================================================================================

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q


[ ]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
         EXCHANGE ACT OF 1934

FOR THE QUARTER ENDED OCTOBER 5, 2003           COMMISSION FILE NUMBER 333-90817


                                  SBARRO, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

       NEW YORK                                             11-2501939
(STATE OR OTHER JURISDICTION OF                     (I.R.S. EMPLOYER I.D. NO.)
INCORPORATION OR ORGANIZATION)

401 BROAD HOLLOW ROAD, MELVILLE, NEW YORK                            11747
    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                       (ZIP CODE)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:              (631) 715-4100

         INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE  SECURITIES  EXCHANGE  ACT OF
1934 DURING THE  PRECEDING  12 MONTHS,  AND (2) HAS BEEN  SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.

YES                        NO
    ------------               ------------

INDICATE  BY CHECK MARK  WHETHER  THE  REGISTRANT  IS AN  ACCELERATED  FILER (AS
DEFINED IN RULE 12B-2 OF THE EXCHANGE ACT).

YES                        NO       X
    ------------               ------------

THE  NUMBER  OF  SHARES  OF COMMON  STOCK OF THE  REGISTRANT  OUTSTANDING  AS OF
NOVEMBER 13, 2003 WAS 7,064,328.

================================================================================

<PAGE>



                                  SBARRO, INC.

                                 FORM 10-Q INDEX
                                 ---------------



PART I.      FINANCIAL INFORMATION                                        PAGES
             ---------------------                                        -----

Consolidated Financial Statements:

     Balance Sheets - October 5, 2003 (unaudited) and December 29, 2002......3-4

     Statements of Operations (unaudited) - Forty Weeks and Twelve
         Weeks ended October 5, 2003 and October 6, 2002.....................5-6

     Statements of Cash Flows (unaudited) - Forty Weeks ended October 5,
         2003 and October 6, 2002............................................7-8

     Notes to Unaudited Consolidated Financial Statements-October 5, 2003...9-27

Management's Discussion and Analysis of Financial Condition and Results
    of Operations..........................................................28-38

Qualitative and Quantitative Disclosures of Market Risk.......................38

Controls and Procedures.......................................................39

PART II.     OTHER INFORMATION................................................40





<PAGE>


                         PART I - FINANCIAL INFORMATION


ITEM 1.       CONSOLIDATED FINANCIAL STATEMENTS


                          SBARRO, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
                                     ASSETS

<TABLE>
<CAPTION>
                                                                            (IN THOUSANDS, EXCEPT SHARE DATA)
                                                                       -------------------------------------------
                                                                       OCTOBER 5, 2003           DECEMBER 29, 2002
                                                                       ---------------           -----------------
                                                                         (UNAUDITED)
<S>                                                                          <C>                       <C>
CURRENT ASSETS:
     CASH AND CASH EQUIVALENTS                                               $31,049                   $55,150
     RESTRICTED CASH FOR UNTENDERED SHARES                                        21                        21
     RECEIVABLES, NET OF ALLOWANCE FOR DOUBTFUL
        ACCOUNTS OF $488 IN 2003 AND $491 IN 2002:
         FRANCHISEE                                                            1,717                     2,059
         OTHER                                                                 1,704                     1,244
                                                                            --------                  --------
                                                                               3,421                     3,303

     INVENTORIES                                                               2,299                     3,285
     PREPAID EXPENSES                                                          8,945                     2,362
     CURRENT PORTION OF LOANS RECEIVABLE FROM SHAREHOLDERS                        58                     3,232
                                                                            --------                  --------
         TOTAL CURRENT ASSETS                                                 45,793                    67,353

PROPERTY AND EQUIPMENT, NET                                                  100,685                   115,081

INTANGIBLE ASSETS:
   TRADEMARKS, NET                                                           195,916                   195,916
   GOODWILL, NET                                                               9,204                     9,204
   DEFERRED FINANCING COSTS AND OTHER, NET                                     5,806                     6,632

LOANS RECEIVABLE FROM SHAREHOLDERS, LESS CURRENT PORTION                       6,104                     2,800

OTHER ASSETS                                                                   8,154                     7,787
                                                                            --------                  --------
                                                                            $371,662                  $404,773
                                                                            ========                  ========

</TABLE>

            SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS




                                     Page 3
<PAGE>


                          SBARRO, INC. AND SUBSIDIARIES
                     CONSOLIDATED BALANCE SHEETS (CONTINUED)


                      LIABILITIES AND SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                                            (IN THOUSANDS, EXCEPT SHARE DATA)
                                                                       -------------------------------------------
                                                                       OCTOBER 5, 2003         DECEMBER 29, 2002
                                                                       ---------------         -----------------
                                                                         (UNAUDITED)
<S>                                                                              <C>                       <C>
CURRENT LIABILITIES:
     AMOUNTS DUE FOR UNTENDERED SHARES                                           $21                       $21
     ACCOUNTS PAYABLE                                                         13,801                    10,279
     ACCRUED EXPENSES                                                         15,644                    21,623
     ACCRUED INTEREST PAYABLE                                                  1,708                     8,181
     CURRENT PORTION OF MORTGAGE PAYABLE                                         205                       154
                                                                            --------                  --------
         TOTAL CURRENT LIABILITIES                                            31,379                    40,258

DEFERRED RENT                                                                  8,885                     8,474

     LONG-TERM DEBT, NET OF ORIGINAL ISSUE
         DISCOUNT, LESS CURRENT PORTION                                      268,054                   267,941

CONTINGENCIES

SHAREHOLDERS' EQUITY:
     PREFERRED STOCK, $1 PAR VALUE; AUTHORIZED 1,000,000 SHARES;
         NONE ISSUED                                                               -                         -
     COMMON STOCK, $.01 PAR VALUE; AUTHORIZED 40,000,000 SHARES;
         ISSUED AND OUTSTANDING 7,064,328 SHARES AT OCTOBER 5,
         2003 AND DECEMBER 29, 2002                                               71                        71
     ADDITIONAL PAID-IN CAPITAL                                                   10                        10
     RETAINED EARNINGS                                                        63,263                    88,019
                                                                            --------                  --------
                                                                              63,344                    88,100
                                                                            --------                  --------
                                                                            $371,662                  $404,773
                                                                            ========                  ========
</TABLE>


            SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS




                                     Page 4
<PAGE>



                          SBARRO, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                                     (IN THOUSANDS)
                                                                                     --------------
                                                                              FOR THE FORTY WEEKS ENDED:
                                                                              --------------------------
                                                                       OCTOBER 5, 2003           OCTOBER 6, 2002
                                                                       ---------------           ---------------

<S>                                                                     <C>                         <C>
REVENUES:
     RESTAURANT SALES                                                   $   228,863                 $254,454
     FRANCHISE RELATED REVENUES                                               7,625                    7,636
     REAL ESTATE AND OTHER                                                    4,448                    4,334
                                                                        -----------                 --------
     TOTAL REVENUES                                                         240,936                  266,424
                                                                        -----------                 --------

COSTS AND EXPENSES:
     RESTAURANT OPERATING EXPENSES:
        COST OF FOOD AND PAPER PRODUCTS                                      49,248                   49,864
        PAYROLL AND OTHER EMPLOYEE BENEFITS                                  66,357                   71,867
        OTHER OPERATING COSTS                                                85,790                   89,152
     DEPRECIATION AND AMORTIZATION                                           14,820                   15,784
     GENERAL AND ADMINISTRATIVE                                              20,122                   17,985
     ASSET IMPAIRMENT AND RESTAURANT CLOSING CHARGES, NET                     4,467                    2,911
                                                                        -----------                 --------
        TOTAL COSTS AND EXPENSES                                            240,804                  247,563
                                                                        -----------                 --------
OPERATING INCOME BEFORE MINORITY INTEREST                                       132                   18,861
MINORITY INTEREST                                                               (22)                     (36)
                                                                        -----------                 --------
     OPERATING INCOME                                                           110                   18,825
                                                                        -----------                 --------

OTHER INCOME (EXPENSE):
     INTEREST EXPENSE                                                       (23,930)                 (23,905)
     INTEREST INCOME                                                            569                      390
     EQUITY IN NET INCOME OF UNCONSOLIDATED AFFILIATES                          270                      692
     INSURANCE RECOVERY, NET                                                      -                    7,162
                                                                        -----------                 --------
     NET OTHER EXPENSE                                                      (23,091)                 (15,661)
                                                                        -----------                 --------

LOSS (INCOME) BEFORE INCOME TAXES                                           (22,981)                   3,164
INCOME TAXES                                                                    675                      276
                                                                        -----------                 --------

NET (LOSS) INCOME                                                         $(23,656)                   $2,888
                                                                        ===========                 ========
</TABLE>


            SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



                                     Page 5
<PAGE>

                          SBARRO, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS

                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                                     (IN THOUSANDS)
                                                                                     --------------
                                                                              FOR THE TWELVE WEEKS ENDED:
                                                                              ---------------------------
                                                                       OCTOBER 5, 2003           OCTOBER 6, 2002
                                                                       ---------------           ---------------
<S>                                                                         <C>                     <C>
REVENUES:
     RESTAURANT SALES                                                       $72,109                 $ 78,006
     FRANCHISE RELATED REVENUES                                               2,295                    2,561
     REAL ESTATE AND OTHER                                                    1,374                    1,319
                                                                            -------                   ------
     TOTAL REVENUES                                                          75,778                   81,886
                                                                            -------                   ------

COSTS AND EXPENSES:
     RESTAURANT OPERATING EXPENSES:
        COST OF FOOD AND PAPER PRODUCTS                                      15,701                   15,010
        PAYROLL AND OTHER EMPLOYEE BENEFITS                                  20,530                   21,811
        OTHER OPERATING COSTS                                                26,261                   26,775
     DEPRECIATION AND AMORTIZATION                                            4,411                    3,872
     GENERAL AND ADMINISTRATIVE                                               6,056                    5,286
     ASSET IMPAIRMENT AND RESTAURANT CLOSING CHARGES, NET                     3,410                      682
                                                                            -------                   ------
        TOTAL COSTS AND EXPENSES                                             76,369                   73,436
                                                                            -------                   ------
OPERATING (LOSS) INCOME BEFORE MINORITY INTEREST                               (591)                   8,450
MINORITY INTEREST                                                               (12)                     ( 3)
                                                                            -------                   ------
     OPERATING (LOSS) INCOME                                                   (603)                   8,447
                                                                            -------                   ------

OTHER INCOME (EXPENSE):
     INTEREST EXPENSE                                                        (7,167)                  (7,165)
     INTEREST INCOME                                                            158                      130
     EQUITY IN NET (LOSS) INCOME OF UNCONSOLIDATED AFFILIATES                  (241)                     147
     INSURANCE RECOVERY, NET                                                      -                    7,162
                                                                            -------                   ------
     NET OTHER EXPENSE                                                       (7,250)                     274
                                                                            -------                   ------

(LOSS) INCOME BEFORE INCOME TAXES                                            (7,853)                   8,721
INCOME TAXES                                                                    101                       75
                                                                            -------                   ------

NET (LOSS) INCOME                                                           $(7,954)                  $8,646
                                                                            ========                  ======
</TABLE>


            SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS




                                     Page 6
<PAGE>



                          SBARRO, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                                     (IN THOUSANDS)
                                                                                     --------------
                                                                               FOR THE FORTY WEEKS ENDED:
                                                                               --------------------------
                                                                       OCTOBER 5, 2003           OCTOBER 6, 2002
                                                                       ---------------           ---------------
OPERATING ACTIVITIES:

<S>                                                                        <C>                        <C>
NET (LOSS) INCOME                                                          $(23,656)                  $2,888
ADJUSTMENTS TO RECONCILE NET (LOSS) INCOME TO NET CASH (USED IN)
      PROVIDED BY OPERATING ACTIVITIES:
      DEPRECIATION AND AMORTIZATION                                          15,938                   16,939
      ASSET IMPAIRMENT AND RESTAURANT CLOSING CHARGES                         5,070                    2,046
      INCREASE IN DEFERRED RENT, NET                                            232                      403
      GAIN ON SALE OF OTHER CONCEPT UNIT                                       (200)                       -
      LOSS ON SALE OF OTHER CONCEPT UNIT INCLUDED IN PRIOR YEAR
          ASSET IMPAIRMENT COSTS                                                250                        -
      MINORITY INTEREST                                                          22                       36
      EQUITY IN NET INCOME OF UNCONSOLIDATED AFFILIATES                        (270)                    (692)
      DIVIDENDS RECEIVED FROM UNCONSOLIDATED AFFILIATE                          119                      311
CHANGES IN OPERATING ASSETS AND LIABILITIES:
      DECREASE IN RECEIVABLES                                                   351                      881
      DECREASE IN INVENTORIES                                                   987                      741
      INCREASE IN PREPAID EXPENSES                                           (6,371)                  (7,507)
      INCREASE IN OTHER ASSETS                                                 (105)                    (181)
      DECREASE IN ACCOUNTS PAYABLE AND ACCRUED EXPENSES                      (2,501)                  (6,012)
      DECREASE IN ACCRUED INTEREST PAYABLE                                   (6,473)                  (6,473)
                                                                            --------                 --------

NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES                         (16,607)                   3,380
                                                                            --------                 --------


</TABLE>


            SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


                                     Page 7
<PAGE>


                          SBARRO, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

                                   (UNAUDITED)


<TABLE>
<CAPTION>
                                                                                     (IN THOUSANDS)
                                                                                     --------------
                                                                               FOR THE FORTY WEEKS ENDED:
                                                                               --------------------------
                                                                       OCTOBER 5, 2003           OCTOBER 6, 2002
                                                                       ---------------           ---------------

<S>                                                                         <C>                      <C>
INVESTING ACTIVITIES:

PURCHASES OF PROPERTY AND EQUIPMENT                                         $(6,265)                 $(6,611)
                                                                            --------                 --------
     NET CASH USED IN INVESTING ACTIVITIES                                   (6,265)                  (6,611)
                                                                            --------                 --------

FINANCING ACTIVITIES:

MORTGAGE PRINCIPAL REPAYMENTS                                                  (128)                    (117)
TAX DISTRIBUTIONS RELATED TO THE PRIOR FISCAL YEAR                           (1,101)                  (3,125)
                                                                            --------                 --------
     NET CASH USED IN FINANCING ACTIVITIES                                   (1,229)                  (3,242)
                                                                            --------                 --------

DECREASE IN CASH AND CASH EQUIVALENTS                                       (24,101)                  (6,473)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                             55,150                   36,952
                                                                            --------                 --------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                                  $31,049                  $30,479
                                                                            =======                  =======

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

CASH PAID DURING THE PERIOD FOR INCOME TAXES                                   $378                     $626
                                                                               ====                     ====

CASH PAID DURING THE PERIOD FOR INTEREST                                    $29,250                  $29,247
                                                                            =======                  =======

</TABLE>




            SEE NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS





                                     Page 8
<PAGE>

                          SBARRO, INC. AND SUBSIDIARIES
              NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


1.       BASIS OF PRESENTATION:

         The accompanying  unaudited consolidated financial statements have been
         prepared  in  accordance  with  the  instructions  for  Form  10-Q  and
         Regulation  S-X related to interim  period  financial  statements  and,
         therefore,  do not include all  information  and footnotes  required by
         generally accepted  accounting  principles.  However, in the opinion of
         our  management,   all  adjustments  (consisting  of  normal  recurring
         adjustments and accruals)  considered necessary for a fair presentation
         of  our  consolidated  financial  position  at  October  5,  2003,  our
         consolidated  results  of  operations  for the  forty and  twelve  week
         periods  ended  October 5, 2003 and  October 6, 2002 and cash flows for
         the forty week  periods then ended have been  included.  The results of
         operations for interim  periods are not  necessarily  indicative of the
         results that may be expected for the entire year.  Reference  should be
         made to the annual financial  statements,  including footnotes thereto,
         included  in our Annual  Report on Form 10-K for the fiscal  year ended
         December 29, 2002.

2.       NEW ACCOUNTING PRONOUNCEMENTS:

         In June 2002,  the FASB  issued  SFAS No.  146,  "Accounting  for Costs
         Associated   with  Exit  or  Disposal   Activities,"   which  addresses
         accounting for restructuring and similar costs. SFAS No. 146 supersedes
         previous   accounting   guidance,   principally  EITF  Issue  No.  94-3
         "Liability  Recognition for Certain Employee  Termination  Benefits and
         Other Costs to Exit an Activity  (including Certain Costs Incurred in a
         Restructuring)."  SFAS No. 146 requires  that the  liability  for costs
         associated  with an exit or disposal  activity be  recognized  when the
         liability  is incurred.  Under EITF No.  94-3, a liability  for an exit
         cost was  recognized at the date of a company's  commitment for an exit
         plan. SFAS No. 146 also establishes that the liability should initially
         be measured and recorded at fair value.  SFAS 146 changes the timing of
         expense   recognition   for  certain   costs  we  incur  while  closing
         restaurants or undertaking other exit or disposal activities;  however,
         the timing difference is not typically significant length.  Adoption of
         SFAS 146 did not have a material impact on our financial statements for
         the quarter and year to date ended October 5, 2003.

         In November 2002, the FASB issued Financial  Interpretation (`FIN") No.
         45, "Guarantor's  Accounting and Disclosure Requirements for Guarantees
         including   Indirect   Guarantees  of  Indebtedness  of  Others"  which
         addresses the  accounting  for and  disclosure by guarantors  regarding
         obligations relating to the issuance of certain guarantees.  FIN No. 45
         requires that, for all guarantees issued or modified after December 31,
         2002, a liability  for the fair value of the  obligation  undertaken be
         recorded at the inception of a guarantee. No revision of or restatement
         of accounting for  guarantees  issued or modified prior to December 31,
         2002 is allowed.  The disclosure  requirements of Interpretation No. 45
         were effective with our 2002 financial statements.  As described in the
         Notes to the



                                     Page 9
<PAGE>

                          SBARRO, INC. AND SUBSIDIARIES
        NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


         Consolidated Financial Statements included in our Annual Report on Form
         10-K for the year ended  December 29, 2002,  we have  provided  certain
         guarantees that would require recognition upon issuance or modification
         under the  provisions  of FIN 45. While the nature of our business will
         include in the issuance of certain  guarantees in the future, we do not
         anticipate  that FIN 45 will have a  material  impact on our  financial
         position or results of operations.

         FIN 46,  "Consolidation  of Variable  Interest  Entities," is effective
         immediately  for all  enterprises  with variable  interests in variable
         interest entities created after January 31, 2003. The provisions of FIN
         46 must be applied to interests in variable  interest  entities created
         before February 1, 2003 beginning with the first reporting period after
         December 15, 2003, which will be our 2003 fiscal year end. If an entity
         is determined to be a variable interest entity, it must be consolidated
         by the  enterprise  that absorbs the majority of the entity's  expected
         losses if they  occur,  receives a majority  of the  entity's  expected
         residual  returns  if they  occur,  or  both.  Where  it is  reasonably
         possible that the enterprise will  consolidate or disclose  information
         about a variable  interest  entity,  the  enterprise  must disclose the
         nature,  purpose, size and activity of the variable interest entity and
         the  enterprise's   maximum  exposure  to  loss  as  a  result  of  its
         involvement  with  the  variable   interest  entity  in  all  financial
         statements  issued after January 31, 2003. On October 9, 2003, the FASB
         issued  FASB  Staff  Position  No.  FIN  46-6  "Effective  Date of FASB
         Interpretation  No. 46,  Consolidation of Variable Interest  Entities,"
         which defers the  implementation  date for public entities that hold an
         interest in a variable  interest entity or potential  variable interest
         entity from the first  fiscal year or interim  period  beginning  after
         June 15, 2003 to the end of the first  interim or annual  period ending
         after December 15, 2003. This deferral applies only if (1) the variable
         interest  entity was created before February 1, 2003 and (2) the public
         entity has not issued  financial  statements  reporting  that  variable
         interest  entity in  accordance  with FIN 46,  other  than  disclosures
         required by paragraph  26 of FIN 46. As of the date of this filing,  we
         understand  the FASB is in the  process  of  further  modifying  and/or
         clarifying  certain  provisions  of FIN 46. These  modifications,  when
         finalized,  could impact our analysis of the applicability of FIN 46 to
         entities   that  are  our   franchisees.   We  are  aware  of   certain
         interpretations  by some parties of the provisions of FIN 46, given its
         continuing  evolution,  which  could have  applicability  when  certain
         conditions  exist that are not  representative  of a typical  franchise
         relationship.  These  conditions  include the franchisor  possessing an
         equity interest in or providing significant levels of financial support
         to a  franchisee,  including  lease  guarantees.  We do not possess any
         ownership  interests in our franchisees and we do not provide financial
         support to franchisees in our typical  franchise  relationship with the
         exception   of   non-cancelable    operating   lease   guarantees   for
         approximately 30 franchise locations.  While we continue to monitor and
         analyze   developments   regarding   FIN  46  that  would   impact  its
         applicability  to  franchise  relationships,  at  this  time  we do not
         believe that the required  consolidation of franchise entities, if any,
         would materially impact our financial statements.



                                    Page 10
<PAGE>

                          SBARRO, INC. AND SUBSIDIARIES
        NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


         We have also reviewed our corporate relationships for possible coverage
         under FIN 46 and have  determined  that  they will not have a  material
         effect on our  disclosures  and our  financial  position  or results of
         operations.

         The required  disclosures  for any variable  interest  entity have been
         included in our Form 10-K for the fiscal year ended December 29, 2002

         3.       LONG-TERM DEBT:

         Our credit  agreement  required  that we  maintain  a minimum  ratio of
         consolidated  earnings  before  interest,  taxes and  depreciation  and
         amortization  ("EBITDA") to consolidated interest expense and a maximum
         ratio of consolidated  senior debt to consolidated  EBITDA. We have not
         been in compliance with the required ratios,  as amended,  during 2003.
         Our bank waived  compliance  with these covenants but we would not have
         been able to borrower  under this  arrangement.  We requested,  and the
         bank agreed,  to terminate the bank's  lending  commitment.  We had not
         made any  borrowings  under  the line of credit  since  its  inception,
         except for a required  one day  borrowing  upon the  activation  of the
         credit agreement and except with respect to letters of credit that have
         been issued by the bank under the sublimit of the line. The termination
         of the bank's  lending  commitment  eliminates  our obligation to pay a
         commitment fee on the unused portion of the facility.  Our  obligations
         under the credit  agreement to  reimburse  the bank with respect to any
         drawings  that may be made  under the  approximately  $1.7  million  of
         letters of credit that are  outstanding  as of  November  19, 2003 will
         remain  in full  force.  We  have  agreed  to  either  arrange  for the
         replacement of the letters of credit or to cash  collateralize  them by
         January 9, 2004. The credit  agreement will remain in effect until such
         time as  outstanding  letters  of credit  shall have been drawn upon in
         full, expired or otherwise terminate,  except for our ability to borrow
         or obtain  letters  of  credit  and  except  that  compliance  with our
         financial  and  certain  other  covenants  has been  waived  until  the
         termination  date of the  credit  agreement.  We are in the  process of
         negotiating  for an  uncommitted  line of credit  from other banks in a
         presently  undetermined  amount,  but there can be no assurance that we
         will be able to obtain the line.

         We are subject to various covenants under the indenture under which our
         senior  notes are issued.  One of the  covenants  limits our ability to
         borrow funds (except under specifically permitted arrangements, such as
         up to $75.0 million of revolving  credit loans) unless our consolidated
         interest ratio coverage (as defined),  after giving pro forma effect to
         the interest on the new  borrowing,  for the four most  recently  ended
         fiscal  quarters  is at least 2.5 to 1.  Another  covenant  limits  our
         ability to make "restricted  payments," including,  among other things,
         dividend  payments  (other  than as  distributions  pursuant to our tax
         payment  agreement  with  our  shareholders  related  to  Subchapter  S
         distributions)  and  investments  in, among other things,  unrestricted
         subsidiaries, to specified amounts determined under a formula contained
         in  the  indenture  provided  that  (except  with  respect  to  certain
         permitted  investments  and tax  distributions)  our interest  coverage
         ratio  is at



                                    Page 11
<PAGE>

                          SBARRO, INC. AND SUBSIDIARIES
        NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


         least 2.0 to 1 after giving pro forma effect to the restricted payment.
         For the four fiscal  quarters ended October 5, 2003,  our  consolidated
         interest coverage ratio was 1.1 to 1. As a result, we are not presently
         able  to  borrow   funds   (other  than  the   specifically   permitted
         indebtedness).   Additionally,  under  the  formula  contained  in  the
         indenture,  we cannot  make  restricted  payments,  other than  certain
         permitted  investments  and tax  distributions,  until we increase  the
         restricted payment  availability by approximately $18 million, and then
         only to the extent of any excess over that amount.

         We  were in  compliance,  as of  October  5,  2003,  with  the  various
         covenants  contained  in the  indenture  for our  senior  notes and our
         mortgage.

4.       EXECUTIVE EMPLOYMENT AGREEMENT:

         On September  8, 2003,  we entered into an  employment  agreement  with
         Michael O'Donnell, our new President and Chief Executive Officer, which
         terminates  December  31, 2006.  The  agreement  provides,  among other
         things,  for an annual salary of $450,000;  an annual performance bonus
         beginning  in 2004 to be based upon the  achievement  of  increases  in
         EBITDA  and  other  objectives  to be set forth in  business  plans and
         budgets  approved from time to time by our board,  which bonus, for the
         year  ending  December  31,  2004,  will  not be  less  than  $112,500;
         $1,000,000 of life insurance;  certain  relocation,  travel and housing
         expenses incurred by Mr. O'Donnell;  and a special incentive award. The
         special  incentive  award is  designed  to  reward  Mr.  O'Donnell  for
         improvements in our adjusted  EBITDA,  cash position and long term debt
         position over the term of the agreement,  vests upon termination of Mr.
         O'Donnell's employment, is reduced in the event of early termination of
         employment and, when earned, is payable, with interest, in twelve equal
         quarterly  installments.  Alternatively,  in  the  event  of  a  public
         offering of our common stock,  a change in control of Sbarro by merger,
         sale of stock or sale of assets,  or a liquidation  or  dissolution  of
         Sbarro,  the  special  incentive  award would be based on the per share
         proceeds  received by our shareholders in excess of a threshold amount.
         The  agreement  also  provides for  severance pay in the event of early
         termination by us without "cause" (as defined) or by Mr.  O'Donnell for
         "good  reason" (as defined).  Since the ultimate  amount of the special
         incentive  award is not known until  termination of the agreement,  the
         special  incentive award is subject to variable plan accounting.  There
         will be no  charge to our  earnings  until our  EBITDA,  cash  position
         and/or long-term debt position  improves or a special event occurs.  No
         compensation  expense  relating  to the  special  incentive  award  was
         recorded in the twelve or forty weeks ended October 5, 2003.

5.       INCOME TAXES:

         During the forty weeks ended  October 5, 2003,  we made a  Subchapter S
         tax distribution to our shareholders, based on our tax basis income for
         fiscal 2002,  that  totaled $1.1 million  compared to a $3.1 million of
         Subchapter S tax distribution made during the forty weeks ended October
         6, 2002 based on our tax basis income for fiscal 2001.



                                    Page 12
<PAGE>

                          SBARRO, INC. AND SUBSIDIARIES
        NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


6.       RELATED PARTY TRANSACTIONS:

         On April 6, 2003, loans of $3.23 million to certain of our shareholders
         were  extended to April 6, 2005.  The notes bear  interest at 4.63% per
         annum.

         On March 28, 2003,  we extended a loan of $40,000 to Gennaro A. Sbarro,
         Corporate Vice President and President of our Franchising and Licensing
         Division,  to March 28,  2004.  The note  bears  interest  at 2.69% per
         annum.

         Anthony  Missano,  Corporate  Vice President and President of our Quick
         Service Division,  entered into a note dated June 15, 2003 in our favor
         in the amount of $89,687,  bearing  interest at 2.96%,  payable in five
         equal annual installments  commencing in June 2004, with respect to the
         payment of royalties due us for 2001 and 2000 from a former  franchisee
         that was owned by Mr. Missano's wife, the daughter of Joseph Sbarro.

         On March 3,  2003,  a company  in which  Gennaro  J.  Sbarro,  then our
         Corporate  Vice  President  and President of our Casual and Fine Dining
         Division and the son of Joseph  Sbarro,  has a 50% interest  (the other
         50% is owned by an  unaffiliated  third party) entered into a franchise
         agreement  with us for a new  location.  The lease for the location was
         entered into in September 2002 by one of our  subsidiaries.  Subsequent
         to that date, we determined that the economics of the location would be
         better  suited for a franchise  operator  and, as such, we entered into
         the franchise  agreement and subleased the premises to this franchisee.
         Payments  under the sublease  will be made  directly to the landlord by
         the  franchisee.  The  franchise  agreement is on terms and  conditions
         similar to those in other  franchise  arrangements we have entered into
         in similar  situations  with  unrelated  third  parties.  The franchise
         agreement  provides for the payment of 5% of the location's  sales as a
         continuing  royalty but does not provide for any initial franchise fee.
         Future minimum  rental  payments under the lease for this location over
         the term of the lease, which expires in 2018,  aggregate  approximately
         $2.6 million.  The location is expected to open in the first quarter of
         fiscal 2004.  As of October 31, 2003,  Gennaro J. Sbarro  resigned from
         his positions as Corporate Vice - President and President of our Casual
         and Fine Dining  division.  A corporation  owned by Mr. Sbarro  entered
         into an eighteen month agreement to provide consulting  services to our
         quick service and casual dining  division for $22,500 per month as well
         as reimbursement for customary and usual expenses that may be incurred.
         Mr. Sbarro has entered into a note for $54,538,  that is repayable over
         the same eighteen  month period with no interest,  to reimburse  Sbarro
         for costs advanced by Sbarro in connection with the franchise location.

         In October  2003,  we sold the assets of three  Sbarro-owned  locations
         separately  to each of  three  of  Anthony  Sbarro's  sons.  Two of the
         locations,  which had no remaining book value,  were transferred for no
         consideration while the third was sold for $0.3 million,  that was paid
         in  full,  and  resulted  in a gain to  Sbarro  of  approximately  $0.1
         million. Two of




                                    Page 13
<PAGE>

                          SBARRO, INC. AND SUBSIDIARIES
        NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

         the locations were marginally profitable in fiscal 2002 while the third
         had a small loss during that period. In connection with the sale of the
         locations,  their  employment  with Sbarro was  terminated  and we will
         include  total  severance  pay of  approximately  $60,000 in our fourth
         quarter  results of operations.  The franchise  agreements are on terms
         and conditions  similar to those other  franchise  arrangements we have
         entered into in similar  situation  with unrelated  third parties.  The
         agreements  provide for the payment of 5% of the location's  sales as a
         continuing  royalty but does not provide for any initial franchise fee.
         In  addition,  we  subleased  two  of  the  locations  to  two  of  the
         franchisees.  The third location is on a  month-to-month  basis any new
         lease  entered  into  by  the  franchisee  will  not be  guaranteed  or
         subleased  by  Sbarro.  Payments  under the  subleases  are being  made
         directly to the  landlord by the  franchisees.  Future  minimum  rental
         payments  under the leases for the two locations  being  subleased over
         the terms of the  leases,  which  expire  in 2006 and  2016,  aggregate
         approximately  $2.0  million.  We will  review  the fair value of these
         lease guarantees in accordance with FIN 45.

7.       LITIGATION:

         On December 20, 1999,  fourteen  current and former general managers of
         Sbarro  restaurants in California  amended a complaint against us filed
         in the Superior Court of California  for Orange  County.  The complaint
         alleges  that the  plaintiffs  were  improperly  classified  as  exempt
         employees  under the  California  wage and hour law. The plaintiffs are
         seeking  actual  damages,  punitive  damages and costs of the  lawsuit,
         including  reasonable  attorney's  fees,  each in unspecified  amounts.
         Plaintiffs filed a motion to certify the lawsuit as a class action, but
         the Court denied the motion. The trial was concluded in April 2003, and
         the parties have  submitted  post-trial  briefs.  The Court has not yet
         issued a ruling.

         On September 6, 2000,  eight other current and former general  managers
         of Sbarro restaurants in California filed a complaint against us in the
         Superior  Court of  California  for  Orange  County  alleging  that the
         plaintiffs  were  improperly   classified  as  exempt  employees  under
         California  wage  and hour  law.  The  plaintiffs  are  seeking  actual
         damages,   punitive  damages  and  costs  of  the  lawsuit,   including
         reasonable attorney's fees, each in unspecified amounts. Plaintiffs are
         represented by the same counsel who is  representing  the plaintiffs in
         the case  discussed  in the  preceding  paragraph.  We have  separately
         settled  with four of the  plaintiffs  in this  action  for  immaterial
         amounts.  The  parties to this case have agreed that it will be settled
         upon the same terms and conditions  that the court orders in connection
         with its decision in the case discussed in the preceding paragraph.

         On March 22, 2002, five former general  managers of Sbarro  restaurants
         in  California  filed a complaint  against us in the Superior  Court of
         California  for Los Angeles  County.  The  complaint  alleges  that the
         plaintiffs  were illegally  required to perform labor services  without
         proper  premium  overtime  compensation  from at least May of 1999. The
         plaintiffs



                                    Page 14
<PAGE>

                          SBARRO, INC. AND SUBSIDIARIES
        NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


         are seeking actual  damages,  punitive  damages and attorney's fees and
         costs,  each in  unspecified  amounts.  In  addition,  plaintiffs  have
         requested  class action status for all managerial  employees who worked
         overtime  and/or were not  otherwise  paid regular  wages due and owing
         from May 1999 to  present.  This  case is  currently  in the  discovery
         phase.

         We believe that we have substantial defenses in each of the actions and
         are vigorously defending these actions.

         In addition to the above complaints,  from time to time, we are a party
         to  certain  claims and legal  proceedings  in the  ordinary  course of
         business.  In our  opinion,  the  results of the  complaints  and other
         claims  and  legal  proceedings  are not  expected  to have a  material
         adverse  effect on our  consolidated  financial  position or results of
         operations.

8.       PROVISION FOR ASSET IMPAIRMENT

         During the third quarter of fiscal 2003, we recorded a $3.0 million for
         impairment  of property and  equipment  (based on the net book value of
         the property and equipment).

9.       GUARANTOR AND NON-GUARANTOR FINANCIAL STATEMENTS:

         Certain  subsidiaries  have guaranteed  amounts  outstanding  under our
         senior  notes  and  bank  credit  agreement.  Each of the  guaranteeing
         subsidiaries is our direct or indirect wholly owned subsidiary and each
         has fully  and  unconditionally  guaranteed  the  senior  notes and the
         credit agreement on a joint and several basis.

         The following condensed consolidating financial information presents:

         (1)   Condensed  consolidating  balance  sheets as of  October  5, 2003
               (unaudited)  and December 29, 2002 and  statements  of operations
               for the forty and twelve weeks ended October 5, 2003  (unaudited)
               and  October  6, 2002  (unaudited)  and cash  flows for the forty
               weeks  ended  October  5, 2003  (unaudited)  and  October 6, 2002
               (unaudited) of (a) Sbarro,  Inc.,  the parent,  (b) the guarantor
               subsidiaries as a group, (c) the  nonguarantor  subsidiaries as a
               group and (d) Sbarro on a consolidated basis.

         (2)   Elimination  entries necessary to consolidate  Sbarro,  Inc., the
               parent, with the guarantor and nonguarantor subsidiaries.

         The principal  elimination entries eliminate  intercompany balances and
         transactions.  Investments  in  subsidiaries  are  accounted for by the
         parent on the cost method.



                                    Page 15
<PAGE>

                          SBARRO, INC. AND SUBSIDIARIES
        NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


                           CONSOLIDATING BALANCE SHEET
                              AS OF OCTOBER 5, 2003
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                                   (UNAUDITED)

                                     ASSETS
<TABLE>
<CAPTION>
                                                           GUARANTOR      NONGUARANTOR                    CONSOLIDATED
                                            PARENT       SUBSIDIARIES     SUBSIDIARIES    ELIMINATIONS       TOTAL
                                            ------       ------------     ------------    ------------       -----

<S>                                          <C>            <C>                <C>          <C>              <C>
Current assets:
   Cash and cash equivalents                  $26,958         $3,302             $789                         $31,049
   Restricted cash for untendered                  21              -                -                              21
     shares
   Receivables net of allowance for
     doubtful accounts of $488:
     Franchise                                  1,717              -                -                           1,717
     Other                                        133            822              749                           1,704
                                               ------          -----            -----                          ------
                                                1,850            822              749
                                                                                                                3,421

   Inventories                                  1,013          1,156              130q                          2,299
   Prepaid expenses                             6,627          2,119              199                           8,945
   Current portion of loans receivable
     from shareholders                             58              -                -               -              58
                                               ------          -----            -----                          ------
     Total current assets                      36,527          7,399            1,867                          45,793

 Intercompany receivables                       6,440        312,612                -       $(319,052)              -

Investment in subsidiaries                     65,469              -                -         (65,469)              -

Property and equipment, net                    35,628         59,845            5,212               -
                                                                                                              100,685

Intangible assets, net:
   Trademarks, net                            195,916              -                -               -         195,916
   Goodwill, net                                9,324              -                -            (120)          9,204
   Deferred financing costs and other, net      5,565            241                -               -           5,806

Loans receivable from shareholders              6,104              -                -               -           6,104

Other assets                                    9,472          1,833             (794)         (2,357)          8,154
                                          -----------    -----------        ----------      ---------        --------

                                             $370,445       $381,930           $6,285       $(386,998)       $371,662
                                             ========       ========           ======       ==========       ========

</TABLE>




                                    Page 16
<PAGE>

                          SBARRO, INC. AND SUBSIDIARIES
        NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


                           CONSOLIDATING BALANCE SHEET
                              AS OF OCTOBER 5, 2003
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                                   (UNAUDITED)

                      LIABILITIES AND SHAREHOLDERS' EQUITY


<TABLE>
<CAPTION>
                                                           GUARANTOR     NONGUARANTOR                     CONSOLIDATED
                                             PARENT      SUBSIDIARIES    SUBSIDIARIES     ELIMINATIONS       TOTAL
                                             ------      ------------    ------------     ------------       -----

<S>                                          <C>             <C>              <C>           <C>              <C>
Current liabilities:
   Amounts due for untendered shares              $21                                                             $21
   Accounts payable                            12,959            $255           $587                           13,801
   Accrued expenses                            12,207           1,379          2,058                           15,644
   Accrued interest payable                     1,708               -              -                            1,708
   Current portion of mortgage payable              -             205              -                              205
                                           -----------    -----------      ----------                        --------
     Total current liabilities                 26,895           1,839          2,645                           31,379

Intercompany payables                         312,614           2,958          3,480        $(319,052)              -

Deferred rent
                                                8,170               -            715                -           8,885

Long-term debt, net of
   original issue discount                    252,740          15,314              -                -         268,054

Shareholders' equity (deficit):
   Preferred stock, $1 par value;
     authorized 1,000,000 shares; none
     issued                                         -               -              -                -               -
   Common stock, $.01 par value;
     authorized 40,000,000 shares;
     issued and outstanding 7,064,328
     shares                                        71               -              -                -              71
   Additional paid-in capital                      10          65,469          2,477          (67,946)             10
   Retained earnings (deficit)               (230,055)        296,350         (3,032)               -          63,263
                                           -----------    -----------      ----------        ---------      --------


                                             (229,974)        361,819           (555)         (67,946)         63,344
                                           -----------    -----------      ----------        ---------      --------

                                             $370,445        $381,930         $6,285        $(386,998)       $371,662
                                             ========        ========         ======        ==========       ========

</TABLE>




                                    Page 17
<PAGE>


                          SBARRO, INC. AND SUBSIDIARIES
        NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


                           CONSOLIDATING BALANCE SHEET
                             AS OF DECEMBER 29, 2002
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                                     ASSETS

<TABLE>
<CAPTION>
                                                           GUARANTOR     NONGUARANTOR                     CONSOLIDATED
                                             PARENT      SUBSIDIARIES    SUBSIDIARIES     ELIMINATIONS       TOTAL
                                             ------      ------------    ------------     ------------       -----

<S>                                          <C>              <C>             <C>           <C>              <C>
Current assets:
   Cash and cash equivalents                  $47,636          $6,539           $975                          $55,150
   Restricted cash for untendered
      shares                                       21               -              -                               21
   Receivables net of allowance for
      doubtful accounts of $491:
      Franchise                                 2,059                              -                            2,059
      Other                                        69           1,088             87                            1,244
                                             --------         --------        -------                        --------
                                                2,128           1,088             87                            3,303

   Inventories                                  1,417           1,725            143                            3,285
   Prepaid expenses                             2,677            (342)            27                            2,362
   Current portion of loans receivable
      from shareholders                         3,232               -              -                            3,232
                                             --------         --------        -------                        --------
     Total current assets                      57,111           9,010          1,232                           67,353

Intercompany receivables                        8,505         313,877              -        $(322,382)              -

Investment in subsidiaries                     65,469               -              -          (65,469)              -

Property and equipment, net                    42,762          65,726          6,593                -         115,081

Intangible assets:
   Trademarks, net                            195,916               -              -                -         195,916
   Goodwill, net                                9,324               -              -             (120)          9,204
   Deferred financing costs, net                6,361             271              -                -           6,632

   Loans receivable from shareholders,
      less current portion                      2,800               -              -                -           2,800

   Other assets                                 8,742            1,705          (303)          (2,357)          7,787
                                             --------         --------        -------       ----------       --------
                                             $396,990         $390,589        $7,522        $(390,328)       $404,773
                                             ========         ========        ======        =========        ========

</TABLE>




                                    Page 18
<PAGE>

                          SBARRO, INC. AND SUBSIDIARIES
        NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


                           CONSOLIDATING BALANCE SHEET
                             AS OF DECEMBER 29, 2002
                        (IN THOUSANDS, EXCEPT SHARE DATA)
                      LIABILITIES AND SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                                           GUARANTOR     NONGUARANTOR                     CONSOLIDATED
                                             PARENT      SUBSIDIARIES    SUBSIDIARIES     ELIMINATIONS       TOTAL
                                             ------      ------------    ------------     ------------       -----

<S>                                          <C>             <C>              <C>           <C>              <C>
Current liabilities:
   Amounts due for untendered shares              $21                                                             $21
   Accounts payable                             9,503            $212           $564                           10,279
   Accrued expenses                            17,887           1,560          2,176                           21,623
   Accrued interest payable                     8,181               -              -                            8,181
   Current portion of
      mortgage payable                              -             154              -                              154
                                             --------        --------         ------                         --------
     Total current liabilities                 35,592           1,926          2,740                           40,258

Intercompany payables                         313,877           3,308          5,197        $(322,382)              -
                                             --------        --------         ------        ---------        --------

Deferred rent                                   7,793               -            681                -           8,474
                                             --------        --------         ------        ---------        --------

Long-term debt, net of original issue
   discount                                   252,449          15,492              -                -         267,941
                                             --------        --------         ------        ---------        --------

Shareholders' equity (deficit):
   Preferred stock, $1 par value;
     authorized 1,000,000 shares; None
     issued                                         -               -              -                -               -
   Common stock, $.01 par value;
     authorized 40,000,000 shares;
     issued and outstanding 7,064,328
     shares                                        71               -              -                -              71
   Additional paid-in capital                      10          65,469          2,477          (67,946)             10
   Retained earnings (deficit)               (212,802)        304,394         (3,573)               -          88,019
                                             --------        --------         ------        ---------        --------

                                             (212,721)        369,863         (1,096)         (67,946)         88,100
                                             --------        --------         ------        ---------        --------

                                             $396,990        $390,589         $7,522        $(390,328)       $404,773
                                             =========       ========         ======        ==========       ========

</TABLE>



                                    Page 19
<PAGE>

                          SBARRO, INC. AND SUBSIDIARIES
        NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


                      CONSOLIDATING STATEMENT OF OPERATIONS
                    FOR THE FORTY WEEKS ENDED OCTOBER 5, 2003
                                 (IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                           GUARANTOR     NONGUARANTOR                     CONSOLIDATED
                                             PARENT      SUBSIDIARIES    SUBSIDIARIES     ELIMINATIONS       TOTAL
REVENUES:
---------
<S>                                          <C>              <C>               <C>                          <C>

   Restaurant sales                           $98,078        $119,528        $11,257                         $228,863
   Franchise related revenues                   7,625               -              -                            7,625
   Real estate and other                        2,170           2,217             61                            4,448
   Intercompany charges                         7,841               -              -          $(7,841)              -
                                             --------         -------          -----         --------         -------
         Total revenues                       115,714         121,745         11,318           (7,841)        240,936
                                             --------         -------          -----         --------         -------

Cost and expenses:
   Restaurant operating expenses:
       Cost of food and paper products         20,105          26,180          2,963                -          49,248
       Payroll and other employee
         Benefits                              27,300          35,218          3,839                -          66,357
       Other operating costs                   39,048          43,682          3,060                -          85,790
   Depreciation and amortization                6,727           7,328            765                -          14,820
   General and administrative                  11,959           8,176            (13)               -          20,122
   Asset impairment and restaurant
     closing charges, net                       4,310               -            157                -           4,467
   Intercompany charges                             -           7,841              -           (7,841)              -
                                             --------         -------          -----         --------         -------
       Total costs and expenses               109,449         128,425         10,771           (7,841)        240,804
                                             --------         -------          -----         --------         -------

Operating income (loss) before
    minority interest                           6,265          (6,680)           547                -             132
Minority interest                                   -               -            (22)               -             (22)
                                             --------         -------          -----         --------         -------
Operating income (loss)                         6,265          (6,680)           525                -             110
                                             --------         -------          -----         --------         -------

Other (expense) income:
   Interest expense                           (22,810)         (1,120)             -                -         (23,930)
   Interest income                                569               -              -                -             569
   Equity in net income  of
     unconsolidated affiliates                    270               -              -                -             270
                                             --------         -------          -----         --------         -------

Net other expense                             (21,971)         (1,120)             -                -         (23,091)
                                             --------         -------          -----         --------         -------

(Loss) income before income taxes             (15,706)         (7,800)           525                -         (22,981)
Income tax provision (benefit)                    447             244            (16)               -             675
                                             --------         -------          -----         --------         -------

Net (loss) income                            $(16,153)        $(8,044)          $541                -        $(23,656)
                                             =========        ========          ====          =======        =========

</TABLE>



                                    Page 20
<PAGE>

                          SBARRO, INC. AND SUBSIDIARIES
        NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


                      CONSOLIDATING STATEMENT OF OPERATIONS
                    FOR THE FORTY WEEKS ENDED OCTOBER 6, 2002
                                 (IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                           GUARANTOR     NONGUARANTOR                     CONSOLIDATED
                                             PARENT      SUBSIDIARIES    SUBSIDIARIES     ELIMINATIONS       TOTAL
                                             ------      ------------    ------------     ------------       -----
<S>                                           <C>             <C>             <C>             <C>             <C>
Revenues:
   Restaurant sales                          $106,043        $130,493        $17,918                         $254,454
   Franchise related revenues                   7,636               -              -                            7,636
   Real estate and other                        2,115           2,910              -            $(691)          4,334
   Intercompany charges                             -          11,091              -          (11,091)              -
                                             --------         -------          -----       ----------         -------
         Total revenues                       115,794         144,494         17,918          (11,782)        266,424
                                             --------         -------          -----       ----------         -------

Cost and expenses:
   Restaurant operating expenses:
       Cost of food and paper products         19,614          25,419          4,831                -          49,864
       Payroll and other employee
         benefits                              28,110          37,233          6,524                -          71,867
       Other operating costs                   37,388          45,970          5,794                -          89,152
   Depreciation and amortization                6,823           8,032            929                -          15,784
   General and administrative                   9,301           9,028            347             (691)         17,985
   Asset impairment and restaurant
     closing charges, net                       2,770               -            141                -           2,911
   Intercompany charges
                                               11,091               -              -          (11,091)               -
                                             --------         -------          -----       ----------         -------
       Total costs and expenses               115,097         125,682         18,566          (11,782)        247,563
                                             --------         -------          -----       ----------         -------

Operating income (loss) before minority
   interest                                       697          18,812           (648)               -          18,861
Minority interest                                   -               -            (36)               -             (36)
                                             --------         -------          -----       ----------         -------
Operating income (loss)                           697          18,812           (684)               -          18,825
                                             --------         -------          -----       ----------         -------

Other (expense) income:
   Interest expense                           (22,774)         (1,131)             -                -         (23,905)
   Interest income                                390               -              -                -             390
   Equity in net income  of
     unconsolidated affiliates
                                                  692               -              -                -             692
   Insurance recovery, net                      7,162                -             -                            7,162
                                             --------         -------          -----       ----------         -------

Net other expense                             (14,530)         (1,131)             -                -         (15,661)
                                             --------         -------          -----       ----------         -------

(Loss) income before income taxes             (13,833)         17,681           (684)               -           3,164
Income tax (benefit) provision                 (1,352)          1,690            (62)               -             276
                                             --------         -------          -----       ----------         -------

Net (loss) income                            $(12,481)        $15,991          $(622)      $        -          $2,888
                                             =========        ========          ====       ==========          =======

</TABLE>




                                    Page 21
<PAGE>

                          SBARRO, INC. AND SUBSIDIARIES
        NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


                      CONSOLIDATING STATEMENT OF OPERATIONS
                   FOR THE TWELVE WEEKS ENDED OCTOBER 5, 2003
                                 (IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                           GUARANTOR     NONGUARANTOR                     CONSOLIDATED
                                             PARENT      SUBSIDIARIES    SUBSIDIARIES     ELIMINATIONS       TOTAL
                                             ------      ------------    ------------     ------------       -----
REVENUES:
---------
<S>                                            <C>             <C>             <C>             <C>             <C>

   Restaurant sales                           $31,445         $37,267         $3,397                          $72,109
   Franchise related revenues                   2,295               -              -                            2,295
   Real estate and other                          682             666             26                            1,374
   Intercompany charges                         2,349               -              -          $(2,349)              -
                                             --------         -------          -----       ----------         -------
         Total revenues                        36,771          37,933          3,423           (2,349)         75,778
                                             --------         -------          -----       ----------         -------

Cost and expenses:
   Restaurant operating expenses:
       Cost of food and paper products          6,526           8,267            908                -          15,701
       Payroll and other employee
         benefits                               8,434          10,973          1,123                -          20,530
       Other operating costs                   12,029          13,302            930                -          26,261
   Depreciation and amortization                2,029           2,155            227                -           4,411
   General and administrative                   3,505           2,470             81                -           6,056
   Asset impairment and restaurant
     closing charges, net                       3,410               -              -                -           3,410
   Intercompany charges                             -           2,349              -           (2,349)              -
                                             --------         -------          -----       ----------         -------
       Total costs and expenses                35,933          39,516          3,269           (2,349)         76,369
                                             --------         -------          -----       ----------         -------

Operating income (loss) before
   minority interest                              838          (1,583)           154                -            (591)
Minority interest                                   -               -            (12)               -             (12)
                                             --------         -------          -----       ----------         -------
Operating income (loss)                           838          (1,583)           142                -            (603)
                                             --------         -------          -----       ----------         -------

Other (expense) income:
   Interest expense                            (6,832)           (335)             -                -          (7,167)
   Interest income                                158               -              -                -             158
   Equity in net loss  of
     unconsolidated affiliates                   (241)              -              -                -            (241)
                                             --------         -------          -----       ----------         -------

Net other expense                              (6,915)           (335)             -                -          (7,250)
                                             --------         -------          -----       ----------         -------

(Loss) income  before income taxes             (6,077)         (1,918)           142                -          (7,853)
Income tax provision (benefit)                     73              30             (2)               -             101
                                             --------         -------          -----       ----------         -------

Net (loss) income                             $(6,150)        $(1,948)          $144                -         $(7,954)
                                              ========        ========          ====       ==========         =======

</TABLE>





                                    Page 22
<PAGE>

                          SBARRO, INC. AND SUBSIDIARIES
        NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


                      CONSOLIDATING STATEMENT OF OPERATIONS
                   FOR THE TWELVE WEEKS ENDED OCTOBER 6, 2002
                                 (IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                           GUARANTOR     NONGUARANTOR                     CONSOLIDATED
                                             PARENT      SUBSIDIARIES    SUBSIDIARIES     ELIMINATIONS       TOTAL
                                             ------      ------------    ------------     ------------       -----
<S>                                            <C>             <C>             <C>             <C>             <C>
Revenues:
   Restaurant sales                           $33,246         $39,588         $5,172                          $78,006
   Franchise related revenues                   2,561               -              -                            2,561
   Real estate and other                          651             875              -            $(207)          1,319
   Intercompany charges                             -           3,651              -           (3,651)              -
                                             --------         -------          -----       ----------         -------
         Total revenues                        36,458          44,114          5,172           (3,858)         81,886
                                             --------         -------          -----       ----------         -------

Cost and expenses:
   Restaurant operating expenses:
       Cost of food and paper products          6,786           6,733          1,491                -          15,010
       Payroll and other employee
         benefits                               8,018          11,919          1,874                -          21,811
       Other operating costs                   12,392          12,738          1,645                -          26,775
   Depreciation and amortization                1,706           1,875            291                -           3,872
   General and administrative                   2,604           2,742            147             (207)          5,286
   Asset impairment and restaurant
     closing charges, net                         700               -            (18)               -             682
   Intercompany charges                         3,651                -             -           (3,651)              -
                                             --------         -------          -----       ----------         -------
       Total costs and expenses                35,857          36,007          5,430           (3,858)         73,436
                                             --------         -------          -----       ----------         -------

Operating income (loss) before minority
   Interest                                       601           8,107           (258)               -           8,450
Minority interest                                   -               -             (3)               -              (3)
                                             --------         -------          -----       ----------         -------
Operating income (loss)                           601           8,107           (261)               -           8,447
                                             --------         -------          -----       ----------         -------

Other (expense) income:
   Interest expense                            (6,827)           (338)             -                -          (7,165)
   Interest income                                130               -              -                -             130
   Equity in net income  of
     unconsolidated affiliates
                                                  147               -              -                -             147
    Insurance recovery, net                     7,162               -              -                -           7,162
                                             --------         -------          -----       ----------         -------

Net other income (expense)                        612            (338)             -                -             274
                                             --------         -------          -----       ----------         -------

Income (loss) before income taxes               1,213           7,769           (261)               -           8,721
Income tax (benefit) provision                 (1,209)          1,331            (47)               -              75
                                             --------         -------          -----       ----------         -------

Net income (loss)                              $2,422          $6,438          $(214)      $        -          $8,646
                                               ======          ======          ======      ==========          ======


</TABLE>




                                    Page 23
<PAGE>

                          SBARRO, INC. AND SUBSIDIARIES
        NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


                      CONSOLIDATING STATEMENT OF CASH FLOWS
                    FOR THE FORTY WEEKS ENDED OCTOBER 5, 2003
                                 (IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                          GUARANTOR      NONGUARANTOR                       CONSOLIDATED
                                            PARENT       SUBSIDIARIES    SUBSIDIARIES     ELIMINATIONS         TOTAL
                                            ------       ------------    ------------     ------------         -----
OPERATING ACTIVITIES:
---------------------

<S>                                          <C>             <C>                <C>           <C>             <C>
Net (loss) income                            $(16,153)       $(8,044)           $541                -         $(23,656)
Adjustments to reconcile net (loss)
  income to net cash (used in)
  provided by operating activities:
  Depreciation and amortization                 8,304          6,872             762                -           15,938
  Asset impairment and restaurant
    closing charges                             5,070              -               -                -            5,070
  Increase (decrease) in deferred rent            230            (33)             35                -              232
  Gain on sale of other concept unit                -              -            (200)               -             (200)
  Loss on sale of other concept units
    included in prior year asset
    impairment costs                                -              -             250                -              250
  Minority interest                                 -              -              22                -               22
  Equity in net income of
    unconsolidated affiliates                    (270)             -               -                -             (270)
  Dividends received from
    unconsolidated affiliates                     119              -               -                -              119
  Changes in operating assets and
    liabilities:
    Decrease (increase) in receivables            149            264             (62)               -              351
    Decrease in inventories                       405            569              13                -              987
    Increase in prepaid expenses               (3,805)        (2,394)           (172)               -           (6,371)
    (Increase) decrease in other assets          (573)          (24)             492                -             (105)
    Increase (decrease) in accounts
       payable and accrued expenses            (3,160)           776            (117)               -           (2,501)
    Decrease in accrued interest
    payable                                    (6,473)             -               -                -           (6,473)
                                             --------         -------          -----          -------         ---------

Net cash (used in) provided by
  operating activities                        (16,157)        (2,014)          1,564                -          (16,607)
                                             --------         -------          -----          -------         ---------

Investing activities:
---------------------
Purchase of property and equipment             (4,219)        (1,875)           (171)               -           (6,265)
                                             --------         -------          -----          -------         ---------

Net cash used in investing activities          (4,219)        (1,875)           (171)               -           (6,265)
                                             --------         -------          -----          -------         ---------


</TABLE>





                                    Page 24
<PAGE>

                          SBARRO, INC. AND SUBSIDIARIES
        NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


                      CONSOLIDATING STATEMENT OF CASH FLOWS
                    FOR THE FORTY WEEKS ENDED OCTOBER 5, 2003
                                 (IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                         GUARANTOR      NONGUARANTOR                   CONSOLIDATED
                                           PARENT       SUBSIDIARIES    SUBSIDIARIES    ELIMINATIONS       TOTAL
                                           ------       ------------    ------------    ------------       -----
FINANCING ACTIVITIES:
---------------------

<S>                                          <C>             <C>               <C>         <C>              <C>
Mortgage principal repayments                      -           (128)              -                -          (128)
Tax distribution                              (1,101)             -               -                -        (1,101)
Intercompany balances                            799            780          (1,579)               -             -
                                             --------      ---------         -------          -------      --------
Net cash (used in) provided by
   financing activities                         (302)           652          (1,579)               -        (1,229)
                                             --------      ---------         -------          -------      --------

Decrease in cash and
  cash equivalents                           (20,678)        (3,237)           (186)               -       (24,101)
Cash and cash equivalents at
  beginning of period                         47,636          6,539             975                -        55,150
                                             --------      ---------         -------          -------      --------
Cash and cash equivalents at
  end of period                              $26,958         $3,302            $789                -       $31 049
                                             ========      =========         =======                       ========

Supplemental disclosure of cash flow
  Information:
Cash paid during the period for
  income taxes                                  $280            $85             $13           $    -          $378
                                             ========      =========         =======          =======      ========
Cash paid during the period for
  Interest                                   $28,159         $1,091            $  -           $    -       $29,250
                                             ========      =========         =======          =======      ========


</TABLE>



                                    Page 25
<PAGE>

                          SBARRO, INC. AND SUBSIDIARIES
        NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


                      CONSOLIDATING STATEMENT OF CASH FLOWS
                    FOR THE FORTY WEEKS ENDED OCTOBER 6, 2002
                                 (IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                           GUARANTOR     NONGUARANTOR                     CONSOLIDATED
OPERATING ACTIVITIES:                        PARENT      SUBSIDIARIES    SUBSIDIARIES     ELIMINATIONS       TOTAL
---------------------                        ------      ------------    ------------     ------------       -----
<S>                                              <C>              <C>             <C>           <C>              <C>

Net (loss) income                            $(12,481)        $15,991          $(622)                          $2,888
Adjustments to reconcile net (loss)
   income to net cash (used in)
   provided by operating activities:
      Depreciation and amortization             7,816           8,194            929                           16,939
      Provision for restaurant closings         2,046               -              -                            2,046
      Increase in deferred rent, net              495            (120)            28                              403
      Minority interest                             -               -             36                               36
      Equity in income of
     unconsolidated affiliates                   (692)              -              -                             (692)
    Dividends received from
     unconcolidated affiliates                    311               -              -                              311
    Changes in operating assets
     and liabilities:
     Decrease (increase) in receivables         1,355            (425)           (49)                             881
     Decrease (increase) in inventories           328             383             30                              741
     Increase in prepaid assets                (4,707)         (2,398)          (402)                          (7,507)
     (Increase) decrease in other
       assets                                    (406)            262             83            $(120)           (181)
     (Decrease) increase in accounts
       payable and accrued expenses            (3,149)         (1,027)        (1,956)             120          (6,012)
     Decrease in accrued interest
       payable                                 (6,473)              -               -               -          (6,473)
                                               -------         -------        -------           ------         -------

Net cash (used in) provided by
    operating activities                      (15,557)         20,860         (1,923)               -           3,380
                                              --------         -------        -------           ------         -------

Investing activities:
Purchases of property and equipment            (4,795)         (1,629)          (187)               -          (6,611)
                                               -------         -------        -------           ------         -------

Net cash used in investing activities          (4,795)         (1,629)          (187)               -          (6,611)
                                               -------         -------        -------           ------         -------

</TABLE>






                                    Page 26
<PAGE>

                          SBARRO, INC. AND SUBSIDIARIES
        NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


                      CONSOLIDATING STATEMENT OF CASH FLOWS
                       FOR THE FORTY ENDED OCTOBER 6, 2002
                                 (IN THOUSANDS)
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                         GUARANTOR      NONGUARANTOR                    CONSOLIDATED
                                           PARENT       SUBSIDIARIES    SUBSIDIARIES    ELIMINATIONS        TOTAL
                                           ------       ------------    ------------    ------------        -----
<S>                                          <C>             <C>               <C>           <C>            <C>
Financing activities:
---------------------
Mortgage principal repayments                      -           (117)              -                -           (117)
Distributions to shareholders                 (3,125)             -               -                -         (3,125)
Intercompany balances                         18,643        (19,728)          1,085                -              -
                                              ------        -------           -----           ------         -------
Net cash provided by
   (used in) financing activities             15,518        (19,845)          1,085                -         (3,242)
                                              ------        -------           -----           ------         -------

Decrease in cash and
  cash equivalents                            (4,834)          (614)         (1,025)               -         (6,473)
Cash and cash equivalents at
  beginning of period                         29,673          5,437           1,842                -         36,952
                                              ------        -------           -----           ------         -------
Cash and cash equivalents at
  end of period                              $24,839         $4,823            $817          $     -        $30,479
                                             =======        =======           =====          =======        ========
Supplemental disclosure of cash flow
  information:
Cash paid during the period for
  income taxes                                  $375           $250        $      1          $     -           $626
                                             =======        =======           =====          =======        ========
Cash paid during the period for              $28,139         $1,108        $      -          $     -        $29,247
  interest                                   =======        =======           =====          =======        ========


</TABLE>










                                    Page 27
<PAGE>


ITEM 2.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
           RESULTS OF OPERATIONS


RESULTS OF OPERATIONS
---------------------

The following table provides information  concerning the number of Company-owned
and franchised restaurants in operation during each indicated period:


<TABLE>
<CAPTION>
                                       40 WEEKS     40 WEEKS      12 WEEKS        12 WEEKS        FISCAL YEAR
                                       ENDED        ENDED         ENDED           ENDED          --------------
                                       10/05/03     10/06/02      10/05/03        10/06/02       2002      2001
                                       --------     --------      --------        --------       ----      ----
<S>                                         <C>         <C>           <C>             <C>          <C>        <C>
Sbarro-owned restaurants:
   Opened during period                     3           8             2               5            13         9
   Acquired from (sold to)
     franchisees during period-net         (7)         (4)           (1)             (3)           (6)        -
   Closed during period                   (19)        (41)           (3)            (22)          (51)      (43)
                                          ---         ---           ---             ---           ---       ---
   Open at end of period (1)              535         565           535             565           558       602

Franchised restaurants:
   Opened during period                    25          28             3              13            42        42
   Purchased from (sold to)
     Sbarro during period-net               7           4             1               3             6         -
   Closed or terminated during
      period                              (15)        (18)           (2)             (5)          (20)      (20)
                                          ---         ---           ---             ---           ---       ---
   Open at end of period                  370         339           370             339           353       325

All restaurants:
   Opened during period                    28          36             5              18            55        51
   Closed or terminated during
     period                               (34)        (59)           (5)            (27)          (71)      (63)
                                          ---         ---           ---             ---           ---       ---
   Open at end of period (1)              905         904           905             904           911       927

Kiosks (all franchised) open at
   end of period                            3           4             3               4             3         4

</TABLE>


------------------------------------
(1)  Excludes  31, 34, 32 and 37 other  concept  units as of October 5, 2003 and
     October  6,  2002,  the end of  fiscal  2002  and the end of  fiscal  2001,
     respectively.





                                    Page 28
<PAGE>


Our  business  is subject to  seasonal  fluctuations,  the effect of weather and
economic conditions. Earnings have been highest in our fourth fiscal quarter due
primarily to  increased  volume in shopping  malls  during the holiday  shopping
season but fluctuates due to the length of the holiday  shopping  period between
Thanksgiving  and New Year's Day and the number of weeks in our fourth  quarter.
In recent years, our fourth quarter income has also been significantly  effected
due to a number of  additional  factors,  including  the  adverse  effect of the
general economic downturn,  the continuing effect of the events of September 11,
2001 and significant year-end adjustments relating to asset impairment and store
closing costs.  Due to the  seasonality  of our business,  we perform the annual
testing for  impairment on our  trademarks  and goodwill as required by SFAS 142
after our fourth  quarter is completed and more  information is available to us.
The evaluation of impairment of long-lived  assets,  as required by SFAS 144, is
also made when events or circumstances  indicate that the carrying amount of the
assets may not be  recoverable  and  considers  many  factors,  in  addition  to
seasonality.  If impairment factors are present earlier than year-end, we record
any  adjustments as determined  necessary  through interim testing at that time.
During the third  quarter of fiscal  2003,  a review of the  impairment  factors
determined  that  the  carrying  amount  of  certain  store  assets  may  not be
recoverable through the estimated  undiscounted future cash flows resulting from
the use of those  assets  and an asset  impairment  charge of $3.0  million  was
recorded in the twelve and forty weeks periods ended October 5, 2003.

Our  consolidated  EBITDA for the forty  weeks  ended  October 5, 2003 was $15.2
million compared to $42.5 million for the forty weeks ended October 6, 2002. Our
consolidated  EBITDA for the twelve weeks ended October 5, 2003 was $3.6 million
compared to $19.6 million for the twelve weeks ended October 6, 2002. EBITDA for
the forty and twelve weeks ended October 6, 2002 included an insurance  recovery
of $7.2 million,  net,  relating to the events of September 11, 2001.  Excluding
this item, EBITDA for the forty and twelve weeks ended October 6, 2002 was $35.3
million and $12.5  million,  respectively.  EBITDA  represents  earnings  before
interest income, interest expense, taxes, depreciation and amortization.  EBITDA
should not be considered in isolation  from, or as a substitute for, net income,
cash  flow from  operations  or other  cash  flow  statement  data  prepared  in
accordance with generally accepted accounting  principles ("GAAP") in the United
States or as a measure of a company's  profitability  or liquidity.  Rather,  we
believe that EBITDA  provides  relevant and useful  information for analysts and
investors  in our  senior  notes in that  EBITDA  is one of the  factors  in the
calculation of our compliance  with the ratios in the indenture  under which our
senior notes are issued. We also internally use EBITDA as one of the measures to
determine  whether to  continue or close  restaurant  units since it provides us
with a  measurement  of whether we are  receiving an adequate cash return on our
cash investment.  Our calculation of EBITDA may not be comparable to a similarly
titled measure reported by other companies, since all companies do not calculate
this  non-GAAP  measure  in the same  manner.  Our EBITDA  calculations  are not
intended to represent cash provided by (used in) operating activities since they
do  not  include  interest  and  taxes  and  changes  in  operating  assets  and
liabilities,  nor are they  intended to  represent a net  increase in cash since
they  do not  include  cash  provided  by  (used  in)  investing  and  financing
activities.  The following  table  reconciles  EBITDA to our net loss,  which we
believe is the most direct comparable  financial measure to EBITDA,  for each of
the forty and twelve week periods presented (in thousands):





                                    Page 29
<PAGE>



<TABLE>
<CAPTION>
                                                      Forty weeks ended:                  Twelve weeks ended:
                                                    10/05/03         10/06/02           10/05/03          10/06/02
                                                    --------         --------           --------          --------
<S>                                                  <C>              <C>                 <C>             <C>
   EBITDA                                            $15,200          $42,463             $3,567          $19,628
   Interest expense                                  (23,930)         (23,905)            (7,167)          (7,165)
   Interest income                                       569              390                158              130
   Income taxes                                         (675)            (276)              (101)             (75)
   Depreciation and amortization                     (14,820)         (15,784)            (4,411)          (3,872)
                                                     --------         --------            -------          -------
      Net (loss) income                             $(23,656)          $2,888            $(7,954)          $8,646
                                                    =========          ======            ========          ======
</TABLE>

Restaurant  sales by  Sbarro-owned  quick service units and  consolidated  other
concept  units  decreased  10.1% to $228.9  million  for the forty  weeks  ended
October 5, 2003 from $254.5 million in the forty weeks ended October 6, 2002 and
decreased  7.6% to $72.1 million for the twelve weeks ended October 5, 2003 from
$78.0 million in the twelve weeks ended October 6, 2002.

The decrease in sales for the forty weeks ended October 5, 2003  reflects  $18.9
million  (8.0%) of lower sales of Sbarro  quick  service  units and $6.7 million
(37.2%) of lower sales of  consolidated  other  concept  units.  The decrease in
sales for the twelve weeks ended October 5, 2003 reflects $4.1 million (5.7%) of
lower sales of Sbarro  quick  service  units and $1.8  million  (34.3%) of lower
sales of consolidated other concept units. Declines in comparable sales of $10.3
million  (4.6% to $211.4  million) in the forty week and $1.6  million  (2.4% to
$67.3  million)  in the twelve week  periods of fiscal 2003 from the  comparable
periods in fiscal 2002 was the primary  reason for the decline in quick  service
restaurant  sales.  We  believe  that  these  declines  were  attributable  to a
reduction in shopping mall traffic related to the general  economic  downturn in
the United States and,  additionally with respect to the forty week period,  the
effects of the  threatened  and then actual  military  action in Iraq during the
first quarter of fiscal 2003.  Comparable  restaurant sales are made up of sales
at locations that were open during the entire current and prior fiscal years.

Since the end of fiscal 2001, we closed 67  (including  23 units closed,  net of
openings during the first forty weeks of fiscal 2003) more units than we opened,
causing the  remaining  $8.6 and $2.5  million  net  reduction  in Sbarro  quick
service  unit  sales for the forty and  twelve  weeks  ended  October  5,  2003,
respectively.  The units closed since the end of fiscal 2001 were  generally low
volume units that did not have a material impact on our results of operations.

Of the decline in  consolidated  other  concept unit sales,  for the forty weeks
ended October 5, 2003,  approximately $0.6 million resulted from a 5.3% decrease
in comparable  unit sales to $11.1  million.  For the  twelve-week  period ended
October  5,  2003,  there was a $0.1  million  or 3.9%  decrease  in  comparable
consolidated  other  concept unit sales to $3.4  million.  We believe that these
declines  were  attributable  to the same  factors  that  affected  Sbarro quick
service locations. In addition, since the end of fiscal 2001, eight consolidated
other concept units have been closed,  resulting in a net sales  reduction  from
sales at those  locations of $6.1  million for the



                                    Page 30
<PAGE>

forty weeks ended  October 5, 2003 and $1.7  million for the twelve  weeks ended
October 5, 2003. These units were either  unprofitable or marginally  profitable
and were part of ventures that we determined to discontinue.

Franchise  related revenues was nominally  ($11,000) lower in the reported forty
week period and $0.3 million  (10.3%)  lower in the twelve week period of fiscal
2003 than in fiscal 2002  because of an accrual  for a potential  need to refund
certain  royalty  payments  previously  made  to us by our  Russian  franchisee.
Excluding the effect of this $0.2 million  accrual,  franchise  related revenues
increased by  approximately  $0.2  million  (2.8%) to $7.8 million for the forty
weeks  ended  October 5, 2003  despite a $0.1  million  (1.7%)  decrease to $2.5
million  for the twelve  weeks  ended  October  5,  2003,  in each case from the
comparable  period ended October 6, 2002.  Initial and ongoing  royalties earned
from locations opened during fiscal 2003 and 2002 were offset,  in part, by 3.8%
and 0.5% reductions in comparable unit sales at both domestic and  international
locations  in the  forty  and  twelve  weeks  periods  ended  October  5,  2003,
respectively,  from the  comparable  period  ended  October 6, 2002.  During the
twelve weeks ended October 5, 2003, our Russian franchisee advised us that sales
and other  income  taxes  that were  remitted  to their  local  government  were
erroneously  included in their previously  reported sales upon which its ongoing
royalty fees were calculated.  Subject to final confirmation and review, we have
reduced our royalty  revenues by  approximately  $0.2 million for this potential
overpayment for the twelve and forty week periods ended October 5, 2003.

Real estate and other revenues were relatively  unchanged for both the forty and
twelve weeks  periods ended  October 5, 2003 from the  respective  periods ended
October 6, 2002.

Cost of food and paper products as a percentage of restaurant sales increased to
21.5% for the forty  weeks ended  October 5, 2003 from 19.6% for the  comparable
2002 fiscal  period and to 21.8% for the twelve weeks ended October 5, 2003 from
19.2% for the same twelve weeks in fiscal 2002. The cost of sales  percentage in
both the forty and twelve week periods of fiscal 2003 were  negatively  impacted
by the decrease in  comparable  unit sales.  In addition,  without  changing the
effect on the final  product,  we modified our pizza and pasta sauce  recipes to
utilize ready made sauce instead of crushed tomatoes as the base raw material to
facilitate the  consistency in product in each  restaurant unit and reduce labor
needed to prepare our products.  We estimate  that this has added  approximately
3/4 of 1 percentage  point to our cost of food.  The  increase in cheese  prices
that began at the end of the second  quarter  resulted in  significantly  higher
cheese costs in the third quarter of fiscal 2003 compared to the similar  period
in fiscal 2002 causing a 1.2% and 0.4%  increase in cost of sales for the twelve
and forty week periods,  respectively,  ended October 5, 2003.  Cheese prices to
date in the fourth quarter of fiscal 2003 have  moderated  somewhat but continue
to be approximately 40% higher than the comparable time in fiscal 2002. In early
fiscal 2003, we replaced our then national  independent  wholesale  distributor,
which  declared  bankruptcy,   with  another  national   independent   wholesale
distributor.  There has not been a material impact on the cost of food and paper
products from this new distribution  arrangement as the majority of the products
used in our restaurants are proprietary and we are involved in negotiating their
cost to the  wholesaler.  However,  the cost of sales



                                    Page 31
<PAGE>

percentage  in the first  quarter of 2003,  effecting the forty week period (but
not a factor in the  increase in cost of sales in the second or third  quarters)
of fiscal  2003 was  impacted  by the cost of  purchases  of product  from third
parties until the new distribution contract was effective.

Payroll  and  other  employee  benefits  decreased  by  $5.5  million  but  as a
percentage  of  restaurant  sales,  increased  to 29.0% in the forty weeks ended
October 5, 2003 from 28.2% of restaurant  sales in the forty weeks ended October
6, 2002. For the twelve week period ended October 5, 2003, these costs decreased
by $1.3 million but  increased to 28.5% from 28.0% as a percentage of restaurant
sales when  compared to the  comparable  twelve week period in fiscal 2002.  The
dollar  decrease  was  primarily  due to fewer  units  in  operation  while  the
percentage of sales increase was due to the reduction in comparable unit sales.

Other  operating  expenses  decreased by $3.4 million but  increased to 37.5% of
restaurant  sales in the forty  weeks  ended  October  5, 2003 from 35.0% in the
forty weeks ended October 6, 2002.  These  expenses  decreased  $0.5 million but
increased  to 36.4% from 34.3% of  restaurant  sales in the twelve  weeks  ended
October 5, 2003 and October 6, 2002,  respectively.  The lower  dollar  level of
other operating  expenses  resulted  primarily from the fewer number of units in
operation.  The increases as a percentage of restaurant sales were primarily due
to increases in rent and other  occupancy  related  expenses  resulting from the
renewal of  existing  leases at the end of their terms at higher  rental  rates,
compounded  by the reduced  level of sales.  In addition,  we are  continuing to
experience  increases in our repair and  maintenance  costs due to the number of
years that the majority of our locations  have been operating and the effects of
the long-term utilization on their equipment.

Depreciation and amortization expense decreased by $1.0 million and increased by
$0.5 million for the forty and twelve weeks,  respectively,  of fiscal 2003 from
the comparable  periods in fiscal 2002. The reductions were due to fewer numbers
of  units  in  operation  in  fiscal  2003  ($1.0   million  and  $0.4  million,
respectively),  the absence in 2003 of  depreciation  of locations that had been
included in the  provision  for asset  impairment  in fiscal 2002 as a result of
which, no depreciation was taken on these units in fiscal 2003 and for locations
that became fully depreciated  during fiscal 2002. These reductions were offset,
in part,  primarily by depreciation of our upgraded  computer system in 2003 and
included a correction  of $0.3 million due to a calculation  error  reflected in
the third quarter of fiscal 2002.

General  and  administrative  expenses  were  $20.1  million,  or 8.4% of  total
revenues,  for the forty weeks ended October 5, 2003, compared to $18.0 million,
or 6.8% of total  revenues,  for the forty  weeks ended  October 6, 2002.  Those
costs were $6.1 million,  or 8.0% of total revenues,  for the twelve weeks ended
October 5, 2003, as compared to $5.3 million, or 6.5% of total revenues, for the
twelve weeks ended October 6, 2002. The principal  factors  contributing  to the
increases in the forty week period were $0.2  million of legal fees  incurred in
connection  with a lawsuit,  a $0.2  million  allowance  for  doubtful  accounts
receivable  recorded  with  respect to our  franchisee  in Spain  that  declared
bankruptcy  and bonuses of $0.7 million  that were granted to certain  executive
officers,  all in the first fiscal  quarter of 2003,  a $0.2  million  allowance
against the  collectibility  of



                                    Page 32
<PAGE>

amounts  owed by our Israeli  franchisee  and $0.2 million of costs and expenses
related to the hiring of our new President and Chief  Executive  Officer  during
the third fiscal quarter and higher  quick-service  field management  travel and
related costs.

During the forty weeks ended  October 5, 2003, we recorded a provision for asset
impairment  and for  restaurant  closing  charges of $4.5 million.  For the same
forty week period ended October 6, 2002, we recorded a provision for  restaurant
closing  charges of $2.9 million.  The similar  provisions  for the  twelve-week
periods  ended  October 5, 2003 and  October 6, 2002 were $3.4  million and $0.7
million,  respectively.  The provisions include a charge for asset impairment of
$3.0 million in the forty and twelve weeks ended  October 5, 2003 that  resulted
from our evaluation of impairment  indicators which determined that the carrying
amount of certain  store  assets may not be  recoverable  through the  estimated
undiscounted  future  cash flows  resulting  from the use of those  assets.  The
remaining  portion of the fiscal  2003  provision  related to charges for closed
locations.  The  provisions  in fiscal 2002  related,  for the most part, to the
planned  closing of up to thirty low volume,  unprofitable  Sbarro quick service
locations  during the third and fourth  quarter  of fiscal  2002,  for which the
provision was recorded primarily in the second quarter of fiscal 2002.

Minority interest represents the share of the minority holders' interests in the
earnings  or loss of a joint  venture in which we have a majority  interest.  In
early  fiscal  2002,  we closed  one of the two  locations  owned by this  joint
venture.  The closed unit had a nominal  operating  loss in the first quarter of
fiscal 2002.

Interest  expense of $23.9  million and $7.2 million for each of the forty weeks
and twelve  weeks,  respectively,  ended  October  5, 2003 and  October 6, 2002,
relates to the 11%,  $255.0  million senior notes we issued to finance our going
private  transaction  in September  1999 ($21.6 million and $6.5 million in both
the forty and twelve  weeks of fiscal 2003 and 2002),  the 8.4%,  $16.0  million
mortgage  loan on our  corporate  headquarters  in 2001 ($1.1  million  and $0.3
million in the respective  periods) and fees for unused borrowing capacity under
our credit  agreement  that we terminated  in the fourth  quarter of fiscal 2003
($0.1 million in the  respective  periods).  In addition,  $0.7 million and $0.4
million in the forty weeks and twelve  weeks,  respectively,  of fiscal 2003 and
2002  represents  non-cash  charges  for the  accretion  of the  original  issue
discount on our senior notes and the amortization of deferred financing costs on
the senior notes, credit agreement and the mortgage loan.

Interest income for the forty week period ended October 5, 2003 was $0.6 million
versus $0.4  million for the forty week period ended  October 6, 2002.  Interest
income was $0.2  million and $0.1  million for the third  quarter of fiscal 2003
and 2002,  respectively.  Higher  average cash  available for investment in each
period  presented in fiscal 2003 compared to the similar  periods in fiscal 2002
was  partially  offset by the lower  prevailing  interest  rates in effect.  The
indenture  under  which  our  senior  notes  are  issued  limits  the  types  of
investments  which we may  make.  In  addition,  we earned  approximately  $0.05
million of interest income that was included in an



                                    Page 33
<PAGE>

income tax refund  received in the second  quarter of fiscal  2003  related to a
year in which we were a Subchapter C corporation.

Equity in the net income  (loss) of  unconsolidated  affiliates  represents  our
proportionate  share of earnings and losses in those other  concepts in which we
have a 50% or less ownership interest. Included in our equity in the net loss of
unconsolidated   affiliates  in  the  third  quarter  of  fiscal  2003  was  our
proportionate  share ($0.5 million) of the losses from the sale of our Vincent's
Clam Bar location  and one of our  steakhouse  joint  venture  locations.  These
losses  were  offsets  against our equity in the net  operational  net income of
unconsolidated  affiliates of approximately $0.8 million and $0.3 million in for
the forty and twelve weeks ended October 5, 2003, respectively, compared to $0.7
million  and $0.1  million,  respectively,  in our equity  for the same  periods
ending October 6, 2002. We have determined that we will continue,  to the extent
agreed with our joint  venture  partners,  to develop and expand the  steakhouse
joint  venture  locations  but do not intend to expand our other  joint  venture
operations.

The  insurance  recovery  credit to our  earnings for the forty and twelve weeks
ended October 6, 2002 of $7.2 million represents the settlement,  net of related
expenses,  to reimburse  us for the lost income under our business  interruption
insurance coverage related to the events of September 11, 2001.

We have elected to be taxed under the provisions of Subchapter S of the Internal
Revenue Code and, where applicable and permitted,  under similar state and local
income  tax  provisions  beginning  January  3, 2000.  Under the  provisions  of
Subchapter S, substantially all taxes on our income are paid by our shareholders
rather than us. Our tax expense was $0.7  million and $0.3 million for the forty
week  periods,  and $0.1 million and $0.1 million for the  twelve-week  periods,
ended  October 5, 2003 and  October 6, 2002,  respectively.  The expense was for
taxes owed by us (rather than our  shareholders)  to  jurisdictions  that do not
recognize S corporation  status or that tax entities based on factors other than
income.

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

We have  historically  not  required  significant  working  capital  to fund our
existing  operations and have financed our capital  expenditures and investments
in our joint  ventures  through cash generated  from  operations.  At October 5,
2003, we had unrestricted cash and cash equivalents of $31.0 million and working
capital of $14.4 million  compared to unrestricted  cash and cash equivalents of
$30.5 million and working capital of $19.5 million at October 6, 2002.

Net cash used in  operating  activities  was $16.6  million  for the forty weeks
ended October 5, 2003 compared to $3.4 million provided by operating  activities
during the forty weeks ended October 6, 2002. The $20.0 million change  resulted
primarily  from a $26.7  million  change  (from a profit of $2.9  million in the
fiscal 2002 period to a loss of $23.7  million in the fiscal 2003 period) in our
results of  operations.  This  change was  reduced,  in part,  by an increase in
non-cash expenses in the fiscal 2003 period from the fiscal 2002 period,  with a
$3.0 million charge for



                                    Page 34
<PAGE>

asset  impairment  in fiscal  2003  being  offset,  in part,  by a $1.0  million
reduction in depreciation and amortization.  Also, less cash was used during the
fiscal 2003 period than the fiscal 2002 period to support  changes in  operating
assets and liabilities, primarily as a result of an increase (a decrease of $2.5
million in fiscal 2003,  compared to a $6.0 million  decrease in fiscal 2002) in
accounts  payable and accrued  expenses  and a $1.1  million  lower  increase in
fiscal 2003 in prepaid  expenses  (the prepaid  balances at the end of the third
fiscal  quarters  of both  2003 and 2002  being  similar).  Of the  increase  in
accounts payable,  approximately $2.6 million relates to the amount accrued for,
but unpaid to, our bankrupt former national independent  wholesale  distributor.
We are in negotiations with its creditors'  committee with regard to the amount,
if any, owed as we incurred  significant  additional  costs after the bankruptcy
filing date due to the  bankruptcy.  In  addition,  there was a decrease of $0.2
million in the dividend received from our unconsolidated affiliate.

Net cash used in  investing  activities  has  historically  been  primarily  for
capital  expenditures,  including  investments  made by our  consolidated  other
concepts.  Net cash used in investing activities decreased from $6.6 million for
the forty weeks ended  October 6, 2002 to $6.3 million for the forty weeks ended
October 5, 2003.  Investing  activities in the forty weeks ended October 5, 2003
reflect  higher  remodel  activity  than during the forty weeks ended October 6,
2002.  These  investing  activities  also include $1.0 million and $1.3 million,
respectively,  paid  as part  of  previously  committed  costs  of $2.9  million
relating to an upgrade of our computer systems.

Net cash used in  financing  activities  was $1.2  million for the  twenty-eight
weeks ended July 13, 2003 compared to $3.2 million in the comparable 2002 period
The  reduction  was  due to a $2.0  million  decrease  in tax  distributions  to
shareholders.

We incur annual cash interest expense of  approximately  $29.7 million under our
senior notes and mortgage  loan and may incur  additional  interest  expense for
borrowings  that may be made if we are able to  secure  an  uncommitted  line of
credit to replace the credit  agreement that we terminated.  In addition to debt
service,  we expect  that our  other  liquidity  needs  will  relate to  capital
expenditures,  working capital, investments in other ventures,  distributions to
shareholders  (to the extent permitted under the indenture for the senior notes)
and for general  corporate  purposes.  We anticipate  that aggregate  restaurant
capital  expenditures  and our  investments  in joint  ventures  during the next
twelve months will approximate the fiscal 2002 levels.

We expect our  primary  sources  of  liquidity  to meet these  needs will be our
existing cash and cash flow from operations.

Our credit  agreement  required that we maintain a minimum ratio of consolidated
earnings before interest,  taxes and depreciation and amortization ("EBITDA") to
consolidated interest expense and a maximum ratio of consolidated senior debt to
consolidated EBITDA. We have not been in compliance with the required ratios, as
amended,  during 2003. Our bank waived  compliance  with these  covenants but we
would not have been able to borrower under this arrangement.  We requested,  and
the bank agreed, to terminate the bank's lending commitment. We had not made



                                    Page 35
<PAGE>

any  borrowings  under the line of  credit  since its  inception,  except  for a
required one day  borrowing  upon the  activation  of the credit  agreement  and
except with respect to letters of credit that have been issued by the bank under
the  sublimit of the line.  The  termination  of the bank's  lending  commitment
eliminates  our  obligation to pay a commitment fee on the unused portion of the
facility.  Our obligations under the credit agreement to reimburse the bank with
respect to any drawings that may be made under the approximately $1.7 million of
letters of credit that are  outstanding  as of November  19, 2003 will remain in
full force.  We have agreed to either arrange for the replacement of the letters
of credit or to cash collateralize them by January 9, 2004. The credit agreement
will remain in effect  until such time as  outstanding  letters of credit  shall
have been drawn upon in full,  expired or  otherwise  terminate,  except for our
ability to borrow or obtain  letters of credit and except that  compliance  with
our financial and certain other  covenants has been waived until the termination
date of the  credit  agreement.  We are in the  process  of  negotiating  for an
uncommitted line of credit from other banks in a presently  undetermined amount,
but there can be no assurance that we will be able to obtain the line.

We are subject to various  covenants  under the indenture under which our senior
notes are  issued.  One of the  covenants  limits our  ability  to borrow  funds
(except under specifically permitted  arrangements,  such as up to $75.0 million
of revolving credit loans) unless our  consolidated  interest ratio coverage (as
defined),  after giving pro forma  effect to the interest on the new  borrowing,
for the four most recently  ended fiscal  quarters is at least 2.5 to 1. Another
covenant  limits our ability to make  "restricted  payments,"  including,  among
other things, dividend payments (other than as distributions pursuant to our tax
payment  agreement with our shareholders  related to Subchapter S distributions)
and investments in, among other things, unrestricted subsidiaries,  to specified
amounts  determined under a formula contained in the indenture  provided (except
with respect to certain permitted  investments and tax  distributions)  that our
interest  coverage  ratio is at least 2.0 to 1 after  giving pro forma effect to
the restricted payment.  For the four fiscal quarters ended October 5, 2003, our
consolidated  interest  coverage  ratio  was 1.1 to 1. As a  result,  we are not
presently  able  to  borrow  funds  (other  than  the   specifically   permitted
indebtedness).  Additionally,  under the formula contained in the indenture,  we
cannot make restricted payments other than certain permitted investments and tax
distributions   until  we  increase  the  restricted  payment   availability  by
approximately  $16 million,  and then only to the extent of any excess over that
amount.

The Tax Payment  Agreement  was entered  into as part of our  election  that our
shareholders,  rather  than us,  be  taxed on our  taxable  income  pursuant  to
Subchapter S of the Internal  Revenue Code and, where  applicable and permitted,
under similar state and local tax provisions.  The Tax Payment Agreement permits
us, regardless of whether we can make restricted payments,  to make periodic tax
distributions  to our shareholders in amounts intended to approximate the income
taxes,  including  estimated taxes,  that would be payable by them if their only
income were their pro rata share of our taxable income and that income was taxed
at the highest applicable Federal and New York state marginal income tax rates.



                                    Page 36
<PAGE>

OFF-BALANCE SHEET FINANCING
---------------------------

The Company has no off-balance sheet contractual  arrangements,  as that term is
defined in Item 304(a)(4) of Regulation S-K.

CONTRACTUAL OBLIGATIONS
-----------------------

Our contractual  obligations  arrangements with respect to both our Sbarro quick
service  and our  other  concepts  (both  those in which we have a  majority  or
minority  interest) do not differ  materially from the information  disclosed in
Part II,  Item 7 of our  Annual  Report on Form 10-K for the  fiscal  year ended
December 29, 2002.

CRITICAL ACCOUNTING POLICIES AND JUDGMENTS
------------------------------------------

Accounting  policies are an integral  part of the  preparation  of our financial
statements in accordance with accounting  principles  generally  accepted in the
United States of America.  Understanding  these  policies,  therefore,  is a key
factor in  understanding  our  reported  results  of  operations  and  financial
position.  Certain critical accounting policies require us to make estimates and
assumptions  that  affect  the  amounts  of assets,  liabilities,  revenues  and
expenses reported in the financial  statements.  Due to their nature,  estimates
involve judgments based upon available information. Therefore, actual results or
amounts  could differ from  estimates and the  difference  could have a material
impact on our consolidated  financial  statements.  During the forty weeks ended
October 5, 2003, there have been no material changes in the accounting  policies
whose  application  may have a  significant  effect on our  reported  results of
operations and financial  position and that can require  judgments by management
that can affect their  application from the matters  discussed under the heading
"Critical  Accounting  Policies and  Judgments" in Part II, Item 7 of our Annual
Report on Form 10-K for the fiscal year ended December 29, 2002.

FORWARD LOOKING STATEMENTS
--------------------------

This report  contains  certain  forward-looking  statements  about our financial
condition,   results  of  operations,   future  prospects  and  business.  These
statements  appear in a number of places in the  report and  include  statements
regarding our intent,  belief,  expectation,  strategies or  projections at that
time. These statements generally contain words such as "may," "should," "seeks,"
"believes,"  "in  our  opinion,"  "expects,"  "intends,"  "plans,"  "estimates,"
"projects," "strategy" and similar expressions or the negative of those words.

Forward-looking  statements  are subject to a number of known and unknown  risks
and  uncertainties  that could cause actual  results to differ  materially  from
those projected,  expressed or implied in the forward-looking statements.  These
risks and uncertainties,  many of which are not within our control,  include but
are not limited to:

o    general economic, weather and business conditions;



                                    Page 37
<PAGE>

o    the  availability  of suitable  restaurant  sites in  appropriate  regional
     shopping malls and other locations on reasonable rental terms;
o    changes in consumer tastes;
o    changes in  population  and  traffic  patterns,  including  the effect that
     military  action and terrorism or other events may have on the  willingness
     of consumers to frequent  shopping  malls,  airports or downtown areas that
     are the predominant areas in which our restaurants are located;
o    our ability to continue to attract franchisees;
o    the  success of our  present,  and any  future,  joint  ventures  and other
     expansion opportunities;
o    the  availability  of food  (particularly  cheese and  tomatoes)  and paper
     products at current prices;
o    our ability to pass along cost increases to our customers;
o    no material increase occurring in the Federal minimum wage;
o    the continuity of services of members of our senior management team;
o    our  ability  to attract  and retain  competent  restaurant  and  executive
     managerial personnel;
o    competition;
o    the level of, and our ability to comply with, government regulations;
o    our ability to generate  sufficient cash flow to make interest payments and
     principal under our senior notes;
o    our  ability to obtain a bank line of credit  that would  enable us to meet
     any unanticipated operational needs;
o    our ability to comply with covenants contained in the indenture under which
     the senior notes are issued, and the effects which the restrictions imposed
     by those covenants may have on our ability to operate our business; and
o    our ability to repurchase  senior notes to the extent required in the event
     we make certain asset sales or experience a change of control.

You are cautioned not to place undue reliance on these  statements,  which speak
only as of the date of the report.  We do not  undertake any  responsibility  to
release publicly any revisions to these forward-looking  statements to take into
account  events or  circumstances  that  occur  after  the date of this  report.
Additionally,  we do not  undertake  any  responsibility  to  update  you on the
occurrence of any unanticipated  events which may cause actual results to differ
from those expressed or implied by the forward-looking  statements  contained in
this report.

ITEM 3.   QUALITATIVE AND QUANTITATIVE DISCLOSURES OF MARKET RISK

We have historically invested our cash on hand in short term, fixed rate, highly
rated and  highly  liquid  instruments  which are  reinvested  when they  mature
throughout  the year.  The  indenture  under  which our senior  notes are issued
limits the  investments we may make.  Although our existing  investments are not
considered  at risk with  respect to changes in  interest  rates or markets  for
these  instruments,  our  rate of  return  on  short-term  investments  could be
affected at the time of reinvestment as a result of intervening events.



                                    Page 38
<PAGE>


Future borrowings under any line of credit we may be able to obtain is likely to
be at rates  that  float  with the  market  and,  therefore,  will be subject to
fluctuations  in interest  rates.  Our $255.0  million senior notes bear a fixed
interest  rate of 11.0%.  We are not a party to, and do not expect to enter into
any interest rate swaps or other instruments to hedge interest rates.

We have not, and do not expect to,  purchase  future,  forward,  option or other
instruments to hedge against  fluctuations  in the prices of the  commodities we
purchase.  As a result, our future commodities  purchases are subject to changes
in the prices of such commodities.

All of our transactions  with foreign  franchisees have been denominated in, and
all  payments  have been made in,  United  States  dollars,  reducing  the risks
attendant in changes in the values of foreign  currencies.  As a result, we have
not purchased future  contracts,  options or other  instruments to hedge against
changes in values of foreign currencies.

ITEM 4.   CONTROLS AND PROCEDURES

As of the end of the period  covered by this report,  our  management,  with the
participation  of our  President  and  Chief  Executive  Officer  and  our  Vice
President,  Controller and principal  accounting  officer (the person  presently
performing  the function of our  principal  financial  officer),  evaluated  the
effectiveness  of our "disclosure  controls and  procedures," as defined in Rule
15d-15(e) under the Securities  Exchange Act of 1934.  Based on that evaluation,
these  officers  concluded  that,  as of  the  date  of  their  evaluation,  our
disclosure   controls  and  procedures  were  effective  to  provide  reasonable
assurance  that  information  required to be disclosed  in our periodic  filings
under the  Exchange  Act is  accumulated  and  communicated  to our  management,
including  those  officers,   to  allow  timely  decisions   regarding  required
disclosure.

During the period covered by this report,  there were no changes in our internal
control  over  financial  reporting  that  have  materially  affected,   or  are
reasonably  likely to materially  affect,  our internal  control over  financial
reporting.







                                    Page 39
<PAGE>


                           PART II. OTHER INFORMATION
                           --------------------------


ITEM 6.       EXHIBITS AND REPORTS ON FORM 8-K.

a) Exhibits:

31.01    Certification  of  Principal  Executive  Officer  pursuant to 18 U.S.C.
         Section 1350, as adopted pursuant to Section 302 of the  Sarbanes-Oxley
         Act of 2002.

31.02    Certification  of Vice President,  Controller and Principal  Accounting
         Officer,  the person performing the function of our principal financial
         officer,  pursuant to 18 U.S.C.  Section 1350,  as adopted  pursuant to
         Section 302 of the Sarbanes-Oxley Act of 2002.

32.01    Certification  of  Principal  Executive  Officer  pursuant to 18 U.S.C.
         Section 1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley
         Act of 2002.

32.02    Certification  of Vice President,  Controller and Principal  Accounting
         Officer,  the person performing the function of our principal financial
         officer,  pursuant to 18 U.S.C.  Section 1350,  as adopted  pursuant to
         Section 906 of the Sarbanes-Oxley Act of 2002.

(b)      Reports on Form 8-K:

         A Report on Form 8-K was filed by Sbarro dated (date of earliest  event
         reported) September 8, 2003,  reporting under Item 5, Other Events, and
         Item 7, Financial Statements and Exhibits. No financial statements were
         filed with that Report.





                                    Page 40
<PAGE>



                                   SIGNATURES
                                   ----------


Pursuant  to the  requirements  of the  Securities  Exchange  Act of  1934,  the
registrant  has duly  caused  this  Report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.



                                   SBARRO, INC.
                                   ---------------------------------------------
                                   Registrant


Date:   November 19, 2003          By: /s/ MICHAEL O'DONNELL
        -----------------              -----------------------------------------
                                       Michael O'Donnell
                                       President and Chief Executive Officer
                                       (Principal Executive Officer)


Date:   November 19, 2003          By: /s/ STEVEN B. GRAHAM
        -----------------              ----------------------------------------
                                       Steven B. Graham
                                       Vice President and Controller (Principal
                                       Accounting Officer)







                                    Page 41
<PAGE>


                                  EXHIBIT INDEX
                                  -------------


EXHIBIT NUMBER               DESCRIPTION
--------------               -----------

31.01    Certification  of  Principal  Executive  Officer  pursuant to 18 U.S.C.
         Section 1350, as adopted pursuant to Section 302 of the  Sarbanes-Oxley
         Act of 2002.

31.02    Certification  of Vice President,  Controller and Principal  Accounting
         Officer,  the person performing the function of our principal financial
         officer,  pursuant to 18 U.S.C.  Section 1350,  as adopted  pursuant to
         Section 302 of the Sarbanes-Oxley Act of 2002.

32.01    Certification  of  Principal  Executive  Officer  pursuant to 18 U.S.C.
         Section 1350, as adopted pursuant to Section 906 of the  Sarbanes-Oxley
         Act of 2002.

32.02    Certification  of  Vice  President,  Controller,  Principal  Accounting
         Officer,  the person performing the function of our principal financial
         officer,  pursuant to 18 U.S.C.  Section 1350,  as adopted  pursuant to
         Section 906 of the Sarbanes-Oxley Act of 2002.




                                    Page 42