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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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|x | Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|- | ---------------------------------------------------------------------------------------



|                                         |  |                                  
|---------------------------------------- |  | ---------------------------------
|For the quarter ended September 30, 2007 |  | Commission file number 333-142081



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SBARRO, INC.

(Exact name of registrant as specified in its Charter)



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|                                                               |  |                           
|-------------------------------------------------------------- |  | --------------------------
|NEW YORK                                                       |  | 11-2501939                
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer I.D. No.)
|                                                               | 
|401 Broad Hollow Road, Melville, New York                      |  | 11747-4714                
|(Address of principal executive offices)                       |  | (Zip Code)                

Registrants telephone number, including area code: (631) 715-4100



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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  x    No ̈

Indicate by check mark whether the registrant is a large accelerated
filer, and accelerated filer, or a non-accelerated filer

Large accelerated filer ̈Accelerated filer ̈Non-accelerated filer  x

Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes ̈No  x

The number of shares of Common Stock of the registrant
outstanding as of November 14, 2007 was 100.



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##### Table of Contents

SBARRO, INC.

FORM 10-Q INDEX



|                                                                                                                                                                                                                                                                                                                                                |  |      
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----
|PART I. FINANCIAL INFORMATION                                                                                                                                                                                                                                                                                                                   |  | PAGES
|                                                                                                                                                                                                                                                                                                                                                | 
|Consolidated Financial Statements (unaudited):                                                                                                                                                                                                                                                                                                  |  |      
|                                                                                                                                                                                                                                                                                                                                                | 
|Consolidated Balance Sheets (unaudited)September 30, 2007 (Successor) and December 31, 2006 (Predecessor)                                                                                                                                                                                                                                      |  | 3-4  
|                                                                                                                                                                                                                                                                                                                                                | 
|Consolidated Statements of Operations (unaudited)Period January 31 through September 30, 2007 (Successor) and the period January 1 through January 30, 2007 (Predecessor) and Forty weeks ended
October 8, 2006 (Predecessor) and the Thirteen weeks ended September 30, 2007 (Successor) and Twelve weeks ended October 8, 2006 (Predecessor) |  | 5-6  
|                                                                                                                                                                                                                                                                                                                                                | 
|Consolidated Statements of Cash Flows (unaudited)Period January 31 through September 30, 2007 (Successor) and the period January 1 through January 30, 2007 (Predecessor) and Forty Weeks ended
October 8, 2006 (Predecessor)                                                                                                                  |  | 7-8  
|                                                                                                                                                                                                                                                                                                                                                | 
|Notes to Unaudited Consolidated Financial Statements                                                                                                                                                                                                                                                                                            |  | 9    
|                                                                                                                                                                                                                                                                                                                                                | 
|Pro Forma Financial Statements (unaudited)                                                                                                                                                                                                                                                                                                      |  | 25   
|                                                                                                                                                                                                                                                                                                                                                | 
|Managements Discussion and Analysis of Financial Condition and Results of Operations                                                                                                                                                                                                                                                           |  | 29   
|                                                                                                                                                                                                                                                                                                                                                | 
|Quantitative and Qualitative Disclosures About Market Risk                                                                                                                                                                                                                                                                                      |  | 44   
|                                                                                                                                                                                                                                                                                                                                                | 
|Controls and Procedures                                                                                                                                                                                                                                                                                                                         |  | 45   
|                                                                                                                                                                                                                                                                                                                                                | 
|PART II. OTHER INFORMATION                                                                                                                                                                                                                                                                                                                      |  | 46   



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##### Table of Contents

Part I  Financial Information

Item 1. Consolidated Financial Statements

SBARRO, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

ASSETS

(Unaudited)

(In thousands)



|                                                                                                                             |  |                    |           |  |  |                   |   |            
|---------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | --------- |  |  | ----------------- | - | -----------
|                                                                                                                             |  | September 30, 2007 |           |  |  | December 31, 2006
|                                                                                                                             |  |                    | SUCCESSOR |  |  |                   |   | PREDECESSOR
|                                                                                                                             |  |                    |          
|Current assets:                                                                                                              |  |                    |           |  |  |                   |   |            
|Cash and cash equivalents                                                                                                    |  | $                  | 13,515    |  |  |                   | $ | 88,627     
|Receivables, net of allowance for doubtful accounts of $0 at September 30, 2007 and $263 at December 31, 2006,
respectively: |  |                    |           |  |  |                   |   |            
|Franchise                                                                                                                    |  |                    | 2,566     |  |  |                   |   | 2,868      
|Other                                                                                                                        |  |                    | 4,156     |  |  |                   |   | 5,259      
|                                                                                                                             |  |                    |           |  |  |                   |   |            
|                                                                                                                             |  |                    | 6,722     |  |  |                   |   | 8,127      
|Loans receivable from shareholders                                                                                           |  |                    |          |  |  |                   |   | 5,585      
|Inventories                                                                                                                  |  |                    | 2,823     |  |  |                   |   | 3,233      
|Prepaid expenses                                                                                                             |  |                    | 4,377     |  |  |                   |   | 3,147      
|Deferred tax asset, current portion                                                                                          |  |                    | 4,577     |  |  |                   |   |           
|                                                                                                                             |  |                    |           |  |  |                   |   |            
|Total current assets                                                                                                         |  |                    | 32,014    |  |  |                   |   | 108,719    
|Property and equipment,
net                                                                                                  |  |                    | 61,604    |  |  |                   |   | 78,953     
|Intangible assets:                                                                                                           |  |                    |           |  |  |                   |   |            
|Goodwill                                                                                                                     |  |                    | 205,311   |  |  |                   |   | 9,204      
|Trademarks                                                                                                                   |  |                    | 248,000   |  |  |                   |   | 195,916    
|Franchise relationships                                                                                                      |  |                    | 24,300    |  |  |                   |   |           
|Franchise agreements, net                                                                                                    |  |                    | 6,817     |  |  |                   |   |           
|Deferred financing costs, net                                                                                                |  |                    | 10,344    |  |  |                   |   | 2,616      
|Deferred tax asset                                                                                                           |  |                    | 8,079     |  |  |                   |   |           
|Other assets                                                                                                                 |  |                    | 1,397     |  |  |                   |   | 7,797      
|                                                                                                                             |  |                    |           |  |  |                   |   |            
|                                                                                                                             |  | $                  | 597,866   |  |  |                   | $ | 403,205    
|                                                                                                                             |  |                    |           |  |  |                   |   |            

See notes to unaudited consolidated financial statements.



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SBARRO, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(CONTINUED)

LIABILITIES & SHAREHOLDERS EQUITY

(Unaudited)

(In thousands except share data)



|                                                                                                                                      |  |                    |           |   |  |  |                   |   |            
|------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------ | --------- | - |  |  | ----------------- | - | -----------
|                                                                                                                                      |  | September 30, 2007 |           |   |  |  | December 31, 2006
|                                                                                                                                      |  |                    | SUCCESSOR |   |  |  |                   |   | PREDECESSOR
|                                                                                                                                      |  |                    |          
|Current liabilities:                                                                                                                  |  |                    |           |   |  |  |                   |   |            
|Accounts payable                                                                                                                      |  | $                  | 6,126     |   |  |  |                   | $ | 9,818      
|Accrued expenses                                                                                                                      |  |                    | 22,478    |   |  |  |                   |   | 29,045     
|Accrued interest payable                                                                                                              |  |                    | 3,889     |   |  |  |                   |   | 8,223      
|Insurance premium financing                                                                                                           |  |                    | 2,289     |   |  |  |                   |   | 1,087      
|Current portion of debt                                                                                                               |  |                    | 1,830     |   |  |  |                   |   | 216        
|                                                                                                                                      |  |                    |           |   |  |  |                   |   |            
|Total current liabilities                                                                                                             |  |                    | 36,612    |   |  |  |                   |   | 48,389     
|Deferred rent                                                                                                                         |  |                    | 1,182     |   |  |  |                   |   | 8,366      
|Lease agreements above (below) market, net                                                                                            |  |                    | 1,004     |   |  |  |                   |   |           
|Deferred tax liability                                                                                                                |  |                    | 98,302    |   |  |  |                   |   |           
|Long-term debt, net of original issue discount at December 31, 2006                                                                   |  |                    | 330,255   |   |  |  |                   |   | 268,694    
|Commitments and
contingencies                                                                                                         |  |                    |           |   |  |  |                   |   |            
|Shareholders equity:                                                                                                                 |  |                    |           |   |  |  |                   |   |            
|Preferred stock, none authorized or issued at September 30, 2007; $1 par value 1,000,000 authorized, none issued at
December 31, 2006 |  |                    |          |   |  |  |                   |   |           
|Common stock                                                                                                                          |  |                    |           |   |  |  |                   |   |            
|Authorized 1,000, issued and outstanding 100 shares at September 30, 2007, $.01 par value.                                            |  |                    |           |   |  |  |                   |   |            
|Authorized 40,000,000 shares; $.01 par value issued & outstanding 7,064,328 shares at December 31,
2006                               |  |                    |          |   |  |  |                   |   | 71         
|Additional paid-in capital                                                                                                            |  |                    | 133,000   |   |  |  |                   |   | 10         
|(Accumulated deficit) retained earnings                                                                                               |  |                    | (2,489    | ) |  |  |                   |   | 77,675     
|                                                                                                                                      |  |                    |           |   |  |  |                   |   |            
|                                                                                                                                      |  |                    | 130,511   |   |  |  |                   |   | 77,756     
|                                                                                                                                      |  |                    |           |   |  |  |                   |   |            
|                                                                                                                                      |  | $                  | 597,866   |   |  |  |                   | $ | 403,205    
|                                                                                                                                      |  |                    |           |   |  |  |                   |   |            

See notes to unaudited consolidated financial statements.



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SBARRO, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands)



|                                                  |  |                                                    |           |   |  |  |                                                 |   |             |                                          |  |   |             |  
|------------------------------------------------- |  | -------------------------------------------------- | --------- | - |  |  | ----------------------------------------------- | - | ----------- | ---------------------------------------- |  | - | ----------- | -
|                                                  |  | For the periodJanuary 31 throughSeptember 30, 2007 |           |   |  |  | For the periodJanuary 1 throughJanuary 30, 2007 |   |             | For the forty weeksended October 8, 2006 | 
|                                                  |  |                                                    | SUCCESSOR |   |  |  |                                                 |   | PREDECESSOR |                                          |  |   | PREDECESSOR |  
|                                                  |  |                                                    |           |  
|Revenues:                                         |  |                                                    |           |   |  |  |                                                 |   |             |                                          |  |   |             |  
|Restaurant sales                                  |  | $                                                  | 219,098   |   |  |  |                                                 | $ | 23,594      |                                          |  | $ | 240,128     |  
|Franchise related income                          |  |                                                    | 10,067    |   |  |  |                                                 |   | 993         |                                          |  |   | 10,678      |  
|Real estate                                       |  |                                                    |          |   |  |  |                                                 |   | 323         |                                          |  |   | 1,741       |  
|                                                  |  |                                                    |           |   |  |  |                                                 |   |             |                                          |  |   |             |  
|Total revenues                                    |  |                                                    | 229,165   |   |  |  |                                                 |   | 24,910      |                                          |  |   | 252,547     |  
|Costs and expenses:                               |  |                                                    |           |   |  |  |                                                 |   |             |                                          |  |   |             |  
|Cost of food and paper products                   |  |                                                    | 44,621    |   |  |  |                                                 |   | 4,308       |                                          |  |   | 46,428      |  
|Payroll and other employee benefits               |  |                                                    | 60,092    |   |  |  |                                                 |   | 6,762       |                                          |  |   | 65,736      |  
|Other operating costs                             |  |                                                    | 79,201    |   |  |  |                                                 |   | 8,839       |                                          |  |   | 87,131      |  
|Other (income) expense                            |  |                                                    | (1,924    | ) |  |  |                                                 |   | (497        | )                                        |  |   | (3,322      | )
|Depreciation and amortization                     |  |                                                    | 12,289    |   |  |  |                                                 |   | 1,272       |                                          |  |   | 12,371      |  
|General and administrative                        |  |                                                    | 18,406    |   |  |  |                                                 |   | 2,843       |                                          |  |   | 23,194      |  
|Special event bonuses                             |  |                                                    |          |   |  |  |                                                 |   | 31,395      |                                          |  |   |            |  
|Asset impairment, restaurant closings/remodels    |  |                                                    | 334       |   |  |  |                                                 |   | 74          |                                          |  |   | 474         |  
|                                                  |  |                                                    |           |   |  |  |                                                 |   |             |                                          |  |   |             |  
|Total costs and expenses                          |  |                                                    | 213,019   |   |  |  |                                                 |   | 54,996      |                                          |  |   | 232,012     |  
|                                                  |  |                                                    |           |   |  |  |                                                 |   |             |                                          |  |   |             |  
|Operating income (loss)                           |  |                                                    | 16,146    |   |  |  |                                                 |   | (30,086     | )                                        |  |   | 20,535      |  
|                                                  |  |                                                    |           |   |  |  |                                                 |   |             |                                          |  |   |             |  
|Other (expense) income:                           |  |                                                    |           |   |  |  |                                                 |   |             |                                          |  |   |             |  
|Interest expense                                  |  |                                                    | (21,036   | ) |  |  |                                                 |   | (2,570      | )                                        |  |   | (23,782     | )
|Interest income                                   |  |                                                    | 461       |   |  |  |                                                 |   | 108         |                                          |  |   | 2,001       |  
|Equity in net income of unconsolidated affiliates |  |                                                    |          |   |  |  |                                                 |   | 12          |                                          |  |   | 153         |  
|                                                  |  |                                                    |           |   |  |  |                                                 |   |             |                                          |  |   |             |  
|Net other expense                                 |  |                                                    | (20,575   | ) |  |  |                                                 |   | (2,450      | )                                        |  |   | (21,628     | )
|                                                  |  |                                                    |           |   |  |  |                                                 |   |             |                                          |  |   |             |  
|Loss before income taxes                          |  |                                                    | (4,429    | ) |  |  |                                                 |   | (32,536     | )                                        |  |   | (1,093      | )
|                                                  |  |                                                    |           |   |  |  |                                                 |   |             |                                          |  |   |             |  
|Income tax (benefit) expense                      |  |                                                    | (1,940    | ) |  |  |                                                 |   | 44          |                                          |  |   | 580         |  
|                                                  |  |                                                    |           |   |  |  |                                                 |   |             |                                          |  |   |             |  
|Net loss                                          |  | $                                                  | (2,489    | ) |  |  |                                                 | $ | (32,580     | )                                        |  | $ | (1,673      | )
|                                                  |  |                                                    |           |   |  |  |                                                 |   |             |                                          |  |   |             |  

See notes to unaudited consolidated financial statements.



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SBARRO, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands)



|                                                  |  |                                               |           |   |  |  |                                          |   |             |  
|------------------------------------------------- |  | --------------------------------------------- | --------- | - |  |  | ---------------------------------------- | - | ----------- | -
|                                                  |  | For the thirteenweeks endedSeptember 30, 2007 |           |   |  |  | For the twelveweeks endedOctober 8, 2006 |  
|                                                  |  |                                               | SUCCESSOR |   |  |  |                                          |   | PREDECESSOR |  
|                                                  |  |                                               |          
|Revenues:                                         |  |                                               |           |   |  |  |                                          |   |             |  
|Restaurant sales                                  |  | $                                             | 87,047    |   |  |  |                                          | $ | 75,525      |  
|Franchise related income                          |  |                                               | 3,948     |   |  |  |                                          |   | 3,279       |  
|Real estate                                       |  |                                               |          |   |  |  |                                          |   | 357         |  
|                                                  |  |                                               |           |   |  |  |                                          |   |             |  
|Total revenues                                    |  |                                               | 90,995    |   |  |  |                                          |   | 79,161      |  
|Costs and expenses:                               |  |                                               |           |   |  |  |                                          |   |             |  
|Cost of food and paper products                   |  |                                               | 18,008    |   |  |  |                                          |   | 14,564      |  
|Payroll and other employee benefits               |  |                                               | 23,001    |   |  |  |                                          |   | 20,046      |  
|Other operating costs                             |  |                                               | 30,597    |   |  |  |                                          |   | 26,538      |  
|Other (income) expense                            |  |                                               | (793      | ) |  |  |                                          |   | (833        | )
|Depreciation and amortization                     |  |                                               | 4,751     |   |  |  |                                          |   | 3,799       |  
|General and administrative                        |  |                                               | 7,145     |   |  |  |                                          |   | 6,686       |  
|Asset impairment, restaurant closings/remodels    |  |                                               | 125       |   |  |  |                                          |   | 161         |  
|                                                  |  |                                               |           |   |  |  |                                          |   |             |  
|Total costs and expenses                          |  |                                               | 82,834    |   |  |  |                                          |   | 70,961      |  
|                                                  |  |                                               |           |   |  |  |                                          |   |             |  
|Operating income                                  |  |                                               | 8,161     |   |  |  |                                          |   | 8,200       |  
|                                                  |  |                                               |           |   |  |  |                                          |   |             |  
|Other (expense) income:                           |  |                                               |           |   |  |  |                                          |   |             |  
|Interest expense                                  |  |                                               | (7,673    | ) |  |  |                                          |   | (7,007      | )
|Interest income                                   |  |                                               | 57        |   |  |  |                                          |   | 731         |  
|Equity in net income of unconsolidated affiliates |  |                                               |          |   |  |  |                                          |   | 2           |  
|                                                  |  |                                               |           |   |  |  |                                          |   |             |  
|Net other expense                                 |  |                                               | (7,616    | ) |  |  |                                          |   | (6,274      | )
|                                                  |  |                                               |           |   |  |  |                                          |   |             |  
|Income before income taxes                        |  |                                               | 545       |   |  |  |                                          |   | 1,926       |  
|                                                  |  |                                               |           |   |  |  |                                          |   |             |  
|Income taxes (benefit)                            |  |                                               | 42        |   |  |  |                                          |   | (134        | )
|                                                  |  |                                               |           |   |  |  |                                          |   |             |  
|Net income                                        |  | $                                             | 503       |   |  |  |                                          | $ | 2,060       |  
|                                                  |  |                                               |           |   |  |  |                                          |   |             |  

See notes to unaudited consolidated financial statements.



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SBARRO, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)



|                                                                                          |  |                                                    |           |   |  |  |                                                 |   |             |                                          |  |   |             |  
|----------------------------------------------------------------------------------------- |  | -------------------------------------------------- | --------- | - |  |  | ----------------------------------------------- | - | ----------- | ---------------------------------------- |  | - | ----------- | -
|                                                                                          |  | For the periodJanuary 31 throughSeptember 30, 2007 |           |   |  |  | For the periodJanuary 1 throughJanuary 30, 2007 |   |             | For the forty weeksended October 8, 2006 | 
|                                                                                          |  |                                                    | SUCCESSOR |   |  |  |                                                 |   | PREDECESSOR |                                          |  |   | PREDECESSOR |  
|                                                                                          |  |                                                    |           |  
|Operating Activities:                                                                     |  |                                                    |           |   |  |  |                                                 |   |             |                                          |  |   |             |  
|Net loss                                                                                  |  | $                                                  | (2,489    | ) |  |  |                                                 | $ | (32,580     | )                                        |  | $ | (1,673      | )
|Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |  |                                                    |           |   |  |  |                                                 |   |             |                                          |  |   |             |  
|Depreciation and amortization                                                             |  |                                                    | 12,289    |   |  |  |                                                 |   | 1,272       |                                          |  |   | 12,371      |  
|Amortization of deferred financing costs                                                  |  |                                                    | 671       |   |  |  |                                                 |   | 80          |                                          |  |   | 739         |  
|Amortization of bond discount                                                             |  |                                                    |          |   |  |  |                                                 |   | 32          |                                          |  |   | 292         |  
|Amortization of leasehold agreements (above) below market, net                            |  |                                                    | (421      | ) |  |  |                                                 |   |            |                                          |  |   |            |  
|Provision for doubtful accounts receivable                                                |  |                                                    |          |   |  |  |                                                 |   |            |                                          |  |   | 130         |  
|Increase (decrease) in deferred rent, net of tenant allowance                             |  |                                                    | 1,479     |   |  |  |                                                 |   | (117        | )                                        |  |   | (39         | )
|Asset impairment and restaurant closings/remodels                                         |  |                                                    | 334       |   |  |  |                                                 |   | 74          |                                          |  |   | 474         |  
|Change in deferred tax benefit                                                            |  |                                                    | (2,689    | ) |  |  |                                                 |   |            |                                          |  |   |            |  
|Gain on sale of restaurant property and equipment                                         |  |                                                    |          |   |  |  |                                                 |   |            |                                          |  |   | (180        | )
|Equity in net income of unconsolidated affiliates                                         |  |                                                    |          |   |  |  |                                                 |   | (12         | )                                        |  |   | (153        | )
|Changes in operating assets and liabilities, net of effects of merger:                    |  |                                                    |           |   |  |  |                                                 |   |             |                                          |  |   |             |  
|Decrease (increase) in receivables                                                        |  |                                                    | 1,546     |   |  |  |                                                 |   | 394         |                                          |  |   | (902        | )
|Decrease in inventories                                                                   |  |                                                    | 90        |   |  |  |                                                 |   | 319         |                                          |  |   | 1           |  
|Decrease (increase) in prepaid expenses                                                   |  |                                                    | 1,232     |   |  |  |                                                 |   | (1,434      | )                                        |  |   | (4,114      | )
|(Increase) decrease in other assets                                                       |  |                                                    | (720      | ) |  |  |                                                 |   | 871         |                                          |  |   | 328         |  
|Increase (decrease) in accounts payable and accrued expenses                              |  |                                                    | 4,204     |   |  |  |                                                 |   | 23,474      |                                          |  |   | (4,904      | )
|Increase (decrease) in accrued interest payable                                           |  |                                                    | 3,890     |   |  |  |                                                 |   | 2,337       |                                          |  |   | (6,414      | )
|                                                                                          |  |                                                    |           |   |  |  |                                                 |   |             |                                          |  |   |             |  
|Net cash provided by (used in) operating activities                                       |  |                                                    | 19,416    |   |  |  |                                                 |   | (5,290      | )                                        |  |   | (4,044      | )
|                                                                                          |  |                                                    |           |   |  |  |                                                 |   |             |                                          |  |   |             |  

(Continued)

See notes to unaudited consolidated financial statements



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SBARRO, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)



|                                                        |  |                                                    |           |   |  |  |                                                 |   |             |                                          |  |   |             |  
|------------------------------------------------------- |  | -------------------------------------------------- | --------- | - |  |  | ----------------------------------------------- | - | ----------- | ---------------------------------------- |  | - | ----------- | -
|                                                        |  | For the periodJanuary 31 throughSeptember 30, 2007 |           |   |  |  | For the periodJanuary 1 throughJanuary 30, 2007 |   |             | For the forty weeksended October 8, 2006 | 
|                                                        |  |                                                    | SUCCESSOR |   |  |  |                                                 |   | PREDECESSOR |                                          |  |   | PREDECESSOR |  
|                                                        |  |                                                    |           |  
|Investing Activities:                                   |  |                                                    |           |   |  |  |                                                 |   |             |                                          |  |   |             |  
|Purchases of property and equipment                     |  |                                                    | (10,816   | ) |  |  |                                                 |   | (1,691      | )                                        |  |   | (10,694     | )
|Purchase of franchise & other locations                 |  |                                                    | (4,790    | ) |  |  |                                                 |   |            |                                          |  |   |            |  
|Investment in joint ventures                            |  |                                                    | (380      | ) |  |  |                                                 |   |            |                                          |  |   |            |  
|Proceeds from sale of restaurant property & equipment   |  |                                                    |          |   |  |  |                                                 |   |            |                                          |  |   | 1,433       |  
|Contributions from partners to joint ventures           |  |                                                    |          |   |  |  |                                                 |   |            |                                          |  |   | 250         |  
|Cash paid for merger, net of cash acquired              |  |                                                    | (177,000  | ) |  |  |                                                 |   |            |                                          |  |   |            |  
|                                                        |  |                                                    |           |   |  |  |                                                 |   |             |                                          |  |   |             |  
|Net cash used in investing activities                   |  |                                                    | (192,986  | ) |  |  |                                                 |   | (1,691      | )                                        |  |   | (9,011      | )
|                                                        |  |                                                    |           |   |  |  |                                                 |   |             |                                          |  |   |             |  
|Financing
Activities:                                   |  |                                                    |           |   |  |  |                                                 |   |             |                                          |  |   |             |  
|Proceeds from shareholders for issuance of common stock |  |                                                    | 133,000   |   |  |  |                                                 |   |            |                                          |  |   |            |  
|Proceeds from secured term loan                         |  |                                                    | 183,000   |   |  |  |                                                 |   |            |                                          |  |   |            |  
|Proceeds from senior notes                              |  |                                                    | 150,000   |   |  |  |                                                 |   |            |                                          |  |   |            |  
|Paydown of Predecessor's Notes                          |  |                                                    | (267,000  | ) |  |  |                                                 |   |            |                                          |  |   |            |  
|Debt Issue Costs                                        |  |                                                    | (11,000   | ) |  |  |                                                 |   |            |                                          |  |   |            |  
|Repayment of secured term loan                          |  |                                                    | (915      | ) |  |  |                                                 |   |            |                                          |  |   |            |  
|Mortgage principal repayments                           |  |                                                    |          |   |  |  |                                                 |   | (17         | )                                        |  |   | (163        | )
|Dividends to sellers                                    |  |                                                    |          |   |  |  |                                                 |   | (76,159     | )                                        |  |   |            |  
|Repayment of loans by officers                          |  |                                                    |          |   |  |  |                                                 |   | 5,530       |                                          |  |   | 7           |  
|                                                        |  |                                                    |           |   |  |  |                                                 |   |             |                                          |  |   |             |  
|Net cash provided by (used in) financing activities     |  |                                                    | 187,085   |   |  |  |                                                 |   | (70,646     | )                                        |  |   | (156        | )
|                                                        |  |                                                    |           |   |  |  |                                                 |   |             |                                          |  |   |             |  
|Increase (decrease) in cash and cash equivalents        |  |                                                    | 13,515    |   |  |  |                                                 |   | (77,627     | )                                        |  |   | (13,211     | )
|Cash and cash equivalents at beginning of period        |  |                                                    |          |   |  |  |                                                 |   | 88,627      |                                          |  |   | 73,089      |  
|                                                        |  |                                                    |           |   |  |  |                                                 |   |             |                                          |  |   |             |  
|Cash and cash equivalents at end of period              |  | $                                                  | 13,515    |   |  |  |                                                 | $ | 11,000      |                                          |  | $ | 59,878      |  
|                                                        |  |                                                    |           |   |  |  |                                                 |   |             |                                          |  |   |             |  

Supplemental non-cash investing activities:

On January 30, 2007, the Company transferred its interest of $5.6 million of certain non-core assets to a newly formed company owned
by certain of our former shareholders as a dividend.

See notes to unaudited consolidated financial statements



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##### Table of Contents

SBARRO INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

1. Basis of presentation:

As a
result of the Merger, which we discuss below, we are required to present our results for the year to date third quarter of 2007 as two separate periods. Our Predecessor financial period refers to the period from January 1 through
January 30, 2007 which was prior to consummation of the Merger. Our Successor financial period refers to the period from January 31 through September 30, 2007 following consummation of the Merger.

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 the consolidated financial position of Sbarro and our subsidiaries at September 30, 2007 (Successor) and our consolidated results of operations and cash flows
for the period January 1, 2007 through January 30, 2007 (Predecessor) and the period January 31, 2007 through September 30, 2007 (Successor) and the forty weeks ended October 8, 2006 (Predecessor) have been included. The
Predecessor and Successor results for the year to date third quarter of 2007 if combined represent thirty nine weeks while the results for the year to date third quarter of 2006 represent forty weeks. The results of operations for interim periods
are not necessarily indicative of the results that may be expected for the entire year.

2. The Merger:

On January 31, 2007, entities controlled by MidOcean Partners III, LP, a private equity firm, and certain of its affiliates (MidOcean)
acquired the Company, pursuant to an agreement and plan of merger (Merger Agreement). MidOcean SBR Acquisition Corp., an indirect, wholly-owned subsidiary of MidOcean SBR Holdings, LLC (Holdings), merged with and into the
Company (the Merger), with the Company surviving the Merger. In the Merger, our former shareholders received consideration of $450 million in cash, subject to certain adjustments, in exchange for all of their shares of Company common
stock, and Sbarro Holdings LLC, a wholly-owned subsidiary of Holdings and the parent of MidOcean SBR Acquisition Corp., acquired all of our outstanding shares of common stock.

MidOcean owns approximately 74% of Holdings and thus acquired control of the Company in the Merger. Certain of our senior managers acquired approximately 5% of the outstanding equity of Holdings
in connection with the Merger, with the balance of the equity of Holdings being owned by other investors.

Sbarro Holdings, LLC owns 100%
of our outstanding common stock. Holdings owns 100% of the limited liability company interests of Sbarro Holdings, LLC.



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##### Table of Contents

SBARRO INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

(Continued)

In connection with the Merger, the Company transferred interests in certain non-core assets to a newly formed company owned by certain
of our former shareholders. There was no gain or loss on this transfer as these assets were transferred at book value and a dividend was issued to certain of our former shareholders. The assets and related costs that we transferred (the
Withdrawn Assets) were:



| |  |  | the interests in 401 Broadhollow Realty Corp. and 401 Broadhollow Fitness Center Corp., which own the corporate headquarters of the Company, the fitness center
and the assets of the Sbarro Café located at the corporate headquarters;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | a parcel of undeveloped real property located in East Northport, New York;
| | - |  | --------------------------------------------------------------------------



| |  |  | the interests in Boulder Creek Ventures, LLC and Boulder Creek Holdings, LLC, which own a 40% interest in a joint venture that operates 15 steakhouses under
Boulder Creek and other names; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the interest in Two Mex-SS, LLC, which owns a 50% interest in a joint venture that operates two tex-mex restaurants under the Baja Grill name.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------

The former shareholders received a distribution of the cash on hand in excess of (i) $11 million, which remained in
the business, plus (ii) all amounts required to be paid in connection with special event bonuses. These bonuses, which were paid to certain members of management and non-employee directors by the Company on the closing date were approximately
$34 million. Additionally, $15 million of the total consideration paid to the former shareholders is held in an escrow account for a period of eighteen months pursuant to an escrow agreement between some of the former shareholders and Holdings as
security for the indemnity obligations of the former shareholders under the Merger Agreement. Concurrently with the Merger, we extended our lease for the space in the office building containing our corporate headquarters. The lease expires in
January 2017. In addition, we agreed to pay to the former shareholders any incremental tax benefit of deductions generated by the repurchase of our 11% Notes or payment of the special event bonuses. The payment is due within 15 days of the filing of
the US tax return that claims these additional deductions and will be treated as a purchase price adjustment at that time.

We refer to
this entire transaction as the Merger.

Holdings financed the Merger, including estimated fees and expenses, with $333 million
of debt financing described below and $133 million of common equity contributed in cash to Holdings by MidOcean, members of management and the other investors in Holdings.

In connection with the Merger, we entered into a new $183.0 million senior secured term loan facility and a new $25.0 million senior secured revolving facility (the Senior Credit
Facilities); issued $150.0 million in aggregate principal amount of 10.375% senior notes due 2015 (the Senior Notes); and repurchased all of our 11% senior notes due 2009 (the 11% Notes).



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##### Table of Contents

SBARRO INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

(Continued)

The Merger was accounted for using the purchase method of accounting in accordance with SFAS No. 141, Business
Combinations, pursuant to which the allocable purchase price of the Merger, including related fees and expenses, will be allocated to our net assets based upon our estimates of fair value. Our consolidated financial statements have been
prepared based on our preliminary estimates of fair value of our net assets using information available as of the date of this report, which are subject to change. The final allocation of the allocable purchase price to our net assets is expected to
be completed by the end of our fiscal year and will be based on a formal valuation of the fair value of our net assets and the resolution of any pre-closing or post-closing purchase price adjustments pursuant to the Merger Agreement. Consequently,
the final calculation of the purchase price and the final allocation could vary from the purchase price and allocation presented herein, and the variations could be material.

Our unaudited consolidated financial statements as of September 30, 2007 include estimated fair value of intangible assets with indefinite lives of (a) trademarks of $248.0 million;
(b) franchise relationships of $24.3 million and (c) goodwill of $205.3 million. Also included in our financial statements is a franchise agreement intangible of $8.0 million with an estimated remaining life of eight years. The franchise
agreement intangible is amortized using a method that reflects the pattern in which the economic benefit of the assets will be consumed in the future. Other fair value adjustments include a net decrease to Property, Plant and Equipment of
approximately $1.0 million with an average remaining useful life of approximately four years and a liability for our lease agreements that are above or below market for approximately $1.4 million which will be amortized over the respective lease
terms.

The following table sets forth the components of the purchase price (in millions):



|                                  |  |   |    
|--------------------------------- |  | - | ---
|Sources of funds:                 |  |   |    
|Secured term loan                 |  | $ | 183
|Senior notes                      |  |   | 150
|Proceeds from contributed capital |  |   | 133
|                                  |  |   |    
|                                  |  | $ | 466
|                                  |  |   |    
|Use of funds:                     |  |   |    
|Consideration to sellers          |  | $ | 450
|Transaction costs                 |  |   | 16 
|                                  |  |   |    
|Total purchase price              |  | $ | 466
|                                  |  |   |    



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##### Table of Contents

SBARRO INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

(Continued)

The following table provides the preliminary allocation of the allocable purchase price based upon the fair value of the assets
acquired and liabilities assumed at January 31, 2007. The final allocation of the total purchase price to our net assets is expected to be completed by the end of our fiscal year and will be based on a formal valuation of the fair value of our
net assets and the resolution of any pre-closing or post-closing purchase price adjustments pursuant to the Merger Agreement. Consequently, the final calculation of the purchase price and the final allocation could vary from the purchase price and
allocation presented herein, and the variations could be material. Final allocation adjustments, if any, are more likely to occur within intangible assets than in working capital.



|                                  |  |   |      
|--------------------------------- |  | - | -----
|Assets:                           |  |   |      
|Cash and cash equivalents         |  | $ | 11.0 
|Accounts receivable               |  |   | 8.0  
|Inventories                       |  |   | 2.9  
|Deferred tax asset                |  |   | 16.6 
|Other current assets              |  |   | 3.3  
|Property and equipment            |  |   | 59.1 
|Goodwill                          |  |   | 202.9
|Trademarks                        |  |   | 248.0
|Franchise relationships           |  |   | 24.3 
|Franchise agreements              |  |   | 8.0  
|Other assets                      |  |   | 11.9 
|                                  |  |   |      
|                                  |  | $ | 596.0
|                                  |  |   |      
|Liabilities:                      |  |   |      
|Accounts payable                  |  | $ | 6.0  
|Accrued liabilities               |  |   | 17.6 
|Net lease agreements above market |  |   | 1.4  
|Deferred tax liability            |  |   | 105.0
|                                  |  |   |      
|                                  |  | $ | 130.0
|                                  |  |   |      
|Total allocable purchase price    |  | $ | 466.0
|                                  |  |   |      

Below are unaudited pro forma results of operations for the period ended September 30, 2007
and October 8, 2006, as if the transaction had occurred as of January 2, 2006 for the periods indicated below. Such pro forma results are not necessarily indicative of the actual consolidated results of operations that would have been
achieved if the acquisition occurred on the date assumed, nor are they necessarily indicative of future consolidated results of operations.

Unaudited pro forma results for the periods ended September 30, 2007 and October 8, 2006 were:



|                 |  |                                            |         |   |                                   |   |         |  
|---------------- |  | ------------------------------------------ | ------- | - | --------------------------------- | - | ------- | -
|                 |  | Thirty nine weeks ended September 30, 2007 |         |   | Forty weeks ended October 8, 2006 |  
|                 |  | (in thousands)                             |        
|Total revenues   |  | $                                          | 253,752 |   |                                   | $ | 250,614 |  
|Operating income |  | $                                          | 17,121  |   |                                   | $ | 20,889  |  
|Net loss         |  | $                                          | (3,434  | ) |                                   | $ | (758    | )



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##### Table of Contents

SBARRO INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

(Continued)

3. Recent Accounting Pronouncements:

SFAS 157:

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements.
This statement defines fair value, establishes a framework for using fair value to measure assets and liabilities, and expands disclosures about fair value measurements. The statement applies whenever other statements require or permit assets or
liabilities to be measured at fair value. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007, and based upon our preliminary analysis, it is expected that SFAS No. 157 will not have a material effect on our
consolidated financial statements.

EITF Issue No. 06-3:

In June 2006, the FASB ratified Emerging Issues Task Force (EITF) Issue No. 063, How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be
Presented in the Income Statement (that is, Gross versus Net Presentation), which allows companies to adopt a policy of presenting taxes in the income statement on either a gross or net basis. Taxes within the scope of this EITF would include
taxes that are imposed on a revenue transaction between a seller and a customer. If such taxes are significant, the accounting policy should be disclosed as well as the amount of taxes included in the financial statements if presented on a gross
basis. EITF 063 is effective for interim and annual reporting periods beginning after December 15, 2006. We have been accounting for sales tax as net and continue to present such tax as net upon the adoption of EITF Issue No. 06-03
in the first quarter of Fiscal 2007.

FASB 159:

In February 2007, the FASB issued FASB Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities  Including an Amendment of FASB Statement No. 115 (SFAS 159).
Under SFAS 159, a company may elect to measure eligible financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings at each subsequent
reporting date. SFAS 159 is effective for fiscal years beginning after November 15, 2007. The Company is currently assessing whether fair value accounting is appropriate for any of the Companys eligible items and we have not yet
determined the impact, if any, on our consolidated financial statements.

FIN 48:

We adopted FIN 48 in the first quarter of 2007. Under FIN 48, tax benefits are recognized only for tax positions that are more likely than not to be
sustained upon examination by tax authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely to be realized upon ultimate settlement. Unrecognized tax benefits are tax benefits claimed in
tax returns that do not meet these recognition and measurement standards. The adoption did not have a material effect on the Companys financial statements and we do not expect the change to have a significant impact on our results of
operations or financial position during the next twelve months.

As permitted by FIN 48, we also adopted an accounting policy to
prospectively classify accrued interest and penalties related to any unrecognized tax benefits in our income tax provision. Previously, our policy was to classify interest and penalties as an operating expense in arriving at pre-tax income. At
September 30, 2007, we do not have accrued interest and penalties related to any unrecognized tax benefits. We were taxed as a subchapter S corporation prior to the Merger, and we do not believe we have taken any uncertain tax positions for our
successor period January 31, 2007 through September 30, 2007. The years subject to potential audit varies depending on the tax jurisdiction. The Companys major taxing jurisdictions include New York, California, Florida, Texas and
Ohio.



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##### Table of Contents

SBARRO INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

(Continued)

4. Long Term Debt:

Senior Notes:

In connection with the Merger, we issued $150.0 million of 10.375% Senior Notes due 2015 (Senior
Notes). The interest is payable on February 1 and August 1 of each year.

The Senior Notes are senior unsecured obligations
of ours and are guaranteed by all of our current and future domestic subsidiaries and rank equally in right of payment with all existing and future senior indebtedness of ours. The Senior Notes are effectively subordinated to all secured
indebtedness of ours, to the extent of the collateral securing such indebtedness, including the Senior Credit Facilities. In the event of any distribution or payment of our assets in any foreclosure, dissolution, winding-up, liquidation,
reorganization, or other bankruptcy proceeding, holders of secured indebtedness will have prior claim to those of our assets that constitute their collateral. The Senior Notes are structurally subordinated to all existing and future indebtedness and
other liabilities of our subsidiaries that do not guarantee the Senior Notes. In the event of a bankruptcy, liquidation or reorganization of any of our non-guarantor subsidiaries, holders of their indebtedness and their trade creditors will
generally be entitled to payment of their claims in full from the assets of those subsidiaries before any assets are made available for distribution to us. The Senior Notes are senior in right of payment to any future subordinated obligations of
ours.

The indenture governing the notes contains certain events of default and restrictive covenants which are customary with respect to
non-investment grade debt securities, including limitations on the incurrence of additional indebtedness, dividends, repurchases of capital stock, sales of assets, liens, mergers and transactions with affiliates.

Senior Credit Facility:

In
connection with the Merger, we entered into a $183.0 million senior secured term loan facility which matures January 31, 2014. Interest is calculated at LIBOR plus 2.5%. Principal amortization payments of .25% of the initial principal are due
quarterly beginning June 30, 2007. Covenants include a leverage ratio and an interest coverage ratio.

Long-Term Debt matures as
follows (In millions):



|                    |  |   |      
|------------------- |  | - | -----
|Year end 2008       |  | $ | 1.8  
|2009                |  |   | 1.8  
|2010                |  |   | 1.8  
|2011                |  |   | 1.8  
|2012                |  |   | 1.8  
|2013 and thereafter |  |   | 322.5

Line of Credit:

In connection with the Merger, we obtained a line of credit facility of $25.0 million, with a sub-limit for letters of credit of $10.0 million. This line replaced our prior line of credit. There
were $3.8 million of letters of credit outstanding as of September 30, 2007.

11% Notes:

The 11% Notes were issued at an aggregate discount of approximately $3.8 million, which was accreted to the 11% Notes on a straight-line basis over the
original ten-year life of the notes. Our 11% Notes were repurchased in conjunction with the Merger.

Mortgage:

In March 2000, one of our subsidiaries obtained a $16 million, 8.4% loan due in 2010, secured by a mortgage on our corporate headquarters building. In
connection with the Merger, we transferred our interests in the real estate secured by the mortgage and our obligations under the related mortgage to a company owned by certain of our former shareholders.



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##### Table of Contents

SBARRO INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

(Continued)

Guarantee Arrangements Pertaining to Other Concepts:

We were party to separate financial guarantees to a bank for two of our unconsolidated joint ventures. These guarantees were released in connection with the Merger.

5. Litigation:

In December 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 were 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 motion was denied by the court. The court issued a ruling in December 2003 which was unfavorable to us which we appealed as we believe errors were made by the trial judge and appealed the decision to
the circuit court. On appeal, the Circuit Court affirmed the lower courts decision in part and reversed it in part finding that their damages should only be computed from October 1996 through May 9, 1999, the date we converted the
compensation of general managers to an hourly rate rather than their later employment termination dates. The Circuit Court remanded the matter to the lower court with instructions on how to compute damages and to redetermine the amount of
attorneys fees awarded. The lower court affirmed the initial determination of the legal fees.

In September 2000, eight other current
and former general managers of Sbarro restaurants in California filed a companion 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 attorneys 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 two of the managers for immaterial amounts. The remaining parties to this case will be paid upon the same terms and conditions that the court ordered in
connection with its decision in the case discussed in the preceding paragraph. We settled both of these cases in the second quarter of 2007 for $1.4 million, of which $.8 million was accrued for in 2003 and $.6 million was accrued for in 2004.

In May 2004 and in February 2007 suits were filed by the landlords of two of our Quick Service Restaurants (QSR) locations as
a result of our premature termination of the leases on those locations by one of our subsidiaries. The Company has defended these cases on the theory that the landlords have failed to maintain a proper shopping center atmosphere by allowing the mall
to deteriorate and in failing to keep the mall leased by retail tenants. We settled both of these in October 2007 for $125,000 and $120,000 respectively.

In January 2007, a franchisee filed a law suit against us alleging, among other things, violations of the Minnesota Franchise Act and the New York State Sales Act and intentional and negligent misrepresentation in
connection with the offer and sale of their franchise. The plaintiff seeks, among other things, damages in an unspecified amount. The parties have negotiated an agreement to submit this matter to arbitration on a high/low basis. We believe we have a
substantial defense in this action and are vigorously defending our position, the minimal amount has been accrued to date.

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

6. Income Taxes:

Effective January 31, 2007, the Company has been organized as a C corporation. Our effective tax rate was 39%. Income taxes are accounted for under the asset and liability method. Deferred
tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax
rates is recognized in income in the period that includes the enactment date.

We discuss the impact of our adoption of FIN 48 in Note 3 to
the Notes to Unaudited Consolidated Financial Statements.



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##### Table of Contents

SBARRO INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

(Continued)

7. Goodwill and Other Intangible Assets (in millions):

The final allocation of the total purchase price to our net assets is expected to be completed by the end of our fiscal year and will be based on a formal valuation of the fair value of our net
assets and the resolution of any pre-closing or post-closing purchase price adjustments pursuant to the Merger Agreement. Consequently, the final calculation of the purchase price and the final allocation could vary from the purchase price and
allocation presented herein, and the variations could be material. Final allocation adjustments, if any, are more likely to occur within intangible assets then in working capital. We have identified two reporting units for purposes of evaluating
goodwill for impairment. The allocation of goodwill to the two reporting units has not yet been prepared. The goodwill attributed to the Company owned reporting unit was $8.5 million and the Franchise reporting unit was $0.7 million at
December 31, 2006 based upon their relative fair value.

Intangible Assets Subject to Amortization



|                                             |  |   |      |  
|-------------------------------------------- |  | - | ---- | -
|Franchise Agreements, January 31, 2007       |  | $ | 8.0  |  
|Accumulated amortization                     |  |   | (1.2 | )
|                                             |  |   |      |  
|Net Franchise Agreements, September 30, 2007 |  | $ | 6.8  |  
|                                             |  |   |      |  

Intangible Assets Not Subject to Amortization



|                        |  |                    |       |                   |   |      
|----------------------- |  | ------------------ | ----- | ----------------- | - | -----
|                        |  | September 30, 2007 |       | December 31, 2006
|                        |  | (Successor)        |       | (Predecessor)    
|Goodwill                |  | $                  | 205.3 |                   | $ | 9.2  
|Trademarks              |  | $                  | 248.0 |                   | $ | 195.9
|Franchise relationships |  | $                  | 24.3  |                   | $ |     



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##### Table of Contents

SBARRO INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

(Continued)

8. Reportable Segment Information:

We operate two business segments. Our company-owned restaurant segment is comprised of the operating activities of our company-owned QSR restaurants and other concept restaurants. Our franchise restaurant segment
offers franchise opportunities worldwide for qualified operators to conduct business under the Sbarro name. Revenue from franchise operations is generated from initial franchise fees, ongoing royalties and other franchising revenue.

We do not allocate indirect corporate charges to the franchise operating segment. Such costs are managed on an entity-wide basis, and the information to
reasonably allocate such costs is not readily available.

We do not allocate assets by segment because our chief operating decision makers
do not review the assets by segment to assess the segments performance as the assets are managed on an entity-wide basis.

The
following table sets forth the information concerning the revenue and operating income before unallocated costs of each of our company owned and franchise restaurant segments.



|                                                    |  |                             |         |                       |   |        |  |   |         |  
|--------------------------------------------------- |  | --------------------------- | ------- | --------------------- | - | ------ |  | - | ------- | -
|                                                    |  | CompanyOwned Restaurants(1) |         | Franchise Restaurants |   | Totals | 
|                                                    |  | (in thousands)              |        
|Thirteen weeks ended September 30, 2007 (Successor) |  |                             |         |                       |   |        |  |   |         |  
|Total revenue                                       |  | $                           | 87,047  |                       | $ | 3,948  |  | $ | 90,995  |  
|                                                    |  |                             |         |                       |   |        |  |   |         |  
|Operating income before unallocated costs           |  | $                           | 11,829  |                       | $ | 2,718  |  | $ | 14,547  |  
|                                                    |  |                             |         |                       |   |        |  |   |         |  
|Unallocated costs and expenses (2)                  |  |                             |         |                       |   |        |  |   | 6,386   |  
|                                                    |  |                             |         |                       |   |        |  |   |         |  
|Operating income                                    |  |                             |         |                       |   |        |  | $ | 8,161   |  
|                                                    |  |                             |         |                       |   |        |  |   |         |  
|Twelve weeks ended October 8, 2006 (Predecessor)    |  |                             |         |                       |   |        |  |   |         |  
|Total revenue                                       |  | $                           | 75,882  |                       | $ | 3,279  |  | $ | 79,161  |  
|                                                    |  |                             |         |                       |   |        |  |   |         |  
|Operating income before unallocated costs           |  | $                           | 11,602  |                       | $ | 2,387  |  | $ | 13,989  |  
|                                                    |  |                             |         |                       |   |        |  |   |         |  
|Unallocated costs and expenses (2)                  |  |                             |         |                       |   |        |  |   | 5,789   |  
|                                                    |  |                             |         |                       |   |        |  |   |         |  
|Operating income                                    |  |                             |         |                       |   |        |  | $ | 8,200   |  
|                                                    |  |                             |         |                       |   |        |  |   |         |  
|January 31September 30, 2007 (Successor)           |  |                             |         |                       |   |        |  |   |         |  
|Total revenue                                       |  | $                           | 219,098 |                       | $ | 10,067 |  | $ | 229,165 |  
|                                                    |  |                             |         |                       |   |        |  |   |         |  
|Operating income before unallocated costs           |  | $                           | 24,959  |                       | $ | 6,749  |  | $ | 31,708  |  
|                                                    |  |                             |         |                       |   |        |  |   |         |  
|Unallocated costs and expenses (2)                  |  |                             |         |                       |   |        |  |   | 15,562  |  
|                                                    |  |                             |         |                       |   |        |  |   |         |  
|Operating income                                    |  |                             |         |                       |   |        |  | $ | 16,146  |  
|                                                    |  |                             |         |                       |   |        |  |   |         |  
|January 1January 30, 2007 (Predecessor)            |  |                             |         |                       |   |        |  |   |         |  
|Total revenue                                       |  | $                           | 23,917  |                       | $ | 993    |  | $ | 24,910  |  
|                                                    |  |                             |         |                       |   |        |  |   |         |  
|Operating income before unallocated costs           |  | $                           | 3,160   |                       | $ | 594    |  | $ | 3,754   |  
|                                                    |  |                             |         |                       |   |        |  |   |         |  
|Unallocated costs and expenses (2)                  |  |                             |         |                       |   |        |  |   | 33,840  |  
|                                                    |  |                             |         |                       |   |        |  |   |         |  
|Operating income                                    |  |                             |         |                       |   |        |  | $ | (30,086 | )
|                                                    |  |                             |         |                       |   |        |  |   |         |  
|Forty weeks ended October 8, 2006 (Predecessor)     |  |                             |         |                       |   |        |  |   |         |  
|Total revenue                                       |  | $                           | 241,869 |                       | $ | 10,678 |  | $ | 252,547 |  
|                                                    |  |                             |         |                       |   |        |  |   |         |  
|Operating income before unallocated costs           |  | $                           | 33,053  |                       | $ | 7,588  |  | $ | 40,641  |  
|                                                    |  |                             |         |                       |   |        |  |   |         |  
|Unallocated costs and expenses (2)                  |  |                             |         |                       |   |        |  |   | 20,106  |  
|                                                    |  |                             |         |                       |   |        |  |   |         |  
|Operating income                                    |  |                             |         |                       |   |        |  | $ | 20,535  |  
|                                                    |  |                             |         |                       |   |        |  |   |         |  

---

|(1) | Total revenue includes restaurant sales and real estate revenues.
|--- | -----------------------------------------------------------------

|(2) | Represents those general and administrative expenses that are not allocated to a segment.
|--- | -----------------------------------------------------------------------------------------



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SBARRO INC. AND SUBSIDIARIES

Notes to Unaudited Consolidated Financial Statements

(Continued)

9. Guarantor and Non-Guarantor Financial Statements:

Certain subsidiaries have guaranteed amounts outstanding under our credit facilities. 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 Senior Credit Facilities on a joint and several basis.

The following unaudited
condensed consolidating financial information presents:



| | (1) | Condensed unaudited consolidating balance sheets as of September 30, 2007 (Successor) and unaudited statements of operations and cash flows for the period
January 31 through September 30, 2007 (Successor) for: (a) Sbarro (the Parent), (b) the guarantor subsidiaries as a group, (c) the nonguarantor subsidiaries as a group (d) elimination entries necessary to
consolidate the Parent, with the guarantor and nonguarantor subsidiaries and (e) Sbarro on a consolidated basis.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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



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SBARRO, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements (Continued)

Unaudited
Consolidating Balance SheetSuccessor

As of September 30, 2007

(In thousands)

ASSETS



|                              |  |        |         |   |                       |   |                          |  |   |              |   |  |                   |         |   |  |   |        
|----------------------------- |  | ------ | ------- | - | --------------------- | - | ------------------------ |  | - | ------------ | - |  | ----------------- | ------- | - |  | - | -------
|                              |  | Parent |         |   | GuarantorSubsidiaries |   | NonguarantorSubsidiaries |  |   | Eliminations |   |  | ConsolidatedTotal
|Current assets:               |  |        |         |   |                       |   |                          |  |   |              |   |  |                   |         |   |  |   |        
|                              |  |        |         |   |                      
|Cash and cash equivalents     |  | $      | 11,389  |   |                       | $ | 1,766                    |  | $ | 360          |   |  | $                 |        |   |  | $ | 13,515 
|Receivables                   |  |        |         |   |                       |   |                          |  |   |              |   |  |                   |         |   |  |   |        
|Franchise                     |  |        | 2,566   |   |                       |   |                         |  |   |             |   |  |                   |        |   |  |   | 2,566  
|Other                         |  |        | 2,998   |   |                       |   | 1,092                    |  |   | 66           |   |  |                   |        |   |  |   | 4,156  
|                              |  |        |         |   |                       |   |                          |  |   |              |   |  |                   |         |   |  |   |        
|                              |  |        | 5,564   |   |                       |   | 1,092                    |  |   | 66           |   |  |                   |        |   |  |   | 6,722  
|Inventories                   |  |        | 1,208   |   |                       |   | 1,607                    |  |   | 8            |   |  |                   |        |   |  |   | 2,823  
|Prepaid expenses              |  |        | 4,269   |   |                       |   | 106                      |  |   | 2            |   |  |                   |        |   |  |   | 4,377  
|Deferred tax asset            |  |        | 4,577   |   |                       |   |                         |  |   |             |   |  |                   |        |   |  |   | 4,577  
|                              |  |        |         |   |                       |   |                          |  |   |              |   |  |                   |         |   |  |   |        
|Total current assets          |  |        | 27,007  |   |                       |   | 4,571                    |  |   | 436          |   |  |                   |        |   |  |   | 32,014 
|Intercompany receivables      |  |        | (31,222 | ) |                       |   | 31,879                   |  |   | (657         | ) |  |                   |        |   |  |   |       
|Investment in
subsidiaries    |  |        | 66,875  |   |                       |   |                         |  |   |             |   |  |                   | (66,875 | ) |  |   |       
|Property and equipment, net   |  |        | 26,813  |   |                       |   | 34,775                   |  |   | 16           |   |  |                   |        |   |  |   | 61,604 
|Goodwill                      |  |        | 205,311 |   |                       |   |                         |  |   |             |   |  |                   |        |   |  |   | 205,311
|Trademarks                    |  |        | 248,000 |   |                       |   |                         |  |   |             |   |  |                   |        |   |  |   | 248,000
|Franchise relationships       |  |        | 24,300  |   |                       |   |                         |  |   |             |   |  |                   |        |   |  |   | 24,300 
|Franchise agreements, net     |  |        | 6,817   |   |                       |   |                         |  |   |             |   |  |                   |        |   |  |   | 6,817  
|                              |  |        |         |   |                      
|Deferred financing costs, net |  |        | 10,344  |   |                       |   |                         |  |   |             |   |  |                   |        |   |  |   | 10,344 
|                              |  |        |         |   |                      
|Deferred tax asset            |  |        | 8,079   |   |                       |   |                         |  |   |             |   |  |                   |        |   |  |   | 8,079  
|Other assets                  |  |        | 1,236   |   |                       |   | 161                      |  |   |             |   |  |                   |        |   |  |   | 1,397  
|                              |  |        |         |   |                       |   |                          |  |   |              |   |  |                   |         |   |  |   |        
|                              |  | $      | 593,560 |   |                       | $ | 71,386                   |  | $ | (205         | ) |  | $                 | (66,875 | ) |  | $ | 597,866
|                              |  |        |         |   |                       |   |                          |  |   |              |   |  |                   |         |   |  |   |        



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SBARRO, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements (Continued)

Unaudited
Consolidating Balance SheetSuccessor

As of September 30, 2007

(In thousands)

LIABILITIES AND SHAREHOLDERS EQUITY



|                                                                                |  |        |         |   |                       |   |        |                          |  |   |              |   |  |                   |         |   |  |   |         |  
|------------------------------------------------------------------------------- |  | ------ | ------- | - | --------------------- | - | ------ | ------------------------ |  | - | ------------ | - |  | ----------------- | ------- | - |  | - | ------- | -
|                                                                                |  | Parent |         |   | GuarantorSubsidiaries |   |        | NonguarantorSubsidiaries |  |   | Eliminations |   |  | ConsolidatedTotal |        
|Current liabilities:                                                            |  |        |         |   |                       |   |        |                          |  |   |              |   |  |                   |         |   |  |   |         |  
|Accounts payable                                                                |  | $      | 5,926   |   |                       | $ | 178    |                          |  | $ | 22           |   |  | $                 |        |   |  | $ | 6,126   |  
|Accrued expenses                                                                |  |        | 19,554  |   |                       |   | 2,915  |                          |  |   | 9            |   |  |                   |        |   |  |   | 22,478  |  
|Accrued interest payable                                                        |  |        | 3,889   |   |                       |   |       |                          |  |   |             |   |  |                   |        |   |  |   | 3,889   |  
|Insurance premium financing                                                     |  |        | 2,289   |   |                       |   |       |                          |  |   |             |   |  |                   |        |   |  |   | 2,289   |  
|Current portion of debt                                                         |  |        | 1,830   |   |                       |   |       |                          |  |   |             |   |  |                   |        |   |  |   | 1,830   |  
|                                                                                |  |        |         |   |                       |   |        |                          |  |   |              |   |  |                   |         |   |  |   |         |  
|Total current liabilities                                                       |  |        | 33,488  |   |                       |   | 3,093  |                          |  |   | 31           |   |  |                   |        |   |  |   | 36,612  |  
|Deferred rent                                                                   |  |        |        |   |                       |   | 1,182  |                          |  |   |             |   |  |                   |        |   |  |   | 1,182   |  
|Net lease agreements above market                                               |  |        | 1,004   |   |                       |   |       |                          |  |   |             |   |  |                   |        |   |  |   | 1,004   |  
|Deferred tax liability                                                          |  |        | 98,302  |   |                       |   |       |                          |  |   |             |   |  |                   |        |   |  |   | 98,302  |  
|Long-term debt                                                                  |  |        | 330,255 |   |                       |   |       |                          |  |   |             |   |  |                   |        |   |  |   | 330,255 |  
|                                                                                |  |        |         |   |                      
|Shareholders equity:                                                           |  |        |         |   |                       |   |        |                          |  |   |              |   |  |                   |         |   |  |   |         |  
|Common stock, $.01 par value , 1000 shares authorized, 100 issued & outstanding |  |        |        |   |                       |   |       |                          |  |   |             |   |  |                   |        |   |  |   |        |  
|Additional paid in capital                                                      |  |        | 133,000 |   |                       |   | 68,302 |                          |  |   |             |   |  |                   | (68,302 | ) |  |   | 133,000 |  
|(Accumulated deficit) retained earnings                                         |  |        | (2,489  | ) |                       |   | (1,191 | )                        |  |   | (236         | ) |  |                   | 1,427   |   |  |   | (2,489  | )
|                                                                                |  |        |         |   |                       |   |        |                          |  |   |              |   |  |                   |         |   |  |   |         |  
|                                                                                |  |        | 130,511 |   |                       |   | 67,111 |                          |  |   | (236         | ) |  |                   | (66,875 | ) |  |   | 130,511 |  
|                                                                                |  |        |         |   |                       |   |        |                          |  |   |              |   |  |                   |         |   |  |   |         |  
|                                                                                |  | $      | 593,560 |   |                       | $ | 71,386 |                          |  | $ | (205         | ) |  | $                 | (66,875 | ) |  | $ | 597,866 |  
|                                                                                |  |        |         |   |                       |   |        |                          |  |   |              |   |  |                   |         |   |  |   |         |  



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SBARRO, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements (Continued)

Unaudited
Consolidating Statement of OperationsSuccessor

For the period January 31September 30, 2007

(In thousands)



|                                      |  |        |         |   |                       |   |         |                          |  |   |              |   |                   |   |       |  |   |         |  
|------------------------------------- |  | ------ | ------- | - | --------------------- | - | ------- | ------------------------ |  | - | ------------ | - | ----------------- | - | ----- |  | - | ------- | -
|                                      |  | Parent |         |   | GuarantorSubsidiaries |   |         | NonguarantorSubsidiaries |  |   | Eliminations |   | ConsolidatedTotal |  
|Revenues:                             |  |        |         |   |                       |   |         |                          |  |   |              |   |                   |   |       |  |   |         |  
|Restaurant sales                      |  | $      | 96,799  |   |                       | $ | 121,355 |                          |  | $ | 944          |   |                   | $ |      |  | $ | 219,098 |  
|Franchise related income              |  |        | 10,067  |   |                       |   |        |                          |  |   |             |   |                   |   |      |  |   | 10,067  |  
|Intercompany charges                  |  |        | 16,324  |   |                       |   | (16,210 | )                        |  |   | (114         | ) |                   |   |      |  |   |        |  
|                                      |  |        |         |   |                       |   |         |                          |  |   |              |   |                   |   |       |  |   |         |  
|Total revenues                        |  |        | 123,190 |   |                       |   | 105,145 |                          |  |   | 830          |   |                   |   |      |  |   | 229,165 |  
|                                      |  |        |         |   |                       |   |         |                          |  |   |              |   |                   |   |       |  |   |         |  
|Costs and expenses:                   |  |        |         |   |                       |   |         |                          |  |   |              |   |                   |   |       |  |   |         |  
|Cost of food and paper products       |  |        | 21,542  |   |                       |   | 22,843  |                          |  |   | 236          |   |                   |   |      |  |   | 44,621  |  
|Payroll and other employee benefits   |  |        | 25,226  |   |                       |   | 34,627  |                          |  |   | 239          |   |                   |   |      |  |   | 60,092  |  
|Other operating costs                 |  |        | 34,507  |   |                       |   | 44,366  |                          |  |   | 328          |   |                   |   |      |  |   | 79,201  |  
|Other (income) expense                |  |        | (138    | ) |                       |   | (1,771  | )                        |  |   | (15          | ) |                   |   |      |  |   | (1,924  | )
|Depreciation and amortization         |  |        | 6,386   |   |                       |   | 5,905   |                          |  |   | (2           | ) |                   |   |      |  |   | 12,289  |  
|General and administrative            |  |        | 18,079  |   |                       |   | 47      |                          |  |   | 280          |   |                   |   |      |  |   | 18,406  |  
|Asset impairment, restaurant closings |  |        |        |   |                       |   | 334     |                          |  |   |             |   |                   |   |      |  |   | 334     |  
|                                      |  |        |         |   |                       |   |         |                          |  |   |              |   |                   |   |       |  |   |         |  
|Total costs and expenses              |  |        | 105,602 |   |                       |   | 106,351 |                          |  |   | 1,066        |   |                   |   |      |  |   | 213,019 |  
|                                      |  |        |         |   |                       |   |         |                          |  |   |              |   |                   |   |       |  |   |         |  
|Operating income (loss)               |  |        | 17,588  |   |                       |   | (1,206  | )                        |  |   | (236         | ) |                   |   |      |  |   | 16,146  |  
|Other (expense) income:               |  |        |         |   |                       |   |         |                          |  |   |              |   |                   |   |       |  |   |         |  
|Interest expense                      |  |        | (21,036 | ) |                       |   |        |                          |  |   |             |   |                   |   |      |  |   | (21,036 | )
|Interest income                       |  |        | 446     |   |                       |   | 15      |                          |  |   |             |   |                   |   |      |  |   | 461     |  
|                                      |  |        |         |   |                       |   |         |                          |  |   |              |   |                   |   |       |  |   |         |  
|Net other (expense) income            |  |        | (20,590 | ) |                       |   | 15      |                          |  |   |             |   |                   |   |      |  |   | (20,575 | )
|                                      |  |        |         |   |                       |   |         |                          |  |   |              |   |                   |   |       |  |   |         |  
|Equity in earnings of subsidiaries    |  |        | (1,427  | ) |                       |   |        |                          |  |   |             |   |                   |   | 1,427 |  |   |        |  
|                                      |  |        |         |   |                       |   |         |                          |  |   |              |   |                   |   |       |  |   |         |  
|(Loss) income before income taxes     |  |        | (4,429  | ) |                       |   | (1,191  | )                        |  |   | (236         | ) |                   |   | 1,427 |  |   | (4,429  | )
|Income tax benefit                    |  |        | (1,940  | ) |                       |   |        |                          |  |   |             |   |                   |   |      |  |   | (1,940  | )
|                                      |  |        |         |   |                       |   |         |                          |  |   |              |   |                   |   |       |  |   |         |  
|Net (loss) income                     |  | $      | (2,489  | ) |                       | $ | (1,191  | )                        |  | $ | (236         | ) |                   | $ | 1,427 |  | $ | (2,489  | )
|                                      |  |        |         |   |                       |   |         |                          |  |   |              |   |                   |   |       |  |   |         |  



21



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SBARRO, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements (Continued)

Unaudited
Consolidating Statement of OperationsSuccessor

For the thirteen weeks ended September 30, 2007

(In thousands)



|                                      |  |        |        |   |                       |   |        |                          |  |   |              |   |  |                   |     |   |  |   |        |  
|------------------------------------- |  | ------ | ------ | - | --------------------- | - | ------ | ------------------------ |  | - | ------------ | - |  | ----------------- | --- | - |  | - | ------ | -
|                                      |  | Parent |        |   | GuarantorSubsidiaries |   |        | NonguarantorSubsidiaries |  |   | Eliminations |   |  | ConsolidatedTotal |    
|Revenues:                             |  |        |        |   |                       |   |        |                          |  |   |              |   |  |                   |     |   |  |   |        |  
|Restaurant sales                      |  | $      | 38,449 |   |                       | $ | 48,181 |                          |  | $ | 417          |   |  | $                 |    |   |  | $ | 87,047 |  
|Franchise related income              |  |        | 3,948  |   |                       |   |       |                          |  |   |             |   |  |                   |    |   |  |   | 3,948  |  
|Intercompany charges                  |  |        | 6,427  |   |                       |   | (6,377 | )                        |  |   | (50          | ) |  |                   |    |   |  |   |       |  
|                                      |  |        |        |   |                       |   |        |                          |  |   |              |   |  |                   |     |   |  |   |        |  
|Total revenues                        |  |        | 48,824 |   |                       |   | 41,804 |                          |  |   | 367          |   |  |                   |    |   |  |   | 90,995 |  
|                                      |  |        |        |   |                       |   |        |                          |  |   |              |   |  |                   |     |   |  |   |        |  
|Costs and expenses:                   |  |        |        |   |                       |   |        |                          |  |   |              |   |  |                   |     |   |  |   |        |  
|Cost of food and paper products       |  |        | 8,661  |   |                       |   | 9,253  |                          |  |   | 94           |   |  |                   |    |   |  |   | 18,008 |  
|Payroll and other employee benefits   |  |        | 9,612  |   |                       |   | 13,289 |                          |  |   | 100          |   |  |                   |    |   |  |   | 23,001 |  
|Other operating costs                 |  |        | 13,081 |   |                       |   | 17,385 |                          |  |   | 131          |   |  |                   |    |   |  |   | 30,597 |  
|Other (income) expense                |  |        | (100   | ) |                       |   | (694   | )                        |  |   | 1            |   |  |                   |    |   |  |   | (793   | )
|Depreciation and amortization         |  |        | 2,445  |   |                       |   | 2,309  |                          |  |   | (3           | ) |  |                   |    |   |  |   | 4,751  |  
|General and administrative            |  |        | 7,032  |   |                       |   | 13     |                          |  |   | 100          |   |  |                   |    |   |  |   | 7,145  |  
|Asset impairment, restaurant closings |  |        |       |   |                       |   | 125    |                          |  |   |             |   |  |                   |    |   |  |   | 125    |  
|                                      |  |        |        |   |                       |   |        |                          |  |   |              |   |  |                   |     |   |  |   |        |  
|Total costs and expenses              |  |        | 40,731 |   |                       |   | 41,680 |                          |  |   | 423          |   |  |                   |    |   |  |   | 82,834 |  
|                                      |  |        |        |   |                       |   |        |                          |  |   |              |   |  |                   |     |   |  |   |        |  
|Operating income
(loss)               |  |        | 8,093  |   |                       |   | 124    |                          |  |   | (56          | ) |  |                   |    |   |  |   | 8,161  |  
|Other (expense) income:               |  |        |        |   |                       |   |        |                          |  |   |              |   |  |                   |     |   |  |   |        |  
|Interest expense                      |  |        | (7,673 | ) |                       |   |       |                          |  |   |             |   |  |                   |    |   |  |   | (7,673 | )
|Interest income                       |  |        | 54     |   |                       |   | 3      |                          |  |   |             |   |  |                   |    |   |  |   | 57     |  
|                                      |  |        |        |   |                       |   |        |                          |  |   |              |   |  |                   |     |   |  |   |        |  
|Net other (expense) income            |  |        | (7,619 | ) |                       |   | 3      |                          |  |   |             |   |  |                   |    |   |  |   | (7,616 | )
|                                      |  |        |        |   |                       |   |        |                          |  |   |              |   |  |                   |     |   |  |   |        |  
|Equity in earnings of subsidiaries    |  |        | 71     |   |                       |   |       |                          |  |   |             |   |  |                   | (71 | ) |  |   |       |  
|                                      |  |        |        |   |                       |   |        |                          |  |   |              |   |  |                   |     |   |  |   |        |  
|Income (loss) before income taxes     |  |        | 545    |   |                       |   | 127    |                          |  |   | (56          | ) |  |                   | (71 | ) |  |   | 545    |  
|Income tax                            |  |        | 42     |   |                       |   |       |                          |  |   |             |   |  |                   |    |   |  |   | 42     |  
|                                      |  |        |        |   |                       |   |        |                          |  |   |              |   |  |                   |     |   |  |   |        |  
|Net income (loss)                     |  | $      | 503    |   |                       | $ | 127    |                          |  | $ | (56          | ) |  | $                 | (71 | ) |  | $ | 503    |  
|                                      |  |        |        |   |                       |   |        |                          |  |   |              |   |  |                   |     |   |  |   |        |  



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##### Table of Contents

SBARRO, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements (Continued)

Unaudited
Consolidating Statement of Cash FlowsSuccessor

For the period January 31September 30, 2007

(In thousands)



|                                                                                          |  |        |        |   |                       |   |        |                          |  |   |              |   |  |                   |        |   |  |   |        |  
|----------------------------------------------------------------------------------------- |  | ------ | ------ | - | --------------------- | - | ------ | ------------------------ |  | - | ------------ | - |  | ----------------- | ------ | - |  | - | ------ | -
|                                                                                          |  | Parent |        |   | GuarantorSubsidiaries |   |        | NonguarantorSubsidiaries |  |   | Eliminations |   |  | ConsolidatedTotal |       
|Operating Activities:                                                                     |  |        |        |   |                       |   |        |                          |  |   |              |   |  |                   |        |   |  |   |        |  
|Net loss                                                                                  |  | $      | (2,489 | ) |                       | $ | (1,191 | )                        |  | $ | (236         | ) |  | $                 | 1,427  |   |  | $ | (2,489 | )
|Adjustments to reconcile net loss to net cash provided by (used in) operating activities: |  |        |        |   |                       |   |        |                          |  |   |              |   |  |                   |        |   |  |   |        |  
|Depreciation and amortization                                                             |  |        | 6,386  |   |                       |   | 5,905  |                          |  |   | (2           | ) |  |                   |       |   |  |   | 12,289 |  
|Amortization of deferred financing costs                                                  |  |        | 671    |   |                       |   |       |                          |  |   |             |   |  |                   |       |   |  |   | 671    |  
|Amortization of leasehold agreements above market                                         |  |        | (421   | ) |                       |   |       |                          |  |   |             |   |  |                   |       |   |  |   | (421   | )
|Increase in deferred rent, net of tenant allowance                                        |  |        |       |   |                       |   | 1,479  |                          |  |   |             |   |  |                   |       |   |  |   | 1,479  |  
|Asset impairment, restaurant closings/remodels                                            |  |        |       |   |                       |   | 334    |                          |  |   |             |   |  |                   |       |   |  |   | 334    |  
|Change in deferred tax benefit                                                            |  |        | (2,689 | ) |                       |   |       |                          |  |   |             |   |  |                   |       |   |  |   | (2,689 | )
|Equity in earnings of subsidiaries                                                        |  |        | 1,427  |   |                       |   |       |                          |  |   |             |   |  |                   | (1,427 | ) |  |   |       |  
|Changes in operating
assets and liabilities, net of effects of merger:                    |  |        |        |   |                       |   |        |                          |  |   |              |   |  |                   |        |   |  |   |        |  
|Decrease (increase) in receivables                                                        |  |        | 1,279  |   |                       |   | 312    |                          |  |   | (45          | ) |  |                   |       |   |  |   | 1,546  |  
|Decrease (increase) in inventories                                                        |  |        | 92     |   |                       |   | (7     | )                        |  |   | 5            |   |  |                   |       |   |  |   | 90     |  
|Decrease in prepaid expenses                                                              |  |        | 924    |   |                       |   | 308    |                          |  |   |             |   |  |                   |       |   |  |   | 1,232  |  
|Increase in other assets                                                                  |  |        | (710   | ) |                       |   | (10    | )                        |  |   |             |   |  |                   |       |   |  |   | (720   | )
|Increase (decrease) in accounts payable and accrued expenses                              |  |        | 9,340  |   |                       |   | (5,206 | )                        |  |   | 70           |   |  |                   |       |   |  |   | 4,204  |  
|Increase in accrued interest payable                                                      |  |        | 3,890  |   |                       |   |       |                          |  |   |             |   |  |                   |       |   |  |   | 3,890  |  
|                                                                                          |  |        |        |   |                       |   |        |                          |  |   |              |   |  |                   |        |   |  |   |        |  
|Net cash (used in) provided by operating activities                                       |  |        | 17,700 |   |                       |   | 1,924  |                          |  |   | (208         | ) |  |                   |       |   |  |   | 19,416 |  
|                                                                                          |  |        |        |   |                       |   |        |                          |  |   |              |   |  |                   |        |   |  |   |        |  



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##### Table of Contents

SBARRO, INC. AND SUBSIDIARIES

Notes To Consolidated Financial Statements (Continued)

Unaudited
Consolidating Statement of Cash FlowsSuccessor

For the period January 31September 30, 2007

(In thousands)



|                                                        |  |        |          |   |                       |   |        |                          |  |   |              |   |                   |   |   |  |   |          |  
|------------------------------------------------------- |  | ------ | -------- | - | --------------------- | - | ------ | ------------------------ |  | - | ------------ | - | ----------------- | - | - |  | - | -------- | -
|                                                        |  | Parent |          |   | GuarantorSubsidiaries |   |        | NonguarantorSubsidiaries |  |   | Eliminations |   | ConsolidatedTotal |  
|Investing Activities:                                   |  |        |          |   |                       |   |        |                          |  |   |              |   |                   |   |   |  |   |          |  
|Purchases of property and equipment                     |  |        | (6,150   | ) |                       |   | (4,640 | )                        |  |   | (26          | ) |                   |   |  |  |   | (10,816  | )
|Purchase of franchise and other locations               |  |        | (4,790   | ) |                       |   |       |                          |  |   |             |   |                   |   |  |  |   | (4,790   | )
|Investment in joint ventures                            |  |        | (380     | ) |                       |   |       |                          |  |   |             |   |                   |   |  |  |   | (380     | )
|Cash paid for merger, net of cash acquired              |  |        | (177,000 | ) |                       |   |       |                          |  |   |             |   |                   |   |  |  |   | (177,000 | )
|                                                        |  |        |          |   |                       |   |        |                          |  |   |              |   |                   |   |   |  |   |          |  
|Net cash used in investing activities                   |  |        | (188,320 | ) |                       |   | (4,640 | )                        |  |   | (26          | ) |                   |   |  |  |   | (192,986 | )
|                                                        |  |        |          |   |                       |   |        |                          |  |   |              |   |                   |   |   |  |   |          |  
|Financing
Activities:                                   |  |        |          |   |                       |   |        |                          |  |   |              |   |                   |   |   |  |   |          |  
|Proceeds from shareholders for issuance of common stock |  |        | 133,000  |   |                       |   |       |                          |  |   |             |   |                   |   |  |  |   | 133,000  |  
|Proceeds from secured term loan                         |  |        | 183,000  |   |                       |   |       |                          |  |   |             |   |                   |   |  |  |   | 183,000  |  
|Proceeds from senior notes                              |  |        | 150,000  |   |                       |   |       |                          |  |   |             |   |                   |   |  |  |   | 150,000  |  
|Paydown of predecessor's notes                          |  |        | (267,000 | ) |                       |   |       |                          |  |   |             |   |                   |   |  |  |   | (267,000 | )
|Debt issue costs                                        |  |        | (11,000  | ) |                       |   |       |                          |  |   |             |   |                   |   |   |  |   | (11,000  | )
|Repayment of secured term loan                          |  |        | (915     | ) |                       |   |       |                          |  |   |             |   |                   |   |  |  |   | (915     | )
|Intercompany balances                                   |  |        | (5,076   | ) |                       |   | 4,482  |                          |  |   | 594          |   |                   |   |  |  |   |         |  
|                                                        |  |        |          |   |                       |   |        |                          |  |   |              |   |                   |   |   |  |   |          |  
|Net cash (used in) provided by financing activities     |  |        | 182,009  |   |                       |   | 4,482  |                          |  |   | 594          |   |                   |   |  |  |   | 187,085  |  
|                                                        |  |        |          |   |                       |   |        |                          |  |   |              |   |                   |   |   |  |   |          |  
|                                                        |  |        |          |   |                      
|Increase in cash and cash equivalents                   |  |        | 11,389   |   |                       |   | 1,766  |                          |  |   | 360          |   |                   |   |  |  |   | 13,515   |  
|                                                        |  |        |          |   |                      
|Cash and cash equivalents at beginning of period        |  |        |         |   |                       |   |       |                          |  |   |             |   |                   |   |  |  |   |         |  
|                                                        |  |        |          |   |                       |   |        |                          |  |   |              |   |                   |   |   |  |   |          |  
|Cash and cash equivalents at end of period              |  | $      | 11,389   |   |                       | $ | 1,766  |                          |  | $ | 360          |   |                   | $ |  |  | $ | 13,515   |  
|                                                        |  |        |          |   |                       |   |        |                          |  |   |              |   |                   |   |   |  |   |          |  

Supplemental non-cash investing activities:

On January 30, 2007, the Company transferred its interest of $5.6 million of certain non-core assets to a newly formed company owned
by certain of our former shareholders.



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##### Table of Contents

Item 1A.    Pro Forma Financial Information (unaudited)

The unaudited pro forma
condensed consolidated financial data of Sbarro is presented to show how Sbarro might have looked if the Merger together with the Financing Transactions that we describe below had occurred as of January 2, 2006 for the periods indicated below.
We derived the following unaudited pro forma condensed consolidated statements of operations on an adjusted basis to give pro forma effect for the year to date ended September 30, 2007 and October 8, 2006 by applying pro forma adjustments
to our historical consolidated statement of operations.

The pro forma adjustments for Withdrawn Assets refers to the following
assets and related costs that were transferred by the Company to our former shareholders in connection with the Merger:



| |  |  | the interests in 401 Broadhollow Realty Corp. and 401 Broadhollow Fitness Center Corp., which own the corporate headquarters of the Company, the fitness center
and the assets of the Sbarro Café located at the corporate headquarters;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | a parcel of undeveloped real property located in East Northport, New York;
| | - |  | --------------------------------------------------------------------------



| |  |  | the interests in Boulder Creek Ventures LLC and Boulder Creek Holdings, LLC, which own a 40% interest in a joint venture that operates 15 steakhouses under
Boulder Creek and other names;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the interest in Two Mex-SS, LLC, which owns a 50% interest in a joint venture that operates two tex-mex restaurants under the Baja Grill name and
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the elimination of certain costs and expenses related to the offices of certain former shareholders including salaries, bonus, benefits, payroll taxes, travel
and entertainment.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The term Financing Transactions means, collectively, our:



| |  |  | entry into the Senior Credit Facilities;
| | - |  | ----------------------------------------



| |  |  | issuance of the Senior Notes;
| | - |  | -----------------------------



| |  |  | repurchase of all of our outstanding 11% Notes; and
| | - |  | ---------------------------------------------------



| |  |  | payment of all related fees and expenses.
| | - |  | -----------------------------------------

The Financing Transactions together with the Merger and payment of the special event bonuses that are described in Note 2 to the Notes to Unaudited Consolidated Financial Statements are referred to herein as the Transactions.
The unaudited pro forma condensed consolidated financial data should not be considered indicative of actual results that would have been achieved had the Transactions been consummated on the date or for the periods indicated and do not purport to
indicate consolidated balance sheet data or statement of operations data or other financial data as of any future date or for any future period. The unaudited pro forma condensed consolidated financial data should be read in conjunction with the
information contained in Selected Financial Data, Managements Discussion and Analysis of Financial Condition and Results of Operations and the historical consolidated financial statements and related notes appearing
elsewhere in this report.



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##### Table of Contents

SBARRO INC. AND SUBSIDIARIES

Unaudited Pro Forma Condensed Consolidated Statements Of Operations

For
Thirty Nine Weeks Ended September 30, 2007

(In thousands)



|                                                  |  |                                                      |         |   |                           |   |      |                          |  |   |                        |   |  |           |         |          |  |   |         |  
|------------------------------------------------- |  | ---------------------------------------------------- | ------- | - | ------------------------- | - | ---- | ------------------------ |  | - | ---------------------- | - |  | --------- | ------- | -------- |  | - | ------- | -
|                                                  |  | For the Thirty Nineweeks ended (*)September 30, 2007 |         |   | WithdrawnAssetAdjustments |   |      | ExcludingWithdrawnAssets |  |   | TransactionAdjustments |   |  | Pro Forma |        
|Revenues:                                         |  |                                                      |         |   |                           |   |      |                          |  |   |                        |   |  |           |         |          |  |   |         |  
|Restaurant sales                                  |  | $                                                    | 242,692 |   |                           | $ |     |                          |  | $ | 242,692                |   |  | $         |        |          |  | $ | 242,692 |  
|Franchise related income                          |  |                                                      | 11,060  |   |                           |   |     |                          |  |   | 11,060                 |   |  |           |        |          |  |   | 11,060  |  
|Real estate                                       |  |                                                      | 323     |   |                           |   | 323  | a                        |  |   |                       |   |  |           |        |          |  |   |        |  
|                                                  |  |                                                      |         |   |                           |   |      |                          |  |   |                        |   |  |           |         |          |  |   |         |  
|Total revenues                                    |  |                                                      | 254,075 |   |                           |   | 323  |                          |  |   | 253,752                |   |  |           |        |          |  |   | 253,752 |  
|                                                  |  |                                                      |         |   |                           |   |      |                          |  |   |                        |   |  |           |         |          |  |   |         |  
|Costs and expenses:                               |  |                                                      |         |   |                           |   |      |                          |  |   |                        |   |  |           |         |          |  |   |         |  
|Cost of food and paper products                   |  |                                                      | 48,929  |   |                           |   |     |                          |  |   | 48,929                 |   |  |           |        |          |  |   | 48,929  |  
|Payroll and other employee benefits               |  |                                                      | 66,854  |   |                           |   |     |                          |  |   | 66,854                 |   |  |           |        |          |  |   | 66,854  |  
|Other operating costs                             |  |                                                      | 88,040  |   |                           |   |     |                          |  |   | 88,040                 |   |  |           | 190     | k        |  |   | 88,230  |  
|Other (income) expense                            |  |                                                      | (2,421  | ) |                           |   |     |                          |  |   | (2,421                 | ) |  |           |        |          |  |   | (2,421  | )
|Depreciation and amortization                     |  |                                                      | 13,561  |   |                           |   | 50   | a                        |  |   | 13,511                 |   |  |           | 75      | f        |  |   | 13,586  |  
|General and administrative                        |  |                                                      | 21,249  |   |                           |   | 288  | a,b                      |  |   | 20,961                 |   |  |           | 84      | g        |  |   | 21,045  |  
|Special event bonuses                             |  |                                                      | 31,395  |   |                           |   |     |                          |  |   | 31,395                 |   |  |           | (31,395 | )    h   |  |   |        |  
|Asset impairment, restaurant closings/remodels    |  |                                                      | 408     |   |                           |   |     |                          |  |   | 408                    |   |  |           |        |          |  |   | 408     |  
|                                                  |  |                                                      |         |   |                           |   |      |                          |  |   |                        |   |  |           |         |          |  |   |         |  
|Total costs and expenses                          |  |                                                      | 268,015 |   |                           |   | 338  |                          |  |   | 267,677                |   |  |           | (31,046 | )        |  |   | 236,631 |  
|                                                  |  |                                                      |         |   |                           |   |      |                          |  |   |                        |   |  |           |         |          |  |   |         |  
|Operating income (loss)                           |  |                                                      | (13,940 | ) |                           |   | (15  | )                        |  |   | (13,925                | ) |  |           | 31,046  |          |  |   | 17,121  |  
|                                                  |  |                                                      |         |   |                           |   |      |                          |  |   |                        |   |  |           |         |          |  |   |         |  
|Other (expense) income:                           |  |                                                      |         |   |                           |   |      |                          |  |   |                        |   |  |           |         |          |  |   |         |  
|Interest expense                                  |  |                                                      | (23,606 | ) |                           |   | (107 | )    a                   |  |   | (23,499                | ) |  |           | (131    | )    i,j |  |   | (23,630 | )
|Interest income                                   |  |                                                      | 569     |   |                           |   |     |                          |  |   | 569                    |   |  |           |        |          |  |   | 569     |  
|Equity in net income of unconsolidated affiliates |  |                                                      | 12      |   |                           |   | 12   | c,d                      |  |   |                       |   |  |           |        |          |  |   |        |  
|                                                  |  |                                                      |         |   |                           |   |      |                          |  |   |                        |   |  |           |         |          |  |   |         |  
|Net other expense                                 |  |                                                      | (23,025 | ) |                           |   | (95  | )                        |  |   | (22,930                | ) |  |           | (131    | )        |  |   | (23,061 | )
|                                                  |  |                                                      |         |   |                           |   |      |                          |  |   |                        |   |  |           |         |          |  |   |         |  
|(Loss) income before
income taxes                 |  |                                                      | (36,965 | ) |                           |   | (110 | )                        |  |   | (36,855                | ) |  |           | 30,915  |          |  |   | (5,940  | )
|                                                  |  |                                                      |         |   |                           |   |      |                          |  |   |                        |   |  |           |         |          |  |   |         |  
|                                                  |  |                                                      |         |   |                          
|Income tax benefit                                |  |                                                      | (1,896  | ) |                           |   |     |                          |  |   | (1,896                 | ) |  |           | (610    | )    l   |  |   | (2,506  | )
|                                                  |  |                                                      |         |   |                           |   |      |                          |  |   |                        |   |  |           |         |          |  |   |         |  
|                                                  |  |                                                      |         |   |                          
|Net income (loss)                                 |  | $                                                    | (35,069 | ) |                           | $ | (110 | )                        |  | $ | (34,959                | ) |  | $         | 31,525  |          |  | $ | (3,434  | )
|                                                  |  |                                                      |         |   |                           |   |      |                          |  |   |                        |   |  |           |         |          |  |   |         |  

---

|(*) | Represents aggregate successor and predecessor results for the period presented. The combined results are non-GAAP financial measures and should not be used in
isolation or substitution of predecessor and successor results.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

See notes to unaudited condensed consolidated pro forma
statements of operations.



26



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##### Table of Contents

SBARRO INC. AND SUBSIDIARIES

Unaudited Pro Forma Condensed Consolidated Statements Of Operations

For Forty
Weeks Ended October 8, 2006

(In thousands)



|                                                  |  |                                         |         |   |                           |   |        |                          |  |   |                        |   |  |           |        |           |  |   |         |  
|------------------------------------------------- |  | --------------------------------------- | ------- | - | ------------------------- | - | ------ | ------------------------ |  | - | ---------------------- | - |  | --------- | ------ | --------- |  | - | ------- | -
|                                                  |  | For the FortyWeeks EndedOctober 8, 2006 |         |   | WithdrawnAssetAdjustments |   |        | ExcludingWithdrawnAssets |  |   | TransactionAdjustments |   |  | Pro Forma |       
|Revenues:                                         |  |                                         |         |   |                           |   |        |                          |  |   |                        |   |  |           |        |           |  |   |         |  
|Restaurant sales                                  |  | $                                       | 240,128 |   |                           | $ | 192    | e                        |  | $ | 239,936                |   |  | $         |       |           |  | $ | 239,936 |  
|Franchise related income                          |  |                                         | 10,678  |   |                           |   |       |                          |  |   | 10,678                 |   |  |           |       |           |  |   | 10,678  |  
|Real estate                                       |  |                                         | 1,741   |   |                           |   | 1,741  | a                        |  |   |                       |   |  |           |       |           |  |   |        |  
|                                                  |  |                                         |         |   |                           |   |        |                          |  |   |                        |   |  |           |        |           |  |   |         |  
|Total revenues                                    |  |                                         | 252,547 |   |                           |   | 1,933  |                          |  |   | 250,614                |   |  |           |       |           |  |   | 250,614 |  
|                                                  |  |                                         |         |   |                           |   |        |                          |  |   |                        |   |  |           |        |           |  |   |         |  
|Costs and expenses:                               |  |                                         |         |   |                           |   |        |                          |  |   |                        |   |  |           |        |           |  |   |         |  
|Cost of food and paper products                   |  |                                         | 46,428  |   |                           |   | 93     | e                        |  |   | 46,335                 |   |  |           |       |           |  |   | 46,335  |  
|Payroll and other employee benefits               |  |                                         | 65,736  |   |                           |   | 188    | e                        |  |   | 65,548                 |   |  |           |       |           |  |   | 65,548  |  
|Other operating costs                             |  |                                         | 87,131  |   |                           |   | 46     | e                        |  |   | 87,085                 |   |  |           | 688    | k         |  |   | 87,773  |  
|Other (income) expense                            |  |                                         | (3,322  | ) |                           |   |       |                          |  |   | (3,322                 | ) |  |           |       |           |  |   | (3,322  | )
|Depreciation and amortization                     |  |                                         | 12,371  |   |                           |   | 466    | a,e                      |  |   | 11,905                 |   |  |           | 553    | f         |  |   | 12,458  |  
|General and administrative                        |  |                                         | 23,194  |   |                           |   | 2,849  | a,b                      |  |   | 20,345                 |   |  |           | 114    | g,h       |  |   | 20,459  |  
|Asset impairment, restaurant closings/remodels    |  |                                         | 474     |   |                           |   |       |                          |  |   | 474                    |   |  |           |       |           |  |   | 474     |  
|                                                  |  |                                         |         |   |                           |   |        |                          |  |   |                        |   |  |           |        |           |  |   |         |  
|Total costs and expenses                          |  |                                         | 232,012 |   |                           |   | 3,642  |                          |  |   | 228,370                |   |  |           | 1,355  |           |  |   | 229,725 |  
|                                                  |  |                                         |         |   |                           |   |        |                          |  |   |                        |   |  |           |        |           |  |   |         |  
|                                                  |  |                                         |         |   |                          
|Operating income (loss)                           |  |                                         | 20,535  |   |                           |   | (1,709 | )                        |  |   | 22,244                 |   |  |           | (1,355 | )         |  |   | 20,889  |  
|                                                  |  |                                         |         |   |                           |   |        |                          |  |   |                        |   |  |           |        |           |  |   |         |  
|Other (expense) income:                           |  |                                         |         |   |                           |   |        |                          |  |   |                        |   |  |           |        |           |  |   |         |  
|Interest expense                                  |  |                                         | (23,782 | ) |                           |   | (1,084 | )     a                  |  |   | (22,698                | ) |  |           | (1,435 | )     i,j |  |   | (24,133 | )
|Interest income                                   |  |                                         | 2,001   |   |                           |   |       |                          |  |   | 2,001                  |   |  |           |       |           |  |   | 2,001   |  
|Equity in net income of unconsolidated affiliates |  |                                         | 153     |   |                           |   | 153    | c,d                      |  |   |                       |   |  |           |       |           |  |   |        |  
|                                                  |  |                                         |         |   |                           |   |        |                          |  |   |                        |   |  |           |        |           |  |   |         |  
|Net other expense                                 |  |                                         | (21,628 | ) |                           |   | (931   | )                        |  |   | (20,697                | ) |  |           | (1,435 | )         |  |   | (22,132 | )
|                                                  |  |                                         |         |   |                           |   |        |                          |  |   |                        |   |  |           |        |           |  |   |         |  
|                                                  |  |                                         |         |   |                          
|Loss before income taxes                          |  |                                         | (1,093  | ) |                           |   | (2640  | )                        |  |   | 1,547                  |   |  |           | (2,790 | )         |  |   | (1,243  | )
|                                                  |  |                                         |         |   |                           |   |        |                          |  |   |                        |   |  |           |        |           |  |   |         |  
|                                                  |  |                                         |         |   |                          
|Income taxes (benefit)                            |  |                                         | 580     |   |                           |   |       |                          |  |   | 580                    |   |  |           | (1,065 | )    l    |  |   | (485    | )
|                                                  |  |                                         |         |   |                           |   |        |                          |  |   |                        |   |  |           |        |           |  |   |         |  
|                                                  |  |                                         |         |   |                          
|Net income (loss)                                 |  | $                                       | (1,673  | ) |                           | $ | (2,640 | )                        |  | $ | 967                    |   |  | $         | (1,725 | )         |  | $ | (758    | )
|                                                  |  |                                         |         |   |                           |   |        |                          |  |   |                        |   |  |           |        |           |  |   |         |  

See notes to unaudited condensed consolidated pro forma statements of operations.



27



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##### Table of Contents

Notes to Unaudited Pro Forma Condensed Consolidated Statements of Operations



|(1) | Reflects the following Withdrawn Assets adjustments:
|--- | ----------------------------------------------------



| | (a) | To reflect the withdrawal of the operating results of 401 Broadhollow Realty Corp. and 401 Broadhollow Fitness Center Corp., including the interest expense
related to the mortgage.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (b) | To reflect the elimination of cost and expenses relating to the offices of certain former shareholders including salaries, bonus, benefits, payroll taxes, travel
and entertainment.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (c) | To reflect the withdrawal of the equity in the net income of investment interests in Boulder Creek Ventures LLC and Boulder Creek Holdings LLC which own a 40%
interest in a joint venture that operates 15 steakhouses under Boulder Creek and other names with a book value of $5.0 million.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (d) | To reflect the equity in the net income of the withdrawal of the investment interest in Two-Mex SS, LLC, which owns a 50% interest in a joint venture that
operates two tex-mex restaurants with a negative book value of $(0.3) million.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (e) | To reflect the withdrawal of the operating results of the Sbarro Cafe.
| | --- | ----------------------------------------------------------------------



|(2) | Reflects the following Transactions adjustments:
|--- | ------------------------------------------------



| | (f) | To record amortization of intangible assets and depreciation relating to the change in value of property, plant and equipment.
| | --- | ------------------------------------------------------------------------------------------------------------------------------



| | (g) | To record the annual management fee to MidOcean.
| | --- | ------------------------------------------------



| | (h) | To eliminate the special event bonuses paid in connection with the Merger, offset by the reversal of a long-term incentive award.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------



| | (i) | To eliminate the interest expense and unamortized deferred financing fees and discount resulting from the repayment of the 11% Notes.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------



| | (j) | To record the interest expense and the amortization of deferred financing costs resulting from the issuance of the notes offered and the borrowings under the
Senior Credit Facilities. In determining pro forma interest expense, we used an interest rate of 10.375% for the notes and we have assumed LIBOR is 5.32%, which approximates the 2006 average LIBOR rate, to calculate pro forma interest expense for
our Senior Credit Facilities (LIBOR interest rates plus 2.50%).
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | (k) | To adjust deferred rent in connection with the Merger and the adjustment for the lease agreements above market.
| | --- | ---------------------------------------------------------------------------------------------------------------



| | (l) | To record the tax effect of the transaction adjustment and the change in the effective tax rate from a Subchapter S Corporation filing status to a C Corporation
filing status for the full period.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



28



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##### Table of Contents

|Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------

Forward Looking Statements

We make
statements in the Quarterly Report that are considered forward-looking statements within the meaning of the Securities Exchange Act of 1934, as amended. The words anticipate, believe, estimate, intend,
may, will, expect and similar words often indicate that a statement is a forward-looking statement. Statements about non-historic results also are considered to be forward-looking statements. None of
these forward-looking statements are guarantees of future performance or events, and they are subject to numerous risks, uncertainties and other factors. These risks, uncertainties and other factors include, but are not limited to:



| |  |  | general economic, inflation, national security, weather and business conditions;
| | - |  | --------------------------------------------------------------------------------



| |  |  | the availability of suitable restaurant sites in appropriate regional shopping malls and other locations on reasonable rental terms;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------



| |  |  | changes in consumer tastes;
| | - |  | ---------------------------



| |  |  | changes in population and traffic patterns, including the effects that military action and terrorism or other events may have on the willingness of consumers to
frequent malls, airports or downtown areas which are the predominant areas in which our restaurants are located;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to continue to attract franchisees;
| | - |  | -----------------------------------------------



| |  |  | the success of our present, and any future, joint ventures and other expansion opportunities;
| | - |  | ---------------------------------------------------------------------------------------------



| |  |  | changes in prices of food (particularly cheese and tomatoes), beverage and paper products;
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | our ability to pass along cost increases to our customers;
| | - |  | ----------------------------------------------------------



| |  |  | increases in the Federal minimum wage;
| | - |  | --------------------------------------



| |  |  | the continuity of services of members of our senior management team;
| | - |  | --------------------------------------------------------------------



| |  |  | our ability to attract and retain competent restaurant and executive managerial personnel;
| | - |  | ------------------------------------------------------------------------------------------



| |  |  | competition;
| | - |  | ------------



| |  |  | the level of, and our ability to comply with, government regulations;
| | - |  | ---------------------------------------------------------------------



| |  |  | our ability to generate sufficient cash flow to make interest and principal payments under our borrowing agreements;
| | - |  | --------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to comply with financials covenants and ratios and the effects which the restrictions imposed by those financial covenants and ratios contained in
our borrowing agreements may have on our ability to operate our business; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | our ability to repurchase and/or repay amounts under our borrowing agreements to the extent required in the event of certain circumstances as defined in our
borrowing agreements.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

You are cautioned not to place undue reliance on forward-looking statements, which speak only as
of the date of this 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.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the consolidated unaudited
financial statements, the notes thereto and other data and information appearing elsewhere in this report.



29



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##### Table of Contents

Executive Overview

For purposes of managements discussion and analysis, the year to date third quarter 2007 is the combined Predecessor and Successor thirty nine week period of January 1, 2007 through September 30, 2007
compared to the year to date third quarter of 2006 which was the forty week period of January 2, 2006 through October 8, 2006.

We believe we are the worlds leading Italian Quick Service Restaurant (QSR) concept and the largest shopping mall-focused restaurant concept in the world. We have a global base of 1,008 units in 40 countries, with 500
company-owned units and 508 franchised units. Sbarro restaurants feature a menu of popular Italian food, including pizza, a selection of pasta dishes and other hot and cold Italian entrees, salads, sandwiches, drinks and desserts.

We operate our business through two segments. Our company-owned restaurant segment is comprised of the operating activities of our company-owned
QSRs and other concepts restaurants. Our franchise restaurant segment is comprised of our franchise restaurant operations which offer opportunities worldwide for qualified operators to conduct business under the Sbarro name. Revenue from
franchise operations is generated from initial franchise fees, ongoing royalties and other franchising revenue. We do not allocate indirect corporate charges to the franchise operating segment. Such costs are managed on an entity-wide basis, and the
information to reasonably allocate such cost is not readily available. We do not allocate assets by segment because our chief operating decision makers do not review the assets by segment to assess performance as the assets are managed on an
entity-wide basis.

Commencing in 2003, we initiated a program to reorganize management, revitalize units and operations and re-launch
historic growth, addressing numerous external and internal pressures, which had resulted in deteriorating performance from 2001 to 2003. We saw increased sales in all areas of our business as we moved through 2004 to 2007. In addition, during 2004,
we re-energized our QSR operations while continuing to provide a quality product coupled with quality service. We believe that the combination of our re-energized QSR restaurants and continued growth in our franchise based business should lead to
continued improvements in both revenue and profit.



30



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##### Table of Contents

Restaurant Expansion

The following table summarizes the number of company-owned and franchised restaurants in operation during each indicated period:



|                                        |  |                      |   |  |  |  |                       |   |  |                      |   |  |                       |  
|--------------------------------------- |  | -------------------- | - |  |  |  | --------------------- | - |  | -------------------- | - |  | --------------------- | -
|                                        |  | 13 weeksended9/30/07 |   |  |  |  | 12 weeksended 10/8/06 |   |  | 39 weeksended9/30/07 |   |  | 40 weeksended 10/8/06 |  
|                                        |  | (Successor)          |   |  |  |  | (Predecessor)         |   |  | (Combined)           |   |  | (Predecessor)         |  
|Company-owned Sbarro restaurants:       |  |                      |   |  |  |  |                       |   |  |                      |   |  |                       |  
|Open at beginning of period             |  | 498                  |   |  |  |  | 488                   |   |  | 485                  |   |  | 502                   |  
|Opened during period                    |  | 3                    |   |  |  |  | 2                     |   |  | 13                   |   |  | 3                     |  
|Acquired from franchisees during period |  |                     |   |  |  |  | 1                     |   |  | 11                   |   |  | 3                     |  
|Closed during period                    |  | (1                   | ) |  |  |  | (4                    | ) |  | (9                   | ) |  | (21                   | )
|                                        |  |                      |   |  |  |  |                       |   |  |                      |   |  |                       |  
|Open at end of period                   |  | 500                  |   |  |  |  | 487                   |   |  | 500                  |   |  | 487                   |  
|                                        |  |                      |   |  |  |  |                       |   |  |                      |   |  |                       |  
|Franchised Sbarro restaurants (1):      |  |                      |   |  |  |  |                       |   |  |                      |   |  |                       |  
|Open at beginning of period             |  | 499                  |   |  |  |  | 454                   |   |  | 478                  |   |  | 437                   |  
|Opened during period                    |  | 17                   |   |  |  |  | 10                    |   |  | 57                   |   |  | 47                    |  
|Transferred to Sbarro during period     |  |                     |   |  |  |  | (1                    | ) |  | (11                  | ) |  | (3                    | )
|Closed during period                    |  | (8                   | ) |  |  |  | (8                    | ) |  | (16                  | ) |  | (26                   | )
|                                        |  |                      |   |  |  |  |                       |   |  |                      |   |  |                       |  
|Open at end of period                   |  | 508                  |   |  |  |  | 455                   |   |  | 508                  |   |  | 455                   |  
|                                        |  |                      |   |  |  |  |                       |   |  |                      |   |  |                       |  
|All restaurants (2):                    |  |                      |   |  |  |  |                       |   |  |                      |   |  |                       |  
|Open at beginning of period             |  | 997                  |   |  |  |  | 942                   |   |  | 963                  |   |  | 939                   |  
|Opened during period                    |  | 20                   |   |  |  |  | 12                    |   |  | 70                   |   |  | 50                    |  
|Closed during period                    |  | (9                   | ) |  |  |  | (12                   | ) |  | (25                  | ) |  | (47                   | )
|                                        |  |                      |   |  |  |  |                       |   |  |                      |   |  |                       |  
|Open at end of period                   |  | 1,008                |   |  |  |  | 942                   |   |  | 1,008                |   |  | 942                   |  
|                                        |  |                      |   |  |  |  |                       |   |  |                      |   |  |                       |  

---

|(1) | Franchised Sbarro restaurants exclude kiosks and vending machines.
|--- | ------------------------------------------------------------------

|(2) | During the 3rd quarter we opened 2 joint venture stores in India bringing the year to date total to 3, which are excluded from above.
|--- | -------------------------------------------------------------------------------------------------------------------------------------

Seasonality

Revenues are highest in our fourth quarter due primarily to increased traffic in shopping malls during the holiday shopping season. Our annual revenues and earnings can fluctuate 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.

Goodwill and Other Intangible Assets

In accordance with SFAS No. 142, Goodwill and Other Intangible Assets, and SFAS No. 144, Accounting for the
Impairment and Disposal of Long-Lived Assets, we annually test impairment of goodwill and intangible assets with indefinite lives during the fourth quarter of our fiscal year unless evidence of an impairment necessitates earlier testing.



31



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##### Table of Contents

Summary Financial Information (Dollars in millions)



|                                                                             |  |                           |             |   |  |  |                        |   |               |                       |  |   |                        |   |  |   |               |  
|---------------------------------------------------------------------------- |  | ------------------------- | ----------- | - |  |  | ---------------------- | - | ------------- | --------------------- |  | - | ---------------------- | - |  | - | ------------- | -
|                                                                             |  | 13 weeksended 9/30/07 (1) |             |   |  |  | 12 weeks ended 10/8/06 |   |               | 39 weeksended 9/30/07 |  |   | 40 weeks ended 10/8/06 |  
|                                                                             |  |                           | (Successor) |   |  |  |                        |   | (Predecessor) |                       |  |   | (Combined)(4)          |   |  |   | (Predecessor) |  
|                                                                             |  |                           |             |   | 
|Comparable QSR-owned sales (2)                                               |  | $                         | 79.6        |   |  |  |                        | $ | 73.0          |                       |  | $ | 225.0                  |   |  | $ | 230.0         |  
|Comparable QSR-owned sales-percentage change vs. prior comparable period (2) |  |                           | 3.2         | % |  |  |                        |   | 4.8           | %                     |  |   | 3.0                    | % |  |   | 5.0           | %
|Franchise location sales                                                     |  | $                         | 90.8        |   |  |  |                        | $ | 74.8          |                       |  | $ | 247.3                  |   |  | $ | 221.2         |  
|Franchise revenues                                                           |  | $                         | 3.9         |   |  |  |                        | $ | 3.3           |                       |  | $ | 11.1                   |   |  | $ | 10.7          |  
|Cost of food and paper products as a percentage of restaurant sales          |  |                           | 20.7        | % |  |  |                        |   | 19.3          | %                     |  |   | 20.2                   | % |  |   | 19.3          | %
|Payroll and other benefits as a percentage of restaurant sales               |  |                           | 26.4        | % |  |  |                        |   | 26.5          | %                     |  |   | 27.5                   | % |  |   | 27.4          | %
|Other operating expense as a percentage of restaurant sales                  |  |                           | 35.1        | % |  |  |                        |   | 35.1          | %                     |  |   | 36.3                   | % |  |   | 36.3          | %
|General and administrative costs as a percentage of revenues                 |  |                           | 7.9         | % |  |  |                        |   | 8.4           | %                     |  |   | 8.4                    | % |  |   | 9.2           | %
|Provision for asset impairment and restaurant closings/remodels              |  | $                         | 0.1         |   |  |  |                        | $ | 0.2           |                       |  | $ | 0.4                    |   |  | $ | 0.5           |  
|EBITDA (1), (3)                                                              |  | $                         | 12.9        |   |  |  |                        | $ | 12.0          |                       |  | $ | (0.4                   | ) |  | $ | 33.1          |  

---

|(1) | Our 2007 third quarter presented consisted of thirteen weeks, while our 2006 third quarter presented consisted of twelve weeks. The one week difference in 2007
generated approximately $6.8 million in revenue and $.9 million in EBITDA. Our 2007 year to date third quarter presented consisted of thirty nine weeks combined Predecessor and Successor. Our 2006 year to date third quarter presented consisted of
forty weeks. The one week difference in 2006 generated approximately $5.9 million in revenue and $.8 million in EBITDA. Included in the calculation of EBITDA for the combined thirty nine weeks ended September 30, 2007 is $31.4 million related
to the special event bonuses.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Comparable QSR-owned sales dollar and annual percentage changes are based on locations that were open during the entire period within the periods presented.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | 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) or as a measure of a companys profitability or liquidity.
Rather, we believe that EBITDA provides relevant and useful information for analysts of, 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 Senior Credit Facilities. We
also internally use EBITDA to determine whether to continue operating restaurant units since it provides us with a measurement of whether we are receiving an adequate cash return on our 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.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | The combined results of the Successor and Predecessor for the thirty nine weeks ended September 30, 2007 does not comply with generally accepted accounting
principles; however, we believe that this provides useful information to assess the relative performance of the businesses in all periods presented in the financial statements on an ongoing basis.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



32



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##### Table of Contents

The following table reconciles EBITDA to our net loss for each of the periods presented, which we believe
is the most direct comparable GAAP financial measure to EBITDA (in thousands):



|                              |  |                                       |         |   |                                         |   |         |                                            |  |   |                              |   |  |   |         |  
|----------------------------- |  | ------------------------------------- | ------- | - | --------------------------------------- | - | ------- | ------------------------------------------ |  | - | ---------------------------- | - |  | - | ------- | -
|                              |  | SuccessorJanuary 31-September 30,2007 |         |   | Predecessor January 1 - January 30,2007 |   |         | Combined(1)39 WeeksEnded September 30,2007 |  |   | 40 WeeksEnded October 8,2006 |  
|EBITDA                        |  | $                                     | 28,435  |   |                                         | $ | (28,802 | )                                          |  | $ | (367                         | ) |  | $ | 33,059  |  
|Interest expense              |  |                                       | (21,036 | ) |                                         |   | (2,570  | )                                          |  |   | (23,606                      | ) |  |   | (23,782 | )
|Interest income               |  |                                       | 461     |   |                                         |   | 108     |                                            |  |   | 569                          |   |  |   | 2,001   |  
|Income tax (expense) benefit  |  |                                       | 1,940   |   |                                         |   | (44     | )                                          |  |   | 1,896                        |   |  |   | (580    | )
|Depreciation and amortization |  |                                       | (12,289 | ) |                                         |   | (1,272  | )                                          |  |   | (13,561                      | ) |  |   | (12,371 | )
|                              |  |                                       |         |   |                                         |   |         |                                            |  |   |                              |   |  |   |         |  
|Net loss                      |  | $                                     | (2,489  | ) |                                         | $ | (32,580 | )                                          |  | $ | (35,069                      | ) |  | $ | (1,673  | )
|                              |  |                                       |         |   |                                         |   |         |                                            |  |   |                              |   |  |   |         |  

---

|(1) | The combined results of the Successor and Predecessor for the periods in 2007 does not comply with generally accepted accounting principles; however, we believe
that this provides useful information to assess the relative performance of the businesses in all periods presented in the financial statements on an ongoing basis.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|                              |  |                                 |        |   |                             |   |        |  
|----------------------------- |  | ------------------------------- | ------ | - | --------------------------- | - | ------ | -
|                              |  | 13 WeeksEnded September 30,2007 |        |   | 12 WeeksEndedOctober 8,2006 |  
|EBITDA                        |  | $                               | 12,912 |   |                             | $ | 12,001 |  
|Interest expense              |  |                                 | (7,673 | ) |                             |   | (7,007 | )
|Interest income               |  |                                 | 57     |   |                             |   | 731    |  
|Income tax (expense) benefit  |  |                                 | (42    | ) |                             |   | 134    |  
|Depreciation and amortization |  |                                 | (4,751 | ) |                             |   | (3,799 | )
|                              |  |                                 |        |   |                             |   |        |  
|Net income (loss)             |  | $                               | 503    |   |                             | $ | 2,060  |  
|                              |  |                                 |        |   |                             |   |        |  



33



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##### Table of Contents

SBARRO, INC. AND SUBSIDIARIES

Combined Consolidated Statements Of Operations

(Unaudited)

(In thousands)



|                                                  |  |                                               |           |   |  |  |                                          |   |             |  
|------------------------------------------------- |  | --------------------------------------------- | --------- | - |  |  | ---------------------------------------- | - | ----------- | -
|                                                  |  | GAAP                                          |          
|                                                  |  | For the thirteenweeks endedSeptember 30, 2007 |           |   |  |  | For the twelveweeks endedOctober 8, 2006 |  
|                                                  |  |                                               | SUCCESSOR |   |  |  |                                          |   | PREDECESSOR |  
|Revenues:                                         |  |                                               |           |   |  |  |                                          |   |             |  
|Restaurant sales                                  |  | $                                             | 87,047    |   |  |  |                                          | $ | 75,525      |  
|Franchise related income                          |  |                                               | 3,948     |   |  |  |                                          |   | 3,279       |  
|Real estate                                       |  |                                               |          |   |  |  |                                          |   | 357         |  
|                                                  |  |                                               |           |   |  |  |                                          |   |             |  
|Total revenues                                    |  |                                               | 90,995    |   |  |  |                                          |   | 79,161      |  
|                                                  |  |                                               |          
|Costs and expenses:                               |  |                                               |           |   |  |  |                                          |   |             |  
|Cost of food and paper products                   |  |                                               | 18,008    |   |  |  |                                          |   | 14,564      |  
|Payroll and other employee benefits               |  |                                               | 23,001    |   |  |  |                                          |   | 20,046      |  
|Other operating costs                             |  |                                               | 30,597    |   |  |  |                                          |   | 26,538      |  
|Other (income) expense                            |  |                                               | (793      | ) |  |  |                                          |   | (833        | )
|Depreciation and amortization                     |  |                                               | 4,751     |   |  |  |                                          |   | 3,799       |  
|General and administrative                        |  |                                               | 7,145     |   |  |  |                                          |   | 6,686       |  
|Asset impairment, restaurant closings/remodels    |  |                                               | 125       |   |  |  |                                          |   | 161         |  
|                                                  |  |                                               |           |   |  |  |                                          |   |             |  
|Total costs and expenses                          |  |                                               | 82,834    |   |  |  |                                          |   | 70,961      |  
|                                                  |  |                                               |           |   |  |  |                                          |   |             |  
|Operating income                                  |  |                                               | 8,161     |   |  |  |                                          |   | 8,200       |  
|                                                  |  |                                               |           |   |  |  |                                          |   |             |  
|                                                  |  |                                               |          
|Other (expense) income:                           |  |                                               |           |   |  |  |                                          |   |             |  
|Interest expense                                  |  |                                               | (7,673    | ) |  |  |                                          |   | (7,007      | )
|Interest income                                   |  |                                               | 57        |   |  |  |                                          |   | 731         |  
|Equity in net income of unconsolidated affiliates |  |                                               |          |   |  |  |                                          |   | 2           |  
|                                                  |  |                                               |           |   |  |  |                                          |   |             |  
|Net other expense                                 |  |                                               | (7,616    | ) |  |  |                                          |   | (6,274      | )
|                                                  |  |                                               |           |   |  |  |                                          |   |             |  
|Income before income taxes                        |  |                                               | 545       |   |  |  |                                          |   | 1,926       |  
|                                                  |  |                                               |           |   |  |  |                                          |   |             |  
|Income taxes (benefit)                            |  |                                               | 42        |   |  |  |                                          |   | (134        | )
|                                                  |  |                                               |           |   |  |  |                                          |   |             |  
|Net income                                        |  | $                                             | 503       |   |  |  |                                          | $ | 2,060       |  
|                                                  |  |                                               |           |   |  |  |                                          |   |             |  



34



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SBARRO, INC. AND SUBSIDIARIES

Combined Consolidated Statements Of Operations

(Unaudited)

(In thousands)



|                                                        |  |                                                    |           |   |                                                 |   |             |                                  |  |   |                                             |   |  |                                           |         |   |                                  |   |         |   |  |   |         |  
|------------------------------------------------------- |  | -------------------------------------------------- | --------- | - | ----------------------------------------------- | - | ----------- | -------------------------------- |  | - | ------------------------------------------- | - |  | ----------------------------------------- | ------- | - | -------------------------------- | - | ------- | - |  | - | ------- | -
|                                                        |  | GAAP                                               |           |   | GAAP                                            |   |             | Combined                       |  |   | Pro Forma                                   |  
|                                                        |  | For the periodJanuary 31 throughSeptember 30, 2007 |           |   | For the
periodJanuary 1 throughJanuary 30, 2007 |   |             | Forty weeks endedOctober 8, 2006 |  |   | Thirty nine weeks endedSeptember 30, 2007 * |   |  | Thirty nine weeks endedSeptember 30, 2007 |         |   | Forty weeks endedOctober 8, 2006 |  
|                                                        |  |                                                    | SUCCESSOR |   |                                                 |   | PREDECESSOR |                                  |  |   | PREDECESSOR                                 |   |  |                                           |         |   |                                  |   |         |   |  |   |         |  
|Revenues:                                               |  |                                                    |           |   |                                                 |   |             |                                  |  |   |                                             |   |  |                                           |         |   |                                  |   |         |   |  |   |         |  
|Restaurant sales                                        |  | $                                                  | 219,098   |   |                                                 | $ | 23,594      |                                  |  | $ | 240,128                                     |   |  | $                                         | 242,692 |   |                                  | $ | 242,692 |   |  | $ | 239,936 |  
|Franchise related income                                |  |                                                    | 10,067    |   |                                                 |   | 993         |                                  |  |   | 10,678                                      |   |  |                                           | 11,060  |   |                                  |   | 11,060  |   |  |   | 10,678  |  
|Real estate                                             |  |                                                    |          |   |                                                 |   | 323         |                                  |  |   | 1,741                                       |   |  |                                           | 323     |   |                                  |   |        |   |  |   |        |  
|                                                        |  |                                                    |           |   |                                                 |   |             |                                  |  |   |                                             |   |  |                                           |         |   |                                  |   |         |   |  |   |         |  
|Total revenues                                          |  |                                                    | 229,165   |   |                                                 |   | 24,910      |                                  |  |   | 252,547                                     |   |  |                                           | 254,075 |   |                                  |   | 253,752 |   |  |   | 250,614 |  
|                                                        |  |                                                    |           |   |                                                 |  
|Costs and expenses:                                     |  |                                                    |           |   |                                                 |   |             |                                  |  |   |                                             |   |  |                                           |         |   |                                  |   |         |   |  |   |         |  
|Cost of food and paper products                         |  |                                                    | 44,621    |   |                                                 |   | 4,308       |                                  |  |   | 46,428                                      |   |  |                                           | 48,929  |   |                                  |   | 48,929  |   |  |   | 46,335  |  
|Payroll and other employee benefits                     |  |                                                    | 60,092    |   |                                                 |   | 6,762       |                                  |  |   | 65,736                                      |   |  |                                           | 66,854  |   |                                  |   | 66,854  |   |  |   | 65,548  |  
|Other operating costs                                   |  |                                                    | 79,201    |   |                                                 |   | 8,839       |                                  |  |   | 87,131                                      |   |  |                                           | 88,040  |   |                                  |   | 88,230  |   |  |   | 87,773  |  
|Other expense (income)                                  |  |                                                    | (1,924    | ) |                                                 |   | (497        | )                                |  |   | (3,322                                      | ) |  |                                           | (2,421  | ) |                                  |   | (2,421  | ) |  |   | (3,322  | )
|Depreciation and amortization                           |  |                                                    | 12,289    |   |                                                 |   | 1,272       |                                  |  |   | 12,371                                      |   |  |                                           | 13,561  |   |                                  |   | 13,586  |   |  |   | 12,458  |  
|General and administrative                              |  |                                                    | 18,406    |   |                                                 |   | 2,843       |                                  |  |   | 23,194                                      |   |  |                                           | 21,249  |   |                                  |   | 21,045  |   |  |   | 20,459  |  
|Special event bonuses                                   |  |                                                    |          |   |                                                 |   | 31,395      |                                  |  |   |                                            |   |  |                                           | 31,395  |   |                                  |   |        |   |  |   |        |  
|Asset impairment and restaurantclosings/remodels        |  |                                                    | 334       |   |                                                 |   | 74          |                                  |  |   | 474                                         |   |  |                                           | 408     |   |                                  |   | 408     |   |  |   | 474     |  
|                                                        |  |                                                    |           |   |                                                 |   |             |                                  |  |   |                                             |   |  |                                           |         |   |                                  |   |         |   |  |   |         |  
|Total costs and expenses                                |  |                                                    | 213,019   |   |                                                 |   | 54,996      |                                  |  |   | 232,012                                     |   |  |                                           | 268,015 |   |                                  |   | 236,631 |   |  |   | 229,725 |  
|                                                        |  |                                                    |           |   |                                                 |   |             |                                  |  |   |                                             |   |  |                                           |         |   |                                  |   |         |   |  |   |         |  
|Operating income (loss)                                 |  |                                                    | 16,146    |   |                                                 |   | (30,086     | )                                |  |   | 20,535                                      |   |  |                                           | (13,940 | ) |                                  |   | 17,121  |   |  |   | 20,889  |  
|                                                        |  |                                                    |           |   |                                                 |   |             |                                  |  |   |                                             |   |  |                                           |         |   |                                  |   |         |   |  |   |         |  
|                                                        |  |                                                    |           |   |                                                 |  
|Other (expense) income:                                 |  |                                                    |           |   |                                                 |   |             |                                  |  |   |                                             |   |  |                                           |         |   |                                  |   |         |   |  |   |         |  
|Interest expense                                        |  |                                                    | (21,036   | ) |                                                 |   | (2,570      | )                                |  |   | (23,782                                     | ) |  |                                           | (23,606 | ) |                                  |   | (23,630 | ) |  |   | (24,133 | )
|Interest income                                         |  |                                                    | 461       |   |                                                 |   | 108         |                                  |  |   | 2,001                                       |   |  |                                           | 569     |   |                                  |   | 569     |   |  |   | 2,001   |  
|Equity in net income (loss) ofunconsolidated affiliates |  |                                                    |          |   |                                                 |   | 12          |                                  |  |   | 153                                         |   |  |                                           | 12      |   |                                  |   |        |   |  |   |        |  
|                                                        |  |                                                    |           |   |                                                 |   |             |                                  |  |   |                                             |   |  |                                           |         |   |                                  |   |         |   |  |   |         |  
|Net other expense                                       |  |                                                    | (20,575   | ) |                                                 |   | (2,450      | )                                |  |   | (21,628                                     | ) |  |                                           | (23,025 | ) |                                  |   | (23,061 | ) |  |   | (22,132 | )
|                                                        |  |                                                    |           |   |                                                 |   |             |                                  |  |   |                                             |   |  |                                           |         |   |                                  |   |         |   |  |   |         |  
|Loss before income taxes                                |  |                                                    | (4,429    | ) |                                                 |   | (32,536     | )                                |  |   | (1,093                                      | ) |  |                                           | (36,965 | ) |                                  |   | (5,940  | ) |  |   | (1,243  | )
|                                                        |  |                                                    |           |   |                                                 |   |             |                                  |  |   |                                             |   |  |                                           |         |   |                                  |   |         |   |  |   |         |  
|Income tax (benefit) expense                            |  |                                                    | (1,940    | ) |                                                 |   | 44          |                                  |  |   | 580                                         |   |  |                                           | (1,896  | ) |                                  |   | (2,506  | ) |  |   | (485    | )
|                                                        |  |                                                    |           |   |                                                 |   |             |                                  |  |   |                                             |   |  |                                           |         |   |                                  |   |         |   |  |   |         |  
|Net (loss) income                                       |  | $                                                  | (2,489    | ) |                                                 | $ | (32,580     | )                                |  | $ | (1,673                                      | ) |  | $                                         | (35,069 | ) |                                  | $ | (3,434  | ) |  | $ | (758    | )
|                                                        |  |                                                    |           |   |                                                 |   |             |                                  |  |   |                                             |   |  |                                           |         |   |                                  |   |         |   |  |   |         |  

---

|* | The combined results of the successor and predecessor for the periods in 2007 do not comply with generally accepted accounting principles; however, we believe
these results provide useful information to assess the relative performance of the businesses in all periods presented in the financial statements on an ongoing basis.
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

We operate two business segments. Our company-owned restaurant segment is comprised of the operating
activities of our company owned QSR restaurants and other concept restaurants. Our franchise restaurant segment offers franchise opportunities worldwide for qualified operators to conduct business under the Sbarro name. Revenue from franchise
operations is generated from initial franchise fees, ongoing royalties and other franchising revenue.

We do not allocate indirect
corporate charges to the franchise operating segment. Such costs are managed on an entity-wide basis as the information to reasonably allocate such costs is not readily available.

We do not allocate assets by segment because our chief operating decision makers do not review the assets by segment to assess the segments performance as the assets are managed on an
entity-wide basis.

Third Quarter 2007 Versus Third Quarter 2006

The following table sets forth the information concerning the revenue and operating income, before unallocated costs, of each of our company owned and franchise restaurant segments for the
thirteen weeks ended September 30, 2007 (Successor) and the twelve weeks ended October 8, 2006 (Predecessor) (in thousands):



|                                          |  |                              |        |                       |   |        |  |   |       
|----------------------------------------- |  | ---------------------------- | ------ | --------------------- | - | ------ |  | - | ------
|                                          |  | CompanyOwned Restaurants (1) |        | Franchise Restaurants |   | Totals
|2007 (Successor)                          |  |                              |        |                       |   |        |  |   |       
|Total revenue                             |  | $                            | 87,047 |                       | $ | 3,948  |  | $ | 90,995
|                                          |  |                              |        |                       |   |        |  |   |       
|Operating income before unallocated costs |  | $                            | 11,829 |                       | $ | 2,718  |  | $ | 14,547
|                                          |  |                              |        |                       |   |        |  |   |       
|Unallocated costs and
expenses (2)        |  |                              |        |                       |   |        |  |   | 6,386 
|                                          |  |                              |        |                       |   |        |  |   |       
|Operating income                          |  |                              |        |                       |   |        |  | $ | 8,161 
|                                          |  |                              |        |                       |   |        |  |   |       
|2006 (Predecessor)                        |  |                              |        |                       |   |        |  |   |       
|Total revenue                             |  | $                            | 75,882 |                       | $ | 3,279  |  | $ | 79,161
|                                          |  |                              |        |                       |   |        |  |   |       
|Operating income before unallocated costs |  | $                            | 11,602 |                       | $ | 2,387  |  | $ | 13,989
|                                          |  |                              |        |                       |   |        |  |   |       
|Unallocated costs and expenses (2)        |  |                              |        |                       |   |        |  |   | 5,789 
|                                          |  |                              |        |                       |   |        |  |   |       
|Operating income                          |  |                              |        |                       |   |        |  | $ | 8,200 
|                                          |  |                              |        |                       |   |        |  |   |       

---

|(1) | Total revenue includes restaurant sales in the Successor period and restaurant sales and real estate revenues in the Predecessor period.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------

|(2) | Represents certain general and administrative expenses that are not allocated to a segment.
|--- | -------------------------------------------------------------------------------------------

Sales by QSR and consolidated other concept restaurants was $87.0 million for the thirteen weeks ended September 30, 2007 compared to $75.5 million
for the twelve weeks ended October 8, 2006. The one week difference in 2007 generated sales of $6.6 million. The remaining increase in sales in 2007 resulted from same store sales growth of 3.2% and new store openings. Predecessor real estate
revenue was $.4 million in third quarter 2006, we transferred our interests in the real estate to a company owned by certain of our former shareholders in connection with the Merger.

Franchise related revenues were $3.9 million for the third quarter of 2007 as compared to $3.3 million in the third quarter of 2006. The one week difference in 2007 generated revenues of
approximately $.3 million. The remaining increase in 2007 is due to comparable unit sales increase of 4.3% for domestic locations and 6.6% for international locations and new store openings.

Cost of food and paper products as a percentage of restaurant sales increased to 20.7% for the thirteen weeks ended September 30, 2007 as compared to 19.3% for the twelve weeks ended
October 8, 2006. The cost of cheese in the third quarter of 2007 averaged $2.16 per pound compared to an average of $1.40 per pound in the third quarter of 2006. This $.76 per pound increase in cheese cost accounted for $1.5 million or 1.9% of
the increased cost which was offset in part by volume discounts and other efficiencies.

Payroll and other employee benefits, as a
percentage of restaurant sales, remained relatively flat at 26.4% in the third quarter of 2007 from 26.5% in the third quarter of 2006.



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Other operating costs as a percentage of restaurant sales also remained relatively flat at 35.1% for both
the third quarter 2007 and third quarter of 2006.

Other income was $.8 million for both the third quarter of 2007 and the third quarter of
2006.

General and administrative expenses were $7.1 million in the third quarter 2007 as compared to $6.7 million in the third quarter of
2006. The one week difference in 2007 generated approximately $.5 million of expense. Expenses of $.7 million in 2006 related to our former shareholders were eliminated as a result of the Merger. An additional $.2 million was included in 2006
relating to a long-term special incentive award that was terminated in connection with the Merger and was not paid. Management fees of $.3 million are included in 2007. The remaining increase in 2007 is primarily severance charges relating to
management realignment.

Interest expense of $7.7 million for the third quarter of 2007 is primarily related to the Senior Notes and the
term loan under our Senior Credit Facilities. Included in interest expense in the third quarter 2007 was amortization of deferred financing costs for the new debt of $.1 million. Interest expense of $7.0 million for the third quarter of 2006 related
to the 11%, $255 million senior notes and the 8.4%, $16 million mortgage loan on our corporate headquarters. In connection with the Merger, the 11% Notes were redeemed and the mortgage loan and interests in the building were transferred to a company
owned by certain of our former shareholders.

In the Predecessor period, equity in the net income of unconsolidated affiliates represented
our proportionate share of earnings and losses in those other concept restaurants in which we have a 50% or less ownership interest. In connection with the Merger, our interests in these unconsolidated affiliates were transferred to a company owned
by certain of our former shareholders.

Income tax expense was $0.1 million for the third quarter 2007. Our effective tax rate was 39% for
the period. In the third quarter 2006, we were 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. Under the provisions of Subchapter S,
substantially all taxes on our income were paid by our shareholders rather than us. Our net tax benefit was $.1 million for the third quarter of 2006.



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##### Table of Contents

Year to Date 2007 Versus 2006

The following table sets forth the information concerning the revenue and operating income, before unallocated costs, of each of our company owned and franchise restaurant segments for the period
January 31 through September 30, 2007 (Successor) and the period January 1, 2007 through January 31, 2007 (Predecessor) and the forty weeks ended October 8, 2006 (Predecessor) (in thousands):



|                                           |  |                              |         |                       |   |        |  |   |         |  
|------------------------------------------ |  | ---------------------------- | ------- | --------------------- | - | ------ |  | - | ------- | -
|                                           |  | CompanyOwned Restaurants (1) |         | Franchise Restaurants |   | Totals | 
|January 31- September 30, 2007 (Successor) |  |                              |         |                       |   |        |  |   |         |  
|Total revenue                              |  | $                            | 219,098 |                       | $ | 10,067 |  | $ | 229,165 |  
|                                           |  |                              |         |                       |   |        |  |   |         |  
|Operating income before unallocated costs  |  | $                            | 24,959  |                       | $ | 6,749  |  | $ | 31,708  |  
|                                           |  |                              |         |                       |   |        |  |   |         |  
|Unallocated costs and expenses (2)         |  |                              |         |                       |   |        |  |   | 15,562  |  
|                                           |  |                              |         |                       |   |        |  |   |         |  
|Operating income                           |  |                              |         |                       |   |        |  | $ | 16,146  |  
|                                           |  |                              |         |                       |   |        |  |   |         |  
|January 1- January 30, 2007 (Predecessor)  |  |                              |         |                       |   |        |  |   |         |  
|Total revenue                              |  | $                            | 23,917  |                       | $ | 993    |  | $ | 24,910  |  
|                                           |  |                              |         |                       |   |        |  |   |         |  
|Operating income before unallocated costs  |  | $                            | 3,160   |                       | $ | 594    |  | $ | 3,754   |  
|                                           |  |                              |         |                       |   |        |  |   |         |  
|Unallocated costs and expenses (2)         |  |                              |         |                       |   |        |  |   | 33,840  |  
|                                           |  |                              |         |                       |   |        |  |   |         |  
|Operating loss                             |  |                              |         |                       |   |        |  | $ | (30,086 | )
|                                           |  |                              |         |                       |   |        |  |   |         |  
|2006 (Predecessor)                         |  |                              |         |                       |   |        |  |   |         |  
|Total revenue                              |  | $                            | 241,869 |                       | $ | 10,678 |  | $ | 252,547 |  
|                                           |  |                              |         |                       |   |        |  |   |         |  
|Operating income before unallocated costs  |  | $                            | 33,053  |                       | $ | 7,588  |  | $ | 40,641  |  
|                                           |  |                              |         |                       |   |        |  |   |         |  
|Unallocated costs and expenses (2)         |  |                              |         |                       |   |        |  |   | 20,106  |  
|                                           |  |                              |         |                       |   |        |  |   |         |  
|Operating income                           |  |                              |         |                       |   |        |  | $ | 20,535  |  
|                                           |  |                              |         |                       |   |        |  |   |         |  

---

|(1) | Total revenue includes restaurant sales in the Successor period and restaurant sales and real estate revenues in the Predecessor period.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------

|(2) | Represents certain general and administrative expenses that are not allocated to a segment.
|--- | -------------------------------------------------------------------------------------------

Sales by QSR and consolidated other concept restaurants was $242.7 million for the combined thirty nine weeks ended September 30, 2007 compared to
$240.1 million for the forty weeks ended October 8, 2006. The additional week in 2006 generated sales of $5.7 million. The increase in sales in 2007 resulted from same store sales increase of 3.0% and new store openings. We believe that the
improvement in comparable unit sales was due to improved economic conditions in the United States, improvement in our operational controls, upgraded field and store management combined with higher check averages and selective price increases.
Predecessor real estate revenue was $.3 million year to date 2007 and $1.7 million in 2006. We transferred our interests in the real estate to a company owned by certain of our former shareholders in connection with the Merger.

Franchise related revenues were $11.1 million for the combined year to date 2007 as compared to $10.7 million in the year to date 2006. The additional
week in 2006 generated revenues of approximately $.2 million. The increase in 2007 is due to comparable unit sales growth of 4.5% for domestic locations and 5.8% for international locations and new store openings.

Cost of food and paper products as a percentage of restaurant sales was 20.2% for the combined year to date 2007 compared to 19.3% for the year to date
2006. The cost of cheese in the combined year to date 2007 averaged $1.82 per pound compared to an average of $1.42 per pound in the year to date 2006. This $.40 per pound increase in cheese cost accounted for $2.3 million or 1.0% of the increased
cost which was offset in part by volume discounts and other efficiencies.

Payroll and other employee benefits, as a percentage of
restaurant sales, remained relatively flat at 27.5% in the combined year to date 2007 compared to 27.4% in the year to date 2006.



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Other operating costs as a percentage of restaurant sales remained flat at 36.3% in year to date 2007 and
in the year to date 2006.

Other income was $2.4 million for the combined year to date 2007 as compared to $3.3 million for the year to
date 2006. The decrease is primarily due to a decrease in certain rebates we received based on franchisees level of purchases.

General and administrative expenses were $21.2 million in the combined year to date 2007 compared to $23.2 million year to date 2006. The additional week in 2006 generated approximately $.5 million of expense. Expenses of $.2 million in
2007 and $2.4 million in 2006 related to our former shareholders were eliminated as a result of the Merger. An additional $.6 million was included in 2006 relating to a long-term special incentive award that was terminated in connection with the
Merger and was not paid. Management fees of $.7 million are included in 2007. The remaining increase in 2007 is primarily due to severance charges relating to management realignment.

Interest expense of $23.6 million for the combined year to date 2007 related primarily to the Senior Notes and the term loan under our Senior Credit Facilities. and included $.7 million
amortization of deferred financing costs for the new debt. Interest expense of $23.8 million for the year to date 2006 related to the 11%, $255 million senior notes and the 8.4%, $16 million mortgage loan on our corporate headquarters. In connection
with the Merger, the 11% Notes were redeemed and the mortgage loan and interests in the building were transferred to a company owned by certain of our former shareholders.

Equity in the net income of unconsolidated affiliates represented our proportionate share of earnings and losses in those other concept restaurants in which we have a 50% or less ownership
interest. In connection with the Merger, our interests in these unconsolidated affiliates were transferred to a company owned by certain of our former shareholders.

In the 2007 Successor periods, we are taxed as a C corporation. The income tax benefit was $1.9 million for the period January 31 through September 30, 2007. Our effective tax rate was 39% for the period. In
2006, we were 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. Under the provisions of Subchapter S, substantially all taxes on our
income were paid by our shareholders rather than us. Our net tax expense was $.6 million for year to date 2006.

Liquidity and Capital
Resources

Principal Cash Requirements and Sources

Our liquidity requirements relate to debt service, capital expenditures, working capital, investments in other ventures, and acquisitions. We estimate that our annual cash interest expense under the Senior Notes and
Senior Credit Facilities that we put into place in connection with the Merger will be approximately $30 million. We also may incur additional interest expense for borrowings under our line of credit. The Senior Credit Facilities require us to prepay
outstanding borrowings, subject to certain exceptions, with (a) 50% of our annual excess cash flow (subject to stepdowns based upon our total leverage ratio); (b) 100% of the net cash proceeds of certain asset sales or other dispositions
of property (including casualty insurance and condemnations) if we do not commit to reinvest such proceeds in accordance with the terms of the Senior Credit Facilities within 365 days of the event giving rise thereto (or, to the extent we have
entered into a commitment to reinvest such proceeds within such time period to the extent such amounts are actually reinvested, within six months of the expiration of such 365 days); and (c) 100% of the net cash proceeds of any incurrence of
debt, other than debt permitted under the Senior Credit Facilities. We are not required to make principal payments, absent the occurrence of certain events, on our Senior Notes until they mature in 2015. We believe that aggregate capital
expenditures for all of 2007 will approximate $15 million. Additionally, we bought back franchise locations and purchased other locations for approximately $4.8 million year to date in 2007.

Based on our current level of operations, we believe our cash flow from operations, available cash and available borrowings under our Senior Credit Facilities will be adequate to meet our
liquidity needs for at least the next twelve months.



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##### Table of Contents

Contractual Obligations

We enter into various agreements that result in contractual payment obligations in connection with our business activities. These obligations primarily relate to our financing arrangements and
leases of real property for our company-owned restaurants.

The following table presents our contractual obligations as of
September 30, 2007:



|                                             |  |      |      |      |   |      |  |      |      |      |   |            |  |           |      |  |   |       |  |   |      
|-------------------------------------------- |  | ---- | ---- | ---- | - | ---- |  | ---- | ---- | ---- | - | ---------- |  | --------- | ---- |  | - | ----- |  | - | -----
|Dollars in million                           |  | 2008 |      | 2009 |   | 2010 |  | 2011 |      | 2012 |   | Thereafter |  | Total (5)
|Senior Notes (1)                             |  | $    |     |      | $ |     |  | $    |     |      | $ |           |  | $         |     |  | $ | 150.0 |  | $ | 150.0
|Senior Credit Facility (2)                   |  |      | 1.8  |      |   | 1.8  |  |      | 1.8  |      |   | 1.8        |  |           | 1.8  |  |   | 172.5 |  |   | 181.5
|Estimated Interest Expense on Long-Term Debt |  |      | 29.9 |      |   | 29.8 |  |      | 29.6 |      |   | 29.8       |  |           | 29.4 |  |   | 47.2  |  |   | 195.7
|Letters of Credit (3)                        |  |      | 3.8  |      |   |     |  |      |     |      |   |           |  |           |     |  |   |      |  |   | 3.8  
|Operating Leases (4)                         |  |      | 53.8 |      |   | 47.9 |  |      | 41.9 |      |   | 36.4       |  |           | 31.9 |  |   | 91.3  |  |   | 303.2
|                                             |  |      |      |      |   |      |  |      |      |      |   |            |  |           |      |  |   |       |  |   |      
|                                             |  | $    | 89.3 |      | $ | 79.5 |  | $    | 73.3 |      | $ | 68.0       |  | $         | 63.1 |  | $ | 461.0 |  | $ | 834.2
|                                             |  |      |      |      |   |      |  |      |      |      |   |            |  |           |      |  |   |       |  |   |      

---

|(1) | There are no principal repayment obligations under the Senior Notes until 2015.
|--- | -------------------------------------------------------------------------------

|(2) | Principal amortization payments of .25% of initial principal are due quarterly beginning second quarter 2007.
|--- | -------------------------------------------------------------------------------------------------------------

|(3) | Represents our maximum reimbursement obligations to the issuer of the letters of credit in the event the letters of credit are drawn upon. The letters of credit
generally are issued instead of cash security deposits under operating leases or to guarantee construction costs for Sbarro. All of the standby letters of credit supporting leases are renewable annually through the expiration of the related lease
terms. If not renewed, the beneficiary may draw upon the letters of credit as long as the underlying obligation remains outstanding.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Does not reflect the impact of renewals of operating leases that are scheduled to expire during the periods indicated. Includes franchise lease guarantees and
the lease on our corporate headquarters.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Does not include an amount we agreed to pay the former shareholders for any incremental tax benefit of deductions generated by the repurchase of our 11% Notes or
payment of the special event bonuses. The payment is due within 15 days of the filing of the US tax return that claims these additional deductions.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Historically, we had not purchased or entered into interest rate swaps of future, forward, option or other instruments designed to hedge against changes in interest rates, the price of commodities we purchase or the
value of foreign currencies. Subsequent to the Merger, we entered into an Interest Rate Cap Letter Agreement for our Senior Credit Facility. This agreement caps our Libor rate at 6.00% through February 2009 and 6.50% through February 2010.

Senior Credit Facilities

We entered into new senior secured credit facilities simultaneously with the closing of the Merger. The Senior Credit Facilities are senior secured credit facilities providing for loans of $208.0 million under a $183.0 million senior
secured term loan facility and a $25.0 million senior secured revolving facility. The revolving facility also provides for the issuance of letters of credit not to exceed $10.0 million at any one time outstanding and swing line loans not to exceed
$5.0 million at any one time outstanding. In addition, the Senior Credit Facilities provide for an uncommitted incremental facility of up to $50.0 million. In connection with the Merger, we borrowed the entire $183.0 million available under the term
loan facility. The term loan facility will mature in 2014 and the revolving credit facility is scheduled to terminate and come due in 2013.

In general, borrowings under the Senior Credit Facilities bear interest based, at our option, at either the Eurodollar rate or an alternate base rate (ABR), in each case plus a margin. The applicable margin will be based on our
total leverage ratio (as defined in the credit agreement governing the Senior Credit Facilities) at the time of determination. Our rate of interest for borrowings under the Senior Credit Facilities is LIBOR plus 2.50% or ABR plus 1.50%. In addition
to paying interest on outstanding principal under the Senior Credit Facilities, we are required to pay an unused line fee to the lenders in respect of the unutilized revolving commitments there under at a rate that shall not exceed 50 basis points
per annum.

Our obligations under the Senior Credit Facilities will be unconditionally and irrevocably guaranteed by our domestic
subsidiaries. In addition, the Senior Credit Facilities will be secured by first priority perfected security interests in substantially all of our and our domestic subsidiaries capital stock, and up to 65% of the outstanding capital stock of
our foreign subsidiaries.



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The credit agreement governing the Senior Credit Facilities contains certain events of default and
restrictive covenants which are customary with respect to facilities of this type, including limitations on the incurrence of additional indebtedness, dividends, investments, repayment of certain indebtedness, sales of assets, liens, mergers and
transactions with affiliates. In addition, the credit agreement requires compliance with certain financial and operating covenants, including a minimum cash interest coverage ratio and a maximum net leverage ratio.

10.375% Senior Notes due 2015

In
connection with the Merger, we issued $150.0 million of Senior Notes due 2015. The notes bear interest which is payable on February 1 and August 1 of each year.

The Senior Notes are senior unsecured obligations of ours and are guaranteed by all of our current and future domestic subsidiaries and rank equally in right of payment with all existing and
future senior indebtedness of ours. The Senior Notes are effectively subordinated to all secured indebtedness of ours, to the extent of the collateral securing such indebtedness, including the Senior Credit Facilities. In the event of any
distribution or payment of our assets in any foreclosure, dissolution, winding-up, liquidation, reorganization, or other bankruptcy proceeding, holders of secured indebtedness will have prior claim to those of our assets that constitute their
collateral. The Senior Notes are structurally subordinated to all existing and future indebtedness, and other liabilities of our subsidiaries that do not guarantee the Senior Notes. In the event of a bankruptcy, liquidation or reorganization of any
of our non-guarantor subsidiaries, holders of their indebtedness and their trade creditors will generally be entitled to payment of their claims in full from the assets of those subsidiaries before any assets are made available for distribution to
us. The Senior Notes are senior in right of payment to any future subordinated obligations of ours.

The indenture governing the notes
contains certain events of default and restrictive covenants which are customary with respect to non-investment grade debt securities, including limitations on the incurrence of additional indebtedness, dividends, repurchases of capital stock, sales
of assets, liens, mergers and transactions with affiliates. As discussed above, in connection with the Merger, we repurchased all of our 11% Notes. We also terminated our prior senior credit facility.



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##### Table of Contents

Sources and Uses of Cash

The following table summarizes our cash and cash equivalents and working capital as of the end of the year to date third quarter of 2007 and 2006 and the cash provided by or used in our
operating, investing and financing activities during year to date third quarter of each of those years:



|                                           |  |                                    |               |   |                              |   |               |                                   |  |   |               |  
|------------------------------------------ |  | ---------------------------------- | ------------- | - | ---------------------------- | - | ------------- | --------------------------------- |  | - | ------------- | -
|                                           |  | Period Jan. 31 -September 30, 2007 |               |   | Period Jan. 1 -Jan. 30, 2007 |   |               | Forty Weeks ended October 8, 2006 | 
|                                           |  |                                    | (Successor)   |   |                              |   | (Predecessor) |                                   |  |   | (Predecessor) |  
|                                           |  |                                    | (in millions) |  
|Liquidity at the end of period             |  |                                    |               |   |                              |   |               |                                   |  |   |               |  
|Cash and cash equivalents                  |  | $                                  | 13.5          |   |                              | $ | 11.0          |                                   |  | $ | 59.9          |  
|Working capital                            |  |                                    | (4.6          | ) |                              |   | (49.2         | )                                 |  |   | 44.8          |  
|Net cash flows for
the period              |  |                                    |               |   |                              |   |               |                                   |  |   |               |  
|Provided by (used in) operating activities |  |                                    | 19.4          |   |                              |   | (5.3          | )                                 |  |   | (4.0          | )
|Used in investing activities               |  |                                    | (193.0        | ) |                              |   | (1.7          | )                                 |  |   | (9.0          | )
|Provided by (used in) financing activities |  |                                    | 187.1         |   |                              |   | (70.6         | )                                 |  |   | (.2           | )
|                                           |  |                                    |               |   |                              |   |               |                                   |  |   |               |  
|Net increase (decrease) in cash            |  | $                                  | 13.5          |   |                              | $ | (77.6         | )                                 |  | $ | (13.2         | )
|                                           |  |                                    |               |   |                              |   |               |                                   |  |   |               |  

We have not historically required significant working capital to fund our existing operations and
have financed our capital expenditures and investments in joint ventures through cash generated from operations.

Net cash provided by
operating activities was $19.4 million for the Successor period January 31 through September 30, 2007 as compared to $5.3 million used in the Predecessor period January 1 through January 30, 2007 and $4.0 million used during the
forty weeks ended October 8, 2006. The change in net cash provided by operating activities is primarily related to a $8.1 million increase in accounts payable, accrued expenses and accrued interest payable combined with a $2.8 million decrease
in receivables and prepaid expenses and other assets.

Net cash used in investing activities has historically been primarily for capital
expenditures and was $193.0 million for the Successor period January 31 through September 30, 2007. The net cash used represents the $177.0 million net cash paid for the merger, capital expenditures of $10.9 million and buy back of
franchise locations and other locations of $4.8 million. Net cash used was $1.7 million for the Predecessor period January 1 through January 30, 2007 and was $9.0 million for the forty weeks ended October 8, 2006. Capital expenditures
were utilized primarily for restaurant openings and renovation activity.

Net cash provided by financing activities was $187.1 million for
the Successor period January 31 through September 30, 2007. The net cash represents proceeds from injected capital, the proceeds from the new debt, debt issue costs, and paydown of the old debt. Net cash used in financing activities for
the Predecessor period January 1 through January 30, 2007 of $70.6 million represents dividends to sellers net of repayments of officer loans.

Critical Accounting Policies

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.
Accounting policies often require us to make estimates and assumptions that affect the amounts of assets, liabilities, revenues and expenses reported in our 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 thirteen weeks ended September 30, 2007, there were no material
changes in the accounting policies whose application may have the most significant effect on our reported results of operations or financial position and that require judgments, estimates and assumptions by management that can affect their
application and our results of operations and financial position from those discussed under the heading Critical Accounting Policies, in Item 2 Managements Discussion and Analysis of Financial Condition and Results of
Operations, in our Quarterly Report on Form 10-Q for the period ending April 1, 2007.



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##### Table of Contents

Recent Accounting Pronouncements

SFAS 157:

In September 2006, the FASB issued SFAS No. 157, Fair
Value Measurements. This statement defines fair value, establishes a framework for using fair value to measure assets and liabilities, and expands disclosures about fair value measurements. The statement applies whenever other statements
require or permit assets or liabilities to be measured at fair value. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007, and based upon our preliminary analysis, it will not have a material effect on our
consolidated financial statements.

EITF Issue No. 06-3:

In June 2006, the FASB ratified Emerging Issues Task Force (EITF) Issue No. 063, How Taxes Collected from Customers and Remitted to Governmental Authorities Should Be
Presented in the Income Statement (that is, Gross versus Net Presentation), which allows companies to adopt a policy of presenting taxes in the income statement on either a gross or net basis. Taxes within the scope of this EITF would include
taxes that are imposed on a revenue transaction between a seller and a customer. If such taxes are significant, the accounting policy should be disclosed as well as the amount of taxes included in the financial statements if presented on a gross
basis. EITF 063 is effective for interim and annual reporting periods beginning after December 15, 2006. We had been accounting for sales tax as net and upon the adoption of EITF Issue No. 06-03 in the first quarter of 2007 we
continued to present as net.

SFAS 159:

In February 2007, the FASB issued FASB Statement No. 159, The Fair Value Option for Financial Assets and Financial Liabilities  Including an Amendment of FASB Statement No. 115 (SFAS 159).
Under SFAS 159, a company may elect to measure eligible financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings at each subsequent
reporting date. SFAS 159 is effective for fiscal years beginning after November 15, 2007. The Company is currently assessing whether fair value accounting is appropriate for any of the Companys eligible items and have not yet determined
the impact, if any, on our consolidated financial statements.

FIN 48:

We adopted FIN 48 in the first quarter of 2007. Under FIN 48, tax benefits are recognized only for tax positions that are more likely than not to be sustained upon examination by tax authorities.
The amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely to be realized upon ultimate settlement. Unrecognized tax benefits are tax benefits claimed in tax returns that do not meet these recognition
and measurement standards. The adoption did not have a material effect on the Companys financial statements and we do not expect the change to have a significant impact on our results of operations or financial position during the next twelve
months.

As permitted by FIN 48, we also adopted an accounting policy to prospectively classify accrued interest and penalties related to
any unrecognized tax benefits in our income tax provision. Previously, our policy was to classify interest and penalties as an operating expense in arriving at pre-tax income. At September 30, 2007, we do not have accrued interest and penalties
related to any unrecognized tax benefits. As we were taxed as a subchapter S corporation prior to the Merger, we do not believe we have taken any uncertain tax positions for our Successor period January 31, 2007 through September 30, 2007.
The years subject to potential audit varies depending on the tax jurisdiction. The Companys major taxing jurisdictions include New York, California, Florida, Texas and Ohio.

Certain Relationships and Transactions

During the third quarter of 2007, there
were no Certain Relationships and Transactions in addition to those discussed under the heading Certain Relationships and Related Transactions in Item 2 Managements Discussion and Analysis of Financial Condition and Results
of Operationin our Quarterly Report on Form 10-Q for the period ending April 1, 2007.



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##### Table of Contents

|Item 3. | Quantitative and Qualitative Disclosures About Market Risk
|------- | ----------------------------------------------------------

The Company is exposed to certain risks, which exists as part of our ongoing business operations.

Interest Rate 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 governing the Senior Notes limits us to making similar investments. 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.

The interest rate on borrowings under our Senior Credit Facilities is floating and, therefore, is subject to fluctuations. In general, borrowings under the Senior Credit Facilities bear interest based, at our option,
on either the Eurodollar rate or an alternative base rate (ABR), in each case plus a margin. The applicable margin will be based on our total leverage ratio (as defined in the credit agreement governing the Senior Credit Facilities) at
the time of determination. Currently, our rate of interest for borrowings under the Senior Credit Facilities is LIBOR plus 2.50% or ABR plus 1.50%. A 1% change in our current rate would have an annual effect of approximately $1.8 million.

We have not purchased, 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. Subsequent to the Merger we entered unto an Interest Rate Cap Letter Agreement for our Senior Credit
Facility. This agreement caps our LIBOR rate at 6.00% through February 2009 and 6.50% through February 2010.

Foreign Exchange Rate Risk

All of our transactions with foreign franchisees have been denominated in, and all payments have been made in, United States dollars,
reducing the risks in the changes of 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.



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##### Table of Contents

Item 4. Controls and Procedures

A control system, no matter how well designed and operated, can provide only
reasonable, not absolute, assurance that the objectives of the control system will be met. As there are inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues within our Company
have been detected. Inherent limitations include human errors or misjudgments. Controls also can be circumvented by the intentional acts of individuals or groups.

The Companys management, with the participation of the Companys Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term
is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of l934, as amended (the Exchange Act)), as of the end of the period covered by this report. Based on such evaluation, the Companys Chief Executive
Officer and Chief Financial Officer have concluded that the disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed in our periodic filings under the Securities Exchange Act of 1934
is accumulated and communicated to our management, including those officers, to allow timely decisions regarding required disclosure.

There have not been any changes in the Companys internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the thirty nine weeks ended September 30, 2007
that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting.



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##### Table of Contents

PART II. OTHER INFORMATION

Item 1.  Legal Proceedings

We discuss our Legal Proceedings in Note 5 to the Notes to Unaudited Consolidated Financial Statements.

Item 1A.  Risk Factors

The risk factors included in our Quarterly Report on Form 10-Q for the period ending April 1, 2007 have not materially changed. You should consider carefully the risks described under Item 1A. Risk Factors in
our Quarterly Report on Form 10-Q for the period ending April 1, 2007. The risks and uncertainties described in our Quarterly Report on Form 10-Q for the period ending April 1, 2007 are not the only ones that may affect us. If
any of the events described actually occur, our business and financial results could be materially adversely affected.



|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds
|------- | -----------------------------------------------------------



| | None.
| | -----



|Item 3. | Default upon senior securities
|------- | ------------------------------



| | None.
| | -----



|Item 4. | Submission of matters to a vote of security holders
|------- | ---------------------------------------------------



| | None.
| | -----



|Item 5. | Other information
|------- | -----------------



| | None.
| | -----



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##### Table of Contents

|Item 6. | Exhibits
|------- | --------



|              |  |                                                                                                                                                     
|------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                         
|31.01         |  | Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                             
|              | 
|31.02         |  | Certification of Vice President, Chief Financial Officer and Principal Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|              | 
|**32.01       |  | Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                             
|              | 
|**32.02       |  | Certification of Vice President, Chief Financial Officer and Principal Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

---

|** | These certifications are being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and are not being filed as part this Quarterly
Report on Form 10-Q or as a separate disclosure document.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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 14, 2007 |  | By: |  | /s/ Peter Beaudrault                 
|                        |  |     |  | Peter Beaudrault,                    
|                        |  |     |  | Chairman of the Board of Directors,  
|                        |  |     |  | President and Chief Executive Officer
|                        |  |    
|Date: November 14, 2007 |  | By: |  | /s/ Anthony J. Puglisi               
|                        |  |     |  | Anthony J. Puglisi                   
|                        |  |     |  | Vice President,                      
|                        |  |     |  | Chief Financial Officer and          
|                        |  |     |  | Principal Accounting Officer         



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EXHIBIT INDEX



|              |  |                                                                                                                                                     
|------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                         
|              | 
|31.01         |  | Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                             
|              | 
|31.02         |  | Certification of Vice President, Chief Financial Officer and Principal Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|              | 
|**32.01       |  | Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                             
|              | 
|**32.02       |  | Certification of Vice President, Chief Financial Officer and Principal Accounting Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

---

|** | These certifications are being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and are not being filed as part this Quarterly
Report on Form 10-Q or as a separate disclosure document.
|-- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



49