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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
 
                                   FORM 10-K
                            ------------------------
 
     [X]   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
        THE SECURITIES EXCHANGE ACT OF 1934
 
                   FOR THE FISCAL YEAR ENDED JANUARY 25, 1999
 
                                       OR
 
     [ ]   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
        THE SECURITIES EXCHANGE ACT OF 1934
 
                         COMMISSION FILE NUMBER: 0-6054
 
                               STAR BUFFET, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
                            ------------------------
 
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<S>                                            <C>
                   DELAWARE                                      84-1433454
         (STATE OR OTHER JURISDICTION                         (I.R.S. EMPLOYER
      OF INCORPORATION OR ORGANIZATION)                     IDENTIFICATION NO.)
 
              440 LAWNDALE DRIVE
             SALT LAKE CITY, UTAH                                  84115
   (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                      (ZIP CODE)
</TABLE>
 
       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (801) 463-5500
                            ------------------------
 
        SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
 
          SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
 
                             (TITLE OF EACH CLASS):
                                  COMMON STOCK
                                $.001 PAR VALUE
 
     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 (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.  Yes [X]  No [ ]
 
     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [ ].
 
     The aggregate market value of the voting stock held by non-affiliates of
the registrant as of April 16, 1999, was $12,538,000.
 
     The number of shares outstanding of the registrant's common stock was
2,950,000 shares as of April 16, 1999.
 
                      DOCUMENTS INCORPORATED BY REFERENCE
 
     Portions of the registrant's Proxy Statement for the 1999 Annual Meeting of
Stockholders, which will be filed with the Securities and Exchange Commission
within 120 days after January 25, 1999, are incorporated by reference into Part
III of this Report.
 
     The Exhibit Index is contained in Part IV herein on Page E-1.
 
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<PAGE>   2
 
                      STAR BUFFET, INC., AND SUBSIDIARIES
 
                      INDEX TO ANNUAL REPORT ON FORM 10-K
                   FOR THE FISCAL YEAR ENDED JANUARY 25, 1999
 
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                                                                        PAGE
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                                   PART I
ITEM 1.   BUSINESS....................................................    1
ITEM 2.   PROPERTIES..................................................   11
ITEM 3.   LEGAL PROCEEDINGS...........................................   12
ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.........   13
 
                                  PART II
 
ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
          STOCKHOLDER MATTERS.........................................   14
ITEM 6.   SELECTED FINANCIAL DATA.....................................   14
ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
          AND RESULTS OF OPERATIONS...................................   16
ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.................   20
ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
          AND FINANCIAL DISCLOSURE....................................   20
 
                                  PART III
 
ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT..........   20
ITEM 11.  EXECUTIVE COMPENSATION......................................   21
ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
          MANAGEMENT..................................................   21
ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..............   21
 
                                  PART IV
 
ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
          8-K.........................................................   22
</TABLE>
 
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                                     PART I
 
ITEM 1. BUSINESS
 
OVERVIEW
 
     Star Buffet, Inc., a Delaware corporation ("Star" and collectively with its
subsidiaries, the "Company") is engaged primarily in the restaurant industry. As
of January 25, 1999, the Company owns and operates 16 franchised HomeTown Buffet
restaurants, eleven BuddyFreddys restaurants, nine franchised JB's restaurants,
six JJ North's Grand Buffet restaurants, five North's Star Buffet restaurants,
three Holiday House restaurants and two Mexican-themed restaurants operated
under the Casa Bonita name. As of January 25, 1999, two of the eleven
BuddyFreddys restaurants were still under construction. The Company's
restaurants are located in nine western states, Oklahoma, Pennsylvania and
Florida and are focused upon providing customers with a wide variety of fresh,
high quality food at moderate prices primarily in the buffet format.
 
     The Company was formed on July 28, 1997 as a wholly-owned subsidiary of CKE
Restaurants, Inc. ("CKE"). On September 30, 1997 the Company completed an
initial public offering (the "Initial Public Offering") of 3,000,000 shares of
its common stock at an Initial Public Offering price of $12.00 per share. Of the
3,000,000 shares of common stock sold in the Initial Public Offering, 2,400,000
shares were sold by the company and 600,000 shares were sold by CKE. On October
7, 1997, the underwriters exercised their over-allotment option and acquired an
additional 450,000 shares of common stock from the Company. The Initial Public
Offering generated total net proceeds to the Company of $30.8 million after
commissions and offering expenses, a portion of the proceeds were used to pay a
dividend to CKE and to repay indebtedness assumed in connection with the
acquisition of restaurants.
 
CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS
 
     This report on Form 10-K contains forward looking statements, which are
subject to known and unknown risks, uncertainties and other factors which may
cause the actual results, performance, or achievements of the Company to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among others, the following: general economic and business conditions; the
impact of competitive products and pricing; success of operating initiatives;
advertising and promotional efforts; adverse publicity; changes in business
strategy or development plans; quality of management; availability, terms and
deployment of capital; changes in prevailing interest rates and the availability
of financing; food, labor, and employee benefits costs; changes in, or the
failure to comply with, government regulations; weather conditions; construction
schedules; implementation of the Company's acquisition and strategic alliance
strategy; the effect of the Company's accounting polices and other risks
detailed in the Company's Prospectus dated September 24, 1997 and other filings
with the Securities and Exchange Commission.
 
RECENT DEVELOPMENTS
 
     On February 24, 1998, the Company acquired twelve JB's Restaurants from
JB's Restaurants, Inc., a wholly-owned subsidiary of CKE, for $4,265,000,
subject to adjustments. At the time of acquisition, the Company prepaid royalty
fees for one year in the amount of $485,000. The Company continues to operate
nine restaurants under a franchise agreement with JB's Family Restaurants, Inc,
which is a wholly-owned subsidiary of Santa Barbara Restaurant Group, Inc.
During fiscal 1999, the Company completed three conversions of JB's restaurants
to North's Star Buffet restaurants -- the Company's small-format buffet concept.
In February 1999, two of the three restaurants were closed because of
unacceptable margins.
 
     On April 1, 1998, as part of the Company's plan to expand its presence in
Florida, the Company acquired two family-dining restaurants which operate under
the brand name of BuddyFreddys. The purchase price was approximately $1.6
million, subject to adjustments. These restaurants, which the Company believes
have very strong brand recognition in central Florida, were acquired to serve as
a platform for additional restaurant acquisitions in that state. Subsequent to
the purchase of BuddyFreddys, the Company acquired additional
 
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restaurants for conversion to the BuddyFreddys concept. Seven conversions to the
BuddyFreddys concept occurred as of the end of the fiscal year. Two more
conversions are planned for the first quarter of fiscal 2000. The Company
anticipates that it will continue to expand the BuddyFreddys concept in the
Florida market by acquiring and/or constructing additional units. As part of the
plan to expand its presence in Florida, the Company announced on December 11,
1998 a strategic alliance with DenAmerica Corp. (AMEX:DEN) whereby the Company
plans to convert certain Black-eyed Pea Restaurants currently owned and operated
by DenAmerica in the Orlando market to the BuddyFreddys concept.
 
     On September 10, 1998, the Company entered into a stock repurchase
authorized by its Board of Directors to purchase two million shares of the
Company's Common Stock held by CKE Restaurants, Inc. ("CKE") for a purchase
price of $5 million in cash and a $7.5 million 90 day promissory note secured by
treasury stock. The Company's Board of Directors also authorized the repurchase
of up to an additional 500,000 shares of the Company's Common Stock to be
effected in the open market, in private transactions or through alternative
repurchase transactions approved by the Board of Directors. During the third
quarter, the Company completed the purchase of two million shares from CKE and
in the fourth quarter repurchased 500,000 additional shares in the open market.
 
     On October 23, 1998, the Company entered into a $20 million syndicated bank
financing agreement led by BankBoston, N.A. The credit facility consists of a
$13 million, 5-year loan (the "Term Loan Facility") and a $7 million, 5-year
revolving credit facility (the "Revolving Credit Facility"). The Term Loan
Facility refinanced existing indebtedness and provided capital for the
repurchase of common stock and acquisitions. The Term Loan Facility balance was
$13 million as of January 25, 1999. Principal payments under the Term Loan
Facility are due in quarterly installments, beginning in November 1999 and
continuing until the final maturity in October 2003. Borrowings under the
Revolving Credit Facility will be used for the Company's new unit development
and working capital needs. All outstanding amounts under the Revolving Credit
Facility will become due in October 2003. The Revolving Credit Facility balance
was $1.5 million on January 25, 1999. As of April 16, 1999, the Term Loan
Facility balance was $11.9 million and the Revolving Credit Facility was unused.
 
BUSINESS
 
     The Company's strategic objective is to become a leading operator of
regional buffet restaurant brands through the acquisition of established
regional concepts and subsequent development of additional restaurants within
existing or new markets. The Company believes that certain elements of its
business strategy can be used successfully to improve the financial performance
of its recent and future acquisitions. Key elements of the Company's business
strategy as are follows:
 
     Customer Focus. The Company believes that its ability to deliver high
quality food to customers with superior service in clean and friendly
environments has been central to its success at improving customer perceptions
and sales at its buffet restaurants. The key elements of management's focus
include:
 
     - High Quality Food. The Company seeks to differentiate itself by providing
       higher quality and better tasting food than its competitors. Food items
       are prepared frequently and in small batches to ensure the correct
       temperature, texture and flavor. Management limits the number of items
       prepared each day and frequently rotates selected specialty items to
       maintain customer interest while ensuring that the Company's signature
       items are offered at the highest possible quality.
 
     - Superior Service. The Company provides a level of customer service which
       it believes has helped it establish a higher level of customer
       satisfaction than its competitors. Customers are greeted by an employee
       who seats the customers and explains the features of the restaurant and
       menu offerings. In addition, the restaurants' managers seek to visit each
       customer's table during meal periods to ensure guest satisfaction. To
       help insure superior service levels, the Company utilizes a number of
       methods to monitor guest satisfaction including independent mystery
       shopper survey and a formalized customer comment card program.
 
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<PAGE>   5
 
     - Clean and Friendly Environment. The Company strives to offer a pleasant,
       customer friendly environment at its restaurants by providing attractive,
       updated restaurant decors and by emphasizing cleanliness in all areas of
       its operations. Further, through regular maintenance, the Company seeks
       to enhance the customer dining experience by keeping its restaurants
       clean and pleasant.
 
     Management Practices. The Company's management team has implemented a
series of management practices that have improved the operations of acquired
restaurants. The key elements of these management practices are:
 
     - Restaurant Management. The Company has developed food, labor and customer
       service management practices and reporting mechanisms that allow
       management to effectively monitor restaurant-level operations, benchmark
       restaurant performance statistics and communicate best-practices across
       its restaurant operations. Through the use of its restaurant-level
       incentive and bonus programs oriented toward motivating employees, as
       well as its traditional recognition programs, the Company seeks to
       motivate its employees and foster an environment where employees are
       encouraged to share their ideas and cost saving suggestions with
       management.
 
     - Cost Management. The Company has been able to maintain a lean corporate
       management structure by expanding the number of restaurants supervised by
       field managers, having corporate personnel oversee multiple
       administrative functions and appropriate outsourcing of certain functions
       when cost effective. The Company's corporate infrastructure provides
       purchasing, information systems, finance and accounting and payroll.
       Through effective management of the Company's product mix, production
       quantities and staffing, the Company has reduced its food, labor and
       other operating costs.
 
     - Brand Management. The Company's strategy is to separately manage each of
       its restaurant brands to create a unique presence in the marketplace.
       Although each of the companies' and its brands is positioned somewhat
       differently in the market, the Company utilizes many of the same
       marketing techniques such as local store marketing representatives, radio
       advertising and promotional mailers to increase customer awareness and
       loyalty.
 
GROWTH STRATEGY
 
     The Company's strategic objective is to become a leading operator of
regional buffet restaurant brands through (i) acquisitions of existing buffet
restaurant chains which management believes can benefit from the Company's
management practices, (ii) the acquisitions of exiting restaurant properties
that can be converted to buffet brands operated or under development by the
Company and (iii) minority investments in or strategic alliances with other
restaurant chains. The Company's growth strategy is designed to capitalize on
the opportunities management perceives in the fragmented buffet segment of the
restaurant industry.
 
     Acquisition Strategy. Management believes that the Company will be able to
capitalize on the successful attributes of acquired buffet chains while
increasing their focus on operations, customer service and quality. Management
believes that a number of acquisition opportunities exist due to the
fragmentation of the buffet, cafeteria and grill-buffet segments of the
restaurant industry, which are comprised of a substantial number of regional
chains. The Company believes that many of these regional chains are privately
owned and may be available for acquisition because they lack the financial and
operational structure to compete with larger regional and national chains.
Following acquisition, management intends to integrate and improve the
operations and profitability of the acquired units through the implementation of
the following key strategies:
 
     - Enhance Food Quality and Service Levels. Management believes that, due to
       the limited capital and management resources of many regional chains,
       such restaurants often offer poor food quality and an insufficient level
       of customer service. Management intends to increase the chains' customer
       focus and utilize the management practices which have proven successful
       at other Star Buffet, Inc. restaurants.
 
     - Implement Operational Cost Controls and Management Incentive
       Structures. Management believes that the management practices which have
       successfully lowered food, labor and other operating costs at other Star
       Buffet, Inc. restaurants can be implemented in other regional buffet
       chains. In addition, the
 
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       Company believes that its management incentive programs can increase the
       customer service and profitability of acquired restaurants.
 
     - Introduce Standardized Marketing Programs. Management believes that
       selected increases in marketing expenditures can create meaningful
       improvements in restaurant sales and profitability. Management intends to
       increase the utilization of a variety of standardized marketing programs
       and apply them to newly acquired restaurants.
 
     Acquisitions, however, involve a number of special risks that could
adversely affect the Company's business, financial condition and results of
operations, including the diversion of management's attention, the assimilation
of the operations and personnel of acquired restaurants, the amortization of
acquired intangible assets and the potential loss of key employees.
 
     New Restaurant Opening Strategy. In order to increase the Company's
presence in existing markets, the Company intends to expand through new
restaurant openings. While the Company may construct new restaurant facilities,
management intends to primarily seek opportunities to convert locations
currently occupied by other buffet, family dining or budget steakhouse
restaurant concepts to existing regional brands owned by the Company. The
Company has developed its prototype designs and menus for new restaurant
openings which management believes will offer customers a dining environment and
experience superior to existing buffet restaurants. Management believes that
these designs can be easily implemented at restaurants acquired by the Company.
 
     In recent years, a number of chains in the family dining and budget
steakhouse segments of the restaurant industry have experienced operational
difficulties and declining performance. Management believes that these
difficulties are the result of increasing competition for these concepts from
the rapid growth of lower priced casual dining chains and casual steakhouses
which offer superior product quality and service at only moderately higher
prices. Many of these family dining restaurants and budget steakhouses occupy
desirable locations and provide opportunities to acquire desirable restaurant
locations at attractive prices. Management believes that these locations can be
acquired and converted at lower prices or leased at rates lower than those
available when compared to the cost of new construction.
 
     Minority Investments and Strategic Alliances. Management intends to seek
minority investments in or strategic alliances with other restaurant chains.
Management believes that minority investments can provide an attractive
investment opportunity for the Company and may lower the acquisition cost of
such chains should the Company ultimately seek to acquire those chains.
Management believes that strategic alliances can be an excellent corporate
arrangement to facilitate (i) more productive use of under-performing restaurant
properties at lower cost and less risk than outright acquisition and (ii) reduce
corporate overhead or improve purchasing economies.
 
HOMETOWN BUFFET RESTAURANTS
 
     General. The Company, through its subsidiary HTB Restaurants, Inc. ("HTB")
has a franchise agreement with HomeTown Buffet, Inc., a wholly-owned subsidiary
of Buffets, Inc., under which HTB operates HomeTown Buffet restaurants in
Arizona, Colorado, New Mexico, Utah and Wyoming.
 
     HTB has entered into a franchise agreement for each location which requires
among other items, the payment of a continuing royalty fee. The royalty fee is
based on the aggregate gross sales of all the Company's HomeTown Buffet
restaurants. Each of the franchise agreements has a 20-year term (with two
five-year renewal options). HTB provides weekly sales reports to the HomeTown
franchisor as well as periodic and annual financial statements. HTB is obligated
to operate its Hometown Buffet restaurants in compliance with the franchisor's
requirements.
 
     The franchisor may terminate a franchise agreement for a number of reasons,
including the failure to pay royalty fees when due, failure to comply with
applicable laws or repeated failure to comply with one or more requirements of
the franchise agreement. Many state franchise laws limit the ability of a
franchisor to terminate or refuse to renew a franchise. Generally, a franchisor
may terminate a franchise agreement only if
 
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the franchisee violates a material and substantial provision of the agreement
and fails to remedy the violation within a specified period.
 
     Concept and Menu. HomeTown Buffet restaurants are located both in shopping
"strip centers" and as freestanding restaurants. HTB's typical restaurant format
is approximately 10,200 square feet with seating for approximately 375
customers. The restaurant design is based upon standardized construction plans,
with modifications made for each particular site. The restaurants offer fixed
price lunch, dinner and breakfast menus that entitle each customer to unlimited
servings of all menu items and beverages. The average check price is
approximately $6.15. The restaurants offer reduced prices to children under age
12 and to senior citizens.
 
     HomeTown Buffet restaurants seek to differentiate themselves from other
buffet and cafeteria restaurants by the quality and variety of their food
offerings. The restaurants feature a "scatter bar" buffet system with eight
separate food islands in an "all-you-can-eat" format. Menus emphasize
traditional American "home cooking" and include soups, salads, entrees,
vegetables, non-alcoholic beverages and desserts. Customers can choose from
multiple entree choices, including fried and baked chicken and fish, roast beef,
turkey and ham. Additional entrees, such as lasagna, barbecued ribs and other
regional or seasonal dishes, are featured on particular days of the week. In
addition to entrees, each meal includes two freshly-prepared soups, assorted
vegetable and potato dishes, hot bread and an extensive salad bar. Dessert
selections include pudding, assorted cobblers, cakes, cookies and soft-serve
frozen dairy desserts and various sundae toppings.
 
     HTB uses high-quality ingredients, including fresh seasonal fruits and
vegetables, in its menu offerings, and all menu items are prepared in small
batches throughout the day. The items are served promptly in relatively small
serving pans in order to ensure that all items are fresh, visually appealing and
served at the proper temperature.
 
     Operations. The HomeTown Buffet restaurants are supervised directly by a
Vice President of HomeTown Buffet Operations, who reports to the Company's
President. Each HomeTown Buffet restaurant has a general manager and at least
three co-managers or assistant managers. Managers are required to attend formal
training sessions in management and operations of the restaurant. In addition,
each restaurant manager is required to comply with an extensive operations
manual to assure uniformity of operations and consistent high quality of
products. The Company has a performance based incentive program covering its
general and assistant managers in addition to a competitive base salary.
 
     Individual restaurants typically employ between 70 and 110 non-management
hourly employees (made up of a mix of part-time and full-time workers),
depending on restaurant size and traffic.
 
CASA BONITA
 
     Concept and Menu. The Company's two Casa Bonita restaurants are located in
Denver, Colorado and Tulsa, Oklahoma and contain 52,000 and 26,000 square feet,
respectively. The restaurants are designed to recreate the atmosphere of a
Mexican village at night. The restaurants also feature entertainment daily,
including strolling mariachis, authentic Mexican dancers, magicians, games and
cliff divers. The restaurants' entertainment, combined with high quality,
authentic Mexican food, is designed to attract a diverse customer base,
including tourists and local customers. In addition to typical Mexican menu
offerings, these restaurants feature all-you-can-eat dinners which offer
customers unlimited servings of selected menu items.
 
     The Company focuses on three primary target audiences in its advertising
and promotional programs for its Casa Bonita restaurants: (i) local customers;
(ii) tourists; and (iii) groups and parties. The Company markets aggressively to
attract tourists by placing advertisements in local tourist and special event
guides and by otherwise promoting each Casa Bonita restaurant as a local
attraction. With its large dining areas and private rooms, the Company also
promotes Casa Bonita as an ideal setting for banquets, private parties and other
group events.
 
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NORTH'S STAR DIVISION
 
     General. The North's Star Division consists of six JJ North's Grand Buffet
restaurants and five North's Star Buffet restaurants, of which two were closed
since the end of the fiscal year due to lower than expected performance. The
Company's six JJ North's Grand Buffet Restaurants are located in Idaho (3),
Washington (2), and Oregon (1). The restaurants are approximately 6,500 to 9,000
square feet and seat approximately 210 to 320 customers. The Company's five
North's Star Buffet restaurants are located in Utah (3), Arizona (1), and
Pennsylvania (1). The restaurants are approximately 4,800 to 9,000 square feet
and seat approximately 150 to 320 customers.
 
     Concept and Menu. Both JJ North's Grand Buffet and North's Star Buffet
restaurants offer fixed price lunch, dinner and weekend breakfast menus that
entitle each customer to unlimited servings of all menu items and beverages.
Prices are approximately $5.59 for lunch and approximately $7.99 for dinner, and
may vary depending on restaurant location. The average check for JJ North's
Grand Buffet is $6.10. The average check in North's Star Buffet is $5.90. The
restaurants offer reduced prices to children under age 12 and to senior
citizens.
 
     Both JJ North's Grand Buffet and North's Star Buffet restaurants seek to
differentiate themselves from other buffet and cafeteria restaurants by the
quality and variety of their food offerings. The restaurants feature a "scatter
bar" buffet system with eight separate food islands in an "all-you-can-eat"
format. Menus emphasize traditional American "home cooking" and include soups,
salads, entrees, vegetables, non-alcoholic beverages and desserts. Customers can
choose from multiple entree choices, including fried and baked chicken and fish,
roast beef, turkey and ham. Additional entrees, such as lasagna, barbecued ribs
and other regional or seasonal dishes, are featured on particular days of the
week. In addition to entrees, each meal includes two freshly-prepared soups,
assorted vegetable and potato dishes, hot bread and an extensive salad bar.
Dessert selections include pudding, assorted cobblers, cakes, cookies and
soft-serve frozen dairy desserts and various sundae toppings.
 
     Both JJ North's Grand Buffet and North's Star Buffet restaurants use
high-quality ingredients, including fresh seasonal fruits and vegetables, in its
menu offerings, and all menu items are prepared in small batches throughout the
day. The items are served promptly in relatively small serving pans in order to
ensure that all items are fresh, visually appealing and served at the proper
temperature. JJ North's Grand Buffet regularly tests new menu items and upgrades
ingredients and cooking methods in order to improve the quality and consistency
of its food offerings.
 
     Operations. The North's Star Division restaurants are supervised by a Vice
President of Operations who reports to the Company's President. Each restaurant
has a general manager and up to three assistant managers and typically employs
between 40 and 100 hourly employees (made up of a mix of part-time and full-time
workers) depending on restaurant size and traffic.
 
FLORIDA BUFFETS DIVISION
 
     General. The Company, through several transactions, has acquired fourteen
properties in Florida which currently operate under the brand names BuddyFreddys
Country Buffet (9), Holiday House (3) and BuddyFreddys (2). Two of the nine
BuddyFreddys Country Buffet restaurants are undergoing conversion and are
expected to open in the first quarter of fiscal year 2000. Each restaurant
averages approximately 10,000 square feet with seating for approximately 350
guests. Each Holiday House Restaurants which average approximately 5,500 square
feet with seating for approximately 170 guests.
 
     Concept and Menu. The nine BuddyFreddys Country Buffet restaurants offer a
buffet menu specializing in local dishes and southern-style cooking. Each
location also offers a small gift shop selling a variety of BuddyFreddys
apparel, snacks and specialty merchandise. The two BuddyFreddys are different in
that they offer a full a la carte menu in addition to the "all-you-can-eat"
buffet. The three Holiday House restaurants also operate in a buffet format and
specialize in offering the customer a wide variety of meat entrees including
ham, roast beef, turkey and its signature leg of lamb. The average check price
for BuddyFreddys and Holiday House is approximately $6.60.
 
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     Operations. The Florida restaurants are supervised by two Area Directors
who report to a Vice President of Operations who, in turn, reports to the
Company's President. Each restaurant has a general manager and up to four
assistant managers. Each restaurant employs between 50 and 100 hourly employees
(made up of a mix of part-time and full-time workers) depending on restaurant
size and traffic.
 
JB'S RESTAURANTS
 
     General. The Company, through its subsidiary Summit Family Restaurants,
Inc. ("Summit") has a franchise agreement with JB's Family Restaurants, Inc., a
wholly-owned subsidiary of Santa Barbara Restaurant Group, Inc., under which
Summit, as a franchisee, currently operates nine JB's Restaurants in Arizona,
Montana, New Mexico, Utah and Wyoming. Summit has entered into a franchise
agreement for each location which requires among other items, the payment of a
continuing royalty fee.
 
     Concept and Menu. JB's Restaurants offer a variety of breakfast, lunch and
dinner selections at moderate prices. The breakfast menu features an
"all-you-can-eat" breakfast buffet along with other traditional breakfast fare.
The lunch and dinner menu has a variety of sandwiches as well as steak, chicken,
pasta and seafood entrees. All JB's Restaurants offer an "all-you-can-eat" soup
and salad bar during the lunch and dinner. With the exception of the breakfast
buffet and the "all-you-can-eat" soup and salad bar, all entrees are cooked to
order and served by a wait staff. The average check is approximately $5.90.
 
     Operations. The JB's Restaurants are supervised by a Vice President of
Operations who reports to the Company's President. Each restaurant has a general
manager and at least two assistant managers. Each restaurant employs between 20
and 50 hourly employees (made up of a mix of part-time and full-time workers)
depending on restaurant size and traffic.
 
LICENSES, TRADEMARKS AND SERVICE MARKS
 
     The Company has purchased the trademarks and service marks for JJ North's
Grand Buffet, Casa Bonita, BuddyFreddys and Holiday House and has entered into a
license agreement with CKE for use of the "Star" name and design. The Company
utilizes the marks JB's Restaurant and HomeTown Buffet pursuant to various
franchise agreements.
 
SEASONALITY
 
     The Company's business is somewhat seasonal in nature with the first and
second fiscal quarters being the highest volume periods. The Company's lowest
volume periods typically occur during the third and fourth fiscal quarters.
 
EMPLOYEES
 
     As of April 16, 1999, the Company employed approximately 3,400 persons, of
whom approximately 3,200 were restaurant employees, and approximately 200 were
restaurant management, supervisory and corporate personnel. Restaurant employees
include both full-time and part-time workers paid on an hourly basis. No Company
employees are covered by collective bargaining agreements. The Company believes
that its relations with its employees are generally good.
 
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DIRECTORS AND EXECUTIVE OFFICERS
 
     The following table sets forth certain information regarding the Company's
directors and executive officers:
 
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           NAME              AGE                      POSITION
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<S>                          <C>   <C>
Robert E. Wheaton..........  47    Chief Executive Officer, President and Chairman
Ronald E. Dowdy............  42    Group Controller, Treasurer and Secretary
Jack M. Lloyd..............  48    Director
Thomas G. Schadt...........  57    Director
Phillip "Buddy" Johnson....  46    Director
Craig B. Wheaton...........  41    Director
</TABLE>
 
     Robert E. Wheaton has served as the Chief Executive Officer and President
and as a director of the Company since its formation in July 1997. Mr. Wheaton
has been Chairman of the Board since September 1998. Mr. Wheaton served as
Executive Vice President of CKE from January 1996 through January 1999. From
April 1995 to January 1996, he served as Vice President and Chief Financial
Officer of Denny's Inc., a subsidiary of Flagstar Corporation. From 1991 to
1995, Mr. Wheaton served as President and Chief Executive Officer, and from 1989
to 1991 as Vice President and Chief Financial Officer of The Bekins Company.
 
     Ronald E. Dowdy has served as the Group Controller since June 1998 and as
Treasurer and Secretary since February 1999. Mr. Dowdy served as Controller to
Holiday House Corporation for nineteen years prior to joining Star Buffet.
 
     Thomas G. Schadt has served as a director of the Company since the
completion of the Company's initial public offering in September 1997. Mr.
Schadt has been the Chief Executive Officer of a privately-held beverage
distribution company, Bear Creek, L.L.C., since 1995. From 1976 to 1994, he held
several positions with PepsiCo, Inc., most recently, Vice President of Food
Service.
 
     Jack M. Lloyd has served as a director of the Company since the completion
of the Company's initial public offering in September 1997. Mr. Lloyd has served
as Chairman of the Board of DenAmerica Corp. since July 9, 1996 and as
President, Chief Executive Officer and a director of DenAmerica Corp. since
March 29, 1996. Mr. Lloyd served as Chairman of the Board and Chief Executive
Officer of Denwest Restaurant Corp. ("DRC") from 1987 until the March 1996
merger of DRC and DenAmerica and as President of DRC from 1987 until November
1994. Mr. Lloyd engaged in commercial and residential real estate development
and property management as President of First Federated Investment Corporation
during the early and mid-1980's. Mr. Lloyd also currently serves as a director
of Action Performance Companies, Inc.
 
     Phillip "Buddy" Johnson has served as a Director of the Company since
February 1999 and as President of the BuddyFreddys Division since it was
acquired in April 1998. From 1980 until 1998, he was the founding Chairman and
CEO of BuddyFreddys Enterprises. From 1991 to 1996, Mr. Johnson served as
Republican floor leader in the Florida House of Representatives. Mr. Johnson
also served on the executive committee of The Foundation for Florida's Future, a
non-profit corporation established in 1995 by Jeb Bush.
 
     Craig B. Wheaton has served as a director of the Company since February
1999. Mr. Wheaton is a partner in the law firm Kilpatrick Stockton LLP. His main
areas of practice include employee benefits, executive compensation and general
corporate law. Mr. Wheaton received his B.A. degree, with honors, from the
University of Virginia and his J.D. degree from Wake Forest University. Mr.
Wheaton was a member of the Tax Council of the North Carolina Bar Association
Section on Taxation ("93-'98) and chair of its Employee Benefits Committee
('95-'97). He is a member and former president of the Triangle Benefits Forum.
He is a member of the Southern Employee Benefits Conference, the Employee
Benefits Committee of the American Bar Association's Section of Taxation, the
National Pension Assistance Project's National Lawyers Network, and the National
Association of Stock Plan Professionals. Mr. Wheaton is the brother of Robert E.
Wheaton, the Company's Chairman, President and Chief Executive Officer.
 
                                        8
<PAGE>   11
 
BUSINESS RISKS
 
     Growth via Acquisitions. The Company intends to pursue an aggressive growth
strategy, the success of which will depend in part on the ability of the Company
to acquire additional buffet restaurants or to convert acquired sites into
buffet restaurants, both within existing and new markets. The success of the
Company's growth strategy is dependent upon numerous factors, many of which are
beyond the Company's control, including the availability of suitable acquisition
opportunities, the leasing or purchase of suitable sites on acceptable terms,
the ability of the Company to obtain necessary governmental permits and
approvals, the availability of appropriate financing and general economic
conditions. The Company must compete with other restaurant operators for
acquisition opportunities and with other restaurant operators, retail stores,
companies and developers for desirable site locations. Many of these entities
have substantially greater financial and other resources than the Company. There
can be no assurance that the Company will be able to identify, negotiate and
consummate acquisitions of additional buffet restaurants or new restaurant sites
or that acquired restaurants or newly constructed or converted restaurants can
be operated profitably and successfully integrated into the Company's
operations. Many of its acquired and new restaurants will be located in
geographic markets in which the Company has limited or no operating experience.
In addition, the Company's acquisition strategy includes the identification of
companies or properties that are viewed as underperforming by the Company. This
element of the Company's strategy increases the risks involved with the
Company's acquisitions.
 
     Acquisitions involve a number of special risks that could adversely affect
the Company's business, results of operations and financial condition, including
the diversion of management's attention, the assimilation of the operations and
personnel of the acquired restaurants, the amortization of acquired intangible
assets and the potential loss of key employees. In particular, the failure to
maintain adequate operating and financial control systems or unexpected
difficulties encountered during expansion could materially and adversely affect
the Company's business, financial condition and results of operations. There can
be no assurance that any acquisition will not materially and adversely affect
the Company or that any such acquisition will enhance the Company's business.
The Company is unable to predict the likelihood of any additional acquisitions
being proposed or completed in the near future. If the Company determines to
make any significant acquisition, the Company may be required to sell additional
equity or debt securities or obtain additional credit facilities. The sale of
additional equity or convertible debt securities could result in additional
dilution to the Company's stockholders. There can be no assurance that adequate
equity or debt financing would be available to the Company for any such
acquisitions.
 
     From February 1998 to January 1999, the Company has acquired 27 restaurants
in seven states, including 14 units in Florida. As a result of the acquisitions,
the Company is more complex and diverse, and the integration of the recent
acquisitions presents difficult challenges for the Company's management due to
the increased time and resources required in management effort. In order to
maintain and increase profitability, the Company will need to successfully
integrate and streamline overlapping functions. There can be no assurance that
integration will be successfully accomplished. The difficulties of such
integration may be increased by the necessity of coordinating geographically
separate organizations. The integration of certain operations following the
acquisitions requires the dedication of management resources which may
temporarily distract attention from the day-to-day business of the Company. The
failure to effectively integrate the operations of the Company or to improve the
results of operations of the acquired restaurants could have a material adverse
effect on the Company's business, financial condition and results of operations.
 
     Dependence Upon and Restrictions Resulting from Franchisors. The Company
owns and operates 25 out of its 52 restaurants pursuant to the terms of
franchise agreements. The Company operates its 16 HomeTown Buffet Restaurants
through its wholly-owned subsidiary, HTB Restaurants, Inc., which is a party to
a Franchise Agreement with the HomeTown Franchisor for each such restaurant. The
Company operates its nine JB's Restaurants through its wholly-owned subsidiary,
Summit, which is a party to a Franchise Agreement with JB's Restaurant, Inc.
("JB's") for each such restaurant. The performance of the Company's HomeTown
Buffet restaurant operations and JB's restaurant operations is directly related
to the success of the HomeTown Buffet restaurant system and the JB's restaurant
system, respectively, including the management and financial condition of
HomeTown and JB's as well as restaurants operated by HomeTown and JB's and
 
                                        9
<PAGE>   12
 
their respective franchisees. The inability of such restaurants to compete
effectively would have a material adverse effect on the Company's operations.
The success of the Company's HomeTown Buffet and JB's restaurants depends in
part on the effectiveness of the HomeTown Franchisor's and JB's marketing
efforts, new product development programs, quality assurance and other
operational systems over which the Company has no control. For example, adverse
publicity involving HomeTown, JB's or one or more HomeTown Buffet or JB's
restaurants operated by the franchisors or their other franchisees could have a
material adverse effect on the Company's business, financial condition and
results of operations.
 
     The Company's operations with respect to its HomeTown and JB's restaurants
are subject to certain restrictions imposed by policies and procedures of
HomeTown or JB's as in effect from time to time. These restrictions limit the
Company's ability to modify the menu items and decor of its restaurants and may
have the effect of limiting the Company's ability to pursue its business plan.
Furthermore, the Franchise Agreement with the HomeTown franchisor imposes
substantial restrictions on the Company's ability to operate certain restaurant
formats and to open additional restaurants in certain geographical areas.
 
     Fluctuations in Quarterly Results. The Company has in the past experienced,
and expects to continue to experience, significant fluctuations in restaurant
revenues and results of operations from quarter to quarter. In particular, the
Company's quarterly results can vary as a result of acquisitions, costs incurred
to integrate newly acquired entities, and seasonal patterns. A large number of
the Company's restaurants are located in areas which are susceptible to severe
winter weather conditions which may have a negative impact on customer traffic
and restaurant revenues. Accordingly, the Company believes that period-to-period
comparisons of its operating results are not necessarily meaningful and that
such comparisons cannot be relied upon as indicators of future performance.
There can be no assurance that future seasonal and quarterly fluctuations will
not have a material adverse effect on the Company's business, results of
operation and financial condition.
 
     Competition. The restaurant industry is highly competitive. The Company
competes on the basis of the quality and value of food products offered, price,
service, location, ambiance and overall dining experience. The Company's
competitors include a large and diverse group of restaurant chains and
individually owned restaurants, including chains and individually owned
restaurants that use a buffet format. The number of buffet restaurants with
operations generally similar to the Company's has grown considerably in the last
several years and the Company believes competition among buffet-style
restaurants is increasing. As the Company and its principal competitors expand
operations in various geographic areas, competition, including competition among
buffet-style restaurants, can be expected to intensify. Such intensified
competition could increase the Company's operating costs or adversely affect its
revenues. A number of competitors have been in existence longer than the Company
and have substantially greater financial, marketing and other resources and
wider geographical diversity than does the Company. In addition, the restaurant
industry has few noneconomic barriers to entry and is affected by changes in
consumer tastes, national, regional and local economic conditions and market
trends. The Company's significant investment in, and long term commitment to,
each of its restaurant sites limits its ability to respond quickly or
effectively to changes in local competitive conditions or other changes that
could affect the Company's operations.
 
     Restaurant Industry. Food service businesses are often affected by changes
in consumer tastes, national, regional and local economic conditions and
demographic trends. The performance of individual restaurants may be adversely
affected by factors such as traffic patterns, demographic considerations and the
type, number and location of competing restaurants. Multi-unit food service
businesses such as the Company's can also be materially and adversely affected
by publicity resulting from poor food quality, illness, injury or other health
concerns or operating issues stemming from one restaurant or a limited number of
restaurants. Dependence on frequent deliveries of fresh produce and groceries
subjects food service businesses such as the Company's to the risk that
shortages or interruptions in supply, caused by adverse weather or other
conditions, could adversely affect the availability, quality and cost of
ingredients. The Company's profitability is highly sensitive to increases in
food, labor and other operating costs that cannot always be passed on to its
guests in the form of higher prices or otherwise compensated for. In addition,
unfavorable trends or developments concerning factors such as inflation,
increased food, labor and employee benefits costs (including increases in hourly
wage and unemployment tax rates), increases in the number and locations of
competing buffet-style restaurants, regional weather conditions and the
availability of experienced management and hourly employees may also
 
                                       10
<PAGE>   13
 
adversely affect the food service industry in general and the Company's
business, financial condition and results of operations in particular. Changes
in economic conditions affecting the Company's guests could reduce traffic in
some or all of the Company's restaurants or impose practical limits on pricing,
either of which could have a material adverse effect on the Company's business,
financial condition and results of operations. The success of the Company will
depend in part on the ability of the Company's management to anticipate,
identify and respond to changing conditions. There can be no assurance that
management will be successful in this regard.
 
     Dependence on Key Personnel. The Company believes that its success will
depend in part on the services of its key executives, including Robert E.
Wheaton, Chairman of the Board, President and Chief Executive Officer. The
Company does not maintain any key man life insurance. The loss of the services
of Mr. Wheaton could have a material adverse effect upon the Company's business,
financial condition and results of operations, and there can be no assurance
that a qualified replacement would be available in a timely manner if at all.
The Company's continued growth will also depend in part on its ability to
attract and retain additional skilled management personnel.
 
     Government Regulation. The restaurant industry is subject to federal, state
and local government regulations, including those relating to the preparation
and sale of food and building and zoning requirements. In addition, the Company
is subject to laws governing its relationship with employees, including minimum
wage requirements, overtime, working and safety conditions and citizenship
requirements. The failure to obtain or retain food licenses or an increase in
the minimum wage rate, employee benefit costs or other costs associated with
employees, could have a material adverse effect on the Company's business,
financial condition and results of operations. Many of the Company's employees
are paid hourly rates based upon the federal and state minimum wage laws. Recent
legislation increasing the minimum wage has resulted in higher labor costs to
the Company.
 
     Effect of Certain Charter and Bylaw Provisions. Certain provisions of the
Company's Certificate of Incorporation and Bylaws may have the effect of making
it more difficult for a third party to acquire, or of discouraging a third party
from attempting to acquire, control of the Company. Such provisions could limit
the price that certain investors might be willing to pay in the future for
shares of the Company's Common Stock. The Company's Certificate of Incorporation
allows the Company to issue up to 1,500,000 shares of currently undesignated
Preferred Stock, to determine the powers, preferences and rights and the
qualifications, limitations or restrictions granted to or imposed on any
unissued series of that Preferred Stock, and to fix the number of shares
constituting any such series and the designation of such series, without any
vote or future action by the stockholders. The Preferred Stock could be issued
with voting, liquidation, dividend and other rights superior to the rights of
the Common Stock. The Certificate of Incorporation also eliminates the ability
of stockholders to call special meetings. The Company's Bylaws require advance
notice to nominate a director or take certain other actions. Such provisions may
make it more difficult for stockholders to take certain corporate actions and
could have the effect of delaying or preventing a change in control of the
Company. In addition, the Company has not elected to be excluded from the
provisions of Section 203 of the Delaware General Corporation Law, which imposes
certain limitations on transactions between a corporation and "interested"
stockholders, as defined in such provisions.
 
     Possible Volatility of Stock Price. The stock market has from time to time
experienced significant price and volume fluctuations that are unrelated to the
operating performance of particular companies. These broad market fluctuations
may adversely affect the market price of the Company's Common Stock. Factors
such as fluctuations in the Company's operating results, failure of such
operating results to meet the expectations of stock market analysts and
investors, changes in stock market analyst recommendations regarding the
Company, its competitors and other companies in the restaurant industry, as well
as changes in general economic or market conditions and changes in the
restaurant industry may have a significant adverse effect on the market price of
the Common Stock.
 
ITEM 2. PROPERTIES
 
     The Company's corporate headquarters are located in Salt Lake City, Utah.
 
                                       11
<PAGE>   14
 
     The Company's restaurants are primarily freestanding locations. As of
January 25, 1999 the majority of the Company's restaurant facilities were
leased. The leases expire on dates ranging from 1999 to 2014 with the majority
of the leases providing for renewal options. All leases provide for specified
periodic rental payments, and most call for additional rent based upon revenue
volume. Most leases require the Company to maintain the property and pay for the
cost of insurance and taxes.
 
     The following is a summary of the Company's restaurant properties as of
March 1, 1999:
 
<TABLE>
<CAPTION>
                                         HOMETOWN                 NORTH'S   FLORIDA
                                          BUFFET    CASA BONITA    STAR     BUFFETS   JB'S   TOTAL
                                         --------   -----------   -------   -------   ----   -----
<S>                                      <C>        <C>           <C>       <C>       <C>    <C>
Owned..................................     --          --           2         2       2       6
Leased.................................     16           2           9        12       7      46
</TABLE>
 
     As of January 25, 1999, the Company's restaurants are located in the
following states:
 
<TABLE>
<CAPTION>
                                                            NUMBER OF RESTAURANTS
                                             ----------------------------------------------------
                                             HOMETOWN    CASA    NORTH'S   FLORIDA
                   STATE                      BUFFET    BONITA    STAR     BUFFETS   JB'S   TOTAL
                   -----                     --------   ------   -------   -------   ----   -----
<S>                                          <C>        <C>      <C>       <C>       <C>    <C>
Arizona....................................      8        --        1        --        1     10
Colorado...................................      2         1       --        --       --      3
Florida....................................     --        --       --        14       --     14
Idaho......................................     --        --        3        --       --      3
Montana....................................     --        --       --        --        4      4
New Mexico.................................      2        --       --        --        1      3
Oklahoma...................................     --         1       --        --       --      1
Oregon.....................................     --        --        1        --       --      1
Pennsylvania...............................     --        --        1        --       --      1
Utah.......................................      3        --        3        --        2      8
Washington.................................     --        --        2        --       --      2
Wyoming....................................      1        --       --        --        1      2
                                                --        --       --        --       --     --
          Total............................     16         2       11        14        9     52
                                                ==        ==       ==        ==       ==     ==
</TABLE>
 
ITEM 3. LEGAL PROCEEDINGS
 
     On November 12, 1998, North's Restaurants, Inc. ("North's") filed a Demand
for Arbitration against the Company with the American Arbitration Association,
Irvine, California (District No. 949-251-9840), alleging breach of contract in
connection with the Company's failure to perform under a Business Services
Agreement between North's and the Company dated July 24, 1997. The Company has
evaluated the claims and believes that such claims are invalid. The Company does
not believe that the result of the arbitration proceeding will have a material
adverse effect on the Company's business, financial condition and results of
operations.
 
     On November 25, 1998, the Company filed an action against North's
Restaurants, Inc. ("North's") in the United States District Court, District of
Utah, Case No. 2-98-CV-893, seeking damages for breach of a promissory note and
an Amended and Restated Credit Agreement (collectively, the "Credit Agreements")
in the amount of $3,570,935. On December 31, 1998, North's filed an answer to
the Company's Complaint, denying generally the allegations, and filed
counterclaims against the Company alleging the (i) the Company fraudulently
induced North's to enter into various agreements with the Company relating to
the Company's acquisition of seven JJ North's Grand Buffet Restaurants and an
option to acquire nine additional restaurants operated by North's and (ii) the
Company has breached the Business Services Agreement. The Company plans to
pursue vigorously its claims against North's and to vigorously defend the
counterclaims asserted by North's. The litigation is continuing and is not yet
scheduled for trial.
 
     HTB Restaurants, Inc. holds 16 franchises for HomeTown Buffet restaurants.
The franchisor, HomeTown Buffet Restaurants, Inc., has asserted that the Company
breached its franchise agreements by
 
                                       12
<PAGE>   15
 
using proprietary information of the franchisor to open the Company's North's
Star Buffet restaurants. The Company has denied any breach and has demanded
arbitration, which is ongoing at this time. The franchisor is seeking all
available remedies, including termination of the franchise agreements,
modification of the North's Star restaurants, and purchase of some or all of the
franchised restaurants at fair market value. The Company is contesting
vigorously the allegations and believes that it has substantial defenses to the
claimed breaches.
 
     The Company is from time to time the subject of complaints or litigation
from customers alleging injury on properties operated by the Company, illness or
other food quality, health or operational concerns. Adverse publicity resulting
from such allegations may materially adversely affect the Company and its
restaurants, regardless of whether such allegations are valid or whether the
Company is liable. The Company also is the subject of complaints or allegations
from employees from time to time. The Company believes that the lawsuits, claims
and other legal matters to which it has become subject in the course of its
business are not material to the Company's business, financial condition or
results of operations, but an existing or future lawsuit or claim could result
in an adverse decision against the Company that could have a material adverse
effect on the Company's business, financial condition and results of operations.
 
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
 
     None.
 
                                       13
<PAGE>   16
 
                                    PART II
 
ITEM 5.MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 
     The Company's Common Stock which began trading on September 30, 1997 after
the completion of the Company's Initial Public Offering, is listed on the NASDAQ
national market under the symbol "STRZ". As of April 16, 1999, there were
approximately 775 record holders of the Company's Common Stock. The following
table sets forth the high and low bid quotations for the Common Stock, as
reported by NASDAQ.
 
<TABLE>
<CAPTION>
                                            1999                  1998
                                      ----------------      ----------------
            FISCAL YEAR               HIGH        LOW       HIGH        LOW
            -----------               -----      -----      -----      -----
<S>                                   <C>        <C>        <C>        <C>
First Quarter.......................  $17 1/4    $11 7/8     --         --
Second Quarter......................   15 7/8      6 7/8     --         --
Third Quarter.......................    8 3/8      3 5/8    $16 1/2    $13 1/4
Fourth Quarter......................    7 5/16     5 3/8     13 5/8     11 3/8
</TABLE>
 
     In connection with the Company's Initial Public Offering, the Company
declared and paid a cash dividend of $9.3 million to CKE. Other than this
dividend, the Company has never declared or paid dividends on its Common Stock.
The Company expects future earnings, if any, will be retained to finance the
operation and expansion of the Company's business and, accordingly, does not
intend to declare or pay any cash dividends on the Common Stock in the
foreseeable future.
 
ITEM 6. SELECTED FINANCIAL DATA
 
     The selected financial information and other data presented below should be
read in conjunction with the "Consolidated Financial Statements", and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this Form 10-K. The operating results for the
52-week period ended January 25, 1999 included 52 weeks of operations for the
Company's 16 franchised HomeTown Buffet restaurants, two Casa Bonita restaurants
and six JJ North's Grand Buffet restaurants. The results also included 48 weeks
of operations for the nine franchised JB's Restaurants operated by the Company;
50 weeks for three Stacey's Buffets that were converted to BuddyFreddys Country
Buffet; 48 weeks for two Maggies Buffets that were converted; 43 weeks for two
BuddyFreddys; 8 weeks for one BuddyFreddys Country Buffet; 3 weeks of operations
for one BuddyFreddys Country Buffet; 50 weeks for one North's Star Buffet; 48
weeks for one North's Star Buffet; 36 weeks for one North's Star Buffet; 31
weeks for one North's Star Buffet; 24 weeks for one North's Star Buffet; and 3
weeks for three Holiday House restaurants
 
     The operating results for the 30-week period ending July 15, 1996, and the
52-week periods ending December 18, 1995 and December 19, 1994 include only the
results of operations of HTB Restaurants, Inc., an operator of franchised
HomeTown Buffet restaurants, and are referred to herein as the Predecessor
Company or Predecessor. Summit Family Restaurants Inc. and its wholly-owned
subsidiary HTB was acquired by CKE on July 15, 1996 (the "Summit Acquisition").
Operating statement data for periods beginning after July 15, 1996 are herein
referred to as the Successor Company or Successor. The operating statement data
for the 28-weeks ending January 27, 1997 include the results of operations of 16
franchised HomeTown Buffet restaurants and the results of operations of the two
Casa Bonita restaurants from October 1, 1996, (the date of the Casa Bonita
acquisition). The 52-week period ended January 26, 1998 includes the results of
operations of 16 franchised HomeTown Buffet restaurants, two Casa Bonita
restaurants and seven JJ North's Grand Buffet Restaurants operated by the
Company from September 30, 1997, (the date of JJ North's acquisition).
 
                                       14
<PAGE>   17
 
                            SELECTED FINANCIAL DATA
          (IN THOUSANDS EXCEPT PER SHARE AMOUNTS AND RESTAURANT DATA)
 
<TABLE>
<CAPTION>
                                            SUCCESSOR COMPANY                               PREDECESSOR COMPANY
                              ---------------------------------------------    ---------------------------------------------
                                 FIFTY-TWO      FIFTY-TWO      TWENTY-EIGHT       THIRTY
                                   WEEKS          WEEKS           WEEKS            WEEKS           FIFTY-TWO WEEKS ENDED
                                   ENDED          ENDED           ENDED            ENDED       -----------------------------
                              JAN. 25, 1999   JAN. 26, 1998   JAN. 27, 1997    JULY 15, 1996   DEC. 18, 1995   DEC. 19, 1994
                              -------------   -------------   -------------    -------------   -------------   -------------
<S>                           <C>             <C>             <C>              <C>             <C>             <C>
CONSOLIDATED STATEMENTS OF
  EARNINGS DATA:
Total revenues..............     $85,409         $54,659         $23,632          $23,207         $36,741         $30,871
Costs and expenses:
  Food costs................      28,578          18,024           8,371            8,569          13,769          11,469
  Labor costs...............      27,983          17,301           7,565            6,810          10,878           9,089
  Occupancy and other
    expenses................      17,806          10,829           4,732            5,030           8,954           6,769
  General and
    administrative..........       4,272           2,291           1,062            1,193           1,666           1,762
  Depreciation and
    amortization............       3,048           2,109             988              914           1,232             821
                                 -------         -------         -------          -------         -------         -------
         Total costs and
           expenses.........      81,687          50,554          22,718           22,516          36,499          29,910
                                 -------         -------         -------          -------         -------         -------
Income from operations......       3,722           4,105             914              691             242             961
Interest expense............        (597)           (200)           (106)            (145)           (192)           (203)
Other Income................         933             593              --               --              --              --
                                 -------         -------         -------          -------         -------         -------
Income before income
  taxes.....................       4,058           4,498             808              546              50             758
Income taxes................       1,623           1,799             338              216              22             301
                                 -------         -------         -------          -------         -------         -------
Net Income..................     $ 2,435         $ 2,699         $   470          $   330         $    28         $   457
                                 =======         =======         =======          =======         =======         =======
Net Income per common
  share -- diluted..........     $  0.53         $  0.76         $  0.18
                                 =======         =======         =======          =======         =======         =======
Weighted average shares
  outstanding -- diluted....       4,601           3,528           2,600
BALANCE SHEET DATA:
Total assets................     $44,159         $40,969         $16,783                          $16,283         $13,003
Total debt including current
  portion...................      17,303           2,368           2,609                           11,150           6,714
Stockholders' equity........     $19,363         $32,537         $ 9,742                          $ 1,806         $ 1,801
OTHER DATA:
Operating units(1)
  HomeTown Buffet...........          16              16              16               16              16              14
  Casa Bonita...............           2               2               2               --              --              --
  North's Star Division.....          11               7              --               --              --              --
  Florida Buffets
    Division................          12              --              --               --              --              --
  JB's Restaurants..........           9              --              --               --              --              --
  Non-Operating.............           2              --              --               --              --              --
                                 -------         -------         -------          -------         -------         -------
         Total..............          52              25              18               16              16              14
                                 =======         =======         =======          =======         =======         =======
</TABLE>
 
---------------
(1) At the end of the respective periods.
 
                                       15
<PAGE>   18
 
ITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
       OF OPERATIONS
 
     The following Management's Discussion and Analysis should be read in
conjunction with the condensed combined financial statements, and the notes
thereto, presented elsewhere in this Form 10-K. The operating results for the
52-week period ended January 25, 1999 ("fiscal 1999") included 52 weeks of
operations for the Company's 16 franchised HomeTown Buffet restaurants, two Casa
Bonita restaurants and six JJ North's Grand Buffet restaurants operated by the
Company (one store was converted to a North's Star Buffet restaurant). The
results also included 48 weeks of operations for the nine franchised JB's
Restaurants operated by the Company; 50 weeks for three Stacey's Buffets that
were converted to BuddyFreddys Country Buffet; 48 weeks for two Maggies Buffets
that were converted; 43 weeks for two BuddyFreddys; 8 weeks for one BuddyFreddys
Country Buffet; 3 weeks of operations for one BuddyFreddys Country Buffet; 50
weeks for one North's Star Buffet; 48 weeks for one North's Star Buffet; 36
weeks for one North's Star Buffet; 31 weeks for one North's Star Buffet; 24
weeks for one North's Star Buffet; and 3 weeks for three Holiday House
restaurants. The results of operations for the period ended January 26, 1998,
("fiscal 1998") include fifty-two weeks of operations for the Company's sixteen
franchised Hometown Buffet Restaurants, fifty-two weeks of operations for the
Company's two Casa Bonita Restaurants and seventeen weeks of operations for the
seven JJ North's Grand Buffet restaurants operated by the Company. The operating
results for the twenty-eight weeks ending January 27, 1997 include the results
of operations of 16 franchised HomeTown Buffet restaurants and the results of
operations of the two Casa Bonita restaurants from October 1, 1996, (the date of
the Casa Bonita acquisition). The operating statement data for the thirty weeks
ending July 15, 1996 include only the results of operations of 16 franchised
HomeTown Buffet restaurants Restaurants, Inc., an operator of franchised
HomeTown Buffet restaurants. Comparability of future periods may also from time
to time be affected by the implementation of the Company's acquisition and
strategic alliance strategies, and the costs associated with integrating new
restaurants or under performing or unprofitable restaurants, if any, acquired or
otherwise operated by the Company may have a material adverse effect on the
Company's results of operations.
 
RESULTS OF OPERATIONS
 
     The following table summarizes the Company's results of operations as a
percentage of total revenues for the fifty-two weeks ended January 26, 1998
("fiscal 1998") and fifty-two weeks ended January 25, 1999 ("fiscal 1999").
 
<TABLE>
<CAPTION>
                                                                                      PREDECESSOR
                                                      SUCCESSOR COMPANY                 COMPANY
                                          ----------------------------------------    -----------
                                           FIFTY-TWO     FIFTY-TWO    TWENTY-EIGHT       THIRTY
                                             WEEKS         WEEKS          WEEKS          WEEKS
                                             ENDED         ENDED          ENDED          ENDED
                                          JANUARY 25,   JANUARY 26,    JANUARY 27,      JULY 15,
                                              1999          1998          1997            1996
                                          -----------   -----------   ------------    -----------
<S>                                       <C>           <C>           <C>             <C>
TOTAL REVENUES..........................     100.0%        100.0%        100.0%          100.0%
                                             -----         -----         -----           -----
Costs and expenses:
  Food costs............................      33.5          33.0          35.4            36.9
  Labor costs...........................      32.8          31.6          32.0            29.3
  Occupancy and other expenses..........      20.7          19.8          20.0            21.7
  General and administrative expenses...       5.0           4.2           4.5             5.1
  Depreciation and amortization.........       3.6           3.9           4.2             4.0
                                             -----         -----         -----           -----
TOTAL COSTS AND EXPENSES................      95.6          92.5          96.1            97.0
                                             -----         -----         -----           -----
INCOME FROM OPERATIONS..................       4.4           7.5           3.9             3.0
  Interest expense......................      (0.7)         (0.4)         (0.5)           (0.6)
  Other income..........................       1.1           1.1            --              --
                                             -----         -----         -----           -----
  Income before income taxes............       4.8           8.2           3.4             2.4
INCOME TAX EXPENSE......................      (1.9)         (3.3)         (1.4)           (1.0)
                                             -----         -----         -----           -----
NET INCOME..............................       2.9%          4.9%          2.0%            1.4%
                                             =====         =====         =====           =====
</TABLE>
 
                                       16
<PAGE>   19
 
  Comparison of Fiscal 1998 to Fiscal 1999
 
     Total revenues increased $30.8 million or 56.3% from $54.7 million in
fiscal 1998 to $85.4 million in fiscal 1999. The increase was attributable to
the addition of nine JB's Restaurants in fiscal 1999 ($10.0 million), a full
year of JJ North's Grand Buffet restaurants plus four North's Star Buffet
restaurants ($8.5 million) and 12 restaurants in Florida ($11.4 million), a 1.5%
or $603,000 increase in same store sales at the Company's HomeTown Buffet
Restaurants and various other changes increasing revenues $300,000.
 
     Food costs as a percent of total revenues increased from 33.0% in fiscal
1998 to 33.5% in fiscal 1999. The increase is primarily attributable to higher
food costs associated with the Florida Buffets Division stores and the North's
Star Buffet restaurants.
 
     Labor costs as a percent of total revenues increased from 31.6% in fiscal
1998 to 32.8% in fiscal 1999. The increase was primarily attributable to the
addition of the Florida Buffets Division restaurants which operate at a higher
labor cost than the Company's sixteen HomeTown Buffet Restaurants.
 
     Occupancy and other expenses as a percent of total revenues increased from
19.8% in fiscal 1998 to 20.7% in fiscal 1999. The increase is primarily
attributable to higher supply and utility expenses associated with the Florida
Buffets Division stores.
 
     General and administrative expenses as a percentage of total revenues
increased from 4.2% in fiscal 1998 to 5.0% in fiscal 1999. The increase is
primarily attributable to higher general and administrative costs resulting from
the reduction and subsequent termination of the Service Agreement with CKE.
 
     Depreciation and amortization as a percent of total revenues decreased from
3.9% in fiscal 1998 to 3.6% in fiscal 1999. The decrease is primarily
attributable to increased revenues of $30.8 million.
 
     Interest expense as a percent of total revenues increased from 0.4% in
fiscal 1998 to 0.7% in fiscal 1999. The increase is primarily attributable to
financing of the purchase and retirement of 2.5 million shares of common stock.
 
     Other income as a percent of total revenues remained the same at 1.1% in
fiscal 1998 and fiscal 1999.
 
     In fiscal 1998 and in fiscal 1999, income taxes were 40.0% of earnings
before taxes.
 
  Comparison of the twenty-eight weeks ended January 27, 1997, to Fiscal 1998
 
     Due to the differing lengths of time included in each period presented, the
comparison of these periods may not be meaningful or indicative of future
results.
 
     Revenues increased $31.1 million or 131.8% from $23.6 million for the
twenty-eight weeks ended January 27, 1997, to $54.7 million for fiscal 1998. The
increase is attributable to the full year impact of the Company's HomeTown
Buffet and Casa Bonita restaurants, $18.9 million and $8.5 million respectively,
the addition of seven JJ North's Grand Buffet Restaurants in fiscal 1998, $2.7
million, and a 2.5% or $1.0 million increase in same store sales at the
Company's HomeTown Buffet Restaurants.
 
     Food costs as a percentage of total revenues decreased from 35.4% for the
twenty-eight weeks ended January 27, 1997, to 33.0% for fiscal 1998. The
decrease is attributable to the inclusion of Casa Bonita for a full year, which
operates at a lower level of food costs.
 
     Labor costs as a percentage of total revenues decreased from 32.0% for the
twenty-eight weeks ended January 27, 1997, to 31.6% for fiscal 1998. The
decrease is attributable to a consistent improvement in labor costs in the Casa
Bonita restaurants.
 
     Occupancy and other, general and administrative and depreciation and
amortization expenses as a percentage of total revenues have all decreased in
fiscal 1998 as compared to the twenty-eight weeks ended January 27, 1997. These
decreases are attributable to the inclusion of Casa Bonita for a full year.
 
                                       17
<PAGE>   20
 
     Other income in fiscal 1998 represents interest income on cash balances and
notes receivable ($321,000) and management fee income ($272,000) resulting from
the Company's strategic alliance with Stacey's Buffet, Inc.
 
     In fiscal 1998, income taxes were 40.0% of earnings before taxes. In the
twenty-eight weeks ended January 27, 1997, income taxes were 41.8% of earnings
before taxes.
 
                                       18
<PAGE>   21
 
                              FINANCIAL CONDITION
 
LIQUIDITY AND CAPITAL RESOURCES
 
     The Company, prior to the reorganization, historically financed operations
through a combination of cash on hand, cash provided from operations and
available borrowings under bank lines of credit. As of January 25, 1999, the
Company had $121,000 in cash, and as of January 26, 1998, the Company had $15.4
million in cash and cash equivalents. The Company used approximately $15.0
million to fund the acquisition of 27 restaurants and fund capital improvements
to existing and acquired restaurants. In addition, the Company used
approximately $3.5 million to fund loans related to acquired restaurants. The
Company also repurchased 2 million shares of its common stock from CKE for a
purchase price equal to $5.0 million in cash and a 90 day promissory note in the
amount of $7.5 million on September 10, 1998. The Company used $7.5 million of
the proceeds from its bank financing arrangement with BankBoston, N.A. to
discharge all of its obligation to CKE on the 90 day promissory note.
 
     Cash provided by operations was approximately $5.9 million for fiscal 1999
and approximately $6.0 million for fiscal 1998.
 
     The Company intends to expand its operations through the opening of new
restaurants and the acquisition of regional buffet chains. In addition, the
Company may expand through the purchase of existing restaurant sites which would
be converted to one of the Company's existing restaurant concepts. Management
estimates the cost of opening its prototype restaurant to be approximately $1.5
million to $1.7 million, assuming leased real estate. In many instances,
management believes that existing restaurant locations can be acquired and
converted to the Company's prototype at a lower cost than new unit openings.
Management estimates the cost of acquiring and converting a property to one of
the existing concepts to be approximately $150,000 to $450,000. These costs
consist primarily of exterior and interior appearance modifications, new table,
chairs and food bars and the addition of certain kitchen and food service
equipment. There can be no assurance that the Company will be able to acquire
additional restaurant chains or locations or, if acquired, that these
restaurants will have a positive contribution to the Company's results of
operations.
 
     On October 23, 1998, the Company entered into a $20 million syndicated bank
financing agreement led by BankBoston, N.A. The credit facility consists of a
$13 million, 5-year term loan (the "Term Loan Facility") and a $7 million,
5-year revolving credit facility (the "Revolving Credit Facility"). The Term
Loan Facility refinanced existing indebtedness and will provide capital for the
repurchase of common stock and acquisitions. The Term Loan Facility balance was
$11.9 million as of April 16, 1999. Principal payments under the Term Loan
Facility are due in quarterly installments, beginning in November 1999 and
continue until the final maturity in October 2003. Borrowings under the
Revolving Credit Facility will be used for the Company's new unit development
and working capital needs. All outstanding amounts under the Revolving Credit
Facility will become due in October 2003. The Revolving Credit Facility balance
was zero on April 16, 1999.
 
     The Company believes that available cash, cash flow from operations and
amounts available under the Term Loan Facility and Revolving Credit Facility
will be sufficient to satisfy its working capital, and capital expenditure
requirements for the foreseeable future. If the Company requires additional
funds to support its working capital requirements or for other purposes,
including acquisitions, it may seek to raise such additional funds through
public or private equity and/or debt financing or from other sources. There can
be no assurance, however, that changes in the Company's operating plans, the
unavailability of a credit facility, the acceleration of the Company's expansion
plans, lower than anticipated revenues, increased expenses, potential
acquisitions of other events will not cause the Company to seek additional
financing sooner than anticipated. There can be no assurance that additional
financing will be available on acceptable terms or at all.
 
YEAR 2000
 
     The Company is currently working to resolve the potential impact of the
year 2000 on the processing of date-sensitive information by the Company's
computerized information systems. The "Year 2000" problem stems from computer
applications that were written using two digits rather than four digits to
define the applicable year. As a result, these applications may recognize "00"
as "1900" rather than "2000."
 
                                       19
<PAGE>   22
 
     The Company has investigated the impact of the Year 2000 problem on its
business, including the Company's operational, information and financial
systems. Based on this investigation, the Company does not expect the Year 2000
problem, including the cost of making the Company's computerized information
systems Year 2000 compliant, to have a material adverse impact on the Company's
financial position, results of operations or cash flows in future periods. The
Company has a few remaining non-compliant restaurants and home office personal
computers that will be upgraded in the next 6 months.
 
     The Company has also initiated communications with significant suppliers
and vendors on which the Company relies in an effort to determine the extent to
which the Company's business is vulnerable to the failure by these third parties
to remediate their Year 2000 problems. While the Company has not been informed
of any material risks associated with the Year 2000 problem on these entities,
there can be no assurance that the computerized information systems of these
third parties will be Year 2000 compliant on a timely basis. The inability of
these third parties to remediate their Year 2000 problems could have a material
adverse impact on the Company.
 
     To date, the Company has expensed incremental costs of approximately
$70,000 to assess and remediate potential Year 2000 problems. The total
remaining incremental cost is estimated to be $130,000. The Company is expensing
as incurred all costs related to the assessment and remediation of the Year 2000
issue. These costs are being funded through operating cash flows.
 
IMPACT OF INFLATION
 
     Management recognizes that inflation has an impact on food, construction,
labor and benefit costs, all of which can significantly affect the Company's
operations. Historically, the Company has been able to pass any associated
higher costs due to these inflationary factors along to its customers because
those factors have impacted nearly all restaurant companies. During fiscal 1999
and fiscal 1998, however, management has emphasized cost controls rather than
price increases, given the competitive pressure within the quick-service
restaurant industry.
 
NEW ACCOUNTING PRONOUNCEMENT
 
     In June 1998, the FASB issued SFAS no. 133, "Accounting for Derivative
Instruments and Hedging Activities." This Statement established standards for
derivative instruments and for hedging activities, and requires that an entity
recognize all derivatives as either assets or liabilities in the balance sheet
and measure those instruments at fair value. The Company has no instruments or
transactions subject to this Statement.
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
     See the Index included at "Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K."
 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
 
     None.
 
                                    PART III
 
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
 
     The information pertaining to directors and executive officers of the
registrant is hereby incorporated by reference to the Company's Proxy Statement
to be used in connection with the Company's 1999 Annual Meeting of Stockholders,
to be filed with the Commission within 120 days of January 25, 1999. Information
concerning the current executive officers of the Company is contained in Item 1
of Part I of this Annual Report on Form 10-K.
 
                                       20
<PAGE>   23
 
ITEM 11. EXECUTIVE COMPENSATION
 
     The information pertaining to executive compensation is hereby incorporated
by reference to the Company's Proxy Statement to be used in connection with the
Company's 1999 Annual Meeting of Stockholders, to be filed with the Commission
within 120 days of January 25, 1999.
 
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
     The information pertaining to security ownership of certain beneficial
owners and management is hereby incorporated by reference to the Company's Proxy
Statement to be used in connection with the Company's 1999 Annual Meeting of
Stockholders, to be filed with the Commission within 120 days of January 25,
1999.
 
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
     The information pertaining to certain relationships and related
transactions is hereby incorporated by reference to the Company's Proxy
Statement to be used in connection with the Company's 1999 Annual Meeting of
Stockholders, to be filed with the Commission within 120 days of January 25,
1999.
 
                                       21
<PAGE>   24
 
                                    PART IV
 
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
 
(a)(1) INDEX TO CONSOLIDATED FINANCIAL STATEMENTS:
 
<TABLE>
<CAPTION>
                                                                  PAGE NUMBER
                                                                  -----------
    <S>                                                           <C>
    Independent Auditors' Report................................      F-1
    Consolidated Balance Sheets -- as of January 25, 1999 and
      January 26, 1998..........................................      F-2
    Consolidated Statements of Income -- for the 52-weeks ended
      January 25, 1999, 52-weeks ended January 26, 1998,
      28-weeks ended January 27, 1997 and 30-weeks ended July
      15, 1996..................................................      F-4
    Consolidated Statements of Stockholders' Equity -- for the
      52-weeks ended January 25, 1999, 52-weeks ended January
      26, 1998, 28-weeks ended January 27, 1997 and 30-weeks
      ended July 15, 1996.......................................      F-5
    Consolidated Statements of Cash Flows -- for the 52-weeks
      ended January 25, 1999, 52-weeks ended January 26, 1998,
      28-weeks ended January 27, 1997 and 30-weeks ended July
      15, 1996..................................................      F-6
    Notes to Consolidated Financial Statements..................      F-7
</TABLE>
 
(a)(2) INDEX TO FINANCIAL STATEMENT SCHEDULES:
 
     All schedules are omitted since the required information is not present in
amounts sufficient to require submission of the schedule, or because the
information required is included in the consolidated financial statements or the
notes thereto.
 
(a)(3) EXHIBITS:
 
     An "Exhibit Index" has been filed as a part of this Form 10-K beginning on
Page E-1 hereof and is incorporated herein by reference.
 
(b) CURRENT REPORTS ON FORM 8-K:
 
     A current report on Form 8-K dated November 2, 1998 was filed during the
fourth quarter of the fiscal year to report the resignations of William P. Foley
and C. Thomas Thompson from its Board of Directors effective November 2, 1998.
Additionally, on November 3, 1998 the Board of Directors received the
resignation of John F. North from its Board of Directors effective November 3,
1998.
 
     A current report on Form 8-K dated December 2, 1998 was filed during the
fourth quarter of the fiscal year to report the resignation of Stuart Clifton
from the Company's Board of Directors effective December 2, 1998, and
additionally on December 2, 1998, the Board of Directors appointed Robert
Wheaton as Chairman of the Board.
 
                                       22
<PAGE>   25
 
                                   SIGNATURES
 
     Pursuant to the requirements of the Securities Exchange Act of l934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
 
                                          STAR BUFFET, INC.
                                          (Registrant)
 
April 26, 1999                            By:     /s/ ROBERT E. WHEATON
                                            ------------------------------------
                                                     Robert E. Wheaton
                                               President and Chief Executive
                                                           Officer
                                               (principal executive officer)
 
     Pursuant to the requirements of the Securities Exchange Act of l934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
 
<TABLE>
<CAPTION>
                      SIGNATURE                                    TITLE                      DATE
                      ---------                                    -----                      ----
<S>                                                    <C>                               <C>
                /s/ ROBERT E. WHEATON                  President and Chief Executive     April 26, 1999
-----------------------------------------------------       Officer and Director
                  Robert E. Wheaton
 
                 /s/ RONALD E. DOWDY                    Group Controller, Treasurer      April 26, 1999
-----------------------------------------------------          and Secretary
                   Ronald E. Dowdy
 
                  /s/ JACK M. LLOYD                               Director               April 26, 1999
-----------------------------------------------------
                    Jack M. Lloyd
 
                /s/ THOMAS G. SCHADT                              Director               April 26, 1999
-----------------------------------------------------
                  Thomas G. Schadt
 
             /s/ PHILLIP "BUDDY" JOHNSON                          Director               April 26, 1999
-----------------------------------------------------
               Phillip "Buddy" Johnson
 
                /s/ CRAIG B. WHEATON                              Director               April 26, 1999
-----------------------------------------------------
                  Craig B. Wheaton
</TABLE>
 
                                       23
<PAGE>   26
 
                         REPORT OF INDEPENDENT AUDITORS
 
The Stockholders and Board of Directors
Star Buffet, Inc.:
 
     We have audited the accompanying consolidated balance sheets of Star
Buffet, Inc. and subsidiaries (Successor Company) as of January 25, 1999 and
January 26, 1998, and the related consolidated statements of income,
stockholders' equity and cash flows for the 52-week periods ended January 25,
1999 and January 26, 1998 and the 28-week period ended January 27, 1997
(Successor Period) and the statements of income, stockholders' equity and cash
flows of HTB Restaurants, Inc. (Predecessor Company) for the 30-week period
ended July 15, 1996. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
 
     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
     In our opinion, the aforementioned Successor consolidated financial
statements present fairly, in all material aspects, the financial position of
Star Buffet, Inc. (and CKE operations that became Star Buffet, Inc.) and
subsidiaries as of January 25, 1999 and January 26, 1998, and the results of
their operations and their cash flows for the Successor Period, in conformity
with generally accepted accounting principles. Further, in our opinion, the
aforementioned Predecessor consolidated financial statements present fairly, in
all material respects, the results of operations and cash flows of HTB
Restaurants, Inc. for the Predecessor Period, in conformity with generally
accepted accounting principles.
 
     As discussed in Note 1 to the consolidated financial statements, effective
July 16, 1996, CKE acquired all of the outstanding stock of HTB Restaurants,
Inc. in a business combination accounted for as a purchase. As a result of the
acquisition, the consolidated financial information for the periods after the
acquisition (Successor Period) is presented on a different cost basis than that
for the periods before the acquisition (Predecessor Period) and, therefore, is
not comparable.
 
                                          /s/ KPMG LLP
 
Salt Lake City, Utah
April 2, 1999
 
                                       F-1
<PAGE>   27
 
                       STAR BUFFET, INC. AND SUBSIDIARIES
 
                          CONSOLIDATED BALANCE SHEETS
 
                                     ASSETS
 
<TABLE>
<CAPTION>
                                                              JANUARY 25,    JANUARY 26,
                                                                 1999           1998
                                                              -----------    -----------
<S>                                                           <C>            <C>
Current assets:
  Cash and cash equivalents.................................  $   121,000    $15,387,000
  Current portion of notes and other receivables............    2,496,000        336,000
  Inventories...............................................      842,000        493,000
  Deferred income taxes, net................................      274,000        110,000
  Prepaid expenses..........................................      159,000        204,000
                                                              -----------    -----------
     Total current assets:..................................    3,892,000     16,530,000
Property, buildings and equipment, at cost, less accumulated
  depreciation..............................................   29,490,000     15,077,000
Real property and equipment under capitalized leases, at
  cost, less accumulated amortization.......................    2,100,000      2,287,000
Notes receivable, net of current portion....................    3,491,000      3,235,000
Deposits and other..........................................      344,000      1,960,000
Deferred income taxes, net..................................           --        207,000
Goodwill, less accumulated amortization.....................    4,069,000      1,313,000
Other intangible assets, less accumulated amortization......      773,000        360,000
                                                              -----------    -----------
          Total assets......................................  $44,159,000    $40,969,000
                                                              ===========    ===========
 
                          LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable-trade....................................  $ 3,622,000    $ 2,212,000
  Payroll and related taxes.................................    1,918,000      1,643,000
  Sales and property taxes..................................      869,000      1,178,000
  Rent, licenses and other..................................      705,000        822,000
  Current maturities of obligations under capital leases and
     long-term debt.........................................    1,329,000        259,000
  Other current liabilities.................................           --        209,000
                                                              -----------    -----------
     Total current liabilities..............................    8,443,000      6,323,000
Deferred income taxes, net..................................      379,000             --
Capitalized lease obligations, net of current maturities....    2,049,000      2,109,000
Long-term debt, net of current maturities...................   13,925,000             --
Stockholders' equity:
  Preferred stock, $.001 par value; authorized 1,500,000
     shares; None issued or outstanding.....................           --             --
  Common stock, $.001 par value; authorized 18,500,000
     shares; issued and Outstanding 2,950,000 shares in 1999
     and 5,450,00 shares in 1998............................        3,000          5,000
  Additional paid-in capital................................   16,351,000     31,768,000
  Retained earnings.........................................    3,199,000        764,000
  Treasury stock, at cost, 31,000 shares....................     (190,000)            --
                                                              -----------    -----------
     Total stockholders' equity.............................   19,363,000     32,537,000
          Total liabilities and stockholders' equity........  $44,159,000    $40,969,000
                                                              ===========    ===========
</TABLE>
 
          See accompanying notes to consolidated financial statements.
 
                                       F-2
<PAGE>   28
 
                       STAR BUFFET, INC. AND SUBSIDIARIES
 
                       CONSOLIDATED STATEMENTS OF INCOME
 
<TABLE>
<CAPTION>
                                                                                                  PREDECESSOR
                                                         SUCCESSOR COMPANY                          COMPANY
                                       ------------------------------------------------------    -------------
                                          FIFTY-TWO          FIFTY-TWO         TWENTY-EIGHT         THIRTY
                                            WEEKS              WEEKS              WEEKS              WEEKS
                                            ENDED              ENDED              ENDED              ENDED
                                       JANUARY 25, 1999   JANUARY 26, 1998   JANUARY 27, 1997    JULY 15, 1996
                                       ----------------   ----------------   ----------------    -------------
<S>                                    <C>                <C>                <C>                 <C>
Total revenues.......................    $85,409,000        $54,659,000        $23,632,000        $23,207,000
                                         -----------        -----------        -----------        -----------
Costs and expenses
  Food costs.........................     28,578,000         18,024,000          8,371,000          8,569,000
  Labor costs........................     27,983,000         17,301,000          7,565,000          6,810,000
  Occupancy and other expenses.......     17,806,000         10,829,000          4,732,000          5,030,000
  General and administrative
     expenses........................      4,272,000          2,291,000          1,062,000          1,193,000
  Depreciation and amortization......      3,048,000          2,109,000            988,000            914,000
                                         -----------        -----------        -----------        -----------
     Total costs and expenses........     81,687,000         50,554,000         22,718,000         22,516,000
                                         -----------        -----------        -----------        -----------
Income from operations...............      3,722,000          4,105,000            914,000            691,000
Interest expense.....................       (597,000)          (200,000)          (106,000)          (145,000)
Interest income......................        666,000            321,000                 --                 --
Other income.........................        267,000            272,000                 --                 --
                                         -----------        -----------        -----------        -----------
Income before income taxes...........      4,058,000          4,498,000            808,000            546,000
Income tax expense...................      1,623,000          1,799,000            338,000            216,000
                                         -----------        -----------        -----------        -----------
Net income...........................    $ 2,435,000        $ 2,699,000        $   470,000        $   330,000
                                         ===========        ===========        ===========        ===========
Net income per common share --
  basic..............................    $      0.53        $      0.77        $      0.18
                                         ===========        ===========        ===========
Weighted average shares outstanding--
  basic..............................      4,601,000          3,515,000          2,600,000
                                         -----------        -----------        -----------
Net income per common share --
  diluted............................    $      0.53        $      0.76        $      0.18
                                         ===========        ===========        ===========
Weighted average shares outstanding--
  diluted............................      4,601,000          3,528,000          2,600,000
                                         -----------        -----------        -----------
</TABLE>
 
          See accompanying notes to consolidated financial statements.
 
                                       F-3
<PAGE>   29
 
                       STAR BUFFET, INC. AND SUBSIDIARIES
 
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
 
<TABLE>
<CAPTION>
                              COMMON STOCK        ADDITIONAL                                  TOTAL
                          --------------------     PAID-IN       RETAINED     TREASURY    SHAREHOLDERS'
                            SHARES     AMOUNT      CAPITAL       EARNINGS       STOCK        EQUITY
                          ----------   -------   ------------   -----------   ---------   -------------
<S>                       <C>          <C>       <C>            <C>           <C>         <C>
PREDECESSOR COMPANY
Balance at December 18,
  1995..................          10   $    --   $  1,000,000   $   806,000   $      --   $  1,806,000
Net income..............          --        --             --       330,000          --        330,000
                          ----------   -------   ------------   -----------   ---------   ------------
Balance at July 15,
  1996..................          10   $    --   $  1,000,000   $ 1,136,000   $      --   $  2,136,000
                          ==========   =======   ============   ===========   =========   ============
SUCCESSOR COMPANY
Beginning balance, July
  15, 1996..............   2,600,000   $ 2,000   $  8,025,000   $        --   $      --   $  8,027,000
Net activity with
  principal
  stockholder...........          --        --      1,245,000            --          --      1,245,000
Net income..............          --        --             --       470,000          --        470,000
                          ----------   -------   ------------   -----------   ---------   ------------
Balance at January 27,
  1997..................   2,600,000     2,000      9,270,000       470,000          --      9,742,000
Net activity with
  principal
  stockholder...........          --        --     (8,272,000)   (2,405,000)         --    (10,677,000)
Issuance of common
  stock.................   2,850,000     3,000     30,770,000            --          --     30,773,000
Net income..............          --        --             --     2,699,000          --      2,699,000
                          ----------   -------   ------------   -----------   ---------   ------------
Balance at January 26,
  1998..................   5,450,000     5,000     31,768,000       764,000          --     32,537,000
Redemption and
  retirement of stock
  from Principal
  stockholder...........  (2,000,000)   (2,000)   (12,498,000)           --          --    (12,500,000)
Purchase and retirement
  of stock..............    (500,000)     (500)    (2,919,000)           --          --     (2,919,000)
Purchase of treasury
  stock.................          --        --             --            --    (190,000)      (190,000)
Net income..............          --        --             --     2,435,000          --      2,435,000
                          ----------   -------   ------------   -----------   ---------   ------------
Balance at January 26,
  1998..................   2,950,000   $ 3,000   $ 16,351,000   $ 3,199,000   $(190,000)  $ 19,363,000
                          ==========   =======   ============   ===========   =========   ============
</TABLE>
 
          See accompanying notes to consolidated financial statements.
 
                                       F-4
<PAGE>   30
 
                       STAR BUFFET, INC. AND SUBSIDIARIES
 
                      CONSOLIDATED STATEMENT OF CASH FLOWS
 
<TABLE>
<CAPTION>
                                                                                        PREDECESSOR
                                                      SUCCESSOR COMPANY                   COMPANY
                                          ------------------------------------------    -----------
                                           FIFTY-TWO      FIFTY-TWO     TWENTY-EIGHT      THIRTY
                                          WEEKS ENDED    WEEKS ENDED    WEEKS ENDED     WEEKS ENDED
                                          JANUARY 25,    JANUARY 26,    JANUARY 27,      JULY 15,
                                              1999           1998           1997           1996
                                          ------------   ------------   ------------    -----------
<S>                                       <C>            <C>            <C>             <C>
Cash flows from operating activities:
  Net income............................  $  2,435,000   $  2,699,000   $   470,000      $ 330,000
Adjustments to reconcile net income to
  net cash provided by operating
  activities:
  Depreciation and amortization.........     3,048,000      2,109,000       988,000        914,000
  Provision for losses on other
     assets.............................            --         75,000            --             --
  Non-cash investment income............            --        (78,000)           --             --
  Amortization of royalty fee...........       460,000             --            --             --
  Change in operating assets and
     liabilities:
     Receivables........................    (1,280,000)       207,000      (114,000)        21,000
     Inventories........................      (349,000)      (109,000)       (5,000)        39,000
     Prepaid expenses...................      (414,000)      (154,000)      178,000       (202,000)
     Deposits...........................       576,000        183,000            --             --
     Deferred income taxes..............       422,000       (331,000)      100,000        (78,000)
     Accounts payable-trade.............     1,410,000        (14,000)      273,000       (280,000)
     Other accrued liabilities..........      (360,000)     1,377,000        27,000         72,000
                                          ------------   ------------   -----------      ---------
Net cash provided by operating
  activities............................     5,948,000      5,964,000     1,917,000        816,000
Cash flows used in investing activities:
  Increase in notes receivable..........    (3,468,000)    (3,400,000)           --             --
  Deposits on future acquisitions.......            --     (1,936,000)           --             --
  Acquisition of property, buildings and
     equipment..........................   (14,979,000)    (5,562,000)     (103,000)       (68,000)
  Deferred organization and franchise
     costs..............................            --        (67,000)           --             --
  Purchase of short-term investments....            --        180,000      (180,000)            --
                                          ------------   ------------   -----------      ---------
Net cash used in investing activities...   (18,447,000)   (10,785,000)     (283,000)       (68,000)
Cash flows from financing activities:
  Proceeds from issuance of common
     stock..............................            --     30,773,000            --             --
  Payments to extinguish debt...........    (8,424,000)            --            --             --
  Proceeds from issuance of long-term
     debt...............................    14,500,000             --            --             --
  Capitalized loan costs................      (437,000)            --            --             --
  Redemption of common stock............    (7,919,000)            --            --             --
  Purchase of treasury stock............      (190,000)            --            --             --
  Net activity with principle
     shareholder........................            --    (10,677,000)   (1,245,000)      (546,000)
  Principal payment on capital leases...      (297,000)      (241,000)     (245,000)      (110,000)
                                          ------------   ------------   -----------      ---------
Net cash provided by (used in) financing
  activities............................    (2,767,000)    19,855,000    (1,490,000)      (656,000)
                                          ------------   ------------   -----------      ---------
Net increase (decrease) in cash and cash
  equivalents...........................   (15,266,000)    15,034,000       144,000         92,000
Cash and cash equivalents at beginning
  of period.............................    15,387,000        353,000       209,000        117,000
                                          ------------   ------------   -----------      ---------
Cash and cash equivalents at end of
  period................................  $    121,000   $ 15,387,000   $   353,000      $ 209,000
                                          ============   ============   ===========      =========
</TABLE>
 
          See accompanying notes to consolidated financial statements.
 
                                       F-5
<PAGE>   31
 
                       STAR BUFFET, INC. AND SUBSIDIARIES
 
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 
     A summary of certain significant accounting policies not disclosed
elsewhere in the footnotes to the consolidated financial statements is set forth
below.
 
BASIS OF PRESENTATION
 
     The accompanying consolidated financial statements include the accounts for
Star Buffet, Inc., together with its direct and indirect wholly owned
subsidiaries Summit Family Restaurants Inc. ("Summit"), HTB Restaurants, Inc.
("HTB"), Northstar Buffet, Inc. ("NSBI") and Star Buffet Management, Inc.
("SBMI") (collectively the "Company"). The accompanying financial statements
include the results of operations and assets and liabilities directly related to
the Company's operations. Certain estimates, assumptions and allocations were
made in preparing such financial statements. In addition, prior to the Formation
Transactions described below, the entities comprising the Company operated
independently of each other and were not under common control or management
until October 1, 1996. As a result, such financial statements may not
necessarily be indicative of the results of operations, financial position or
cash flows that would have existed had the Company been a separate, independent
company.
 
ORGANIZATION AND NATURE OF OPERATIONS
 
     The Company was formed by CKE Restaurants, Inc. ("CKE") in July 1997 in
connection with the reorganization of CKE's buffet-style restaurant business.
Pursuant to a contribution agreement among the Company and CKE and certain of
their respective subsidiaries, CKE transferred to Summit the net assets of its
two Casa Bonita Mexican theme restaurants (which were acquired by CKE on October
1, 1996), and Summit transferred substantially all of its assets and liabilities
(primarily those relating to the JB's Restaurant system and Galaxy Diner
restaurants, but excluding 16 HomeTown Buffet restaurants operated by HTB) to a
newly formed subsidiary of CKE. Summit was acquired by CKE on July 16, 1996.
Then, CKE contributed the outstanding shares of Summit to the Company in
exchange for 2,600,000 shares of the Company's Common Stock. All of the parties
to the foregoing transactions (the "Formation Transactions") were, upon
completion thereof, direct or indirect wholly owned subsidiaries of CKE, and
such Formation Transactions were accounted for as a reorganization among
companies under common control. Accordingly, results of operations are presented
for the period commencing on July 16, 1996 (the date of CKE's acquisition of
Summit), and include results of operations of the two Casa Bonita Mexican theme
restaurants only from October 1, 1996 (the date of acquisition by CKE) and the
results of operations of seven JJ North's Grand Buffet Restaurants operated by
the Company only from September 30, 1997 (the date of acquisition by the
Company). See Note 3 for acquisitions subsequent to the Formation Transactions.
 
     The operating results for the 52-week period ended January 25, 1999 include
52 weeks of operations for the 16 franchised HomeTown Buffet restaurants, two
Casa Bonita restaurants and six JJ North's Grand Buffet restaurants. The results
also include 48 weeks of operations for nine franchised JB's Restaurants; 50
weeks for three Staceys Buffets that were converted to BuddyFreddys Country
Buffet; 48 weeks for two Maggies Buffets that were converted to BuddyFreddys
Country Buffet; 43 weeks for two BuddyFreddys; 8 weeks for one BuddyFreddys
Country Buffet; 3 weeks of operations for one BuddyFreddys Country Buffet; 50
weeks for one North's Star Buffet; 48 weeks for one North's Star Buffet; 36
weeks for one North's Star Buffet; 31 weeks for one North's Star Buffet; 24
weeks for one North's Star Buffet; and 3 weeks for three Holiday House
restaurants.
 
     The operating results for the fifty-two week period ended January 26, 1998,
include 52 weeks of operations for the Company's 16 franchised HomeTown Buffet
restaurants, 52 weeks of operations for the Company's two Casa Bonita
restaurants and 16 weeks of operations for the seven JJ North's Grand Buffet
restaurants operated by the Company. The operations for the 28 week period ended
January 27, 1997, include 28 weeks of operations for the Company's 16 franchised
HomeTown Buffet restaurants, and 17 weeks of
 
                                       F-6
<PAGE>   32
                       STAR BUFFET, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
operations for the Company's two Casa Bonita restaurants, but do not include the
operations for JJ North's Grand Buffet restaurants.
 
     The Predecessor Company, HTB Restaurants, Inc., has been a wholly-owned
subsidiary of Summit Family Restaurants Inc. ("Summit") since October 9, 1991.
The Predecessor Company operated 16 buffet style restaurants in five western
states as a franchisee of HomeTown Buffet, Inc. and utilized a 52/53-week fiscal
year which ends in December. The period ended July 15, 1996 contained 30 weeks.
 
FISCAL YEAR
 
     The Company utilizes a 52/53 week fiscal year which ends on the last Monday
in January. The first quarter of each year contains 16 weeks while the other
three quarters each contain 12 weeks.
 
CASH EQUIVALENTS
 
     For purposes of reporting cash flows, highly liquid investments purchased
with original maturities of three months or less are considered cash
equivalents. The carrying amounts reported in the consolidated balance sheets
for these instruments approximate their fair value.
 
SHORT-TERM INVESTMENTS
 
     Short-term investments (consisting primarily of certificates of deposits,
with original maturities of greater than three months) are held-to-maturity
securities and, accordingly, have been stated at cost.
 
INVENTORIES
 
     Inventories consist of food, beverages and restaurant supplies and are
valued at cost, determined by the first-in, first-out method.
 
PROPERTY AND EQUIPMENT
 
     Property and equipment and real property under capitalized leases are
carried at cost, less accumulated depreciation and amortization. Depreciation
and amortization are provided using the straight-line method over the following
useful lives: buildings and leasehold improvements -- lesser of lease life or 40
years; furniture, fixtures and equipment -- five to eight years; capitalized
leases -- lesser of lease life or 20 years. Lease renewal option periods are
included in determining leasehold improvement useful lives when, in management's
opinion, such renewal options will be exercised.
 
     Repairs and maintenance are charged to operations as incurred. Remodeling
costs are generally capitalized.
 
GOODWILL
 
     Goodwill represents costs in excess of fair value of net assets acquired
and is amortized on the straight-line basis over 40 years. The Company
periodically reviews goodwill for recoverability in connection with its review
of impairment of long-lived assets.
 
     Accumulated amortization of goodwill totaled $93,000 at January 25, 1999
and $10,000 at January 26, 1998.
 
OTHER INTANGIBLE ASSETS
 
     Other intangible assets are comprised of franchise fees, organization costs
and loan costs. Franchise fees are amortized using the straight-line method over
the remaining terms of the franchise agreements, which
 
                                       F-7
<PAGE>   33
                       STAR BUFFET, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
range typically from eight to 16 years. Organization costs are amortized using
the straight-line method over 40 years. Loan costs are amortized using the
straight-line method over 5 years.
 
     Accumulated amortization of these other intangible assets totaled $161,000
at January 25, 1999 and $117,000 at January 26, 1998.
 
IMPAIRMENT OF LONG-LIVED ASSETS
 
     The Company determines that an impairment write down is necessary for
locations whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. Recoverability of assets to be held
and used is measured by a comparison of the carrying amount of an asset to
future net cash flows expected to be generated by the asset. If such assets are
considered to be impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the assets exceed the fair value of the
assets. In fiscal 1999 the Company determined a $72,000 impairment write down
was necessary for one location. The write down is included in depreciation and
amortization for fiscal 1999 in the consolidated statement of income.
 
PRE-OPENING COSTS
 
     In April 1998, the AICPA issued Statement of Position 98-5, "Reporting on
the Costs of Start-Up Activities" ("SOP 98-5"). SOP 98-5 requires that costs
incurred during a start-up activity (including organization costs) be expensed
as incurred and is effective for fiscal years beginning after December 31, 1998.
The Company adopted SOP 98-5 effective January 27, 1998. There were no
capitalized pre-opening costs as of January 26, 1998. During fiscal 1999, the
Company incurred approximately $1,000,000 of pre-opening costs which were
expensed.
 
GENERAL AND ADMINISTRATIVE EXPENSES
 
     General and administrative expenses include certain expenses directly
related to the Company and other corporate overhead. Allocations of expenses
were made by Summit to HTB prior to September 22, 1997 and by CKE to Star Buffet
after September 22, 1997 for certain corporate services and overhead incurred by
the Company. Total corporate allocations included in general and administrative
expenses in the accompanying consolidated statements of income amounted to
approximately $274,000, $437,000, $252,000 and $951,000 for the 52 week periods
ended January 25, 1999 and January 26, 1998, the 28 week period ended January
27, 1997, and the 30 week period ended July 15, 1996, respectively. These
allocations were based on, among other things, percentage of revenues, number of
stores, number of employees or the amount of capital expenditures in relation to
the total of the respective amounts of Summit on a combined basis. Allocations
are made on a basis that management of the Company believes to be reasonable;
however, such allocations are not necessarily indicative of the expenses which
might have been incurred by the Company had they operated on a stand-alone
basis. In connection with the initial public offering (described in Note 2), the
Company and CKE entered into a CKE Service Agreement pursuant to which CKE was
to provide the Company with certain multi-unit restaurant infrastructure
support. Such services consisted of accounting, administrative, financial, real
estate, and purchasing services. In August of 1998, the Company began to provide
many of these services internally. In February of 1999, the CKE Service
Agreement was terminated.
 
     The following amounts were paid to CKE for services, $274,000 for the 52
weeks periods ended January 25, 1999 and $437,000 for the 52 weeks ended January
26, 1998.
 
INCOME TAXES
 
     The Company accounts for income taxes using the asset and liability method.
Under this method, income tax assets and liabilities are recognized using
enacted tax rates for the expected future tax consequences
 
                                       F-8
<PAGE>   34
                       STAR BUFFET, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
attributable to temporary differences between the financial statement carrying
amounts of existing assets and liabilities and their respective tax bases. A
change in tax rates is recognized in income in the period that includes the
enactment date.
 
ADVERTISING EXPENSES
 
     Advertising costs are charged to operations as incurred. Amounts charged to
operations totaled $1,965,000, $708,000, $123,000 and $131,000 for the 52 week
periods ended January 25, 1999 and January 26, 1998, the 28 week period ended
January 27, 1997, and the 30 week period ended July 15, 1996, respectively.
 
USE OF ESTIMATES
 
     Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these consolidated financial
statements in conformity with generally accepted accounting principles. Actual
results could differ from those estimates.
 
EARNINGS PER SHARE
 
     Basic earnings per share are computed by dividing net income by the
weighted average number of common shares outstanding. Diluted earnings per share
assumes the exercise of stock options using the treasury stock method, if
dilutive. The following is a reconciliation of the numerators and denominators
used to calculated diluted earnings per share:
 
<TABLE>
<CAPTION>
                                                            SUCCESSOR COMPANY
                                         --------------------------------------------------------
                                            FIFTY-TWO           FIFTY-TWO          TWENTY-EIGHT
                                              WEEKS               WEEKS               WEEKS
                                              ENDED               ENDED               ENDED
                                         JANUARY 25, 1999    JANUARY 26, 1998    JANUARY 27, 1997
                                         ----------------    ----------------    ----------------
<S>                                      <C>                 <C>                 <C>
Weighted average common shares
  outstanding..........................     4,601,000           3,515,000           2,600,000
Dilutive effect of stock options.......            --              13,000                  --
                                            ---------           ---------           ---------
Common shares assuming dilution........     4,601,000           3,528,000           2,600,000
                                            =========           =========           =========
</TABLE>
 
     Average shares used in the fifty-two weeks ended January 25, 1999 and the
fifty-two weeks ended January 26, 1998 diluted earnings per share computations
exclude stock options to purchase 500,000 shares of common stock at a weighted
average price of $12.00 and stock options to purchase 608,000 shares of common
stock at weighted average price of $12.00 per share, respectively, due to their
antidilutive effect. No stock options were outstanding during the twenty-eight
weeks ended January 27, 1997.
 
SEGMENT REPORTING
 
     In fiscal 1999, the Company adopted Statement of Financial Accounting
Standards No. 131, "Disclosures About Segments of an Enterprise and Related
Information" ("SFAS 131"). SFAS 131 established standards for reporting
information about operating segments. The Company's reportable segments are
based on the brand similarities and geographic locations.
 
COMPREHENSIVE INCOME
 
     In fiscal 1999, the Company adopted Statement of Financial Accounting
Standard No. 130, "Reporting Comprehensive Income" ("SFAS 130"). This statement
established rules for the reporting of comprehensive income and its components.
The adoption of SFAS 130 did not impact the Company's consolidated financial
 
                                       F-9
<PAGE>   35
                       STAR BUFFET, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
statements or related disclosures as the Company does not have any components of
other comprehensive income. Therefore, comprehensive income (loss) equaled net
income (loss) for all periods represented.
 
STOCK-BASED COMPENSATION
 
     The Company uses the intrinsic value method prescribed by Accounting
Principles Board (APB) Opinion No. 25 when recognizing expense for employee
stock compensation plans. As such, compensation is recognized on the date of
grant when the current market price of the stock exceeds the exercise price.
 
NOTE 2 -- INITIAL PUBLIC OFFERING
 
     On September 30, 1997, the Company completed an initial public offering
(the "IPO") of 3,000,000 shares of its Common Stock at an IPO price of $12.00
per share. Of the 3,000,000 share offering, 2,400,000 shares were sold by the
Company and 600,000 shares were sold by CKE. On October 7, 1997, the
underwriters exercised their over-allotment option and acquired an additional
450,000 shares of Common Stock. The IPO generated total net proceeds to the
Company of $30.8 million after commissions and offering expenses.
 
USE OF PROCEEDS
 
     Of the net proceeds received from the IPO, the Company paid to CKE $10.7
million, which included a dividend of $9.3 million. These payments were in
effect reimbursement CKE for its equity in HomeTown Buffet and Casa Bonita at
the date of the IPO. The remaining proceeds from the IPO were loaned to North's
Restaurants, Inc. for $3.6 million, acquisition of restaurants $11.9 million,
acquisition of furniture, fixtures, and equipment $2.4 million, and real estate
loans on two BuddyFreddys properties -- BuddyFreddys Brandon, LTD. for $1.1
million at 10.0% interest for one year and BuddyFreddys Plant City, LTD. for
$1.3 million at 10.0% interest for one year. The BuddyFreddys Brandon, LTD real
estate loan was paid off in April 1999, and the BuddyFreddys Plant City, LTD
real estate loan was converted when the Company acquired the property in January
1999.
 
NOTE 3 -- ACQUISITIONS
 
     Concurrent with the IPO, the Company acquired six JJ North's Grand Buffet
Restaurants from North's Restaurants, Inc., ("North's"), and completed a
management agreement for a seventh restaurant. The total cash consideration paid
to North's was approximately $4.5 million which generated $1.3 million of
goodwill. The acquisition was accounted for as a purchase. In connection with
the North's acquisition, the Company has provided a $3.0 million term loan and a
$750,000 line of credit to North's. The term loan and line of credit are secured
by North's remaining restaurants and bear interest at 8.0% (See note 15).
 
     Selected unaudited proforma combined results of operations for the
fifty-two week period ended January 26, 1998 and the twenty-eight weeks ended
January 27, 1997, as if the acquisition occurred on July 16, 1996, using actual
restaurant-level margins and general and administrative expenses prior to the
acquisition are presented as follows:
 
<TABLE>
<CAPTION>
                                                     FIFTY-TWO      TWENTY-EIGHT
                                                    WEEKS ENDED     WEEKS ENDED
                                                    JANUARY 26,     JANUARY 27,
                                                        1998            1997
                                                    ------------    ------------
<S>                                                 <C>             <C>
Total revenues....................................  $60,866,000     $26,249,000
Net income........................................  $ 2,452,000     $   467,000
Net income per common share -- basic..............  $       .70     $       .18
Net income per common share -- diluted............  $       .70     $       .18
</TABLE>
 
                                      F-10
<PAGE>   36
                       STAR BUFFET, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
     On February 13, 1998, the Company acquired the leasehold interests of three
restaurants located in Florida for $1,004,000. The Company accounted for the
acquisition as a purchase. In addition, the Company acquired leasehold interests
of two restaurants in Florida for a purchase price of $463,000. The Company
accounted for the acquisition as a purchase.
 
     On February 24, 1998, the Company acquired twelve JB's Restaurants from
JB's Restaurants, Inc., a wholly-owned subsidiary of CKE, for $4,265,000,
subject to adjustment. At the time of acquisition, the Company prepaid royalty
fees for one year in the amount of $485,000. The Company continues to operate
nine restaurants under a franchise agreement with JB's Family Restaurants, Inc,
a wholly-owned subsidiary of Santa Barbara Restaurant Group, Inc. During fiscal
1999, the Company completed three conversions of JB's restaurants to North's
Star Buffet restaurants -- the Company's small-format buffet concept. In
February 1999, two of the three restaurants were closed due to their failure to
meet performance expectations. The Company accounted for the acquisition as a
purchase.
 
     On April 1, 1998, the Company acquired two family-dining restaurants
located in Florida which operate under the brand name of BuddyFreddys. The
purchase price was $1.6 million, subject to adjustments. The Company accounted
for the acquisition as a purchase.
 
     In January 1999, the Company completed the Holiday House transaction
acquiring three Holiday House restaurants in Florida for a purchase price of
$1,166,000. The Company accounted for the acquisition as a purchase.
 
     The total goodwill recognized in connection with the acquisitions in fiscal
1999 was $2,839,000.
 
NOTE 4 -- NOTES RECEIVABLE
 
     Notes receivable at January 25, 1999 consists of the following:
 
<TABLE>
<CAPTION>
                                                      JANUARY 25,    JANUARY 26,
                                                         1999           1998
                                                      -----------    -----------
<S>                                                   <C>            <C>
Notes receivable from North's Restaurants, Inc. ....  $3,491,000     $3,078,000
Line of credit due from North's Restaurants,
  Inc. .............................................          --        400,000
Note receivable from BuddyFreddys of Brandon,
  Ltd. .............................................   1,124,000             --
                                                      ----------     ----------
                                                       4,615,000      3,478,000
Less current portion................................   1,124,000        243,000
                                                      ----------     ----------
                                                      $3,491,000     $3,235,000
                                                      ==========     ==========
</TABLE>
 
     The amount receivable from North's Restaurants, Inc. includes $3,120,000
for the term note and $371,000 on the line of credit that was converted to a
note receivable as a result of the pending dispute with North's Restaurants,
Inc. No line of credit was available as of January 25, 1999. The $3.0 million
note receivable stipulates that interest accruing on the loan will be added to
the note balance for the first six months. Interest on the aggregate balance was
to be payable monthly with monthly principal payments beginning November 1,
1999. The interest on the line of credit was to be payable monthly for the first
six months with principal and interest payments due monthly thereafter until the
line was repaid. However, management has suspended the interest accrual totaling
$100,000 as of January 25, 1999 pending resolution of the Company's dispute with
North's Restaurants, Inc. (See Note 15).
 
     The note receivable from BuddyFreddys of Brandon, Ltd. was secured by real
estate and included interest at 10 percent. The note was paid in full in April
of 1999.
 
                                      F-11
<PAGE>   37
                       STAR BUFFET, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 5 -- PROPERTY AND EQUIPMENT AND REAL PROPERTY UNDER CAPITALIZED LEASES
 
     The components of property and equipment and real property under
capitalized leases are as follows:
 
<TABLE>
<CAPTION>
                                                    JANUARY 25,    JANUARY 26,
                                                       1999           1998
                                                    -----------    -----------
<S>                                                 <C>            <C>
Property and equipment:
  Buildings and leasehold improvements............  $13,076,000    $12,535,000
  Land............................................    2,382,000             --
  Furniture, fixtures and equipment...............   21,602,000      7,648,000
                                                    -----------    -----------
                                                     37,060,000     20,183,000
  Less accumulated depreciation and
     amortization.................................   (7,570,000)    (5,106,000)
                                                    -----------    -----------
                                                    $29,490,000    $15,077,000
                                                    ===========    ===========
Real property and equipment under capitalized
  leases..........................................  $ 3,193,000    $ 3,031,000
  Less accumulated amortization...................   (1,093,000)      (744,000)
                                                    -----------    -----------
                                                    $ 2,100,000    $ 2,287,000
                                                    ===========    ===========
</TABLE>
 
NOTE 6 -- DEPOSITS AND OTHER
 
     Deposits and other consists of the following:
 
<TABLE>
<CAPTION>
                                                       JANUARY 25,    JANUARY 26,
                                                          1999           1998
                                                       -----------    -----------
<S>                                                    <C>            <C>
Deposit on the acquisition of restaurants............   $     --      $1,935,000
Option to purchase two Holiday House restaurants.....    166,000              --
Miscellaneous deposits...............................    178,000          25,000
                                                        --------      ----------
                                                        $344,000      $1,960,000
                                                        ========      ==========
</TABLE>
 
NOTE 7 -- LONG-TERM DEBT
 
     On October 23, 1998, the Company entered into a $20 million syndicated bank
financing agreement led by BankBoston, N.A. The credit facility consists of a
$13 million, 5-year term loan (the "Term Loan Facility") and a $7 million,
5-year revolving credit facility (the "Revolving Credit Facility"). The Term
Loan Facility refinanced existing indebtedness and provided capital for the
repurchase of common stock and acquisitions. The Term Loan Facility balance was
$13.0 million as of January 25, 1999. Principal payments under the Term Loan
Facility are due in quarterly installments, beginning in November 1999 and
continue until the final maturity in October 2003, with interest at the Bank's
Base Rate plus 0.00% to 0.75%, or the Eurodollar Rate plus 1.25% to 2.00% at the
Company's option. Borrowings under the Revolving Credit Facility bear interest
at approximately 6.5% to 8.25% and will be used for the Company's new unit
development and working capital needs. All outstanding amounts under the
Revolving Credit Facility will become due in October 2003. The Revolving Credit
Facility balance was $1.5 million on January 25, 1999. The secured Term Loan
Facility and Revolving Credit Facility are collateralized by tangible and
intangible personal property of the Company and require the Company to maintain
specified minimum levels of net worth, limit the amount of capital expenditures,
and meet other financial covenants. The Revolving Credit Facility includes an
annual commitment fee of $30,000 per year plus a percentage of .375% to 0.50% of
any unused balance.
 
     In addition as of January 25, 1999, the Company had other debt of
approximately $190,000 with monthly principal payments of $95,000 bearing
interest at 10.0% and secured by tangible personal property due in 1999. The
Company also had a one year unsecured debt of $166,000 due in January 2000. The
Company had approximately $86,000 in long-term debt with annual payments of
approximately $43,000 bearing interest at 10% due in 2001.
 
                                      F-12
<PAGE>   38
                       STAR BUFFET, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
     Long term debt matures in fiscal years ending after January 25, 1999 as
follows:
 
<TABLE>
<S>                                               <C>
FISCAL YEAR:
  2000..........................................  $ 1,017,000
  2001..........................................    2,668,000
  2002..........................................    3,125,000
  2003..........................................    3,625,000
  2004..........................................    4,507,000
                                                  -----------
  Total.........................................  $14,942,000
                                                  ===========
</TABLE>
 
NOTE 8 -- LEASES
 
     The Company occupies certain restaurants under long-term leases expiring at
various dates through 2014. Most restaurant leases have renewal options for
terms of 5 to 20 years, and substantially all require the payment of real estate
taxes and insurance. Certain leases require the rent to be the greater of a
stipulated minimum rent or a specified percentage of sales.
 
     Minimum lease payments for all leases and the present value of net minimum
lease payments for capital leases as of January 25, 1999 are as follows:
 
<TABLE>
<CAPTION>
                                                      CAPITAL       OPERATING
FISCAL YEAR:                                         ----------    -----------
<S>                                                  <C>           <C>
  2000.............................................  $  490,000    $ 3,903,000
  2001.............................................     348,000      3,866,000
  2002.............................................     272,000      3,814,000
  2003.............................................     272,000      3,857,000
  2004.............................................     248,000      3,636,000
  Thereafter.......................................   2,049,000     20,541,000
                                                     ----------    -----------
          Total minimum lease payments:............   3,679,000    $39,617,000
                                                     ----------    ===========
  Less amount representing interest................   1,318,000
                                                     ----------
  Present value of minimum lease payments..........   2,361,000
  Less current portion.............................     312,000
                                                     ----------
  Capital lease obligation excluding current
     portion.......................................  $2,049,000
                                                     ==========
</TABLE>
 
     Aggregate rents under noncancelable operating leases during fiscal 1999 and
1998 are as follows:
 
<TABLE>
<CAPTION>
                                                                                PREDECESSOR
                                              SUCCESSOR COMPANY                   COMPANY
                                  ------------------------------------------    -----------
                                   FIFTY-TWO      FIFTY-TWO     TWENTY-EIGHT      THIRTY
                                  WEEKS ENDED    WEEKS ENDED    WEEKS ENDED     WEEKS ENDED
                                  JANUARY 25,    JANUARY 26,    JANUARY 27,      JULY 15,
                                     1999           1998            1997           1996
                                  -----------    -----------    ------------    -----------
<S>                               <C>            <C>            <C>             <C>
Minimum rentals.................  $3,433,000     $2,967,000      $  978,000     $1,617,000
Contingent rentals..............      99,000        114,000          41,000         28,000
                                  ----------     ----------      ----------     ----------
                                  $3,532,000     $3,081,000      $1,019,000     $1,645,000
                                  ==========     ==========      ==========     ==========
</TABLE>
 
                                      F-13
<PAGE>   39
                       STAR BUFFET, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 9 -- INCOME TAXES
 
     Income tax expense (benefit) is comprised of the following:
 
<TABLE>
<CAPTION>
                                                                                           PREDECESSOR
                                                   SUCCESSOR COMPANY                         COMPANY
                                 ------------------------------------------------------   -------------
                                    FIFTY-TWO          FIFTY-TWO         TWENTY-EIGHT        THIRTY
                                   WEEKS ENDED        WEEKS ENDED        WEEKS ENDED       WEEKS ENDED
                                 JANUARY 25, 1999   JANUARY 26, 1998   JANUARY 27, 1997   JULY 15, 1996
                                 ----------------   ----------------   ----------------   -------------
<S>                              <C>                <C>                <C>                <C>
Current:
  Federal......................     $1,009,000         $1,643,000          $196,000          $226,000
  State........................        192,000            440,000            35,000            68,000
                                    ----------         ----------          --------          --------
                                     1,201,000          2,083,000           231,000           294,000
Deferred:
  Federal......................        354,000           (238,000)           81,000           (55,000)
  State........................         68,000            (46,000)           26,000           (23,000)
                                    ----------         ----------          --------          --------
                                       422,000           (284,000)          107,000           (78,000)
                                    ----------         ----------          --------          --------
                                    $1,623,000         $1,799,000          $338,000          $216,000
                                    ==========         ==========          ========          ========
</TABLE>
 
     A reconciliation of income tax expense at the federal statutory rate to the
Company's provision for taxes on income is as follows:
 
<TABLE>
<CAPTION>
                                                                                           PREDECESSOR
                                                   SUCCESSOR COMPANY                         COMPANY
                                 ------------------------------------------------------   -------------
                                    FIFTY-TWO          FIFTY-TWO         TWENTY-EIGHT        THIRTY
                                   WEEKS ENDED        WEEKS ENDED        WEEKS ENDED       WEEKS ENDED
                                 JANUARY 25, 1999   JANUARY 26, 1998   JANUARY 27, 1997   JULY 15, 1996
                                 ----------------   ----------------   ----------------   -------------
<S>                              <C>                <C>                <C>                <C>
Income taxes at statutory
  rate.........................     $1,380,000         $1,529,000          $274,000          $186,000
State income taxes.............        172,000            273,000            47,000            29,000
Other..........................         79,000            (11,000)           17,000             1,000
Change in valuation
  allowance....................         (8,000)             8,000                --                --
                                    ----------         ----------          --------          --------
                                    $1,623,000         $1,799,000          $338,000          $216,000
                                    ==========         ==========          ========          ========
</TABLE>
 
     Temporary differences give rise to a significant amount of deferred tax
assets and liabilities as set forth below:
 
<TABLE>
<CAPTION>
                                                   FIFTY-TWO           FIFTY-TWO
                                                  WEEKS ENDED         WEEKS ENDED
                                                JANUARY 25, 1999    JANUARY 26, 1998
                                                ----------------    ----------------
<S>                                             <C>                 <C>
Deferred tax assets:
  Leases......................................    $   778,000          $  922,000
  Reserves....................................        136,000             113,000
  Accrued Vacation............................        109,000              70,000
  Other.......................................         29,000              43,000
  Litigation Reserve..........................             --                  --
                                                  -----------          ----------
  Less valuation allowance....................             --              (8,000)
                                                  -----------          ----------
          Total deferred tax assets...........      1,052,000           1,140,000
                                                  -----------          ----------
Deferred tax liabilities:
  Depreciation and amortization...............       (991,000)           (799,000)
  Other.......................................       (166,000)            (24,000)
                                                  -----------          ----------
          Total deferred tax liabilities......     (1,157,000)           (823,000)
                                                  -----------          ----------
Net deferred tax assets/(liabilities).........    $  (105,000)         $  317,000
                                                  ===========          ==========
</TABLE>
 
                                      F-14
<PAGE>   40
                       STAR BUFFET, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
     While there can be no assurance that the Company will generate any earnings
or any specific level of earnings in the future years, management believes it is
more likely than not that the Company will realize the majority of the benefit
of the existing total deferred tax assets at January 25, 1999 based on the
Company's current and future pre-tax earnings.
 
NOTE 10 -- SEGMENT AND RELATED REPORTING
 
     The Company has five reportable operating segments: HomeTown Buffet, Casa
Bonita, North's Star, Florida Buffets Division and JB's Restaurants. The
Company's reportable segments are based on the brand similarities and geographic
location.
 
     The HomeTown Buffet segment includes the Company's 16 franchised HomeTown
Buffet restaurants. The Casa Bonita segment includes two Casa Bonita
restaurants. The North's Star segment includes six JJ North's Grand Buffet
restaurants and five North's Star Buffet Restaurants. The Florida Buffets
Division includes two BuddyFreddys restaurants, seven BuddyFreddys Country
Buffet restaurants and three Holiday House restaurants. The JB's Restaurants
segment includes the Company's nine franchised JB's Restaurants.
 
     The accounting policies of the reportable segments are the same as those
described in Note 1. The Company evaluates the performance of its operating
segments based on income before income taxes.
 
                                      F-15
<PAGE>   41
                       STAR BUFFET, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
     Summarized financial information concerning the Company's reportable
segments is shown in the following table. The other assets presented in the
consolidated balance sheet and not in the reportable segments relate to the
Company as a whole, and not individual segments. Also certain incomes and
expenses in the consolidated statements of income are not included in the
reportable segments.
 
<TABLE>
<CAPTION>
                                                                   SUCCESSOR COMPANY
                                        -----------------------------------------------------------------------
                                        HOMETOWN                 NORTH'S   FLORIDA
                                         BUFFET    CASA BONITA    STAR     BUFFET     JB'S     OTHER     TOTAL
                                        --------   -----------   -------   -------   ------   -------   -------
                                                                (DOLLARS IN THOUSANDS)
<S>                                     <C>        <C>           <C>       <C>       <C>      <C>       <C>
52 WEEKS ENDED JANUARY 25, 1999
Revenues..............................  $41,039      $11,835     $11,207   $11,350   $9,978   $    --   $85,409
Interest income.......................       --           --         197       146       --       323       666
Interest expense......................     (192)          --          (7)      (39)     (11)     (348)     (597)
Deprecation & amortization............    1,811          133         639       171      201        93     3,048
Income before income taxes............    4,261        2,190         304    (1,369)     559    (1,885)    4,058
Total assets..........................   21,192        1,400       6,877     8,605    2,016     4,069    44,159
52 WEEKS ENDED JANUARY 26, 1998
Revenues..............................  $40,435      $11,570     $ 2,654   $    --   $   --   $    --   $54,659
Interest income.......................       --           --          83        --       --       238       321
Interest expense......................     (200)          --          --        --       --        --      (200)
Deprecation & amortization............    1,711          305          93        --       --        --     2,109
Income before income taxes............    2,326        1,975         261        --       --       (64)    4,498
Total assets..........................   19,721        1,127       2,356        --       --    17,765    40,969
28 WEEKS ENDED JANUARY 27, 1997
Revenues..............................  $20,599      $ 3,033     $    --   $    --   $   --   $    --   $23,632
Interest expense......................     (106)          --          --        --       --        --      (106)
Deprecation & amortization............      855          133          --        --       --        --       988
Income before income taxes............      525          283          --        --       --        --       808
Total assets..........................   15,777        1,006          --        --       --        --    16,783
</TABLE>
 
<TABLE>
<CAPTION>
                                                                 PREDECESSOR COMPANY*
                                        -----------------------------------------------------------------------
<S>                                     <C>        <C>           <C>       <C>       <C>      <C>       <C>
30 WEEKS ENDED JULY 15, 1996
Revenues..............................  $23,207                                               $    --   $23,207
Interest expense......................     (145)                                                   --      (145)
Deprecation & amortization............      914                                                    --       914
Income before income taxes............      546                                                    --       546
Total assets..........................   17,523                                                    --    17,523
</TABLE>
 
---------------
* The Predecessor Company included only HomeTown Buffet.
 
NOTE 11 -- STOCKHOLDERS EQUITY
 
COMMON STOCK
 
     Holders of Common Stock are entitled to one vote per share on all matters
to be voted upon by the stockholders and do not have cumulative voting rights.
Subject to preferences that may be applicable to the holders of outstanding
shares of Preferred Stock, if any, at the time holders of Common Stock are
entitled to receive ratably such dividends, if any, as may be declared from time
to time by the Board of Directors out of funds legally available therefor. In
the event of a liquidation, dissolution or winding up of the Company, the
holders of Common Stock shall be entitled to assets of the Company remaining
after payment of the Company's liabilities and the liquidation preference, if
any, of any outstanding Preferred Stock. All outstanding shares of Common Stock,
are, and the shares of Common Stock offered by the Company hereby will be, when
issued and paid for, fully paid and nonassessable. Holders of Common Stock have
no preemptive, subscription, redemption or conversion rights. The rights,
preferences and privileges of holders of Common Stock are subject to, and may be
adversely affected by, the rights of the holders of shares of any series of
Preferred Stock which the Company may designate and issue in the future.
 
                                      F-16
<PAGE>   42
                       STAR BUFFET, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
PREFERRED STOCK
 
     The Board of Directors has the authority, without further vote or action by
the stockholders, to provide for the issuance of up to 1,500,000 shares of
Preferred Stock from time to time in one or more series with such designations,
rights, preferences and privileges and limitations on the Board of Directors may
determine, including the consideration received therefor. The Board of Directors
also will have the authority to determine the number of shares comprising each
series, dividend rates, redemption provisions, liquidation preferences, sinking
fund provisions, conversion rights and voting rights without approval by the
holders of Common Stock. Although it is not possible to state the effect that
any issuance of Preferred Stock might have on the rights of holders of Common
Stock, the issuance of Preferred Stock may have one or more of the following
effects: (i) to restrict the payment of dividends on the Common Stock, (ii) to
dilute the voting power and equity interests of holders of Common Stock, (iii)
to prevent holders of Common Stock from participating in any distribution of the
Company's assets upon liquidation until any liquidation preferences granted to
holders of Preferred Stock are satisfied, or (iv) to require approval by the
holders of Preferred Stock for certain matters such as amendments to the
Company's Certificate of Incorporation or any reorganization, consolidation,
merger or other similar transaction involving the Company. As a result, the
issuance of Preferred Stock may, under certain circumstances, have the effect of
delaying, discouraging or preventing bids for the Common Stock at a premium over
the market price thereof, or a change in control of the Company, and could have
a material adverse effect on the market price for the Common Stock.
 
COMMON STOCK REPURCHASE
 
     During fiscal 1999, the Company purchased and retired 2,000,000 shares of
common stock acquired from CKE and 500,000 shares acquired on the open market
for $12,500,000 and $2,919,000, respectively. The Company purchased 31,000
shares of treasury stock in the open market for $190,000.
 
NOTE 12 -- EMPLOYEE BENEFIT PLANS
 
401(k) PLAN
 
     Beginning in May 1998, the Company has a 401(k) plan available to certain
employees who have attained age 21, work 30 hours or more per week, and have met
certain minimum service requirements. The plan allows participants to allocate
up to 15% of their annual compensation before taxes for investment in several
investment alternatives. The Company incurred approximately $18,000 in costs for
fiscal 1999.
 
1997 EMPLOYEE STOCK PURCHASE PLAN
 
     The Company's Employee Stock Purchase Plan (the "Purchase Plan"), was
adopted by the Board of Directors on January 15, 1998, covering an aggregate of
750,000 shares of Common Stock. The purpose of the Purchase Plan is to provide
participants with incentives to acquire a proprietary interest in, and continue
to provide services to, the Company. The Company did not contribute to the plan
in fiscal 1999.
 
     Employees are eligible to participate if they (i) are employed on an hourly
basis as a restaurant employee for at least 30 hours per week and if they have
been employed by the Company since September 30, 1997 or for at least one year;
(ii) are employed on an hourly basis as a non-restaurant employee for at least
30 hours per week and have been so employed continuously during the preceding 90
days; or (iii) are exempt from the overtime and minimum wage requirements under
federal and state laws and have been so employed by the Company continuously
during the preceding 90 days. The Purchase Plan permits eligible employees to
purchase common stock through payroll deductions, which range from 3% to 10% of
the employee's base earnings as defined in the Purchase Plan. The price of stock
purchased under the Purchase Plan shall be at the then current fair market
value. Each participant who remains an employee of the Company for at least one
year after the end of a particular quarterly offering period shall receive, on
the one-year anniversary date of the
 
                                      F-17
<PAGE>   43
                       STAR BUFFET, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
end of such offering period, a matching contribution from the Company totaling
one-half of a participating Officer's or Director's contribution, and one-third
of other participant's contributions. Employees may withdraw from the Purchase
Plan, effective at the end of a quarterly offering period, by delivering a
notice to the Company no later than the 15th day prior to the end of such
quarterly offering period, and participation ends automatically on termination
of employment. The Board of Directors may at any time amend or terminate the
Purchase Plan, and upon such termination, each participant is entitled to
receive the funds in such participant's account which have not been used to
purchase Common Stock but shall not be entitled to any future matching
contribution.
 
1997 STOCK INCENTIVE PLAN
 
     In fiscal year 1998, the Company adopted the 1997 Stock Incentive Plan (the
"1997 Plan"), which provides for the grant of options to purchase an aggregate
of 750,000 shares of Common Stock. The 1997 Plan provides for the granting of
"incentive stock options," within the meaning of section 422 of the Internal
Revenue Code of 1986, as amended (the "Code") and non-statutory options to
directors, officers, employees and consultants of the Company, except that
incentive stock options may not be granted to non-employee directors or
consultants. The purpose of the 1997 Plan is to provide participants with
incentives which will encourage them to acquire a proprietary interest in, and
continue to provide services to, the Company. The 1997 Plan is administered by
the Board of Directors, which has sole discretion and authority, consistent with
the provisions of the 1997 Plan, to determine which eligible participants will
receive options, the time when options will be granted, the terms of options
granted and the number of shares which will be subject to options granted under
the 1997 Plan.
 
     A summary of the status of the Company's stock options is presented below
(shares in thousands):
 
<TABLE>
<CAPTION>
                                                     FIFTY-TWO                FIFTY-TWO
                                                    WEEKS ENDED              WEEKS ENDED
                                                 JANUARY 25, 1999         JANUARY 26, 1998
                                               ---------------------    ---------------------
                                                         WGTD. AVG.               WGTD. AVG.
                                               SHARES    EXER. PRICE    SHARES    EXER. PRICE
                                               ------    -----------    ------    -----------
<S>                                            <C>       <C>            <C>       <C>
Outstanding at beginning of year.............    608       $12.00         --        $12.00
Granted......................................     --        12.00        608         12.00
Cancelled....................................   (108)       12.00         --         12.00
                                                ----       ------        ---        ------
Outstanding at end of year...................    500        12.00        608         12.00
                                                ====       ======        ===        ======
Options exercisable at year end..............    339        12.00        263         12.00
                                                ====       ======        ===        ======
</TABLE>
 
     The Company applies the intrinsic value method in accounting for its Plan
and, accordingly, no compensation cost has been recognized for it's stock
options in the financial statements. Had the Company determined compensation
cost based on the fair value method at the grant date for its stock options, the
Company's net income and earnings per share would have been reduced to the pro
forma amounts indicated below:
 
<TABLE>
<CAPTION>
                                              FIFTY-TWO          FIFTY-TWO         TWENTY-EIGHT
                                             WEEKS ENDED        WEEKS ENDED        WEEKS ENDED
                                           JANUARY 25, 1999   JANUARY 26, 1998   JANUARY 27, 1997
                                           ----------------   ----------------   ----------------
<S>                                        <C>                <C>                <C>
Net income as reported...................     $2,435,000         $2,699,000          $470,000
  Earnings per share -- basic as
     reported............................            .53                .77               .18
  Earnings per share -- diluted as
     reported............................            .53                .76               .18
Pro forma net income.....................      1,874,000          2,285,000           470,000
  Earnings per share -- basic as
     reported............................            .41                .65               .18
  Earnings per share -- diluted as
     reported............................            .41                .65               .18
</TABLE>
 
                                      F-18
<PAGE>   44
                       STAR BUFFET, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
     For purposes of the preceding pro forma disclosures, the fair value of each
stock option has been estimated on the date of grant using the Black-Scholes
option-pricing model with the following assumptions: no projected annual
dividends, expected volatility of 15%, a risk free interest rate of 5.83% and an
expected life of three years.
 
     Since the pro forma compensation expense for stock-based compensation plans
is recognized over a three year vesting period, the foregoing pro forma
reductions in the Company's net income are not representative of anticipated
amounts in future years.
 
     The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options that do not have vesting
restrictions and are fully transferable. In addition, option valuation models
require the input of highly subjective assumptions including the expected stock
price volatility. Because the Company's stock options have characteristics
significantly different from those of traded options and because changes in the
subjective input assumptions can materially affect the value of an estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
 
NOTE 13 -- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
 
<TABLE>
<CAPTION>
                                                                                          PREDECESSOR
                                                           SUCCESSOR PERIOD                 COMPANY
                                               ----------------------------------------   -----------
                                                FIFTY-TWO     FIFTY-TWO    TWENTY-EIGHT     THIRTY
                                                  WEEKS         WEEKS         WEEKS          WEEKS
                                                  ENDED         ENDED         ENDED          ENDED
                                               JANUARY 25,   JANUARY 26,   JANUARY 27,     JULY 15,
                                                  1999          1998           1997          1996
                                               -----------   -----------   ------------   -----------
<S>                                            <C>           <C>           <C>            <C>
Cash paid for income taxes...................  $2,270,000    $1,020,000       $   --       $     --
Cash paid for interest.......................     407,000            --           --        145,000
Non-cash investing and financing activities
  are as follows:
  Transfer of current assets and current
     liabilities to primary stockholder......  $       --    $  335,000       $   --       $     --
  Use of deposit to buy out operating
     equipment leases........................          --       375,000           --             --
  Exchange of receivables for three
     restaurants.............................   1,004,000            --           --             --
  Acquisition of BuddyFreddys assets.........   1,200,000            --           --             --
  Acquisition of 2,000,000 shares of common
     stock...................................   7,500,000            --           --             --
  Acquisition of Holiday House assets........     166,000            --           --             --
  Use of deposit to buy assets...............     912,000            --           --             --
  Exchange of note receivable for real
     estate..................................   1,328,000            --           --             --
</TABLE>
 
NOTE 14 -- FAIR VALUE OF FINANCIAL INSTRUMENTS
 
     The carrying amount of the Company's cash and cash equivalents, accounts
receivable, accounts payable and accrued expenses approximates fair value
because of the short maturity of these instruments.
 
     The carrying amount of the Company's notes receivable, long-term debt and
capital lease obligations approximates fair value and is based on discounted
cash flows using market rates at the balance sheet date. The use of discounted
cash flows can be significantly affected by the assumptions used, including the
discount rate and estimates of future cash flows. The derived fair values
estimates cannot be substantiated by comparison to independent markets and, in
many cases, could not be realized in immediate settlement of the instrument.
 
                                      F-19
<PAGE>   45
                       STAR BUFFET, INC. AND SUBSIDIARIES
 
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 
NOTE 15 -- COMMITMENTS AND CONTINGENCIES
 
     The Company is engaged in ordinary and routine litigation incidental to its
business. Management does not anticipate that any resolution will require
payments that will have a material effect on the Company's consolidated
statements of operations or financial position or liquidity.
 
     On November 12, 1998, North's Restaurants, Inc. ("North's") filed a Demand
for Arbitration against the Company with the American Arbitration Association,
Irvine, California (District No. 949-251-9840), alleging breach of contract in
connection with the Company's failure to perform under a Business Services
Agreement between North's and the Company dated July 24, 1997. The Company has
evaluated the claims and believes that such claims are invalid. The Company does
not believe that the result of the arbitration proceeding will have a material
adverse effect on the Company's business, financial condition and results of
operations.
 
     On November 25, 1998, the Company filed an action against North's
Restaurants, Inc. ("North's") in the United States District Court, District of
Utah, Case No. 2-98-CV-893, seeking damages for breach of a promissory note and
an Amended and Restated Credit Agreement (collectively, the "Credit Agreements")
in the amount of $3,570,935. The note is a recognized asset on the accompanying
balance sheet. On December 31, 1998, North's filed an answer to the Company's
Complaint, denying generally the allegations, and filed counterclaims against
the Company alleging the (i) the Company fraudulently induced North's to enter
into various agreements with the Company relating to the Company's acquisition
of seven JJ North's Grand Buffet Restaurants and an option to acquire nine
additional restaurants operated by North's and (ii) the Company has breached the
Business Services Agreement. The Company has a first priority security interest
in substantially all of the assets of North's, the value of which the Company
believes exceeds the amounts outstanding under the Credit Agreements. The
Company plans to pursue vigorously its claims against North's and to vigorously
defend the counterclaims asserted by North's. The litigation is continuing and
is not yet scheduled for trial.
 
     HTB Restaurants, Inc. holds 16 franchises for HomeTown Buffet restaurants.
The franchisor, HomeTown Buffet Restaurants, Inc., has asserted that the Company
breached its franchise agreements by using proprietary information of the
franchisor to open the Company's North's Star Buffet restaurants. The Company
has denied any breach and has demanded arbitration, which is ongoing at this
time. The franchisor is seeking all available remedies, including termination of
the franchise agreements, modification of the North's Star restaurants, and
purchase of some or all of the franchised restaurants at fair market value. The
Company is contesting vigorously the allegations and believes that it has
substantial defenses to the claimed breaches.
 
NOTE 16 -- SUBSEQUENT EVENT
 
     On February 19, 1999, the Board of Directors elected Mssrs. Phillip "Buddy"
Johnson and Craig B. Wheaton to serve as directors of the Registrant.
 
                                      F-20
<PAGE>   46
 
                                 EXHIBIT INDEX
 
<TABLE>
<CAPTION>
    EXHIBIT
      NO.                            DESCRIPTION
    -------                          -----------
    <S>      <C>
     3.1     Certificate of Incorporation*
     3.2     Bylaws, as amended on September 22, 1997*
     4.1     Form of Common Stock Certificate**
    10.1     Star Buffet, Inc. 1997 Stock Incentive Plan (the "1997
             Plan")**
    10.2     Form of Stock Option Agreement for the 1997 Plan**
    10.3     Form of Indemnification Agreement**
    10.4     Management Services Agreement with CKE**
    10.5     Form Of Franchise Agreement with HomeTown Buffet, Inc.**
    10.6     Asset Purchase Agreement with North's Restaurants, Inc.
             dated July 24, 1997**
    10.6.1   Amendment No. 1 to Asset Purchase Agreement dated as of
             September 30, 1997 (incorporated by reference to the
             Company's filing on Form 8-K on October 17, 1997)
    10.6.2   Amended and Restated Credit Agreement dated as of September
             30, 1997 between the Company and North's Restaurants, Inc.
             (incorporated by reference to the Company's filing on Form
             8-K on October 17, 1997)
    10.7     Form of Credit Agreement with Stacey's Buffet, Inc.*
    10.8     Form of Contribution Agreement among CKE Restaurants, Inc.,
             Summit Family Restaurants Inc. and the Company*
    10.9     Form of Bill of Sale and Assumption Agreement between Summit
             Family Restaurants Inc. and Taco Bueno Restaurants, Inc.
             (formerly known as Casa Bonita Incorporated)*
    10.11    Form of Bill of Sale and Assumption Agreement between Summit
             Family Restaurants Inc. and JB's Restaurants, Inc.*
    10.12    License Agreement with CKE (incorporated by reference to the
             Company's filing on Form 10-K on April 24, 1998)
    10.13    Settlement Agreement with HomeTown Buffet, Inc.
             (incorporated by reference to the Company's filing on Form
             10-K on April 24, 1998)
    10.14    Asset Purchase Agreement among Summit Family Restaurants
             Inc. and JB's Family Restaurants, Inc., dated February 10,
             1998. (incorporated by reference to the Company's filing on
             Form 8-K on March 9, 1998)
    10.15    Stock Repurchase Agreement between Star Buffet, Inc. and CKE
             Restaurants, Inc., dated September 10, 1998. (incorporated
             by reference to the Company's filing on Form 8-K on
             September 28, 1998)
    10.16    Credit Agreement (Portions of this Exhibit are omitted and
             were filed separately with the Secretary of the Commission
             pursuant to the Company's application for confidential
             treatment under Rule 24b-2 of the Exchange Act.)
             (incorporated by reference to the Company's filing on Form
             10-Q on December 17, 1998)
    11.0     Computation of Earnings Per Share Income
    21.1     List of Subsidiaries*
    27.1     Financial Data Schedules (included only with electronic
             filing)
</TABLE>
 
---------------
 * Previously filed as an exhibit to the Registration Statement on Form S-1,
   Amendment No. 1 (Registration No. 333- 32249).
 
** Previously filed as an exhibit to the Registration Statement on Form S-1,
   Amendment No. 2 (Registration No. 333- 32249).