The Company does not
have employment agreements with any of  its senior management or employees.  The
loss  of the services of one or more of such key personnel could have a material
adverse effect upon the Company's  results of operations. The Company's  success
is  also dependent  upon its  ability to  attract and  retain skilled restaurant
managers and  employees and  the ability  of  its key  personnel to  manage  the
Company's  growth and integrate  its operations. There can  be no assurance that
the Company will be successful in  attracting and retaining such personnel.  See
"Management."                                                                   

    INCREASES  IN OPERATING  COSTS; INTERRUPTIONS IN  SUPPLIES.   An increase in
operating costs could adversely affect the profitability of the Company. Factors
such as  inflation,  increased food  and  labor costs,  including  the  proposed
increase  in the minimum hourly wage requirement, and employee benefit costs and
the availability  of  qualified management  and  other personnel  may  adversely
affect  the  profitability of  the Company.  The cost  and availability  of many
restaurant commodities are subject to fluctuations due to seasonality,  weather,
demand  and other factors.  The Company's restaurants  are dependent on frequent
deliveries of food  supplies and  any shortages  or interruptions  could have  a
material  adverse  effect  on  the  Company.  See  "Business  --  Purchasing and
Distribution."                                                                  

    GEOGRAPHIC CONCENTRATION.  All but one of the Company-owned restaurants  are
located in Oklahoma, Kansas and Tennessee. As a result, the Company's results of
operations  may be materially affected by  adverse business, economic or weather
conditions in  these  states. Although  the  Company plans  to  open  additional
restaurants  in new geographic areas, there can be no assurance that the current
geographic concentration  of the  Company's business  will not  have an  adverse
effect on its results of operations or financial condition in the future.       

    POSSIBLE  ACQUISITIONS.   The  Company's  growth strategy  includes possible
acquisitions of bagel restaurants. However, no  assurance can be given that  the
Company  will  be able  to  find attractive  acquisition  candidates, consummate
additional acquisitions  or  that it  will  successfully integrate,  convert  or
operate any acquired business. In the event that the Company makes acquisitions,
there  can be  no assurance that  any such acquisition  and resulting conversion
expenses, including loss of restaurant sales during the remodel period, will not
have  a  material   adverse  effect  upon   the  Company's  operating   results,
particularly  during the  period in which  such operations  are being integrated
into the Company. Furthermore,  the Company's ability  to make acquisitions  may
depend  upon its ability to obtain financing. There can be no assurance that the
Company will be able to obtain  financing on acceptable terms. See "Business  --
Expansion Strategy."                                                            

    FLUCTUATIONS  IN QUARTERLY  RESULTS.  The  timing of  restaurant openings or
acquisitions, recognition  of  franchise fee  income  and seasonal  factors  may
result in fluctuations in quarterly operating results                           

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of  the Company.  In accordance  with generally  accepted accounting principles,
franchise and  development  fees and  the  corresponding deferred  charges  with
respect  to each franchise or development agreement are not recognized as income
until a  restaurant  commences  operations.  There  can  be  no  assurance  that
quarterly  fluctuations  will  not  continue  and,  accordingly,  the  Company's
financial results for a particular quarter may not be indicative of results  for
an entire year. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations -- Quarterly Financial Data."                         

    CONTROL  OF COMPANY.   Following completion of  this offering, the directors
and executive officers of the Company will beneficially own approximately  45.3%
of  the  outstanding Common  Stock of  the Company  (approximately 42.3%  if the
Underwriters' over-allotment  option is  exercised in  full). In  addition,  the
existing  stockholders and  the Company are  parties to  a certain stockholders'
agreement (the "Stockholders' Agreement"), which, among other things, sets forth
certain agreements regarding the  designation and election  of directors of  the
Company.  These  stockholders will  own approximately  56.5% of  the outstanding
Common Stock following completion of  this offering (approximately 52.8% if  the
Underwriters'  over-allotment  option  is  exercised  in  full).  Due  to  their
ownership position  and  the  Stockholders' Agreement,  such  stockholders  will
retain  the power  to direct  the Company's  business and  affairs through their
ability to control the outcome of elections of the Company's Board of  Directors
and  to take other actions that require the vote or approval of the stockholders
of the Company. See "Management  -- Stockholders' Agreement" and "Principal  and
Selling Stockholders."                                                          

    BENEFITS  OF  OFFERING  TO  CERTAIN STOCKHOLDERS.    The  Company's existing
stockholders are hereby offering an aggregate of 200,000 shares of Common  Stock
(230,000  shares  if the  Underwriters'  over-allotment option  is  exercised in
full). The Company will not receive any proceeds from the sale of shares by  the
Selling Stockholders. In addition, the Company intends to use approximately $4.5
million  of the  proceeds of  this offering to  retire bank  indebtedness of the
Company which certain stockholders have guaranteed either jointly and  severally
or  severally  on  either  a  limited or  unlimited  basis.  A  portion  of such
indebtedness was used to fund  prior distributions to stockholders. The  Company
also  intends to use  a portion of the  net proceeds of this  offering to fund a
distribution to existing stockholders in connection with their estimated federal
and state income tax obligations attributable to the Company's 1996 earnings. If
the Company had terminated  its S corporation  status as of  June 30, 1996,  the
Company's  S corporation taxable  income for 1996  would have been approximately
$409,000 and the resulting distribution would have been approximately  $184,000.
There can be no assurance as to the actual amount of the Company's S corporation
taxable  income for 1996 up to the date the Company terminates its S corporation
status  or  the  amount  of   the  related  distribution.  See  "S   Corporation
Distributions,"   "Use  of  Proceeds,"   "Certain  Transactions  --  Stockholder
Guarantees" and "Principal and Selling Stockholders."                           

    GOVERNMENT REGULATION.  The  Company is subject  to numerous federal,  state
and  local government regulations,  including those relating  to the preparation
and sale of food,  the sale of alcoholic  beverages, public health and  building
and  zoning requirements. Also,  the Company and its  franchisees are subject to
laws  governing  their  relationship  with  employees,  including  minimum  wage
requirements,  overtime,  working conditions  and citizenship  requirements. The
Company is  also subject  to federal  regulation and  certain state  laws  which
govern  the  offer and  sale  of franchises.  Many  state franchise  laws impose
substantive requirements  on  franchise  agreements,  including  limitations  on
non-competition  provisions and termination or  non-renewal of a franchise. Some
states require that  certain franchise offering  materials be registered  before
franchises can be offered or sold in that state. The failure to obtain or retain
food licenses, alcoholic beverage licenses or approvals to sell franchises could
adversely  affect the Company's and its  franchisees' results of operations. The
future enactment,  adoption  or  amendment  of  laws  or  regulations,  such  as
establishing basic franchisee rights, increasing the minimum wage or other costs
associated  with  employees, could  adversely  affect the  Company's  results of
operations. See  "Business --  Franchise Program"  and "Business  --  Government
Regulation."                                                                    

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    TRADEMARKS  AND SERVICE  MARKS.  The  Company is  aware of the  use by other
persons and entities in certain geographic areas of names and marks that are the
same as or similar to the Company's marks. Some of these persons or entities may
have prior  rights to  those  names or  marks  in their  respective  localities.
Negative   publicity  surrounding  such  businesses  may  adversely  affect  the
Company's operations in those markets. In addition, the Company's marks  contain
common  descriptive words and thus may be subject to challenge by users of these
words, alone or in combination with  other words, which describe other  services
or products. Accordingly, there is no assurance that the Company's marks will be
available  in all  locations or that  a challenge  to the Company's  use of such
marks will not result in adverse  consequences, including a judgment that  would
entail  damages and/or the discontinuation of the Company's use of its marks. It
is the Company's policy to utilize  other compatible marks in areas where  there
are preexisting competing marks. See "Business -- Trademarks and Service Marks."

    CLASSIFIED  BOARD  OF DIRECTORS.   Concurrent  with  the completion  of this
offering, the  Company's  Restated and  Amended  Articles of  Incorporation  and
Restated  and Amended Bylaws  will provide for a  classified Board of Directors.
The terms of each class  expire in consecutive years so  that only one class  is
elected  in any  given year.  Such provisions  could delay,  deter or  prevent a
merger, consolidation, tender offer, or other business combination or change  of
control  involving  the  Company  that  some  or  a  majority  of  the Company's
stockholders might consider to be in  their best interests, including offers  or
attempted takeovers that might otherwise result in such stockholders receiving a
premium  over the market price for the  Common Stock. See "Management -- Term of
Office" and "Description of Capital Stock -- Certain Anti-Takeover Matters."    

    PREFERRED STOCK.   Concurrent  with  the completion  of this  offering,  the
Company's  Restated  and  Amended  Articles of  Incorporation  and  Restated and
Amended Bylaws will authorize  shares of Preferred Stock  with respect to  which
the  Board of Directors  of the Company will  have the power  to fix the rights,
preferences, privileges and restrictions without  any further vote or action  by
the  stockholders.  Depending  upon  the rights  of  such  Preferred  Stock, the
issuance of Preferred Stock  could have an adverse  effect on holders of  Common
Stock by delaying or preventing a change in control of the Company, diluting the
voting  rights  of  holders  of  Common Stock,  making  removal  of  the present
managment of the Company more difficult  or reducing or restricting the  payment
of  dividends and other distributions to the holders of Common Stock, including,
without limitation,  any  liquidation  preferences  which  may  relate  to  such
Preferred  Stock.  Such  provisions  could delay,  deter  or  prevent  a merger,
consolidation, tender offer, or other business combination or change of  control
involving  the Company  that some  or a  majority of  the Company's stockholders
might consider to  be in  their best  interests, including  offers or  attempted
takeovers  that might otherwise result in  such stockholders receiving a premium
over the market price for the Common Stock. See "Description of Capital Stock --
Preferred Stock."                                                               

    SUPERMAJORITY STOCKHOLDER VOTES.   Concurrent  with the  completion of  this
offering,  the  Company's Restated  and  Amended Articles  of  Incorporation and
Restated and Amended Bylaws will require the affirmative vote of the holders  of
at  least  two-thirds  of  the  outstanding capital  stock  in  order  to remove
directors for cause, amend the Bylaws and approve certain business  combinations
with  respect  to a  "related  person." Such  provisions  could delay,  deter or
prevent a merger, consolidation, tender offer, or other business combination  or
change of control involving the Company that some or a majority of the Company's
stockholders  might consider to be in  their best interests, including offers or
attempted takeovers that might otherwise result in such stockholders receiving a
premium over the market price for the Common Stock. See "Description of  Capital
Stock -- Certain Anti-Takeover Matters."                                        

    DILUTION;   ABSENCE  OF  PRIOR   PUBLIC  MARKET  AND   VOLATILITY  OF  STOCK
PRICE.   This offering  will result  in immediate  substantial dilution  of  net
tangible book value of $7.54 per share to new investors, which amount represents
the difference between the pro forma net tangible book value per share after the
offering and an assumed initial public offering price of $11.00 per share. Prior
to this offering, there has been no public market for the Common Stock. Although
the  Company's Common Stock has been approved for listing on the Nasdaq National
Market,   subject    to    notice    of    issuance,    there    can    be    no

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assurance  that an  active market  will develop  or be  sustained following this
offering; therefore, a purchaser of the Common Stock may not be able to  readily
liquidate  its investment in the Common Stock. The initial public offering price
for the shares of Common Stock sold in this offering will be determined  through
negotiations between the Company and the representatives of the underwriters and
will  not necessarily reflect  the market prices for  the Common Stock following
this offering.                                                                  

    Market  prices  for  the  Common  Stock  following  this  offering  will  be
influenced by a number of factors, including the Company's operating results and
other factors affecting the Company specifically and the restaurant industry and
the  financial markets generally, as well as the liquidity of the market for the
Common Stock. The  Company believes that  the market price  of its Common  Stock
will  reflect expectations that the Company will  be able to continue to operate
its restaurants profitably and to develop new restaurants at a significant  rate
and operate them profitably. If the Company is unable to operate its restaurants
as  profitably and develop restaurants at  a pace that reflects the expectations
of the market, investors could sell shares  of the Common Stock at or after  the
time  that  it becomes  apparent  that such  expectations  may not  be realized,
resulting in a decrease in the market price of the Common Stock. In recent years
the stock market  has experienced  extreme price and  volume fluctuations.  This
volatility  has  had a  significant effect  on the  market prices  of securities
issued by many companies for  reasons unrelated to their operating  performance.
See "Dilution" and "Underwriting."                                              

    SHARES  ELIGIBLE FOR  FUTURE SALE.   Upon  completion of  this offering, the
Company will have outstanding 4,600,000 shares of Common Stock (4,870,000 shares
of Common  Stock if  the  Underwriters' over-allotment  option is  exercised  in
full).  Of these  shares, the  shares sold  in this  offering will  be tradeable
without restriction  unless they  are purchased  by affiliates  of the  Company.
Shares  of Common Stock outstanding prior to completion of this offering will be
"restricted securities"  as  that term  is  defined  in Rule  144  ("Rule  144")
promulgated under the Securities Act of 1933, as amended (the "Securities Act").
These  "restricted securities,"  and any shares  purchased by  affiliates of the
Company in  this offering  may be  publicly sold  only if  registered under  the
Securities  Act  or  if sold  in  accordance  with an  available  exemption from
registration, such  as those  provided by  Rule 144.  The holders  of  2,600,000
shares  of such "restricted securities" have agreed that they will not, directly
or indirectly, sell or otherwise dispose of  any of such shares for a period  of
180 days after the date of this Prospectus, without the prior written consent of
Rauscher  Pierce  Refsnes,  Inc.,  on  behalf  of  the  representatives  of  the
underwriters. No prediction can be  made as to the  effect, if any, that  future
sales  of shares, or the  availability of shares for  future sales, will have on
the market price of the Common Stock. The sale of substantial amounts of  Common
Stock, or the perception that such sales could occur, could adversely affect the
prevailing  market price for  the Common Stock. See  "Shares Eligible For Future
Sale."                                                                          

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S CORPORATION DISTRIBUTIONS 

    Since January 1,  1994, the Company  and certain of  the Prior Entities  (as
defined herein) have been treated for federal and state income tax purposes as S
corporations under Subchapter S of the Internal Revenue Code of 1986, as amended
(the  "Code"). Since  such date,  the Company's earnings  have been  and will be
taxed for federal and most state  income tax purposes directly to the  Company's
stockholders,  rather than to the Company, through the date immediately prior to
the date of termination of the Company's S corporation status (the  "Termination
Date").  The Termination  Date will  occur on the  day immediately  prior to the
completion of this offering. The Company will be responsible for the payment  of
all federal and state income taxes on earnings beginning on the Termination Date
and  continuing thereafter.  See Notes  2 and 9  of Notes  to Combined Financial
Statements and Pro Forma Balance Sheet as of June 30, 1996.                     

    Certain Prior Entities paid cash distributions to their stockholders in  the
aggregate  amounts of  approximately $394,000 and  $2.5 million  during 1994 and
1995,  respectively.   See   "Certain  Transactions   --   Distributions."   The
distributions made in 1995 were in excess of the earnings of such Prior Entities
and  were  partially funded  by  borrowings of  such  Prior Entities  which were
assumed by the Company in connection with the Reorganization, as defined herein.
The Company intends to repay  all of its bank borrowings  with a portion of  the
net  proceeds of this offering. The Company also intends to use a portion of the
net  proceeds  of  this  offering  to  fund  a  distribution  to  the   existing
stockholders  in connection  with their estimated  federal and  state income tax
obligations attributable to the Company's 1996 earnings prior to the Termination
Date. If the  Company had terminated  its S  corporation status as  of June  30,
1996,  the  Companys' S  corporation  taxable income  for  1996 would  have been
approximately  $409,000  and   the  resulting  distribution   would  have   been
approximately $184,000. There can be no assurance as to the actual amount of the
Company's  S corporation  taxable income  for 1996  up to  the date  the Company
terminates its S corporation status or  the amount of the related  distribution.
Under  federal tax laws, if the Company  fails to distribute its undistributed S
corporation earnings within a limited  period of time following the  Termination
Date,  a later distribution could be taxed as a dividend to the stockholders. No
S corporation distributions will be made to the stockholders in connection  with
the  Company's earnings  for any  period beginning  on or  after the Termination
Date.                                                                           

    Had the Company's S corporation election terminated effective June 30, 1996,
the Company  would have  recognized a  deferred tax  liability of  approximately
$91,000  at the current corporation tax  rate pursuant to Statement of Financial
Accounting  Standards  No.  109,  which  represents  the  cumulative  amount  of
temporary  differences that  have been  deducted by  the Company  for income tax
purposes but have not yet been  expensed for financial accounting purposes.  See
"Selected  Combined Financial Data" and  Notes 2, 9 and  15 of Notes to Combined
Financial Statements.                                                           

DIVIDEND POLICY 

    The Company currently intends  to retain all earnings  to provide funds  for
its  operations and  expansion, and  therefore does  not anticipate  paying cash
dividends or making any other distributions on its shares of Common Stock in the
foreseeable future. The Company's future  dividend policy will be determined  by
its Board of Directors based on various factors, including the Company's results
of    operations,   financial   condition,   business   opportunities,   capital
requirements, credit  restrictions  and  such  other factors  as  the  Board  of
Directors may deem relevant.                                                    

    The  Company and  certain Prior Entities  have been treated  for federal and
state income tax  purposes as  S corporations under  the Code  since January  1,
1994.  As a  result, earnings  of the  Company were  subject to  taxation at the
stockholder level rather than the corporate level for federal and certain  state
income  tax  purposes.  Certain  of  the  Prior  Entities  have  previously made
distributions to their  stockholders in connection  with the Reorganization  and
the Company intends to make distributions to its stockholders in connection with
its  status as an S corporation. However, no S corporation distributions will be
made to the existing stockholders in connection with the Company's earnings  for
any  period  beginning on  or  after the  Termination  Date. See  "S Corporation
Distributions."                                                                 

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USE OF PROCEEDS 

    The net proceeds from the sale of the shares of Common Stock offered by  the
Company  are estimated  to be  approximately $17.7  million (approximately $20.5
million if  the  Underwriter's  over-allotment option  is  exercised  in  full),
assuming  an  initial  public  offering  price of  $11.00  per  share  and after
deducting the underwriting discount and  other estimated offering expenses.  The
Company  will not  receive any proceeds  from the  sale of the  shares of Common
Stock by the Selling Stockholders.                                              

    The Company intends to  use approximately $4.5 million  of the net  proceeds
for  repayment of indebtedness, as discussed  below, and an amount sufficient to
fund a  distribution  to the  existing  stockholders in  connection  with  their
estimated federal and state income tax obligations attributable to the Company's
1996 earnings prior to the Termination Date. If the Company had terminated its S
corporation  status as  of June  30, 1996,  the Company's  S corporation taxable
income for  1996  would  have  been approximately  $409,000  and  the  resulting
distribution   would  have  been  approximately  $184,000.  See  "S  Corporation
Distributions." The balance of the net  proceeds, together with cash flows  from
operations,  will  be  used  to  finance  future  development  of  Company-owned
restaurants, possible acquisitions, working capital requirements and for general
corporate purposes.  The Company  presently does  not have  any specific  plans,
arrangements,  understandings or agreements regarding any material acquisitions;
however, the Company will  continue to evaluate  suitable acquisitions of  bagel
restaurant businesses as they are identified.                                   

    The Company intends to use approximately $4.5 million of the net proceeds to
repay  all indebtedness outstanding under its bank financing, approximately $3.8
million of which was outstanding as of June 30, 1996 and up to $747,500 of which
has been, or is anticipated  to be, incurred subsequent  to June 30, 1996.  This
bank debt consists of the following:                                            

    - A  loan agreement (the "Loan Agreement"),  the proceeds of which were used
      to fund stockholder  distributions and for  working capital purposes.  The
      Loan  Agreement bears interest at the prime  rate plus 1.0% (9.25% at June
      30, 1996), has a maturity date of December 28, 2000 and had an outstanding
balance of approximately $2.5 million as of June 30, 1996.          

    - Six term notes (the "Term Notes"), the proceeds of which are being used to
      fund the current development of Company-owned restaurants. The Term  Notes
      bear interest at the prime rate plus 0.5% (8.75% at June 30, 1996), have a
      maturity date of June 15, 2003 and had an aggregate outstanding balance of
approximately $800,000 as of June 30, 1996.                         

    - A  term  loan  (the  "Nashville Note")  incurred  in  connection  with the
      acquisition of Nashville Bagel Co., Inc. The Nashville Note bears interest
      at the prime rate plus 0.5% (8.75% at June 30, 1996), has a maturity  date
      of March 26, 2003 and had an outstanding balance of approximately $487,000
as of June 30, 1996.                                                

    - A  term loan (the "Stillwater Note") dated July 10, 1996 for $300,000 used
      to purchase land  and building  for an additional  restaurant location  in
      Stillwater, Oklahoma. The Stillwater Note bears interest at the prime rate
      plus 0.5% (8.75% at July 10, 1996), and has a maturity date of January 10,
2007.                                                               

    - A  term loan (the "Springfield Note") dated July 8, 1996 for $125,000 used
      to fund  the development  of a  Company-owned restaurant  in  Springfield,
      Missouri.  The Springfield Note bears interest at the prime rate plus 0.5%
(8.75% at July 8, 1996), and has a maturity date of October 8, 2001.

    - A term loan (the "Remodel Note") dated July 8, 1996 for $172,500 used  for
      funding  of the remodeling of  three existing Company-owned restaurants in
      Oklahoma. The Remodel  Note bears  interest at  the prime  rate plus  0.5%
(8.75% at July 8, 1996) and has a maturity date of July 8, 2001.    

    - A  term loan (the "Lubbock Note") dated July 15, 1996 for $150,000 used to
      fund the development of a Company-owned restaurant in Lubbock, Texas.  The
      Lubbock Note bears interest at the prime rate plus 0.5% (8.75% at July 15,
1996), and has a maturity date of October 15, 2003.                 

    See  Note  7 of  the  Notes to  Combined  Financial Statements  and "Certain
Transactions."                                                                  

    Pending use  of the  proceeds as  set forth  above, the  Company intends  to
invest  the  net  proceeds  in  interest-bearing,  short-term,  investment-grade
securities.                                                                     

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DILUTION

    At June  30, 1996,  the Company  had a  pro forma  net tangible  book  value
(deficit) of approximately $(1.8 million), or $(0.65) per share of Common Stock.
Net  tangible book value per share of  Common Stock is defined as total tangible
assets of the  Company less total  liabilities, divided by  the total number  of
shares  of  Common  Stock outstanding,  without  giving effect  to  the possible
exercise of outstanding  stock options  or other  convertible securities.  After
giving  effect to the  sale of the shares  of Common Stock  offered hereby at an
assumed initial public offering price of $11.00 per share and the application of
the estimated net proceeds therefrom, the  pro forma net tangible book value  of
the  Company at June  30, 1996 would  have been approximately  $15.9 million, or
$3.46 per share. This represents an immediate increase in pro forma net tangible
book value of  approximately $4.11 per  share to existing  stockholders, and  an
immediate  dilution of  $7.54 per  share to  new investors  purchasing shares of
Common Stock in  this offering. The  following table illustrates  the per  share
dilution to new investors:                                                      

                                                                · Download Table
                                                                                 
Assumed initial public offering price per share.......................  $   11.00
  Pro forma net tangible book value (deficit) per share....  $   (0.65)          
  Increase in net tangible book value per share                                  
   attributable to payments by investors of Common Stock in                      
   this offering...........................................       4.11           
                                                             ---------           
Pro forma net tangible book value per share after this offering.......       3.46
                                                                        ---------
Dilution per share to new investors...................................  $    7.54
                                                                        ---------
                                                                        ---------

    The  following table summarizes, at  June 30, 1996, the  number of shares of
Common Stock purchased  from the Company,  the total consideration  paid to  the
Company  and the average price  paid per share by  existing stockholders and new
investors purchasing  shares  in this  offering  at an  assumed  initial  public
offering price of $11.00 per share:                                             

                                                        · Enlarge/Download Table

                                              SHARES PURCHASED(1)(2)                                             
                                                                           TOTAL CONSIDERATION                   
                                             ------------------------  ---------------------------  AVERAGE PRICE
                                               NUMBER       PERCENT        AMOUNT        PERCENT      PER SHARE  
                                             -----------  -----------  --------------  -----------  -------------
                                                                                                                 
Existing stockholders.......................   2,800,000        60.9%  $      185,650         0.9%    $    0.07  
New investors...............................   1,800,000        39.1       19,800,000        99.1         11.00  
                                             -----------       -----   --------------       -----                
  Total.....................................   4,600,000       100.0%  $   19,985,650       100.0%               
                                             -----------       -----   --------------       -----                
                                             -----------       -----   --------------       -----                

------------------------                                                        
(1) Sales  by Selling  Stockholders in this  offering will reduce  the number of
    shares held by  existing stockholders to  2,600,000, or 56.5%  of the  total
    number  of shares of Common Stock to be outstanding after this offering, and
    will increase  the number  of  shares held  by  new investors  to  2,000,000
    shares, or 43.5% of the total shares of Common Stock to be outstanding after
   this offering. See "Principal and Selling Stockholders" and "Underwriting."

(2) Excludes  (i) 400,000 shares of Common Stock reserved for issuance under the
    Company's 1996 Incentive Plan,  of which options  to acquire 271,000  shares
    are  outstanding as of the date of this Prospectus and (ii) 19,320 shares of
    Common Stock  issuable  upon conversion  of  the Convertible  Debenture,  as
    defined  herein. See "Management -- 1996 Incentive Plan" and "Description of
Capital Stock -- Convertible Debenture."                                

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CAPITALIZATION

    The following table sets forth the short-term debt and capitalization of the
Company at June 30, 1996 (i) on an actual basis, (ii) on a pro forma basis as if
the Company had terminated its S corporation status as of June 30, 1996 and made
a distribution to the  stockholders in connection  with their estimated  federal
and  state income tax obligations,  and (iii) as adjusted  to give effect to the
sale of 1,800,000 shares  of Common Stock  offered by the  Company hereby at  an
assumed initial public offering price of $11.00 per share and the application of
the  estimated  net  proceeds  therefrom. This  information  should  be  read in
conjunction with "Management's  Discussion and Analysis  of Financial  Condition
and  Results of Operations" and the  Company's Combined Financial Statements and
the Notes thereto included elsewhere in this Prospectus. See "Use of Proceeds." 

                                                        · Enlarge/Download Table

                                                                                         JUNE 30, 1996           
                                                                              -----------------------------------
                                                                               ACTUAL     PRO FORMA   AS ADJUSTED
                                                                              ---------  -----------  -----------
                                                                                    (DOLLARS IN THOUSANDS)       
                                                                                                                 
Short-term debt.............................................................. $     649   $     649    $      29 
                                                                              ---------  -----------  -----------
                                                                              ---------  -----------  -----------
Distributions payable........................................................        49         233           49 
                                                                              ---------  -----------  -----------
                                                                              ---------  -----------  -----------
Long-term debt, less current portion......................................... $   3,281   $   3,281    $      86 
Stockholders' equity (deficit):                                                                                  
  Preferred stock, 5,000,000 shares authorized, no par value, none issued or                                     
   outstanding (1)...........................................................    --          --           --     
  Common stock, $0.01 par value, 30,000,000 shares authorized; 2,800,000                                         
   shares issued and outstanding, actual; 4,600,000 shares issued and                                            
   outstanding, as adjusted (2)..............................................        28          28           46 
  Additional paid-in capital (deficit).......................................       158      (1,369)      16,327 
  Accumulated deficit........................................................    (1,252)     --           --     
                                                                              ---------  -----------  -----------
Total stockholders' equity (deficit).........................................    (1,066)     (1,341)      16,373 
                                                                              ---------  -----------  -----------
Total capitalization......................................................... $   2,215   $   1,940    $  16,459 
                                                                              ---------  -----------  -----------
                                                                              ---------  -----------  -----------

------------------------                                                        
(1) Concurrent with the completion of this offering, the Company's Restated  and
    Amended  Articles of Incorporation will  authorize the issuance of preferred
stock. See "Description of Capital Stock."                              

(2) Excludes (i) 400,000 shares of Common Stock reserved for issuance under  the
    Company's  1996 Incentive Plan,  of which options  to acquire 271,000 shares
    are outstanding as of the date of this Prospectus and (ii) 19,320 shares  of
    Common  Stock  issuable upon  conversion  of the  Convertible  Debenture, as
    defined herein. See "Management -- 1996 Incentive Plan" and "Description  of
Capital Stock -- Convertible Debenture."                                

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SELECTED COMBINED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA) 

    The  following table  sets forth  selected combined  financial data  for the
Company at  the dates  and  for the  periods  indicated. The  selected  combined
financial  data at December 31, 1994  and 1995 and for each  of the years in the
three-year period ended December  31, 1995 have been  derived from the  Combined
Financial Statements of the Company which have been audited by KPMG Peat Marwick
LLP,  independent certified public accountants, and which are included elsewhere
in this Prospectus. The selected combined  financial data at December 31,  1991,
1992  and 1993  and June 30,  1996, and  for each of  the years  in the two-year
period ended December 31, 1992, and for  the six months ended June 30, 1995  and
the  twenty-six weeks ended June 30, 1996,  have been prepared on the same basis
as the  audited  financial statements,  have  been derived  from  the  unaudited
Combined  Financial Statements of  the Company for such  periods and include, in
the opinion  of  management, all  adjustments  (consisting of  normal  recurring
adjustments)  necessary for the fair presentation  of the financial position and
combined results of operations at and  for such periods. The Company's  combined
results  of operations for the  twenty-six weeks ended June  30, 1996 may not be
indicative of its  combined results of  operations for the  full year.  Selected
combined  financial data should be read in conjunction with, and is qualified in
its entirety by,  "Management's Discussion and  Analysis of Financial  Condition
and  Results of Operations" and the Combined Financial Statements of the Company
and the Notes thereto appearing elsewhere in this Prospectus.                   

                                                        · Enlarge/Download Table

                                                                                 YEAR ENDED DECEMBER 31,                
                                                                  ----------------------------------------------------- 
                                                                    1991       1992       1993       1994      1995(1)  
                                                                  ---------  ---------  ---------  ---------  --------- 
                                                                      (UNAUDITED)                                       
                                                                                                                        
STATEMENT OF OPERATIONS DATA:                                                                                           
Revenues:                                                                                                               
  Sales from Company-owned restaurants........................... $   1,596  $   2,438  $   3,539  $   5,653  $   6,875 
  Franchise revenues.............................................    --         --             22        169        484 
                                                                  ---------  ---------  ---------  ---------  --------- 
    Total revenues...............................................     1,596      2,438      3,561      5,822      7,359 
Costs and expenses:                                                                                                     
  Cost of sales..................................................       789      1,192      1,527      2,280      2,612 
  Restaurant operating expenses..................................       594        985      1,386      2,326      3,084 
  General and administrative expenses............................       152        203        469        452        838 
  Depreciation and amortization..................................        43         57         80        117        159 
                                                                  ---------  ---------  ---------  ---------  --------- 
    Total costs and expenses.....................................     1,578      2,437      3,462      5,175      6,693 
    Operating income.............................................        18          1         99        647        666 
Interest expense, net............................................        20         18         14         53         40 
                                                                  ---------  ---------  ---------  ---------  --------- 
  Earnings (loss) before income taxes............................        (2)       (17)        85        594        626 
Income tax expense (benefit).....................................         2         (1)         9         (3)         7 
                                                                  ---------  ---------  ---------  ---------  --------- 
    Net earnings (loss).......................................... $      (4) $     (16) $      76  $     597  $     619 
                                                                  ---------  ---------  ---------  ---------  --------- 
                                                                  ---------  ---------  ---------  ---------  --------- 
Pro forma to reflect income taxes (3):                                                                                  
  Net earnings...................................................                                             $     380 
  Net earnings per share.........................................                                             $    0.13 
Pro forma weighted average shares outstanding (4)................                                                 2,978 



                                                                                      DECEMBER 31,                      
                                                                  ----------------------------------------------------- 
                                                                    1991       1992       1993       1994       1995    
                                                                  ---------  ---------  ---------  ---------  --------- 
                                                                            (UNAUDITED)                                 
                                                                                                                        
BALANCE SHEET DATA:                                                                                                     
Working capital deficit.......................................... $      (4) $     (67) $    (171) $    (120) $    (368)
Total assets.....................................................       294        347        819        872      2,295 
Total debt.......................................................       234        230        560        359      3,365 
Stockholders' equity (deficit)...................................        16         51        126        159     (1,578)


                                                                               TWENTY-SIX                               
                                                                  SIX MONTHS   WEEKS ENDED                              
                                                                  ENDED JUNE    JUNE 30,                                
                                                                   30, 1995      1996(2)                                
                                                                  -----------  -----------                              
                                                                        (UNAUDITED)                                     
                                                                                                                        
STATEMENT OF OPERATIONS DATA:                                                                                           
Revenues:                                                                                                               
  Sales from Company-owned restaurants...........................  $   3,345    $   4,850                               
  Franchise revenues.............................................        194          340                               
                                                                  -----------  -----------                              
    Total revenues...............................................      3,539        5,190                               
Costs and expenses:                                                                                                     
  Cost of sales..................................................      1,273        1,733                               
  Restaurant operating expenses..................................      1,433        2,202                               
  General and administrative expenses............................        375          402                               
  Depreciation and amortization..................................         64          177                               
                                                                  -----------  -----------                              
    Total costs and expenses.....................................      3,145        4,514                               
    Operating income.............................................        394          676                               
Interest expense, net............................................         20          164                               
                                                                  -----------  -----------                              
  Earnings (loss) before income taxes............................        374          512                               
Income tax expense (benefit).....................................     --           --                                   
                                                                  -----------  -----------                              
    Net earnings (loss)..........................................  $     374    $     512                               
                                                                  -----------  -----------                              
                                                                  -----------  -----------                              
Pro forma to reflect income taxes (3):                                                                                  
  Net earnings...................................................               $     311                               
  Net earnings per share.........................................               $    0.10                               
Pro forma weighted average shares outstanding (4)................                   2,978                               

                                                                       JUNE 30, 1996                                    
                                                                  ------------------------                              
                                                                        (UNAUDITED)                                     
                                                                                                                        
BALANCE SHEET DATA:                                                                                                     
Working capital deficit..........................................         $ (872)                                       
Total assets.....................................................          4,002                                        
Total debt.......................................................          3,930                                        
Stockholders' equity (deficit)...................................         (1,066)                                       

------------------------------                                                  
(1) The Company acquired two restaurants in December 1995. If such  transactions
    had  occurred on January 1, 1995,  "Total revenues," "Net earnings" and "Net
    earnings per share" would have  been approximately $8,761,000, $224,000  and
    $0.08,  respectively, for the year  ended December 31, 1995,  on a pro forma
    basis. The pro  forma results  do not  necessarily reflect  what would  have
    occurred  if  the  acquisitions  had  been  made  at  the  beginning  of the
    respective periods or  the results that  may occur in  the future. See  "Pro
    Forma   Condensed  Combined  Statement   of  Operations"  and  "Management's
    Discussion and Analysis of Financial Condition and Results of Operations  --
Overview."                                                              
(2) Effective January 1, 1996, the Company elected to change its fiscal year end
    from  a calendar year  end to a  52/53-week fiscal year,  ending on the last
Sunday of the year, which consists of four 13-week periods.             
(3) Reflects a pro forma adjustment assuming the Company had been treated as a C
    corporation rather than as an S corporation for income tax purposes for  the
    periods  presented. See "S Corporation Distributions" and Note 2(i) of Notes
to Combined Financial Statements.                                       
(4) See Note 2(i) of Notes to Combined Financial Statements.                    

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 
AND RESULTS OF OPERATIONS 

OVERVIEW                                                                        

    The Company opened its first restaurant in 1986, and has developed 18 of its
20  Company-owned  restaurants  in  Oklahoma, Kansas,  Tennessee  and  Texas. In
addition  to  developing  new  restaurants,  the  Company  acquired  two   bagel
restaurants  in December  1995, one  of which  was a  franchised New  York Bagel
restaurant. The Company commenced franchising the New York Bagel concept in 1993
and currently has 20 franchisees operating 30 restaurants.                      

    The  Company's  business  was  previously  operated  through  six   separate
entities,  each  of  which  was  owned  by  one  or  more  existing stockholders
(collectively, the "Prior Entities"). The  Company was incorporated in  December
1995 under the laws of Kansas, and on December 31, 1995, the Prior Entities were
merged  into the Company (the "Reorganization"). The financial statements herein
include the results of operations of the Prior Entities on a combined basis  for
all  periods. See  "Certain Transactions  -- Reorganization"  and Note  1 of the
Notes to Combined Financial Statements.                                         

    The Company completed the acquisition  of two bagel restaurants in  December
1995  (the  "Acquisitions").  The  Company  acquired  the  outstanding  stock of
Nashville Bagel Co., Inc. ("Nashville Bagel"), which operated a bagel restaurant
in Nashville, Tennessee,  and acquired  a franchised New  York Bagel  restaurant
located  in  Wichita,  Kansas.  Each Acquisition  was  accounted  for  under the
purchase method,  and accordingly,  the operations  of Nashville  Bagel and  the
acquired  franchised  restaurant have  been included  in the  Company's combined
results  of  operations  after  December   14,  1995  and  December  31,   1995,
respectively.  Pro  Forma Condensed  Combined  Statement of  Operations included
herein presents the results of operations of the Company as if the  Acquisitions
had  occurred  at  January  1,  1995.  See  "Certain  Transactions  -- Franchise
Acquisitions" and Note 12 of the Notes to Combined Financial Statements.        

    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. Franchise and development fees
are initially  recorded as  deferred revenue  until each  franchised  restaurant
opens, at which time these fees are recorded as revenue.                        

    Cost  of  sales  includes 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.                                           

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RESULTS OF OPERATIONS                                                           

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

                                                        · Enlarge/Download Table

                                                                                                  SIX MONTHS   TWENTY-SIX 
                                                                     YEAR ENDED DECEMBER 31,      ENDED JUNE   WEEKS ENDED
                                                                 -------------------------------      30,       JUNE 30,  
                                                                   1993       1994       1995        1995         1996    
                                                                 ---------  ---------  ---------  -----------  -----------
                                                                                                                          
Revenues:                                                                                                                 
  Sales from Company-owned restaurants..........................      99.4%      97.1%      93.4%       94.5%        93.5%
  Franchise revenues............................................       0.6        2.9        6.6         5.5          6.5 
                                                                 ---------  ---------  ---------       -----        ----- 
    Total revenues..............................................     100.0%     100.0%     100.0%      100.0%       100.0%
Costs and expenses:                                                                                                       
  Cost of sales (1).............................................      43.2%      40.3%      38.0%       38.0%        35.7%
  Restaurant operating expenses (1).............................      39.2       41.1       44.9        42.8         45.4 
  General and administrative expenses...........................      13.2        7.8       11.4        10.6          7.7 
  Depreciation and amortization.................................       2.3        2.0        2.2         1.8          3.4 
Operating income................................................       2.8       11.1        9.0        11.1         13.0 
Interest expense, net...........................................       0.4        0.9        0.5         0.6          3.1 
  Net earnings..................................................       2.1       10.3        8.4        10.6          9.9 

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

TWENTY-SIX WEEKS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995 

    Total  revenues increased by $1.7 million, or 46.6%, to $5.2 million for the
period ended June 30, 1996  compared to $3.5 million  for the period ended  June
30,  1995,  primarily due  to an  increase  in the  number of  Company-owned and
franchised restaurants open.                                                    

    Sales from Company-owned  restaurants increased $1.5  million, or 45.0%,  to
$4.8 million for the period ended June 30, 1996 compared to $3.3 million for the
period  ended  June  30,  1995.  This increase  is  largely  the  result  of the
acquisitions of Nashville Bagel  and a franchised  restaurant in December  1995,
the  opening of a Company-owned  restaurant in October 1995,  and the opening of
five additional  Company-owned restaurants  during the  first half  of 1996.  In
addition,  the  Company experienced  a 5.1%  increase  in same  restaurant sales
during  the  period.  At  June  30,  1996,  the  Company  had  20  Company-owned
restaurants compared to 12 restaurants at June 30, 1995.                        

    Franchise  revenues increased  by $146,000,  or 75.7%,  to $340,000  for the
period ended June 30, 1996  compared to $193,000 for  the period ended June  30,
1995.  This  increase is  primarily due  to  an increase  in royalty  revenue of
$136,000, or 156.3%, to $223,000 for the period ended June 30, 1996 from $87,000
during the period ended June 30,  1995. This is attributable to the  significant
growth  in the number of  franchised restaurants opened during  the last half of
1995 and continuing into the first half of 1996. At June 30, 1996, there were 30
franchised restaurants compared to 16 restaurants at June 30, 1995.             

    Cost of  sales increased  by $461,000,  or 36.2%,  to $1.7  million for  the
period  ended June 30, 1996  compared to $1.3 million  for the period ended June
30, 1995,  primarily  due to  the  increase in  Company-owned  restaurant  sales
discussed  above. As  a percentage  of Company-owned  restaurant sales,  cost of
sales decreased to 35.7% for the period  ended June 30, 1996 from 38.0% for  the
period ended June 30, 1995, as a result of purchasing and operating efficiencies
experienced in 1996. Prices of the Company's commodities (meat and cheese, flour
and  other  bakery  ingredients)  have  generally  remained  stable  during  the
comparable periods.                                                             

    Restaurant operating  expenses  increased by  $769,000,  or 53.7%,  to  $2.2
million  for the  period ended June  30, 1996  compared to $1.4  million for the
period ended June 30, 1995, primarily due to the                                

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increase in restaurant sales discussed  above. As a percentage of  Company-owned
restaurant  sales,  restaurant operating  expenses  increased to  45.4%  for the
period ended June 30, 1996 from 42.8%  for the period ended June 30, 1995.  This
increase is primarily due to increased labor costs associated with the Company's
acquisition  of  Nashville Bagel  in  December 1995,  and  the opening  of three
Company-owned restaurants in Nashville, Tennessee during the first half of 1996.

    General and  administrative  expenses  increased by  $27,000,  or  7.2%,  to
$402,000  for the period ended June 30, 1996 compared to $375,000 for the period
ended June 30, 1995. This increase is primarily attributable to the increase  in
franchise   activity.   As  a   percentage  of   total  revenues,   general  and
administrative expenses decreased  to 7.7% for  the period ended  June 30,  1996
from  10.6% for the period ended June 30,  1995. The decrease as a percentage of
total revenues was primarily due to increased economies of scale resulting  from
franchise infrastructure implemented in 1995.                                   

    Depreciation  and amortization increased by $112,000, or 174.4%, to $177,000
for the period ended June 30, 1996 compared to $65,000 for the period ended June
30, 1995.  As a  percentage  of total  revenues, depreciation  and  amortization
increased  to 3.4% for the  period ended June 30, 1996  from 1.8% for the period
ended  June  30,  1995.  This  increase  is  primarily  the  result  of   higher
depreciation  and amortization associated with the Acquisitions, and the opening
of five additional Company-owned restaurants during the first half of 1996.     

    Interest expense increased by $143,000 to $163,000 for the period ended June
30, 1996 compared to the period ended  June 30, 1995. This increase in  interest
expense  is primarily the result of increased borrowings during the period ended
June 30, 1996.                                                                  

FISCAL YEAR 1995 COMPARED TO FISCAL YEAR 1994                                   

    Total revenues increased by $1.5 million, or 26.4%, to $7.4 million for 1995
compared to $5.8 million for 1994, primarily due to an increase in the number of
Company-owned and franchised restaurants open.                                  

    Sales from Company-owned  restaurants increased $1.2  million, or 21.6%,  to
$6.9  million for 1995 compared to $5.7  million for 1994. This is primarily the
result of the opening of one additional Company-owned restaurant in October 1995
and two  additional Company-owned  restaurants in  late 1994.  In addition,  the
Company  experienced an 9.8%  increase in same restaurant  sales during 1995. At
December 31, 1995, the Company had  15 Company-owned restaurants compared to  12
restaurants at December 31, 1994.                                               

    Franchise  revenues increased by  $315,000, or 187.1%,  to $484,000 for 1995
compared to $169,000 for 1994. This increase is primarily due to the opening  of
franchised  restaurants in 1995. There were 25 franchised restaurants at the end
of 1995 and nine franchised restaurants at the end of 1994, which impacted  both
franchise  fees and  royalty revenue.  Franchise and  development fees increased
$143,000, or  132.4%,  to $251,000  for  1995  compared to  $108,000  for  1994.
Franchise royalty revenue increased by $173,000, or 283.6%, to $234,000 for 1995
compared to $61,000 for 1994.                                                   

    Cost  of sales  increased by  $333,000, or 14.6%,  to $2.6  million for 1995
compared to $2.3 million  for 1994. This increase  is primarily attributable  to
the  increase in sales from Company-owned  restaurants. As a percentage of sales
from Company-owned restaurants, cost  of sales decreased to  38.0% in 1995  from
40.3%  in  1994  as  a  result  of  purchasing  and  operating  efficiencies and
portioning refinements achieved  in 1995.  Prices of  the Company's  commodities
(meat  and cheese, flour  and other bakery  ingredients) have generally remained
stable during the comparable periods.                                           

    Restaurant operating  expenses  increased by  $758,000,  or 32.6%,  to  $3.1
million  for 1995 compared to $2.3 million  for 1994. This increase is primarily
due to the increase in sales from Company-owned restaurants discussed above  and
to approximately two weeks of operating expenses attributable to Nashville Bagel
subsequent  to  its  acquisition by  the  Company  on December  14,  1995.  As a
percentage  of  sales  from  Company-owned  restaurants,  restaurant   operating
expenses increased to                                                           

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44.9%  for 1995 from  41.1% for 1994.  This increase is  primarily the result of
higher operating expenses attributable to  a restaurant which opened in  October
1995,  the acquisition of Nashville Bagel  and two restaurants which were closed
for remodeling during a portion of the fourth quarter of 1995.                  

    General and  administrative expenses  increased by  $386,000, or  85.5%,  to
$838,000  for 1995  compared to  $452,000 for  1994. This  increase is primarily
attributable to  the  increase  in  franchise  activity  and  to  merger-related
expenses  related  to  the Reorganization  in  1995.  As a  percentage  of total
revenues, general and administrative  expenses increased to  11.4% in 1995  from
7.8%  in 1994, primarily as a result of the further development of the franchise
program.                                                                        

    Depreciation and amortization  increased by $42,000,  or 35.9%, to  $159,000
for  1995 compared  to $117,000  for 1994.  As a  percentage of  total revenues,
depreciation and amortization increased to 2.2% for 1995 from 2.0% in 1994. This
increase is primarily attributable to the opening of the additional  restaurants
discussed above.                                                                

    Interest expense decreased by $12,000 to $40,000 for 1995 compared to 52,000
for  1994. This decrease  in interest expense  is primarily the  result of lower
bank borrowings during 1995.                                                    

FISCAL YEAR 1994 COMPARED TO FISCAL YEAR 1993                                   

    Total revenues increased by $2.2 million, or 63.5%, to $5.8 million for 1994
compared to $3.6 million for 1993, primarily due to an increase in the number of
Company-owned and franchised restaurants open.                                  

    Sales from Company-owned  restaurants increased $2.1  million, or 59.8%,  to
$5.7  million for 1994 compared to $3.5  million for 1993. This is primarily the
result of the opening of three additional Company-owned restaurants in 1994.  In
addition,  the Company  experienced a  19.0% increase  in same  restaurant sales
during 1994. At December 31, 1994, the Company had 12 Company-owned  restaurants
compared to nine restaurants at December 31, 1993.                              

    Franchise  revenues increased by  $146,000 to $169,000  for 1994 compared to
$23,000 for 1993. This  increase is primarily due  to the opening of  franchised
restaurants  in 1994. There were nine franchised  restaurants open at the end of
1994 versus two franchised restaurants at the end of 1993.                      

    Cost of sales  increased by  $753,000, or 49.3%,  to $2.3  million for  1994
compared  to $1.5 million  for 1993. This increase  is primarily attributable to
the opening  of  three  additional  Company-owned  restaurants  in  1994.  As  a
percentage  of Company-owned restaurant sales, cost  of sales decreased to 40.3%
in 1994 from 43.2%  in 1993 primarily  as a result  of purchasing and  operating
efficiencies.  Prices of the  Company's commodities (meat  and cheese, flour and
other bakery ingredients) have generally  remained stable during the  comparable
periods.                                                                        

    Restaurant  operating  expenses increased  by  $940,000, or  67.8%,  to $2.3
million for 1994 compared to $1.4  million for 1993. This increase is  primarily
due  to the additional  restaurant openings discussed above.  As a percentage of
Company-owned restaurant sales, restaurant operating expenses increased to 41.1%
for 1994 from 39.2% for 1993.                                                   

    General and  administrative  expenses  decreased by  $17,000,  or  3.6%,  to
$452,000  for 1994 compared to $469,000 for 1993. This decrease is primarily the
result of a  reduction in  management compensation  in 1994.  This decrease  was
offset slightly by an increase in general and administrative expenses related to
the  increase in franchise  activity. As a percentage  of total revenue, general
and administrative expenses decreased to 7.8% in 1994 from 13.2% in 1993.       

    Depreciation and amortization  increased by $37,000,  or 45.9%, to  $117,000
for  1994 compared to $80,000 for  1993. This increase is primarily attributable
to the opening of the additional restaurants discussed above. As a percentage of
total revenues, depreciation  and amortization  decreased to 2.0%  in 1994  from
2.3% in 1993.                                                                   

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    Interest  expense increased by $39,000 to $52,000 for 1994 compared to 1993.
This increase in  interest expense  is primarily  the result  of increased  bank
borrowings in order to expand the Company's restaurant base.                    

QUARTERLY FINANCIAL DATA                                                        

    The  following sets forth  selected quarterly results  from operations. This
information is derived from  unaudited financial statements  of the Company  and
includes in the opinion of management, all normal and recurring adjustments that
management  considers necessary  for a  fair statement  of the  results for such
periods. The operating results for any quarter are not necessarily indicative of
results for any future period.                                                  

                                                        · Enlarge/Download Table

                                                     QUARTER    QUARTER    QUARTER    QUARTER    QUARTER    QUARTER 
                                                      ENDED      ENDED      ENDED      ENDED      ENDED      ENDED  
                                                     3/31/95    6/30/95    9/30/95   12/31/95    3/31/96    6/30/96 
                                                    ---------  ---------  ---------  ---------  ---------  ---------
                                                             (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)          
                                                                                                                    
Revenues:                                                                                                           
  Sales from Company-owned restaurants............. $   1,649  $   1,696  $   1,652  $   1,878  $   2,219  $   2,631
  Franchise revenues...............................        59        135        145        145        170        170
                                                    ---------  ---------  ---------  ---------  ---------  ---------
    Total revenues.................................     1,708      1,831      1,797      2,023      2,389      2,801
                                                    ---------  ---------  ---------  ---------  ---------  ---------
Costs and expenses:                                                                                                 
  Cost of sales....................................       636        637        649        690        813        920
  Restaurant operating expenses....................       705        727        759        893        960      1,242
  General and administrative expenses..............       159        216        192        271        207        195
  Depreciation and amortization....................        31         34         41         53         71        106
                                                    ---------  ---------  ---------  ---------  ---------  ---------
    Total costs and expenses.......................     1,531      1,614      1,641      1,907      2,051      2,463
                                                    ---------  ---------  ---------  ---------  ---------  ---------
    Operating income...............................       177        217        156        116        338        338
Interest expense, net..............................         7         13          8         12         78         86
                                                    ---------  ---------  ---------  ---------  ---------  ---------
    Earnings before income taxes...................       170        204        148        104        260        252
Income tax expense.................................    --         --              2          5     --         --    
                                                    ---------  ---------  ---------  ---------  ---------  ---------
  Net earnings..................................... $     170  $     204  $     146  $      99  $     260  $     252
                                                    ---------  ---------  ---------  ---------  ---------  ---------
                                                    ---------  ---------  ---------  ---------  ---------  ---------
Pro forma to reflect income taxes:                                                                                  
  Income tax expense............................... $      67  $      80  $      58  $      41  $     104  $      97
  Net earnings..................................... $     103  $     124  $      90  $      63  $     156  $     155
  Net earnings per share........................... $    0.03  $    0.04  $    0.03  $    0.02  $    0.05  $    0.05

    Although the Company's  historical and anticipated  growth makes  predicting
future   trends   difficult,  the   Company-owned  restaurants   have  generally
experienced slightly lower restaurant sales in the fourth quarter.              

LIQUIDITY AND CAPITAL RESOURCES                                                 

    The  Company  requires  capital  primarily   for  the  development  of   new
restaurants,  possible acquisitions and the remodeling of existing Company-owned
restaurants. Capital expenditures  totaled $584,000, $285,000  and $475,000  for
1993,  1994 and 1995, respectively,  and $1.2 million for  the period ended June
30, 1996. The Company has historically funded its capital expenditures with cash
provided by  operations and  bank  borrowings. Net  cash provided  by  operating
activities  was  $192,000,  $696,000  and  $777,000  for  1993,  1994  and 1995,
respectively, and $1.0 million for the period ended June 30, 1996.              

    At June  30, 1996,  the  Company had  outstanding  bank borrowings  of  $3.8
million  consisting of  (i) $2.5  million under  the Loan  Agreement which bears
interest at the  prime rate plus  1.0% and  matures on December  28, 2000,  (ii)
aggregate outstanding borrowings under the Term Notes of $800,000, each of which
bear  interest at the prime rate plus 0.5%  and have a maturity date of June 15,
2003 and (iii)  $487,000 under the  Nashville Note which  bears interest at  the
prime rate plus 0.5% and matures                                                

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on  March 26, 2003.  Subsequent to June  30, 1996, the  Company has incurred, or
anticipates  incurring,   additional   bank  borrowings   to   finance   capital
expenditures  of up to $747,500, consisting of (i) $300,000 under the Stillwater
Note which bears interest at the prime rate plus 0.5% and matures on January 10,
2007, (ii) $125,000 under the Springfield Note which bears interest at the prime
rate plus 0.5% and matures on October 8, 2001, (iii) $172,500 under the  Remodel
Note  which bears interest  at the prime rate  plus 0.5% and  matures on July 8,
2001, and (iv) $150,000 under the Lubbock Note which bears interest at the prime
rate plus 0.5%  and matures on  October 15, 2003.  The outstanding  indebtedness
under these bank financings, which is secured by substantially all of the assets
of  the Company, will be repaid from the  proceeds of this offering. See "Use of
Proceeds."                                                                      

    Certain Prior Entities paid cash distributions to their stockholders in  the
aggregate  amounts of  approximately $394,000 and  $2.5 million  during 1994 and
1995, respectively.  The  distributions made  in  1995  were in  excess  of  the
earnings  of such Prior  Entities and were partially  funded by borrowings under
the Loan  Agreement. The  Company  also intends  to use  a  portion of  the  net
proceeds of this offering to fund a distribution to the existing stockholders in
connection  with  their  estimated  federal  and  state  income  tax obligations
attributable to the Company's 1996 earnings  prior to the Termination Date.  See
"S Corporation Distributions."                                                  

    Based  on its contemplated  expansion plans, the  Company estimates that its
total capital expenditures will be approximately  $3.0 million in 1996 and  $3.2
million  in 1997. These estimates include  the estimated costs of developing new
restaurants and renovating Company-owned  restaurants. The Company expects  that
the net proceeds of this offering and cash provided by operating activities will
provide sufficient funds to finance its capital expenditures through 1997.      

INFLATION                                                                       

    The  Company believes that  the relatively moderate  rates of inflation over
the past  few  years  have not  had  a  significant impact  on  its  results  of
operations.                                                                     

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BUSINESS

GENERAL                                                                         

    The  Company owns and franchises 50 quick-service New York Bagel restaurants
in 16 states that serve generous portions of fresh, high quality food with fast,
friendly service  at an  attractive price-value  relationship. The  Company  has
grown   by  developing  Company-owned  restaurants  and  by  selectively  adding
franchisees. As  of  June 30,  1996,  there were  20  Company-owned  restaurants
located  in Oklahoma, Kansas, Tennessee and  Texas and 30 franchised restaurants
located in 15 states operated by 20 franchisees.                                

    The Company  believes that  consumption of  bagels has  increased in  recent
years,  as  consumers have  discovered that  bagels are  a healthier,  lower fat
alternative to  other quick-service  foods  and are  a suitable  substitute  for
sandwich   breads.  Management  believes  that   the  market  for  retail  bagel
restaurants is fragmented and underserved,  and that the Company can  capitalize
on  the  demand for  fresh bagels  by expanding  the New  York Bagel  concept in
targeted markets.                                                               

THE NEW YORK BAGEL CONCEPT                                                      

    PREPARE FRESH, HIGH QUALITY PRODUCTS.   New York Bagel restaurants serve  up
to  20  varieties  of  bagels  that are  made  from  scratch,  boiled  and baked
throughout the day in the traditional "New York style." The Company believes its
five-ounce bagel is larger  than those served by  many of its competitors.  Menu
items  are prepared in  accordance with the  Company's specifications using high
quality ingredients  such  as  Philadelphia-Registered  Trademark-  Brand  cream
cheese,  Kraft-Registered Trademark-  cheeses and  premium deli  meats. Generous
portions of cream cheese are applied on  its breakfast bagel and four ounces  of
meat  are served on each  of its deli sandwiches.  The Company believes that the
quality and portion size of its menu items generally equals or exceeds those  of
its  competitors. Because its menu pricing  is competitive, the Company believes
that it offers customers an attractive price-value relationship.                

    MAXIMIZE  TRAFFIC  THROUGHOUT  THE  DAY.    Management  has  recognized  the
versatility  of  the  bagel  and  has  developed  a  menu  to  attract customers
throughout the day. The breakfast menu at New York Bagel restaurants includes  a
variety  of  bagels and  custom-blended cream  cheeses, breakfast  sandwiches on
bagels, gourmet coffees, muffins and croissants. Lunch and dinner items  include
a  wide range of delicatessen sandwiches made on bagels or other breads, salads,
cookies and  soft drinks.  Management  believes that  Company-owned  restaurants
typically  generate approximately 40% of their  sales before 11:00 a.m., with an
average ticket of approximately $3.00 during such period and $4.00 thereafter.  

    COMMITMENT TO TIMELY SERVICE.  The  Company believes that timely service  is
essential  in the quick-service  restaurant business. Service  time is minimized
through the division of  employee functions, efficient  store layout and  design
and  queuing mechanisms. The Company conducts time studies of its restaurants on
a periodic basis and  believes that on average,  breakfast customers are  served
within  three minutes of placing their order  and lunch and dinner customers are
served within five  minutes. As  a result,  the Company  also has  been able  to
successfully   operate  drive-through   windows  at   certain  New   York  Bagel
restaurants.                                                                    

    FOCUS ON  TRAINING.   The Company  believes that  comprehensive training  is
essential  to the efficiency and consistency of its operations. Accordingly, the
Company conducts  an  extensive  90-day  training  program  for  its  restaurant
managers and franchisees that is composed of approximately ten days of classroom
instruction  and approximately 80 days of  on-site instruction. In addition, the
Company's training team provides on-site assistance during the initial ten  days
of  operation at  each Company-owned  restaurant and  at a  franchisee's initial
franchised restaurant.                                                          

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EXPANSION STRATEGY                                                              

    EMPHASIZE MID-SIZED AND SMALLER METROPOLITAN MARKETS.  The Company presently
targets its expansion  efforts in  mid-sized and  smaller metropolitan  markets.
Management  believes that  these markets  are attractive  because they typically
have fewer  competing  bagel restaurants  and  more favorable  lease  and  labor
environments than larger metropolitan markets.                                  

    ESTABLISH  STRONG  MARKET  PRESENCE.   Since  the bagel  industry  is highly
fragmented and increasingly competitive, the Company seeks to establish a strong
market presence in  its targeted markets.  To develop a  strong market  presence
rapidly and efficiently, the Company employs a multiple store strategy involving
a  bakery restaurant  which produces  bagels for itself  and one  or more nearby
satellite restaurants.  By entering  underserved  markets and  opening  multiple
restaurants,  the Company  seeks to  maximize market  share and  establish brand
awareness.   The   Company   and   its   franchisees   have   implemented   this
bakery/satellite restaurant combination 15 times.                               

    FOCUS  ON  UNIT AND  MARKET  ECONOMICS.   Consistent  with its  market share
objective, the  Company focuses  not only  on generating  attractive unit  level
economics,  but also on the economic returns  of a particular target market. The
Company  believes  that  bakery  restaurants  can  be  opened  for  an   initial
investment,  including leasehold  improvements, furniture,  fixtures, equipment,
initial working  capital and  pre-opening expenses,  of approximately  $250,000,
with  satellite restaurants requiring approximately $150,000. By averaging these
initial investment  amounts within  markets, the  Company believes  it  achieves
attractive returns on investment.                                               

    MAINTAIN  BALANCED RESTAURANT  DEVELOPMENT.   The Company  intends to expand
through a balanced development  of Company-owned and  franchised New York  Bagel
restaurants.  While Company-owned  restaurants provide the  Company with greater
revenues and profits than franchised restaurants, franchising allows the Company
to accelerate its  expansion and name  recognition with less  investment of  the
Company's capital or human resources.                                           

    MAKE SELECTIVE ACQUISITIONS.  The Company has acquired two bagel restaurants
to  date, including  an unaffiliated restaurant  in Nashville,  Tennessee, a new
market, and a franchised restaurant in  an existing market. Since acquiring  the
Nashville restaurant, a bakery restaurant, the Company has added three satellite
restaurants  in that market. The Company intends to pursue other acquisitions of
local and regional bagel operations with an established market presence.        

RESTAURANT DESIGN AND SITE SELECTION                                            

    The Company's prototypical restaurant is  decorated in rich colors and  dark
woods  and contains a  mixture of booth,  table and barstool  seating and, where
available,  outdoor  seating.  Exposed  ceilings   with  drop  lighting  and   a
combination  of tile and  carpeted flooring are used  to enhance its comfortable
ambiance. Walls are covered with  black and white photographs depicting  classic
New York scenes. The Company's restaurants are configured to facilitate a smooth
flow of dine-in and carry-out traffic while retaining a casual, cafe atmosphere.
Bagels and other baked products are displayed prominently behind a glass counter
while  other  items  such as  salads,  packaged  cream cheese  for  take-out and
specialty sodas and drinks are located in an open, self-serve refrigerated  area
next  to the  cash register.  Restaurant staff  prepare sandwich  and other menu
items behind the counter for dine-in and take-out customers. Dine-in  customers'
food  is delivered directly  to the table. The  restaurants serve cappuccino and
espresso, and a  fountain drink  and gourmet coffee  station are  placed in  the
dining  area for  customer convenience.  Retail merchandise,  including New York
Bagel logo clothing, coffee  mugs and gift items,  are displayed throughout  the
restaurant.                                                                     

    The  Company  believes  that  the  layout  and  design  of  each  restaurant
contributes to the success  of its operations.  The Company continually  reviews
the  restaurant design  package for  its restaurants  and remodels  as required.
Pursuant  to  the  franchise  agreement,  franchised  restaurants'  decor   must

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be  updated  every  five years  or  upon  renewal of  each  particular franchise
agreement. Remodeling typically requires closing the restaurant for one to  four
weeks.  Although restaurants may  vary in size, layout  and design are generally
consistent.                                                                     

    The Company considers  the location of  a restaurant to  be important,  and,
therefore,  devotes significant resources to the investigation and evaluation of
potential sites.  The  site  selection process  focuses  on  area  demographics,
including  population density,  traffic patterns, income  levels and competitive
factors. The  Company  generally targets  locations  that possess  a  population
density of at least 50,000 residents within a three mile radius and are situated
on the morning side of commuter traffic. The Company's restaurants are typically
located  in  strip  shopping  centers or  free-standing  buildings  that provide
visibility, curb  appeal  and  accessibility.  Certain  limited  hour  satellite
restaurants  are located in office buildings  and are open during business hours
Monday through Friday. The Company's restaurant design may be configured to  fit
a  wide variety of building  shapes and sizes, thereby  increasing the number of
suitable sites for new locations.                                               

UNIT ECONOMICS                                                                  

    In targeted markets, the Company employs a multiple store strategy involving
a bakery restaurant  which produces  bagels for itself  and one  or more  nearby
satellite  restaurants. The  Company's approach  to opening  new restaurants has
been to minimize  its required investment  by leasing substantially  all of  its
locations.  The Company  believes that bakery  restaurants can be  opened for an
initial  investment,  including  leasehold  improvements,  furniture,  fixtures,
equipment,  initial working  capital and pre-opening  expenses, of approximately
$250,000,  with  satellite  restaurants  requiring  approximately  $150,000.  By
averaging  these  initial investment  amounts  within a  particular  market, the
Company believes it achieves attractive returns on investment within markets.   

    During  1995  and  the  period  ended  June  30,  1996,  average  sales  per
Company-owned  restaurant  opened  throughout  each  period  were  $559,000  and
$293,000, respectively. During  1995 and  the period  ended June  30, 1996,  the
Company's restaurant level cash flow margin (defined as sales from Company-owned
restaurants less cost of sales and restaurant operating expenses as a percentage
of sales from Company-owned restaurants) was 17.1% and 18.9%, respectively.     

RESTAURANT LOCATIONS                                                            

    The  average bakery restaurant contains approximately 2,750 square feet, and
the average  satellite  restaurant  contains approximately  2,000  square  feet.
Approximately  1,200  square  feet of  a  bakery  restaurant is  used  for dough
production, baking and food preparation while approximately 500 square feet of a
satellite restaurant is used for  food preparation. Restaurants have an  average
seating  capacity of approximately 60  persons. The Company leases approximately
1,200 to 4,000 square feet of space for each of its 20 Company-owned  restaurant
sites.  As  of June  30,  1996, the  Company has  entered  into an  agreement to
purchase land and a  building under development as  a restaurant and leases  for
three  restaurants  under  development. Although  the  terms of  its  leases for
Company-owned restaurants vary, the Company typically seeks to obtain an initial
five-year term lease  with two or  three five-year option  terms. The  following
table  sets  forth certain  information  as of  June  30, 1996  with  respect to
Company-owned and franchised New York  Bagel restaurants currently in  operation
or  under development. Restaurants under development include locations for which
leases have been signed, a real estate purchase agreement has been executed,  or
construction has commenced, but are not currently in operation.                 

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COMPANY-OWNED RESTAURANTS 

                                                        · Enlarge/Download Table

                                                                        DATE              TYPE OF  
                          LOCATION                                     OPENED           RESTAURANT 
------------------------------------------------------------  ------------------------  -----------
                                                                                                   
Stillwater, OK            Elm Street                          January 1986                  Bakery 
Stillwater, OK            Downtown                            August 1986                Satellite 
Oklahoma City, OK         Casady Square                       August 1988                   Bakery 
Oklahoma City, OK         Leadership Square                   October 1989               Satellite 
Tulsa, OK                 Yale and 71st Street                January 1990                  Bakery 
Edmond, OK                Broadway Extension                  September 1991             Satellite 
Wichita, KS               East Central Avenue                 July 1992                     Bakery 
Wichita, KS               Downtown                            April 1993                 Satellite 
Oklahoma City, OK         Brixton Square                      July 1993                  Satellite 
Tulsa, OK                 Cherry Street                       January 1994               Satellite 
Norman, OK                Lindsey Avenue                      August 1994                   Bakery 
Norman, OK                Campus                              September 1994             Satellite 
Wichita, KS               Rock Road                           July 1995                  Satellite 
Tulsa, OK                 Peoria Avenue                       September 1995                Bakery 
Nashville, TN             West End Avenue                     December 1995                 Bakery 
Nashville, TN             Hillsboro Village                   March 1996                 Satellite 
Tulsa, OK                 Downtown                            March 1996                 Satellite 
Waco, TX                  West Waco Drive                     April 1996                    Bakery 
Nashville, TN             White Bridge Road                   April 1996                 Satellite 
Nashville, TN             L&C Tower                           June 1996                  Satellite 
Springfield, MO           Campbell Avenue                     Under Development             Bakery 
Tulsa, OK                 51st Street                         Under Development          Satellite 
Stillwater, OK            Perkins Road                        Under Development          Satellite 
Lubbock, TX               Quaker Avenue                       Under Development             Bakery 

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                                                        · Enlarge/Download Table
                                                                                                   
                                      FRANCHISED RESTAURANTS                                       


                                                                        DATE              TYPE OF  
                          LOCATION                                     OPENED           RESTAURANT 
------------------------------------------------------------  ------------------------  -----------
                                                                                                   
Omaha, NE                 South 106th                         December 1993                 Bakery 
Knoxville, TN             Kingston Pike                       March 1994                    Bakery 
Olathe, KS                Mur-len Avenue                      July 1994                     Bakery 
Dallas, TX                Lemmon Avenue                       July 1994                     Bakery 
Kansas City, MO           Downtown                            September 1994             Satellite 
Austin, TX                Research Boulevard                  October 1994                  Bakery 
Little Rock, AR           Markham Avenue                      November 1994                 Bakery 
Tucson, AZ                East Broadway                       February 1995                 Bakery 
Omaha, NE                 Farnam Street                       February 1995              Satellite 
Santa Fe, NM              St. Michaels Boulevard              March 1995                    Bakery 
Littleton, CO             West Bowles Avenue                  April 1995                    Bakery 
Plano, TX                 Legacy Drive                        April 1995                    Bakery 
Dallas, TX                Preston Royal Centre                May 1995                   Satellite 
Amarillo, TX              Soncy Road                          June 1995                     Bakery 
Knoxville, TN             Gay Street                          July 1995                  Satellite 
Longview, WA              Ocean Beach Highway                 July 1995                     Bakery 
Columbia, SC              Harden Street                       September 1995                Bakery 
Tampa, FL                 North Dale Mabry Highway            September 1995                Bakery 
Hurst, TX                 Grapevine Highway                   September 1995                Bakery 
Bismarck, ND              East Bismark Expressway             October 1995                  Bakery 
San Antonio, TX           Embassy Oaks                        November 1995                 Bakery 
Austin, TX                Research Boulevard                  November 1995              Satellite 
Amarillo, TX              West Georgia Street                 December 1995              Satellite 
Omaha, NE                 Pacific Street                      January 1996               Satellite 
Irving, TX                North MacArthur Boulevard           March 1996                 Satellite 
New Orleans, LA           Veteran's Boulevard                 March 1996                    Bakery 
Tucson, AZ                North Oracle Avenue                 March 1996                 Satellite 
San Antonio, TX           Broadway Avenue                     May 1996                   Satellite 
Englewood, CO             Holly Street                        June 1996                     Bakery 
Birmingham, AL            20th Street South                   June 1996                     Bakery 
Little Rock, AR           Center Street                       Under Development          Satellite 
Littleton, CO             Wadsworth Avenue                    Under Development          Satellite 
Aurora, CO                East Mississippi Street             Under Development          Satellite 
Columbia, SC              Palmetto Plaza                      Under Development          Satellite 

PLANNED EXPANSION                                                               

    The   Company  intends  to  expand   through  the  balanced  development  of
Company-owned and franchised restaurants. Since January 1, 1996, the Company has
opened five Company-owned restaurants and currently  plans to open eight to  ten
additional   Company-owned  restaurants   during  the  remainder   of  1996  and
approximately 17 to 20 in 1997.  Since January 1, 1996, franchisees have  opened
seven  franchised  restaurants  and  the Company  currently  has  20 franchisees
operating 30 restaurants in 15 states.  The Company considers franchisees to  be
an  integral component of its continued  growth. The Company expects franchisees
to open an  additional 15 to  20 restaurants  during the remainder  of 1996  and
approximately 25 to 30 franchised restaurants during 1997, although there can be
no assurance that all of these restaurants will be opened.                      

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OPERATIONS                                                                      

    RESTAURANT  PERSONNEL.    A  typical New  York  Bagel  restaurant  employs a
restaurant manager,  an assistant  manager  and approximately  25 to  30  hourly
employees  for a bakery restaurant and 15 to 20 hourly employees for a satellite
restaurant, most of whom work  part-time. The restaurant manager is  responsible
for  the  day-to-day  operation  of  the  restaurant  and  for  compliance  with
Company-established operating  standards. The  Company  also employs  five  area
managers,   each  of  whom  has  responsibility  for  overseeing  three  to  six
Company-owned restaurants.  The Company  seeks  to hire  experienced  restaurant
managers  and staff, and to motivate  and retain them by providing opportunities
for  advancement  and  performance-based,  financial  incentives.  Training  and
compensation  programs  are intended  to  instill restaurant  managers  and area
managers with a sense  of ownership in their  restaurants. The Company  believes
the  issuance of stock awards  under its 1996 Incentive  Plan and the restaurant
management bonus  program  will  enhance  its  ability  to  attract  and  retain
restaurant  and  area  managers. To  date,  the  Company has  experienced  a low
managerial turnover rate which it  believes results in decreased training  costs
and higher productivity. See "Management -- 1996 Incentive Plan."               

    REPORTING.    The Company's  restaurant  managers prepare  daily  and weekly
reports of sales, cash deposits and operating costs. Physical inventories of all
food and beverage items are taken monthly. The Company conducts monthly meetings
with area managers  to discuss restaurant  sales, profitability and  operations,
personnel needs and product quality.                                            

    HOURS  OF OPERATIONS.   The  restaurants are  generally open  Monday through
Saturday from 6:30 a.m. to 8:00 p.m. and  on Sunday from 8:00 a.m. to 5:00  p.m.
Management   believes   that   Company-owned   restaurants   typically  generate
approximately 40% of their sales before 11:00 a.m. Although the majority of  New
York Bagel restaurants are open seven days a week, certain satellite restaurants
are  located in downtown  business districts and are  open during business hours
Monday through Friday.                                                          

TRAINING                                                                        

    The Company  believes  that  comprehensive  training  is  essential  to  the
efficiency and consistency of its restaurants. Accordingly, the Company conducts
an extensive 90-day training program for its restaurant managers and franchisees
that  is  composed  of  approximately  ten  days  of  classroom  instruction  on
administration, record keeping and inventory  control and approximately 80  days
of  on-site instruction on baking and food preparation at the Company's training
facility in Oklahoma City,  Oklahoma. The Company has  a team of five  employees
dedicated  to  training  and  new  restaurant  openings,  including  a full-time
coordinator. In  addition,  the  team provides  on-site  assistance  during  the
initial  ten  days  of  operation  at each  Company-owned  restaurant  and  at a
franchisee's  initial  franchised  restaurant.  Management  believes  that   its
emphasis on training currently exceeds that of many of its competitors.         

PURCHASING AND DISTRIBUTION                                                     

    The  Company  establishes  quality  standards  and  specifications  for food
products and equipment used in New York Bagel restaurants and designates primary
and secondary suppliers for all food items and restaurant supplies. In order  to
ensure  product quality  and consistency, franchisees  purchase certain products
from the  Company's approved  distributors. To  obtain competitive  prices,  the
Company   contracts  centrally  for  certain  food  products  and  supplies  and
negotiates volume  discounts for  the benefit  of Company-owned  and  franchised
restaurants. Most Company-owned and franchised restaurants purchase the majority
of their food and non-food items from one nationally recognized distributor. The
Company  believes that the loss of  this distributor would not materially affect
the Company's results of operations.                                            

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MARKETING AND ADVERTISING                                                       

    The Company and  its franchisees advertise  through newspapers, direct  mail
and  radio. All  advertising materials must  be produced or  pre-approved by the
Company. The Company  provides restaurants with  pre-opening, grand opening  and
ongoing  advertising  and in-store  promotional  materials. In  April  1996, the
Company and its  franchisees commenced payments  of 0.5% of  gross sales to  the
Company's  advertising fund.  The advertising fund  is governed  by a six-member
board  comprised  of   three  Company  representatives   and  three   franchisee
representatives  who oversee the development  of advertising materials. Prior to
April 1996,  the Company  funded the  development of  advertising materials  and
furnished  such materials to all restaurants for their use. Franchisees maintain
sole discretion over the placement of advertisements in their market.           

FRANCHISE PROGRAM                                                               

    The Company  commenced  franchising  its  restaurant  concept  in  1993  and
currently  has  20 franchisees  operating 30  New York  Bagel restaurants  in 15
states. The Company expects that 45 to 50 franchised restaurants will be open by
the end of  1996 and  70 to 80  by the  end of 1997.  However, there  can be  no
assurance  that all of  these restaurants will  be open or  that the development
schedule set forth in each development agreement will be achieved. During  April
1996,  a franchisee  in the  Houston, Texas  market closed  two restaurants. The
Company anticipates  refranchising  the Houston,  Texas  market in  the  future.
During  July 1996, the  Company agreed to  purchase certain restaurant operating
equipment of its existing Kansas  City area franchisee. The Company  anticipates
refranchising the Kansas City market in the future.                             

    The  Company primarily seeks franchisees that have restaurant experience and
that  will  enter   into  development  agreements   for  multiple   restaurants.
Franchisees  are approved on  the basis of  operational experience and financial
resources. If the franchisee  is not an  owner-operator, the Company  encourages
the  franchisee  to provide  the full-time  operator an  equity interest  in the
franchise operation.                                                            

    DEVELOPMENT AGREEMENT.  The Company enters into a development agreement with
each franchisee (a "Development Agreement")  for the exclusive development of  a
predetermined  number of New  York Bagel restaurants  within a designated market
area (the "Area of Exclusivity"). The Area of Exclusivity is negotiated prior to
the signing  of a  Development Agreement  and varies  by agreement  as to  size,
number  of New York  Bagel restaurants required and  the schedule for restaurant
development and opening. A Development Agreement generally requires a franchisee
to develop the  first restaurant  within 12  months of  signing the  Development
Agreement and the second restaurant within 18 months. Subsequent restaurants are
generally  required to be opened  in six-month intervals thereafter. Development
schedules vary  based  upon  the  size  of  the  territory  and  the  number  of
restaurants  to  be  developed.  Development  Agreements  contain  cross-default
provisions, and failure to develop the  restaurants on schedule may result in  a
loss  of  exclusivity  within  the  Area  of  Exclusivity.  Under  the Company's
Development Agreement,  the  franchisee is  required  to  pay, at  the  time  of
signing,  a non-refundable fee  equal to one-third of  the initial franchise fee
per restaurant  covered by  the Development  Agreement. The  amount is  credited
against the Company's standard franchisee fee, the remainder of which is payable
to the Company upon signing the franchise agreement for a specific location.    

    FRANCHISE  AGREEMENT.   After signing  a Development  Agreement, the Company
enters into a  franchise agreement  (a "Franchise Agreement")  generally when  a
franchisee  secures a location. The Franchisee  Agreement provides for a term of
ten  years  with  one  ten-year   renewal  option  and  contains   cross-default
provisions. The Company has the right to terminate any Franchise Agreement under
certain  specified  circumstances,  including  a  franchisee's  failure  to make
payments when due or failure to adhere to the Company's standards or procedures.
Many state franchise  laws limit  the ability of  a franchisor  to terminate  or
refuse to renew a franchise. The current Franchise Agreement contains a right of
first  refusal for the Company to purchase  an interest in the franchise and the
franchisee. The                                                                 

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current Franchise Agreement provides for an initial franchise fee of $21,000 for
each bakery restaurant and $12,000  for each satellite restaurant. During  1995,
the  initial franchisee fees for a  bakery restaurant and a satellite restaurant
were $18,000 and  $9,000, respectively. Under  the current Franchise  Agreement,
the franchisee pays the Company a monthly royalty fee of 4% of gross sales. Upon
renewal of the Franchisee Agreement, the monthly royalty fee cannot be increased
to  an  amount greater  than  the monthly  royalty fee  then  in effect  for new
franchisees. See "Business -- Government Regulation."                           

    SERVICES.  The  Company assists each  franchisee in the  site selection  and
development  of restaurants and  provides the physical  specifications and plans
for each franchised  location. Each franchisee  is responsible for  recommending
the  location  for its  restaurants, but  must obtain  Company approval  of each
restaurant design  and  each location  based  on Company  requirements.  Company
personnel also visit each site in connection with the site approval process. The
Company  provides standard design plans  and equipment layout and specifications
for most franchisees. In addition,  Company personnel provide telephone  support
with   respect  to  operations  issues,  as  well  as  ongoing  assistance  with
advertising and promotion.                                                      

    QUALITY CONTROL.   All franchisees are  required to operate  their New  York
Bagel  restaurants  in compliance  with  the Company's  policies,  standards and
specifications, including matters  such as menu  items, ingredients,  materials,
supplies,  fixtures, furnishings,  decor and  signage. Each  franchisee has full
discretion, however,  to  determine the  prices  to charge  its  customers.  The
Company collects sales and other operating information from its franchisees on a
monthly,  quarterly  and annual  basis. The  Company monitors  each franchisee's
operations and product quality  through review of  monthly paperwork, review  of
quarterly  financial  statements  and  quarterly  field  visits.  These overview
mechanisms allow the Company to quickly identify potential problems and  provide
operational, marketing or accounting assistance.                                

    FRANCHISE  TRAINING  AND SUPPORT.   Each  franchisee is  required to  have a
restaurant manager, approved  by the Company,  who satisfactorily completes  the
Company's  training program and  who devotes his  or her full  business time and
efforts to the  operation of the  franchisee's restaurant. In  addition to  this
program,  the Company also provides an on-site training crew for ten days during
the opening  of  the franchisee's  initial  restaurant and  ongoing  supervision
thereafter.  Multi-unit franchisees are encouraged  to hire a full-time training
coordinator to train new employees for their restaurants. The Company  regularly
communicates with its franchisees, and encourages active communication among its
franchisees,  through  franchise  newsletters,  special  bulletins  and periodic
meetings.                                                                       

GOVERNMENT REGULATION                                                           

    The Company is subject  to various federal, state  and local laws  affecting
its  business. Each  of the  Company's restaurants  is subject  to licensing and
regulation by  a  number  of governmental  authorities,  which  include  health,
safety,  sanitation, building and fire agencies  in the state or municipality in
which the restaurant is located. Difficulties in obtaining or failures to obtain
required licenses  or approvals  could delay  or prevent  the opening  of a  new
restaurant in a particular area.                                                

    The  Company is subject  to Federal Trade  Commission ("FTC") regulation and
various state laws  which regulate  the offer  and sale  of franchises.  Several
state  laws  also  regulate  substantive  aspects  of  the franchisor-franchisee
relationship. The FTC requires the Company to furnish to prospective franchisees
a franchise offering circular containing prescribed information. The Company  is
currently required to register as a franchisor in two states. A number of states
in  which  the  Company  may  consider franchising  also  regulate  the  sale of
franchises and  require registration  of the  franchise offering  circular  with
state authorities. Substantive state laws that regulate the                     
franchisor-franchisee  relationship presently  exist in  many states,  and bills
have been introduced in Congress from time-to-                                  

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time which would provide for  Federal registration of the  franchisor-franchisee
relationship  in  certain  respects. The  state  laws often  limit,  among other
things, the duration and scope of non-competition provisions and the ability  of
a franchisor to terminate or refuse to renew a franchise.                       

    The  Company's  operations  are  also  subject  to  federal  and  state laws
governing such matters  as wages, working  conditions, citizenship  requirements
and overtime. The Company is also subject to the Americans with Disabilities Act
of  1990, which,  among other things,  could require certain  renovations to its
restaurants to  meet federal  mandates. If  such renovations  are required,  the
Company  believes  the cost  thereof will  not  materially affect  the Company's
results of operations. The Company believes it is in substantial compliance with
all material laws.                                                              

COMPETITION                                                                     

    The quick-service restaurant industry is intensely competitive and generally
characterized  by  low  barriers  to  entry.  There  are  a  growing  number  of
significant national, regional and local bagel restaurant chains, operating both
owned and franchised bagel restaurants including Quality Dining, Inc. (Brueggers
Bagel  Bakery), Einstein/Noah Bagel Corp., Manhattan Bagel Company, Inc. and BAB
Holdings, Inc., many of which have greater financial resources than the Company.
New  York  Bagel   restaurants  also   compete  with   other  well   established
quick-service restaurants that have greater product and name recognition, larger
financial  and other resources than the  Company and longer operating histories,
as well  as numerous  local food  establishments, supermarkets  and  convenience
stores  that offer  similar products. The  Company believes that  New York Bagel
restaurants compete  favorably  in  terms  of  taste,  food  quality,  portions,
service, convenience and value, which the Company believes are important factors
to its targeted customers.                                                      

    The  Company  competes  for qualified  franchisees  with a  wide  variety of
investment  opportunities  both  in  the   restaurant  business  and  in   other
industries. The Company's continued success is dependent to a substantial extent
on  its reputation  for providing  high quality  and value  with respect  to its
service, products and franchises, and this  reputation may be affected not  only
by  the performance of Company-owned restaurants, but also by the performance of
its franchised  restaurants  over  which the  Company  has  limited  operational
control.                                                                        

TRADEMARKS AND SERVICE MARKS                                                    

    The  Company operates and franchises bagel  restaurants under the names "New
York Bagel Shop & Delicatessen," "New York Bagel Shop & Deli," "NY Bagel  Cafe,"
"New  York Bagel Cafe &  Deli," "NYB New York Bagel,"  "the New York Bagel Shop"
and "Nashville  Bagel  Co." The  Company's  trademark  "New York  Bagel  Shop  &
Delicatessen"  and service  mark "Like  Bread With  An Attitude"  are registered
under applicable federal trademark law. Under federal trademark law, the Company
is required to renew these marks  every 20 years. The Company claims  common-law
rights  to the marks  "New York Bagel  Shop & Delicatessen,"  "NYB," "The City's
Best Bagel,"  and "Where  Yeast Meets  West," but  there have  been no  judicial
determinations  of the existence,  validity, or extent  of the Company's rights.
Certain of the  marks are  licensed by the  Company to  franchisees pursuant  to
franchise agreements.                                                           

    The  Company is aware  of the use  by other persons  and entities in certain
geographic areas  of names  and  marks which  are the  same  or similar  to  the
Company's  marks. Some  of these  persons or entities  may have  prior rights to
those names or  marks in  their respective  localities. Therefore,  there is  no
assurance  that the "New York Bagel Shop & Delicatessen" mark or any other marks
are available in all locations.                                                 

PROPERTIES                                                                      

    The Company's principal executive offices  are located at 300 I.M.A.  Plaza,
250  North Water Street, Wichita, Kansas 67202-1213, where the Company subleases
approximately 1,200 square feet of office space pursuant to a sublease agreement
with Murfin Drilling Company, Inc., a  wholly owned subsidiary of Murfin,  Inc.,
that  expires  during  March  1997.  The Company  has  the  option  to terminate

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such sublease upon  30 days'  notice. Mr.  David L.  Murfin, a  Director of  the
Company,  is  a  7.1% stockholder  of  Murfin,  Inc. The  Company  believes that
alternative office space is  available at comparable  rates from third  parties.
The  Company's  operational  offices  are  located  at  110  West  Third Street,
Stillwater, Oklahoma 74074,  where the Company  leases approximately 900  square
feet  of office space pursuant to a lease agreement that expires during December
1997. The Company conducts its management and franchisee training at its  Casady
Square,  Oklahoma City, Oklahoma facility in  an approximately 3,400 square foot
space contiguous to  the restaurant. Such  facility is subject  to a lease  that
expires  during  July  2003. The  Company  believes that  its  current executive
offices and training facilities  are adequate for the  near future and does  not
anticipate  the  need  for  significant expansion  of  these  facilities  in the
foreseeable future. See "Certain Transactions -- Leases."                       

EMPLOYEES                                                                       

    As of June  30, 1996, the  Company employed  362 persons, 202  of which  are
employed part-time. None of the Company's employees is subject to any collective
bargaining agreements, and management considers its relations with its employees
to be good.                                                                     

LEGAL PROCEEDINGS                                                               

    The  Company is involved from time-to-time  in various legal proceedings and
claims incident to the normal conduct of its business. The Company believes that
such legal proceedings and  claims, individually and in  the aggregate, are  not
likely  to have a material adverse effect  on its financial condition or results
of operations.                                                                  

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MANAGEMENT

DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES                                 

    The  names of  the directors,  executive officers  and key  employees of the
Company and their respective ages and positions are as follows:                 

                                                        · Enlarge/Download Table

NAME                                           AGE                          POSITION                      
---------------------------------------------  ---     ---------------------------------------------------
                                                                                                          
Robert J. Geresi (1).........................      34  Chairman of the Board, Chief Executive Officer and 
                                                        President                                         
Paul T. Sorrentino (2).......................      34  Vice President -- New Store Development and        
                                                        Director                                          
Paul R. Hoover (1)...........................      35  Vice President -- Strategic Planning and Director  
J. Chris Dennis..............................      32  Chief Financial Officer, Secretary and Treasurer   
Vincent J. Vrana.............................      33  Vice President -- Training                         
Markus K. Scholler...........................      41  Director of Franchise Operations                   
William S. Atherton (3)(4)...................      63  Director                                           
David L. Murfin (2)(4).......................      44  Director                                           

------------------------                                                        
(1) Class III Director.                                                         
(2) Class II Director.                                                          
(3) Class I Director.                                                           
(4) Member of the Audit Committee and the Compensation Committee.               

    ROBERT J.  GERESI has  served  as Chairman  of  the Board,  Chief  Executive
Officer  and President of the Company since  December 1995. Mr. Geresi served as
an executive  officer of  each Prior  Entity since  their respective  inceptions
beginning  in  1986. From  1984  through 1986,  Mr.  Geresi served  as  a Senior
Financial Analyst of Grumman  Aerospace Corp., Bethpage,  New York. Since  1995,
Mr.  Geresi has served  as a director  of Cowboy Land  Development, Inc., a real
estate subsidiary  of  Karsten  Creek Golf  Course,  Oklahoma  State  University
Foundation.  Mr. Geresi  received a  Bachelor of  Arts degree  in economics from
Binghamton University, Binghamton, New York in 1984.                            

    PAUL T. SORRENTINO has served as Vice President -- New Store Development and
as a Director of the  Company since December 1995.  Mr. Sorrentino served as  an
executive  officer  of  each  Prior  Entity  since  their  respective inceptions
beginning in 1986. From  1985 to 1986, Mr.  Sorrentino was a  telecommunications
consultant  for Cameron Communications, Oklahoma  City, Oklahoma. Mr. Sorrentino
received  a  Bachelor  of  Arts  degree  in  advertising  from  Oklahoma   State
University, Stillwater, Oklahoma in 1985.                                       

    PAUL  R. HOOVER has served as Vice  President -- Strategic Planning and as a
Director of the Company since December 1995. From June 1994 until December 1995,
Mr. Hoover  served  as Vice  President  and as  a  Director of  New  York  Bagel
Enterprises,  Inc., the franchisor entity of the Prior Entities. Since 1984, Mr.
Hoover has been a  Director and stockholder of  West-Kan Foods, Inc., a  Wendy's
restaurant  franchisee. From  1986 to  1990, Mr.  Hoover was  President of Midco
Foods, Inc., a multi-concept restaurant franchisee.  Mr. Hoover is the owner  of
and  has served  as the President  of Paul  R. Hoover Real  Estate Company since
1990. Mr. Hoover  received a  Bachelor of Arts  degree in  geology from  Wichita
State University, Wichita, Kansas in 1983.                                      

    J.  CHRIS  DENNIS  has  served as  Chief  Financial  Officer,  Secretary and
Treasurer of the Company  since April 1996.  From 1991 to  1996, Mr. Dennis  was
Vice  President and Controller  of Railroad Savings Bank  fsb in Wichita, Kansas
and its parent company, Railroad Financial Corporation, a                       

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publicly-held financial institution. From 1986 to 1991, Mr. Dennis was an  audit
supervisor  with Grant Thornton LLP, certified public accountants. Mr. Dennis is
a member of the  American Institute of Certified  Public Accountants and  Kansas
Society  of Certified Public  Accountants, and currently  serves on the Planning
Committee of  the  Annual  Wichita  State  University  Accounting  and  Auditing
Conference.  Mr. Dennis received a Bachelor of Business Administration degree in
accounting from Wichita State University, Wichita, Kansas in 1985. Mr. Dennis is
a Certified Public Accountant.                                                  

    VINCENT J. VRANA  has served as  Vice President --  Training of the  Company
since  December 1995.  Mr. Vrana  served as an  executive officer  of each Prior
Entity since their respective inceptions beginning in 1986. Mr. Vrana received a
Bachelor of Arts degree from Oklahoma State University, Stillwater, Oklahoma  in
1986.                                                                           

    MARKUS  K. SCHOLLER  has served as  Director of Franchise  Operations of the
Company since October 1994. From 1990 to 1994, Mr. Scholler was Training General
Manager for J.S. Ventures,  Inc., a multi-unit  Applebee's Neighborhood Grill  &
Bar  franchisee. From 1986  to 1990, Mr.  Scholler was General  Manager of Midco
Foods, Inc., a multi-concept restaurant  franchisee. Mr. Scholler is a  Director
of the Kansas Restaurant and Hospitality Association.                           

    WILLIAM  S. ATHERTON has served  as a Director of  the Company since January
1996. Mr. Atherton  is a  partner of Atherton  & Murphy  Investment Company,  an
investment  partnership,  and  serves  as  Chairman  of  the  Board  of Atherton
Restaurant Services, Inc. Mr. Atherton also serves as a Director of Wall  Street
Deli,  Inc., a publicly-traded restaurant  company, Chimis, Inc., a full-service
casual dining concept, Oklahoma State  University Foundation Board of  Governors
and  the National Cowboy Hall of Fame. From 1964 until 1986, Mr. Atherton served
as Chairman of  the Board and  Chief Executive Officer  of A &  M Food  Service,
Inc.,  a Pizza  Hut franchisee.  He received  a Bachelors  of Science  degree in
petroleum engineering from  Oklahoma State University,  Stillwater, Oklahoma  in
1956.                                                                           

    DAVID  L. MURFIN has  served as a  Director of the  Company since July 1994.
Since 1978, Mr. Murfin has served in various capacities with, and since 1992  as
President  of, Murfin Drilling  Company, an oil  and gas production, exploration
and drilling  company.  From 1975  to  1978, Mr.  Murfin  was a  Production  and
Reservoir  Engineer with  Amoco Production  Company. Mr.  Murfin also  serves as
National  Chairman  of  the  Liaison  Committee  of  Cooperating  Oil  and   Gas
Associations,  President of  the Kansas Independent  Oil and  Gas Association, a
director of the International Association  of Drilling Contractors, director  of
the  Quivira Council  of the  Boy Scouts  of America,  a member  of the Economic
Analysis  Panel  of  the  Wichita  Chamber  of  Commerce,  and  a  director   of
Heartspring.  Mr.  Murfin  received  Bachelors of  Science  degrees  in business
administration and in mechanical  engineering from the  University of Kansas  in
1975.                                                                           

TERM OF OFFICE                                                                  

    Upon  completion of this offering, the  Company's Board of Directors will be
divided into three classes (Class I, Class II and Class III) of as equal size as
possible, with the  terms of each  class expiring in  consecutive years so  that
only  one class is elected  in any given year. Directors  for each class will be
elected at the annual meeting of stockholders held in the year in which the term
for such class expires and will serve thereafter for a term of three years until
their successors  are elected  and  qualified or  their earlier  resignation  or
removal,  except for  the initial  Class I  and Class  II directors  whose terms
expire in 1997  and 1998,  respectively. Vacancies  in unexpired  terms and  any
additional positions created are filled by action of the Board of Directors. The
Board  of  Directors  intends  to appoint  one  additional  independent  Class I
Director to the  Company's Board of  Directors during  1996 in order  to fill  a
current vacancy on the Board of Directors. The executive officers of the Company
are  elected annually by the  Board of Directors and  serve at the discretion of
the Board of Directors until their successors are elected and qualified or their
earlier resignation or removal.                                                 

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STOCKHOLDERS' AGREEMENTS                                                        

    In June 1994,  Mr. Geresi,  the Company's Chairman  of the  Board and  Chief
Executive  Officer, Mr. Sorrentino,  a Director and Vice  President -- New Store
Development, Mr. Vrana, Vice President --  Training, Mr. Hoover, a Director  and
Vice President -- Strategic Planning, and Mr. Murfin, a Director of the Company,
entered  into a Contract for Sale of Stock which contained agreements among such
stockholders pertaining  to  the  approval of  certain  actions,  management  of
NYBE-OK,  as defined herein, election of directors, restrictions on the transfer
of stock  and preemptive  rights.  The current  directors  of the  Company  were
designated  and elected  pursuant to this  agreement. During  January 1996, this
agreement was terminated and the Stockholders' Agreement became effective.      

    The existing stockholders and the  Company are parties to the  Stockholders'
Agreement  which sets forth  certain agreements regarding  the management of the
Company. The Stockholders'  Agreement provides  that Messrs.  Geresi, Vrana  and
Sorrentino  shall designate three persons to  stand for election as directors of
the Company and  that Ms. Nancy  Murfin, Ms. Barbara  Murfin Murphy and  Messrs.
Hoover,  Murfin,  Mark A.  Moxley, V.  Richard Hoover  and Philip  Faubert shall
designate three persons to stand for  election as directors of the Company.  All
stockholders  who are parties to the Stockholders' Agreement have agreed to vote
their shares  in favor  of the  election of  such designees.  The  Stockholders'
Agreement  will automatically terminate three years after the completion of this
offering. Following this  offering, the existing  stockholders will have  voting
control  over more  than 56.5%  of the  outstanding Common  Stock (approximately
52.8%  if  the  Underwriters'  over-allotment  option  is  exercised  in  full).
Accordingly, the existing stockholders will be able to elect the entire Board of
Directors and otherwise direct the affairs of the Company.                      

COMMITTEES                                                                      

    The  Company's Board of  Directors has established an  Audit Committee and a
Compensation Committee,  both  of  which are  solely  comprised  of  Independent
Directors,  as defined herein. The functions of  the Audit Committee are to make
recommendations to  the  Board of  Directors  regarding the  engagement  of  the
Company's  independent  accountants  and  to  review  with  management  and  the
independent accountants the Company's financial statements, basic accounting and
financial policies  and  practices, audit  scope  and competency  of  accounting
personnel.  The  functions  of  the Compensation  Committee  are  to  review and
recommend to  the  Board  of  Directors  the  compensation,  stock  options  and
employment  benefits of all officers of the Company, to administer the Incentive
Plan, as defined herein, to fix the terms of other employee benefit arrangements
and to  make awards  under  such arrangements.  Members  of the  committees  are
appointed  annually by the Board of Directors and serve at the discretion of the
Board of  Directors  until  their  successors are  appointed  or  their  earlier
resignation or removal.                                                         

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EXECUTIVE COMPENSATION                                                          

    The following table sets forth the salary and other annual compensation paid
by  the Prior Entities during 1995 to  the Company's Chief Executive Officer and
each of the  other most  highly compensated  executive officers  of the  Company
whose  annual salary and  other annual compensation  during such period exceeded
$100,000 (collectively, the "Named Executive Officers"):                        

SUMMARY COMPENSATION TABLE

                                                        · Enlarge/Download Table

                                                                                 ANNUAL COMPENSATION    
                                                                             ---------------------------
                                                                                          OTHER ANNUAL  
NAME AND PRINCIPAL POSITION                                                  SALARY(1)  COMPENSATION(2) 
---------------------------------------------------------------------------  ---------  ----------------
                                                                                                        
Robert J. Geresi...........................................................  $  76,750     $   90,781   
  Chairman of the Board, Chief Executive Officer and President                                          
Paul T. Sorrentino.........................................................  $  79,750     $   90,699   
  Vice President -- New Store Development and Director                                                  
Vincent J. Vrana...........................................................  $  46,763     $   80,846   
  Vice President -- Training                                                                            

------------------------                                                        
(1) Effective April  1,  1996, these  employees'  annual salaries  are  $65,000,
$62,500 and $48,000, respectively.                                      

(2) Consists  of (i) amounts reimbursed during 1995  for the payment of taxes of
    $74,643, $74,643  and  $74,655 for  Messrs.  Geresi, Sorrentino  and  Vrana,
    respectively,  (ii) health and life insurance  premium payments on behalf of
   such individuals, and (iii) directors' fees paid by certain Prior Entities.

COMPENSATION OF DIRECTORS                                                       

    Directors  who  are  not  also   employees  of  the  Company   ("Independent
Directors") receive $250 per board meeting attended and $125 per board committee
meeting  attended  and are  reimbursed for  out-of-pocket expenses  incurred for
attendance at meetings. The Company granted on June 4, 1996, nonqualified  stock
options  under the  Company's 1996 Incentive  Plan to purchase  17,500 shares of
Common Stock  to  each of  Messrs.  Murfin  and Atherton,  who  are  Independent
Directors,  at an exercise  price equal to  110% and 100%,  respectively, of the
price to public set forth on the cover page of this Prospectus. The nonqualified
stock options vest over  a period of  four years with  the initial 20%  becoming
exercisable on the six-month anniversary of the grant date and an additional 20%
becoming  exercisable on each of the first four anniversaries of the grant date.
While the  Company does  not have  a formal  policy concerning  the granting  of
nonqualified  stock options to Independent Directors, the Company may grant such
options to Independent Directors in the future.                                 

1996 INCENTIVE PLAN                                                             

    SCOPE.  The Board of Directors and stockholders of the Company have approved
the New York Bagel Enterprises, Inc. 1996 Incentive Plan (the "Incentive Plan").
The Incentive Plan authorizes the Company  to award incentive stock options  and
nonqualified  stock options  to purchase  Common Stock  and restricted  stock to
officers, employees  and directors  of,  and consultants  and advisors  to,  the
Company.  The purpose of the  Incentive Plan is to  attract, retain and motivate
such persons.                                                                   

    The Incentive Plan authorizes the award of 400,000 shares of Common Stock to
be used for incentive  stock options, nonqualified  stock options or  restricted
stock  grants, of which options to purchase  271,000 shares of Common Stock have
been   granted    as    of   the    date    of   this    Prospectus.    If    an

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award  made  under  the Incentive  Plan  expires,  is canceled  or  is otherwise
terminated, those shares will be available for future awards under the Incentive
Plan. The Incentive Plan will terminate during January 2006.                    

    ADMINISTRATION.  The Incentive Plan will be administered by a committee (the
"Committee") which is comprised  of directors who  are disinterested within  the
meaning of Rule 16b-3 promulgated under Section 16(b) of the Securities Exchange
Act  of 1934, as amended (the "Exchange  Act"). Subject to the provisions of the
Incentive Plan,  the Committee  will have  authority to  select those  officers,
employees,  advisors  and  consultants  of the  Company  to  receive  awards, to
determine the time or times of receipt, to determine the types of awards and the
number of shares covered by the  awards, and to establish the terms,  conditions
and  provisions  of  such  awards.  In  making  such  award  determinations, the
Committee may  take  into  account  the  nature  of  services  rendered  by  the
recipient, his or her present and potential contribution to the Company's growth
and  success,  and  such other  factors  as  the Committee  deems  relevant. The
Committee is authorized to interpret the Incentive Plan, to establish, amend and
revoke any rules and  regulations relating to the  Incentive Plan, to  determine
the  terms and provisions of any agreements  made pursuant to the Incentive Plan
and to make all other determinations that may be necessary or advisable for  the
administration of the Incentive Plan.                                           

    STOCK  OPTIONS.  Both incentive stock options and nonqualified stock options
(collectively referred to  as "Stock Options")  may be granted  pursuant to  the
Incentive  Plan. All Stock Options granted under the Incentive Plan will have an
exercise price per share  to be determined by  the Committee; provided that  the
exercise price per share under each Stock Option shall not be less than the fair
market  value of a share of Common Stock at the time the Stock Option is granted
(110% of such fair market value in  the case of incentive stock options  granted
to  a  stockholder who  owns 10%  or  more of  the Company's  outstanding Common
Stock). The maximum term for all Stock Options granted under the Incentive  Plan
is  ten years (five years in the case  of an incentive stock option granted to a
stockholder who owns  10% or more  of the Company's  outstanding Common  Stock).
Moreover, no Stock Options may be granted under the Incentive Plan more than ten
years  after the  date of  its adoption.  All Stock  Options are nontransferable
other than  by will  or the  laws of  descent and  distribution or  a  qualified
domestic  relations order,  and during an  optionee's lifetime  may be exercised
only by the optionee or the  optionee's guardian or legal representative.  Stock
Options  are exercisable at such time and  in such installments as the Committee
may provide  at  the  time  the  Stock Option  is  granted.  The  Committee  may
accelerate  the exercisability  of any  Stock Option  at any  time. The purchase
price for shares acquired  pursuant to the  exercise of a  Stock Option must  be
paid  in the  manner determined  by the Committee.  The terms  and conditions of
Stock Options relating  to their  treatment upon termination  of the  optionee's
employment  or association with the  Company will be determined  at the time the
Stock Options are  granted. An optionee  is not deemed  to be the  owner of  any
shares  of Common Stock subject  to any Stock Option  until the Stock Option has
been exercised, the Company has issued and delivered the shares to the  optionee
and the optionee's name has been entered as a stockholder of record on the books
of  the Company.  The stock options  vest over a  period of four  years with the
initial 20% becoming exercisable on the six-month anniversary of the grant  date
and   an  additional  20%  becoming  exercisable  on  each  of  the  first  four
anniversaries of the  grant date. In  the event of  a change in  control of  the
Company,  as defined, awards under the  Incentive Plan become exercisable within
60 days of the change in control.                                               

    RESTRICTED STOCK.  Restricted stock awards  are grants of Common Stock  made
to  officers and employees, subject to  conditions established by the Committee.
The terms of a restricted stock award, including the restrictions placed on such
shares and the time  or times at  which such restrictions  will lapse, shall  be
determined  by the Committee at the time the award is made. Unless the Committee
determines otherwise, holders of restricted stock  shall have the right to  vote
the  shares  of  restricted stock  and  to  receive all  dividends  thereon. The
Committee may  determine  at the  time  of an  award  of restricted  stock  that
dividends  paid on such shares may be  paid to the grantee or deferred. Deferred
dividends (together with  any interest accrued  thereon) will be  paid upon  the
lapsing of the restrictions                                                     

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on the shares of restricted stock or forfeited upon the forfeiture of the shares
of  restricted stock. The agreements evidencing awards of restricted stock shall
set forth the terms and conditions of such awards and the effect of a  grantee's
termination of employment.                                                      

    ADJUSTMENTS.  In the event of any change in the outstanding shares of Common
Stock   by   reason   of   any   reclassification,   recapitalization,   merger,
consolidation, reorganization,  spin-off,  split-up,  issuance  of  warrants  or
rights  or debentures, stock dividend, stock  split or reverse stock split, cash
dividend, property dividend or  similar change in  the corporate structure,  the
aggregate  number of shares of Common Stock  with respect to which awards may be
made under  the Incentive  Plan,  and the  terms and  the  number of  shares  of
restricted  stock,  or  the number  of  shares  of Common  Stock  underlying any
outstanding Stock Options may be equitably adjusted by the Committee in its sole
discretion.                                                                     

    TERMINATION AND AMENDMENT.  The Incentive Plan may be terminated or  amended
by  the  Board  of  Directors,  provided that,  in  the  absence  of stockholder
approval, no amendment of the Incentive  Plan may materially increase the  total
number  of shares of Common Stock with respect to which awards may be made under
the Incentive Plan (except as discussed  in "-- Adjustments" above), change  the
exercise  price  of a  Stock Option,  materially modify  the requirements  as to
eligibility for participation in the  Incentive Plan or materially increase  the
benefits  accruing to participants under the Incentive Plan. No amendment of the
Incentive Plan  may adversely  alter or  impair  any Stock  Option or  share  of
restricted  stock  awarded  under the  Incentive  Plan prior  to  such amendment
without the consent of the holder thereof.                                      

INDEMNIFICATION ARRANGEMENTS                                                    

    The Company's Restated  and Amended Articles  of Incorporation and  Restated
and  Amended Bylaws will provide that  the Company shall indemnify all directors
and officers  of the  Company to  the  fullest extent  permitted by  the  Kansas
general corporation code. Under such provisions, any director or officer, who in
his  capacity as such, is made or threatened to  be made, a party to any suit or
proceeding, shall  be indemnified  if it  is determined  that such  director  or
officer  acted in good faith and in a  manner he reasonably believed to be in or
not opposed to the best interests of the Company.                               

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION                     

    During 1995, all compensation  decisions concerning executive officers  were
made  by the Company's Board of Directors and the respective boards of directors
of the  Prior  Entities,  which included  Messrs.  Geresi,  Sorrentino,  Hoover,
Murfin, Vrana, Trizza, Robert D. Young, Brent E. Durham, John R. Geresi and Chad
E.  Watkins. The Compensation  Committee currently makes  recommendations to the
Board of  Directors  regarding  compensation  to  the  executive  officers.  See
"Certain Transactions."                                                         

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PRINCIPAL AND SELLING STOCKHOLDERS

    The  following table presents  certain information as of  July 26, 1996, and
after giving  effect to  this offering,  regarding the  beneficial ownership  of
Common  Stock of  (i) each  director of the  Company, (ii)  each Named Executive
Officer, (iii) all persons known by the Company to be beneficial owners of  five
percent  or  more of  the Common  Stock,  and (iv)  all directors  and executive
officers of  the Company  as  a group.  Additionally,  the table  reflects  each
Selling  Stockholder and the number of shares of Common Stock to be sold by each
in this offering. The persons listed below have sole voting and investment power
and record and beneficial ownership with respect to such shares.                

                                                        · Enlarge/Download Table

                                                    SHARES BENEFICIALLY OWNED                SHARES BENEFICIALLY OWNED 
                                                        PRIOR TO OFFERING                        AFTER OFFERING(6)     
                                                    --------------------------    SHARES     --------------------------
                       NAME                           NUMBER      PERCENTAGE    OFFERED(5)     SHARES      PERCENTAGE  
--------------------------------------------------  -----------  -------------  -----------  -----------  -------------
                                                                                                                       
NAMED EXECUTIVE OFFICERS AND DIRECTORS                                                                                 
Robert J. Geresi (1)(2)...........................      599,343         21.4%       48,000       551,343         12.0% 
Paul T. Sorrentino (1)............................      598,543         21.4        48,000       550,543         12.0  
Paul R. Hoover (3)(4).............................       69,348          2.4         5,000        64,348          1.4  
Vincent J. Vrana (1)..............................      556,564         19.9        44,000       512,564         11.1  
David L. Murfin (3)...............................      438,246         15.7        33,000       405,246          8.8  
Directors and executive officers as a group (seven                                                                     
 persons).........................................    2,262,044         80.8%      178,000     2,084,044         45.3% 

5% STOCKHOLDER                                                                                                         
Rodney Joe Trizza (1).............................      161,951          5.8%       10,750       151,201          3.3% 

OTHER SELLING STOCKHOLDERS                                                                                             
Brent E. Durham...................................       24,217            *         1,750        22,467            *  
John R. Geresi....................................       21,389            *           500        20,889            *  
V. Richard Hoover.................................       69,350          2.5%        2,500        66,850          1.5% 
Nancy Murfin Moxley and Mark A. Moxley............       70,850          2.5         2,500        68,350          1.5  
Barbara Murfin Murphy.............................       70,850          2.5         2,500        68,350          1.5  
Chad E. Watkins...................................       25,833            *         1,500        24,333            *  

------------------------                                                        
*   Represents beneficial ownership of less than 1%                             

(1) The address for  Messrs. Geresi, Sorrentino,  Vrana and Trizza  is 110  West
Third Street, Stillwater, Oklahoma 74074-3504.                          

(2) Includes 5,000 shares owned by Mr. Geresi's minor children.                 

(3) The  address for Messrs.  Hoover and Murfin  is 300 I.M.A.  Plaza, 250 North
Water Street, Wichita, Kansas 67202-1213.                               

(4) Includes 5,000 shares owned by Mr. Hoover's minor children.                 

(5) In the event that  the Underwriters' over-allotment  option is exercised  in
    full, Messrs. Geresi, Sorrentino, Hoover, Vrana, Murfin and Trizza will sell
    an  aggregate of  54,500, 54,500, 6,500,  50,500, 38,500  and 13,250 shares,
respectively, in this offering.                                         

(6) In the event that  the Underwriters' over-allotment  option is exercised  in
    full,  Messrs. Geresi, Sorrentino,  Hoover, Vrana, Murfin  and directors and
    executive officers as a group will beneficially own 544,843 (11.2%), 544,043
    (11.2%), 62,848 (1.3%), 506,064 (10.4%), 399,746 (8.2%) and 2,057,544 shares
(42.3%), respectively, following this offering.                         

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CERTAIN TRANSACTIONS

REORGANIZATION                                                                  

    On December  31,  1995, the  Company  effected the  Reorganization  whereby,
through a series of transactions, the Company succeeded to the businesses of the
Prior  Entities.  First, New  York  Bagel Shop  &  Delicatessen, Inc.,  a Kansas
corporation, and VPR,  Inc., New  York Bagel Shop,  Inc., Bagel  Boss, Inc.  and
Bagels  of Norman,  Inc., all Oklahoma  corporations, were merged  into New York
Bagel Enterprises,  Inc., an  Oklahoma corporation  ("NYBE-OK") by  issuance  of
1,368,704 shares of the Company's Class B Common Stock. Second, Nashville Bagel,
a  wholly owned subsidiary of NYBE-OK, was merged into NYBE-OK. Finally, NYBE-OK
was merged into the Company for  the purpose of changing the corporate  domicile
from Oklahoma to Kansas by issuance of 1,416,988 shares of the Company's Class A
Common  Stock to the pre-reorganization stockholders  of NYBE-OK. As a result of
the Reorganization, Messrs. Geresi, Sorrentino, Hoover, Vrana, Murfin and Trizza
received 627,343,  627,343,  141,698, 584,564,  354,246  and 161,951  shares  of
Common  Stock, respectively. In  addition, Mr. Geresi's  father, John R. Geresi,
received 21,389 shares; Mr. Hoover's father, V. Richard Hoover, received  70,850
shares;  Mr. Murfin's sister, Barbara Murfin Murphy, received 70,850 shares; Mr.
Murfin's sister  and brother-in-law,  Nancy Murfin  Moxley and  Mark A.  Moxley,
received 70,850 shares; and 54,608 shares were issued to others.                

FRANCHISE ACQUISITION                                                           

    On  December 31, 1995,  the Company acquired  the assets of  Central & Ridge
Yogurt, Inc.  ("C&R"), a  franchisee of  the Company,  in consideration  of  the
assumption  by the Company of $225,000 of  liabilities of C&R. The assets, which
had been acquired by  C&R over time  at a cost  of approximately $195,000,  were
valued  by the Company without benefit  of an independent appraisal at $225,000.
At the time of the  acquisition, Mr. Hoover was the  President of C&R and  owned
10%  of the stock  of C&R. The terms  of the transaction  were negotiated by Mr.
Hoover on behalf of C&R and Mr. Geresi on behalf of the Company and approved  by
the  Board of Directors of the Company, with the purchase price being determined
by arm's-length negotiation between C&R and the Company.                        

LEASES                                                                          

    The Company  currently  leases space  for  a Company-owned  New  York  Bagel
restaurant  located in Norman, Oklahoma from Bagel Land, Inc. ("Bagel Land"), an
Oklahoma corporation, owned  one-third each  by Messrs.  Geresi, Sorrentino  and
Vrana.  The Company  made aggregate rent  payments under such  lease of $14,100,
$28,200 and  $14,100 during  1994, 1995  and  the period  ended June  30,  1996,
respectively.  The lease is for  a term of five years  commencing June 1994 at a
rent of $2,350 per month for 30 months and $2,500 per month for the remaining 30
months with an option to renew for five years at $2,650 for the first 30  months
and $2,800 per month for the last 30 months. The Company also leases space for a
Company-owned  New York Bagel restaurant located  in Tulsa, Oklahoma from Cherry
Street Land, Inc.,  an Oklahoma  corporation, owned one-fourth  each by  Messrs.
Geresi,  Sorrentino, Vrana and Trizza. The  Company made aggregate rent payments
under such lease of $27,600  and $13,800 during 1995  and the period ended  June
30,  1996, respectively. The lease is for a term of five years beginning January
1995 with an option to renew for five years and rent for the first 24 months  of
$2,300  per month, $2,500 per month for the next 36 months, $2,700 per month for
the next 30 months and  $2,900 per month for the  last 30 months. Bagel Land  is
anticipated  to lease space to the Company for a New York Bagel restaurant to be
opened in Lubbock, Texas. Bagel  Land is anticipated to  be paid rent of  $3,500
per month commencing during the later part of 1996.                             

    The  Company subleases space  for its corporate  offices located in Wichita,
Kansas from Murfin Drilling Company, Inc., a wholly owned subsidiary of  Murfin,
Inc. which is owned 7.1% by Mr. Murfin. The Company made aggregate rent payments
under  such sublease of  $7,449 and $6,572  during 1995 and  the twenty-six week
period ended June 30, 1996, respectively. The current sublease is for a term  of
12  months commencing April 1, 1996, and is terminable on 30 days' notice by the
Company.                                                                        

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STOCKHOLDER GUARANTEES                                                          

    The Loan Agreement is guaranteed in an amount up to $1.0 million by each  of
Messrs.  Geresi,  Sorrentino  and Vrana.  The  Nashville Note  is  guaranteed by
Messrs. Geresi, Sorrentino and Vrana each  up to $83,250 and Messrs. Murfin,  up
to $175,000, and Hoover, up to $75,000. The Term Notes, the Stillwater Note, the
Springfield  Note, the Remodel  Note and the  Lubbock Note are  guaranteed in an
unlimited amount by Messrs. Geresi, Sorrentino and Vrana and in various  limited
amounts  by  Messrs.  Murfin, Hoover  and  Trizza.  The Company  intends  to use
approximately $4.5 million  of the net  proceeds of this  offering to repay  all
outstanding  indebtedness under the  Loan Agreement, the  Nashville Note and the
Term Notes. See "Risk Factors --  Benefits of Offering to Certain  Stockholders"
and "Use of Proceeds."                                                          

DISTRIBUTIONS                                                                   

    During  1994, the Prior Entities declared  distributions in the aggregate of
$614,260 to  their stockholders,  of which  Messrs. Geresi,  Sorrentino,  Vrana,
Murfin  and  Hoover received  $184,254, $184,254,  $184,254, $7,800  and $1,200,
respectively. Mr. Trizza, a 5.8%  stockholder of the Company, received  $49,498,
$2,400  was received by members of Mr. Murfin's family, and $600 was received by
V. Richard Hoover,  the father of  Mr. Hoover. During  1995, the Prior  Entities
declared  distributions in the aggregate of  $2,363,030 to their stockholders of
which Messrs. Geresi,  Sorrentino, Vrana, Murfin  and Hoover received  $571,740,
$571,738,  $544,838,  $225,000 and  $90,000,  respectively. Mr.  Trizza received
$177,252, John R. Geresi, the father of Mr. Geresi, received $13,447, V. Richard
Hoover, the father  of Mr.  Hoover, received  $45,000, $90,000  was received  by
members  of Mr.  Murfin's family,  and the balance  ($34,015) was  paid to other
stockholders of the Prior Entities. The  Company intends to make a  distribution
to  the stockholders in connection with their estimated federal and state income
tax obligations attributable to the Company's 1996 earnings. If the Company  had
terminated  its  S  corporation  status  as  of  June  30,  1996,  the Company's
distribution  would  have  been  approximately  $184,000.  See  "S   Corporation
Distributions."                                                                 

FRANCHISEE                                                                      

    During  August 1995, the  Company entered into  a Development Agreement with
Mr. Vrana's brother and his partner concerning the development of three New York
Bagel restaurants in Columbia, South Carolina on terms and conditions comparable
to all other franchisees of the  Company as discussed herein. Pursuant  thereto,
Mr.  Vrana's brother and  his partner have developed  one restaurant and entered
into a franchise agreement with the Company in connection therewith.            

FUTURE TRANSACTIONS                                                             

    Although each of  the foregoing transactions  were among affiliated  parties
and  necessarily involved conflicts of interest,  the Company believes that they
were on  terms  that were  no  less  favorable than  reasonably  available  from
unaffiliated  third parties.  It is the  Company's policy  that all transactions
between the Company and its affiliated entities, executive officers or directors
will be subject  to the review  and approval  of the majority  of the  Company's
directors  that do not have an interest in  the transaction and will be on terms
which will be no  less favorable to  the Company than  the Company could  obtain
from non-affiliated parties.                                                    

DESCRIPTION OF CAPITAL STOCK

    The  authorized  capital stock  of the  Company  consists of  (i) 25,000,000
shares of Class A Common  Stock, par value $0.01  per share, and (ii)  5,000,000
shares  of Class B Common Stock, par value $0.01 per share. As of June 30, 1996,
there were 1,416,988  shares of Class  A Common Stock  outstanding held by  nine
record  holders and 1,383,012 shares of Class B Common Stock outstanding held by
eight record holders.                                                           

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    Concurrently with  the  completion  of  this offering,  (i)  the  number  of
authorized  shares of Class A Common Stock will be increased to 30,000,000, (ii)
each share of outstanding Class B Common Stock will be converted into one  share
of  Class A Common Stock resulting in the 24 stockholders prior to this offering
holding 2,800,000 shares of  Common Stock, (iii) the  Class B Common Stock  will
cease  to exist  and the  Class A  Common Stock  will be  reclassified as Common
Stock, and (iv)  the Company  will be authorized  to issue  5,000,000 shares  of
Preferred Stock, no par value per share.                                        

COMMON STOCK                                                                    

    Holders  of Common Stock will be entitled to one vote for each share held in
the election  of directors  and on  all other  matters submitted  to a  vote  of
stockholders.  Cumulative voting of shares of Common Stock will be prohibited in
the Company's Restated  and Amended  Articles of Incorporation.  Subject to  the
preferential  rights of the holders of  Preferred Stock, holders of Common Stock
will be entitled to receive ratably such  dividends, if any, as may be  declared
by  the Board  of Directors  out of funds  legally available  therefor. Upon the
liquidation, dissolution or  winding up of  the Company, the  holders of  Common
Stock  will  be  entitled to  receive  ratably  the net  assets  of  the Company
available after payment of all debts  and other liabilities and payment in  full
to  holders of shares of Preferred Stock then outstanding, if any, of any amount
required to be paid under the terms  of such Preferred Stock. Holders of  Common
Stock  will have no  preemptive, subscription, redemption  or conversion rights.
The rights,  preferences and  privileges  of holders  of  Common Stock  will  be
subject  to,  and may  be adversely  affected by,  the rights  of any  series of
Preferred Stock that the Company may issue in the future. See "Dividend Policy."

PREFERRED STOCK                                                                 

    Upon completion of this offering, the Board of Directors will be  authorized
to issue, from time-to-                                                         
time  without further action by the  Company's stockholders, shares of Preferred
Stock, in one or more series, and  fix the dividend rights, dividend rates,  any
conversion  rights or right of  exchange, any voting right,  rights and terms of
redemption (including sinking fund provisions), the redemption price or  prices,
the  liquidation preferences and  any other rights,  preferences, privileges and
restrictions of  any  series  of  Preferred  Stock  and  the  number  of  shares
constituting  such series and the designation thereof. Depending upon the rights
of such Preferred Stock, the issuance  of Preferred Stock could have an  adverse
effect  on holders of Common Stock by delaying or preventing a change in control
of the Company, diluting  the voting rights of  holders of Common Stock,  making
removal  of the present management of the Company more difficult or resulting in
the reduction  of  or restrictions  upon  the  payment of  dividends  and  other
distributions to the holders of Common Stock, including, without limitation, any
liquidation preferences which may relate to such Preferred Stock.               

CLASS B COMMON STOCK                                                            

    Holders  of Class B Common  Stock have no voting  rights, but otherwise have
the same rights as holders of Common Stock. Concurrently with the completion  of
this  offering, the outstanding shares of Class B Common Stock will be converted
into shares of Class A Common Stock, which will be reclassified as Common Stock,
and the Class B Common Stock will cease to exist.                               

CONVERTIBLE DEBENTURE                                                           

    In connection with the acquisition of Nashville Bagel, the Company issued  a
4.0%  contingently convertible subordinated debenture  in the amount of $115,000
payable in annual installments of  $28,750 plus interest beginning December  14,
1996  (the "Convertible  Debenture"). The  Convertible Debenture  is convertible
into a maximum of  19,320 shares of  Common Stock, at the  option of the  holder
thereof,  during the  period commencing  ten days  after the  completion of this
offering and  ending  270 days  later.  The number  of  shares of  Common  Stock
issuable  upon conversion  are subject  to adjustment from  time to  time in the
event the Company (i) pays a dividend or makes a distribution on the outstanding
Common Stock payable  in Common  Stock, (ii) subdivides  the outstanding  Common

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Stock  into a  greater number of  shares, (iii) combines  the outstanding Common
Stock into a lesser number of shares, or (iv) issues by reclassification of  the
Common  Stock  any Common  Stock of  the Company.  The Convertible  Debenture is
subordinate to the liabilities of the Company.                                  

CERTAIN ANTI-TAKEOVER MATTERS                                                   

    The  provisions  of   the  Company's  Restated   and  Amended  Articles   of
Incorporation  and Amended and Restated Bylaws summarized below may be deemed to
have an anti-takeover effect and may delay,  defer or prevent a tender offer  or
takeover attempt that a stockholder might consider to be in the best interest of
the Company or its stockholders, including those attempts that might result in a
premium over the market price for the Common Stock.                             

    Upon  completion  of  this  offering,  the  Company's  Restated  and Amended
Articles of Incorporation will provide for the Board of Directors to be  divided
into  three classes as  of equal size as  possible, with the  term of each class
expiring in consecutive years. As a result, approximately one-third of the Board
of Directors  will be  elected each  year. The  Company's Restated  and  Amended
Articles  of Incorporation will also provide  that directors may be removed from
office only for  cause. Directors may  be removed for  cause by the  affirmative
vote of the holders of at least two-thirds of the outstanding shares of stock of
the  Company, or by  a majority if such  removal is recommended  by the Board of
Directors by the affirmative vote of  at least two-thirds of the directors.  The
Company's  Bylaws may be adopted,  amended or repealed (i)  by the holders of at
least a majority of the outstanding shares of stock of the Company or (ii) by at
least a two-thirds vote of the full Board of Directors. The calling of a special
meeting of the stockholders requires the written request of holders of more than
two-thirds of all  the outstanding shares  of the stock  of the Company,  unless
called by the Board of Directors or the Chairman of the Board of Directors.     

    The  Company's Articles of Incorporation require the affirmative vote of the
holders of at least two-thirds of either the outstanding voting stock (excluding
voting stock held by the "related person") or the directors in order to  approve
any  "business combination"  with a  "related person."  A "business combination"
includes (i)  any  merger of  the  Company with  a  "related person,"  (ii)  any
transfer  of  a substantial  part of  the assets  of the  Company to  a "related
person," (iii) any transfer of  a substantial part of  the assets of a  "related
person"  to the Company, (iv) the issuance of any securities of the Company to a
"related person" and (v)  certain reclassifications and recapitalizations  which
have  the  effect of  increasing the  power  of a  "related person."  A "related
person" includes any person that is the beneficial owner of five percent or more
of the outstanding shares of the Company's voting stock.                        

LIMITATION ON LIABILITY                                                         

    As authorized by the Kansas general corporation code, the Company's Articles
of Incorporation provide that to the fullest extent permitted by Kansas law,  as
the  same exists or may hereafter be  amended, directors and former directors of
the Company will not be liable to  the Company or its stockholders for  monetary
damages for an act or omission occurring in their capacity as a director. Kansas
law  does not currently authorize the elimination or limitation of the liability
of a director to the extent the director  is found liable (i) for any breach  of
the director's duty of loyalty to the Company or its stockholders, (ii) for acts
or  omissions not in good faith that constitute a breach of duty of the director
of the Company or that involve intentional misconduct or a knowing violation  of
law,  (iii)  for  transactions  from which  the  director  received  an improper
benefit, whether or not the benefit resulted from action taken within the  scope
of  the director's office, or (iv) for acts or omissions for which the liability
of a director is expressly provided by law.                                     

TRANSFER AGENT AND REGISTRAR                                                    

    Upon completion of this offering, the  transfer agent and registrar for  the
Common  Stock will  be American  Stock Transfer &  Trust Company  located in New
York, New York.                                                                 

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SHARES ELIGIBLE FOR FUTURE SALE 

    Upon completion of this offering, the Company will have 4,600,000 shares  of
Common  Stock outstanding (4,870,000 shares  if the Underwriters' over-allotment
option is exercised in full). Of these shares, the shares sold in this  offering
will  be freely  tradeable in the  public market without  restriction or further
registration under the  Securities Act, except  for any shares  purchased by  an
"affiliate"  (as defined in the rules  and regulations under the Securities Act)
of the Company. The remaining shares (the "Restricted Shares") are deemed to  be
"restricted  securities" within the meaning of Rule 144 and may be publicly sold
only if  registered under  the Securities  Act  or sold  in accordance  with  an
available  exemption from registration, such as  those provided by Rule 144. The
beneficial owners of  2,600,000 of the  Restricted Shares have  agreed with  the
Underwriters  not to offer,  sell or otherwise  dispose of any  shares of Common
Stock beneficially owned or controlled by them (including subsequently  acquired
shares)  for a period of 180 days after  the date of this Prospectus without the
prior written  consent  of Rauscher  Pierce  Refsnes,  Inc., on  behalf  of  the
representatives of the Underwriters. See "Underwriting."                        

    In  general, under  Rule 144  as currently in  effect, a  person (or persons
whose shares are aggregated) is entitled  to sell Restricted Shares if at  least
two years have passed since the later of the time such shares were acquired from
the  Company or an  affiliate of the  Company. Rule 144  provides, however, that
within any three-month period such person may only sell up to the greater of (i)
1% of the then outstanding shares of Common Stock (46,000 shares upon completion
of this offering) or (ii) the average weekly trading volume in the Common  Stock
during the four calendar weeks immediately preceding the date on which notice of
the   sale  is   filed  with  the   Securities  and   Exchange  Commission  (the
"Commission"). Under Rule 144(k),  any person who has  not been an affiliate  of
the  Company for a  period of 90 days  preceding a sale  of Restricted Shares is
entitled to sell  such shares without  regard to such  volume limitations if  at
least  three years  have passed  since the  later of  the time  such shares were
acquired from the Company or an affiliate of the Company. Shares held by persons
who are  deemed to  be affiliates  of the  Company are  subject to  such  volume
limitations  regardless  of how  long  they have  been  owned or  how  they were
acquired. The Company is unable to estimate the number of Restricted Shares that
may be sold from time to time under  Rule 144, since such number will depend  on
the  market  price  and  trading  volume  for  the  Common  Stock,  the personal
circumstances of the sellers and other factors.                                 

    An aggregate  of 400,000  shares  of Common  Stock  have been  reserved  for
issuance  to  employees,  officers,  consultants  and  advisors  of  the Company
pursuant to the Incentive Plan.  As of the date  of this Prospectus, options  to
purchase  271,000 shares of  Common Stock have been  granted under the Incentive
Plan. The Company anticipates filing  registration statements on Form S-8  under
the  Securities Act  to register  all of  the shares  of Common  Stock currently
issuable or  reserved  for future  issuance  under the  Incentive  Plan.  Shares
purchased  upon exercise of  the options granted pursuant  to the Incentive Plan
generally are available for resale in the public market to the extent the  stock
transfer  restriction agreements with the Underwriters have expired, except that
any such shares issued to affiliates  are subject to the volume limitations  and
certain  other restrictions of  Rule 144, unless  appropriately registered under
the Securities Act. See "Management -- 1996 Incentive Plan."                    

    The Company can make no prediction as  to the effect, if any, that sales  of
shares  of Common Stock or the availability of  shares for sale will have on the
market price  of Common  Stock. Nevertheless,  sales of  significant amounts  of
Common Stock could adversely affect the prevailing market price of Common Stock,
as  well  as impair  the ability  of the  Company to  raise capital  through the
issuance of additional equity securities. Prior to this offering, there has been
no  established  public  trading  market  for  the  Common  Stock.  The  Company
anticipates that the trading market in the Common Stock, if any, will be limited
based upon the number of shares currently outstanding and anticipated to be sold
in this offering. See "Risk Factors -- Shares Eligible for Future Sale."        

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UNDERWRITING

    The  Underwriters named below, represented  by Rauscher Pierce Refsnes, Inc.
and J.C. Bradford & Co. (the "Representatives"), have severally agreed,  subject
to  the terms and conditions of the  Underwriting Agreement to purchase from the
Company the number of shares of Common Stock set forth opposite their respective
names below. The nature of the obligations  of the Underwriters is such that  if
any of such shares are purchased, all must be purchased.                        

                                                        · Enlarge/Download Table

                                                                                              NUMBER OF 
NAME                                                                                           SHARES   
-------------------------------------------------------------------------------------------  -----------
                                                                                                        
Rauscher Pierce Refsnes, Inc...............................................................             
J.C. Bradford & Co.........................................................................             

                                                                                             -----------
  Total....................................................................................    2,000,000
                                                                                             -----------
                                                                                             -----------

    The  Underwriters  propose initially  to offer  the  shares of  Common Stock
offered hereby to the public at the price to public set forth on the cover  page
of  this Prospectus. The Underwriters may allow a concession to selected dealers
who are members of the National Association of Securities Dealers, Inc. ("NASD")
not in excess of  $       per  share, and the Underwriters  may allow, and  such
dealers  may  reallow, to  members of  the NASD  a concession  not in  excess of
$      per share. After the public offering, the price to public, the concession
and the reallowance may be changed by the Representatives.                      

    The  Company  and  Selling  Stockholders  have  granted  an  option  to  the
Underwriters,  exercisable within 30 days after  the date of this Prospectus, to
purchase up to an  aggregate of 270,000 and  30,000 additional shares of  Common
Stock,  respectively,  at the  initial price  to  public, less  the underwriting
discount, set forth on the cover  page of this Prospectus. The Underwriters  may
exercise  the option  only for the  purpose of covering  over-allotments. To the
extent that  the Underwriters  exercise such  option, each  Underwriter will  be
committed,  subject  to certain  conditions, to  purchase  from the  Company and
Selling Stockholders on  a pro rata  basis that number  of additional shares  of
Common Stock which is proportionate to such Underwriter's initial commitment.   

    The  Company  and  the Selling  Stockholders  have agreed  to  indemnify the
Underwriters  against  certain  liabilities,  including  liabilities  under  the
Securities Act.                                                                 

    The   Company,  its  executive  officers  and  directors,  and  all  of  its
stockholders have agreed that for  a period of 180 days  after the date of  this
Prospectus,  they will  not offer,  sell or otherwise  dispose of  any shares of
Common Stock beneficially  owned or controlled  by them (including  subsequently
acquired  shares) without the prior written  consent of Rauscher Pierce Refsnes,
Inc. on behalf of the Representatives.                                          

    Prior to this offering, there  has been no market  for the Common Stock  and
there  can be no assurance  that a regular trading  market will develop upon the
completion  of  this  offering.  The  initial  public  offering  price  will  be
determined  by  negotiations between  the Company  and the  Representatives. The
primary factors considered in determining  such offering price will include  the
history of and                                                                  

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prospects  for the industry  in which the Company  competes, market valuation of
comparable companies, market conditions for public offerings, the history of and
prospects for the Company's business, the Company's past and present  operations
and  earnings and the trend of such  earnings, the prospects for future earnings
of the Company, the Company's current  financial position, an assessment of  the
Company's  management,  the general  condition  of the  securities  markets, the
demand for  similar  securities  of  comparable  companies  and  other  relevant
factors.                                                                        

    The  Representatives have  advised the Company  that they do  not expect any
sales by the  Underwriters to  accounts over which  they exercise  discretionary
authority.                                                                      

LEGAL MATTERS 

    The  validity of the issuance  of the shares of  Common Stock offered hereby
will be passed upon for the  Company by Klenda, Mitchell, Austerman &  Zuercher,
L.L.C.,  Wichita, Kansas. Certain legal matters  in connection with the issuance
of the  shares of  Common  Stock offered  hereby will  be  passed upon  for  the
Underwriters by Jackson & Walker, L.L.P., Dallas, Texas.                        

EXPERTS 

    The combined balance sheets of the Company as of December 31, 1994 and 1995,
and  the combined statements of  operations, stockholders' equity (deficit), and
cash flows for each  of the years  in the three-year  period ended December  31,
1995, have been included herein in reliance upon the report of KPMG Peat Marwick
LLP,  independent certified public accountants,  appearing elsewhere herein, and
upon the authority of said firm as experts in accounting and auditing.          

    The statements  of  operations,  stockholder's equity,  and  cash  flows  of
Nashville  Bagel Co., Inc. for each of  the years in the three-year period ended
June 30, 1995 and for  the period from July 1,  1995 through December 14,  1995,
have  been included herein in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants,  appearing elsewhere herein, and  upon
the  authority of said firm as experts in accounting and auditing. The report of
KPMG Peat  Marwick  LLP covering  the  June  30, 1994  financial  statements  of
Nashville  Bagel Co., Inc.  refers to a  change in the  method of accounting for
income taxes.                                                                   

    The statements  of  operations, stockholders'  deficit,  and cash  flows  of
Central  & Ridge Yogurt,  Inc. for the  year ended December  31, 1995, have been
included  herein  in  reliance  upon  the  report  of  KPMG  Peat  Marwick  LLP,
independent  certified public accountants, appearing  elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.               

ADDITIONAL INFORMATION

    The Company has filed with the  Commission a Registration Statement on  Form
S-1  (as  amended  and together  with  all exhibits  thereto,  the "Registration
Statement") under the Securities Act, with respect to the shares of Common Stock
offered hereby. This Prospectus constitutes a part of the Registration Statement
and does  not contain  all of  the  information set  forth in  the  Registration
Statement,  certain parts of which are omitted from this Prospectus as permitted
by the rules  and regulations of  the Commission. Statements  contained in  this
Prospectus  as  to the  contents of  any contract,  agreement or  other document
referred to herein  are not necessarily  complete and, where  such agreement  or
other  document is an exhibit to the Registration Statement, each such statement
is qualified  in  all respects  by  the provisions  of  such exhibit,  to  which
reference  is hereby made  for a full  statement of the  provisions thereof. For
further information with respect to the Company and the Common Stock,  reference
is hereby made to the Registration Statement and to the exhibits thereto.       

    The  Registration Statement may be inspected, without charge, and copies may
be obtained, at  prescribed rates,  at the  public reference  facilities of  the
Commission maintained at Judiciary Plaza,                                       

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450  Fifth  Street,  N.W., Room  1024,  Washington,  D.C. 20549.  Copies  of the
Registration  Statement  may   also  be  inspected,   without  charge,  at   the
Commission's regional offices at 7 World Trade Center, Suite 1300, New York, New
York  10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. In
addition, copies  of the  Registration  Statement may  be  obtained by  mail  at
prescribed  rates, from  the Public  Reference Branch  of the  Commission at 450
Fifth Street, N.W., Washington, D.C. 20549.                                     

    As a  result  of this  offering,  the Company  will  become subject  to  the
information  and periodic  reporting requirements of  the Exchange  Act, and, in
accordance therewith, will  file periodic  reports, proxy  statements and  other
information  with the  Commission. Such  periodic reports,  proxy statements and
other information will  be available for  inspection and copying  at the  public
reference facilities and regional offices referred to above. The Company intends
to  furnish its stockholders with annual reports containing financial statements
certified by its independent auditors and with quarterly reports for each of the
first  three  quarters  of  each  fiscal  year  containing  unaudited  financial
information.                                                                    

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NEW YORK BAGEL ENTERPRISES, INC.

INDEX TO FINANCIAL STATEMENTS 

                                                        · Enlarge/Download Table

                                                                                                               PAGE   
                                                                                                             ---------
                                                                                                                      
New York Bagel Enterprises, Inc.:                                                                                     
  Independent Auditors' Report.............................................................................        F-2
  Combined Balance Sheets at December 31, 1994 and 1995 and June 30, 1996 (unaudited)......................        F-3
  Combined Statements of Operations for the Years Ended December 31, 1993, 1994 and 1995 and the Six Months           
   Ended June 30, 1995 (unaudited) and the Twenty-Six Weeks Ended June 30, 1996 (unaudited)................        F-4
  Combined Statements of Stockholders' Equity (Deficit) for the Years Ended December 31, 1993, 1994 and               
   1995 and the Twenty-Six Weeks Ended June 30, 1996 (unaudited)...........................................        F-5
  Combined Statements of Cash Flows for the Years Ended December 31, 1993, 1994 and 1995 and the Six Months           
   Ended June 30, 1995 (unaudited) and the Twenty-Six Weeks Ended June 30, 1996 (unaudited)................        F-6
  Notes to Combined Financial Statements...................................................................        F-7
New York Bagel Enterprises, Inc. (Unaudited):                                                                         
  Pro Forma Condensed Combined Statement of Operations for the Year Ended December 31, 1995................       F-18
  Notes to Pro Forma Condensed Combined Statement of Operations............................................       F-19
Nashville Bagel Co., Inc.:                                                                                            
  Independent Auditors' Report.............................................................................       F-20
  Statements of Operations for the Years Ended June 30, 1993, 1994 and 1995 and for the Period from July 1,           
   1995 through December 14, 1995..........................................................................       F-21
  Statements of Stockholder's Equity for the Years Ended June 30, 1993, 1994 and 1995 and for the Period              
   from July 1, 1995 through December 14, 1995.............................................................       F-22
  Statements of Cash Flows for the Years Ended June 30, 1993, 1994 and 1995 and for the Period from July 1,           
   1995 through December 14, 1995..........................................................................       F-23
  Notes to Financial Statements............................................................................       F-24
Central & Ridge Yogurt, Inc.:                                                                                         
  Independent Auditors' Report.............................................................................       F-26
  Statement of Operations for the Year Ended December 31, 1995.............................................       F-27
  Statement of Stockholders' Deficit for the Year Ended December 31, 1995..................................       F-28
  Statement of Cash Flows for the Year Ended December 31, 1995.............................................       F-29
  Notes to Financial Statements............................................................................       F-30

F-1 

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INDEPENDENT AUDITORS' REPORT

The Board of Directors                                                          
New York Bagel Enterprises, Inc.:                                               

    We  have audited the accompanying combined  balance sheets of New York Bagel
Enterprises, Inc. as  of December 31,  1994 and 1995,  and the related  combined
statements  of operations,  stockholders' equity  (deficit), and  cash flows for
each of  the years  in the  three-year  period ended  December 31,  1995.  These
combined   financial  statements   are  the  responsibility   of  the  Company's
management. Our  responsibility  is to  express  an opinion  on  these  combined
financial statements based on our audits.                                       

    We  conducted  our audits  in  accordance with  generally  accepted auditing
standards. Those standards require that we plan and perform the audit to  obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also  includes
assessing  the  accounting principles  used  and significant  estimates  made by
management, as well as evaluating the overall financial statement  presentation.
We believe that our audits provide a reasonable basis for our opinion.          

    In  our opinion, the combined financial statements referred to above present
fairly, in all material  respects, the combined financial  position of New  York
Bagel Enterprises, Inc. as of December 31, 1994 and 1995, and the results of its
operations  and its cash  flows for each  of the years  in the three-year period
ended December  31,  1995,  in conformity  with  generally  accepted  accounting
principles.                                                                     

                         KPMG Peat Marwick LLP

Wichita, Kansas                                                                 
February 21, 1996, except                                                       
note 14 which is as of                                                        
June 4, 1996                                                                  

F-2 

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NEW YORK BAGEL ENTERPRISES, INC.
COMBINED BALANCE SHEETS 
DECEMBER 31, 1994 AND 1995 AND JUNE 30, 1996

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                                                                                 DECEMBER 31,                                   
                                                                           ------------------------                             
                                                                              1994         1995                                 
                                                                           ----------  ------------    JUNE 30,     PRO FORMA   
                                                                                                         1996        JUNE 30,   
                                                                                                     ------------   1996 (NOTE  
                                                                                                                       15)      
                                                                                                     (UNAUDITED)   ------------ 
                                                                                                                   (UNAUDITED)  
                                                                                                                                
                             ASSETS (NOTE 7)                                                                                    
Current assets:                                                                                                                 
  Cash...................................................................  $   46,200  $    133,425  $    207,454  $    207,454 
  Accounts receivable (note 3)...........................................     114,492       137,853       191,593       191,593 
  Inventory..............................................................      81,913       143,964       139,148       139,148 
  Deferred costs, net of accumulated amortization of $43,340 at June 30,                                                        
   1996 (note 4).........................................................       6,428        77,100       200,041       200,041 
  Other current assets (note 9)..........................................       8,598        24,018        77,379        77,379 
                                                                           ----------  ------------  ------------  ------------ 
    Total current assets.................................................     257,631       516,360       815,615       815,615 
Property, plant and equipment, net (note 5)..............................     554,340     1,256,154     2,318,973     2,318,973 
Other assets, net of accumulated amortization of $4,063, $12,433 and                                                            
 $17,367 at December 31, 1994 and 1995 and June 30, 1996, respectively...      60,027        55,658        56,726        56,726 
Deferred offering costs..................................................      --             8,474       363,966       363,966 
Goodwill, net of accumulated amortization of $999 and $12,475 at December                                                       
 31, 1995 and June 30, 1996 (note 12)....................................      --           458,052       446,574       446,574 
                                                                           ----------  ------------  ------------  ------------ 
                                                                           $  871,998  $  2,294,698  $  4,001,854  $  4,001,854 
                                                                           ----------  ------------  ------------  ------------ 
                                                                           ----------  ------------  ------------  ------------ 
                      LIABILITIES AND STOCKHOLDERS'                                                                             
                            EQUITY (DEFICIT)                                                                                    
Current liabilities:                                                                                                            
  Current installments of long-term debt (note 7)........................  $   58,700  $    519,936  $    649,017  $    649,017 
  Accounts payable.......................................................      58,640       163,172       468,897       468,897 
  Accrued liabilities....................................................      99,062        83,761       485,184       485,184 
  Current portion of deferred franchise fees.............................     119,500        69,000        36,000        36,000 
  Deferred income taxes..................................................      --           --            --             68,000 
  Distributions payable (note 10)........................................      42,000        48,693        48,693       232,693 
                                                                           ----------  ------------  ------------  ------------ 
    Total current liabilities............................................     377,902       884,562     1,687,791     1,939,791 
Due to stockholders (note 8).............................................      67,341       --            --            --      
Long-term debt, less current portion (note 7)............................     232,942     2,845,064     3,280,730     3,280,730 
Deferred franchise fees..................................................      --            98,000        41,500        41,500 
Deferred credits.........................................................      30,059        45,537        57,809        57,809 
Deferred income taxes (note 9)...........................................       4,786       --            --             23,000 
                                                                           ----------  ------------  ------------  ------------ 
    Total liabilities....................................................     713,030     3,873,163     5,067,830     5,342,830 
                                                                           ----------  ------------  ------------  ------------ 
Stockholders' equity (deficit) (notes 10 and 14):                                                                               
  Class A common stock, $.01 par value. Authorized 25,000,000 shares;                                                           
   issued and outstanding 1,416,988 shares...............................      14,170        14,170        14,170        14,170 
  Class B common stock, $.01 par value. Authorized 5,000,000 shares;                                                            
   issued and outstanding 1,368,704, 1,368,704 and 1,383,012 shares at                                                          
   December 31, 1994 and 1995 and June 30, 1996, respectively............      13,687        13,687        13,830        13,830 
  Additional paid-in capital (deficit)...................................     151,293       157,793       157,650    (1,368,976)
  Accumulated deficit....................................................     (20,182)   (1,764,115)   (1,251,626)      --      
                                                                           ----------  ------------  ------------  ------------ 
    Total stockholders' equity (deficit).................................     158,968    (1,578,465)   (1,065,976)   (1,340,976)
Commitments and contingencies (notes 6 and 13)                                                                                  
                                                                           ----------  ------------  ------------  ------------ 
                                                                           $  871,998  $  2,294,698  $  4,001,854  $  4,001,854 
                                                                           ----------  ------------  ------------  ------------ 
                                                                           ----------  ------------  ------------  ------------ 

See accompanying notes to combined financial statements.

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NEW YORK BAGEL ENTERPRISES, INC.
COMBINED STATEMENTS OF OPERATIONS 
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995 AND
THE SIX MONTHS ENDED JUNE 30, 1995 AND
THE TWENTY-SIX WEEKS ENDED JUNE 30, 1996

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                                                                                     SIX MONTHS     TWENTY-SIX  
                                                YEARS ENDED DECEMBER 31,                ENDED       WEEKS ENDED 
                                       -------------------------------------------    JUNE 30,       JUNE 30,   
                                           1993           1994           1995           1995           1996     
                                       -------------  -------------  -------------  -------------  -------------
                                                                                            (UNAUDITED)         
                                                                                                                
Revenues:                                                                                                       
  Sales from Company-owned                                                                                      
   restaurants........................ $   3,538,612  $   5,653,177  $   6,875,146  $   3,345,422  $   4,849,860
  Franchise revenues (note 3).........        22,677        168,704        484,300        193,413        339,733
                                       -------------  -------------  -------------  -------------  -------------
    Total revenues....................     3,561,289      5,821,881      7,359,446      3,538,835      5,189,593
                                       -------------  -------------  -------------  -------------  -------------
Costs and expenses:                                                                                             
  Cost of sales.......................     1,527,246      2,280,012      2,612,772      1,272,689      1,733,312
  Restaurant operating expenses (note                                                                           
   6).................................     1,386,676      2,326,178      3,083,902      1,432,657      2,201,632
  General and administrative                                                                                    
   expenses...........................       468,691        451,900        838,190        374,972        401,883
  Depreciation and amortization.......        80,145        116,960        158,996         64,579        177,213
                                       -------------  -------------  -------------  -------------  -------------
    Total costs and expenses..........     3,462,758      5,175,050      6,693,860      3,144,897      4,514,040
                                       -------------  -------------  -------------  -------------  -------------
    Operating income..................        98,531        646,831        665,586        393,938        675,553
Interest expense......................        13,745         52,383         39,800         19,621        163,064
                                       -------------  -------------  -------------  -------------  -------------
    Earnings before income taxes......        84,786        594,448        625,786        374,317        512,489
Income tax expense (benefit) (note                                                                              
 9)...................................         9,280         (2,498)         6,689       --             --      
                                       -------------  -------------  -------------  -------------  -------------
    Net earnings...................... $      75,506  $     596,946  $     619,097  $     374,317  $     512,489
                                       -------------  -------------  -------------  -------------  -------------
                                       -------------  -------------  -------------  -------------  -------------
Pro forma to reflect income taxes                                                                               
 (note 2(i)):                                                                                                   
  Income tax expense..................                               $     245,628                 $     201,112
  Net earnings........................                               $     380,158                 $     311,377
  Net earnings per share..............                               $         .13                 $         .10

See accompanying notes to combined financial statements.

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NEW YORK BAGEL ENTERPRISES, INC.
COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) 
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995
AND THE TWENTY-SIX WEEKS ENDED JUNE 30, 1996

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                                                  COMMON STOCK      ADDITIONAL                                  
                                              --------------------    PAID-IN     ACCUMULATED                   
                                               CLASS A    CLASS B     CAPITAL       DEFICIT          TOTAL      
                                              ---------  ---------  -----------  --------------  -------------- 
                                                                                                                
Balance, December 31, 1992................... $  14,170  $  13,687  $   101,043  $      (78,374) $       50,526 
Net earnings.................................    --         --          --               75,506          75,506 
                                              ---------  ---------  -----------  --------------  -------------- 
Balance, December 31, 1993...................    14,170     13,687      101,043          (2,868)        126,032 
Contributed capital (note 10)................    --         --           50,250        --                50,250 
Net earnings.................................    --         --          --              596,946         596,946 
Distributions to stockholders (note 10)......    --         --          --             (614,260)       (614,260)
                                              ---------  ---------  -----------  --------------  -------------- 
Balance, December 31, 1994...................    14,170     13,687      151,293         (20,182)        158,968 
Net earnings.................................    --         --          --              619,097         619,097 
Stock compensation...........................    --         --            6,500        --                 6,500 
Distributions to stockholders (note 10)......    --         --          --           (2,363,030)     (2,363,030)
                                              ---------  ---------  -----------  --------------  -------------- 
Balance, December 31, 1995...................    14,170     13,687      157,793      (1,764,115)     (1,578,465)
Issuance of 14,308 shares of common stock                                                                       
 (unaudited).................................    --            143         (143)       --              --       
Net earnings (unaudited).....................    --         --          --              512,489         512,489 
                                              ---------  ---------  -----------  --------------  -------------- 
Balance, June 30, 1996 (unaudited)........... $  14,170  $  13,830  $   157,650  $   (1,251,626) $   (1,065,976)
                                              ---------  ---------  -----------  --------------  -------------- 
                                              ---------  ---------  -----------  --------------  -------------- 

See accompanying notes to combined financial statements.

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NEW YORK BAGEL ENTERPRISES, INC.
COMBINED STATEMENTS OF CASH FLOWS 
YEARS ENDED DECEMBER 31, 1993, 1994 AND 1995 AND
THE SIX MONTHS ENDED JUNE 30, 1995 AND
THE TWENTY-SIX WEEKS ENDED JUNE 30, 1996

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                                                                                                                TWENTY-SIX   
                                                                YEARS ENDED DECEMBER 31,          SIX MONTHS    WEEKS ENDED  
                                                         ---------------------------------------  ENDED JUNE     JUNE 30,    
                                                            1993         1994          1995        30, 1995        1996      
                                                         -----------  -----------  -------------  -----------  ------------- 
                                                                                                         (UNAUDITED)         
                                                                                                                             
Cash flows from operating activities:                                                                                        
  Net earnings.........................................  $    75,506  $   596,946  $     619,097  $   374,317  $     512,489 
  Adjustments to reconcile net earnings to net cash                                                                          
   provided by operating activities:                                                                                         
    Depreciation and amortization......................       80,145      116,960        158,996       64,579        177,213 
    Noncash stock compensation expense.................      --           --               6,500      --            --       
    Increase (decrease) in cash resulting from changes                                                                       
     in listed items, net of effects from acquisitions:                                                                      
      Deferred income taxes............................        5,614       (2,498)         1,302      --            --       
      Inventory........................................      (16,413)     (28,451)      (178,209)     (14,389)         4,816 
      Income taxes receivable..........................       (1,300)     --               1,300      --            --       
      Other current assets.............................        1,296       (4,348)        (1,588)       5,628        (53,361)
      Accounts receivable..............................       (8,854)    (105,638)       (23,361)     (13,877)       (53,740)
      Deferred costs...................................      --            (6,428)       (70,672)       4,019       (166,281)
      Other assets.....................................       (3,535)     (52,318)        (2,403)      (3,258)        (6,443)
      Accounts payable.................................       10,330       30,882        140,253       42,881        305,725 
      Accrued liabilities and deferred credits.........       47,416       34,138         78,509       49,744        413,695 
      Income taxes payable.............................        1,364       (2,295)      --            --            --       
      Deferred franchise fees..........................      --           119,500         47,500       10,500        (89,500)
                                                         -----------  -----------  -------------  -----------  ------------- 
        Net cash provided by operating activities......      191,569      696,450        777,224      520,144      1,044,613 
                                                         -----------  -----------  -------------  -----------  ------------- 
Cash flows from investing activities:                                                                                        
  Additions to property, plant and equipment...........     (583,708)    (285,080)      (474,674)    (147,373)    (1,179,839)
  Acquisitions, net of cash acquired...................      --           --            (656,174)     --            --       
                                                         -----------  -----------  -------------  -----------  ------------- 
        Net cash used in investing activities..........     (583,708)    (285,080)    (1,130,848)    (147,373)    (1,179,839)
                                                         -----------  -----------  -------------  -----------  ------------- 
Cash flows from financing activities:                                                                                        
  Proceeds from issuance of long-term debt.............      379,325      252,865      3,049,210       24,080        800,000 
  Principal payments on long-term debt.................      (48,248)    (128,309)       (90,852)     (40,384)      (235,253)
  Decrease in due to stockholders......................       (1,411)     (40,274)       (26,330)     (25,318)      --       
  Decrease in distributions payable....................      --           --              (8,807)      (5,307)      --       
  Proceeds from contributed capital....................      --            50,250       --            --            --       
  Debt issuance costs..................................      --           --             (13,916)     --            --       
  Deferred offering costs..............................      --           --              (8,474)     --            (355,492)
  Distributions to stockholders........................      --          (394,080)    (2,459,982)    (269,438)      --       
  (Decrease) increase in excess of checks written over                                                                       
   funds on deposit....................................       62,473     (105,622)      --            --            --       
                                                         -----------  -----------  -------------  -----------  ------------- 
        Net cash provided by (used in) financing                                                                             
         activities....................................      392,139     (365,170)       440,849     (316,367)       209,255 
                                                         -----------  -----------  -------------  -----------  ------------- 
        Net increase in cash...........................      --            46,200         87,225       56,404         74,029 
Cash at beginning of period............................      --           --              46,200       46,200        133,425 
                                                         -----------  -----------  -------------  -----------  ------------- 
Cash at end of period..................................  $   --       $    46,200  $     133,425  $   102,604  $     207,454 
                                                         -----------  -----------  -------------  -----------  ------------- 
                                                         -----------  -----------  -------------  -----------  ------------- 

See accompanying notes to combined financial statements.

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NEW YORK BAGEL ENTERPRISES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS

DECEMBER 31, 1993, 1994 AND 1995

(1) REORGANIZATION AND OPERATIONS                                               

REORGANIZATION                                                                  

    The Company was formed as a result of a merger (the Merger) between New York
Bagel  Enterprises, Inc., which  became the surviving  corporation, and New York
Bagel Shop, Inc.; New  York Bagel Shop &  Delicatessen, Inc.; Bagels of  Norman,
Inc.; Bagel Boss, Inc.; and VPR Incorporated (the five restaurant entities). The
Merger  was effective on December  31, 1995 whereby each  of the five restaurant
entities were merged  into New  York Bagel Enterprises,  Inc. (collectively  the
five restaurant entities and New York Bagel Enterprises, Inc. are referred to as
the  Prior Entities). The term  Company as used herein  refers to New York Bagel
Enterprises, Inc.  including the  five restaurant  entities unless  the  context
otherwise requires.                                                             

    To  effect the  Merger, New  York Bagel  Enterprises, Inc.  issued 1,368,704
shares of its Class B common stock in exchange for all the outstanding stock  of
each of the five restaurant entities.                                           

    Since the primary stockholders of each of the five restaurant entities prior
to the Merger are also the primary stockholders of the Company subsequent to the
Merger,  the  Merger  essentially  represents  a  transfer  to  New  York  Bagel
Enterprises, Inc.  of  nonmonetary assets  in  exchange  for stock  prior  to  a
proposed  public  offering of  the Company's  common  stock (the  Offering). The
Merger has been accounted for at historical cost.                               

    The accompanying financial statements are presented on a combined basis  for
all  periods  presented  due to  the  common  management of  the  Prior Entities
throughout the period of the financial statements.                              

    The Company  converted  shares  of  Class  A  common  stock  outstanding  in
connection   with  the  Merger  (effectively   a  3373.78:1  stock  split).  The
outstanding shares of common stock,  as reflected in the accompanying  financial
statements, include the effect of such stock conversion and the shares issued to
effect the Merger for all periods presented.                                    

OPERATIONS                                                                      

    The Company operates Company-owned restaurants and sells franchise rights to
operate  restaurants. In both  instances, the restaurants  operate under the New
York Bagel and Delicatessen  concept which is  a quick-service bakery  featuring
freshly  made bagels  and deli-style  sandwiches. As  of December  31, 1995, the
Company had  15  Company-owned restaurants  primarily  located in  Oklahoma  and
Kansas and 25 franchised restaurants located throughout the United States.      

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                                  

(a)  FRANCHISE REVENUES                                                 

    Franchise agreements are executed for each franchised restaurant and provide
the  terms of the franchise arrangement  between the Company and the franchisee.
The  franchise   agreement  requires   the  franchisee   to  pay   an   initial,
non-refundable  franchise fee plus continuing  royalties based upon a percentage
of restaurant sales. Additionally,  the Company executes development  agreements
with  franchisees which stipulates the area,  the number of restaurants, and the
timeframe for development in exchange for an initial, non-refundable development
fee based on a standard price per type of restaurant.                           

    Initial franchise fees are recognized  as revenue when the Company  performs
substantially  all initial services  required by the  franchise agreement, which
generally occurs  shortly after  restaurant  opening. Continuing  royalties  are
recognized   as   earned   with   an   appropriate   provision   for   estimated

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NEW YORK BAGEL ENTERPRISES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)                      
uncollectible amounts. Initial franchise fees received applicable to restaurants
for which substantially all initial services required by the franchise agreement
have not  been  performed  are  recorded  as  deferred  franchise  fees  in  the
accompanying  balance  sheets. Development  fees are  received upon  signing the
agreement and are initially recorded as  deferred franchise fees. Such fees  are
applied  to reduce the initial franchise fees paid for each store opened and are
accounted for as a component of the initial franchise fees.                     

    Deferred initial  franchise and  development fees  that are  expected to  be
recognized  within 12 months of the balance sheet date are classified as current
portion of deferred franchise fees in the accompanying balance sheets.          

(b)  INVENTORIES                                                        

    Inventories are stated at  the lower of cost  or market. Cost is  determined
using the first-in, first-out method.                                           

(c)  DEFERRED FRANCHISE COSTS                                           

    Direct,  incremental  costs  incurred  to  secure  franchise  agreements are
charged to expense  in the same  period the related  initial franchise fees  are
recognized  as  revenue.  Costs applicable  to  initial franchise  fees  not yet
recognized as revenue are recorded as deferred franchise costs.                 

(d)  PROPERTY, PLANT AND EQUIPMENT                                      

    Property, plant and equipment are stated at cost. Depreciation is calculated
using the straight-line method  over the estimated useful  lives of the  assets.
Leasehold improvements are amortized on a straight-line basis over the lesser of
the  remaining lease term, including renewal periods when the Company intends to
exercise renewal options, or the estimated useful life of the asset.            

(e)  GOODWILL                                                           

    Goodwill, which represents the excess of  purchase price over fair value  of
net  assets acquired, is amortized  on a straight-line basis  over 20 years. The
Company periodically assesses  the recoverability  of this  intangible asset  by
determining  whether the amortization of the goodwill balance over its remaining
life can be recovered  through undiscounted future operating  cash flows of  the
acquired operation. The amount of goodwill impairment, if any, is measured based
on  projected future operating cash flows discounted at a rate commensurate with
the risks involved.  The assessment of  the recoverability of  goodwill will  be
impacted if estimated future operating cash flows are not achieved.             

(f)  INCOME TAXES                                                       

    Effective  January 1, 1994, New York  Bagel Enterprises, Inc. and certain of
the restaurant entities elected and received approval to become S  corporations.
During  the periods the entities operated  as S corporations, income tax expense
or benefit was  not recorded  in the  accompanying financial  statements as  the
entities'  results of operations were reported to the entities' stockholders for
inclusion in their individual income tax returns.                               

    Effective January 1, 1993, the  Company adopted the provisions of  Statement
of   Financial  Accounting  Standards  No.  109,  ACCOUNTING  FOR  INCOME  TAXES
(Statement 109). Under the asset and liability method of Statement 109, deferred
tax assets  and  liabilities are  recognized  for the  future  tax  consequences
attributable  to differences between the financial statement carrying amounts of
existing assets and  liabilities and  their respective tax  bases and  operating
loss  and  tax credit  carryforwards. Deferred  tax  assets and  liabilities are
measured using enacted  tax rates  expected to apply  to taxable  income in  the
years  in  which those  temporary differences  are expected  to be  recovered or

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NEW YORK BAGEL ENTERPRISES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)                      
settled. Under Statement 109, the effect on deferred tax assets and  liabilities
of a change in tax rates is recognized in income in the period that includes the
enactment  date. There was no cumulative effect  of adoption of Statement 109 as
of January 1, 1993.                                                             

(g)  STATEMENTS OF CASH FLOWS                                           

 Noncash investing and financing activities during 1994 and 1995 included:

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                                                                        1994          1995     
                                                                    ------------  ------------ 
                                                                                               
Noncash distributions to stockholders:                                                         
  Distributions payable (see note 10).............................  $     42,000  $     15,500 
                                                                    ------------  ------------ 
  Net asset (liability) distributions (see note 10):                                           
    Assets distributed............................................       507,695       137,134 
    Liabilities distributed.......................................      (329,515)     (249,586)
                                                                    ------------  ------------ 
      Net assets (liabilities) distributed........................       178,180      (112,452)
                                                                    ------------  ------------ 
      Total noncash distributions.................................  $    220,180  $    (96,952)
                                                                    ------------  ------------ 
                                                                    ------------  ------------ 
Property, plant and equipment acquired in exchange for increase in                             
 due to stockholders (see note 8).................................  $     44,250  $    --      
                                                                    ------------  ------------ 
                                                                    ------------  ------------ 
Long-term debt issued to seller in connection with acquisition                                 
 (see note 7).....................................................  $    --       $    115,000 
                                                                    ------------  ------------ 
                                                                    ------------  ------------ 

Cash paid during the years for interest and taxes is as follows:        

                                                        · Enlarge/Download Table

                                                              1993       1994       1995   
                                                            ---------  ---------  ---------
                                                                                           
Interest................................................... $  13,745  $  52,383  $  36,676
Taxes......................................................     1,300      3,660     --    

(h)  PRE-OPENING COSTS                                                  

    Direct, incremental restaurant pre-opening costs, comprised primarily of the
cost of hiring and  training restaurant employees and  rent, are amortized  over
the initial 12 months of a restaurant's operations.                             

(i)  PRO FORMA INCOME TAX EXPENSE AND PRO FORMA NET EARNINGS PER SHARE  

PRO FORMA INCOME TAX EXPENSE                                            

    Subsequent  to the proposed Offering, the  Company will no longer operate as
an S corporation. Pro forma income tax expense, as set forth in the accompanying
statements of operations, reflects  what the income tax  expense of the  Company
would  have been for the year ended  December 31, 1995, and the twenty-six weeks
ended June 30, 1996 if none of  the entities included in the combined  financial
statements had operated as S corporations during such periods.                  

PRO FORMA NET EARNINGS PER SHARE                                        

    Pro  forma  net  earnings  per  share  information,  as  set  forth  in  the
accompanying statements  of  operations, is  computed  based on  pro  forma  net
earnings  of $380,158  and $311,377 which  is based on  reported earnings before
income taxes less pro forma income tax expense of $245,628 and $201,112 for  the
year  ended December  31, 1995  and the  twenty-six weeks  ended June  30, 1996,
respectively.                                                                   

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NEW YORK BAGEL ENTERPRISES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)                      
    Pro forma weighted average common shares outstanding have been determined as
follows:                                                                        

                                                        · Enlarge/Download Table

                                                                   YEAR ENDED                
                                                                  DECEMBER 31,               
                                                                      1995                   
                                                                  ------------   TWENTY-SIX  
                                                                                 WEEKS ENDED 
                                                                                JUNE 30, 1996
                                                                                -------------
                                                                                 (UNAUDITED) 
                                                                                             
Weighted average shares outstanding.............................    2,785,692      2,800,000 
Shares issued during 12-month period prior to initial filing of                              
 the registration statement at price per share below the initial                             
 public offering price..........................................       14,308        --      
Pro forma number of shares whose proceeds would be sufficient                                
 (based upon the estimated net initial public offering price) to                             
 replace the excess of distributions to stockholders over net                                
 earnings for the year ended December 31, 1995..................      178,134        178,134 
                                                                  ------------  -------------
Pro forma weighted average common shares outstanding............    2,978,134      2,978,134 
                                                                  ------------  -------------
                                                                  ------------  -------------

    The 19,320 shares contingently  issuable under the convertible  subordinated
debenture  (see note 7) have not been considered in the computation of pro forma
net earnings per share due to immateriality.                                    

(j)  USE OF ESTIMATES                                                   

    The  preparation  of  financial  statements  in  accordance  with  generally
accepted  accounting  principles  requires  management of  the  Company  to make
estimates and  assumptions  that  affect  the reported  amounts  of  assets  and
liabilities  and  disclosure  of  contingent  liabilities  at  the  date  of the
financial statements and the  reported amounts of  revenues and expenses  during
the reporting periods. Actual results could differ from these estimates.        

(k)  INTERIM FINANCIAL DATA (UNAUDITED)                                 

    The  accompanying balance  sheet as  of June  30, 1996  and the accompanying
statements of operations, stockholders' equity (deficit) and cash flows for  the
six months ended June 30, 1995 and the twenty-six weeks ended June 30, 1996 have
been prepared by the Company without an audit. In the opinion of management, all
adjustments,   consisting  only  of  normal  recurring  adjustments,  considered
necessary for a fair presentation for  such periods have been made. Results  for
interim  periods should not  be considered as  indicative of results  for a full
year.                                                                           

    Footnote  disclosures  normally  included  in  annual  financial  statements
prepared  in accordance with generally  accepted accounting principles have been
omitted  herein  with  respect  to  the  interim  financial  data.  The  interim
information  herein  should be  read in  conjunction  with the  annual financial
information presented herein.                                                   

(l)  NEW ACCOUNTING STANDARD                                            

    The Company  adopted the  provisions of  Statement of  Financial  Accounting
Standards  No. 121, ACCOUNTING  FOR THE IMPAIRMENT OF  LONG-LIVED ASSETS AND FOR
LONG-LIVED ASSETS TO BE DISPOSED OF as  of January 1, 1996. There was no  effect
at the date of adoption.                                                        

(m)  FISCAL PERIODS                                                     

    Prior  to 1996,  the Company's  financial reporting  was done  on a calendar
basis. Effective January  1, 1996, the  Company changed to  a 52/53-week  fiscal
year comprised of four thirteen-week periods.                                   

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NEW YORK BAGEL ENTERPRISES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

(3) FRANCHISE REVENUES                                                          

    Franchise  revenues for  the years  ended December  31, 1993,  1994 and 1995
consist of the following:                                                       

                                                        · Enlarge/Download Table

                                                                     1993        1994         1995    
                                                                   ---------  -----------  -----------
                                                                                                      
Initial franchise and development fees............................ $  21,000  $   108,000  $   250,500
Royalty revenue...................................................     1,677       60,704      233,800
                                                                   ---------  -----------  -----------
  Total........................................................... $  22,677  $   168,704  $   484,300
                                                                   ---------  -----------  -----------
                                                                   ---------  -----------  -----------

    The associated franchise receivables included within accounts receivable  in
the accompanying balance sheets at December 31, 1994 and 1995 are as follows:   

                                                        · Enlarge/Download Table

                                                                                  1994         1995     
                                                                               -----------  ----------- 
                                                                                                        
Initial franchise and development fee receivables............................. $   104,000  $   106,416 
Royalty receivables...........................................................      10,492       46,437 
Less allowance for doubtful accounts..........................................     --           (15,000)
                                                                               -----------  ----------- 
                                                                               $   114,492  $   137,853 
                                                                               -----------  ----------- 
                                                                               -----------  ----------- 

(4) DEFERRED COSTS                                                              

Deferred costs as of December 31, 1994 and 1995 include the following:  

                                                        · Enlarge/Download Table

                                                                                     1994       1995   
                                                                                   ---------  ---------
                                                                                                       
Pre-opening costs................................................................. $  --      $  60,445
Deferred franchise costs..........................................................     6,428     16,655
                                                                                   ---------  ---------
  Total deferred costs............................................................ $   6,428  $  77,100
                                                                                   ---------  ---------
                                                                                   ---------  ---------

(5) PROPERTY, PLANT AND EQUIPMENT                                               

    A  summary of property, plant and  equipment and accumulated depreciation as
of December 31, 1994 and 1995 is as follows:                                    

                                                        · Enlarge/Download Table

                                                                                1994          1995      
                                                                            ------------  ------------- 
                                                                                                        
Buildings.................................................................. $     30,292  $      30,292 
Equipment..................................................................      781,741      1,354,649 
Leasehold improvements.....................................................      173,824        453,863 
                                                                            ------------  ------------- 
                                                                                 985,857      1,838,804 
Less accumulated depreciation..............................................     (431,517)      (582,650)
                                                                            ------------  ------------- 
  Net property, plant and equipment........................................ $    554,340  $   1,256,154 
                                                                            ------------  ------------- 
                                                                            ------------  ------------- 

(6) LEASES                                                                      

    The  Company  leases  several  restaurant  facilities  under   noncancelable
operating  leases. These  leases generally  contain renewal  options for periods
ranging from 3 to 15 years and  require the Company to pay executory costs  such
as  maintenance  and insurance.  Rent  expense for  operating  leases aggregated
$126,614, $193,418 and $296,950 for the years ended December 31, 1993, 1994  and
1995, respectively.                                                             

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NEW YORK BAGEL ENTERPRISES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

(6) LEASES (CONTINUED)                                                          
    Future  minimum  lease payments  under  noncancelable operating  leases with
initial or remaining lease terms in excess  of one year as of December 31,  1995
are:                                                                            

                                                                · Download Table
                                                                                  
Year ending December 31:                                                          
  1996................................................................. $  305,200
  1997.................................................................    255,875
  1998.................................................................    222,447
  1999.................................................................    201,662
  2000.................................................................    100,592
  Thereafter...........................................................    119,697
                                                                        ----------
    Total minimum lease payments....................................... $1,205,473
                                                                        ----------
                                                                        ----------

    The  Company is  party to certain  operating leases with  companies that are
owned by certain stockholders of the Company. Rent expense paid to these related
companies pursuant to lease  agreements aggregated $14,100  and $63,249 for  the
years ended December 31, 1994 and 1995, respectively.                           

    Deferred  credits in the accompanying  balance sheets represent accruals for
escalating rental payments on operating leases.                                 

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NEW YORK BAGEL ENTERPRISES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

(7) LONG-TERM DEBT                                                              

Long-term debt at December 31, 1994 and 1995 consists of the following: 

                                                        · Enlarge/Download Table

                                                                                 1994          1995      
                                                                              -----------  ------------- 
                                                                                                         
Prime rate plus 1.0% note payable to bank (9.5% at December 31, 1995) due in                             
 monthly installments of $57,800 including interest with the remaining                                   
 balance due in December 2000. Secured by substantially all tangible and                                 
 intangible assets of the Company and guaranteed by certain Company                                      
 stockholders...............................................................  $   --       $   2,750,000 
Prime rate plus 0.5% note payable to bank (9.0% at December 31, 1995) due in                             
 monthly installments of $8,110 including interest beginning in April 1996                               
 with the remaining balance due in March 2003. Secured by substantially all                              
 tangible and intangible assets of the Company and guaranteed by certain                                 
 Company stockholders.......................................................      --             500,000 
4.0% contingently convertible subordinated debenture payable in annual                                   
 installments of $28,750 plus interest beginning in December 1996. The                                   
 debenture may be converted at the option of the debenture holder into                                   
 shares of common stock equal to a maximum 0.69% of the Company's                                        
 outstanding common stock but the conversion privilege is only operative in                              
 the event the Company has completed an initial public offering of its                                   
 common stock which meets certain specified criteria. The debenture is                                   
 subordinate to all other liabilities of the Company (note 12)..............      --             115,000 
Various notes payable with a bank due in monthly installments through                                    
 October 2001 with interest rates ranging from 8.0% to 10.875%; secured by                               
 equipment. Notes were refinanced as part of the $2,750,000 note payable to                              
 bank discussed above.......................................................      264,527       --       
8.0% note payable to a bank due in monthly installments through 2001;                                    
 secured by equipment. The note was fully paid-off in 1995..................       27,115       --       
                                                                              -----------  ------------- 
  Total long-term debt......................................................      291,642      3,365,000 
Less current installments of long-term debt.................................      (58,700)      (519,936)
                                                                              -----------  ------------- 
Long-term debt, less current installments...................................  $   232,942  $   2,845,064 
                                                                              -----------  ------------- 
                                                                              -----------  ------------- 

    The aggregate  maturities of  long-term  debt for  each  of the  five  years
subsequent  to  December  31, 1995  are  as  follows: 1996  -  $519,936;  1997 -
$582,364; 1998 -  $637,154; 1999  - $697,365;  2000 -  $731,357; and  thereafter
$196,824.                                                                       

(8) DUE TO STOCKHOLDERS                                                         

    Amounts  due to  stockholders represent funds  advanced to  the Company from
stockholders of  the five  restaurant  entities which  were used  primarily  for
equipment  additions.  Such amounts  were  non-interest-bearing and  were either
repaid in 1995 or included in the transfer to stockholders described in note 10.

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NEW YORK BAGEL ENTERPRISES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

(9) INCOME TAXES                                                                

    Income tax expense (benefit) for the years ended December 31, 1993, 1994 and
1995 consists of the following:                                                 

                                                        · Enlarge/Download Table

                                                                          1993       1994       1995    
                                                                        ---------  ---------  --------- 
                                                                                                        
Current................................................................ $   3,666  $  --      $   9,805 
Deferred...............................................................     5,614     (2,498)    (3,116)
                                                                        ---------  ---------  --------- 
  Total................................................................ $   9,280  $  (2,498) $   6,689 
                                                                        ---------  ---------  --------- 
                                                                        ---------  ---------  --------- 

    As described in note 2, certain entities included in the combined  financial
statements  elected S corporation status as of  January 1, 1994, and as a result
no longer pay corporate  income taxes. Additionally, as  a result of the  Merger
discussed in note 1, the Company is an S corporation effective December 31, 1995
and,  accordingly, no  deferred tax  assets or  liabilities are  recorded in the
accompanying balance sheet  as of  December 31, 1995.  Consequently, income  tax
expense  (benefit) for the  years ended December  31, 1994 and  1995 include the
reversal of  existing deferred  tax assets  and liabilities  for those  entities
which first became S corporations in each year.                                 

    Actual  income tax expense (benefit) differs from the "expected" tax expense
(benefit) computed by applying the United  States Federal corporate tax rate  of
34%  to earnings before income taxes for the years ended December 31, 1993, 1994
and 1995 as follows:                                                            

                                                        · Enlarge/Download Table

                                                                   1993         1994          1995     
                                                                ----------  ------------  ------------ 
                                                                                                       
Computed expected tax expense.................................. $   28,827  $    202,112  $    212,767 
S corporation earnings allocated to stockholders...............     --          (193,589)     (195,515)
Surtax exemption...............................................    (16,199)       (6,488)       (7,613)
Change in valuation allowance..................................     (6,596)       (5,303)       (9,736)
Other..........................................................      3,248           770         6,786 
                                                                ----------  ------------  ------------ 
                                                                $    9,280  $     (2,498) $      6,689 
                                                                ----------  ------------  ------------ 
                                                                ----------  ------------  ------------ 

    Income taxes receivable of $1,300 and $16,747 at December 31, 1994 and 1995,
respectively, are included in the accompanying balance sheets as a component  of
other  current assets. A net deferred tax  asset of $1,670 was included in other
current assets at December 31, 1994.                                            

    The tax effects  of temporary  differences that  give rise  to deferred  tax
assets and liabilities at December 31, 1994 are presented below:                

                                                                · Download Table
                                                                              
Deferred tax assets:                                                          
  Net operating loss carryforward.................................  $   8,867 
  Accrued liabilities, due to accrual for financial reporting                 
   purposes.......................................................      2,539 
                                                                    --------- 
    Total gross deferred tax assets...............................     11,406 
    Less valuation allowance......................................      9,736 
                                                                    --------- 
    Net deferred tax asset........................................      1,670 
Deferred tax liabilities:                                                     
  Property, plant and equipment, due to accelerated depreciation              
   for tax reporting purposes.....................................      4,786 
                                                                    --------- 
    Net deferred tax liability....................................  $  (3,116)
                                                                    --------- 
                                                                    --------- 

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NEW YORK BAGEL ENTERPRISES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

(9) INCOME TAXES (CONTINUED)                                                    
    Differences  between the  tax bases and  the amounts  reported for financial
statement purposes for the Company's assets and liabilities at December 31, 1995
are as follows:                                                                 

                                                        · Enlarge/Download Table

                                                                                   AMOUNTS   
                                                                                REPORTED FOR 
                                                                                  FINANCIAL  
                                                                   TAX BASES     STATEMENTS  
                                                                 -------------  -------------
                                                                                             
Assets.......................................................... $   2,069,284  $   2,294,698
Liabilities..................................................... $   3,765,972  $   3,873,163

(10)STOCKHOLDERS' EQUITY                                                        

CAPITAL CONTRIBUTIONS AND DISTRIBUTIONS TO STOCKHOLDERS                         

    In July 1994, pursuant to a contract for sale of stock (the contract) of New
York Bagel  Enterprises,  Inc.,  an Oklahoma  corporation  (NYBE-OK),  the  then
existing  stockholders (sellers)  of NYBE-OK  sold a  50% ownership  interest in
NYBE-OK to certain individuals (buyers) in exchange for a cash payment from  the
buyers  directly to  the sellers  and a  $50,000 contribution  by the  buyers to
NYBE-OK of which $49,250 has been  recorded as contributed capital and $750  has
been applied as payment of amounts owed to NYBE-OK by the sellers. The remaining
$1,000  of capital contribution  in 1994 was  a cash contribution  to one of the
five restaurant entities. Pursuant to the contract, NYBE-OK is obligated to  pay
to the sellers (as distributions) collections of franchise fees NYBE-OK receives
subsequent  to closing of  the contract for certain  specified locations. To the
extent such  fees  have  been  recognized  as  income  but  have  not  yet  been
distributed  to the sellers, such amounts  are recorded as distributions payable
in the accompanying balance sheets.                                             

    Distributions to stockholders for the years ended December 31, 1994 and 1995
are comprised of the following:                                                 

                                                        · Enlarge/Download Table

                                                                      1994          1995     
                                                                   -----------  -------------
                                                                                             
Distributions of NYBE-OK.......................................... $   132,000  $     963,923
Distributions of the five restaurant entities.....................     482,260      1,399,107
                                                                   -----------  -------------
Total distributions............................................... $   614,260  $   2,363,030
                                                                   -----------  -------------
                                                                   -----------  -------------

    As disclosed in  note 2(g),  distributions of the  five restaurant  entities
include  two transfers  to certain  stockholders in 1994  of real  estate net of
related indebtedness and the transfer in  1995, prior to the Merger, of  certain
assets   and  liabilities  (primarily  restaurant  related  current  assets  and
liabilities) to the stockholders of the five restaurant entities.               

CLASS B COMMON STOCK                                                            

    The Class B common stock has no voting power. Class A common stock has  full
voting  power. The Class  B common stock  will be converted  into Class A common
stock on a  one-for-one basis upon  completion of  the Offering of  the Class  A
common stock.                                                                   

(11)FINANCIAL INSTRUMENTS FAIR VALUE INFORMATION                                

    The  carrying values of the Company's long-term debt approximates their fair
values based  on current  interest rates  of similar  instruments. The  carrying
values  of  the  Company's other  financial  instruments at  December  31, 1995,
including cash, accounts receivable, other current assets, accounts payable, and
accrued expenses approximate their fair values because of their short maturity. 

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NEW YORK BAGEL ENTERPRISES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

(12)ACQUISITIONS                                                                

    Effective December  14,  1995, the  Company  purchased all  the  outstanding
common  stock of  Nashville Bagel Co.,  Inc. for  $565,000. Acquisition expenses
amounted to $23,338.  The acquisition  has been  accounted for  by the  purchase
method  of accounting and,  accordingly, the operations  of Nashville Bagel Co.,
Inc. have been included in the accompanying statements of operations  subsequent
to  December 14, 1995. The  purchase price has been  allocated to the assets and
liabilities  acquired  based  on  their   estimated  fair  values  at  date   of
acquisition. Goodwill arising from the acquisition amounted to $434,451.        

    Effective December 31, 1995, the Company purchased certain assets of Central
&  Ridge  Yogurt,  Inc.  by  assuming  liabilities  amounting  to  $225,000. The
acquisition has been  accounted for by  the purchase method  of accounting.  The
purchase  price has  been allocated  to the net  assets acquired  based on their
estimated fair  values  at  date  of  acquisition.  Goodwill  arising  from  the
acquisition  amounted  to $24,600.  A Company  officer was  also an  officer and
stockholder of Central & Ridge Yogurt, Inc.                                     

    The following table summarizes the pro  forma results of operations for  the
years  ended  December  31,  1994  and 1995  as  if  the  acquisitions  had been
consummated at the beginning  of the respective periods.  In presenting the  pro
forma  information, depreciation,  amortization and  interest expense  have been
adjusted to reflect  the purchase  accounting recorded in  the acquisitions  and
income taxes have been recognized as if none of the entities included in the pro
forma  results had  operated as a  S corporation.  The pro forma  results do not
necessarily reflect what would have occurred  if the acquisitions had been  made
at  the beginning of the respective periods or the results that may occur in the
future.                                                                         

                                                        · Enlarge/Download Table

                                                                     1994           1995     
                                                                 -------------  -------------
                                                                                             
Revenues........................................................ $   7,339,463  $   8,761,108
Net earnings....................................................       311,051        223,898
Net earnings per share..........................................                          .08

(13)COMMITMENTS AND CONTINGENCIES                                               

    Pursuant to the terms of one operating lease, the Company has guaranteed the
performance under a lease agreement of  an unrelated lessee. As of December  31,
1995,  future lease payments guaranteed  aggregated $54,000; however, the lessee
is current on lease payments and the Company does not currently expect to  incur
any loss applicable to this guaranty.                                           

    As  of December 31, 1995, the Company has issued a guaranty totaling $35,000
on a borrowing by a franchisee.  The Company monitors the financial  performance
of  such franchisee and the Company does not believe an accrual is necessary for
the Company's obligation under this guaranty.                                   

(14)SUBSEQUENT EVENTS                                                           

STOCK SPLIT                                                                     

    On June 4, 1996,  the Company effected  a 1.4 for 1  stock split. The  stock
split  has  been  reflected  retroactively  for  all  periods  presented  in the
accompanying financial statements and, accordingly, all applicable dollar, share
and per share amounts have been restated to reflect the stock split.            

STOCK AWARDS                                                                    

    On January 16, 1996, the Company adopted the 1996 Incentive Plan (the  Plan)
which  authorizes  the  award of  400,000  shares  of common  stock  pursuant to
incentive stock options, nonqualified stock  options or restricted stock. As  of
June   4,   1996,  options   to  purchase   271,000   shares  of   common  stock

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NEW YORK BAGEL ENTERPRISES, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

(14)SUBSEQUENT EVENTS (CONTINUED)                                               
have been granted pursuant to the Plan. The exercise price per share is equal to
100% of  the price  per share  of  common stock  to be  issued pursuant  to  the
Offering  for options pertaining to 193,500 shares  and is equal to 110% of such
price per  share for  options  pertaining to  77,500  shares. One-fifth  of  the
options  will become exercisable six months after date of grant and one-fifth on
each of the first four anniversaries of the date of grant.                      

(15)PRO FORMA BALANCE SHEET (UNAUDITED)                                         

    The unaudited pro forma balance sheet at  June 30, 1996 gives effect to  the
following transactions as if such transaction occurred on that date:            

        (1)  An accrual for  the distribution of $184,000  to stockholders as if
    the Company had  terminated its S  corporation status at  June 30, 1996  and
    made  a distribution to the stockholders  in connection with their estimated
federal and state income tax obligations.                               

        (2) An  estimated  $91,000 of  deferred  tax liability  which  would  be
    recorded  as a debit to accumulated deficit had the Company terminated its S
corporation status at June 30, 1996.                                    

        (3)  Reclassification  of  accumulated  deficit  to  additional  paid-in
    capital  (deficit) as if the Company had terminated its S corporation status
at June 30, 1996.                                                       

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NEW YORK BAGEL ENTERPRISES, INC.
PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS (UNAUDITED)
YEAR ENDED DECEMBER 31, 1995

    The  following pro forma condensed combined statement of operations presents
the results of operations of the Company for the year ended December 31, 1995 as
if the acquisitions  of Nashville Bagel  Co., Inc. and  Central & Ridge  Yogurt,
Inc.  had  each occurred  as  of January  1,  1995. The  acquisitions  have been
accounted for by  the purchase  method of  accounting. The  pro forma  financial
information  should be read in conjunction with the related historical financial
information of  the Company,  Nashville  Bagel Co.,  Inc.  and Central  &  Ridge
Yogurt,  Inc.  included  elsewhere  herein. The  unaudited  pro  forma condensed
combined statement  of  operations  does  not  purport  to  represent  what  the
Company's results of operations would actually have been had the transactions in
fact occurred on the aforementioned date, or to project the Company's results of
operations  for any  future periods.  The pro  forma adjustments  are based upon
available information and upon certain assumptions that management believes  are
reasonable.  These adjustments are directly attributable to the transactions and
are expected to have  a continuing impact  on the results  of operations of  the
Company.                                                                        

                                                        · Enlarge/Download Table

                                                      HISTORICAL                                              
                                       -----------------------------------------                              
                                         NEW YORK                     CENTRAL &                               
                                           BAGEL        NASHVILLE       RIDGE                                 
                                       ENTERPRISES,    BAGEL CO.,      YOGURT,                                
                                           INC.           INC.          INC.                      PRO FORMA   
                                       -------------  -------------  -----------   PRO FORMA    ------------- 
                                                                                  ADJUSTMENTS                 
                                                                                  ------------                
                                                                                    (NOTE A)                  
                                                                                                              
Total revenues........................ $   7,359,446  $   1,074,719  $   326,943  $    --       $   8,761,108 
                                       -------------  -------------  -----------  ------------  ------------- 
Costs and expenses:                                                                                           
  Cost of sales.......................     2,612,772        363,972      162,836       --           3,139,580 
  Restaurant operating expenses.......     3,083,902        677,200      186,696       --           3,947,798 
  General and administrative                                                                                  
   expenses...........................       838,190         79,378       27,861       --             945,429 
  Depreciation and amortization.......       158,996         16,421       31,108(1)        4,852       234,329
                                                                                (2)       22,952              
                                       -------------  -------------  -----------  ------------  ------------- 
    Total costs and expenses..........     6,693,860      1,136,971      408,501        27,804      8,267,136 
                                       -------------  -------------  -----------  ------------  ------------- 
    Operating income (loss)...........       665,586        (62,252)     (81,558)      (27,804)       493,972 
Interest expense (note B).............        39,800       --             16,893(3)       52,042       108,735
Gain on sale of business..............      --             --            (92,342 (4)       92,342      --     
                                       -------------  -------------  -----------  ------------  ------------- 
    Earnings (loss) before income                                                                             
     taxes............................       625,786        (62,252)      (6,109)     (172,188)       385,237 
Income tax expense (benefit)..........         6,689        (13,176)     --     (5)      167,826       161,339
                                       -------------  -------------  -----------  ------------  ------------- 
    Net earnings (loss)............... $     619,097  $     (49,076) $    (6,109) $   (340,014) $     223,898 
                                       -------------  -------------  -----------  ------------  ------------- 
                                       -------------  -------------  -----------  ------------  ------------- 
Pro forma net earnings per share...... $         .13                                            $         .08 
                                       -------------                                            ------------- 
                                       -------------                                            ------------- 
Pro forma weighted average common                                                                             
 shares outstanding...................     2,978,134                                                2,978,134 
                                       -------------                                            ------------- 
                                       -------------                                            ------------- 

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NEW YORK BAGEL ENTERPRISES, INC.
NOTES TO PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS 
DECEMBER 31, 1995 

NOTE A:                                                                         

    The  acquisition of Nashville  Bagel Co., Inc. was  effective as of December
14, 1995 and the acquisition of Central & Ridge Yogurt, Inc. was effective as of
December 31, 1995. The  results of operations of  such acquired businesses  have
been  included in the Company's historical statement of operations subsequent to
the respective dates of acquisition.                                            

    Prior to the acquisition, Nashville Bagel Co., Inc. had a fiscal year  ended
June 30. For purposes of the accompanying unaudited pro forma condensed combined
statement  of operations, the Nashville Bagel  Co., Inc. historical statement of
operations has  been  updated to  a  December 31  year  end basis  by  deducting
operations  for the six-month period ended  December 31, 1994 from the statement
of operations for the year ended June 30, 1995 and adding the operations for the
period from July 1, 1995 through December 14, 1995.                             

Pro forma adjustments are as follows:                                   

        (1) To  reflect depreciation  expense based  upon the  cost assigned  to
acquired assets based upon applying the purchase method of accounting.  

        (2)  To reflect  the amortization  of goodwill  over 20  years using the
straight-line method.                                                   

        (3) To reflect  interest expense  applicable to  borrowings incurred  to
effect the acquisitions.                                                

(4) To eliminate nonrecurring gain on sale of business.         

        (5) To reflect the adjustment for income taxes. Such adjustment has been
    derived  by applying  statutory rates  to pro  forma earnings  before income
taxes adjusted for permanent differences.                               

NOTE B:                                                                         

    A pro forma  adjustment has not  been included to  reflect interest  expense
applicable  to borrowings  incurred by the  Company in December  1995 to finance
distributions to stockholders because the Company intends to use the proceeds of
the Offering to repay  such borrowings and the  number of shares whose  proceeds
would be sufficient (based upon the estimated net offering price) to replace the
excess  of distributions to stockholders over  net earnings have been considered
as outstanding for purposes of computing pro forma net earnings per share.      

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INDEPENDENT AUDITORS' REPORT

The Boards of Directors                                                         
Nashville Bagel Co., Inc. and                                                   
New York Bagel Enterprises, Inc.:                                               

    We  have audited  the accompanying  statements of  operations, stockholder's
equity and cash flows of Nashville Bagel Co., Inc. for each of the years in  the
three-year  period ended  June 30,  1995 and  for the  period from  July 1, 1995
through December 14, 1995. These financial statements are the responsibility  of
the  Company's management. Our responsibility is  to express an opinion on these
financial statements based on our audits.                                       

    We conducted  our  audits in  accordance  with generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence  supporting
the  amounts and disclosures in the financial statements. An audit also includes
assessing the  accounting  principles used  and  significant estimates  made  by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.          

    In our opinion, the financial  statements referred to above present  fairly,
in  all  material respects,  the results  of  operations and  the cash  flows of
Nashville Bagel Co., Inc. for each of  the years in the three-year period  ended
June 30, 1995 and for the period from July 1, 1995 through December 14, 1995, in
conformity with generally accepted accounting principles.                       

    As  discussed in note 2 to the financial statements, the Company adopted the
provisions of the Financial Accounting Standards Board's Statement of  Financial
Accounting Standards No. 109, ACCOUNTING FOR INCOME TAXES, in 1994.             

                                         KPMG Peat Marwick LLP

Wichita, Kansas                                                                 
February 12, 1996                                                               

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NASHVILLE BAGEL CO., INC. 
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED JUNE 30, 1993, 1994 AND 1995 AND
THE PERIOD FROM JULY 1, 1995 THROUGH DECEMBER 14, 1995

                                                        · Enlarge/Download Table

                                                                                                    PERIOD FROM 
                                                                                                    JULY 1, 1995
                                                                        JUNE 30,                      THROUGH   
                                                       -------------------------------------------  DECEMBER 14,
                                                           1993           1994           1995           1995    
                                                       -------------  -------------  -------------  ------------
                                                                                                                
Revenues.............................................. $   1,137,246  $   1,189,756  $   1,243,796   $  472,057 
                                                       -------------  -------------  -------------  ------------
Costs and expenses:                                                                                             
  Cost of sales.......................................       382,512        390,289        403,966      167,414 
  Restaurant operating expenses.......................       613,563        637,770        721,689      318,305 
  General and administrative expenses.................        18,883         16,974         20,118        9,503 
  Officers' salaries..................................        85,000         52,000         52,000       24,000 
  Depreciation........................................        19,724         24,036         18,816        8,624 
                                                       -------------  -------------  -------------  ------------
    Total costs and expenses..........................     1,119,682      1,121,069      1,216,589      527,846 
                                                       -------------  -------------  -------------  ------------
Earnings (loss) before income taxes...................        17,564         68,687         27,207      (55,789)
Income tax expense (benefit)..........................         4,878         16,616          6,582      (11,808)
                                                       -------------  -------------  -------------  ------------
Net earnings (loss)................................... $      12,686  $      52,071  $      20,625   $  (43,981)
                                                       -------------  -------------  -------------  ------------
                                                       -------------  -------------  -------------  ------------

See accompanying notes to financial statements. 

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NASHVILLE BAGEL CO., INC. 
STATEMENTS OF STOCKHOLDER'S EQUITY
FOR THE YEARS ENDED JUNE 30, 1993, 1994 AND 1995 AND
THE PERIOD FROM JULY 1, 1995 THROUGH DECEMBER 14, 1995

                                                        · Enlarge/Download Table

                                                                               ADDITIONAL                            
                                                                    COMMON       PAID-IN     RETAINED                
                                                                     STOCK       CAPITAL     EARNINGS       TOTAL    
                                                                  -----------  -----------  -----------  ----------- 
                                                                                                                     
Balance, June 30, 1992...........................................  $   5,000    $  30,000   $    36,253  $    71,253 
Net earnings.....................................................     --           --            12,686       12,686 
                                                                  -----------  -----------  -----------  ----------- 
Balance, June 30, 1993...........................................      5,000       30,000        48,939       83,939 
Net earnings.....................................................     --           --            52,071       52,071 
                                                                  -----------  -----------  -----------  ----------- 
Balance, June 30, 1994...........................................      5,000       30,000       101,010      136,010 
Contribution of capital..........................................     --           25,000       --            25,000 
Net earnings.....................................................     --           --            20,625       20,625 
                                                                  -----------  -----------  -----------  ----------- 
Balance, June 30, 1995...........................................      5,000       55,000       121,635      181,635 
Net loss.........................................................     --           --           (43,981)     (43,981)
                                                                  -----------  -----------  -----------  ----------- 
Balance, December 14, 1995.......................................  $   5,000    $  55,000   $    77,654  $   137,654 
                                                                  -----------  -----------  -----------  ----------- 
                                                                  -----------  -----------  -----------  ----------- 

See accompanying notes to financial statements. 

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NASHVILLE BAGEL CO., INC. 
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED JUNE 30, 1993, 1994 AND 1995 AND
THE PERIOD FROM JULY 1, 1995 THROUGH DECEMBER 14, 1995

                                                        · Enlarge/Download Table

                                                                                                   PERIOD FROM 
                                                                                                   JULY 1, 1995
                                                                            JUNE 30,                 THROUGH   
                                                               ----------------------------------  DECEMBER 14,
                                                                  1993        1994        1995         1995    
                                                               ----------  ----------  ----------  ------------
                                                                                                               
Cash flows from operating activities:                                                                          
  Net earnings (loss)........................................  $   12,686  $   52,071  $   20,625   $  (43,981)
  Adjustments to reconcile net earnings (net loss) to net                                                      
   cash provided by (used in) operating activities:                                                            
    Depreciation.............................................      19,724      24,036      18,816        8,624 
    Deferred income taxes....................................      (1,549)        104       1,710       (1,124)
    Increase in inventory....................................        (164)       (283)       (292)      --     
    (Increase) decrease in income taxes receivable...........        (897)        897      (6,063)     (10,684)
    (Increase) decrease in other assets......................         232         (12)         54          140 
    Increase (decrease) in accounts payable..................      11,700      (2,090)       (684)         450 
    Increase (decrease) in income taxes payable..............        (799)     10,084     (13,368)      --     
    Increase (decrease) in accrued liabilities...............         946       3,914       2,867       (3,714)
                                                               ----------  ----------  ----------  ------------
      Net cash provided by (used in) operating activities....      41,879      88,721      23,665      (50,289)
                                                               ----------  ----------  ----------  ------------
Cash flows from investing activities:                                                                          
  Additions to property, plant and equipment.................     (41,670)     (9,723)    (24,209)      (4,771)
                                                               ----------  ----------  ----------  ------------
Cash flows from financing activities:                                                                          
  Repayment of note payable to bank..........................     (34,496)    (10,400)     --           --     
  Repayment of debenture payable to stockholder..............      --          --         (25,000)      --     
                                                               ----------  ----------  ----------  ------------
      Net cash used in financing activities..................     (34,496)    (10,400)    (25,000)      --     
                                                               ----------  ----------  ----------  ------------
      Net increase (decrease) in cash........................     (34,287)     68,598     (25,544)     (55,060)
Cash at beginning of period..................................      64,720      30,433      99,031       73,487 
                                                               ----------  ----------  ----------  ------------
Cash at end of period........................................  $   30,433  $   99,031  $   73,487   $   18,427 
                                                               ----------  ----------  ----------  ------------
                                                               ----------  ----------  ----------  ------------
Cash paid for taxes..........................................  $    4,040  $    5,531  $   25,298   $   --     
                                                               ----------  ----------  ----------  ------------
                                                               ----------  ----------  ----------  ------------
Significant noncash financing activities:                                                                      
  During the year ended June 30, 1995, $25,000 of a $50,000 debenture payable to the stockholder was           
   contributed to additional paid-in capital.                                                                  

See accompanying notes to financial statements. 

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NASHVILLE BAGEL CO., INC. 
NOTES TO FINANCIAL STATEMENTS 
FOR THE YEARS ENDED JUNE 30, 1993, 1994 AND 1995 AND
THE PERIOD FROM JULY 1, 1995 THROUGH DECEMBER 14, 1995

(1) OPERATIONS                                                                  
    Nashville  Bagel Co., Inc. (the Company)  operates a retail bagel restaurant
located in Nashville, Tennessee. The  Company also wholesales bagels to  grocery
stores and other food service entities.                                         

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                                  

(a)  INVENTORIES                                                        

    Inventories  are stated at the  lower of cost or  market. Cost is determined
using the first-in, first-out method.                                           

(b)  PROPERTY, PLANT AND EQUIPMENT                                      

    Property, plant and equipment are stated at cost. Depreciation is calculated
using the double declining balance method over the estimated useful lives of the
assets. Leasehold  improvements are  amortized over  the remaining  lease  term,
including renewal periods.                                                      

(c)  INCOME TAXES                                                       

    Effective  July 1, 1993, the Company  adopted the provisions of Statement of
Financial Accounting Standards No. 109,  ACCOUNTING FOR INCOME TAXES  (Statement
109). Under the asset and liability method of Statement 109, deferred tax assets
and  liabilities are recognized for the  future tax consequences attributable to
differences between the financial statement carrying amounts of existing  assets
and liabilities and their respective tax bases and operating loss and tax credit
carryforwards.  Deferred tax assets  and liabilities are  measured using enacted
tax rates  expected to  apply to  taxable income  in the  years in  which  those
temporary  differences are expected to be  recovered or settled. Under Statement
109, the effect on deferred tax assets and liabilities of a change in tax  rates
is  recognized in income in  the period that includes  the enactment date. There
was no cumulative effect of adoption of Statement 109 as of July 1, 1993.       

(d)  USE OF ESTIMATES                                                   

    The  preparation  of  financial  statements  in  accordance  with  generally
accepted  accounting  principles  requires  management of  the  Company  to make
estimates and  assumptions  that  affect  the reported  amounts  of  assets  and
liabilities  and  disclosures  of  contingent liabilities  at  the  date  of the
financial statements and the  reported amounts of  revenues and expenses  during
the reporting periods. Actual results could differ from these estimates.        

(3) INCOME TAXES                                                                
    Income  tax expense (benefit) for  years ended June 30,  1993, 1994 and 1995
and the period  from July  1, 1995  through December  14, 1995  consists of  the
following:                                                                      

                                                        · Enlarge/Download Table

                                                                                PERIOD FROM 
                                                                                JULY 1, 1995
                                                          JUNE 30,                THROUGH   
                                               -------------------------------  DECEMBER 14,
                                                 1993       1994       1995         1995    
                                               ---------  ---------  ---------  ------------
                                                                                            
Current:                                                                                    
  Federal..................................... $   3,143  $  10,586  $   2,721   $  (11,706)
  State.......................................     3,284      5,926      2,151        1,022 
Deferred......................................    (1,549)       104      1,710       (1,124)
                                               ---------  ---------  ---------  ------------
    Total..................................... $   4,878  $  16,616  $   6,582   $  (11,808)
                                               ---------  ---------  ---------  ------------
                                               ---------  ---------  ---------  ------------

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NASHVILLE BAGEL CO., INC. 
NOTES TO FINANCIAL STATEMENTS 
FOR THE YEARS ENDED JUNE 30, 1993, 1994 AND 1995 AND
THE PERIOD FROM JULY 1, 1995 THROUGH DECEMBER 14, 1995 (CONTINUED)

(3) INCOME TAXES (CONTINUED)                                                    
    Actual  income tax expense (benefit) differs  from the "expected" income tax
expense (benefit) computed by applying  the United States Federal corporate  tax
rate  of 34% to earnings (loss) before income taxes for the years ended June 30,
1993, 1994 and 1995 and  for the period from July  1, 1995 through December  14,
1995 and the as follows:                                                        

                                                        · Enlarge/Download Table

                                                                               PERIOD FROM 
                                                                               JULY 1, 1995
                                                         JUNE 30,                THROUGH   
                                             --------------------------------  DECEMBER 14,
                                               1993        1994       1995         1995    
                                             ---------  ----------  ---------  ------------
                                                                                           
Tax at statutory rate....................... $   5,972  $   23,353  $   9,250   $  (18,968)
State income taxes, net of federal                                                         
 benefit....................................     2,167       3,911      2,076          674 
Effect of graduated rates...................    (3,261)    (10,648)    (4,744)       6,486 
                                             ---------  ----------  ---------  ------------
                                             $   4,878  $   16,616  $   6,582   $  (11,808)
                                             ---------  ----------  ---------  ------------
                                             ---------  ----------  ---------  ------------

    The  tax effects of temporary differences that give rise to the deferred tax
assets and liabilities are  due to liabilities  accrued for financial  reporting
purposes  and  property,  plant  and  equipment  which  have  different  tax and
financial reporting bases. Net deferred tax assets amounted to $13,523; $13,419;
$11,709 and $12,833 at June 30, 1993, June 30, 1994, June 30, 1995 and  December
14, 1995, respectively.                                                         

(4) LEASES                                                                      
    The  Company leases its restaurant  facility under a noncancelable operating
lease that expires in May 1996 and contains three remaining renewal options  for
five  years each. The lease requires the  Company to pay executory costs such as
maintenance and insurance.  Rent expense amounted  to $77,651; $80,246;  $83,456
and  $43,110 for years  ended June 30, 1993,  1994 and 1995  and the period from
July 1, 1995 through December 14, 1995, respectively.                           

(5) SALE OF BUSINESS                                                            
    Effective December 14, 1995, the stockholder of the Company sold all of  the
Company's outstanding common stock to New York Bagel Enterprises, Inc.          

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INDEPENDENT AUDITORS' REPORT

The Boards of Directors                                                         
Central & Ridge Yogurt, Inc. and                                                
New York Bagel Enterprises, Inc.:                                               

    We  have audited  the accompanying  statements of  operations, stockholders'
deficit, and cash  flows of  Central &  Ridge Yogurt,  Inc. for  the year  ended
December  31, 1995.  These financial  statements are  the responsibility  of the
Company's management.  Our responsibility  is  to express  an opinion  on  these
financial statements based on our audit.                                        

    We  conducted  our  audit  in accordance  with  generally  accepted auditing
standards. Those standards require that we plan and perform the audit to  obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also  includes
assessing  the  accounting principles  used  and significant  estimates  made by
management, as well as evaluating the overall financial statement  presentation.
We believe that our audit provides a reasonable basis for our opinion.          

    In  our opinion, the financial statements  referred to above present fairly,
in all  material respects,  the results  of  operations and  the cash  flows  of
Central & Ridge Yogurt, Inc. for the year ended December 31, 1995, in conformity
with generally accepted accounting principles.                                  

                         KPMG Peat Marwick LLP

Wichita, Kansas                                                                 
March 26, 1996                                                                  

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CENTRAL & RIDGE YOGURT, INC.
STATEMENT OF OPERATIONS 
YEAR ENDED DECEMBER 31, 1995

                                                        · Enlarge/Download Table
                                                                                            
Revenues......................................................................... $ 326,943 
                                                                                  --------- 
Costs and expenses:                                                                         
  Cost of sales..................................................................   162,836 
  Restaurant operating expenses..................................................   186,696 
  General and administrative expenses............................................    27,861 
  Depreciation and amortization..................................................    31,108 
                                                                                  --------- 
    Total costs and expenses.....................................................   408,501 
                                                                                  --------- 
    Operating loss...............................................................   (81,558)
Other expense (income):                                                                     
  Interest expense...............................................................    16,893 
  Gain on sale of business (note 5)..............................................   (92,342)
                                                                                  --------- 
    Net loss..................................................................... $  (6,109)
                                                                                  --------- 
                                                                                  --------- 

See accompanying notes to financial statements. 

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CENTRAL & RIDGE YOGURT, INC.
STATEMENT OF STOCKHOLDERS' DEFICIT
YEAR ENDED DECEMBER 31, 1995

                                                        · Enlarge/Download Table

                                                            COMMON STOCK      ADDITIONAL                            
                                                        --------------------    PAID-IN    ACCUMULATED              
                                                         SHARES     AMOUNT      CAPITAL      DEFICIT       TOTAL    
                                                        ---------  ---------  -----------  ------------  ---------- 
                                                                                                                    
Balance, December 31, 1994.............................     1,000  $   1,000  $   109,000   $ (143,310)  $  (33,310)
Net loss...............................................    --         --          --            (6,109)      (6,109)
Distributions to stockholders..........................    --         --          --            (7,164)      (7,164)
                                                        ---------  ---------  -----------  ------------  ---------- 
Balance, December 31, 1995.............................     1,000  $   1,000  $   109,000   $ (156,583)  $  (46,583)
                                                        ---------  ---------  -----------  ------------  ---------- 
                                                        ---------  ---------  -----------  ------------  ---------- 

See accompanying notes to financial statements. 

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CENTRAL & RIDGE YOGURT, INC.
STATEMENT OF CASH FLOWS 
YEAR ENDED DECEMBER 31, 1995

                                                        · Enlarge/Download Table
                                                                                           
Cash flows from operating activities:                                                      
  Net loss...................................................................... $  (6,109)
  Adjustments to reconcile net loss to net cash used in operating activities:              
    Gain on sale of business....................................................   (92,342)
    Depreciation and amortization...............................................    31,108 
    Gain on sale of assets......................................................    (9,425)
    Increase (decrease) in cash resulting from changes in listed items:                    
      Inventory.................................................................    (1,119)
      Pre-opening costs.........................................................    (6,653)
      Accounts receivable.......................................................     5,028 
      Other assets..............................................................      (879)
      Accounts payable..........................................................     2,489 
      Accrued liabilities.......................................................     3,168 
                                                                                 --------- 
        Net cash used in operating activities...................................   (74,734)
                                                                                 --------- 
Cash flows from investing activities:                                                      
  Additions to property, plant and equipment....................................  (100,499)
  Proceeds on sale of assets....................................................    27,000 
                                                                                 --------- 
        Net cash used in investing activities...................................   (73,499)
                                                                                 --------- 
Cash flows from financing activities:                                                      
  Proceeds from notes payable...................................................   159,493 
  Principal payments on notes payable...........................................   (12,493)
  Increase in due to stockholders...............................................     8,020 
  Distributions to stockholders.................................................    (7,164)
  Excess of checks written over funds on deposit................................       377 
                                                                                 --------- 
        Net cash provided by financing activities...............................   148,233 
                                                                                 --------- 
        Net increase in cash....................................................    --     
Cash at beginning of year.......................................................       400 
                                                                                 --------- 
Cash at end of year............................................................. $     400 
                                                                                 --------- 
                                                                                 --------- 

See accompanying notes to financial statements. 

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CENTRAL & RIDGE YOGURT, INC.
NOTES TO FINANCIAL STATEMENTS 
DECEMBER 31, 1995 

(1) OPERATIONS                                                                  
    Central  &  Ridge Yogurt,  Inc.  (the Company)  operates  a restaurant  as a
franchisee of New York Bagel Enterprises,  Inc. (Franchisor) under the New  York
Bagel  concept which is a quick-service bakery featuring freshly made bagels and
deli-style sandwiches. The Company's restaurant is located in Wichita, Kansas.  

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES                                  

(a)  FRANCHISE FEES                                                     

    A franchise  agreement  has  been  executed  between  the  Company  and  the
Franchisor  that provides  the terms of  the franchise  arrangement. The initial
franchise fee is being amortized on a  straight-line basis over the term of  the
agreement.                                                                      

(b)  INVENTORIES                                                        

    Inventories  are stated at the  lower of cost or  market. Cost is determined
using the first-in, first-out method.                                           

(c)  PRE-OPENING COSTS                                                  

    Direct, incremental restaurant pre-opening costs, comprised primarily of the
cost of hiring and  training restaurant employees and  rent, are amortized  over
the initial twelve months of the restaurant's operations.                       

(d)  PROPERTY, PLANT AND EQUIPMENT                                      

    Property, plant and equipment are stated at cost. Depreciation is calculated
using  the straight-line method  over the estimated useful  lives of the assets.
Leasehold improvements are amortized on a straight-line basis over the lesser of
the remaining lease term, including renewal periods when the Company intends  to
exercise renewal options, or the estimated useful life of the asset.            

(e)  INCOME TAXES                                                       

    The  Company operates  as an S  corporation for income  tax purposes. Income
taxes have not  been provided because  the Company's results  of operations  are
reported to its stockholders for inclusion in their individual tax returns.     

(f)  STATEMENT OF CASH FLOWS                                            

Cash paid during the year for interest was $15,744.                     

(g)  USE OF ESTIMATES                                                   

    The  preparation  of  financial  statements  in  accordance  with  generally
accepted accounting  principles  requires  management of  the  Company  to  make
estimates  and  assumptions  that  affect the  reported  amounts  of  assets and
liabilities and  disclosure  of  contingent  liabilities  at  the  date  of  the
financial  statements and the  reported amounts of  revenues and expenses during
the reporting periods. Actual results could differ from these estimates.        

(3) PROPERTY, PLANT AND EQUIPMENT                                               
    Depreciation expense amounted  to $26,882  for the year  ended December  31,
1995.                                                                           

(4) LEASES                                                                      
    The  Company leases  its present  restaurant facility  under a noncancelable
operating lease. The lease term expires in February 1998 and contains a  renewal
option  for an  additional three-year  period. Total  rent expense  for the year
ended December 31, 1995 was $23,629.                                            

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CENTRAL & RIDGE YOGURT, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED) 
DECEMBER 31, 1995 

(4) LEASES (CONTINUED)                                                          
    Future minimum lease payments under the noncancelable operating lease as  of
December 31, 1995 are:                                                          

                                                                · Download Table
                                                                             
Year ending December 31:                                                     
  1996............................................................  $  18,600
  1997............................................................     18,600
  1998............................................................     19,050
  1999............................................................     19,200
  2000............................................................     19,200
  Thereafter......................................................      4,800
                                                                    ---------
  Total minimum lease payments....................................  $  99,450
                                                                    ---------
                                                                    ---------

(5) SALE OF BUSINESS                                                            
    Effective after the close of business on December 31, 1995, the Company sold
substantially  all of its assets to the  Franchisor. One of the Company's owners
is also an  officer and  stockholder of the  Franchisor. The  gain amounting  to
$92,342  arising from such sale has been reflected in the accompanying statement
of operations.                                                                  

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   [COMPANY LOGO ON MENU.]

[PHOTOGRAPH DEPICTING THE INTERIOR OF A COMPANY RESTAURANT AND VARIOUS COMPANY
PRODUCTS.]

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-------------------------------------------                                     
                                     -------------------------------------------
-------------------------------------------                                     
                                     -------------------------------------------

    NO  DEALER, SALESPERSON,  OR OTHER  PERSON HAS  BEEN AUTHORIZED  TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION IN CONNECTION WITH THIS OFFERING OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH  INFORMATION
OR  REPRESENTATION MUST  NOT BE  RELIED UPON  AS HAVING  BEEN AUTHORIZED  BY THE
COMPANY OR THE  UNDERWRITERS. THIS PROSPECTUS  DOES NOT CONSTITUTE  AN OFFER  TO
SELL  OR A SOLICITATION  OF AN OFFER  TO BUY ANY  OF THE SECURITIES  TO WHICH IT
RELATES IN ANY STATE  TO ANY PERSON WHOM  IT IS UNLAWFUL TO  MAKE SUCH OFFER  OR
SOLICITATION IN SUCH STATE. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE
HEREUNDER  SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
NOT BEEN ANY CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR  THAT
THE  INFORMATION CONTAINED HEREIN  IS CORRECT AS  OF ANY TIME  SUBSEQUENT TO ITS
DATE.                                                                           
------------------------

TABLE OF CONTENTS 

                                                                · Download Table

                                                    PAGE   
                                                    -----  
                                                           
Prospectus Summary.............................           3
Risk Factors...................................           7
S Corporation Distributions....................          12
Dividend Policy................................          12
Use of Proceeds................................          13
Dilution.......................................          14
Capitalization.................................          15
Selected Combined Financial Data...............          16
Management's Discussion and Analysis of                    
 Financial Condition and Results of                        
 Operations....................................          17
Business.......................................          23
Management.....................................          33
Principal and Selling Stockholders.............          39
Certain Transactions...........................          40
Description of Capital Stock...................          41
Shares Eligible for Future Sale................          44
Underwriting...................................          45
Legal Matters..................................          46
Experts........................................          46
Additional Information.........................          46
Index to Financial Statements..................         F-1

------------------------

    UNTIL            , 1996  (25 DAYS AFTER  THE DATE OF  THIS PROSPECTUS),  ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK, WHETHER OR NOT PARTICIPATING
IN  THIS DISTRIBUTION,  MAY BE REQUIRED  TO DELIVER A  PROSPECTUS. THIS DELIVERY
REQUIREMENT IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS
WHEN ACTING  AS UNDERWRITERS  AND WITH  RESPECT TO  THEIR UNSOLD  ALLOTMENTS  OR
SUBSCRIPTIONS.                                                                  

2,000,000 SHARES

[LOGO]

NEW YORK BAGEL
ENTERPRISES, INC. 

COMMON STOCK
--------------------- 

PROSPECTUS

--------------------- 
RAUSCHER PIERCE REFSNES, INC. 

J.C. BRADFORD & CO. 
        , 1996

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S-1/A 84th Page of 91 TOC 1st Previous Next Bottom Just 84th

PART II 
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13.  OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.                          

    The  following  is an  itemized statement  of the  estimated expenses  to be
incurred in connection with the  registration, issuance and distribution of  the
Common  Stock covered by this Registration Statement,  all of which will be paid
by New York Bagel  Enterprises, Inc. (the "Registrant"),  none of which will  be
paid by the Selling Stockholders:                                               

                                                                · Download Table
                                                                                   
Securities and Exchange Commission Registration Fee...................... $   9,518
National Association of Securities Dealers, Inc. Filing Fee..............     3,260
Nasdaq National Market Application Fee...................................    28,000
Accounting Fees and Expenses.............................................   200,000
Legal Fees and Expenses..................................................   225,000
Blue Sky Fees and Expenses...............................................     7,500
Transfer Agent/Registrar Fees and Expenses...............................    10,000
Printing Expenses........................................................   150,000
Miscellaneous Expenses...................................................    66,722
                                                                          ---------
  Total.................................................................. $ 700,000
                                                                          ---------
                                                                          ---------

ITEM 14.  INDEMNIFICATION OF DIRECTORS AND OFFICERS.                            

    The  Registrant  is incorporated  in Kansas.  Under  Section 17-6305  of the
Kansas general  corporation code,  a  Kansas corporation  has the  power,  under
specified  circumstances, to  indemnify its  directors, officers,  employees and
agents in connection with actions, suits or proceedings brought against them  by
a  third party,  by reason  of the fact  that they  were or  are such directors,
officers, employees or  agents, against expenses,  judgments, fines and  amounts
paid  in  settlement actually  and reasonably  incurred in  any action,  suit or
proceeding, including attorney fees, if such person acted in good faith and in a
manner such person  reasonably believed  to be  in or  not opposed  to the  best
interests  of  the  corporation; and  with  respect  to any  criminal  action or
proceeding, had  no  reasonable  cause  to believe  such  person's  conduct  was
unlawful.  The same test  applies to actions brought  by or in  the right of the
corporation with the  additional requirement  that no  indemnification shall  be
made in respect of any claim, issue or matter as to which such person shall have
been adjudged to be liable to the corporation unless and only to the extent that
the  court  in  which such  action  or  suit was  brought  shall  determine upon
application that, despite the adjudication of  liability but in view of all  the
circumstances  of the  case, such  person is  fairly and  reasonably entitled to
indemnity for such expenses which the court shall deem proper. Article X of  the
Articles  of Incorporation, Article VII of  the Restated and Amended Articles of
Incorporation to be effective upon the  completion of this offering, Sec. 33  of
the  Bylaws and Section 60 of the  Restated and Amended Bylaws of the Registrant
to  be   effective  upon   the  completion   of  this   offering,  provide   for
indemnification of directors and officers to the fullest extent permitted by the
Kansas   general  corporation  code.  Reference  is  made  to  the  Articles  of
Incorporation, Restated  and  Amended  Articles  of  Incorporation,  Bylaws  and
Restated  and Amended Bylaws of the Registrant,  filed as Exhibits 3.1, 3.3, 3.2
and 3.4, respectively, hereto.

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New York Bagel Enterprises Inc · S-1/A · On 7/26/96

Filed On 7/26/96 · SEC File 333-05785 · Accession Number 912057-96-15590

Pre-Effective Amendment to Registration Statement (General Form) · Form S-1Filing Table of Contents

S-1/A · Pre-Effective Amendment to Registration Statement (General Form)Document Table of Contents

Pre-Effective Amendment to Registration Statement (General Form) · Form S-1
Filing Table of Contents

S-1/A · Pre-Effective Amendment to Registration Statement (General Form)
Document Table of Contents