---

# SECURITIES AND
EXCHANGE COMMISSIONWashington, D.C. 20549

# FORM 10-Q

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

|                                      |                                 
|------------------------------------- | --------------------------------
|For the quarter ended October 8, 2006 | Commission file number 333-90817

# SBARRO, INC.

(Exact name of
registrant as specified in its Charter)

|                                |                           
|------------------------------- | --------------------------
|NEW YORK                        | 11-2501939                
|(State or other jurisdiction of | (I.R.S. Employer I.D. No.)
|incorporation or organization) 

|                                          |           
|----------------------------------------- | ----------
|401 Broad Hollow Road, Melville, New York | 11747-4714
|(Address of principal executive offices)  | (Zip Code)

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

Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject
to such filing requirements for the past 90 days.

|Yes |  | No
|--- |  | --

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

|                        |                   |                      
|----------------------- | ----------------- | ---------------------
|Large accelerated filer | Accelerated filer | Non-accelerated filer

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

The number of shares of Common Stock
of the registrant outstanding as of November 20, 2006 was 7,064,328.



---

# SBARRO, INC.

# FORM 10-Q INDEX

|                                                                                             |      
|-------------------------------------------------------------------------------------------- | -----
|PART I.      FINANCIAL INFORMATION                                                           | PAGES
|Consolidated Financial Statements:                                                          
|Balance Sheets - October 8, 2006 (unaudited) and January 1, 2006                             | 3-4  
|                                                                                            
|Statements  of Operations (unaudited)  Forty Weeks and Twelve Weeks ended                  
|October 8, 2006 and October 9, 2005                                                          | 5-6  
|                                                                                            
|Statements of Cash Flows (unaudited)  Forty Weeks ended October 8, 2006 and October 9, 2005 | 7-8  
|                                                                                            
|Notes to Unaudited Consolidated Financial Statements                                         | 9-26 
|                                                                                            
|Managements Discussion and Analysis of Financial Condition and Results                     
|of Operations                                                                                | 27-39
|                                                                                            
|Qualitative and Quantitative Disclosures of Market Risk                                      | 40   
|                                                                                            
|Controls and Procedures                                                                      | 41   
|                                                                                            
|PART II.      OTHER INFORMATION                                                              | 42-43

Page 2



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# Part I  Financial
Information

# Item 1. Consolidated
Financial Statements

# SBARRO, INC. AND SUBSIDIARIES

# CONSOLIDATED BALANCE
SHEETS

# ASSETS

|                                                    | October 8, 2006 |  | January 1, 2006 |        
|--------------------------------------------------- | --------------- |  | --------------- | -------
|
|
|Current assets:                                     |                 |  |                 |        
|                                                    |                 | 
|Cash and cash equivalents                           |                 |  | $               | 59,878 
|Receivables, net of allowance for doubtful accounts |                 | 
|of $433 in 2006 and $323 in 2005:                   |                 | 
|Franchise                                           |                 |  |                 | 2,297  
|Other                                               |                 |  |                 | 4,883  
|                                                    |                 |  |                 |        
|                                                    |                 |  |                 | 7,180  
|                                                    |                 | 
|Inventories                                         |                 |  |                 | 2,880  
|Prepaid expenses                                    |                 |  |                 | 9,466  
|                                                    |                 |  |                 |        
|Total current assets                                |                 |  |                 | 79,404 
|                                                    |                 | 
|Property and equipment, net                         |                 |  |                 | 78,018 
|                                                    |                 | 
|Intangible assets:                                  |                 | 
|Trademarks                                          |                 |  |                 | 195,916
|Goodwill                                            |                 |  |                 | 9,204  
|Deferred financing costs, net                       |                 |  |                 | 2,839  
|Loans receivable from shareholders                  |                 |  |                 | 5,587  
|Other assets                                        |                 |  |                 | 7,427  
|                                                    |                 |  |                 |        
|                                                    |                 |  | $               | 378,395
|                                                    |                 |  |                 |        

See notes to unaudited
consolidated financial statements.

Page 3



---

# SBARRO, INC. AND
SUBSIDIARIES

# CONSOLIDATED BALANCE
SHEETS

# LIABILITIES &
SHAREHOLDERS EQUITY

|                                               | October 8, 2006 |  | January 1, 2006 |        
|---------------------------------------------- | --------------- |  | --------------- | -------
|
|
|Current liabilities:                           |                 |  |                 |        
|Accounts payable                               |                 |  | $               | 5,907  
|Accrued expenses                               |                 |  |                 | 24,590 
|Accrued interest payable                       |                 |  |                 | 1,768  
|Insurance premium financing                    |                 |  |                 | 2,145  
|Current portion of mortgage payable            |                 |  |                 | 198    
|                                               |                 |  |                 |        
|Total current liabilities                      |                 |  |                 | 34,608 
|                                               |                 | 
|Deferred rent                                  |                 |  |                 | 8,904  
|                                               |                 | 
|Long-term debt, net of original issue discount |                 |  |                 | 268,658
|                                               |                 | 
|Commitments and contingencies                  |                 | 
|                                               |                 | 
|Shareholders' equity:                          |                 | 
|Preferred stock, $1 par value;                 |                 | 
|authorized 1,000,000 shares;                   |                 | 
|none issued                                    |                 |  |                 | -      
|Common stock, $.01 par value;                  |                 | 
|authorized 40,000,000 shares;                  |                 | 
|issued and outstanding 7,064,328 shares        |                 | 
|at October 8, 2006 and January 1, 2006         |                 |  |                 | 71     
|Additional paid-in capital                     |                 |  |                 | 10     
|Retained earnings                              |                 |  |                 | 66,144 
|                                               |                 |  |                 |        
|                                               |                 |  |                 | 66,225 
|                                               |                 |  |                 |        
|                                               |                 |  | $               | 378,395
|                                               |                 |  |                 |        

See notes to unaudited
consolidated financial statements.

Page 4



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# SBARRO, INC. AND
SUBSIDIARIES

# CONSOLIDATED
STATEMENTS OF OPERATIONS

# (UNAUDITED)

|                                                         | For the forty weeks ended | 
|-------------------------------------------------------- | ------------------------- | 
|
|
|
|Revenues:                                                |                           | 
|Restaurant sales                                         |                           | 
|Franchise related income                                 |                           | 
|Real estate and other                                    |                           | 
|                                                         |                           | 
|Total revenues                                           |                           | 
|Costs and expenses:                                      |                           | 
|Cost of food and paper products                          |                           | 
|Payroll and other employee benefits                      |                           | 
|Other operating costs                                    |                           | 
|Depreciation and amortization                            |                           | 
|General and administrative                               |                           | 
|Asset impairment, restaurant closings/remodels and       |                           | 
|loss on sale of other concept restaurant                 |                           | 
|                                                         |                           | 
|Total costs and expenses                                 |                           | 
|                                                         |                           | 
|Operating income                                         |                           | 
|                                                         |                           | 
|Other (expense) income:                                  |                           | 
|Interest expense                                         |                           | 
|Interest income                                          |                           | 
|Equity in net income (loss) of unconsolidated affiliates |                           | 
|                                                         |                           | 
|Net other expense                                        |                           | 
|                                                         |                           | 
|Loss before income taxes                                 |                           | 
|                                                         |                           | 
|Income taxes                                             |                           | 
|                                                         |                           | 
|Net loss                                                 |                           | 
|                                                         |                           | 

See notes to unaudited
consolidated financial statements.

Page 5



---

# SBARRO, INC. AND
SUBSIDIARIES

# CONSOLIDATED
STATEMENTS OF OPERATIONS

# (UNAUDITED)

|                                                         | For the twelve weeks ended | 
|-------------------------------------------------------- | -------------------------- | 
|
|
|
|Revenues:                                                |                            | 
|Restaurant sales                                         |                            | 
|Franchise related income                                 |                            | 
|Real estate and other                                    |                            | 
|                                                         |                            | 
|Total revenues                                           |                            | 
|Costs and expenses:                                      |                            | 
|Cost of food and paper products                          |                            | 
|Payroll and other employee benefits                      |                            | 
|Other operating costs                                    |                            | 
|Depreciation and amortization                            |                            | 
|General and administrative                               |                            | 
|Asset impairment, restaurant closings/remodels and       |                            | 
|loss on sale of other concept restaurant                 |                            | 
|                                                         |                            | 
|Total costs and expenses                                 |                            | 
|                                                         |                            | 
|Operating income                                         |                            | 
|                                                         |                            | 
|Other (expense) income:                                  |                            | 
|Interest expense                                         |                            | 
|Interest income                                          |                            | 
|Equity in net income (loss) of unconsolidated affiliates |                            | 
|                                                         |                            | 
|Net other expense                                        |                            | 
|                                                         |                            | 
|Income before income taxes                               |                            | 
|                                                         |                            | 
|Income taxes                                             |                            | 
|                                                         |                            | 
|Net income (loss)                                        |                            | 
|                                                         |                            | 

See notes to unaudited
consolidated financial statements.

Page 6



---

# SBARRO, INC. AND
SUBSIDIARIES

# CONSOLIDATED
STATEMENTS OF CASH FLOWS

# (UNAUDITED)

|                                                              | For the forty weeks ended | 
|------------------------------------------------------------- | ------------------------- | 
|
|
|
|Operating Activities:                                         |                           | 
|Net  loss                                                     |                           | 
|Adjustments to reconcile net loss to net cash                 |                           | 
|used in operating activities:                                 |                           | 
|Depreciation and amortization                                 |                           | 
|Amortization of deferred financing costs                      |                           | 
|Amortization of bond discount                                 |                           | 
|Provision for doubful accounts receivable                     |                           | 
|(Decrease)/increase in deferred rent, net of tenant allowance |                           | 
|Asset impairment, restaurant closings/remodels and loss on    |                           | 
|sale of  other concept restaurant                             |                           | 
|Gain on sale of restaurant property and equipment             |                           | 
|Equity in net (income)/loss of unconsolidated affiliates      |                           | 
|                                                              |                           | 
|Changes in operating assets and liabilities:                  |                           | 
|Increase in receivables                                       |                           | 
|Decrease  in inventories                                      |                           | 
|Increase in prepaid expenses                                  |                           | 
|Decrease in other assets                                      |                           | 
|Decrease in accounts payable and accrued expenses             |                           | 
|Decrease in accrued interest payable                          |                           | 
|                                                              |                           | 
|Net cash used in operating activities                         |                           | 
|                                                              |                           | 

See notes to unaudited
consolidated financial statements.

Page 7



---

# SBARRO, INC. AND
SUBSIDIARIES

# CONSOLIDATED
STATEMENTS OF CASH FLOWS

# (UNAUDITED)

|                                                                                                                                                          | For the forty weeks ended | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------- | 
|
|
|Investing Activities:                                                                                                                                     |                           | 
|Purchases of property and equipment                                                                                                                       |                           | 
|Proceeds from sale of joint venture property & equipment                                                                                                  |                           | 
|Proceeds from sale of restaurant property &  equipment                                                                                                    |                           | 
|Contributions from partners to joint ventures                                                                                                             |                           | 
|Dividend received from unconsolidated affiliate                                                                                                           |                           | 
|                                                                                                                                                          |                           | 
|Net cash used in investing activities                                                                                                                     |                           | 
|                                                                                                                                                          |                           | 
|Financing Activities:                                                                                                                                     |                           | 
|Mortgage principal repayments                                                                                                                             |                           | 
|Repayment of loans by officers                                                                                                                            |                           | 
|                                                                                                                                                          |                           | 
|Net cash used in financing activities                                                                                                                     |                           | 
|                                                                                                                                                          |                           | 
|Decrease in cash and cash equivalents                                                                                                                     |                           | 
|Cash and cash equivalents at beginning of year                                                                                                            |                           | 
|                                                                                                                                                          |                           | 
|Cash and cash equivalents at end of period                                                                                                                |                           | 
|                                                                                                                                                          |                           | 
|Supplemental disclosure of cash flow information:                                                                                                         |                           | 
|Cash paid during the period for income taxes                                                                                                              |                           | 
|                                                                                                                                                          |                           | 
|Cash paid during the period for interest                                                                                                                  |                           | 
|                                                                                                                                                          |                           | 
|Supplemental disclosure of
noncash financing information: In
June 2006, we entered into a noncash insurance premium financing agreement for $3.3
million. |                           | 

See notes to unaudited
consolidated financial statement

Page 8



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# SBARRO, INC. AND
SUBSIDIARIES  Notes To Unaudited Consolidated Financial Statements

|1. |  | Basis
of presentation:
|-- |  | ----------------------

| | The
accompanying unaudited consolidated financial statements have been prepared in accordance
with the instructions for Form 10-Q and Regulation S-X related to interim period
financial statements and, therefore, do not include all information and footnotes
required by generally accepted accounting principles. However, in the opinion of our
management, all adjustments (consisting of normal recurring adjustments and accruals)
considered necessary for a fair presentation of the consolidated financial position of
Sbarro and our subsidiaries at October 8, 2006 and our consolidated results of operations
and cash flows for the forty weeks ended October 8, 2006 and October 9, 2005 have been
included. The results of operations for interim periods are not necessarily indicative of
the results that may be expected for the entire year. Reference should be made to our
annual financial statements, including footnotes thereto, included in our Annual Report
on Form 10-K for the year ended January 1, 2006.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Certain
items in the financial statements presented have been reclassified to conform to the 2006
presentation.
| | ---------------------------------------------------------------------------------------------------------------

|2. |  | Recent
Accounting Pronouncement:
|-- |  | --------------------------------

| | In
July 2006, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation No. (FIN) 48, Accounting for Uncertainty in Income TaxesAn
Interpretation of FASB Statement No. 109 which prescribes a recognition threshold
and measurement attribute for the financial statement recognition and measurement of a
tax position taken or expected to be taken in a tax return. In particular, this
interpretation requires uncertain tax positions to be recognized only if they are more-likely-than-not to
be upheld based on their technical merits. Additionally, the measurement of the tax
position will be based on the largest amount that is determined to have greater than a
50% likelihood of realization upon ultimate settlement. Any resulting cumulative effect
of applying the provisions of FIN 48 upon adoption would be reported as an adjustment to
the beginning balance of retained earnings in the period of adoption. FIN 48 will be
effective beginning fiscal 2007. We have not yet evaluated the impact of this
interpretation on our financial statements.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Page 9



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# SBARRO, INC. AND
SUBSIDIARIES  
Notes To Unaudited
Consolidated Financial Statements (continued)

| | November
 15,  2007.  We are  evaluating  the impact the  adoption  of SFAS No.  157 will have on
our  consolidated  financial          statements.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------

| | In
September 2006, the Staff of the Securities and Exchange Commission Issued Staff
Accounting Bulletin (SAB) No. 108, Considering the Effects of Prior
Year Misstatements when Quantifying Misstatements in Current Year Financial Statements,which
provides interpretive guidance regarding the consideration given to prior year
misstatements when determining materiality in current year financial statements. SAB No.
108 is effective for fiscal years ending after November 15, 2006. We are evaluating the
impact of SAB No. 108 on our consolidated financial statements.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3. |  | Senior
Notes:
|-- |  | -------------

| | The
$255 million of 11% senior notes we issued in 1999 are due September 15, 2009. Interest
is payable semi-annually on March 15 and September 15 of each year.  Our payment
obligations under the senior notes are jointly, severally, unconditionally and
irrevocably guaranteed by all of Sbarros current Restricted Subsidiaries (as
defined in the indenture) and is to be similarly guaranteed by our future Restricted
Subsidiaries.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
senior notes and the subsidiary guarantees are senior unsecured obligations of Sbarro and
the guaranteeing subsidiaries, respectively, ranking equally in right of payment to all
of our and their respective present and future senior debt, currently all of our
obligations.  The indenture permits redemption of the senior notes until September
15, 2007 at 101.833% of the principal amount of the senior notes to be redeemed and
requires us to offer to purchase senior notes in the event of a Change of Control and in
connection with certain Asset Sales (each as defined).
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
indenture contains various covenants that limit our ability to borrow funds, other than
certain permitted indebtedness, to make restricted payments including, among
other things, dividend payments, and to make investments in, among other things,
unrestricted subsidiaries. The indenture for the senior notes permits us to make
distributions to shareholders pursuant to a tax payment agreement between us and our
shareholders that contains a formula that is designed to approximate the income taxes,
including estimated taxes, that would be payable by our shareholders if their only income
were their pro-rata share of our taxable income and such income were taxed at the highest
applicable federal and New York State marginal income tax rates.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Among
other covenants, the indenture requires that, in order for us to borrow, our consolidated
interest ratio coverage (as defined in the indenture), after giving pro forma effect to
the interest on the new borrowing, for the four most recently ended
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Page 10



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# SBARRO, INC. AND
SUBSIDIARIES  
Notes To Unaudited
Consolidated Financial Statements (continued)

| | fiscal
quarters must be at least 2.5 to 1. As of October 8, 2006, that ratio was 1.8 to 1. As a
result, we are not presently able to borrow funds except for the specifically permitted
indebtedness, including up to $75 million of revolving credit loans.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
order to make restricted payments, that ratio must be at least 2.0 to 1, after giving pro
forma effect to the restricted payment and, in any event, is limited in dollar amount
pursuant to a formula contained in the indenture. We refer to the amount that is
available for us to make dividends and other restricted payments as the restricted
payment availability. We cannot make restricted payments (other than distributions
pursuant to the tax payment agreement) until we increase the restricted payment
availability by approximately $28 million, and then only to the extent of any excess over
that amount.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Line
of Credit:
| | ---------------

| | In
July 2005, we obtained a three year line of credit from Commerce Bank to replace our
former uncommitted revolving credit facility. Under the Commerce Bank line of credit, we
currently have the ability to borrow up to $10 million, with a sub-limit for letters of
credit of $5 million. Interest applicable to the loans under the line of credit is at the
banks LIBOR rate plus 1.5% at the time of any borrowings for interest periods of 1,
2, 3 or 6 months. The credit facility contains various covenants, including a minimum
coverage ratio of at least 1.0 to 1.0 at the end of each quarter on a rolling four
quarter basis. The minimum coverage ratio is primarily a ratio of EBITDA (less unfinanced
capital expenditures) to the current maturity of long term indebtedness and interest
expense. There are currently $1.9 million of letters of credit outstanding under the new
facility.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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. The loan is payable in
monthly installments of principal and interest of $.1 million. The outstanding principal
balance of the loan as of October 8, 2006 was $15 million. The mortgage agreement
contains various covenants.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | We
were in compliance with all covenants in the indenture for the senior notes, our credit
line and our mortgage as of October 8, 2006.
| | ---------------------------------------------------------------------------------------------------------------------------------------

Page 11



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# SBARRO, INC. AND
SUBSIDIARIES  
Notes To Unaudited
Consolidated Financial Statements (continued)

| | Insurance
Premium Financing:
| | ----------------------------

| | In
June 2006, we entered into a short term insurance premium financing agreement for $3.3
million. Under the agreement, we are required to make three quarterly payments beginning
August 1, 2006 of $1.2 million, including interest, with the final payment due February
1, 2007. The annual percentage rate is 6.49%.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Guarantee
Arrangements Pertaining to Other Concepts:
| | ----------------------------------------------------

| | We
are party to separate financial guarantees to a bank for two of our unconsolidated joint
ventures. To varying degrees, our guarantees involve elements of performance and credit
risk. The possibility of our having to honor our guarantee is largely dependent upon the
future operation of the joint ventures. The joint ventures were in compliance with all
covenants contained in the loan agreements that are guaranteed by us as of October 8,
2006.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4. |  | Business
Segment Information
|-- |  | ----------------------------

| | We
operate two business segments. Our company owned restaurant segment is comprised of the
operating activities of our company owned Quick Service restaurants and other concept
restaurants (owned and joint ventures). 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.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Page 12



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# SBARRO, INC. AND
SUBSIDIARIES  
Notes To Unaudited
Consolidated Financial Statements (continued)

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 (in thousands):

|                                          | Company Owned
Restaurants |  | Franchise
Restaurants |        | Totals |  
|----------------------------------------- | ------------------------- |  | --------------------- | ------ | ------ | -
|Twelve weeks ended October 8, 2006        |                           |  |                       |        |        |  
|Total revenue                             |                           |  | $                     | 76,715 |        | $
|                                          |                           |  |                       |        |        |  
|Operating income before unallocated costs |                           |  |                       | 11,602 |        |  
|Unallocated costs and expenses (1)        |                           |  |                       |        |        |  
|                                          |                           |  |                       |       
|Operating income                          |                           |  |                       |        |        |  
|                                          |                           |  |                       |       
|                                          |                           | 
|Twelve weeks ended October 9, 2005        |                           | 
|Total revenue                             |                           |  | $                     | 76,399 |        | $
|                                          |                           |  |                       |        |        |  
|Operating income before unallocated costs |                           |  |                       | 9,916  |        |  
|Unallocated costs and expenses (1)        |                           |  |                       |        |        |  
|                                          |                           |  |                       |       
|Operating income                          |                           |  |                       |        |        |  
|                                          |                           |  |                       |       

|                                          | Company Owned
Restaurants |  | Franchise
Restaurants |         | Totals |  
|----------------------------------------- | ------------------------- |  | --------------------- | ------- | ------ | -
|Forty weeks ended October 8, 2006         |                           |  |                       |         |        |  
|Total revenue                             |                           |  | $                     | 245,191 |        | $
|                                          |                           |  |                       |         |        |  
|Operating income before unallocated costs |                           |  |                       | 33,053  |        |  
|                                          |                           |  |                      
|Unallocated costs and expenses (1)        |                           |  |                       |         |        |  
|                                          |                           |  |                       |        
|Operating income                          |                           |  |                       |         |        |  
|                                          |                           |  |                       |        
|                                          |                           | 
|Forty weeks ended October 9, 2005         |                           | 
|Total revenue                             |                           |  | $                     | 241,202 |        | $
|                                          |                           |  |                       |         |        |  
|Operating income before unallocated costs |                           |  |                       | 25,307  |        |  
|Unallocated costs and expenses (1)        |                           |  |                       |         |        |  
|                                          |                           |  |                       |        
|Operating income                          |                           |  |                       |         |        |  
|                                          |                           |  |                       |        

_________________

(1)    
          Represents those general and administrative expenses that are not allocated to a
          segment.

Page 13



---

# SBARRO, INC. AND
SUBSIDIARIES  
Notes To Unaudited
Consolidated Financial Statements (continued)

|5. |  | Guarantor
and non-guarantor financial statements:
|-- |  | -------------------------------------------------

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

| | The
following condensed consolidating financial information presents:
| | ---------------------------------------------------------------------

| | (1) |  | Condensed
unaudited consolidating balance sheets as of October 8, 2006 and                January
1, 2006 and unaudited statements of operations for the forty and twelve
               weeks ended October 8, 2006 and October 9, 2005 and unaudited statements
of cash                flows for forty weeks ended October 8, 2006 and October 9, 2005 of
(a) Sbarro,                Inc., the parent, (b) the guarantor subsidiaries as a group,
(c) the                nonguarantor subsidiaries as a group and (d) Sbarro on a
consolidated basis.
| | --- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

Page 14



---

# SBARRO, INC. AND
SUBSIDIARIES  
Notes To Unaudited
Consolidated Financial Statements (continued)

# Consolidating Balance
Sheet  As of October 8, 2006 
(In thousands) (Unaudited) ASSETS

|                                   | Parent |  | Guarantor
Subsidiaries |         | Nonguarantor
Subsidiaries |   | Eliminations |  | Consolidated
Total |       
|---------------------------------- | ------ |  | ---------------------- | ------- | ------------------------- | - | ------------ |  | ------------------ | ------
|Current assets:                    |        |  |                        |         |                           |   |              |  |                    |       
|                                   |        | 
|Cash and cash equivalents          |        |  | $                      | 53,464  |                           | $ | 3,890        |  | $                  | 2,524 
|Receivables, net of allowance for  |        | 
|doubtful accounts of $433          |        | 
|Franchise                          |        |  |                        | 2,297   |                           |   | -            |  |                    | -     
|Other                              |        |  |                        | 3,652   |                           |   | 804          |  |                    | 427   
|                                   |        |  |                        |         |                           |   |              |  |                    |       
|                                   |        |  |                        | 5,949   |                           |   | 804          |  |                    | 427   
|                                   |        | 
|Inventories                        |        |  |                        | 1,353   |                           |   | 1,478        |  |                    | 49    
|Prepaid expenses                   |        |  |                        | 6,926   |                           |   | 2,621        |  |                    | (81   
|                                   |        |  |                        |         |                           |   |              |  |                    |       
|Total current assets               |        |  |                        | 67,692  |                           |   | 8,793        |  |                    | 2,919 
|                                   |        | 
|Intercompany receivables           |        |  |                        | 5,810   |                           |   | 463,155      |  |                    | (5,577
|                                   |        | 
|Investment in subsidiaries         |        |  |                        | 67,450  |                           |   | 1,945        |  |                    | -     
|                                   |        | 
|Property and equipment, net        |        |  |                        | 29,953  |                           |   | 45,331       |  |                    | 2,734 
|Trademarks                         |        |  |                        | 195,916 |                           |   | -            |  |                    | -     
|Goodwill                           |        |  |                        | 9,204   |                           |   | -            |  |                    | -     
|Deferred financing costs, net      |        |  |                        | 2,711   |                           |   | 128          |  |                    | -     
|Loans receivable from shareholders |        |  |                        | 5,587   |                           |   | -            |  |                    | -     
|Other assets                       |        |  |                        | 6,437   |                           |   | 1,079        |  |                    | 30    
|                                   |        |  |                        |         |                           |   |              |  |                    |       
|                                   |        |  | $                      | 390,760 |                           | $ | 520,431      |  | $                  | 106   
|                                   |        |  |                        |         |                           |   |              |  |                    |       

Page 15



---

# SBARRO, INC. AND
SUBSIDIARIES  
Notes To Unaudited
Consolidated Financial Statements

# Consolidating Balance
Sheet  As of October 8, 2006 (In thousands except
share data) (Unaudited) LIABILITIES &
SHAREHOLDERS EQUITY

|                                      | Parent |  | Guarantor
Subsidiaries |          | Nonguarantor
Subsidiaries |   | Eliminations |  | Consolidated
Total |       
|------------------------------------- | ------ |  | ---------------------- | -------- | ------------------------- | - | ------------ |  | ------------------ | ------
|Current liabilities:                  |        |  |                        |          |                           |   |              |  |                    |       
|Accounts payable                      |        |  | $                      | 5,522    |                           | $ | 103          |  | $                  | 282   
|Accrued expenses                      |        |  |                        | 19,787   |                           |   | 4,170        |  |                    | 633   
|Accrued interest payable              |        |  |                        | 1,768    |                           |   | -            |  |                    | -     
|Insurance premium financing           |        |  |                        | 2,145    |                           |   | -            |  |                    | -     
|Current portion of mortgage payable   |        |  |                        | -        |                           |   | 198          |  |                    | -     
|                                      |        |  |                        |          |                           |   |              |  |                    |       
|Total current liabilities             |        |  |                        | 29,222   |                           |   | 4,471        |  |                    | 915   
|                                      |        | 
|Intercompany payables                 |        |  |                        | 463,388  |                           |   | -            |  |                    | -     
|                                      |        | 
|Deferred rent                         |        |  |                        | 7,760    |                           |   | 958          |  |                    | 186   
|                                      |        | 
|Long-term debt, net of original issue |        | 
|discount                              |        |  |                        | 253,878  |                           |   | 14,780       |  |                    | -     
|                                      |        | 
|Shareholders' equity (deficit):       |        | 
|Preferred stock, $1 par value;        |        | 
|authorized 1,000,000 shares;          |        | 
|none issued                           |        |  |                        | -        |                           |   | -            |  |                    | -     
|Common stock, $.01 par value;         |        | 
|authorized 40,000,000 shares;         |        | 
|issued and outstanding 7,064,328      |        | 
|shares                                |        |  |                        | 2,969    |                           |   | -            |  |                    | (2,898
|Additional paid-in capital            |        |  |                        | (65,996  | )                         |   | 134,188      |  |                    | 3,018 
|Retained earnings (deficit)           |        |  |                        | (300,461 | )                         |   | 366,034      |  |                    | (1,115
|                                      |        |  |                        |          |                           |   |              |  |                    |       
|                                      |        |  |                        | (363,488 | )                         |   | 500,222      |  |                    | (995  
|                                      |        |  |                        |          |                           |   |              |  |                    |       
|                                      |        |  | $                      | 390,760  |                           | $ | 520,431      |  | $                  | 106   
|                                      |        |  |                        |          |                           |   |              |  |                    |       

Page 16



---

# SBARRO, INC. AND
SUBSIDIARIES  
Notes To Unaudited
Consolidated Financial Statements

# Consolidating Balance
Sheet  As of January 1, 2006 (In thousands) (Unaudited) ASSETS

|                                   | Parent |  | Guarantor
Subsidiaries |         | Nonguarantor
Subsidiaries |   | Eliminations |   | Consolidated
Total |       
|---------------------------------- | ------ |  | ---------------------- | ------- | ------------------------- | - | ------------ | - | ------------------ | ------
|Current assets:                    |        |  |                        |         |                           |   |              |   |                    |       
|                                   |        | 
|Cash and cash equivalents          |        |  | $                      | 66,377  |                           | $ | 5,303        |   | $                  | 1,409 
|Receivables less allowance for     |        | 
|doubtful accounts of $323          |        | 
|Franchise                          |        |  |                        | 1,865   |                           |   | -            |   |                    | -     
|Other                              |        |  |                        | 3,385   |                           |   | 119          |   |                    | 140   
|                                   |        |  |                        |         |                           |   |              |   |                    |       
|                                   |        |  |                        | 5,250   |                           |   | 119          |   |                    | 140   
|                                   |        | 
|Inventories                        |        |  |                        | 1,312   |                           |   | 1,525        |   |                    | 53    
|Prepaid expenses                   |        |  |                        | 3,517   |                           |   | (301         | ) |                    | (7    
|                                   |        |  |                        |         |                           |   |              |   |                    |       
|Total current assets               |        |  |                        | 76,456  |                           |   | 6,646        |   |                    | 1,595 
|                                   |        | 
|Intercompany receivables           |        |  |                        | 2,578   |                           |   | 458,262      |   |                    | (4,448
|                                   |        | 
|Investment in subsidiaries         |        |  |                        | 67,450  |                           |   | 1,945        |   |                    | -     
|                                   |        | 
|Property and equipment, net        |        |  |                        | 31,820  |                           |   | 46,819       |   |                    | 2,871 
|Trademarks, net                    |        |  |                        | 195,916 |                           |   | -            |   |                    | -     
|Goodwill                           |        |  |                        | 9,204   |                           |   | -            |   |                    | -     
|Deferred financing costs, net      |        |  |                        | 3,420   |                           |   | 157          |   |                    | -     
|Loans receivable from shareholders |        |  |                        | 5,593   |                           |   | -            |   |                    | -     
|Other assets                       |        |  |                        | 6,643   |                           |   | 1,490        |   |                    | 27    
|                                   |        |  |                        |         |                           |   |              |   |                    |       
|                                   |        |  | $                      | 399,080 |                           | $ | 515,319      |   | $                  | 45    
|                                   |        |  |                        |         |                           |   |              |   |                    |       

Page 17



---

# SBARRO, INC. AND
SUBSIDIARIES  
Notes To Unaudited
Consolidated Financial Statements

# Consolidating Balance Sheet
As of January 1, 2006 (In thousands except
share data) (Unaudited) LIABILITIES &
SHAREHOLDERS EQUITY

|                                      | Parent |  | Guarantor
Subsidiaries |          | Nonguarantor
Subsidiaries |   | Eliminations |  | Consolidated
Total |       
|------------------------------------- | ------ |  | ---------------------- | -------- | ------------------------- | - | ------------ |  | ------------------ | ------
|Current liabilities:                  |        |  |                        |          |                           |   |              |  |                    |       
|Accounts payable                      |        |  | $                      | 10,866   |                           | $ | 169          |  | $                  | 403   
|Accrued expenses                      |        |  |                        | 19,840   |                           |   | 4,033        |  |                    | 310   
|Accrued interest payable              |        |  |                        | 8,181    |                           |   | -            |  |                    | -     
|Current portion of mortgage payable   |        |  |                        | -        |                           |   | 198          |  |                    | -     
|                                      |        |  |                        |          |                           |   |              |  |                    |       
|Total current liabilities             |        |  |                        | 38,887   |                           |   | 4,400        |  |                    | 713   
|                                      |        | 
|Intercompany payables                 |        |  |                        | 456,392  |                           |   | -            |  |                    | -     
|                                      |        | 
|Deferred rent                         |        |  |                        | 7,802    |                           |   | -            |  |                    | 308   
|                                      |        | 
|Long-term debt, net of original issue |        | 
|discount                              |        |  |                        | 253,586  |                           |   | 14,944       |  |                    | -     
|                                      |        | 
|Shareholders' equity (deficit):       |        | 
|Preferred stock, $1 par value;        |        | 
|authorized 1,000,000 shares;          |        | 
|none issued                           |        |  |                        | -        |                           |   | -            |  |                    | -     
|Common stock, $.01 par value;         |        | 
|authorized 40,000,000 shares;         |        | 
|issued and outstanding 7,064,328      |        | 
|shares                                |        |  |                        | 71       |                           |   | -            |  |                    | -     
|Additional paid-in capital            |        |  |                        | (65,479  | )                         |   | 133,671      |  |                    | 3,018 
|Retained earnings (deficit)           |        |  |                        | (292,179 | )                         |   | 362,304      |  |                    | (3,994
|                                      |        |  |                        |          |                           |   |              |  |                    |       
|                                      |        |  |                        | (357,587 | )                         |   | 495,975      |  |                    | (976  
|                                      |        |  |                        |          |                           |   |              |  |                    |       
|                                      |        |  | $                      | 399,080  |                           | $ | 515,319      |  | $                  | 45    
|                                      |        |  |                        |          |                           |   |              |  |                    |       

Page 18



---

# SBARRO, INC. AND
SUBSIDIARIES
Notes To Unaudited
Consolidated Financial Statements

# Consolidating
Statement of Operations  
For the forty weeks
ended October 8, 2006 (In thousands) (Unaudited)

|                                       | Parent |  | Guarantor
Subsidiaries |         | Nonguarantor
Subsidiaries |   | Eliminations |   | Consolidated
Total |      
|-------------------------------------- | ------ |  | ---------------------- | ------- | ------------------------- | - | ------------ | - | ------------------ | -----
|Revenues:                              |        |  |                        |         |                           |   |              |   |                    |      
|Restaurant sales                       |        |  | $                      | 108,397 |                           | $ | 125,831      |   | $                  | 5,900
|Franchise related income               |        |  |                        | 10,678  |                           |   | -            |   |                    | -    
|Real estate and other                  |        |  |                        | 2,942   |                           |   | 1,800        |   |                    | 321  
|Intercompany charges                   |        |  |                        | 50      |                           |   | -            |   |                    | -    
|                                       |        |  |                        |         |                           |   |              |   |                    |      
|                                       |        | 
|Total revenues                         |        |  |                        | 122,067 |                           |   | 127,631      |   |                    | 6,221
|                                       |        |  |                        |         |                           |   |              |   |                    |      
|Costs and expenses:                    |        | 
|Cost of food and paper products        |        |  |                        | 18,113  |                           |   | 26,781       |   |                    | 1,534
|Payroll and other employee benefits    |        |  |                        | 28,439  |                           |   | 34,882       |   |                    | 2,415
|Other operating costs                  |        |  |                        | 39,455  |                           |   | 45,698       |   |                    | 1,978
|Depreciation and amortization          |        |  |                        | 5,603   |                           |   | 6,339        |   |                    | 429  
|General and administrative             |        |  |                        | 15,541  |                           |   | 7,584        |   |                    | 69   
|Asset impairment and restaurant        |        | 
|closings/remodels                      |        |  |                        | 474     |                           |   | -            |   |                    | -    
|Intercompany charges                   |        |  |                        | -       |                           |   | 50           |   |                    | -    
|                                       |        |  |                        |         |                           |   |              |   |                    |      
|                                       |        | 
|Total costs and expenses               |        |  |                        | 107,625 |                           |   | 121,334      |   |                    | 6,425
|                                       |        |  |                        |         |                           |   |              |   |                    |      
|Operating income                       |        |  |                        | 14,442  |                           |   | 6,297        |   |                    | (204 
|                                       |        | 
|Other (expense) income:                |        | 
|Interest expense                       |        |  |                        | (22,696 | )                         |   | (1,086       | ) |                    | -    
|Interest income                        |        |  |                        | 1,961   |                           |   | -            |   |                    | 40   
|Equity in net income of unconsolidated |        | 
|affiliates                             |        |  |                        | 153     |                           |   | -            |   |                    | -    
|                                       |        |  |                        |         |                           |   |              |   |                    |      
|Net other (expense) income             |        |  |                        | (20,582 | )                         |   | (1,086       | ) |                    | 40   
|                                       |        |  |                        |         |                           |   |              |   |                    |      
|Income (loss) before income taxes      |        |  |                        | (6,140  | )                         |   | 5,211        |   |                    | (164 
|                                       |        | 
|Income taxes                           |        |  |                        | 580     |                           |   | -            |   |                    | -    
|                                       |        |  |                        |         |                           |   |              |   |                    |      
|Net income (loss)                      |        |  | $                      | (6,720  | )                         | $ | 5,211        |   | $                  | (164 
|                                       |        |  |                        |         |                           |   |              |   |                    |      

Page 19



---

# SBARRO, INC. AND
SUBSIDIARIES  
Notes To Unaudited
Consolidated Financial Statements

# Consolidating
Statement of Operations  For the forty weeks
ended October 9, 2005 (In thousands) (Unaudited)

|                                       | Parent |  | Guarantor
Subsidiaries |         | Nonguarantor
Subsidiaries |   | Eliminations |   | Consolidated
Total |      
|-------------------------------------- | ------ |  | ---------------------- | ------- | ------------------------- | - | ------------ | - | ------------------ | -----
|Revenues:                              |        |  |                        |         |                           |   |              |   |                    |      
|Restaurant sales                       |        |  | $                      | 105,020 |                           | $ | 123,576      |   | $                  | 7,722
|Franchise related income               |        |  |                        | 9,285   |                           |   | -            |   |                    | -    
|Real estate and other                  |        |  |                        | 2,675   |                           |   | 2,192        |   |                    | 17   
|Intercompany charges                   |        |  |                        | 50      |                           |   | -            |   |                    | -    
|                                       |        |  |                        |         |                           |   |              |   |                    |      
|                                       |        | 
|Total revenues                         |        |  |                        | 117,030 |                           |   | 125,768      |   |                    | 7,739
|                                       |        |  |                        |         |                           |   |              |   |                    |      
|                                       |        | 
|Costs and expenses:                    |        | 
|Cost of food and paper products        |        |  |                        | 19,656  |                           |   | 27,153       |   |                    | 2,217
|Payroll and other employee benefits    |        |  |                        | 28,819  |                           |   | 34,447       |   |                    | 2,932
|Other operating costs                  |        |  |                        | 39,997  |                           |   | 45,985       |   |                    | 2,151
|Depreciation and amortization          |        |  |                        | 5,525   |                           |   | 6,215        |   |                    | 499  
|General and administrative             |        |  |                        | 12,023  |                           |   | 7,396        |   |                    | 448  
|Asset impairment and restaurant        |        | 
|closings/remodels                      |        |  |                        | 300     |                           |   | -            |   |                    | -    
|Intercompany charges                   |        |  |                        | -       |                           |   | 50           |   |                    | -    
|                                       |        |  |                        |         |                           |   |              |   |                    |      
|                                       |        | 
|Total costs and expenses               |        |  |                        | 106,320 |                           |   | 121,246      |   |                    | 8,247
|                                       |        |  |                        |         |                           |   |              |   |                    |      
|                                       |        | 
|Operating income                       |        |  |                        | 10,710  |                           |   | 4,522        |   |                    | (508 
|                                       |        | 
|Other (expense) income:                |        | 
|Interest expense                       |        |  |                        | (22,582 | )                         |   | (1,097       | ) |                    | -    
|Interest income                        |        |  |                        | 864     |                           |   | -            |   |                    | 5    
|Equity in net income of unconsolidated |        | 
|affiliates                             |        |  |                        | (254    | )                         |   | -            |   |                    | -    
|                                       |        |  |                        |         |                           |   |              |   |                    |      
|                                       |        | 
|Net other (expense) income             |        |  |                        | (21,972 | )                         |   | (1,097       | ) |                    | 5    
|                                       |        |  |                        |         |                           |   |              |   |                    |      
|                                       |        | 
|Income (loss) before income taxes      |        |  |                        | (11,262 | )                         |   | 3,425        |   |                    | (503 
|                                       |        | 
|Income taxes                           |        |  |                        | 1,035   |                           |   | -            |   |                    | -    
|                                       |        |  |                        |         |                           |   |              |   |                    |      
|                                       |        | 
|Net income (loss)                      |        |  | $                      | (12,297 | )                         | $ | 3,425        |   | $                  | (503 
|                                       |        |  |                        |         |                           |   |              |   |                    |      

Page 20



---

# SBARRO, INC. AND
SUBSIDIARIES  
Notes To Unaudited
Consolidated Financial Statements

# Consolidating
Statement of Operations  For the twelve weeks
ended October 8, 2006 (In thousands) 
(Unaudited)

|                                       | Parent |  | Guarantor
Subsidiaries |        | Nonguarantor
Subsidiaries |   | Eliminations |   | Consolidated
Total |      
|-------------------------------------- | ------ |  | ---------------------- | ------ | ------------------------- | - | ------------ | - | ------------------ | -----
|Revenues:                              |        |  |                        |        |                           |   |              |   |                    |      
|Restaurant sales                       |        |  | $                      | 34,677 |                           | $ | 39,139       |   | $                  | 1,709
|Franchise related income               |        |  |                        | 3,279  |                           |   | -            |   |                    | -    
|Real estate and other                  |        |  |                        | 886    |                           |   | 343          |   |                    | (39  
|Intercompany charges                   |        |  |                        | 15     |                           |   | -            |   |                    | -    
|                                       |        |  |                        |        |                           |   |              |   |                    |      
|                                       |        | 
|Total revenues                         |        |  |                        | 38,857 |                           |   | 39,482       |   |                    | 1,670
|                                       |        |  |                        |        |                           |   |              |   |                    |      
|                                       |        | 
|Costs and expenses:                    |        | 
|Cost of food and paper products        |        |  |                        | 5,779  |                           |   | 8,332        |   |                    | 453  
|Payroll and other employee benefits    |        |  |                        | 8,752  |                           |   | 10,579       |   |                    | 715  
|Other operating costs                  |        |  |                        | 11,997 |                           |   | 13,885       |   |                    | 656  
|Depreciation and amortization          |        |  |                        | 1,760  |                           |   | 1,916        |   |                    | 123  
|General and administrative             |        |  |                        | 4,469  |                           |   | 2,202        |   |                    | 15   
|Asset impairment and restaurant        |        | 
|closings/remodels                      |        |  |                        | 161    |                           |   | -            |   |                    | -    
|Intercompany charges                   |        |  |                        | -      |                           |   | 15           |   |                    | -    
|                                       |        |  |                        |        |                           |   |              |   |                    |      
|                                       |        | 
|Total costs and expenses               |        |  |                        | 32,918 |                           |   | 36,929       |   |                    | 1,962
|                                       |        |  |                        |        |                           |   |              |   |                    |      
|                                       |        | 
|Operating income                       |        |  |                        | 5,939  |                           |   | 2,553        |   |                    | (292 
|                                       |        | 
|Other (expense) income:                |        | 
|Interest expense                       |        |  |                        | (6,682 | )                         |   | (325         | ) |                    | -    
|Interest income                        |        |  |                        | 693    |                           |   | -            |   |                    | 38   
|Equity in net income of unconsolidated |        | 
|affiliates                             |        |  |                        | 2      |                           |   | -            |   |                    | -    
|                                       |        |  |                        |        |                           |   |              |   |                    |      
|                                       |        | 
|Net other (expense) income             |        |  |                        | (5,987 | )                         |   | (325         | ) |                    | 38   
|                                       |        |  |                        |        |                           |   |              |   |                    |      
|                                       |        | 
|Income (loss) before income taxes      |        |  |                        | (48    | )                         |   | 2,228        |   |                    | (254 
|                                       |        | 
|Income taxes                           |        |  |                        | (134   | )                         |   | -            |   |                    | -    
|                                       |        |  |                        |        |                           |   |              |   |                    |      
|                                       |        | 
|Net income (loss)                      |        |  | $                      | 86     |                           | $ | 2,228        |   | $                  | (254 
|                                       |        |  |                        |        |                           |   |              |   |                    |      

Page 21



---

# SBARRO, INC. AND
SUBSIDIARIES  
Notes To Unaudited
Consolidated Financial Statements

# Consolidating
Statement of Operations  For the twelve weeks
ended October 9, 2005 (In thousands) (Unaudited)

|                                                  | Parent |  | Guarantor
Subsidiaries |        | Nonguarantor
Subsidiaries |   | Eliminations |   | Consolidated
Total |      
|------------------------------------------------- | ------ |  | ---------------------- | ------ | ------------------------- | - | ------------ | - | ------------------ | -----
|Revenues:                                         |        |  |                        |        |                           |   |              |   |                    |      
|Restaurant sales                                  |        |  | $                      | 33,937 |                           | $ | 38,396       |   | $                  | 2,200
|Franchise related income                          |        |  |                        | 2,927  |                           |   | -            |   |                    | -    
|Real estate and other                             |        |  |                        | 1,200  |                           |   | 665          |   |                    | 1    
|Intercompany charges                              |        |  |                        | 15     |                           |   | -            |   |                    | -    
|                                                  |        |  |                        |        |                           |   |              |   |                    |      
|                                                  |        | 
|Total revenues                                    |        |  |                        | 38,079 |                           |   | 39,061       |   |                    | 2,201
|                                                  |        |  |                        |        |                           |   |              |   |                    |      
|                                                  |        | 
|Costs and expenses:                               |        | 
|Cost of food and paper products                   |        |  |                        | 6,252  |                           |   | 8,419        |   |                    | 609  
|Payroll and other employee benefits               |        |  |                        | 9,411  |                           |   | 10,863       |   |                    | 846  
|Other operating costs                             |        |  |                        | 12,055 |                           |   | 13,830       |   |                    | 490  
|Depreciation and amortization                     |        |  |                        | 1,580  |                           |   | 1,878        |   |                    | 151  
|General and administrative                        |        |  |                        | 3,433  |                           |   | 2,055        |   |                    | 125  
|Asset impairment and restaurant closings/remodels |        |  |                        | 100    |                           |   | -            |   |                    | -    
|Intercompany charges                              |        |  |                        | -      |                           |   | 15           |   |                    | -    
|                                                  |        |  |                        |        |                           |   |              |   |                    |      
|Total costs and expenses                          |        |  |                        | 32,831 |                           |   | 37,060       |   |                    | 2,221
|                                                  |        |  |                        |        |                           |   |              |   |                    |      
|                                                  |        | 
|Operating income                                  |        |  |                        | 5,248  |                           |   | 2,001        |   |                    | (20  
|                                                  |        | 
|Other (expense) income:                           |        | 
|Interest expense                                  |        |  |                        | (6,774 | )                         |   | (328         | ) |                    | -    
|Interest income                                   |        |  |                        | 249    |                           |   | -            |   |                    | 2    
|Equity in net loss of unconsolidated affiliates   |        |  |                        | (230   | )                         |   | -            |   |                    | -    
|                                                  |        |  |                        |        |                           |   |              |   |                    |      
|Net other (expense) income                        |        |  |                        | (6,755 | )                         |   | (328         | ) |                    | 2    
|                                                  |        |  |                        |        |                           |   |              |   |                    |      
|Income (loss) before income taxes (credit)        |        |  |                        | (1,507 | )                         |   | 1,673        |   |                    | (18  
|                                                  |        | 
|Income taxes  (credit)                            |        |  |                        | 471    |                           |   | -            |   |                    | -    
|                                                  |        |  |                        |        |                           |   |              |   |                    |      
|Net income (loss)                                 |        |  | $                      | (1,978 | )                         | $ | 1,673        |   | $                  | (18  
|                                                  |        |  |                        |        |                           |   |              |   |                    |      

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# SBARRO, INC. AND
SUBSIDIARIES  
Notes To Unaudited
Consolidated Financial Statements

# Consolidating
Statement of Cash Flows                                                            For
the forty weeks ended October 8, 2006                                              (In
thousands)                                               (Unaudited)

|                                                               | Parent |  | Guarantor
Subsidiaries |         | Nonguarantor
Subsidiaries |   | Eliminations |   | Consolidated
Total |     
|-------------------------------------------------------------- | ------ |  | ---------------------- | ------- | ------------------------- | - | ------------ | - | ------------------ | ----
|Operating Activities:                                          |        |  |                        |         |                           |   |              |   |                    |     
|                                                               |        | 
|Net (loss) income                                              |        |  | $                      | (6,720  | )                         | $ | 5,211        |   | $                  | (164
|Adjustments to reconcile net (loss) income to net cash         |        | 
|(used in) provided by operating activities:                    |        | 
|Depreciation and amortization                                  |        |  |                        | 5,603   |                           |   | 6,339        |   |                    | 429 
|Amortization of deferred financing costs                       |        |  |                        | 710     |                           |   | 29           |   |                    | -   
|Amortization of bond discount                                  |        |  |                        | 292     |                           |   | -            |   |                    | -   
|Provision for doubtful accounts receivables                    |        |  |                        | 130     |                           |   | -            |   |                    | -   
|(Decrease)/increase in deferred rent, net of tenant  allowance |        |  |                        | (474    | )                         |   | 557          |   |                    | (122
|Asset impairment, restaurant closings/remodels and loss        |        | 
|on sale of other concept restaurants                           |        |  |                        | 474     |                           |   | -            |   |                    | -   
|Gain on sale of restaurant property and equipment              |        |  |                        | -       |                           |   | -            |   |                    | (180
|Equity in net income of unconsolidated affiliates              |        |  |                        | (153    | )                         |   | -            |   |                    | -   
|                                                               |        | 
|Changes in operating assets and liabilities:                   |        | 
|Increase in receivables                                        |        |  |                        | (515    | )                         |   | (150         | ) |                    | (237
|Decrease (increase) in inventories                             |        |  |                        | (38     | )                         |   | 46           |   |                    | (7  
|Decrease (increase) in prepaid expenses                        |        |  |                        | (1,265  | )                         |   | (2,922       | ) |                    | 73  
|Decrease (increase) in other assets                            |        |  |                        | 323     |                           |   | 8            |   |                    | (3  
|Increase (decrease) in accounts payable and accrued expenses   |        |  |                        | (5,318  | )                         |   | 512          |   |                    | (98 
|Decrease in accrued interest payable                           |        |  |                        | (6,414  | )                         |   | -            |   |                    | -   
|                                                               |        |  |                        |         |                           |   |              |   |                    |     
|Net cash (used in) provided by operating activities            |        |  |                        | (13,365 | )                         |   | 9,630        |   |                    | (309
|                                                               |        |  |                        |         |                           |   |              |   |                    |     

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# SBARRO, INC. AND
SUBSIDIARIES  
Notes To Unaudited
Consolidated Financial Statements

# Consolidating
Statement of Cash Flows                                  For the forty weeks ended
October 8, 2006                                               (In thousands)
                                                (Unaudited)
                                                (Continued)

|                                                       | Parent |  | Guarantor
Subsidiaries |         | Nonguarantor
Subsidiaries |   | Eliminations |   | Consolidated
Total |       
|------------------------------------------------------ | ------ |  | ---------------------- | ------- | ------------------------- | - | ------------ | - | ------------------ | ------
|Investing Activities:                                  |        |  |                        |         |                           |   |              |   |                    |       
|Purchase of property and equipment                     |        |  |                        | (4,151  | )                         |   | (5,010       | ) |                    | (1,533
|Proceeds from sale of restaurant property &  equipment |        |  |                        | -       |                           |   | -            |   |                    | 1,433 
|Capital contributions from joint venture partners      |        |  |                        | -       |                           |   | -            |   |                    | 250   
|                                                       |        |  |                        |         |                           |   |              |   |                    |       
|Net cash used in investing activities                  |        |  |                        | (4,151  | )                         |   | (5,010       | ) |                    | 150   
|                                                       |        |  |                        |         |                           |   |              |   |                    |       
|Financing Activities:                                  |        | 
|Mortgage principal repayments                          |        |  |                        | -       |                           |   | (163         | ) |                    | -     
|Repayments of loans by officers                        |        |  |                        | 7       |                           |   | -            |   |                    | -     
|Intercompany balances                                  |        |  |                        | 4,595   |                           |   | (5,869       | ) |                    | 1,274 
|                                                       |        |  |                        |         |                           |   |              |   |                    |       
|Net cash (used in) provided by financing activities    |        |  |                        | 4,602   |                           |   | (6,032       | ) |                    | 1,274 
|                                                       |        |  |                        |         |                           |   |              |   |                    |       
|(Decrease) increase in cash and cash equivalents       |        |  |                        | (12,914 | )                         |   | (1,412       | ) |                    | 1,115 
|Cash and cash equivalents at beginning of year         |        |  |                        | 66,377  |                           |   | 5,303        |   |                    | 1,409 
|                                                       |        |  |                        |         |                           |   |              |   |                    |       
|Cash and cash equivalents at end of period             |        |  | $                      | 53,463  |                           | $ | 3,891        |   | $                  | 2,524 
|                                                       |        |  |                        |         |                           |   |              |   |                    |       
|Supplemental disclosure of cash flow information:      |        | 
|Cash paid during the period for income taxes           |        |  | $                      | 516     |                           | $ | -            |   | $                  | -     
|                                                       |        |  |                        |         |                           |   |              |   |                    |       
|Cash paid during the period for interest               |        |  | $                      | 28,050  |                           | $ | 1,055        |   | $                  | -     
|                                                       |        |  |                        |         |                           |   |              |   |                    |       

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# SBARRO, INC. AND
SUBSIDIARIES  
Notes To Unaudited
Consolidated Financial Statements

# Consolidating
Statement of Cash FlowsFor the forty weeks
ended October 9, 2005 (In thousands) (Unaudited)

|                                                               | Parent |  | Guarantor
Subsidiaries |         | Nonguarantor
Subsidiaries |   | Eliminations |   | Consolidated
Total |     
|-------------------------------------------------------------- | ------ |  | ---------------------- | ------- | ------------------------- | - | ------------ | - | ------------------ | ----
|Operating Activities:                                          |        |  |                        |         |                           |   |              |   |                    |     
|                                                               |        | 
|Net (loss) income                                              |        |  | $                      | (12,297 | )                         | $ | 3,425        |   | $                  | (503
|Adjustments to reconcile net (loss) income to net cash         |        | 
|(used in) provided by operating activities:                    |        | 
|Depreciation and amortization                                  |        |  |                        | 5,525   |                           |   | 6,215        |   |                    | 499 
|Amortization of deferred financing costs                       |        |  |                        | 711     |                           |   | -            |   |                    | -   
|Amortization of bond discount                                  |        |  |                        | 292     |                           |   | 29           |   |                    | -   
|Provision for doubtful accounts receivables                    |        |  |                        | -       |                           |   | -            |   |                    | -   
|(Decrease)/increase in deferred rent, net of tenant  allowance |        |  |                        | (23     | )                         |   | 182          |   |                    | (104
|Asset impairment and restaurant closings/remodels and loss     |        |  |                        |         |                           |   |              |   |                    |     
|on sale of other concept restaurants                           |        |  |                        | 300     |                           |   | -            |   |                    | -   
|Equity in net income of unconsolidated affiliates              |        |  |                        | 254     |                           |   | -            |   |                    | -   
|                                                               |        | 
|Changes in operating assets and liabilities:                   |        | 
|Increase in receivables                                        |        |  |                        | (600    | )                         |   | (96          | ) |                    | 280 
|Decrease (increase) in inventories                             |        |  |                        | 299     |                           |   | 391          |   |                    | 84  
|Decrease (increase) in prepaid expenses                        |        |  |                        | (3,681  | )                         |   | (2,328       | ) |                    | 65  
|Decrease (increase) in other assets                            |        |  |                        | 25      |                           |   | (1           | ) |                    | (2  
|Increase (decrease) in accounts payable and accrued expenses   |        |  |                        | (3,064  | )                         |   | 80           |   |                    | (710
|Increase in accrued interest payable                           |        |  |                        | (6,473  | )                         |   | -            |   |                    | -   
|                                                               |        |  |                        |         |                           |   |              |   |                    |     
|Net cash (used in) provided by operating activities            |        |  |                        | (18,732 | )                         |   | 7,897        |   |                    | (391
|                                                               |        |  |                        |         |                           |   |              |   |                    |     

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# SBARRO, INC. AND
SUBSIDIARIES  
Notes To Unaudited
Consolidated Financial Statements

# Consolidating
Statement of Cash FlowsFor the forty weeks
ended October 9, 2005 (In thousands) (Unaudited)(Continued)

|                                                         | Parent |  | Guarantor
Subsidiaries |         | Nonguarantor
Subsidiaries |   | Eliminations |   | Consolidated
Total |      
|-------------------------------------------------------- | ------ |  | ---------------------- | ------- | ------------------------- | - | ------------ | - | ------------------ | -----
|Investing Activities:                                    |        |  |                        |         |                           |   |              |   |                    |      
|Purchase of property and equipment                       |        |  |                        | (5,464  | )                         |   | (3,331       | ) |                    | (234 
|Proceeds from sale of joint venture property & equipment |        |  |                        | 300     |                           |   | -            |   |                    | -    
|Dividend received from unconsolidated affiliate          |        |  |                        | 603     |                           |   | -            |   |                    | -    
|                                                         |        |  |                        |         |                           |   |              |   |                    |      
|Net cash used in investing activities                    |        |  |                        | (4,561  | )                         |   | (3,331       | ) |                    | (234 
|                                                         |        |  |                        |         |                           |   |              |   |                    |      
|Financing Activities:                                    |        | 
|Mortgage principal repayments                            |        |  |                        | -       |                           |   | (151         | ) |                    | -    
|Repayments of loans by officers                          |        |  |                        | 52      |                           |   | -            |   |                    | -    
|Intercompany balances                                    |        |  |                        | 4,307   |                           |   | (4,944       | ) |                    | 637  
|                                                         |        |  |                        |         |                           |   |              |   |                    |      
|Net cash (used in) provided by financing activities      |        |  |                        | 4,359   |                           |   | (5,095       | ) |                    | 637  
|                                                         |        |  |                        |         |                           |   |              |   |                    |      
|(Decrease) increase in cash and cash equivalents         |        |  |                        | (18,934 | )                         |   | (529         | ) |                    | 12   
|Cash and cash equivalents at beginning of year           |        |  |                        | 57,150  |                           |   | 4,680        |   |                    | 1,170
|                                                         |        |  |                        |         |                           |   |              |   |                    |      
|Cash and cash equivalents at end of period               |        |  | $                      | 38,216  |                           | $ | 4,151        |   | $                  | 1,182
|                                                         |        |  |                        |         |                           |   |              |   |                    |      
|Supplemental disclosure of cash flow information:        |        | 
|Cash paid during the period for income taxes             |        |  | $                      | 1,448   |                           | $ | -            |   | $                  | -    
|                                                         |        |  |                        |         |                           |   |              |   |                    |      
|Cash paid during the period for interest                 |        |  | $                      | 28,050  |                           | $ | 1,068        |   | $                  | -    
|                                                         |        |  |                        |         |                           |   |              |   |                    |      

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

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

# Results of Operations

We are a leading owner, operator and
franchisor of quick service restaurants (QSR), serving a wide variety of
Italian specialty foods. We also operate, in certain cases with joint venture partners, a
number of other restaurant concepts.

The following table summarizes the
number of Sbarro owned, franchised and other concept restaurants in operation during each
indicated period:

|                                      | 12 Weeks
Ended
10/08/06 |  | 12 Weeks
Ended
10/09/05 |     | 40 Weeks
Ended
10/08/06 |  | 40 Weeks
Ended
10/09/05 |  
|------------------------------------- | ----------------------- |  | ----------------------- | --- | ----------------------- |  | ----------------------- | -
|Company-owned Sbarro restaurants:     |                         |  |                         |     |                         |  |                         |  
|Open at beginning of period           |                         |  |                         | 481 |                         |  | 496                     |  
|Opened during period                  |                         |  |                         | 1   |                         |  | 1                       |  
|Acquired from (sold to) franchisees   |                         | 
|during period                         |                         |  |                         | 1   |                         |  | -                       |  
|Closed during period                  |                         |  |                         | (4  | )                       |  | (2                      | )
|                                      |                         |  |                         |     |                         |  |                         |  
|Open at end of period                 |                         |  |                         | 479 |                         |  | 495                     |  
|                                      |                         |  |                         |     |                         |  |                         |  
|Franchised Sbarro restaurants:        |                         | 
|Open at beginning of period           |                         |  |                         | 475 |                         |  | 435                     |  
|Opened during period                  |                         |  |                         | 10  |                         |  | 12                      |  
|Acquired from (sold to) Sbarro during |                         | 
|period                                |                         |  |                         | (1  | )                       |  | -                       |  
|Closed or terminated during period    |                         |  |                         | (8  | )                       |  | (6                      | )
|                                      |                         |  |                         |     |                         |  |                         |  
|Open at end of period                 |                         |  |                         | 476 |                         |  | 441                     |  
|                                      |                         |  |                         |     |                         |  |                         |  
|Other concepts:                       |                         | 
|Open at beginning of period           |                         |  |                         | 24  |                         |  | 26                      |  
|Opened during period                  |                         |  |                         | 1   |                         |  | -                       |  
|Closed during period                  |                         |  |                         | -   |                         |  | (1                      | )
|                                      |                         |  |                         |     |                         |  |                         |  
|Open at end of period                 |                         |  |                         | 25  |                         |  | 25                      |  
|                                      |                         |  |                         |     |                         |  |                         |  
|All restaurants:                      |                         | 
|Open at beginning of period           |                         |  |                         | 980 |                         |  | 957                     |  
|Opened during period                  |                         |  |                         | 12  |                         |  | 13                      |  
|Closed or terminated during period    |                         |  |                         | (12 | )                       |  | (9                      | )
|                                      |                         |  |                         |     |                         |  |                         |  
|Open at end of period                 |                         |  |                         | 980 |                         |  | 961                     |  
|                                      |                         |  |                         |     |                         |  |                         |  

Page 27



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# Executive Overview

Sales increased in the first three
quarters of 2006 compared to the first three quarters of 2005. Mall traffic has increased
as retailers, particularly high end mall based retailers, are serving more customers. We
continue to benefit from the reengineering of our QSR operations in 2004 while continuing
to provide a quality product coupled with quality service. We believe our strategy
resulted in the significant improvement of our operations, including higher sales and
improved results of operations. Selective price increases, improvements in operational
controls and upgraded store management at all levels produced increased comparable
restaurant unit sales and improved earnings in the first three quarters of 2006.

We have developed a new concept,
Carmelas of Brooklyn, which opened its first restaurant in February 2005.
Carmelas of Brooklyn is expected to operate outside of our traditional mall,
hospitality and airport venues. We believe that the continuing development of this and
other concepts, along with a combination of our re-energized QSR restaurants and continued
growth in our franchise based business, should lead to continued improvements in both
revenues and profits.

# Seasonality

Our business is subject to seasonal
fluctuations, and the effects of weather, national security, economic and business
conditions. Earnings have been highest in our fourth quarter due primarily to increased
volume in shopping malls during the holiday shopping season. Our annual 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

Due to the seasonality of our
business, after we determine the results of operations for our fourth quarter, we perform
an annual test for impairment on our goodwill and intangible assets with indefinite lives
as required by SFAS No. 142, Goodwill and Other Intangible Assets, and fully
evaluate the impairment of long-lived assets as required by SFAS No. 144, Accounting
for the Impairment and Disposal of Long-Lived Assets. Any required adjustments are
recorded at that time unless impairment factors become evident earlier.

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# Relevant Financial
Information

|                                                 | Twelve weeks ended | Forty weeks ended
|------------------------------------------------ | ------------------ | -----------------
|
|
|Comparable Sbarro-owned QSR sales(1)             |                    |                  
|Comparable Sbarro-owned QSR sales percentage     |                    |                  
|change vs. prior compared period(1)              |                    |                  
|Franchise location sales                         |                    |                  
|Franchise revenues                               |                    |                  
|Cost of food and paper products as a percentage  |                    |                  
|of  restaurant sales                             |                    |                  
|Payroll and other benefits as a percentage of    |                    |                  
|restaurant sales                                 |                    |                  
|Other operating expenses as a percentage of      |                    |                  
|restaurant sales                                 |                    |                  
|General and administrative costs as a percentage |                    |                  
|of revenues                                      |                    |                  
|Asset impairment, restaurant closings/remodels   |                    |                  
|and loss on sale of other concept restaurants    |                    |                  
|EBITDA (2)                                       |                    |                  

____________

| | (1)        
Comparable Sbarro-owned QSR sales dollar and annual percentage change are based on
locations that were in operation on a continuing basis for all of each period
presented.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2)        
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
calculations used to determine our compliance with the ratios in the indenture
under which our senior notes are issued. 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 cash
investment. Our calculation of EBITDA may not be comparable to a similarly titled
measure reported by other companies, since all companies do not calculate this
non-GAAP measure in the same manner. Our EBITDA calculations are not intended to
represent cash provided by (used in) operating activities since they do not
include interest and taxes and changes in operating assets and liabilities, nor
are they intended to represent a net increase in cash since they do not include cash
provided by (used in) investing and financing activities. The following table
reconciles EBITDA to our net loss for the periods
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Page 29



---

presented,  which we believe is the
most direct comparable GAAP financial measure to EBITDA (in thousands):

|                              | Forty Weeks Ended | 
|----------------------------- | ----------------- | 
|
|EBITDA                        |                   | 
|Interest expense              |                   | 
|Interest income               |                   | 
|Income taxes                  |                   | 
|Depreciation and amortization |                   | 
|                              |                   | 
|Net loss                      |                   | 
|                              |                   | 

|                              | Twelve Weeks Ended | 
|----------------------------- | ------------------ | 
|
|EBITDA                        |                    | 
|Interest expense              |                    | 
|Interest income               |                    | 
|Income taxes                  |                    | 
|Depreciation and amortization |                    | 
|                              |                    | 
|Net income (loss)             |                    | 
|                              |                    | 

# Third quarter 2006 Versus
Third quarter 2005

We operate two business segments. Our
company owned restaurant segment is comprised of the operating activities of our company
owned Quick Service restaurants and other concept restaurants (owned and joint ventures).
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.

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---

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 twelve weeks ended October
8, 2006 and October 9, 2005 (in thousands):

|                                          | Company Owned
Restaurants |  | Franchise
Restaurants |        | Totals |  
|----------------------------------------- | ------------------------- |  | --------------------- | ------ | ------ | -
|2006                                      |                           |  |                       |        |        |  
|Total revenue                             |                           |  | $                     | 76,715 |        | $
|                                          |                           |  |                       |        |        |  
|Operating income before unallocated costs |                           |  |                       | 11,602 |        |  
|                                          |                           |  |                      
|Unallocated costs and expenses (1)        |                           |  |                       |        |        |  
|                                          |                           |  |                       |       
|Operating income                          |                           |  |                       |        |        |  
|                                          |                           |  |                       |       
|2005                                      |                           |  |                       |        |       
|Total revenue                             |                           |  | $                     | 76,399 |        | $
|                                          |                           |  |                       |        |        |  
|Operating income before unallocated costs |                           |  |                       | 9,916  |        |  
|Unallocated costs and expenses (1)        |                           |  |                       |        |        |  
|                                          |                           |  |                       |       
|Operating income                          |                           |  |                       |        |        |  
|                                          |                           |  |                       |       

_________________ (1)    
          Represents those general and administrative expenses that are not allocated to a
          segment

Sales by QSR and consolidated other
concept restaurants increased 1.3% to $75.5 million for the twelve weeks ended October 8,
2006 from $74.5 million for the twelve weeks ended October 9, 2005. The increase in sales
for the third quarter of 2006 is the result of $1.5 million or 2.1% of higher sales in our
QSR restaurants, with comparable restaurant sales increasing by 4.8% offset, in part by
fewer company owned QSR restaurants in operation during 2006 and slightly lower restaurant
sales of our consolidated other concepts as a result of the sale of a joint venture and
two company owned restaurants. We believe that improved economic conditions in the United
States, improvement in our operational controls and upgraded field and store management,
combined with higher check averages and selective price increases implemented in 2005,
accounted for the improvement in comparable restaurant sales.

Franchise related revenues increased
to $3.3 million for the third quarter of 2006 from $2.9 million in the third quarter of
2005. The increase was attributable to additional locations opened during the last twelve
months (net of closed locations).

Real estate and other revenues
decreased by $.7 million in the third quarter of 2006 from $1.9 million in the third
quarter of 2005. The decrease was primarily attributable to a reduction in rental income
in one of our subsidiaries resulting from a tenant bankruptcy and a decrease in certain
food rebates we receive based on franchisees level of purchase.

Cost of food and paper products as a
percentage of restaurant sales improved by 1.2 percentage points to 19.3% for the twelve
weeks ended October 8, 2006 from 20.5% for the twelve weeks ended October 9, 2005. The
cost of cheese in the third quarter of 2006 averaged approximately $1.40 per pound
compared to an average of approximately $1.68 per pound for the third quarter of 2005.
This $0.28 per pound improvement in cheese cost accounted for $0.6 million or 8 basis
points of the improvement. Improved operational controls, combined

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---

with selective price increases
implemented in 2005, were the primary reasons for the remainder of the improvement in our
cost of sales as a percentage of restaurant sales.

Payroll and other employee benefits
as a percentage of restaurant sales was 26.5% in the third quarter of 2006 compared to
28.3% in the third quarter of 2005. Payroll costs decreased $1.1 million as compared to
the third quarter of 2005 as a result of improved efficiencies and improved sales.

Other operating costs increased by
$.2 million the for twelve weeks ended October 8, 2006 from the third quarter of 2005 and,
as a percentage of restaurant sales, decreased to 35.1% from 35.4%. The increase is
primarily attributable to an increase in bonus expense partially offset by lower repairs
and maintenance.

General and administrative expenses
were $6.7 million for the third quarter of 2006 compared to $5.6 million the third quarter
of 2005. The increase resulted primarily from upgrades and additions to corporate and
franchise personnel and an increase in a long term executive bonus plan accrual.

Interest expense of $7 million for
the third quarters of both 2006 and 2005 relates primarily to the 11%, $255 million senior
notes we issued to finance our going private transaction in 1999 and the 8.4%, $16 million
mortgage loan on our corporate headquarter building.

Equity in the net income (loss) of
unconsolidated affiliates represents our proportionate share of earnings and losses in
those other concept restaurants in which we have a 50% or less ownership interest. Our
equity in the overall profits of those concepts increased by $0.2 million in the third
quarter of 2006 from the third quarter of 2005 as a result of improved performance. We do
not have any further expansion plans for these ventures.

We have elected to be taxed under the
provisions of Subchapter S of the Internal Revenue Code and, where applicable and
permitted, under similar state and local income tax provisions beginning January 3, 2000.
Under the provisions of Subchapter S, substantially all taxes on our income are paid by
our shareholders rather than us. In the third quarter of 2006 we had an income tax credit
of $.1 million for changes in taxable income projections in states that do not recognize S
Corp status. Our tax expense was $.5 million for the third quarter of 2005. The expense in
the third quarter of 2005 was for taxes owed by us to jurisdictions that do not recognize
S corporation status or that tax entities based on factors other than income and for taxes
withheld at the source of payment on foreign franchise income related payments.

# Year to Date 2006 Versus
2005

We operate two business segments. Our
company owned restaurant segment is comprised of the operating activities of our company
owned Quick Service restaurants and other concept restaurants (owned and joint ventures).
Our franchise restaurant segment offers

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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 for the forty weeks ended October
8, 2006 and October 9, 2005 (in thousands):

|                                          | Company Owned
Restaurants |  | Franchise
Restaurants |         | Totals |  
|----------------------------------------- | ------------------------- |  | --------------------- | ------- | ------ | -
|2006                                      |                           |  |                       |         |        |  
|Total revenue                             |                           |  | $                     | 245,191 |        | $
|                                          |                           |  |                       |         |        |  
|Operating income before unallocated costs |                           |  |                       | 33,053  |        |  
|Unallocated costs and expenses (1)        |                           |  |                       |         |        |  
|                                          |                           |  |                       |        
|Operating income                          |                           |  |                       |         |        |  
|                                          |                           |  |                       |        
|2005                                      |                           |  |                       |         |       
|Total revenue                             |                           |  | $                     | 241,202 |        | $
|                                          |                           |  |                       |         |        |  
|Operating income before unallocated costs |                           |  |                       | 25,307  |        |  
|Unallocated costs and expenses (1)        |                           |  |                       |         |        |  
|                                          |                           |  |                       |        
|Operating income                          |                           |  |                       |         |        |  
|                                          |                           |  |                       |        

_________________ (1)    
          Represents those general and administrative expenses that are not allocated to a
          segment

Sales by QSR and consolidated other
concept restaurants increased 1.6% to $240 million for the forty weeks ended October 8,
2006 from $236 million for the forty weeks ended October 9, 2005. The increase in sales
for the first three quarters of 2006 is the result of $5.4 million or 2.4% of higher
restaurant sales in our QSR restaurants due to an increase of comparable sales of 5.0%
offset, in part by fewer company-owned QSR restaurants in operation during 2006 and
slightly lower restaurant sales of our consolidated other concepts as a result of the sale
of a joint venture and two company owned restaurants. We believe that the improvement in
comparable unit sales was due to improved economic conditions in the United States,

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improvement in our operational
controls, upgraded field and store management combined with higher check averages and
selective price increases.

Franchise related revenues increased
to $10.7 million for the first three quarters of 2006 from $9.3 million in the first three
quarters of 2005. The increase was attributable to additional locations opened during the
last year (net of closed locations) and a settlement with a franchisee which increased
revenues by approximately $.5 million.

Real estate and other revenues
increased by $.2 million in the first three quarters of 2006. The increase was
attributable to the gain from the sale of restaurant property and equipment of one of our
other concept restaurants partially offset by a reduction in rental income in one of our
subsidiaries resulting from a tenant bankruptcy.

Cost of food and paper products as a
percentage of restaurant sales improved by 1.4 percentage points to 19.3% for the forty
weeks ended October 8, 2006 from 20.7% for the forty weeks ended October 9, 2005. The cost
of cheese in the first three quarters of 2006 averaged approximately $1.42 per pound
compared to an average of approximately $1.72 per pound in the first three quarters of
2005. This $.30 per pound improvement in cheese cost accounted for $1.8 million or 8 basis
points of the improvement. Improved operational controls and sales growth also contributed
to the improvement in our cost of sales as a percentage of restaurant sales.

Payroll and other employee benefits,
as a percentage of restaurant sales, improved to 27.4% in the first three quarters of 2006
from 28.0% in the first three quarters of 2005. The improvement was primarily a result of
efficiencies and improved sales.

Other operating costs decreased by $1
million in the first three quarters of 2006 and, as a percentage of restaurant sales,
decreased to 36.3% from 37.3% in the first three quarters of 2005. The decrease resulted
primarily from lower repair and maintenance costs.

General and administrative expenses
were $23.2 million for the first three quarters of 2006 compared to $19.9 million in the
first three quarters of 2005. The increase resulted primarily from upgrades and additions
to corporate and franchise personnel, an increase in the provision for doubtful accounts
relating to franchise receivables and an increase in a long term executive bonus plan
accrual.

Interest expense of $23.8 million for
the first three quarters of 2006 and $23.7 million for the first three quarters of 2005
relates primarily to the 11%, $255 million senior notes we issued to finance our going
private transaction in 1999 and the $16 million mortgage loan at 8.4% on our corporate
headquarters.

Equity in the net income (loss) of
unconsolidated affiliates represents our proportionate share of earnings and losses in
those other concept restaurants in which we have a 50% or less ownership interest. Our
equity in the overall profits of those concepts in the first three quarters

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of 2006 increased by $.4 million as a
result of a new steakhouse that opened in the beginning of the third quarter 2005. We do
not have any expansion plans for these ventures.

We have elected to be taxed under the
provisions of Subchapter S of the Internal Revenue Code and, where applicable and
permitted, under similar state and local income tax provisions beginning January 3, 2000.
Under the provisions of Subchapter S, substantially all taxes on our income are paid by
our shareholders rather than us. Our tax expense was $.6 million and $1 million for the
first three quarters of 2006 and 2005, respectively. The expense in each period was for
taxes owed by us to jurisdictions that do not recognize S corporation status or that tax
entities based on factors other than income and for taxes withheld at the source of
payment on foreign franchise income related payments.

# Liquidity and Capital
Resources

# Cash Requirements

Our liquidity requirements relate to
debt service, including to repay any borrowings we may make under our line of credit
agreement, capital expenditures, working capital, investments in other ventures,
distributions to shareholders when permitted under the indenture for the senior notes and
general corporate purposes. We incur annual cash interest expense of approximately $29
million under the senior notes and mortgage loan and may incur additional interest expense
for borrowings under our line of credit. We are not required to make principal payments,
absent the occurrence of certain events, on our senior notes until they mature in
September 2009. We believe that aggregate restaurant capital expenditures and our
investments in joint ventures for full year 2006 will approximate $13 million, of which
approximately $10.7 million was expended during the forty weeks ended October 8, 2006.

We expect our primary source of
liquidity to meet current requirements will be from cash flow from operations. In July
2005, we obtained a three year line of credit from Commerce Bank to replace our former
revolving credit facility. Under this line of credit, we currently have the ability to
borrow up to $10 million with a sub-limit for letters of credit of $5 million. We do not
presently expect to borrow under our line of credit except for required letters of credit.
The maximum amount available under our line of credit, after giving effect to outstanding
letters of credit, was $8.1 million at October 8, 2006.

# Contractual Obligations
and Off-Balance Sheet Arrangements

Our contractual obligations and
off-balance sheet arrangements do not materially differ from the information disclosed in
Part II, Item 7 of our Annual Report on Form 10-K for the year ended January 1, 2006.

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# Sources and Uses of Cash

The following table summarizes our
cash and cash equivalents and working capital as at the end of the first three quarters of
2006 and 2005 and the sources and uses of our cash flows during the first three quarters
of each of the respective years:

|                                      | Forty Weeks Ended | 
|------------------------------------- | ----------------- | 
|
|
|Liquidity at the end of period        |                   | 
|Cash and cash equivalents             |                   | 
|Working capital                       |                   | 
|                                      |                   | 
|Net cash flows for the period         |                   | 
|Used in operating activities          |                   | 
|Used in investing activities          |                   | 
|Provided used in financing activities |                   | 
|                                      |                   | 
|Net decrease in cash                  |                   | 
|                                      |                   | 

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 used in operating activities
was $4.0 million for the forty weeks ended October 8, 2006 compared to $11.2 million used
during the forty weeks ended October 9, 2005. The decrease in net cash used in operating
activities was primarily attributable to a lower net loss combined with a lower increase
in prepaid expenses partially offset by an accounts payable decrease.

Net cash used in investing activities
has historically been primarily for capital expenditures. Net cash used in investing
activities was $.9 million higher in the forty weeks ended October 8, 2006 increasing to
$9.0 million from $8.1 million for the forty weeks ended October 9, 2005. The increase was
primarily due to increased restaurant remodeling partially offset by proceeds from the
sale of restaurant property and equipment and capital contributions from partners to
consolidated joint ventures.

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# Recent Accounting
Pronouncement:

In July 2006, the Financial
Accounting Standards Board (FASB) issued FASB Interpretation No.
(FIN) 48, Accounting for Uncertainty in Income TaxesAn
Interpretation of FASB Statement No. 109", which prescribes a recognition threshold
and measurement attribute for the financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return. In particular, this interpretation
requires uncertain tax positions to be recognized only if they are
more-likely-than-not to be upheld based on their technical merits.
Additionally, the measurement of the tax position will be based on the largest amount that
is determined to have greater than a 50% likelihood of realization upon ultimate
settlement. Any resulting cumulative effect of applying the provisions of FIN 48 upon
adoption would be reported as an adjustment to the beginning balance of retained earnings
in the period of adoption. FIN 48 will be effective beginning fiscal 2007. We have not yet
evaluated the impact of this interpretation on our financial statements.

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. We are evaluating the
impact the adoption of SFAS No. 157 will have on our consolidated financial statements.

In September 2006, the Staff of the
Securities and Exchange Commission Issued Staff Accounting Bulletin (SAB) No.
108, Considering the Effects of Prior Year Misstatements when Quantifying
Misstatements in Current Year Financial Statements, which provides interpretive
guidance regarding the consideration given to prior year misstatements when determining
materiality in current year financial statements. SAB No. 108 is effective for fiscal
years ending after November 15, 2006. We are evaluating the impact of SAB No. 108 on our
consolidated financial statements.

# Critical Accounting
Policies and Judgments

Accounting policies are an integral
part of the preparation of our financial statements in accordance with accounting
principles generally accepted in the United States of America. Understanding these
policies, therefore, is a key factor in understanding our reported results of operations
and financial position. Accounting policies often require us to make estimates and
assumptions that affect the amounts of assets, liabilities, revenues and expenses reported
in the financial statements. Due to their nature, estimates involve judgments based upon
available information. Therefore, actual results or amounts could differ from estimates
and the difference could have a material impact on our consolidated financial statements.
During the

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forty weeks ended October 8, 2006,
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 and Judgments in Part II, Item
7 of our Annual Report on Form 10-K for the fiscal year ended January 1, 2006.

# Certain Relationships
and Transactions

During the first three quarters of
2006, there were no related party transactions. See Certain Relationships and
Related Transactions in Part II, Item 13 of our Annual Report on Form 10-K for the
year ended January 1, 2006 for information concerning related party transactions.

# Forward Looking
Statements

This report contains certain
forward-looking statements about our financial condition, results of operations, future
prospects and business. These statements appear in a number of places in the report and
include statements regarding our intent, belief, expectation, strategies or projections at
this time. These statements generally contain words such as may,
should, seek, believes, in our opinion,
expect, intend, plan, estimate,
project, strategy and similar expressions or the negative of those
words.

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

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

| |  | the
availability of food (particularly cheese and tomatoes), beverage and paper products at
current prices; o our ability to pass along cost increases to our customers;
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | increases
in Federal or State minimum wages;
|- |  | --------------------------------------------

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

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

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

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

| |  | our
ability to generate sufficient cash flow to make interest payments and principal under
our senior notes, mortgage loan and line of credit;
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------

| |  | our
ability to comply with covenants contained in the indenture under which the senior notes
are issued and our mortgage loan and the effects which the restrictions imposed by those
covenants may have on our ability to operate our business; and
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | our
ability to repurchase our senior notes to the extent required in the event we make
certain asset sales or experience a change of control.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------

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

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

We have historically invested our
cash on hand in short term, fixed rate, highly rated and highly liquid instruments which
are reinvested when they mature throughout the year. The indenture under which our senior
notes are issued limits us to similar investments. Although, due to their short term
nature, 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.

Future borrowings under our line of
credit (none are currently outstanding) will be at rates that float with the market and,
therefore, will be subject to fluctuations in interest rates. Our $255 million senior
notes bear a fixed interest rate of 11%. We are not a party to, and do not expect to enter
into any, interest rate swaps or other instruments to hedge interest rates.

We have not 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.

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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|Item 4. |  | Controls
and Procedures
|------- |  | -----------------------

# Disclosure Controls and
Procedures:

Our management, with the
participation of our 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, our 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 Exchange Act
is accumulated and communicated to our management, including those officers, to allow
timely decisions regarding required disclosure. It should be noted that a control system,
no matter how well designed and operated, can provide only reasonable, not absolute,
assurance that it will detect or uncover failures within our company to disclose material
information otherwise required to be set forth in our periodic reports.

# Internal Control Over
Financial Reporting:

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 forty weeks ended October
8, 2006 that have materially affected, or are reasonable likely to materially affect, the
Companys internal control over financial reporting.

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# PART II.    OTHER
INFORMATION

|Item 1A. |  | Risk
Factors
|-------- |  | ------------

There have been no material changes in our
risk factors from those disclosed in our Annual Report on Form 10-K for the year ended
January 1, 2006.

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

| | Exhibit Number |  | 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 Financial and 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 Financial and Accounting Officer
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
| | ----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

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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 be three quarters by the undersigned, thereunto duly
authorized.

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

|Date:     
November 20, 2006 | By:     /s/ Peter BeaudraultPeter Beaudrault
President and Chief Executive Officer   (Principal Executive Officer)
|---------------------------- | ------------------------------------------------------------------------------------------------------------------

|Date:     
November 20, 2006 | By:     /s/ Anthony J. PuglisiAnthony J.
Puglisi                                                      Vice President and
                                                     Chief Financial Officer
                                                     (Principal Financial and Accounting
Officer)
|---------------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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# EXHIBIT INDEX

| | Exhibit Number |  | 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 Financial and 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 Financial and Accounting Officer
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
| | ----- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------