Use these links to rapidly review the documentSTAR BUFFET, INC., AND SUBSIDIARIES Index to Annual Report on Form 10-K For the Fiscal Year Ended January 27, 2003

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

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FORM 10-K

|ý | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE EXCHANGE ACT OF 1934
|- | -------------------------------------------------------------------------

For the fiscal year ended January 27, 2003

OR

|o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

Commission file number: 0-6054

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STAR BUFFET, INC.(Exact Name of Registrant as Specified in its Charter)

Delaware(State or Other Jurisdiction of
Incorporation or Organization)

84-1430786(I.R.S. Employer Identification No.)420 Lawndale Drive
Salt Lake City, Utah(Address of Principal Executive Offices)

84115(Zip Code)


Registrant's Telephone Number, Including Area Code: (801) 463-5500

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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):

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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 ý    No o

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. o

Indicate
by check mark whether registrant is an accelerated filer (as defined in Exchange Act
Rule 12b-2). Yes o    No ý

The
aggregate market value of the registrant's common stock held by non-affiliates of the registrant as of August 12, 2002, was $3,421,000.

The
number of shares outstanding of the registrant's common stock was 2,950,000 shares as of April 15, 2003.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's Proxy Statement for the 2003 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission within
120 days after January 27, 2003, are incorporated by reference into Part III of this Form 10-K.

The
Exhibit Index is contained in Part IV herein on Page E-1.

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STAR BUFFET, INC., AND SUBSIDIARIES        Index to Annual Report on Form 10-K        For the Fiscal Year Ended January 27, 2003



|         |  |                                                                                               
|-------- |  | ----------------------------------------------------------------------------------------------
|PART I  
|ITEM 1.  |  | BUSINESS                                                                                      
|ITEM 2.  |  | PROPERTIES                                                                                    
|ITEM 3.  |  | LEGAL PROCEEDINGS                                                                             
|ITEM 4.  |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                           
|PART II 
|ITEM 5.  |  | MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS                         
|ITEM 6.  |  | SELECTED FINANCIAL DATA                                                                       
|ITEM 7.  |  | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS         
|ITEM 7A. |  | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                                    
|ITEM 8.  |  | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                                   
|ITEM 9.  |  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE          
|PART III
|ITEM 10. |  | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                            
|ITEM 11. |  | EXECUTIVE COMPENSATION                                                                        
|ITEM 12. |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|ITEM 13. |  | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                                
|ITEM 14. |  | CONTROLS AND PROCEDURES                                                                       
|PART IV 
|ITEM 15. |  | EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K                              
|         |  | SIGNATURES                                                                                    
|         |  | CHIEF EXECUTIVE OFFICER CERTIFICATION                                                         
|         |  | PRINCIPAL ACCOUNTING OFFICER CERTIFICATION                                                    
|         |  | EXHIBITS                                                                                      
|         |  | FINANCIAL STATEMENTS                                                                          

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Cautionary Statements Regarding Forward-Looking Statements

This annual report on Form 10-K contains forward-looking statements, within the meaning of the Securities Exchange Act of 1934 and the
Securities Act of 1933, 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. In some cases, forward-looking statements are identified by words such as
"believe, "anticipate, "expect," "intend," "plan," "will," "may" and similar expressions. You should not place undue reliance on these forward-looking statements, which speak only as of the date of
this annual report on Form 10-K. All these forward-looking statements are based on information available to the Company at this time, and the Company assumes no obligation to update
any of these statements. Actual results could differ from those projected in these forward-looking statements as a result of may factors, including those identified in the section titled
"Risks" under Item 1, Business and elsewhere. You should review and consider the various disclosures made by the Company in this report, and those detailed from time to time in the Company's filings
with the Securities and Exchange Commission, that attempt to advise you of the risks and factors that may affect the Company's future results.

PART I

Item 1.Business

Overview

Star Buffet, Inc., a Delaware corporation ("Star" and collectively with its subsidiaries, the "Company") is engaged in the restaurant industry. As of
January 27, 2003, the Company owned and operated 16 franchised HomeTown Buffet restaurants, 12 BuddyFreddys restaurants, 10 JB's Restaurants, seven JJ North's Country Buffet restaurants, one
North's Star Buffet restaurant, two Holiday House restaurants,
two Mexican-themed restaurants operated under the Casa Bonita name and one JJ North's Family Restaurant. As of January 27, 2003, five of the 12 BuddyFreddys restaurants, one of the 10 JB's
restaurants and one of the seven JJ North's Country Buffet restaurants were closed for remodeling and repositioning. Two closed restaurants have been leased and the net assets of another one is under
contract to be sold and is reported as property held for sale. The Company's restaurants are located in nine western states, Oklahoma and Florida and are focused upon providing customers with a wide
variety of fresh, high quality food at moderate prices.

Recent Developments

On March 21, 2002, Alliant Foodservice, Inc. ("Alliant") filed a breach of contract complaint against the Company in the Superior Court for the
State of Arizona in and for the County of Maricopa, Case No. CVZ002-005195, alleging breach of the Master Distribution Agreement ("MDA") executed between the Company and Alliant on
or about December 1, 1999. Alliant sought $2,479,000 for alleged amounts owed by the Company plus attorneys' fees and costs. The Company included approximately $2,000,000 for this alleged
amount owed in relation to this litigation in accounts payable-trade at January 27, 2003 net of any amounts receivable from Alliant. The Company denied the allegations and vigorously defended
the alleged breach of contract. On April 29, 2002, the Company filed an answer and counterclaim in Superior Court for the State of Arizona in and for the County of Maricopa citing among other
things, breach of the MDA. The Company sought over $7,250,000 in damages. On February 27, 2003, the Company and Alliant entered into a Settlement Agreement that dismissed charges against both
parties and required the Company to pay Alliant $1,600,000 which will result in a gain of approximately $400,000 in the first quarter of fiscal 2004.

On
July 17, 2002, JB's Family Restaurants, Inc. ("JBFR") filed a complaint in the United States Bankruptcy Court District of Arizona against the Company, Case
No. 02-03349-ECF-CGC, Adversary

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No. 02-815, alleging various claims arising from an alleged breach of a franchise agreement. JBFR sought injunctive relief prohibiting the Company's use of various JB's trademarks
together with monetary damages. On November 8, 2002, the Company reached an accord with JBFR that settled all alleged breaches of the franchise agreement. Under this accord, JBFR has granted
the Company a license agreement for the use of the JB's trademark through August 31, 2012, with an option to extend the license agreement for an additional ten years. To date, all
license and marketing expenses related to this accord have been expensed in the periods incurred.

Business

The Company's 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 uniformly applied business practices
can be used successfully to improve the financial performance of its past and future acquisitions. Key elements of the Company's business practices are as 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. Management's focus includes the following key elements:



Management Practices.The Company's management team utilizes a series of uniform management practices to operate the acquired
restaurants. The key elements of these management practices are:



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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 subsidiary and its brands are positioned somewhat differently in the market, the Company utilizes many of the same marketing techniques such as local store marketing,
radio advertising and promotional mailers to increase customer awareness and loyalty.

Segment And Related Reporting

The Company has five reporting segments: HomeTown Buffet, Casa Bonita, North's Star, Florida Buffets Division and JB's Restaurants. The Company's reportable
segments are based on brand similarities. 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 seven JJ North's Country Buffet restaurants and one North's Star Buffet Restaurants. The Florida Buffets Division includes two BuddyFreddys restaurants, 10
BuddyFreddys Country Buffet restaurants and two Holiday House restaurants. The JB's Restaurants segment includes the Company's ten JB's Restaurants and one JJ North's Family Restaurant.

Growth Strategy

The Company's objective is to become a leading operator of regional buffet restaurant brands through (1) acquisitions of existing buffet restaurant chains
which management believes can benefit from the Company's management practices, (2) the acquisitions of exiting restaurant properties that can be converted to buffet brands operated or under
development by the Company and (3) 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.The Company believes that it will be able to capitalize on the successful attributes of acquired buffet
chains while increasing their focus on operations, customer service and quality. The Company 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.

Restaurant Conversions.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. The Company believes that these difficulties are the result of increasing competition from 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. The Company 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.The Company intends to seek minority investments in, or strategic alliances
with, other restaurant chains. The Company 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. The Company believes that strategic alliances can be an excellent corporate arrangement to facilitate (1) more productive use of

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under-performing restaurant properties at lower cost and less risk than outright acquisition and (2) reduce corporate overhead or improve purchasing economies.

Restaurant Concepts



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 16 HomeTown Buffet restaurants in Arizona, Colorado, New Mexico, Utah and Wyoming.

HTB
entered into a franchise agreement for each location which requires among other items, the payment of a continuing royalty fee paid to HomeTown Buffet, Inc. 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
HomeTown franchisor may terminate a franchise agreement for a number of reasons, including HTB's 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 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 $6.10. The restaurants offer reduced prices to children under age 12 and to senior citizens.

Operations.The HomeTown Buffet restaurants are supervised directly by a vice president of 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 specific franchisor-provided guidelines 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 40 and 80 non-management hourly employees, made up of a mix of part-time and full-time workers,
depending on restaurant size and traffic.



Concept and Menu.The Company's two Casa Bonita restaurants are located in Denver, Colorado and Tulsa, Oklahoma. The Denver
restaurant is approximately 52,000 square feet, and the Tulsa restaurant is approximately 26,000 square feet. 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.

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The
Company focuses on three primary target audiences in its advertising and promotional programs for its Casa Bonita restaurants: (1) local customers, (2) tourists and
(3) groups and parties. The Company markets over a broad regional territory to attract tourists by placing advertisements in tourist and special event guides and by otherwise promoting each
Casa Bonita restaurant as a major destination 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. The average check for the Casa Bonita restaurant in Denver, Colorado is approximately $9.10. The average check for the Casa Bonita restaurant in Tulsa, Oklahoma is approximately
$8.20.

Operations.The two Casa Bonita restaurants are supervised by a vice president of operations who reports directly to the
Company's President. Each Casa Bonita restaurant has a general manager and at least three assistant managers. Each restaurant employs between 150 and 270 hourly employees, made up of a mix of
part-time and full-time workers, depending on restaurant size and traffic.



General.The North's Star Division consists of seven JJ North's Country Buffet restaurants and one North's Star Buffet
restaurant. The Company's seven JJ North's Country Buffet restaurants are located in Idaho (3), Washington (2), Oregon (1) and Utah (1). The restaurants are approximately 6,500 to 9,000 square
feet and seat approximately 210 to 320 customers. The Company's North's Star Buffet restaurant is located in Arizona. One of the seven JJ North's Country Buffet restaurants has been closed for
repositioning.

Concept and Menu.Both JJ North's Country 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 Country Buffet is approximately $6.35. The average check in North's Star Buffet is approximately $5.85. The restaurants offer reduced
prices to children under age 12 and to senior citizens.

Both
JJ North's Country 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 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 period includes 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 with various sundae toppings.

Operations.The seven JJ North's Country Buffet restaurants are supervised by the President of the Company. Each JJ North's
restaurant has a general manager and at least two assistant managers. Each restaurant employs between 25 and 50 hourly employees, made up of a mix of part-time and
full-time workers, depending on restaurant size and traffic.



General.The Company, through several transactions, has acquired 14 properties in Florida which currently operate under the
brand names BuddyFreddys Country Buffet (10), BuddyFreddys (2) and Holiday House (2). Five of the 10 BuddyFreddys Country Buffet restaurants have been closed for repositioning. Two closed
restaurants have been leased and the property of another one is under contract to be sold and reported as property held for sale. BuddyFreddys restaurants average

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approximately 10,000 square feet with seating for approximately 350 guests. Holiday House restaurants average approximately 5,500 square feet with seating for approximately 170 guests.

Concept and Menu.The 10 BuddyFreddys Country Buffet restaurants, five of which are closed for repositioning at
January 27, 2003 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 differ from BuddyFreddys Country Buffets in that they offer a full a la carte menu in addition to the "all-you-can-eat"
buffet. The two 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.

Operations.The Florida restaurants are supervised by a vice president of operations who reports directly to the Company's
President. Each Florida restaurant has a general manager and at least two assistant managers. Each restaurant employs between 25 and 60 hourly employees, made up of a mix of
part-time and full-time workers, depending on restaurant size and traffic.



General.The Company, through its subsidiary Summit Family Restaurants, Inc. ("Summit"), operates 10 JB's Restaurants
in Arizona, Montana, New Mexico, Utah and Wyoming and one JJ North's Family Restaurant in Utah. One of the 10 JB's Restaurants was closed for repositioning at January 27, 2003. The JJ North's
Family Restaurant was also closed in the first quarter of fiscal 2004. The restaurants are approximately 4,300 to 5,600 square feet and seat approximately 110 to 180 customers.

In
connection with the acquisition of certain JB's Restaurants in 1998 from CKE Restaurants, Inc., the Company entered into a one-year franchise agreement for each
location which required among other items, the payment of royalty fees. Subsequent to the acquisition of certain JB's Restaurants, the Company negotiated a ten-year option for annual
renewable franchise agreements for each of the JB's Restaurants the Company operates. In February 2000, the annual renewable franchise agreement expired and the Company elected not to renew
these franchise agreements. On July 17, 2002, JB's Family Restaurants, Inc. ("JBFR") filed a complaint in the United States Bankruptcy Court District of Arizona against the Company, Case
No. 02-03349-ECF-CGC, Adversary No. 02-815, alleging various claims arising from an alleged breach of a franchise agreement. JBFR sought
injunctive relief prohibiting the Company's use of various JB's trademarks together with monetary damages. On November 8, 2002, the Company reached an accord with JBFR that settled all alleged
breaches of the franchise agreement. Under this accord, JBFR granted the Company a license agreement for the use of the JB's trademark through August 31, 2012 in exchange for certain cash
payments with an option for an additional ten years. To date, all license and marketing expenses related to this accord have been expensed in the periods incurred.

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 are served by a wait staff. The average check is
approximately $6.15.

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.

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Each restaurant employs between 25 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 owns the trademarks and service marks for Casa Bonita, BuddyFreddys and Holiday House and has a license agreement with CKE Restaurants, Inc.
for use of the "Star" name and design. The Company has an agreement with North's Restaurants, Inc. for a royalty-free, transferable license to use the intangible property of JJ
North's. The Company utilizes the HomeTown Buffet mark pursuant to various franchise agreements. The Company has a transferable license agreement to use the JB's trademark through August 31,
2012 with an option for an additional ten years.

Seasonality

The Company's business is moderately seasonal in nature. For the majority of the Company's restaurants, the highest volume periods are in the first and second
fiscal quarters and lowest volume periods typically occur during the third and fourth fiscal quarters.

Employees

As of April 15, 2003, the Company employed approximately 2,200 persons, of whom approximately 2,075 were restaurant employees, and approximately 125 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.

Directors and Executive Officers

The following table sets forth certain information regarding the Company's directors and executive officers:

|Name                    |  | Age |  | Position                                       
|----------------------- |  | --- |  | -----------------------------------------------
|Robert E. Wheaton       |  | 51  |  | Chief Executive Officer, President and Chairman
|Ronald E. Dowdy         |  | 46  |  | Group Controller, Treasurer and Secretary      
|Thomas G. Schadt        |  | 61  |  | Director                                       
|Jack M. Lloyd           |  | 53  |  | Director                                       
|Phillip "Buddy" Johnson |  | 50  |  | Director                                       
|Craig B. Wheaton        |  | 45  |  | Director                                       
|B. Thomas M. Smith, Jr. |  | 68  |  | Director                                       

Robert E. Wheatonhas 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 Restaurants, Inc. 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.
Mr. Wheaton is the brother of Craig B. Wheaton, a director of the Company.

Ronald E. Dowdyhas 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 19 years prior to joining the Company.

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Thomas G. Schadthas 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. Lloydhas served as a director of the Company since the completion of the Company's initial public offering in
September 1997. Mr. Lloyd served as Chairman of the Board of DenAmerica Corporation from July 1996 until September 2000, and as President, Chief Executive Officer and a
director of DenAmerica Corporation from March 1996 until September 2000. DenAmerica Corporation changed its name to Phoenix Restaurant Group in June 1999. 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.

Phillip "Buddy" Johnsonhas served as a director of the Company since February 1999. Mr. Johnson has served as the
Supervisor of Elections of Hillsborough County since March 2003. From March 2001 until March 2003, he served as the Director of the Division of Real Estate in the Florida
Department of Business and Professional Regulations. Mr. Johnson served as President of the BuddyFreddys Division from April 1998 until March 2001. 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 now governor, Jeb Bush.

Craig B. Wheatonhas 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. From 1993 to 1998, Mr. Wheaton was a member of the Tax Council of the North Carolina Bar Association Section on
Taxation and chair of its Employee Benefits Committee from 1995 to 1997. 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 of the Board, Chief Executive Officer and President.

B. Thomas M. Smith, Jr.has served as a director of the Company since June 2002. Mr. Smith was a consultant with ITT Corp.
from January 1996 to December 1996 and is now retired. From 1988 until 1995, he was Vice President and Director of Corporate Purchasing for ITT Corp. Mr. Smith has served as
director of Republic Bancorp since June 1999.

Risks

Growth Strategy Depends Upon Ability to Acquire and Successfully Integrate Additional Restaurants Through Acquisitions.The
Company intends to pursue a strategy of moderate growth, primarily through acquisitions. The success of this strategy will depend in part on the ability of the Company to acquire additional buffet
restaurants or to convert acquired sites into buffet restaurants, within both 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 availability of appropriate financing and general economic conditions. The Company must compete
with other restaurant operators for acquisition opportunities and with other

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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. Many of
its acquired restaurants may be located in geographic markets in which the Company has limited or no operating experience. There can be no assurance that the Company will be able to identify,
negotiate and consummate acquisitions of additional buffet restaurants or that acquired restaurants or converted restaurants can be operated profitably and successfully integrated into the Company's
operations.

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 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. Furthermore, the Company is unable to predict the
likelihood of any additional acquisitions being proposed or completed in the near future.

A
strategy of growth through acquisitions requires access to significant capital resources. If the Company determines to make a sizeable 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. At present, the Company has only limited availability under its credit facilities which expires on October 31, 2003. There can be no assurance that this credit facility will be
replaced or a new credit facility will be established to the Company for any such acquisition.

From
February 1998 to January 2001, the Company acquired 27 restaurants in seven states, including 15 stores in Florida. The Company has only acquired one new restaurant
between January 2001 to January 2003. As a result of these acquisitions, the Company is complex and diverse, and the integration of the acquisitions has presented difficult challenges
for the Company requiring increased management time and resources. In order to improve profitability, the Company needs to continue successfully
integrating and streamlining restaurant functions. The difficulties of such integration have been increased by the necessity of coordinating geographically separate organizations. The integration of
certain operations following the acquisitions required the dedication of management resources which did temporarily distract attention from the day-to-day business of the
Company. The Company continues to reduce costs and integrate functions. The failure to continue effectively integrating the operations of the Company or improving 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 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
performance of the Company's HomeTown Buffet restaurant operations is directly related to the success of the HomeTown Buffet restaurant system, including the management and financial
condition of HomeTown as well as restaurants operated by HomeTown and their other 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 restaurants depends in part on the effectiveness of the HomeTown franchisor's marketing efforts, new product development programs,
quality assurance and other operational systems over which the Company has little or no control. For example, adverse publicity involving HomeTown restaurants operated by the franchisor or their other
franchisees could have a material adverse effect on the Company's business, financial condition and results of operations.

9

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The
Company's operations with respect to its HomeTown restaurants are subject to certain restrictions imposed by policies and procedures of HomeTown currently in effect and which, from
time to time, change. 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.

Dependence Upon and Restrictions Resulting from Licensors.The Company, through its subsidiary Summit Family
Restaurants, Inc. ("Summit") operates 10 JB's Restaurants in Arizona, Montana, New Mexico, Utah and Wyoming. In connection with the acquisition of certain JB's Restaurants in 1998 from JB's
Family Restaurants, Inc., a subsidiary of CKE Restaurants, Inc., the Company entered into a one-year franchise agreement for each location which required among other items, the
payment of royalty fees. After the acquisition of certain JB's Restaurants, the Company negotiated a ten-year option for annual renewable franchise agreements for each of the JB's
Restaurants the Company operates. In February 2000, the annual renewable franchise agreement expired and the Company elected not to renew these franchise agreements. Recently, the Company
entered into a License Agreement with the JB's Licensor for each such restaurant.

The
performance of the Company's JB's Restaurant operations is directly related to the success of the JB's Restaurant system, including the management and financial condition of the JB's
Licensor as well as the number of restaurants operated by the JB's Licensor and their other licensees or franchisees. The inability of such restaurants to compete effectively would have a material
adverse effect on the Company's operations as well as the number of restaurants. The success of the Company's JB's Restaurants depends in part on the effectiveness of the JB's Licensor'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 JB's Restaurants operated by
the licensor or their other licensees or 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 JB's Restaurants are subject to certain restrictions imposed by policies and procedures of JB's currently in effect and which, from time to
time, change. The licensor, JB's Family Restaurants, Inc. filed for bankruptcy on March 20, 2002.

On
July 17, 2002, JB's Family Restaurants, Inc. ("JBFR") filed a complaint in the United States Bankruptcy Court District of Arizona against the Company, Case
No. 02-03349-ECF-CGC, Adversary No. 02-815, alleging various claims arising from an alleged breach of a franchise agreement. JBFR sought
injunctive relief prohibiting the Company's use of various JB's trademarks together with monetary damages. On November 8, 2002, the Company reached an accord with JBFR that settled all alleged
breaches of the franchise agreement. Under this accord, JBFR has granted the Company a license agreement for the use of the JB's trademark through August 31, 2012 in exchange for certain cash
payments with an option for an additional ten years. To date, all license and marketing expenses related to this accord have been expensed in the periods incurred.

The Company's Quarterly Results are Likely to Fluctuate.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 or
tropical storm patterns 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

10

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fluctuations will not have a material adverse effect on the Company's business, results of operation and financial condition.

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.

The Restaurant Industry is Complex and Volatile.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, employee
benefits, including increases in hourly wage and unemployment tax rates and utility costs, 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 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. The impact and uncertainty created by the September 11,
2001 terrorist attack and the consequences of any future terrorist attacks, as well as other events affecting the national and world economies may affect the Company's business.

The Company is Dependent on Its 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, Chief Executive Officer and President. The Company does not maintain 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, as there can be no assurances that a qualified

11

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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.

The Restaurant Industry is Subject to Substantial Government Regulation.The restaurant industry is subject to federal, state
and local government regulations, including those relating to the preparation and sale of food as well as 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, rights, qualifications and 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.

Sale of a Substantial Number of Shares of Our Common Stock Could Cause the Market Price to Decline.Sales of a substantial
number of shares of our common stock in the public market could substantially reduce the prevailing market price of our common stock. As of April 15, 2003, 2,950,000 shares of common stock were
outstanding and 733,000 shares were issuable upon exercise of outstanding options at exercise prices ranging from $5.00 to $12.00. The Company cannot predict the effect, if any, that sales of shares
of the Company's common stock or the availability of such shares for sale will have on prevailing market prices. However, substantial amounts of the Company's common stock could be sold in the public
market, which may adversely affect prevailing market prices for the common stock.

Control by One Principal Stockholder.Robert E. Wheaton, Chairman of the Board, Chief Executive Officer and President,
currently beneficially owns approximately 49.0% of our total equity

12

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securities, assuming exercise of vested employee stock options, and possesses approximately 49.0% of the total voting power. Thus Mr. Wheaton has the ability to control or significantly
influence all matters requiring the approval of our stockholders, including the election of our directors. Sales of a substantial number of shares of our common stock by Mr. Wheaton in the
public market could substantially reduce the prevailing market price of our common stock.

Item 2.Properties

The Company's corporate headquarters are located in Salt Lake City, Utah, and other executive offices are located in Scottsdale, Arizona.

The
Company's restaurants are primarily freestanding locations. As of January 27, 2003 most of the Company's restaurant facilities were leased. The leases expire on dates ranging
from 2001 to 2014 with the majority of the leases providing for renewal options. All leases provide for specified periodic rental payments including periodic rent escalation terms in certain
instances, and most call for additional rent based upon revenue volume. Most leases require the Company to maintain the property and pay taxes and other related expenses.

The
following is a summary of the Company's restaurant properties as of January 27, 2003:

HomeTown
Buffet

Casa
Bonita

North's
Star

Florida
Buffets

JB's

TotalOwned

1



1

6

3

11Leased

15

2

7

8

8

40


As
of January 27, 2003, the Company's restaurants are located in the following states:

Number of RestaurantsState

HomeTown
Buffet

Casa
Bonita

North's
Star

Florida
Buffets

JB's

TotalArizona

8



1



1

10Colorado

2

1







3Florida







14



14Idaho





3





3Montana









3

3New Mexico

2







1

3Oklahoma



1







1Oregon





1





1Utah

3



1



5

9Washington





2





2Wyoming

1







1

2Total

16

2

8

14

11

51


As
of January 27, 2003, the Company's non-operating restaurants are located in the following states:

Number of Non-Operating RestaurantsState

HomeTown
Buffet

Casa
Bonita

North's
Star

Florida
Buffets

JB's

TotalFlorida







5



5Utah





1



1

2Total





1

5

1

7


13

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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. On June 22, 1999, the parties agreed to dismiss the Arbitration Proceeding without prejudice since the issues related to
the Business Service Agreement were being litigated in the Utah action described below.

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
(1) 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 (2) the Company had breached the Business Services Agreement. On January 26, 2001, the parties entered into a Settlement
Agreement (the "Settlement Agreement"). The Settlement Agreement provides, among other things, that the Credit Agreement and Revolving Note terminate concurrently with the execution of the
Settlement Agreement, that the Term Note be amended and restated, that the terms of the Term Note have no further force or effect and that the security interest transferred to the
Company pursuant to the Assignment Agreement dated September 30, 1997 between the Company and U.S. Bank National Association be amended and restated pursuant to an Amended and Restated Star
Buffet Security Agreement (the "Security Agreement"). The Company and North's have agreed that the Star Buffet Debt be reduced to a total amount of $3,500,000 and that such reduced obligation be
payable by North's pursuant to the terms of the Amended and Restated Promissory Note. The Company recorded no gain or loss on the settlement as the recorded balance of the note was approximately
$3.5 million at the time of the settlement. The Company and North's have agreed that the Company's existing liens encumbering certain property of North's remain in place and continue to secure
North's obligations to the Company, and the Company and North's reserve all rights, claims and defenses with respect to the extent and validity of such existing liens.

On
March 21, 2002, Alliant Foodservice, Inc. ("Alliant") filed a breach of contract complaint against the Company in the Superior Court for the State of Arizona in and for
the County of Maricopa
(No. CVZ002-005195), alleging breach of the Master Distribution Agreement ("MDA") executed between the Company and Alliant on or about December 1, 1999. Alliant sought
$2,479,000 for alleged amounts owed by the Company plus attorneys' fees and costs. The Company included approximately $2,000,000 for this alleged amount owed in relation to this litigation in accounts
payable-trade at January 27, 2003 net of any amounts receivable from Alliant. The Company denied the allegations and vigorously defended the alleged breach of contract. On April 29,
2002, the Company filed an answer and counterclaim in Superior Court for the State of Arizona in and for the County of Maricopa citing among other things, breach of the MDA. The Company sought over
$7,250,000 in damages. On February 27, 2003, the Company and Alliant entered into a Settlement Agreement that dismissed charges against both parties and required the Company to pay Alliant
$1,600,000 which will result in a gain of approximately $400,000 in the first quarter of fiscal 2004.

On
July 17, 2002, JB's Family Restaurants, Inc. ("JBFR") filed a complaint in the United States Bankruptcy Court District of Arizona against the Company, Case
No. 02-03349-ECF-CGC, Adversary No. 02-815, alleging various claims arising from an alleged breach of a franchise agreement. JBFR sought
injunctive relief prohibiting the Company's use of various JB's trademarks together with monetary damages. On November 8, 2002, the Company reached an accord with JBFR that settled all

14

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alleged breaches of the franchise agreement. Under this accord, JBFR has granted the Company a license agreement for the use of the JB's trademark through August 31, 2012 in exchange for
certain cash payments with an option for an additional ten years. To date, all license and marketing expenses related to this accord have been expensed in the periods incurred.

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.

15

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PART II

Item 5.Market for the Registrant's Common Equity and Related Stockholder Matters

Market Information and Holders.The Company's Common Stock is listed on the NASDAQ smallcap market under the symbol "STRZ".
As of April 15, 2003, there were approximately 550 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.

|               |  | 2003 |      | 2002
|-------------- |  | ---- | ---- | ----
|
|
|First Quarter  |  | $    | 3.10 |     
|Second Quarter |  |      | 2.97 |     
|Third Quarter  |  |      | 2.97 |     
|Fourth Quarter |  |      | 2.43 |     

Dividends.In connection with the Company's Initial Public Offering in 1997, the Company declared and paid a cash dividend of
$9.3 million to CKE Restaurants, Inc. Other than this dividend, the Company has never declared or paid dividends on its Common Stock. The Company is restricted from payment of any cash
dividends on the Common Stock under the terms of its existing credit facility.

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 27, 2003 included 52 weeks of operations for the Company's 16 franchised HomeTown Buffet restaurants, nine JB's restaurants, seven BuddyFreddys restaurants (five of the seven
BuddyFreddys restaurants are BuddyFreddys Country Buffet restaurants), six JJ North's Country Buffet restaurants, two Casa Bonita restaurants, two Holiday House restaurants and one North's Star Buffet
restaurant. In addition, operating results include 23 and 9 weeks for two BuddyFreddys Country Buffet restaurants closed during the fiscal year 2003. Results also include 19 weeks of operations for
one JJ North's Country Buffet restaurant and 30 weeks of operations for one JJ North's Family Restaurant opened July 2002. Seven restaurants were closed at the end of the 2003 fiscal year for
repositioning. Two of the seven closed restaurants have been leased and the property of another one is under contract to be sold and is reported as property held for sale. During the first quarter of
fiscal 2004, three restaurants were closed that resulted in an impairment of leasehold improvements of $188,000 included in the fourth quarter of 2003.

The
operating results for the 52-week period ended January 28, 2002 included 52 weeks of operations for the Company's 16 franchised HomeTown Buffet restaurants, ten
JB's restaurants, nine BuddyFreddys restaurants, seven of which are BuddyFreddys Country Buffet restaurants, six JJ North's Country Buffet restaurants, two Casa Bonita restaurants, two Holiday House
restaurants and one North's Star Buffet restaurant. In addition, the results include 36, 35, 24, 19 and 3 weeks respectively for five BuddyFreddys Country Buffet restaurants. Results also include 30
weeks of operations for one JJ North's Country Buffet restaurant which reopened in July 2001. Four restaurants were closed at the end of the 2002 fiscal year for remodeling and repositioning.
The fiscal year 2002 included impairment charges for a restaurant closed in the first quarter of 2003.

The
operating results for the 52-week period ended January 29, 2001 included 52 weeks of operations for the Company's 16 franchised HomeTown Buffet restaurants, ten
JB's restaurants, ten BuddyFreddys Country Buffet restaurants, six JJ North's Country Buffet restaurants, two BuddyFreddys restaurants, two Casa Bonita restaurants, two Holiday House restaurants and
one North's Star Buffet

16

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restaurant. The results also include 14 weeks for one North's Star Buffet restaurant which was closed for remodeling and 15 weeks for one JB's restaurant which closed when the lease terminated. In
addition, results include 49, 31, 18, 12 and 12 weeks respectively for five BuddyFreddys Country Buffet restaurants. Two restaurants were closed at the end of the 2001 fiscal year for remodeling and
repositioning. The fiscal year 2001 included impairment charges for a restaurant closed in the first quarter of 2002.

The
operating results for the 53-week period ended January 31, 2000 included 53 weeks of operations for the Company's 16 franchised HomeTown Buffet restaurants, nine
franchised JB's restaurants, six JJ North's Country Buffet restaurants, five BuddyFreddys Country Buffet restaurants, two BuddyFreddys restaurants, two North's Star Buffet restaurants, two Casa Bonita
restaurants and two Holiday House restaurants. The results also included 3 weeks of operations for 2 North's Star Buffet restaurants that were converted back to JB's Restaurants operating for 28 and
13 weeks respectively in fiscal 2000; 17 weeks of operations for one Holiday House that was converted to a BuddyFreddys Country Buffet restaurant operating for 34 weeks; and 46, 45, 40, 32, 25, 21 and
14 weeks respectively for seven BuddyFreddys Country Buffet restaurants. In addition, two restaurants were closed at the end of the 2000 fiscal yearone due to impassable road
construction, the other was awaiting conversion to a BuddyFreddys Country Buffet restaurant.

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 Country 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 to BuddyFreddys Country Buffets; 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.

17

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SELECTED FINANCIAL DATA  (In thousands except per share amounts and restaurant unit data)

|                                                                                                              |                                     | Fifty-Two
Weeks
Ended
Jan. 27, 2003 |        | Fifty-Two
Weeks
Ended
Jan. 28, 2002 |        | Fifty-Two
Weeks
Ended
Jan. 29, 2001 |        | Fifty-Three
Weeks
Ended
Jan. 31, 2000 |        | Fifty-Two
Weeks
Ended
Jan. 25, 1999 |       
|------------------------------------------------------------------------------------------------------------- | ----------------------------------- | ----------------------------------- | ------ | ----------------------------------- | ------ | ----------------------------------- | ------ | ------------------------------------- | ------ | ----------------------------------- | ------
|Consolidated Statements of Operations Data:                                                                   |                                     |                                     |        |                                     |        |                                     |        |                                       |        |                                    
|Total revenues                                                                                                |                                     | $                                   | 74,798 |                                     | $      | 83,218                              |        | $                                     | 94,039 |                                     | $     
|Costs and expenses:                                                                                           |                                     |                                     |        |                                     |        |                                     |        |                                       |        |                                     |       
|                                                                                                              | Food costs                          |                                     |        | 25,867                              |        |                                     | 27,020 |                                       |        | 30,899                              |       
|                                                                                                              | Labor costs                         |                                     |        | 25,695                              |        |                                     | 28,291 |                                       |        | 32,301                              |       
|                                                                                                              | Occupancy and other expenses        |                                     |        | 15,918                              |        |                                     | 17,319 |                                       |        | 18,984                              |       
|                                                                                                              | General and administrative expenses |                                     |        | 3,739                               |        |                                     | 3,552  |                                       |        | 4,108                               |       
|                                                                                                              | Depreciation and amortization       |                                     |        | 3,360                               |        |                                     | 3,684  |                                       |        | 3,650                               |       
|                                                                                                              | Impairment of long-lived assets     |                                     |        | 1,831                               |        |                                     | 806    |                                       |        | 590                                 |       
|                                                                                                              |                                     |                                     |        |                                     |        |                                     |        |                                       |        |                                     |       
|                                                                                                              |                                     | Total costs and expenses            |        |                                     | 76,410 |                                     |        | 80,672                                |        |                                     | 90,532
|                                                                                                              |                                     |                                     |        |                                     |        |                                     |        |                                       |        |                                     |       
|Income (loss) from operations                                                                                 |                                     |                                     | (1,612 | )                                   |        | 2,546                               |        |                                       | 3,507  |                                     |       
|Interest expense                                                                                              |                                     |                                     | (739   | )                                   |        | (1,055                              | )      |                                       | (1,630 | )                                   |       
|Other income, net                                                                                             |                                     |                                     | 272    |                                     |        | 289                                 |        |                                       | 52     |                                     |       
|                                                                                                              |                                     |                                     |        |                                     |        |                                     |        |                                       |        |                                     |       
|Income (loss) before income taxes (benefit)                                                                   |                                     |                                     | (2,079 | )                                   |        | 1,780                               |        |                                       | 1,929  |                                     |       
|Income taxes (benefit)                                                                                        |                                     |                                     | (800   | )                                   |        | 270                                 |        |                                       | 759    |                                     |       
|                                                                                                              |                                     |                                     |        |                                     |        |                                     |        |                                       |        |                                     |       
|Income (loss) before cumulative effect of a change in accounting principle                                    |                                     |                                     | (1,279 | )                                   |        | 1,510                               |        |                                       | 1,170  |                                     |       
|Cumulative effect of a change in accounting principlenet of tax benefit                                      |                                     |                                     | (560   | )                                   |        |                                    |        |                                       |       |                                     |       
|                                                                                                              |                                     |                                     |        |                                     |        |                                     |        |                                       |        |                                     |       
|Net income (loss)                                                                                             |                                     | $                                   | (1,839 | )                                   | $      | 1,510                               |        | $                                     | 1,170  |                                     | $     
|                                                                                                              |                                     |                                     |        |                                     |        |                                     |        |                                       |        |                                     |       
|Income (loss) per common share before cumulative effect of a change in accounting principlebasic and diluted |                                     | $                                   | (0.43  | )                                   | $      | 0.51                                |        | $                                     | 0.40   |                                     | $     
|Cumulative effect of a change in accounting principlenet of tax benefit                                      |                                     |                                     | (0.19  | )                                   |        |                                    |        |                                       |       |                                     |       
|                                                                                                              |                                     |                                     |        |                                     |        |                                     |        |                                       |        |                                     |       
|Net income (loss) per common sharebasic and diluted                                                          |                                     | $                                   | (0.62  | )                                   | $      | 0.51                                |        | $                                     | 0.40   |                                     | $     
|                                                                                                              |                                     |                                     |        |                                     |        |                                     |        |                                       |        |                                     |       
|Weighted average shares outstandingbasic and diluted                                                         |                                     |                                     | 2,950  |                                     |        | 2,950                               |        |                                       | 2,950  |                                     |       
|Balance sheet data:                                                                                           |                                     |                                     |        |                                     |        |                                     |        |                                       |        |                                     |       
|Total assets                                                                                                  |                                     | $                                   | 39,305 |                                     | $      | 43,972                              |        | $                                     | 46,037 |                                     | $     
|Total debt and capital lease obligation including current portion                                             |                                     |                                     | 9,134  |                                     |        | 13,036                              |        |                                       | 14,912 |                                     |       
|Stockholders' equity                                                                                          |                                     | $                                   | 19,939 |                                     | $      | 21,770                              |        | $                                     | 20,677 |                                     | $     
|Other data:                                                                                                   |                                     |                                     |        |                                     |        |                                     |        |                                       |        |                                     |       
|                                                                                                              | Operating units(1)                  |                                     |        |                                     |        |                                     |        |                                       |        |                                     |       
|                                                                                                              |                                     | HomeTown Buffet                     |        |                                     | 16     |                                     |        | 16                                    |        |                                     | 16    
|                                                                                                              |                                     | Casa Bonita                         |        |                                     | 2      |                                     |        | 2                                     |        |                                     | 2     
|                                                                                                              |                                     | North's Star Division               |        |                                     | 7      |                                     |        | 8                                     |        |                                     | 7     
|                                                                                                              |                                     | Florida Buffets Division            |        |                                     | 9      |                                     |        | 11                                    |        |                                     | 16    
|                                                                                                              |                                     | JB's Restaurants Division           |        |                                     | 10     |                                     |        | 10                                    |        |                                     | 10    
|                                                                                                              |                                     | Non-Operating                       |        |                                     | 7      |                                     |        | 4                                     |        |                                     | 2     
|                                                                                                              |                                     |                                     |        |                                     |        |                                     |        |                                       |        |                                     |       
|Total                                                                                                         |                                     |                                     | 51     |                                     |        | 51                                  |        |                                       | 53     |                                     |       
|                                                                                                              |                                     |                                     |        |                                     |        |                                     |        |                                       |        |                                     |       

---

18

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Supplemental Quarterly Financial Data (Unaudited).Quarterly financial results for the 52 weeks ended
January 27, 2003, January 28, 2002, and January 29, 2001, are summarized below.

(In
thousands except per share data)

|                                                                                                              |  | For the 52 Weeks Ended January 27, 2003 |       
|------------------------------------------------------------------------------------------------------------- |  | --------------------------------------- | ------
|
|Revenues                                                                                                      |  | $                                       | 25,192
|                                                                                                              |  |                                         |       
|Income (loss) from operations                                                                                 |  |                                         | 595   
|                                                                                                              |  |                                         |       
|Income (loss) before income taxes (benefit)                                                                   |  |                                         | 440   
|Income taxes (benefit)                                                                                        |  |                                         | 152   
|                                                                                                              |  |                                         |       
|Income (loss) before cumulative effect of a change in accounting principle                                    |  |                                         | 288   
|Cumulative effect of a change in accounting principlenet of taxes                                            |  |                                         | (560  
|                                                                                                              |  |                                         |       
|Net income (loss)                                                                                             |  | $                                       | (272  
|                                                                                                              |  |                                         |       
|Income (loss) per common share before cumulative effect of a change in accounting principlebasic and diluted |  | $                                       | 0.10  
|Cumulative effect of a change in accounting principlenet of taxes                                            |  | $                                       | (0.19 
|Net income (loss) per common sharebasic and diluted                                                          |  | $                                       | (0.09 

(In
thousands except per share data)

|                                  |         | For the 52 Weeks Ended January 28, 2002
|--------------------------------- | ------- | ---------------------------------------
|
|Revenues                          |         | $                                      
|                                  |         |                                        
|Income (loss) from operations     |         |                                        
|                                  |         |                                        
|Income (loss) before income taxes |         |                                        
|Income taxes (benefit)            |         |                                        
|                                  |         |                                        
|Net income (loss)                 |         | $                                      
|                                  |         |                                        
|Earnings (loss) per share:        |         |                                        
|                                  | Basic   |                                        
|                                  | Diluted |                                        

(In
thousands except per share data)

|                                  |         | For the 52 Weeks Ended January 29, 2001
|--------------------------------- | ------- | ---------------------------------------
|
|Revenues                          |         | $                                      
|                                  |         |                                        
|Income from operations            |         |                                        
|                                  |         |                                        
|Income (loss) before income taxes |         |                                        
|Income taxes (benefit)            |         |                                        
|                                  |         |                                        
|Net income (loss)                 |         | $                                      
|                                  |         |                                        
|Income (loss) per share:          |         |                                        
|                                  | Basic   |                                        
|                                  | Diluted |                                        

Amounts
indicated may not foot due to quarterly rounding.

19

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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 consolidated financial statements, and the notes thereto, presented
elsewhere in this Form 10-K. The operating results for the 52-week periods ended January 27, 2003, January 28, 2002, and January 29, 2001 are based
on the composition of restaurant operations as discussed in Item 6Selected Financial Data.

The
implementation of the Company's acquisition and strategic alliance strategies, and the costs associated with integrating new, under performing or unprofitable restaurants, acquired
or otherwise operated by the Company may affect the comparability of future periods and 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 27,
2003 ("fiscal 2003"), January 28, 2002 ("fiscal 2002"), and January 29, 2001 ("fiscal 2001").

|                                                                                                      |                                     | Fifty-Two
Weeks
Ended
January 27,
2003 |      | Fifty-Two
Weeks
Ended
January 28,
2002 |      | Fifty-Two
Weeks
Ended
January 29,
2001 |     
|----------------------------------------------------------------------------------------------------- | ----------------------------------- | -------------------------------------- | ---- | -------------------------------------- | ---- | -------------------------------------- | ----
|Total revenues                                                                                        |                                     | 100.0                                  | %    | 100.0                                  | %    | 100.0                                  | %   
|                                                                                                      |                                     |                                        |      |                                        |      |                                        |     
|Costs and expenses:                                                                                   |                                     |                                        |      |                                        |      |                                        |     
|                                                                                                      | Food costs                          |                                        | 34.6 |                                        | 32.4 |                                        | 32.9
|                                                                                                      | Labor costs                         |                                        | 34.4 |                                        | 34.0 |                                        | 34.3
|                                                                                                      | Occupancy and other expenses        |                                        | 21.3 |                                        | 20.8 |                                        | 20.2
|                                                                                                      | General and administrative expenses |                                        | 5.0  |                                        | 4.3  |                                        | 4.4 
|                                                                                                      | Depreciation and amortization       |                                        | 4.5  |                                        | 4.4  |                                        | 3.9 
|                                                                                                      | Impairment of long-lived assets     |                                        | 2.4  |                                        | 1.0  |                                        | 0.6 
|                                                                                                      |                                     |                                        |      |                                        |      |                                        |     
|Total costs and expenses                                                                              |                                     | 102.2                                  |      | 96.9                                   |      | 96.3                                   |     
|                                                                                                      |                                     |                                        |      |                                        |      |                                        |     
|Income (loss) from operations                                                                         |                                     | (2.2                                   | )    | 3.1                                    |      | 3.7                                    |     
|                                                                                                      | Interest expense                    |                                        | (1.0 | )                                      | (1.3 | )                                      | (1.7
|                                                                                                      | Other income, net                   |                                        | 0.4  |                                        | 0.3  |                                        | 0.1 
|                                                                                                      |                                     |                                        |      |                                        |      |                                        |     
|Income (loss) before income taxes (benefit) and cumulative effect of a change in accounting principle |                                     | (2.8                                   | )    | 2.1                                    |      | 2.1                                    |     
|Income taxes (benefit)                                                                                |                                     | (1.1                                   | )    | 0.3                                    |      | 0.8                                    |     
|                                                                                                      |                                     |                                        |      |                                        |      |                                        |     
|Income (loss) before cumulative effect of a change in accounting principle                            |                                     | (1.7                                   | )    | 1.8                                    |      | 1.3                                    |     
|Cumulative effect of a change in accounting principlenet of taxes                                    |                                     | (0.7                                   | )    |                                       |      |                                       |     
|                                                                                                      |                                     |                                        |      |                                        |      |                                        |     
|Net income (loss)                                                                                     |                                     | (2.4                                   | )%   | 1.8                                    | %    | 1.3                                    | %   
|                                                                                                      |                                     |                                        |      |                                        |      |                                        |     

Comparison of Fiscal 2003 to Fiscal 2002

Total revenues decreased $8.4 million or 10.1% from $83.2 million in fiscal 2002 to $74.8 million in fiscal 2003. The decrease was primarily
attributable to lower same store sales due to the sluggish economic conditions and a decrease in the number of restaurants open and operating in fiscal 2003 as compared to fiscal 2002.

20

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Food
costs as a percent of total revenues increased from 32.4% in fiscal 2002 to 34.6% in fiscal 2003 although actual food costs decreased by $1,153,000. The increase as a percentage of
total revenues was primarily attributable to higher food costs from the transition to several new food suppliers during the first quarter when the former supplier cancelled a food contract with the
Company.

Labor
costs as a percent of total revenues increased from 34.0% in fiscal 2002 to 34.4% in fiscal 2003. The increase as a percentage of total revenues was primarily attributable to
decreased revenues and fewer stores in operation this year even though actual labor costs decreased by $2,596,000.

Occupancy
and other expenses as a percent of total revenues increased from 20.8% in fiscal 2002 to 21.3% in fiscal 2003. The increase as a percentage of revenue is primarily attributable
to decreased revenues while the fixed portion of occupancy costs remained relatively constant. The fixed portion of occupancy costs is primarily fixed costs for property leases and related common area
maintenance and property taxes. The actual occupancy and other expenses decreased by $1,401,000.

General
and administrative expenses as a percentage of total revenues increased from 4.3% in fiscal 2002 to 5.0% in fiscal 2003. The increase as a percentage of revenue is primarily
attributable to decreased revenue while expenses increased. The increases in expenses were primarily higher net insurance costs at the corporate level of approximately $165,000, $141,000 of additional
corporate legal costs and increased consulting fees of approximately $56,000. The increased expenses were partially offset by reduced corporate bonus accruals of approximately $46,000 and lower
royalty expenses of $163,000.

Depreciation
and amortization as a percent of total revenues increased from 4.4% in fiscal 2002 to 4.5% in fiscal 2003. The increase as a percentage of revenue is primarily attributable
to decreased revenues while depreciation and amortization expense decreased by $324,000.

Impairment
of long-lived assets increased from 1.0% in fiscal 2002 to 2.4% in fiscal 2003. The impairment in fiscal 2003 was a result of the lease termination of two
restaurants in Florida, the pending sale of one owned restaurant and two leased restaurants where projected undiscounted cash flow is less than the net book value of assets. The impairment also
included consideration for one leased JJ North's Country Buffet for leasehold improvements and projected shortfalls in rental income should the Company decide to sub-lease the facility.
Also included in fiscal 2003 impairments are two JB's Restaurants in which the lease agreements were terminated subsequent to year-end and the write-down of one closed
restaurant assets to fair market value. The impairment in fiscal 2002 was a result of the closure of two Florida restaurants resulting in closing costs and the abandonment of leasehold improvements.

Interest
expense as a percent of total revenues decreased from 1.3% in fiscal 2002 to 1.0% in fiscal 2003. The decrease is primarily attributable to lower interest rates decreasing from
5.8% in fiscal 2002
to 3.5% in fiscal 2003 on the Term Loan Facility and Revolving Credit Facility financed by Fleet National Bank as discussed in Note 5 of the notes to the consolidated financial statements and
lower outstanding balances on those facilities.

Income
taxes decreased from 15.2% of earnings before taxes in fiscal 2002 to a benefit of 38.5% of earnings before taxes in fiscal 2003 due to the loss for fiscal 2003. The Company
amended prior tax returns and received a credit for excess social security tax on tips exceeding minimum wage in fiscal 2002 resulting in a low rate for that year.

Comparison of Fiscal 2002 to Fiscal 2001

Total revenues decreased $10.8 million or 11.5% from $94.0 million in fiscal 2001 to $83.2 million in fiscal 2002. The decrease was primarily
attributable to lower same store sales due to the sluggish economic conditions and a decrease in the number of restaurants open and operating in fiscal 2002 as compared to fiscal 2001.

21

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Food
costs as a percent of total revenues decreased from 32.9% in fiscal 2001 to 32.4% in fiscal 2002. The decrease was primarily attributable to lower food costs in the HomeTown Buffet
division.

Labor
costs as a percent of total revenues decreased from 34.3% in fiscal 2001 to 34.0% in fiscal 2002. The decrease was primarily attributable to lower benefit costs in fiscal 2002. The
decrease in benefit costs was a result of the Company increasing the employee share of health and medical costs and lower workers compensation costs.

Occupancy
and other expenses as a percent of total revenues increased from 20.2% in fiscal 2001 to 20.8% in fiscal 2002. The percentage increase is primarily attributable to decreased
revenues as total actual occupancy costs and other expenses decreased as a result of the decline in the number of operating restaurants. The occupancy costs include fixed costs for property leases and
related costs of common area maintenance and property taxes.

General
and administrative expenses as a percentage of total revenues decreased from 4.4% in fiscal 2001 to 4.3% in fiscal 2002. The decrease is primarily attributable to decreases in
legal expenses.

Depreciation
and amortization as a percent of total revenues increased from 3.9% in fiscal 2001 to 4.4% in fiscal 2002. The increase is primarily attributable to decreased revenues while
depreciation and amortization remain constant from year to year.

Impairment
of long-lived assets increased from 0.6% in fiscal 2001 to 1.0% in fiscal 2002. The impairment in fiscal 2002 was a result of permanently closing two leased
restaurants in Florida. The impairment in fiscal 2001 was a result of closing three stores in Florida and one in Utah.

Interest
expense as a percent of total revenues decreased from 1.7% in fiscal 2001 to 1.3% in fiscal 2002. The decrease is primarily attributable to lower interest rates and lower
outstanding balances on the Term Loan Facility and Revolving Credit Facility financed by Fleet National Bank as discussed in Note 5 of the notes to the consolidated financial statements.

Income
taxes decreased from 39.3% of earnings before taxes in fiscal 2001 to 15.2% of earnings before taxes in fiscal 2002. The Company amended prior tax returns and received a credit
for excess social security tax on tips exceeding minimum wage.

22

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FINANCIAL CONDITION

Liquidity and Capital Resources

The Company has 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 27, 2003, the Company had $433,000 in cash, and as of January 28, 2002, the Company had $727,000 in cash and cash equivalents. During fiscal 2003, the Company used
approximately $814,000 to fund capital improvements to existing and acquired restaurants.

Cash
provided by operations was approximately $3.7 million for fiscal 2003 and approximately $5.3 million for fiscal 2002.

The
Company intends to modestly expand operations through the acquisition of regional buffet chains or through the purchase of existing restaurants which would be converted to one of the
Company's existing restaurant concepts. In many instances, management believes that existing restaurant locations can be acquired and converted to the Company's prototype at a lower cost. Management
estimates the cost of acquiring and converting one leased 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 tables, chairs and food bars and the addition of certain kitchen and food service equipment, of which the Company has some available from closed stores. 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 FleetBoston Financial Corporation (formerly known as 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 Star Buffet common stock and acquisitions. Principal payments under the
Term Loan Facility were due in quarterly installments beginning November 1999 and were scheduled to continue until the final maturity in October 2003. However, the Company paid
the Term Loan Facility in full on May 17, 2002. Borrowings under the Revolving Credit Facility have been 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 $6,800,000 on April 15, 2003 and $4,700,000 at January 27,
2003. The Company has $100,000 in letters of credit against the Revolving Credit Facility leaving $100,000 available for borrowing on April 15, 2003.

Negotiations
are in process to replace the existing Revolving Credit Facility. Alternatively, the Company is also active in securing long term financing of real estate properties and/or
the disposition of excess properties to the extent the need for refinancing the revolving credit facilities would be mitigated if not entirely eliminated. One property has already been sold in
April 2003 for $1,250,000.

The
Company believes that available cash, cash flow from operations and amounts available under the Revolving Credit Facility or the replacement of the revolving credit facility,
securing long term financing of real estate properties and/or the disposition of excess properties 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, 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 or potential acquisitions of other events will not cause the

23

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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.

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. However, management has emphasized cost controls rather than price increases given the competitive pressure within the quick-service restaurant industry.

Critical Accounting Policies and Judgments

The Company prepares its consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. The
Company's consolidated financial statements are based on the application of certain accounting policies, the most significant of which are described in Note 1Summary of Significant
Accounting Policies. Certain of these policies require numerous
estimates and strategic or economic assumptions that may prove inaccurate or subject to variations and may significantly affect the Company's reported results and financial position for the period or
in future periods. Changes in underlying factors, assumptions or estimates in any of these areas could have a material impact on the Company's future financial condition and results of operations. The
Company considers the following policies to be the most critical in understanding the judgments that are involved in preparing its consolidated financial statements.

Property,
Buildings 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:

YearsBuildings

40Building improvements

15  20Furniture, fixtures and equipment

5  8


Leasehold
improvements are amortized over the lessor of the life of the lease or estimated economic life of the assets. The life of the lease includes renewal options determined by
management at lease inception for which failure to renew options would result in a substantial economic penalty.

Repairs
and maintenance are charged to operations as incurred. Remodeling costs are generally capitalized.

The
Company's accounting policies regarding buildings and equipment include certain management judgments regarding the estimated useful lives of such assets, the residual values to which
the assets are depreciated and the determination as to what constitutes increasing the life of existing assets. These judgments and estimates may produce materially different amounts of depreciation
and amortization expense that would be reported if different assumptions were used. As discussed further below, these judgments may also impact the Company's need to recognize an impairment charge on
the carrying amount of these assets as the cash flows associated with the assets are realized.

Impairment
of Goodwill

Goodwill
and other intangible assets primarily represent the excess of the purchase price paid over the fair value of the net assets acquired in connection with business acquisitions. As
of January 29,

24

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2002, the Company adopted SFAS No. 142, Goodwill and Other Intangible Assets ("SFAS 142"). In accordance with SFAS 142, the Company has ceased amortizing goodwill recorded in
past business combinations effective as of January 29, 2002. As a result, there is no charge for goodwill amortization expense contained in the Company's statements of operations for the year
ended January 27, 2003; whereas the Company's statements of operations for the years ended January 28, 2002 and January 29, 2001 do contain charges for goodwill
amortization expense.

SFAS 142
required that goodwill initially be tested for impairment by comparing the fair value of goodwill on a reporting unit basis to the carrying amount of the goodwill as of
January 29, 2002. The Company performed the transitional impairment test and determined that the carrying amount of goodwill was in excess of the fair value of the Company's net assets. This
has resulted in a transitional impairment loss of $849,000 which has been reported as a cumulative effect of a change in accounting principle net of a tax benefit of $289,000 reported in the first
quarter of 2003.

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.

Judgments
made by the Company related to the expected useful lives of long-lived assets and the ability of the Company to realize undiscounted cash flows in excess of the
carrying amounts of such assets are affected by factors such as the ongoing maintenance and improvements of the assets, changes in economic conditions, and changes in operating performance. As the
Company assesses the ongoing expected cash flows and carrying amounts of its long-lived assets, these factors could cause the Company to realize a material impairment charge.

New Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other
Intangible Assets." SFAS 142 addresses accounting and reporting standards for acquired goodwill and other intangible assets. Under the new standards, goodwill and indefinite life intangible
assets are no longer amortized but will be subject to annual impairment tests. Finite life intangible assets such as franchise agreements will continue to be amortized over their useful lives. The
provisions of SFAS 142 are required to be applied starting with fiscal years beginning after December 15, 2001.

The
Company adopted SFAS 142 effective January 29, 2002. As a result, the Company ceased amortization of goodwill and indefinite life intangible assets which increased
income before income taxes by approximately $100,000 in fiscal 2003. Annual amortization expense related to goodwill was $106,000 and $105,000 for the fifty-two weeks ended
January 28, 2002 and January 29, 2001, respectively. In fiscal 2001, the Company had a $67,000 impairment of goodwill due to store closures for a total goodwill charge of $172,000.
During fiscal 2003, the Company performed the required transitional impairment tests of goodwill and indefinite life intangible assets as of January 29, 2002. The Company's impairment charge as
a result of the transitional impairment test in fiscal 2003 is $849,000 before a tax benefit of $289,000.

In
August 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 143 provides accounting and reporting guidance for legal
obligations associated with the retirement of long-lived assets that result from the acquisition, construction or normal operation of a

25

---

long-lived asset. The standard is effective for fiscal years beginning after June 15, 2002. Its adoption did not have a material effect on the financial statements.

In
October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 addresses significant
issues relating to the implementation of SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," and develops a
single accounting model, based on the framework established in SFAS No. 121 for long-lived assts to be disposed of by sale, whether such assets are or are not deemed to be a
business. SFAS No. 144 also modifies the accounting and disclosure rules for discontinued operations and is effective for fiscal years beginning after December 15, 2001. The
standard was adopted on January 29, 2002, and did not have a material effect on the financial statements except that any future discontinued operations may be presented in the financial
statements differently under the new rules as compared to the old rules.

In
May 2002, the Financial Accounting Standards Board issued SFAS No. 145, "Rescission of SFAS Nos. 4, 44, and 64, Amendment of SFAS No. 13, and Technical
Corrections." Among other things, SFAS No. 145 rescinds various pronouncements regarding early extinguishment of debt and allows extraordinary accounting treatment for early extinguishment only
when the provisions of APB Opinion
No. 30 are met. This Statement also amends SFAS No. 13 to require sale-leaseback accounting for certain lease modifications that have economic effects that are similar to
sale-leaseback transactions. SFAS No. 145 provisions are generally effective for fiscal years beginning after May 15, 2002. Its adoption did not have a material effect
on the Company's consolidated financial statements.

In
June 2002, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 146, "Accounting for Costs Associated with
Exit or Disposal Activities" ("SFAS 146"). This statement addresses significant issues regarding the recognition, measurement, and reporting of costs associated with exit or disposal
activities, and nullifies Emerging Issues Task Force Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including
Certain Costs Incurred in a Restructuring)." Costs addressed by SFAS No. 146 include costs to terminate a contract that is not a capital lease, costs of involuntary employee termination
benefits pursuant to a one-time benefit arrangement, costs to consolidate facilities, and costs to relocate employees. This statement is effective for exit or disposal activities that are
initiated after December 31, 2002. The adoption of SFAS No. 146 did not have a material impact on its consolidated financial position, results of operations or cash flows.

In
December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based CompensationTransition and Disclosurean amendment of FASB Statement
No. 123. This statement amends FASB Statement No. 123, "Accounting for Stock-Based Compensation," to provide alternative methods of transition for a voluntary change to the fair value
based method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual
and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. The amendments to Statement 123 regarding
disclosure are effective for financial statements for fiscal years ending after December 15, 2002. The Company has adopted the annual disclosure provisions of SFAS No. 148 in its
financial statements for the year ended January 27, 2003 and will adopt the interim disclosure provisions for its financial statements for the quarter ended May 19, 2003. The adoption of
this standard involves additional disclosures. The Company's adoption of SFAS No. 148 did not have a material impact on its results of operations, financial position or cash flows.

In
November 2002, the FASB issued FASB Interpretation No. 45 "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others" ("FIN 45"). This interpretation elaborates on the disclosures to be made by a guarantor in its interim

26

---

and annual financial statements about its obligations under certain guarantees that it has been issued and requires that they be recorded at fair value. The initial recognition and measurement
provisions of this interpretation are to be applied only on a prospective basis to guarantees issued or modified after December 31, 2002, which, for the Company, is the fiscal year beginning
January 28, 2003. The disclosure requirements of this interpretation are effective for financial statements of interim or annual periods ending after December 15, 2002. The Company does
not have any indirect guarantees of indebtedness of others as of January 27, 2003.

In
January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities." This interpretation addresses the consolidation of business
enterprises (variable interest entities) to which the usual condition of consolidation does not apply. This interpretation focuses on financial interests that indicate control. It concludes that in
the absence of clear control through voting interests, a company's exposure (variable interest) to the economic risks and potential rewards from the variable interest entity's assets and activities
are the best evidence of control. Variable interests are rights and obligations that convey economic gains or losses from changes in the values of the variable interest entity's assets and
liabilities. Variable interests may arise from financial instruments, service contracts, nonvoting ownership interests and other arrangements. If an enterprise holds a majority of the variable
interests of an entity, it would be considered the primary beneficiary. The primary beneficiary would be required to include assets, liabilities and the results of operations of the variable interest
entity in its consolidated financial statements. This interpretation applies immediately to variable interest entities which are created after or for which control is obtained after January 31,
2003. For variable interest entities created prior to February 1, 2003, the provisions would be applied effective July 1, 2003. The company does not have any variable interest entities
as of January 27, 2003.

Item 7A.Quantitative and Qualitative Disclosures about Market Risk

Interest Rate Risk

The Company's principal exposure to financial market risks is the impact that interest rate changes could have on its $20.0 million credit facility, of
which $6,800,000 remained outstanding as of April 15, 2003. Borrowings under the Company's credit facility bear interest at the prime rate or at LIBOR plus an applicable margin based on certain
financial ratios (averaging approximately 3.5% in fiscal 2003). A hypothetical increase of 100 basis points in short-term interest rates would result in a reduction of approximately
$68,000 in annual pre-tax earnings. The estimated reduction is based upon the outstanding balance of the Company's credit facility and assumes no change in the volume, index or composition
of debt at April 15, 2003. All of our business is transacted in U.S. dollars. Accordingly, foreign exchange rate fluctuations have never had a significant impact on the Company and are not
expected to in the foreseeable future.

Commodity Price Risk

The Company purchases certain products which are affected by commodity prices and are, therefore, subject to price volatility caused by weather, market conditions
and other factors which are not considered predictable or within our control. Although many of the products purchased are subject to changes in commodity prices, certain purchasing contracts or
pricing arrangements contain risk management techniques designed to minimize price volatility. Typically the Company uses these types of purchasing techniques to control costs as an alternative to
directly managing financial instruments to hedge commodity prices. In many cases, the Company believes it will be able to address commodity cost increases which are significant and appear to be
long-term in nature by adjusting its menu pricing,
menu mix or changing our product delivery strategy. However, increases in commodity prices could result in lower operating margins for our restaurant concepts.

27

---

Item 8.Financial Statements and Supplementary Data

See the Index included at "Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K."

Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

In September 2001, pursuant to the recommendation of management and the approval of the board of directors and the audit committee of the board, the
Company appointed Grant Thornton LLP as the Company's independent public auditors for the year ended January 28, 2002. KPMG LLP was the Company's prior independent public audit firm. The
reports of KPMG LLP on the Company's financial statements for the years ended January 29, 2001 and January 31, 2000 did not contain an adverse opinion or disclaimer of opinion,
nor were they qualified as to uncertainty, audit scope or accounting principles. The Company reported in accordance with Regulation 8-K, Item 304(a)(1)(v)(A) that in
connection with the audit of the fiscal year ended January 31, 2000, KPMG LLP issued a letter to the Company's audit committee dated April 7, 2000, informing the Company that KPMG LLP
believed a material weakness existed with respect to the Company's cash reconciliation process. The Company corrected the bank reconciliations in question and implemented new procedures to address the
weakness identified by KPMG LLP. The Company authorized KPMG to respond fully to inquiries from the successor accountants with respect to such matter. There were no reporting disagreements between the
Company and KPMG LLP on any matter of accounting principle, practice, financial statement disclosure or auditing scope or procedure during the years covered by these reports.

28

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PART III

Item 10.Directors and Executive Officers of the Registrant

The information concerning the current directors and executive officers of the Company is contained in Item 1 of Part I of this Annual Report on
Form 10-K.

The
information pertaining to compliance with Section 16(a) of the Exchange Act is hereby incorporated by reference to the Company's Proxy Statement to be used in
connection with the Company's 2003 Annual Meeting of Stockholders, to be filed with the Commission within 120 days of January 27, 2003.

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 2003 Annual Meeting of Stockholders, to be filed with the Commission within 120 days of January 27, 2003.

Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information pertaining to security ownership of certain beneficial owners and management and equity compensation plan information is hereby incorporated by
reference to the Company's Proxy Statement to be used in connection with the Company's 2003 Annual Meeting of Stockholders, to be filed with the Commission within 120 days of January 27,
2003.

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 2003 Annual Meeting of Stockholders, to be filed with the Commission within 120 days of January 27, 2003.

Item 14.Control and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded,
processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to management, including the Chief
Executive Officer and Principal Accounting Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures,
management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management
necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.



29

---





PART IV

Item 15.Exhibits, Financial Statement Schedules and Reports on Form 8-K



|                                                                                                                               |  | Page
Number
|------------------------------------------------------------------------------------------------------------------------------ |  | -----------
|Report of Management Responsibilities                                                                                          |  | F-1        
|Report of Grant Thornton LLP, Independent Certified Public Accountants                                                         |  | F-2        
|Report of KPMG LLP, Independent Auditors                                                                                       |  | F-3        
|Consolidated Balance Sheetsas of January 27, 2003 and January 28, 2002                                                        |  | F-4        
|Consolidated Statements of Operationsfor the 52-weeks ended January 27, 2003, January 28, 2002 and January 29, 2001           |  | F-5        
|Consolidated Statements of Stockholders' Equityfor the 52-weeks ended January 27, 2003, January 28, 2002 and January 29, 2001 |  | F-6        
|Consolidated Statements of Cash Flowsfor the 52-weeks ended January 27, 2003, January 28, 2002 and January 29, 2001           |  | F-7        
|Notes to Consolidated Financial Statements                                                                                     |  | F-8        



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.



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.



None.

30

---



SIGNATURES

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

|               |  | STAR BUFFET, INC.(Registrant)
|-------------- |  | -----------------------------
|April 28, 2003 |  | By:                          
|April 28, 2003 |  | By:                          

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on
the dates indicated.

|Signature                                          |  | Title                                     |  | Date          
|-------------------------------------------------- |  | ----------------------------------------- |  | --------------
|                                                   |  |                                           |  |               
|/s/ROBERT E. WHEATONRobert E. Wheaton              |  | Chief Executive Officer, and Director     |  | April 28, 2003
|/s/RONALD E. DOWDYRonald E. Dowdy                  |  | Group Controller, Treasurer and Secretary |  | April 28, 2003
|/s/JACK M. LLOYDJack M. Lloyd                      |  | Director                                  |  | April 28, 2003
|/s/THOMAS G. SCHADTThomas G. Schadt                |  | Director                                  |  | April 28, 2003
|/S/ PHILLIP "BUDDY" JOHNSONPhillip "Buddy" Johnson |  | Director                                  |  | April 28, 2003
|/s/CRAIG B. WHEATONCraig B. Wheaton                |  | Director                                  |  | April 28, 2003
|/s/B. THOMAS M. SMITH, JR.B. Thomas M. Smith, Jr.  |  | Director                                  |  | April 28, 2003

31

---



CERTIFICATION

I,
Robert E. Wheaton, President and Chief Executive Officer of Star Buffet, Inc., certify that:





|April 28, 2003 |  | By: |  | /s/ROBERT E. WHEATONRobert E. Wheaton President and Chief Executive Officer
|-------------- |  | --- |  | ---------------------------------------------------------------------------

32

---



CERTIFICATION

I,
Ronald E. Dowdy, Group Controller, Treasurer and Secretary of Star Buffet, Inc., certify that:





|April 28, 2003 |  | By: |  | /s/RONALD E. DOWDYRonald E. Dowdy Group Controller, Treasurer and Secretary
|-------------- |  | --- |  | ---------------------------------------------------------------------------

33

---



REPORT OF MANAGEMENT RESPONSIBILITIES

The
management of Star Buffet, Inc. is responsible for the fairness and accuracy of the consolidated financial statements. The consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United States of America, using management's best estimates and judgments where appropriate. The financial information throughout
this report is consistent with our consolidated financial statements.

Management
has established a system of internal controls that provides reasonable assurance that assets are adequately safeguarded, and transactions are recorded accurately, in all
material respects, in accordance with management's authorization. We maintain a strong audit program that independently evaluates the adequacy and effectiveness of internal controls. Our internal
controls provide for appropriate separation of duties and responsibilities, and there are documented policies regarding utilization of Company assets and proper financial reporting. These formally
stated and regularly communicated policies set high standards of ethical conduct for all employees.

The
Audit Committee of the Board of Directors meets regularly to determine that management and independent auditors are properly discharging their duties regarding internal control and
financial reporting. The independent auditors and employees have full and free access to the Audit Committee at any time.

Grant
Thornton LLP, independent certified public accountants, are retained to audit the Company's consolidated financial statements. Their report follows.

/s/
Robert E. Wheaton

Robert
E. Wheaton, Chairman of the Board and Chief Executive Officer

F-1

---

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

The
Stockholders and Board of Directors
Star Buffet, Inc.:

We
have audited the accompanying consolidated balance sheets of Star Buffet, Inc. and subsidiaries (a Delaware corporation) as of January 27, 2003 and January 28,
2002 and the related consolidated statements of operations, stockholders' equity and cash flows for the 52-week periods then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We
conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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 consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Star Buffet, Inc. and
subsidiaries as of January 27, 2003 and January 28, 2002, and the consolidated results of their operations and their consolidated cash flows for each of the 52-week periods
then ended, in conformity with accounting principles generally accepted in the United States of America.

As
discussed in Note 1 to the consolidated financial statements, the Company adopted Statement of Financial Accounting Standards No. 142 "Goodwill and Other Intangible
Assets" ("SFAS 142") on January 29, 2002.

/s/
Grant Thornton LLP

Salt
Lake City, Utah
March 31, 2003

F-2

---

REPORT OF INDEPENDENT AUDITORS

The
Stockholders and Board of Directors
Star Buffet, Inc.:

We
have audited the accompanying consolidated statements of income, stockholders' equity and cash flows of Star Buffet, Inc. and subsidiaries for the 52-week period
ended January 29, 2001. 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 audit.

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

In
our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated results of operations and cash flows of Star
Buffet, Inc. and subsidiaries for the 52-week period ended January 29, 2001, in conformity with accounting principles generally accepted in the United States of America.

/s/
KPMG LLP

Salt
Lake City, Utah
March 16, 2001

F-3

---

STAR BUFFET, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

|                                                          |                                                                                                     | January 27,
2003 |            | January 28,
2002 |  
|--------------------------------------------------------- | --------------------------------------------------------------------------------------------------- | ---------------- | ---------- | ---------------- | -
|ASSETS                                                    |                                                                                                    
|Current assets:                                           |                                                                                                     |                  |            |                  |  
|                                                          | Cash and cash equivalents                                                                           |                  | $          | 433,000          |  
|                                                          | Current portion of notes receivable, net of allowance                                               |                  |            | 193,000          |  
|                                                          | Receivables, net                                                                                    |                  |            | 367,000          |  
|                                                          | Inventories                                                                                         |                  |            | 619,000          |  
|                                                          | Deferred income taxes                                                                               |                  |            | 194,000          |  
|                                                          | Prepaid expenses                                                                                    |                  |            | 279,000          |  
|                                                          | Property held for sale                                                                              |                  |            | 1,211,000        |  
|                                                          |                                                                                                     |                  |            |                  |  
|Total current assets                                      |                                                                                                     |                  | 3,296,000  |                  |  
|Property, buildings and equipment, net                    |                                                                                                     |                  | 27,091,000 |                  |  
|Real property and equipment under capitalized leases, net |                                                                                                     |                  | 1,297,000  |                  |  
|Notes receivable, net of current portion                  |                                                                                                     |                  | 2,695,000  |                  |  
|Deposits and other                                        |                                                                                                     |                  | 220,000    |                  |  
|Deferred income taxes, net                                |                                                                                                     |                  | 713,000    |                  |  
|Goodwill, net                                             |                                                                                                     |                  | 2,907,000  |                  |  
|Other intangible assets, net                              |                                                                                                     |                  | 1,086,000  |                  |  
|                                                          |                                                                                                     |                  |            |                  |  
|Total assets                                              |                                                                                                     | $                | 39,305,000 |                  | $
|                                                          |                                                                                                     |                  |            |                  |  
|LIABILITIES AND STOCKHOLDERS' EQUITY                      |                                                                                                    
|Current liabilities:                                      |                                                                                                     |                  |            |                  |  
|                                                          | Accounts payable-trade                                                                              |                  | $          | 4,045,000        |  
|                                                          | Checks written in excess of cash in bank                                                            |                  |            | 1,306,000        |  
|                                                          | Payroll and related taxes                                                                           |                  |            | 1,494,000        |  
|                                                          | Sales and property taxes                                                                            |                  |            | 1,047,000        |  
|                                                          | Rent, licenses and other                                                                            |                  |            | 1,260,000        |  
|                                                          | Income taxes payable                                                                                |                  |            |                 |  
|                                                          | Current maturities of obligations under long-term debt                                              |                  |            | 4,862,000        |  
|                                                          | Current maturities of obligations under capital leases                                              |                  |            | 98,000           |  
|                                                          |                                                                                                     |                  |            |                  |  
|Total current liabilities                                 |                                                                                                     |                  | 14,112,000 |                  |  
|Deferred income taxes, net                                |                                                                                                     |                  |           |                  |  
|Deferred rent payable                                     |                                                                                                     |                  | 1,080,000  |                  |  
|Capitalized lease obligations, net of current maturities  |                                                                                                     |                  | 1,751,000  |                  |  
|Long-term debt, net of current maturities                 |                                                                                                     |                  | 2,423,000  |                  |  
|Stockholders' equity:                                     |                                                                                                     |                  |            |                  |  
|                                                          | Preferred stock, $.001 par value; authorized 1,500,000 shares; none issued or outstanding           |                  |            |                 |  
|                                                          | Common stock, $.001 par value; authorized 8,000,000 shares; issued and outstanding 2,950,000 shares |                  |            | 3,000            |  
|                                                          | Additional paid-in capital                                                                          |                  |            | 16,351,000       |  
|                                                          | Officer's notes receivable                                                                          |                  |            | (1,330,000       | )
|                                                          | Retained earnings                                                                                   |                  |            | 4,915,000        |  
|                                                          |                                                                                                     |                  |            |                  |  
|Total stockholders' equity                                |                                                                                                     |                  | 19,939,000 |                  |  
|                                                          |                                                                                                     |                  |            |                  |  
|Total liabilities and stockholders' equity                |                                                                                                     | $                | 39,305,000 |                  | $
|                                                          |                                                                                                     |                  |            |                  |  

The accompanying notes are an integral part of the consolidated financial statements.

F-4

---

STAR BUFFET, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

|                                                                                                              |                                     | Fifty-Two
Weeks Ended
January 27, 2003 |            | Fifty-Two
Weeks Ended
January 28, 2002 |   | Fifty-Two
Weeks Ended
January 29, 2001 |           
|------------------------------------------------------------------------------------------------------------- | ----------------------------------- | -------------------------------------- | ---------- | -------------------------------------- | - | -------------------------------------- | ----------
|Total revenues                                                                                                |                                     | $                                      | 74,798,000 |                                        | $ | 83,218,000                             |           
|                                                                                                              |                                     |                                        |            |                                        |   |                                        |           
|Costs and expenses                                                                                            |                                     |                                        |            |                                        |   |                                        |           
|                                                                                                              | Food costs                          |                                        |            | 25,867,000                             |   |                                        | 27,020,000
|                                                                                                              | Labor costs                         |                                        |            | 25,695,000                             |   |                                        | 28,291,000
|                                                                                                              | Occupancy and other expenses        |                                        |            | 15,918,000                             |   |                                        | 17,319,000
|                                                                                                              | General and administrative expenses |                                        |            | 3,739,000                              |   |                                        | 3,552,000 
|                                                                                                              | Depreciation and amortization       |                                        |            | 3,360,000                              |   |                                        | 3,684,000 
|                                                                                                              | Impairment of long-lived assets     |                                        |            | 1,831,000                              |   |                                        | 806,000   
|                                                                                                              |                                     |                                        |            |                                        |   |                                        |           
|Total costs and expenses                                                                                      |                                     |                                        | 76,410,000 |                                        |   | 80,672,000                             |           
|                                                                                                              |                                     |                                        |            |                                        |   |                                        |           
|Income (loss) from operations                                                                                 |                                     |                                        | (1,612,000 | )                                      |   | 2,546,000                              |           
|Interest expense                                                                                              |                                     |                                        | (739,000   | )                                      |   | (1,055,000                             | )         
|Interest income                                                                                               |                                     |                                        | 239,000    |                                        |   | 289,000                                |           
|Other income                                                                                                  |                                     |                                        | 33,000     |                                        |   |                                       |           
|                                                                                                              |                                     |                                        |            |                                        |   |                                        |           
|Income (loss) before income taxes (benefit) and cumulative effect of a change in accounting principle         |                                     |                                        | (2,079,000 | )                                      |   | 1,780,000                              |           
|Income taxes (benefit)                                                                                        |                                     |                                        | (800,000   | )                                      |   | 270,000                                |           
|                                                                                                              |                                     |                                        |            |                                        |   |                                        |           
|Income (loss) before cumulative effect of a change in accounting principle                                    |                                     |                                        | (1,279,000 | )                                      |   | 1,510,000                              |           
|Cumulative effect of a change in accounting principlenet of tax benefit                                      |                                     |                                        | (560,000   | )                                      |   |                                       |           
|                                                                                                              |                                     |                                        |            |                                        |   |                                        |           
|Net income (loss)                                                                                             |                                     | $                                      | (1,839,000 | )                                      | $ | 1,510,000                              |           
|                                                                                                              |                                     |                                        |            |                                        |   |                                        |           
|Income (loss) per common share before cumulative effect of a change in accounting principlebasic and diluted |                                     | $                                      | (0.43      | )                                      | $ | 0.51                                   |           
|Cumulative effect of a change in accounting principlenet of taxes                                            |                                     |                                        | (0.19      | )                                      |   |                                       |           
|                                                                                                              |                                     |                                        |            |                                        |   |                                        |           
|Net income (loss) per common sharebasic and diluted                                                          |                                     | $                                      | (0.62      | )                                      | $ | 0.51                                   |           
|                                                                                                              |                                     |                                        |            |                                        |   |                                        |           
|Weighted average shares outstandingbasic and diluted                                                         |                                     |                                        | 2,950,000  |                                        |   | 2,950,000                              |           
|                                                                                                              |                                     |                                        |            |                                        |   |                                        |           

The
accompanying notes are an integral part of the consolidated financial statements.

F-5

---

STAR BUFFET, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

|                                  |  | Common Stock |  |   |       |  |   |            |  |   |            |   |  
|--------------------------------- |  | ------------ |  | - | ----- |  | - | ---------- |  | - | ---------- | - | -
|
|
|Balance at January 31, 2000       |  | 2,950,000    |  | $ | 3,000 |  | $ | 16,351,000 |  | $ | (813,000   | ) | $
|Loan to officer to purchase stock |  |             |  |   |      |  |   |           |  |   | (105,000   | ) |  
|Sale of treasury stock            |  |             |  |   |      |  |   |           |  |   |           |   |  
|Net income                        |  |             |  |   |      |  |   |           |  |   |           |   |  
|                                  |  |              |  |   |       |  |   |            |  |   |            |   |  
|Balance at January 29, 2001       |  | 2,950,000    |  |   | 3,000 |  |   | 16,351,000 |  |   | (918,000   | ) |  
|Loan to officer to purchase stock |  |             |  |   |      |  |   |           |  |   | (420,000   | ) |  
|Sale of treasury stock            |  |             |  |   |      |  |   |           |  |   |           |   |  
|Net income                        |  |             |  |   |      |  |   |           |  |   |           |   |  
|                                  |  |              |  |   |       |  |   |            |  |   |            |   |  
|Balance at January 28, 2002       |  | 2,950,000    |  |   | 3,000 |  |   | 16,351,000 |  |   | (1,338,000 | ) |  
|Payment by officer                |  |             |  |   |      |  |   |           |  |   | 8,000      |   |  
|Sale of treasury stock            |  |             |  |   |      |  |   |           |  |   |           |   |  
|Net loss                          |  |             |  |   |      |  |   |           |  |   |           |   |  
|                                  |  |              |  |   |       |  |   |            |  |   |            |   |  
|Balance at January 27, 2003       |  | 2,950,000    |  | $ | 3,000 |  | $ | 16,351,000 |  | $ | (1,330,000 | ) | $
|                                  |  |              |  |   |       |  |   |            |  |   |            |   |  

The accompanying notes are an integral part of the consolidated financial statements.

F-6

---

STAR BUFFET, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

|                                                                                         |                                                     | Fifty-Two
Weeks Ended
January 27,
2003 |            | Fifty-Two
Weeks Ended
January 28,
2002 |          | Fifty-Two
Weeks Ended
January 29,
2001 |           
|---------------------------------------------------------------------------------------- | --------------------------------------------------- | -------------------------------------- | ---------- | -------------------------------------- | -------- | -------------------------------------- | ----------
|Cash flows from operating activities:                                                    |                                                     |                                        |            |                                        |          |                                        |           
|Net income (loss)                                                                        |                                                     | $                                      | (1,839,000 | )                                      | $        | 1,510,000                              |           
|Adjustments to reconcile net income (loss) to net cash provided by operating activities: |                                                     |                                        |            |                                        |          |                                        |           
|                                                                                         | Cumulative effect of change in accounting principle |                                        |            | 560,000                                |          |                                        |          
|                                                                                         | Depreciation and amortization                       |                                        |            | 3,360,000                              |          |                                        | 3,684,000 
|                                                                                         | Provision for allowances for bad debts              |                                        |            |                                       |          |                                        | 253,000   
|                                                                                         | Impairment of long-lived assets                     |                                        |            | 1,831,000                              |          |                                        | 806,000   
|                                                                                         | Amortization of loan costs                          |                                        |            | 125,000                                |          |                                        | 120,000   
|                                                                                         | Deferred income taxes, net                          |                                        |            | (525,000                               | )        |                                        | 114,000   
|                                                                                         | Change in operating assets and liabilities:         |                                        |            |                                        |          |                                        |           
|                                                                                         |                                                     | Receivables                            |            |                                        | 430,000  |                                        |           
|                                                                                         |                                                     | Inventories                            |            |                                        | 151,000  |                                        |           
|                                                                                         |                                                     | Prepaid expenses                       |            |                                        | (133,000 | )                                      |           
|                                                                                         |                                                     | Deposits and other                     |            |                                        | (57,000  | )                                      |           
|                                                                                         |                                                     | Deferred rent payable                  |            |                                        | 122,000  |                                        |           
|                                                                                         |                                                     | Accounts payable-trade                 |            |                                        | (601,000 | )                                      |           
|                                                                                         |                                                     | Income taxes payable                   |            |                                        | (434,000 | )                                      |           
|                                                                                         |                                                     | Other accrued liabilities              |            |                                        | 671,000  |                                        |           
|                                                                                         |                                                     |                                        |            |                                        |          |                                        |           
|Total adjustments                                                                        |                                                     |                                        | 6,700,000  |                                        |          | 3,758,000                              |           
|                                                                                         |                                                     |                                        |            |                                        |          |                                        |           
|Net cash provided by operating activities                                                |                                                     |                                        | 3,661,000  |                                        |          | 5,268,000                              |           
|                                                                                         |                                                     |                                        |            |                                        |          |                                        |           
|Cash flows from investing activities:                                                    |                                                     |                                        |            |                                        |          |                                        |           
|                                                                                         | Payments on notes receivable                        |                                        |            | 271,000                                |          |                                        | 47,000    
|                                                                                         | Acquisition of property, buildings and equipment    |                                        |            | (814,000                               | )        |                                        | (3,378,000
|                                                                                         | Proceeds from sale of securities                    |                                        |            |                                       |          |                                        | 36,000    
|                                                                                         | Purchase of license agreement                       |                                        |            | (773,000                               | )        |                                        |          
|                                                                                         | Loans to officer                                    |                                        |            |                                       |          |                                        | (420,000  
|                                                                                         |                                                     |                                        |            |                                        |          |                                        |           
|Net cash used in investing activities                                                    |                                                     |                                        | (1,316,000 | )                                      |          | (3,715,000                             | )         
|                                                                                         |                                                     |                                        |            |                                        |          |                                        |           
|Cash flows from financing activities:                                                    |                                                     |                                        |            |                                        |          |                                        |           
|                                                                                         | Checks written in excess of cash in bank            |                                        |            | 1,306,000                              |          |                                        |          
|                                                                                         | Payments on long-term debt                          |                                        |            | (11,924,000                            | )        |                                        | (7,924,000
|                                                                                         | Proceeds from issuance of long-term debt            |                                        |            | 8,126,000                              |          |                                        | 6,132,000 
|                                                                                         | Capitalized loan costs                              |                                        |            | (43,000                                | )        |                                        | (54,000   
|                                                                                         | Sale of treasury stock                              |                                        |            |                                       |          |                                        | 3,000     
|                                                                                         | Principal payment on capital leases                 |                                        |            | (104,000                               | )        |                                        | (84,000   
|                                                                                         |                                                     |                                        |            |                                        |          |                                        |           
|Net cash used in financing activities                                                    |                                                     |                                        | (2,639,000 | )                                      |          | (1,927,000                             | )         
|                                                                                         |                                                     |                                        |            |                                        |          |                                        |           
|Net increase (decrease) in cash and cash equivalents                                     |                                                     |                                        | (294,000   | )                                      |          | (374,000                               | )         
|Cash and cash equivalents at beginning of period                                         |                                                     |                                        | 727,000    |                                        |          | 1,101,000                              |           
|                                                                                         |                                                     |                                        |            |                                        |          |                                        |           
|Cash and cash equivalents at end of period                                               |                                                     | $                                      | 433,000    |                                        | $        | 727,000                                |           
|                                                                                         |                                                     |                                        |            |                                        |          |                                        |           

The
accompanying notes are an integral part of the consolidated financial statements.

F-7

---



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 consolidated financial statements include the results of operations and assets and liabilities of the Company's operations. Certain estimates,
assumptions and allocations were made in preparing such financial statements. Significant intercompany transactions and balances have been eliminated in consolidation.

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 respective subsidiaries, CKE transferred to Summit the net assets of its two Casa Bonita Mexican theme restaurants,
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. 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. Furthermore, the results of
operations include seven JJ North's Country Buffet Restaurants operated by the Company only from September 30, 1997 (the date of acquisition by the Company).

The
operating results for the 52-week period ended January 27, 2003 included 52 weeks of operations for the Company's 16 franchised HomeTown Buffet restaurants, nine
JB's restaurants, seven BuddyFreddys restaurants (five of the seven BuddyFreddys restaurants are BuddyFreddys Country Buffet restaurants), six JJ North's Country Buffet restaurants, two Casa Bonita
restaurants, two Holiday House restaurants and one North's Star Buffet restaurant. In addition, operating results include 23 and 9 weeks respectively for two BuddyFreddys Country Buffet restaurants
closed during the fiscal year 2003. Results also include 19 weeks of operations for one JJ North's Country Buffet restaurant and 30 weeks of operations for one JJ North's Family Restaurant opened
July 2002. Seven restaurants were closed at the end of the 2003 fiscal year for repositioning. Two of the seven closed restaurants have been leased and the property of another one is under
contract to be sold and is reported as property held for sale. During the first quarter of fiscal 2004, three restaurants were closed, of which one was closed for repositioning that resulted in an
impairment of leasehold improvements of $188,000 included in the fourth quarter of 2003.

The
operating results for the 52-week period ended January 28, 2002 includes 52 weeks of operations for the Company's 16 franchised HomeTown Buffet restaurants, ten
JB's restaurants, seven BuddyFreddys Country Buffet restaurants, six JJ North's Country Buffet restaurants, two BuddyFreddys restaurants, two Casa Bonita restaurants, two Holiday House restaurants and
one North's Star Buffet restaurant. In addition, the results include 36, 35, 24, 19 and 3 weeks respectively for five BuddyFreddys Country Buffet restaurants that were closed during the year, two of
which were

F-8

---

permanently closed. Results also include 30 weeks of operations for one JJ North's Country Buffet restaurant reopened in July 2001. Four restaurants remained closed at the end of the 2002
fiscal year for remodeling and repositioning.

The
operating results for the 52-week period ended January 29, 2001 included 52 weeks of operations for the Company's 16 franchised HomeTown Buffet restaurants, ten
JB's restaurants, ten BuddyFreddys Country Buffet restaurants, six JJ North's Country Buffet restaurants, two BuddyFreddys restaurants, two Casa Bonita restaurants, two Holiday House restaurants and
one North's Star Buffet restaurant. The results also include 14 weeks for one North's Star Buffet restaurant which was closed for remodeling and 15 weeks for one JB's restaurant which closed when the
lease terminated. In addition, results include 49, 31, 18, 12 and 12 weeks respectively for five BuddyFreddys Country Buffet restaurants. Two restaurants were closed at the end of the 2001 fiscal year
for remodeling and repositioning.

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 except in the 53 week fiscal year, when the fourth quarter has 13 weeks.

Cash Equivalents

Highly liquid investments with original maturities of three months or less when purchased are considered cash equivalents. The carrying amounts reported in
the consolidated balance sheets for these instruments approximate their fair value.

Inventories

Inventories consist of food, beverage, gift shop items and restaurant supplies and are valued the lower of cost or market, determined by the first-in,
first-out method.

Property, Buildings 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:

YearsBuildings

40Building improvements

15  20Furniture, fixtures and equipment

5  8


Leasehold
improvements are amortized over the lessor of the life of the lease or estimated economic life of the assets. The life of the lease includes renewal options determined by
management at lease inception for which failure to renew options would result in a substantial economic penalty.

F-9

---

Property
and equipment placed on the market for sale is not depreciated and is reclassed on the balance sheet as property held for sale. Property and equipment in
non-operating units for remodeling or repositioning continue to be depreciated.

Repairs
and maintenance are charged to operations as incurred. Remodeling costs are generally capitalized.

Goodwill

Goodwill and other intangible assets primarily represent the excess of the purchase price paid over the fair value of the net assets acquired in connection with
business acquisitions. As of January 29, 2002, the Company adopted SFAS No. 142, Goodwill and Other Intangible Assets ("SFAS 142"). In accordance with SFAS 142, the Company
has ceased amortizing goodwill recorded in past business combinations effective as of January 29, 2002. As a result, there is no charge for goodwill amortization expense contained in the
Company's statements of operations for the year ended January 27, 2003; whereas the Company's statements of operations for the years ended January 28, 2002 and January 29,
2001 do contain charges for goodwill amortization expense.

SFAS 142
required that goodwill initially be tested for impairment by comparing the fair value of goodwill on a reporting unit basis to the carrying amount of the goodwill as of
January 29, 2002. The Company performed the transitional impairment test and determined that the carrying amount of goodwill was in excess of the fair value of the Company's net assets. This
has resulted in a transitional impairment loss of $849,000 which has been reported as a cumulative effect of a change in accounting principle net of a tax benefit of $289,000 reported in the first
quarter of 2003.

The
following is the Company's disclosure of what reported net earnings (loss) and earnings (loss) per share would have been in all periods presented if the Company had accounted for
goodwill consistent with the provisions of SFAS 142 effective at the beginning of fiscal 2001.

|                                                       |  | Fifty-Two
Weeks Ended
January 27, 2003 |            | Fifty-Two
Weeks Ended
January 28, 2002 |   | Fifty-Two
Weeks Ended
January 29, 2001
|------------------------------------------------------ |  | -------------------------------------- | ---------- | -------------------------------------- | - | --------------------------------------
|Net income (loss) as reported                          |  | $                                      | (1,839,000 | )                                      | $ | 1,510,000                             
|Amortization, net of tax                               |  |                                        |           |                                        |   | 70,000                                
|                                                       |  |                                        |            |                                        |   |                                       
|Proforma net income (loss)                             |  | $                                      | (1,839,000 | )                                      | $ | 1,580,000                             
|                                                       |  |                                        |            |                                        |   |                                       
|Basic and diluted income (loss) per share, as reported |  | $                                      | (0.62      | )                                      | $ | 0.51                                  
|Change in amortization expense                         |  |                                        |           |                                        |   | 0.02                                  
|                                                       |  |                                        |            |                                        |   |                                       
|Proforma basic and diluted income (loss) per share     |  | $                                      | (0.62      | )                                      | $ | 0.53                                  
|                                                       |  |                                        |            |                                        |   |                                       

Other Intangible Assets

Other intangible assets are comprised of franchise fees, loan acquisition costs, and JB's license agreement. Franchise fees are amortized using the
straight-line method over the terms of the franchise agreements, which range typically from 8 to 20 years. Loan costs are amortized using the straight-line

F-10

---

method over the lesser of the life of the loan or five years. The JB's license agreement is being amortized using the straight-line method over 11 years.

|Fiscal 2003                |  | Gross
Carrying Amt |           | Accumulated
Amortization |   | Net     
|-------------------------- |  | ------------------ | --------- | ------------------------ | - | --------
|Franchise and license fees |  | $                  | 1,172,000 |                          | $ | (206,000
|Loan acquisition costs     |  |                    | 598,000   |                          |   | (478,000
|                           |  |                    |           |                          |   |         
|Total                      |  | $                  | 1,770,000 |                          | $ | (684,000
|                           |  |                    |           |                          |   |         
|Fiscal 2002                |  |                    |           |                          |   |         
|Franchise fees             |  | $                  | 410,000   |                          | $ | (218,000
|Loan acquisition costs     |  |                    | 555,000   |                          |   | (354,000
|                           |  |                    |           |                          |   |         
|Total                      |  | $                  | 965,000   |                          | $ | (572,000
|                           |  |                    |           |                          |   |         

The
table below shows expected amortization for purchased intangibles as of January 27, 2003 for the next five years:

Fiscal Year2004

$
194,0002005


105,0002006


105,0002007


105,0002008


100,000Thereafter


477,000Total

$
1,086,000


The
Company acquired the JB's license agreement in November 2002 for $773,000.

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 undiscounted 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 exceeds the fair value of the
assets.

Fair Value Of Financial Instruments

The carrying amounts of the Company's cash and cash equivalents, receivables, accounts payable and accrued expenses approximates fair value because of the short
maturity of these instruments.

The
carrying amounts of the Company's notes receivable, long-term debt and capital lease obligations approximate fair value and are 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 value estimates

F-11

---

cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument.

Pre-Opening Costs

Pre-opening costs are expensed when incurred. The Company incurred and charged to operations approximately $63,000, $168,000 and $223,000 of
pre-opening costs during fiscal 2003, 2002 and 2001, respectively.

Income Taxes

The Company utilizes the liability method of accounting for income taxes. Under the liability method, deferred tax assets and liabilities are determined based on
the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect during the years in which the differences are expected to reverse. An
allowance against deferred tax assets is recorded in whole or in part when it is more likely than not that such tax benefits will not be realized.

Advertising Expenses

Advertising costs are charged to operations as incurred. Amounts charged to operations totaled $853,000, $976,000 and $1,412,000, for the 52 weeks ended
January 27, 2003, January 28, 2002 and January 29, 2001, respectively.

Leases

The Company has various lease commitments on store locations. Expenses of operating leases with escalating payment terms are recognized on a
straight-line basis over the lives of the related leases. Contingent rental expense is accrued on a monthly basis for those stores where contingent rent expense is probable.

Use of Estimates

In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make
estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenue and
expenses during the reporting period. Actual results could differ from those estimates.

Earnings (Loss) per Share

Basic earnings (loss) per share are computed by dividing net income (loss) by the weighted average number of common shares outstanding. Diluted earnings (loss)
per share assumes the exercise of stock

F-12

---

options using the treasury stock method, if dilutive. The following is a reconciliation of the numerators and denominators used to calculate diluted earnings (loss) per share:

|                                                   |  | Fifty-Two
Weeks Ended
January 27, 2003 |  | Fifty-Two
Weeks Ended
January 28, 2002 |  | Fifty-Two
Weeks Ended
January 29, 2001
|-------------------------------------------------- |  | -------------------------------------- |  | -------------------------------------- |  | --------------------------------------
|Weighted average common shares outstandingbasic   |  | 2,950,000                              |  | 2,950,000                              |  | 2,950,000                             
|Dilutive effect of stock options                   |  |                                       |  |                                       |  |                                      
|                                                   |  |                                        |  |                                        |  |                                       
|Weighted average common shares outstandingdiluted |  | 2,950,000                              |  | 2,950,000                              |  | 2,950,000                             
|                                                   |  |                                        |  |                                        |  |                                       

Average
shares used in the fifty-two weeks ended January 27, 2003, January 28, 2002 and January 29, 2001 diluted earnings (loss) per share computations
exclude stock options to purchase 733,000 shares which
are considered to be antidilutive and 735,000 shares and 742,000 shares of common stock, respectively, due to the market price of the underlying stock being less than the exercise price.

Segment Reporting

The Company's reportable segments are based on brand similarities. Business results are based on the Company's management accounting practices.

Comprehensive Income

The Company does not have any components of comprehensive income other than net income (loss) and, therefore, comprehensive income equaled net income (loss) for
all periods presented.

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 expense is generally only recognized on the date of grant when the current market price of the stock exceeds the exercise price. Had the Company determined
compensation cost based on the

F-13

---

fair value method at the grant date for its stock options, the Company's net income (loss) and earnings (loss) per share would have been reduced to the pro forma amounts indicated below:

|                                                      |                                | Fifty-Two
Weeks Ended
January 27, 2003 |   | Fifty-Two
Weeks Ended
January 28, 2002 |   | Fifty-Two
Weeks Ended
January 29, 2001 |      
|----------------------------------------------------- | ------------------------------ | -------------------------------------- | - | -------------------------------------- | - | -------------------------------------- | -----
|
|Net income (loss) attributable to common stockholders |                                |                                        |   |                                        |   |                                        |      
|                                                      | As reported                    |                                        | $ | (1,839                                 | ) | $                                      | 1,510
|                                                      | Pro forma compensation expense |                                        |   |                                       |   |                                        | (20  
|                                                      | Pro forma net income (loss)    |                                        | $ | (1,839                                 | ) | $                                      | 1,490
|Per sharebasic                                       |                                |                                        |   |                                        |   |                                        |      
|                                                      | As reported                    |                                        | $ | (.62                                   | ) | $                                      | .51  
|                                                      | Pro forma compensation expense |                                        |   |                                       |   |                                        | (.01 
|                                                      | Pro forma net income (loss)    |                                        | $ | (.62                                   | ) | $                                      | .50  
|Per sharediluted                                     |                                |                                        |   |                                        |   |                                        |      
|                                                      | As reported                    |                                        | $ | (.62                                   | ) | $                                      | .51  
|                                                      | Pro forma compensation expense |                                        |   |                                       |   |                                        | (.01 
|                                                      | Pro forma net income (loss)    |                                        | $ | (.62                                   | ) | $                                      | .50  

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 5.98% for grants in fiscal 2000 and an expected life of five years for grants in
fiscal 2000.

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.

New Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) 142, "Goodwill and Other Intangible
Assets." SFAS 142 addresses accounting and reporting standards for acquired goodwill and other intangible assets. Under the new standards, goodwill and indefinite life intangible assets are no
longer amortized but will be subject to annual impairment tests. Finite life intangible assets such as franchise agreements will continue to be amortized over their useful lives. The provisions of
SFAS 142 are required to be applied starting with fiscal years beginning after December 15, 2001.

The
Company adopted SFAS 142 effective January 29, 2002. As a result, the Company ceased amortization of goodwill and indefinite life intangible assets which increased
income before income taxes by approximately $100,000 in fiscal 2003. Annual amortization expense related to goodwill was $106,000 and $105,000 for the fifty-two weeks ended
January 28, 2002 and January 29, 2001,

F-14

---

respectively. In fiscal 2001, the Company had a $67,000 impairment of goodwill due to store closures for a total goodwill charge of $172,000. During fiscal 2003, the Company performed the required
transitional impairment tests of goodwill and indefinite life intangible assets as of January 29, 2002. The Company's impairment charge as a result of the transitional impairment test in fiscal
2003 is $849,000 before a tax benefit of $289,000.

In
August 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 143 provides accounting and reporting guidance for legal
obligations associated with the retirement of long-lived assets that result from the acquisition, construction or normal operation of a long-lived asset. The standard is
effective for fiscal years beginning after June 15, 2002. Its adoption did not have a material effect on the financial statements.

In
October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS No. 144 addresses significant
issues relating to the implementation of SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," and develops a
single accounting model, based on the framework established in SFAS No. 121 for long-lived assts to be disposed of by sale, whether such assets are or are not deemed to be a
business. SFAS No. 144 also modifies the accounting and disclosure rules for discontinued operations and is effective for fiscal years beginning after December 15, 2001. The
standard was adopted on January 29, 2002, and did not have a material effect on the financial statements except that any future discontinued operations may be presented in the financial
statements differently under the new rules as compared to the old rules.

In
May 2002, the Financial Accounting Standards Board issued SFAS No. 145, "Rescission of SFAS Nos. 4, 44, and 64, Amendment of SFAS No. 13, and Technical
Corrections." Among other things, SFAS No. 145 rescinds various pronouncements regarding early extinguishment of debt and allows extraordinary accounting treatment for early extinguishment only
when the provisions of APB Opinion No. 30 are met. This Statement also amends SFAS No. 13 to require sale-leaseback accounting for certain lease modifications that have
economic effects that are similar to sale-leaseback transactions. SFAS No. 145 provisions are generally effective for fiscal years beginning after May 15, 2002. Its
adoption did not have a material effect on the Company's consolidated financial statements.

In
June 2002, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 146, "Accounting for Costs Associated with
Exit or Disposal Activities" ("SFAS 146"). This statement addresses significant issues regarding the recognition, measurement, and reporting of costs associated with exit or disposal
activities, and nullifies Emerging Issues Task Force Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including
Certain Costs Incurred in a Restructuring)." Costs addressed by SFAS No. 146 include costs to terminate a contract that is not a capital lease, costs of involuntary employee termination
benefits pursuant to a one-time benefit arrangement, costs to consolidate facilities, and costs to relocate employees. This statement is effective for exit or disposal activities that are
initiated after December 31, 2002. The adoption of SFAS No. 146 did not have a material impact on its consolidated financial position, results of operations or cash flows.

In
December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based CompensationTransition and Disclosurean amendment of FASB Statement
No. 123. This statement amends FASB Statement No. 123, "Accounting for Stock-Based Compensation," to provide alternative methods of transition for a voluntary change to the fair value
based method of accounting for stock-based

F-15

---

employee compensation. In addition, this Statement amends the disclosure requirements of SFAS No. 123 to require prominent disclosures in both annual and interim financial statements about the
method of accounting for stock-based employee compensation and the effect of the method used on reported results. The amendments to Statement 123 regarding disclosure are effective for financial
statements for fiscal years ending after December 15, 2002. The Company has adopted the annual disclosure provisions of SFAS No. 148 in its financial statements for the year ended
January 27, 2003 and will adopt the interim disclosure provisions for its financial statements for the quarter ended May 19,
2003. The adoption of this standard involves additional disclosures. The Company's adoption of SFAS No. 148 had no impact on its results of operations, financial position or cash flows.

In
November 2002, the FASB issued FASB Interpretation No. 45 "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others" ("FIN 45"). This interpretation elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain
guarantees that it has been issued and requires that they be recorded at fair value. The initial recognition and measurement provisions of this interpretation are to be applied only on a prospective
basis to guarantees issued or modified after December 31, 2002, which, for the Company, is the fiscal year beginning January 28, 2003. The disclosure requirements of this interpretation
are effective for financial statements of interim or annual periods ending after December 15, 2002. The Company does not have any indirect guarantees of indebtedness of others as of
January 27, 2003.

In
January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities." This interpretation addresses the consolidation of business
enterprises (variable interest entities) to which the usual condition of consolidation does not apply. This interpretation focuses on financial interests that indicate control. It concludes that in
the absence of clear control through voting interests, a company's exposure (variable interest) to the economic risks and potential rewards from the variable interest entity's assets and activities
are the best evidence of control. Variable interests are rights and obligations that convey economic gains or losses from changes in the values of the variable interest entity's assets and
liabilities. Variable interests may arise from financial instruments, service contracts, nonvoting ownership interests and other arrangements. If an enterprise holds a majority of the variable
interests of an entity, it would be considered the primary beneficiary. The primary beneficiary would be required to include assets, liabilities and the results of operations of the variable interest
entity in its consolidated financial statements. This interpretation applies immediately to variable interest entities which are created after or for which control is obtained after January 31,
2003. For variable interest entities created prior to February 1, 2003, the provisions would be applied effective July 1, 2003. The company does not have any variable interest entities
as of January 27, 2003.

Reclassifications

Certain non-material amounts in fiscal 2002 and 2001 have been reclassed to conform with the fiscal 2003 presentation.

F-16

---

NOTE 2NOTES RECEIVABLE

Notes receivable consist of the following:

January 27, 2003

January 28, 2002Notes receivable from North's Restaurants, Inc.

$
2,888,000

$
2,974,000Notes receivable from related party





185,000Total notes receivable


2,888,000


3,159,000Less current portion


193,000


436,000Notes receivable, net of current portion

$
2,695,000

$
2,723,000


The
receivable from North's Restaurants, Inc. ("North's") originally included $3,123,000 for a term note and $371,000 on a line of credit that was converted to a note receivable.
As a result of a dispute with North's, management stopped accruing interest pending resolution of the dispute with North's (Note 13). As part of a Settlement Agreement entered on
January 26, 2001, North's promises to pay the Company the principal sum of $3,500,000 with an interest rate of 8% per annum. North's paid the Company $295,000 pursuant to the terms of the
Settlement Agreement and such payment was applied to reduce the principal amount owing. The $3.5 million note receivable stipulates that monthly payments of principal and interest be made in
the amount of $39,954. The loan calls for monthly payments to start on February 26, 2001 and continue on the 26th day of each month thereafter, with a final payment of all
remaining unpaid principal, accrued interest and other sums due under the note due and payable on September 26, 2010.

The
Company accommodated North's request for working capital and remodeling expenditures by reducing the principal payments due from June 26, 2002 through July 26, 2003
from $303,000 to $65,000. Full principal and interest payments will resume in August 2003 through January 2011 with the final payment due in February 2011.

At
January 28, 2002, the Company had a $185,000 note receivable at a 6.5% monthly interest rate with Phillip "Buddy" Johnson who is a member of the Board of Directors. The note
receivable was due July 31, 2002 and was secured by property adjacent to the Plant City, Florida facility. The Company uses the adjacent property as additional parking. The note receivable was
paid in full in June 2002.

NOTE 3RECEIVABLES

Included in receivables is an allowance for bad debts of $0, $323,000 and $70,000 for fiscal years 2003, 2002 and 2001, respectively. The allowance is for
a related party receivable from Phoenix Restaurant Group, see Note 12Related Party Transaction. There are no other allowances for receivables. The Company reserved $70,000 in first
quarter fiscal 2001 and $253,000 in second quarter fiscal 2002. The Company increased the allowance in August 2001 when management deemed the receivable was potentially uncollectible. Phoenix
Restaurant Group subsequently filed for bankruptcy in October 2001. During fiscal 2003, the receivable and the corresponding allowance for bad debt of $323,000 were removed when deemed
uncollectible.

F-17

---

NOTE 4PROPERTY, BUILDINGS AND EQUIPMENT AND REAL PROPERTY UNDER CAPITALIZED LEASES

The components of property, buildings and equipment and real property under capitalized leases are as follows:

January 27,
2003

January 28,
2002Property and equipment:Furniture, fixtures and equipment

$
17,763,000

$
17,017,000Land


4,691,000


5,466,000Buildings and leasehold improvements


26,232,000


27,081,00048,686,000


49,564,000Less accumulated depreciation


(21,595,000
)

(17,250,000
)$
27,091,000

$
32,314,000Real property and equipment under capitalized leases

$
3,193,000

$
3,193,000Less accumulated amortization


(1,896,000
)

(1,731,000
)$
1,297,000

$
1,462,000


The
property and equipment includes the following land, equipment and buildings and leaseholds currently in non-operating units.

|                         |  | Asset |           | Current Year
Depreciation
Expense |   | Depreciation
Accumulated
|------------------------ |  | ----- | --------- | --------------------------------- | - | ------------------------
|Land                     |  | $     | 2,354,000 |                                   | $ |                        
|Equipment                |  |       | 1,919,000 |                                   |   | 211,000                 
|Buildings and leaseholds |  |       | 4,178,000 |                                   |   | 163,000                 
|                         |  |       |           |                                   |   |                         
|                         |  | $     | 8,451,000 |                                   | $ | 374,000                 
|                         |  |       |           |                                   |   |                         

NOTE 5LONG-TERM DEBT

On October 23, 1998, the Company entered into a $20 million syndicated bank financing agreement led by FleetBoston Financial Corporation (formerly
known as 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"). Principal payments under the Term Loan Facility were due in quarterly installments beginning November 1999 and were scheduled to continue until the
final maturity in October 2003. However, the Company paid the Term Loan Facility in full on May 17, 2002. Borrowings under the Revolving Credit Facility bore interest at approximately
3.5% for fiscal 2003. All outstanding amounts under the Revolving Credit Facility become due in October 2003. The Revolving Credit Facility balance was $4,700,000 and $6,375,000 on
January 27, 2003 and January 28, 2002, respectively. The secured Revolving Credit Facility is collateralized by tangible and intangible personal property of the Company and requires the
Company to maintain specified minimum levels of net worth, limit the amount of capital expenditures, and meet other financial covenants. The Company was in compliance with the required covenants at
year end. The Revolving Credit Facility includes an annual commitment fee of $30,000 per year plus a percentage of .375% to

F-18

---

0.50% of any unused balance. The balance of the Revolving Credit Facility available for borrowing on January 27, 2003 and January 28, 2002 was $2.1 million and $139,000,
respectively. The Company's letters of credit on January 27, 2003 and January 28, 2002 were $200,000 and $486,000, respectively.

On
February 1, 2001, the Company completed a promissory note secured by a first mortgage with Victorium Corporation for $460,000 to purchase the real estate of the BuddyFreddys
Country Buffet in Ocala, Florida. The fixed rate (7.5%) mortgage requires monthly payments of $4,264 including interest and matures in 15 years. The balance at January 27, 2003 and
January 28, 2002 was $426,000 and $442,000, respectively.

On
October 9, 2001, the Company completed a $773,000 15 year first real estate mortgage with First National Bank of Wyoming. The mortgage has monthly payments including
interest of $7,253 and has an October 1, 2016 maturity date with a fixed interest rate of 7.625%. The proceeds were used to pay the FleetBoston Term Loan Facility as required by the Company's
agreement with FleetBoston. The mortgage is secured by the Company's JB's Restaurant in Laramie, Wyoming. The balance at January 27, 2003 and January 28, 2002 was $729,000 and $766,000,
respectively.

On
May 2, 2002, the Company completed a $1,500,000 ten year first real estate mortgage with M&I Marshall & Ilsley Bank. The mortgage has monthly payments including interest
of $17,894 and matures on May 2, 2012 with a fixed interest rate of 7.5% for the first five years with interest for years six to ten calculated at the five year LIBOR rate plus
250 basis points with a floor of 7.5%. The proceeds were used to pay the FleetBoston Term Loan Facility as required by the Company's agreement with FleetBoston. The mortgage is secured by the
Company's HomeTown Buffet restaurant in Scottsdale, Arizona. The balance at January 27, 2003 is $1,430,000.

Long
term debt matures in fiscal years ending after January 27, 2003 as follows:

Fiscal Year2004

$
4,862,0002005


175,0002006


189,0002007


203,0002008


220,000Thereafter


1,636,000Total

$
7,285,000


NOTE 6LEASES

The Company occupies certain restaurants under long-term capital and operating leases expiring at various dates through 2014. Most restaurant leases
have renewal options for terms of 5 to 20 years, and substantially all require 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. Certain operating lease agreements contain scheduled rent escalation clauses which are being amortized over the terms of the lease, ranging from 5 to
12 years using the straight line method.

F-19

---

Minimum
lease payments for all leases and the present value of net minimum lease payments for capital leases as of January 27, 2003 are as follows:

Fiscal year

Capital

Operating2004

$
301,000

$
3,323,0002005


288,000


3,165,0002006


298,000


2,973,0002007


309,000


2,611,0002008


309,000


2,300,000Thereafter


1,680,000


6,953,000Total minimum lease payments:


3,185,000

$
21,325,000Less amount representing interest:


1,336,000Present value of minimum lease payments:


1,849,000Less current portion


98,000Capital lease obligation excluding current portion

$
1,751,000


Aggregate
rent expense under noncancelable operating leases during fiscal 2003, 2002 and 2001 are as follows:

Fifty-Two
Weeks Ended
January 27,
2003

Fifty-Two
Weeks Ended
January 28,
2002

Fifty-Two
Weeks Ended
January 29,
2001Minimum rentals

$
3,729,000

$
4,085,000

$
4,000,000Straight-line rentals


122,000


17,000


138,000Contingent rentals


148,000


196,000


211,000$
3,999,000

$
4,298,000

$
4,349,000


In
fiscal 2002, the Company reduced the deferred rent payable for three stores that were purchased or closed. The $87,000 decrease in rent expense is recognized in the 2002
straight-line rentals disclosed above.

The
Company currently leases one non-operating unit. The rental income for fiscal 2003 was $33,000. The payment terms contain scheduled rent escalation clauses which are
being amortized on a straight-line basis over the term of the lease.

F-20

---

Rental
income in fiscal years ending after January 27, 2003 are as follows:

Fiscal Year2004

$
72,0002005


72,0002006


72,0002007


72,0002008


72,000Thereafter


397,000Total

$
757,000


NOTE 7INCOME TAXES

Income taxes (benefit) are comprised of the following:

Fifty-Two
Weeks Ended
January 27, 2003

Fifty-Two
Weeks Ended
January 28, 2002

Fifty-Two
Weeks Ended
January 29, 2001Current:Federal

$
(271,000
)
$
63,000

$
679,000State


(4,000
)

93,000


122,000(275,000
)

156,000


801,000Deferred:Federal


(676,000
)

87,000


(40,000
)State


(138,000
)

27,000


(2,000
)(814,000
)

114,000


(42,000
)$
(1,089,000
)
$
270,000

$
759,000


A
reconciliation of income taxes (benefit) at the federal statutory rate of 34% to the Company's provision for taxes on income is as follows:

Fifty-Two
Weeks Ended
January 27, 2003

Fifty-Two
Weeks Ended
January 28, 2002

Fifty-Two
Weeks Ended
January 29, 2001Income taxes (benefit) at statutory rate

$
(995,000
)
$
605,000

$
656,000State income taxes


(107,000
)

75,000


71,000Nondeductible expenses


15,000


3,000


Federal income tax credits





(123,000
)

Adjustment of estimated income tax accruals


(227,000
)

(290,000
)

Increase in valuation allowance


215,000





All other, net


10,000





32,000$
(1,089,000
)
$
270,000

$
759,000


F-21

---

Temporary
differences give rise to a significant amount of deferred tax assets and liabilities as set forth below:

January 27, 2003

January 28, 2002Current deferred tax assets:Allowance for doubtful accounts

$


$
26,000Accrued vacation


98,000


97,000Accrued expenses and reserves


96,000


83,000Total deferred tax assets


194,000


206,000Long-term deferred tax assets (liabilities):Leases


1,100,000


1,098,000Depreciation, amortization and impairments


(512,000
)

(1,316,000
)Federal tax credit carryforward


111,000


105,000State NOL carryforwards


229,000


Total deferred tax assets (liabilities), net


928,000


(113,000
)Valuation allowance


(215,000
)

Net long term asset


713,000


Net deferred tax assets

$
907,000

$
93,000


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 be able to realize the benefit of the deferred tax assets existing at January 27, 2003 based on the Company's current and future pre-tax earnings.

A
valuation allowance has been recognized for a state loss carryforward as cumulative losses create uncertainty about the realization of the tax benefits in future years. The
Company has state net operating loss carryforwards of approximately $8,266,000 which expire in the years 2007 through 2022.

NOTE 8SEGMENT AND RELATED REPORTING

The Company has five reporting segments: HomeTown Buffet, Casa Bonita, North's Star, Florida Buffets Division and JB's Restaurants. The Company's reportable
segments are aggregated based on brand similarities of operating segments.

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 Country Buffet restaurants and one North's Star Buffet Restaurants. The Florida Buffets Division includes two BuddyFreddys restaurants, five BuddyFreddys Country Buffet
restaurants and two Holiday House restaurants. The JB's Restaurants segment includes the Company's ten JB's Restaurants and one JJ North's Family Restaurant.

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.

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

F-22

---

segments relate to the Company as a whole, and not individual segments. Also certain corporate overhead income and expenses in the consolidated statements of operations are not included in the
reportable segments.

|52 Weeks Ended
January 27, 2003                                                                       |  | HomeTown
Buffet |        | Casa
Bonita |   | North's
Star |  | Florida
Buffets |       | JB's |   | Other  |   | Total |       
|----------------------------------------------------------------------------------------------------- |  | --------------- | ------ | ----------- | - | ------------ |  | --------------- | ----- | ---- | - | ------ | - | ----- | ------
|
|Revenues                                                                                              |  | $               | 35,512 |             | $ | 9,780        |  | $               | 7,564 |      | $ | 11,913 |   | $     | 10,029
|Interest income                                                                                       |  |                 |       |             |   |             |  |                 |      |      |   |       |   |       |      
|Interest expense                                                                                      |  |                 | (210   | )           |   |             |  |                 |      |      |   | (33    | ) |       | (2    
|Depreciation & amortization                                                                           |  |                 | 1,520  |             |   | 241          |  |                 | 364   |      |   | 811    |   |       | 390   
|Impairment of long-lived assets                                                                       |  |                 |       |             |   |             |  |                 | 300   |      |   | 1,249  |   |       | 282   
|Income (loss) before income taxes (benefit) and cumulative effect of a change in accounting principle |  |                 | 1,541  |             |   | 1,764        |  |                 | (981  | )    |   | (1,501 | ) |       | (106  
|Cumulative effect of a change in accounting principlenet of taxes                                    |  |                 |       |             |   |             |  |                 | (367  | )    |   | (124   | ) |       | (69   
|Total assets                                                                                          |  |                 | 12,150 |             |   | 1,417        |  |                 | 6,474 |      |   | 13,207 |   |       | 4,991 
|                                                                                                      |  |                 |        |             |   |              |  |                 |       |      |   |        |   |       |       
|52 Weeks Ended
January 28, 2002                                                                       |  |                 |        |             |   |              |  |                 |       |      |   |        |   |       |       
|Revenues                                                                                              |  | $               | 36,845 |             | $ | 10,755       |  | $               | 9,078 |      | $ | 15,979 |   | $     | 10,561
|Interest income                                                                                       |  |                 |       |             |   |             |  |                 |      |      |   |       |   |       |      
|Interest expense                                                                                      |  |                 | (215   | )           |   |             |  |                 |      |      |   | (31    | ) |       | (6    
|Depreciation & amortization                                                                           |  |                 | 1,468  |             |   | 214          |  |                 | 426   |      |   | 1,196  |   |       | 346   
|Impairment of long-lived assets                                                                       |  |                 |       |             |   |             |  |                 |      |      |   | 806    |   |       |      
|Income (loss) before income taxes                                                                     |  |                 | 3,198  |             |   | 1,873        |  |                 | (179  | )    |   | (1,131 | ) |       | 677   
|Total assets                                                                                          |  |                 | 14,203 |             |   | 2,237        |  |                 | 8,079 |      |   | 15,784 |   |       | 5,080 
|                                                                                                      |  |                 |        |             |   |              |  |                 |       |      |   |        |   |       |       
|52 Weeks Ended
January 29, 2001                                                                       |  |                 |        |             |   |              |  |                 |       |      |   |        |   |       |       
|Revenues                                                                                              |  | $               | 41,682 |             | $ | 11,248       |  | $               | 9,670 |      | $ | 20,584 |   | $     | 10,855
|Interest income                                                                                       |  |                 | 5      |             |   | 1            |  |                 |      |      |   |       |   |       |      
|Interest expense                                                                                      |  |                 | (220   | )           |   |             |  |                 |      |      |   |       |   |       | (8    
|Depreciation & amortization                                                                           |  |                 | 1,517  |             |   | 189          |  |                 | 424   |      |   | 1,156  |   |       | 337   
|Impairment of long-lived assets                                                                       |  |                 |       |             |   |             |  |                 | 143   |      |   | 443    |   |       | 4     
|Income (loss) before income taxes                                                                     |  |                 | 3,979  |             |   | 1,845        |  |                 | 33    |      |   | (975   | ) |       | 614   
|Total assets                                                                                          |  |                 | 13,217 |             |   | 2,043        |  |                 | 7,858 |      |   | 16,855 |   |       | 5,316 

F-23

---



NOTE 9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 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.

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 as 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. The Company's existing credit facility restricts the payment of Common Stock or Preferred
Stock dividends.

Officer's Notes Receivable

In connection with the Company's employment contract with Mr. Robert E. Wheaton, the Company's Chief Executive Officer and President, the Company agreed to
provide Mr. Wheaton loans solely for the purchase of the Company's common stock. The loans were secured by the stock at the prevailing interest rate set forth in the Company's credit facility
with FleetBoston. The average rate for fiscal 2003 and 2002 was approximately 3.5% and 5.8%, respectively. The loans totaled $1,330,000 as of January 27, 2003 and $1,338,000 as of
January 28, 2002.

F-24

---

Common Stock Repurchase

On December 7, 1999, the Company's Board of Directors 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. As of January 27, 2003, no shares have been repurchased
under the December 7, 1999 authorization due to restrictions contained in the Company's existing credit facility.

NOTE 10EMPLOYEE BENEFIT PLANS

401(k) Plan

In May 1998, the Company established 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.
Employer contributions are at the discretion of the Company. The Company's contributions to the plan were approximately $8,000, $13,000, and $35,000 in administration costs for fiscal 2003, 2002 and
2001, respectively.

1997 Employee Stock Purchase Plan

The Company's 1997 Employee Stock Purchase Plan (the "Purchase Plan"), was adopted by the Board of Directors on January 15, 1998, covering 750,000 shares
of Common Stock. The Purchase Plan is intended to provide participants with incentives to acquire a proprietary interest in, and continue to provide services to, the Company. The Company's
contributions to the plan were approximately $0, $21,000 and $13,000 for fiscal 2003, 2002 and 2001, respectively.

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 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 end of such offering period, a matching
contribution from the Company to purchase stock 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. The Board of
Directors terminated the plan in fiscal 2002. The Company returned all of the funds to the participants.

F-25

---

1997 Stock Incentive Plan

In fiscal year 1998, the Company adopted the 1997 Stock Incentive Plan (the "1997 Plan"), which grants options to purchase up to 750,000 shares of Common Stock.
The 1997 Plan provides for "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 1997 Plan provides
participants with incentives which will encourage them to acquire a proprietary interest in, and continue to provide services to, the Company. The Board of Directors has sole discretion and authority,
consistent with the provisions of the 1997 Plan, to determine which eligible participants will receive options, time when options will be granted, terms of options granted and 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):

|                                 |  | Fifty-Two
Weeks Ended
January 27, 2003 |  | Fifty-Two
Weeks Ended
January 28, 2002 |      | Fifty-Two
Weeks Ended
January 29, 2001
|-------------------------------- |  | -------------------------------------- |  | -------------------------------------- | ---- | --------------------------------------
|
|Outstanding at beginning of year |  | 735                                    |  | $                                      | 9.74 |                                       
|Granted                          |  |                                       |  |                                        |     |                                       
|Cancelled                        |  | 2                                      |  |                                        | 7.50 |                                       
|                                 |  |                                        |  |                                        |      |                                       
|Outstanding at end of year       |  | 733                                    |  | $                                      | 9.75 |                                       
|                                 |  |                                        |  |                                        |      |                                       
|Options exercisable at year end  |  | 733                                    |  | $                                      | 9.75 |                                       
|                                 |  |                                        |  |                                        |      |                                       

The
exercise price of the options granted and exercisable at January 27, 2003 is $5.00 for 236,000 options and $12.00 for 497,000 options.

F-26

---

NOTE 11SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

|                                                            |                                                                     | Fifty-Two
Weeks
Ended
January 27,
2003 |         | Fifty-Two
Weeks
Ended
January 28,
2002 |   | Fifty-Two
Weeks
Ended
January 29,
2001
|----------------------------------------------------------- | ------------------------------------------------------------------- | -------------------------------------- | ------- | -------------------------------------- | - | --------------------------------------
|Cash paid for income taxes                                  |                                                                     | $                                      | 181,000 |                                        | $ | 355,000                               
|Cash paid for interest                                      |                                                                     |                                        | 432,000 |                                        |   | 825,000                               
|Non-cash investing and financing activities are as follows: |                                                                     |                                        |         |                                        |   |                                       
|                                                            | Exchange of receivables from Phoenix Restaurant Group for equipment |                                        | $       |                                       |   | $                                     
|                                                            | Exchange of deposit for property acquisition                        |                                        |         |                                       |   |                                       
|                                                            | Acquisition of property with debt financing                         |                                        |         |                                       |   |                                       
|                                                            | Exchange of receivables for equipment                               |                                        |         | 79,000                                 |   |                                       
|                                                            | Exchange of officer's note receivable for equipment                 |                                        |         | 8,000                                  |   |                                       
|                                                            | Write off of fully amortized intangibles                            |                                        |         | 10,000                                 |   |                                       
|                                                            | Write off of a receivable against allowance for bad debt            |                                        |         | 323,000                                |   |                                       
|                                                            | Reclassification of property held for sale                          |                                        |         | 1,211,000                              |   |                                       
|                                                            | Transitional impairment of goodwill                                 |                                        |         | 849,000                                |   |                                       
|                                                            | Disposal of long-lived assets                                       |                                        |         | 318,000                                |   |                                       

NOTE 12RELATED PARTY TRANSACTION

In
addition to the note receivable included in Note 2, the Company entered into an agreement with a company whose former chief executive officer is a member of the Company's Board
of Directors. Under the agreement, the Company operated three of the related party's restaurants as BuddyFreddys Country Buffet restaurants. Revenues and expenses of the restaurants are included in
the Company's financial statements. The Company and the related party divide income and losses based on an agreed upon formula. Included in receivables is $323,000 for both fiscal 2002 and 2001 due
from the related party as a result of the agreement and an allowance for that receivable of $323,000 and $70,000 for fiscal 2002 and 2001, respectively. The joint venture was terminated in the first
quarter of fiscal 2001. During fiscal 2003, management removed the receivable and corresponding allowance for bad debt when the receivable was deemed uncollectible.

The
Company purchased a 1995 Volvo from Mr. Wheaton, Chairman of the Board, Chief Executive Officer and President of the Company in fiscal 2003 for $11,000.

NOTE 13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 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 $3,571,000. On December 31, 1998, North's filed an answer to the Company's Complaint, denying generally the allegations, and filed counterclaims against the Company

F-27

---

alleging (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 had breached the Business Services Agreement. On January 26, 2001, the parties entered into a
Settlement Agreement (the "Settlement Agreement"). The Settlement Agreement provides, among other things, that the Credit Agreement and Revolving Note terminate concurrently with the execution
of the Settlement Agreement, that the Term Note be amended and restated, that the terms of the Term Note have no further force or effect and that the security interest transferred to the
Company pursuant to the Assignment Agreement dated September 30, 1997 between the Company and U.S. Bank National
Association be amended and restated pursuant to an Amended and Restated Star Buffet Security Agreement (the "Security Agreement"). The Company and North's have agreed that the Star Buffet Debt be
reduced to a total amount of $3,500,000 and that such reduced obligation be payable by North's pursuant to the terms of the Amended and Restated Promissory Note. The Company recorded no gain or loss
on the settlement as the recorded balance of the note was approximately $3.5 million at the time of the settlement. The Company and North's have agreed that the Company's existing liens
encumbering certain property of North's remain in place and continue to secure North's obligations to the Company, and the Company and North's reserve all rights, claims and defenses with respect to
the extent and validity of such existing liens.

On
March 21, 2002, Alliant Foodservice, Inc. ("Alliant") filed a breach of contract complaint against the Company in the Superior Court for the State of Arizona in and for
the County of Maricopa (No. CVZ002-005195), alleging breach of the Master Distribution Agreement ("MDA") executed between the Company and Alliant on or about December 1,
1999. Alliant sought $2,479,000 for alleged amounts owed by the Company plus attorneys' fees and costs. The Company included approximately $2,000,000 for this alleged amount owed in relation to this
litigation in accounts payable-trade at January 27, 2003 net of any amounts receivable from Alliant. The Company denied the allegations and vigorously defended the alleged breach of contract.
On April 29, 2002, the Company filed an answer and counterclaim in Superior Court for the State of Arizona in and for the County of Maricopa citing among other things, breach of the MDA. The
Company sought over $7,250,000 in damages. On February 27, 2003, the Company and Alliant entered into a Settlement Agreement that dismissed charges against both parties and required the Company
to pay Alliant $1,600,000 which will result in a gain of approximately $400,000 in the first quarter of fiscal 2004.

On
July 17, 2002, JB's Family Restaurants, Inc. ("JBFR") filed a complaint in the United States Bankruptcy Court District of Arizona against the Company, Case
No. 02-03349-ECF-CGC, Adversary No. 02-815, alleging various claims arising from an alleged breach of a franchise agreement. JBFR sought
injunctive relief prohibiting the Company's use of various JB's trademarks together with monetary damages. On November 8, 2002, the Company reached an accord with JBFR that settled all alleged
breaches of the franchise agreement. Under this accord, JBFR has granted the Company a license agreement for the use of the JB's trademark through August 31, 2012 in exchange for certain cash
payments with an option for an additional ten years. To date, all license and marketing expenses related to this accord have been expensed in the periods incurred.

In
connection with the Company's employment contract with Robert E. Wheaton, the Company's Chief Executive Officer and President, the Company has agreed to pay Mr. Wheaton
six years salary and bonus if he resigns related to change of control of the Company or is terminated, unless the termination is for cause. Mr. Wheaton's employment contract also
includes an annual bonus of $25,000.

F-28

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NOTE 14SUPPLEMENTAL QUARTERLY FINANCIAL DATA (UNAUDITED)

Quarterly financial results for the 52 weeks ended January 27, 2003, January 28, 2002, and January 29, 2001, are summarized below.

(In
thousands except per share data)

|                                                                                                              |  | For the 52 Weeks Ended January 27, 2003 |       
|------------------------------------------------------------------------------------------------------------- |  | --------------------------------------- | ------
|
|Revenues                                                                                                      |  | $                                       | 25,192
|                                                                                                              |  |                                         |       
|Income (loss) from operations                                                                                 |  |                                         | 595   
|                                                                                                              |  |                                         |       
|Income (loss) before income taxes (benefit) and cumulative effect of a change in accounting principle         |  |                                         | 440   
|Income taxes (benefit)                                                                                        |  |                                         | 152   
|                                                                                                              |  |                                         |       
|Income (loss) before cumulative effect of a change in accounting principle                                    |  |                                         | 288   
|Cumulative effect of a change in accounting principlenet of taxes                                            |  |                                         | (560  
|                                                                                                              |  |                                         |       
|Net income (loss)                                                                                             |  | $                                       | (272  
|                                                                                                              |  |                                         |       
|Income (loss) per common share before cumulative effect of a change in accounting principlebasic and diluted |  | $                                       | 0.10  
|Cumulative effect of a change in accounting principlenet of taxes                                            |  | $                                       | (0.19 
|Net income (loss) per common sharebasic and diluted                                                          |  | $                                       | (0.09 

(In
thousands except per share data)

|                                  |         | For the 52 Weeks Ended January 28, 2002
|--------------------------------- | ------- | ---------------------------------------
|
|Revenues                          |         | $                                      
|                                  |         |                                        
|Income (loss) from operations     |         |                                        
|                                  |         |                                        
|Income (loss) before income taxes |         |                                        
|Income taxes (benefit)            |         |                                        
|                                  |         |                                        
|Net income (loss)                 |         | $                                      
|                                  |         |                                        
|Earnings (loss) per share:        |         |                                        
|                                  | Basic   |                                        
|                                  | Diluted |                                        

F-29

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(In
thousands except per share data)

|                                  |         | For the 52 Weeks Ended January 29, 2001
|--------------------------------- | ------- | ---------------------------------------
|
|Revenues                          |         | $                                      
|                                  |         |                                        
|Income from operations            |         |                                        
|                                  |         |                                        
|Income (loss) before income taxes |         |                                        
|Income taxes (benefit)            |         |                                        
|                                  |         |                                        
|Net income (loss)                 |         | $                                      
|                                  |         |                                        
|Earnings (loss) per share:        |         |                                        
|                                  | Basic   |                                        
|                                  | Diluted |                                        

Amounts
indicated may not foot due to quarterly rounding.

The
fiscal 2003 figures include certain significant fourth quarter adjustments including asset impairment charges of $982,000 and income tax benefit of $334,000 relating to the
impairment charges and an increase in the deferred tax asset valuation.

The
fiscal 2002 figures include a significant fourth quarter adjustment for income tax credits resulting from the Company amending prior year tax returns for social security taxes on
tips exceeding minimum wage.

The
fiscal 2001 figures do not include any significant fourth quarter adjustments.

NOTE 15SUBSEQUENT EVENTS

In February 2003, the Company leased to a third party its non-operating restaurant in Ocala, Florida for 10 years. The monthly rental
income is $5,300 starting in April, 2003.

In
February, March and April 2003, the Company terminated leases in Clearwater, Florida, Billings, Montana and Moab and Logan, Utah.

In
February 2003, the Company and Alliant entered into a Settlement Agreement (footnote 13) that requires the Company to pay Alliant $1,600,000 which resulted in an
approximate gain of $400,000.

In
March 2003, the Company purchased the real estate property of the HomeTown Buffet in Layton, Utah, for $1,300,000. The Company paid $800,000 in cash and obtained seller
financing for $500,000.

In
April 2003, the Company leased to a third party its non-operating restaurant in Kissimmee, Florida, for five years with two five year options. The first five
years, the rental income averages approximately $10,800 per month starting in May, 2003.

In
April 2003, the Company sold the property held for sale in Jacksonville, Florida, for $1,250,000.

F-30

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EXHIBIT INDEX

|Exhibit
No. |  | Description                                                                                                                                                                                                                                                                                                                                                                      
|----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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 Restaurants, Inc.**                                                                                                                                                                                                                                                                                                                       
|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 Restaurants, Inc. (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 10-K on September 28,
1998)                                                                                                                                                                                  
|10.16       |  | Credit Agreement with FleetBoston Financial Corporation dated October 23, 1998 (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)
|21.1        |  | List of Subsidiaries*                                                                                                                                                                                                                                                                                                                                                            
|23.1        |  | Consent of Grant Thornton LLP                                                                                                                                                                                                                                                                                                                                                    
|23.2        |  | Consent of KPMG LLP                                                                                                                                                                                                                                                                                                                                                              
|99.1        |  | Certification of Officers pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                                                             

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E-1

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