<PAGE>   1
 
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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
 
                                   FORM 10-K

                            ------------------------
 
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934
 
                   FOR THE FISCAL YEAR ENDED JANUARY 26, 1998
 
                                       OR
 
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934
 
                         COMMISSION FILE NUMBER: 0-6054
 
                               STAR BUFFET, INC.
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
                            ------------------------
 
<TABLE>
<S>                                            <C>
                   DELAWARE                                      84-1433454
         (STATE OR OTHER JURISDICTION                         (I.R.S. EMPLOYER
      OF INCORPORATION OR ORGANIZATION)                     IDENTIFICATION NO.)
              440 LAWNDALE DRIVE                                   84115
             SALT LAKE CITY, UTAH                                (ZIP CODE)
            (ADDRESS OF PRINCIPAL
              EXECUTIVE OFFICES)
</TABLE>
 
       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (801) 463-5500

                            ------------------------
 
        SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
          SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
 
(TITLE OF EACH CLASS):                NAME OF EACH EXCHANGE ON WHICH REGISTERED:
----------------------                ------------------------------------------
    COMMON STOCK                      NATIONAL ASSOCIATION OF SECURITIES DEALERS
   $.001 PAR VALUE                                    (NASDAQ)
           
                            
 
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.  Yes [X]   No [ ]
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [ ].
 
The aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 31, 1998, was $56,276,000.
 
The number of shares outstanding of the registrant's common stock was 5,450,000
shares as of March 31, 1998.
                      DOCUMENTS INCORPORATED BY REFERENCE
 
Portions of the registrant's Proxy Statement for the 1998 Annual Meeting of
Stockholders, which will be filed with the Securities and Exchange Commission
within 120 days after January 26, 1998, are incorporated by reference into Part
III of this Report.
 
The Exhibit Index is contained in Part IV herein on Page E-1.
 
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<PAGE>   2
 
                      STAR BUFFET, INC., AND SUBSIDIARIES
 
                      INDEX TO ANNUAL REPORT ON FORM 10-K
 
                   FOR THE FISCAL YEAR ENDED JANUARY 26, 1998
 
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<S>        <C>                                                             <C>
                                PART I
ITEM 1.    BUSINESS....................................................      1
ITEM 2.    PROPERTIES..................................................      9
ITEM 3.    LEGAL PROCEEDINGS...........................................     10
ITEM 4.    SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.........     10
 
                                PART II
ITEM 5.    MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
           STOCKHOLDER MATTERS.........................................     11
ITEM 6.    SELECTED FINANCIAL DATA.....................................     11
ITEM 7.    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
           AND RESULTS OF OPERATIONS...................................     12
ITEM 8.    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.................     17
ITEM 9.    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
           AND FINANCIAL DISCLOSURE....................................     17
 
                               PART III
ITEM 10.   DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT..........     18
ITEM 11.   EXECUTIVE COMPENSATION......................................     18
ITEM 12.   SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
           MANAGEMENT..................................................     18
ITEM 13.   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS..............     18
 
                                PART IV
ITEM 14.   EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
           8-K.........................................................     19
</TABLE>
 
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                                     PART I
 
ITEM 1. BUSINESS
 
OVERVIEW
 
     Star Buffet, Inc., a Delaware corporation ("Star" and collectively with its
subsidiaries, the "Company") is engaged primarily in the food service industry.
As of January 26, 1998, the Company owns and operates 16 franchised HomeTown
Buffet restaurants, seven JJ North's Grand Buffet restaurants and two Mexican-
themed restaurants operated under the Casa Bonita name. Subsequent to January
26, 1998, the Company has acquired twelve franchised JB's Restaurants, three
Stacey's Buffet restaurants, two Maggie's Buffet restaurants, two BuddyFreddys
restaurants and one additional restaurant that is not currently operating but
will be converted to one of the Company's buffet concepts. The Company's
restaurants are located in ten western states and Florida and are focused on
providing customers with a wide variety of fresh, high quality food at modest
prices in a warm, friendly atmosphere.
 
     The Company was formed on July 28, 1997 as a wholly-owned subsidiary of CKE
Restaurants, Inc. ("CKE") an operator, franchisor and licensor of 3,981 branded
restaurants in the United States and abroad. On September 30, 1997 the Company
completed an initial public offering (the "Initial Public Offering") of
3,000,000 shares of its common stock at an Initial Public Offering price of
$12.00 per share. Of the 3,000,000 shares of common stock sold in the Initial
Public Offering, 2,400,000 shares were sold by the company and 600,000 shares
were sold by CKE. On October 7, 1997, the underwriters exercised their
over-allotment option and acquired an additional 450,000 shares of common stock
from the Company. The Initial Public Offering generated total net proceeds to
the Company of $30.8 million after commissions and offering expenses. The
Company has used a portion of the proceeds to pay a dividend to CKE and to repay
indebtedness assumed in connection with the acquisition of restaurants. The
remaining proceeds are being used for working capital and general corporate
purposes.
 
CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS
 
     This report on Form 10-K contains forward looking statements, which are
subject to known and unknown risks, uncertainties and other factors which may
cause the actual results, performance, or achievements of the Company to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among others, the following: general economic and business conditions; the
impact of competitive products and pricing; success of operating initiatives;
advertising and promotional efforts; adverse publicity; changes in business
strategy or development plans; quality of management; availability, terms and
deployment of capital; changes in prevailing interest rates and the availability
of financing; food, labor, and employee benefits costs; changes in, or the
failure to comply with, government regulations; weather conditions; construction
schedules; implementation of the Company's acquisition and strategic alliance
strategy; the effect of the Company's accounting polices and other risks
detailed in the Company's Prospectus dated September 24, 1997 and other filings
with the Securities and Exchange Commission.
 
RECENT DEVELOPMENTS
 
     On October 31, 1997, the Company entered into a strategic alliance (the
"Alliance") with Stacey's Buffet, Inc. ("Stacey's") whereby, among other things,
the Company agreed to provide certain services for 23 Stacey's restaurants and
make loans to Stacey's from time to time up to an aggregate principal amount of
$4,500,000. On February 13, 1998, the Company acquired three Stacey's
restaurants, and the Company and Stacey's mutually agreed to terminate the
Alliance, including cancellation of any future obligations of the Company to
make loans to Stacey's. The Company paid the purchase price for the three
restaurants by the cancellation of Stacey's outstanding indebtedness to the
Company which was incurred as part of the Alliance.
 
     On February 24, 1998, the Company acquired twelve JB's Restaurants from
JB's Restaurants, Inc., a wholly-owned subsidiary of CKE, for $4,265,000,
subject to adjustment. At the time of acquisition, the Company prepaid royalty
fees for one year in the amount of $485,000. The Company will operate the
 
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<PAGE>   4
 
restaurants under franchise agreements with JB's Family Restaurants, Inc. until
such time as they are converted to the Company's small-format buffet concept.
The Company has completed one of the conversions and expects to complete
additional conversions during fiscal 1999.
 
     In addition, during February 1998, the Company, in three separate
transactions, acquired three additional restaurants in the state of Florida. The
purchase price for these restaurants, one of which is a fee property, was
approximately $1.8 million. Two of the restaurants are operated as Maggie's
Buffet restaurants and the third restaurant, which was formerly operated as a
Stacey's Buffet restaurant prior to being closed in 1996, will be converted to
one of the Company's buffet concepts and re-opened during fiscal 1999.
 
     On April 1, 1998, the Company acquired two buffet restaurants located in
Florida, which operate under the brand name of BuddyFreddys. The purchase price
was $1.6 million, subject to adjustment, of which, $400,000 was paid in cash at
closing and the remaining $1.2 million will be paid in equal monthly
installments of $100,000 each beginning April 15, 1998 and continuing through
March 15, 1999. In addition, the Company has loaned the seller $2.4 million. The
loan has a term of one year, is secured by the real property of the purchased
restaurants and bears interest at 8.5% for the first 90 days and 10.0% for the
remainder of the term. It is anticipated that the Company will convert certain
of its other restaurants in the Florida market to the BuddyFreddys concept.
 
BUSINESS
 
     The Company's strategic objective is to become a leading national operator
of regional buffet restaurants through the acquisition of established regional
concepts and the development of additional restaurants within existing or new
markets. The Company believes that certain elements of its business strategy can
be used successfully to improve the financial performance of its recent and
future acquisitions. Key elements of the Company's business strategy as are
follows:
 
     Customer Focus. The Company believes that its ability to deliver high
quality food to customers with superior service in clean and friendly
environments has been central to its success at improving customer perceptions
and sales at its buffet restaurants. The key elements of management's focus
include:
 
        -  High Quality Food. The Company seeks to differentiate itself by
           providing higher quality and better tasting food than its
           competitors. Food items are prepared frequently and in small batches
           to ensure the correct temperature, texture and flavor. Management
           limits the number of items prepared each day and frequently rotates
           selected specialty items to maintain customer interest while ensuring
           that the Company's signature items are offered at the highest
           possible quality.
 
        -  Superior Service. The Company provides a level of customer service
           which it believes has helped it establish a higher level of customer
           satisfaction than its competitors. Customers are greeted by an
           employee who seats the customers and explains the features of the
           restaurant and menu offerings. In addition, the restaurants' managers
           seek to visit each customer's table during peak meal periods to
           ensure guest satisfaction. The Company's restaurants are inspected by
           independent "mystery shoppers" several times each month, and
           restaurants not performing up to Company standards receive additional
           inspection surveys until appropriate standards are restored.
 
        -  Clean and Friendly Environment. The Company strives to offer a
           pleasant, customer friendly environment at its restaurants by
           providing attractive, updated restaurant decors and by emphasizing
           cleanliness in all areas of its operations. Further, through regular
           maintenance, the Company seeks to enhance the customer dining
           experience by keeping its restaurants clean and pleasant.
 
     Management Practices. The Company's management team has implemented a
series of management practices, many of which were developed by CKE, that have
improved the operations of the Company's
 
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<PAGE>   5
 
HomeTown Buffet restaurants. Management believes that many of these practices
and policies can be applied to the Company's other buffet restaurants. The key
elements of these management practices are:
 
        -  Restaurant Management. The Company has developed food, labor and
           customer service management practices and reporting mechanisms that
           allow management to effectively monitor restaurant-level operations,
           analyze restaurant performance statistics and communicate best-
           practices across its restaurant operations. Through the use of its
           restaurant-level incentive and bonus programs, as well as its
           traditional recognition programs, the Company seeks to motivate its
           employees and foster an environment where employees are encouraged to
           share their ideas and cost-saving suggestions with management.
 
        -  Cost Management. The Company's Service Agreement (the "CKE Service
           Agreement"), has enabled the Company to maintain a lean corporate
           management structure. The Company believes that it can continue to
           leverage its corporate infrastructure and Service Agreement with CKE
           in order to achieve additional synergies in purchasing, information
           systems, finance and accounting, benefits and human resource
           management. The Company is committed to controlling costs at all
           levels of its operations. Through effective management of the
           Company's product mix, production quantities and staffing, the
           Company has significantly reduced its food, labor and other operating
           costs.
 
        -  Brand Management. The Company promotes its restaurants and enhances
           its brand awareness through local promotions and advertising programs
           which convey a targeted, consistent message and build customer
           awareness and loyalty. The Company primarily utilizes local marketing
           representatives to promote the restaurants to local organizations and
           groups seeking facilities and services offered by buffet restaurants.
 
GROWTH STRATEGY
 
     The Company's strategic objective is to become a leading national operator
of regional buffet restaurants through (i) acquisitions of existing buffet
restaurants which management believes can benefit from the Company's management
practices and can be converted to buffet restaurants operated or under
development by the Company and (ii) minority investments in or strategic
alliances with other regional buffet restaurant chains. The Company's growth
strategy is designed to capitalize on the opportunities management perceives in
the fragmented buffet segment of the restaurant industry.
 
     Acquisition Strategy. Management believes that the Company will be able to
capitalize on the successful attributes of acquired buffet chains while
increasing their focus on operations, customer service and quality. Management
believes that a number of acquisition opportunities exist due to the
fragmentation of the buffet, cafeteria and grill-buffet segments of the
restaurant industry, which are comprised of a substantial number of regional
chains. The Company believes that most of these regional chains are privately
owned and may be available for acquisition because they lack the financial and
operational structure to compete with larger regional and national chains.
Following acquisition, management intends to integrate and improve the
operations and profitability of the chain through the implementation of the
following key strategies:
 
        -  Enhance Food Quality and Service Levels. Management believes that,
           due to the limited capital and management resources of many regional
           chains, such restaurants often offer poor food quality and an
           insufficient level of customer service. Management intends to
           increase the chains' customer focus and utilize the management
           practices which have proven successful at other CKE operated
           restaurants.
 
        -  Implement Operational Cost Controls and Management Incentive
           Structures. Management believes that the management practices which
           have successfully lowered food, labor and other operating costs at
           other CKE operated restaurants can be implemented in other regional
           buffet chains. In addition, the Company believes that its management
           incentive programs can increase the customer service and
           profitability of acquired restaurants.
 
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<PAGE>   6
 
        -  Leverage CKE Relationship to Reduce Overhead Expenses. The Company
           intends to achieve operating efficiencies by eliminating certain
           administrative functions and redundant operations. Management
           believes that significant savings can result through the
           implementation of CKE's purchasing, financial services, information
           systems and accounting functions pursuant to the terms of the CKE
           Service Agreement.
 
     Acquisitions, however, involve a number of special risks that could
adversely affect the Company's business, financial condition and results of
operations, including the diversion of management's attention, the assimilation
of the operations and personnel of acquired restaurants, the amortization of
acquired intangible assets and the potential loss of key employees.
 
     New Restaurant Opening Strategy. In order to increase the Company's
presence in existing markets, or when acquisition opportunities are not
available, the Company intends to expand through new restaurant openings. While
the Company may construct new restaurant facilities, management intends to seek
opportunities to convert locations currently occupied by other buffet, family
dining or budget steakhouse restaurant concepts. The Company has developed its
prototype design and menu for new restaurant openings which management believes
will offer customers a dining environment and experience superior to existing
buffet restaurants. Management believes that this design can easily be
implemented at restaurants acquired by the Company.
 
     In recent years, a number of chains in the family dining and budget
steakhouse segments of the restaurant industry have experienced operational
difficulties and declining performance. Management believes that these
difficulties are the result of increasing competition for these concepts from
the rapid growth of lower priced casual dining chains and casual steakhouses
which offer superior product quality and service at only moderately higher
prices. Many of these family dining restaurants and budget steakhouses occupy
desirable locations and provide opportunities to acquire desirable restaurant
locations at attractive prices. Management believes that these locations can be
acquired at lower prices or leased at rates lower than those available from a
comparable undeveloped site.
 
     Minority Investments. Management intends to seek minority investments in
other restaurant chains, like Stacey's, that the Company believes can be
improved through the implementation of the Company's management practices.
Management believes that minority investments can in other restaurant chains
provide an attractive investment opportunity for the Company and may lower the
acquisition cost of such chains should the Company ultimately seek to acquire
the chains.
 
HOMETOWN BUFFET RESTAURANTS
 
     General. The Company, through its subsidiary HTB Restaurants, Inc. ("HTB")
has franchise agreements with HomeTown Buffet, Inc., a wholly-owned subsidiary
of Buffets, Inc., (the "HomeTown Franchisor"), under which HTB, operates
HomeTown Buffet restaurants in Arizona, Colorado, Idaho, Montana, Nevada, New
Mexico, Utah and Wyoming.
 
     HTB has entered into a franchise agreement for each location which requires
among other items, the payment of a continuing royalty fee. The royalty fee is
based on the aggregate gross sales of all the Company's HomeTown Buffet
restaurants at the following rates:
 
<TABLE>
<CAPTION>
                  ANNUAL GROSS SALES                     RATE
                  ------------------                     ----
<S>                                                      <C>
$0 to $1,000,000                                         4%
$1,000,001 to $2,000,000                                 3%
$2,000,001 and over                                      2%
</TABLE>
 
     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 HomeTown Franchisor's
operating and recipe manuals.
 
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<PAGE>   7
 
     The HomeTown Franchisor may terminate a franchise agreement for a number of
reasons, including the failure to pay royalty fees when due, failure to comply
with applicable laws or repeated failure to comply with one or more requirements
of the franchise agreements. 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 a 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 free standing 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 weekend breakfast menus that entitle each customer to
unlimited servings of all menu items and beverages. Prices are approximately
$5.75 for lunch and approximately $7.65 for dinner, and may vary depending on
restaurant location. The restaurants offer reduced prices to children under age
12 and to senior citizens.
 
     HomeTown Buffet restaurants seek to differentiate themselves from other
buffet and cafeteria restaurants by the quality and variety of their food
offerings. The restaurants feature a "scatter bar" buffet system with eight
separate food islands in an "all-you-can-eat" format. Menus emphasize
traditional American "home cooking" and include soups, salads, entrees,
vegetables, non-alcoholic beverages and desserts. Customers can choose from
multiple entree choices, including fried and baked chicken and fish, roast beef,
turkey and ham. Additional entrees, such as lasagna, barbecued ribs and other
regional or seasonal dishes, are featured on particular days of the week. In
addition to entrees, each meal includes two freshly-prepared soups, assorted
vegetable and potato dishes, hot bread and an extensive salad bar. Dessert
selections include pudding, assorted cobblers, cakes, cookies and soft-serve
frozen dairy desserts and various sundae toppings.
 
     HTB uses high-quality ingredients, including fresh seasonal fruits and
vegetables, in its menu offerings, and all menu items are prepared in small
batches throughout the day. The items are served promptly in relatively small
serving pans in order to ensure that all items are fresh, visually appealing and
served at the proper temperature. HTB regularly tests new menu items and
upgrades ingredients and cooking methods in order to improve the quality and
consistency of its food offerings.
 
     Operations. The HomeTown Buffet restaurants are supervised directly by a
Vice President of HomeTown Buffet operations, who reports to the Company's
President. Each HomeTown Buffet restaurant has a general manager and at least
three co-managers or assistant managers. Managers are required to attend formal
training sessions in management and operations of the restaurant. In addition,
each restaurant manager is required to comply with an extensive operations
manual to assure uniformity of operations and consistent high quality of
products. The Company has a performance based incentive program covering its
general and assistant managers in addition to a competitive base salary.
 
     Individual restaurants typically employ between 70 and 110 non-management
hourly employees (made up of a mix of part-time and full-time workers),
depending on restaurant size and traffic.
 
CASA BONITA
 
     Concept and Menu. The Company's two Casa Bonita restaurants are located in
Denver, Colorado and Tulsa, Oklahoma and contain 42,000 and 26,000 square feet,
respectively. The restaurants are designed to recreate the atmosphere of a
Mexican village at night. The restaurants also feature entertainment daily,
including strolling mariachis, authentic Mexican dancers, magicians, games and
cliff divers. The restaurant's entertainment, combined with high quality,
authentic Mexican food, is designed to attract a diverse customer base,
including tourists and local customers. In addition to typical Mexican menu
offerings, these restaurants feature all-you-can-eat dinners which offer
customers unlimited servings of selected menu items.
 
     The Company focuses on three primary target audiences in its advertising
and promotional programs for its Casa Bonita restaurants: (i) local customers;
(ii) tourists; and (iii) groups and parties. The Company markets aggressively to
attract tourists by placing advertisements in local tourist and special event
guides and by otherwise promoting each Casa Bonita restaurant as a local
attraction. With its large dining areas and
 
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private rooms, the Company also promotes Casa Bonita as an ideal setting for
banquets, private parties and other group events.
 
JJ NORTH'S GRAND BUFFET
 
     Concept and Menu. The Company's seven JJ North's Grand Buffet Restaurants
are located in Idaho (3) Washington (2) Oregon (1) and Utah (1). The restaurants
are approximately 6,000 to 10,000 square feet and seat approximately 210 to 320
customers. The 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 $5.99 for lunch and approximately $7.99 for
dinner, and may vary depending on restaurant location. The restaurants offer
reduced prices to children under age 12 and to senior citizens.
 
     Operations. The JJ North's restaurants are supervised by a Vice President
of Operations who reports to the Company's President. Each restaurant has a
general manager and two assistant managers and typically employs between 40 and
100 hourly employees (made up of a mix of part-time and full-time workers)
depending on restaurant size and traffic.
 
RELATIONSHIP WITH CKE
 
     In connection with the Initial Public Offering, the Company and CKE entered
into a CKE Service Agreement pursuant to which CKE provides the Company with
certain multi-unit retail infrastructure support in exchange for an annual fee
of $350,000, which fee may be increased up to 10% per year based upon increases
in CKE's cost of providing such services. Such services consist of (i)
accounting and administrative services, such as maintaining accounting records,
performing accounting activities, preparing financial reports, operating and
maintaining the information technology system, establishing and administering
certain employee benefits and complying with reporting obligations thereunder,
(ii) financial services, including the identification and analysis of possible
transactions and related financial and strategic advice, assistance in budget
and forecast preparation, consultations and advice as to presentations,
discussions and disclosures to financial analysts and the financial press and
advice concerning crisis management and control, (iii) real estate services,
including site analysis and other real estate matters, and (iv) purchasing
services. The CKE Service Agreement has a five year term and will expire, unless
extended, on September 15, 2002. CKE or the Company may terminate the agreement
upon 90 days written notice.
 
LICENSES, TRADEMARKS AND SERVICE MARKS
 
     The Company purchased the trademarks and service marks for JJ North's Grand
Buffet, Casa Bonitas and BuddyFreddys. The Company has entered into a license
agreement with CKE for use of the "Star" name and design. The Company utilizes
the JB's Restaurant and HomeTown Buffet marks pursuant to various franchise
agreements. The Company also has entered into license agreements for the
Stacey's Buffet mark, which the Company plans to use until such restaurants are
converted to the Company's other buffet concepts. The Company is utilizing the
Maggie's name until such restaurants are converted to one of the Company's other
buffet concepts.
 
SEASONALITY
 
     The Company's business is seasonal in nature with the spring and summer
quarters being the highest volume periods. The Company's lowest volume periods
typically occur during the fall and winter fiscal quarters.
 
COMPETITION
 
     The restaurant industry is highly competitive. The Company competes on the
basis of the quality and value of food products offered, price, service,
location and overall dining experience. The Company's primary competitor in the
buffet restaurant business is Buffets, Inc., which owns, operates and franchises
the HomeTown Buffet and Old Country Buffet restaurant concepts. The Company also
competes with a large and diverse group of restaurant chains and individually
owned restaurants, including chains and individually owned
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<PAGE>   9
 
restaurants that utilize 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 restaurants is
increasing. As the Company and its principal competitors expand operations in
various geographic areas, competition, including competition among buffet
restaurants with concepts similar to the Company's concepts, 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 the Company.
In addition, the restaurant industry is affected by changes in consumer tastes,
national, regional and local economic conditions and market trends. The
performance of individual restaurants may be affected by factors such as traffic
patterns, demographic considerations and the type, number and location of
competing restaurants. 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 have a material adverse effect on the Company's operations. The Company's
continued success is dependent to a substantial extent on its reputation for
providing high quality and value and this reputation may be affected not only by
the performance of its restaurants but also by the performance of
franchisor-owned restaurants and restaurants operated by other franchisees, over
which the Company has no control.
 
GOVERNMENT REGULATION
 
     The restaurant industry is subject to numerous federal, state and local
government regulations, including those relating to the preparation and sale of
food and building and zoning requirements.
 
     In addition, the Company is subject to laws governing its relationship with
employees, including minimum wage requirements, overtime, working and safety
conditions and citizenship requirements. 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. 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.
 
EMPLOYEES
 
     As of April 17, 1998, the Company employed approximately 2,940 persons, of
whom approximately 2,775 were restaurant employees, and approximately 165 were
restaurant management, supervisory and corporate personnel. Restaurant employees
include both full-time and part-time workers and all are typically paid on an
hourly basis. No Company employees are covered by collective bargaining
agreements. The Company believes that its relations with its employees are
generally good.
 
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<PAGE>   10
 
DIRECTORS AND EXECUTIVE OFFICERS
 
     The following table sets forth certain information regarding the Company's
directors and executive officers:
 
<TABLE>
<CAPTION>
           NAME               AGE                           POSITION
           ----               ---                           --------
<S>                           <C>      <C>
William P. Foley II.......    53       Chairman of the Board
Robert E. Wheaton.........    45       Chief Executive Officer, President and Director
Theodore Abajian..........    34       Chief Financial Officer
Charlotte L. Miller.......    41       General Counsel and Secretary
C. Thomas Thompson........    48       Director
Stuart W. Clifton.........    53       Director
Jack M. Lloyd.............    47       Director
Thomas G. Schadt..........    56       Director
Norman N. Habermann.......    64       Director
John F. North, Jr.........    49       Director
</TABLE>
 
     William P. Foley II has served as the Chairman of the Board of the Company
since its formation in July 1997. Mr. Foley has been the Chief Executive Officer
of CKE since October 1994, the Chairman of the Board of Directors of CKE since
March 1994, and has served as a director of CKE since December 1993. Since 1981,
Mr. Foley has been Chairman of the Board, President (until January 1995) and
Chief Executive Officer of Fidelity National Financial, Inc., a company engaged
in title insurance and related services. Mr. Foley also serves as the Chairman
of the Board of Checkers Drive-In Restaurants, Inc. and GB Foods Corporation and
as a member of the Boards of Directors of Rally's Hamburgers, Inc., DataWorks
Corporation and Micro General Corporation.
 
     Robert E. Wheaton has served as the Chief Executive Officer, President and
as a director of the Company since its formation in July 1997. Mr. Wheaton also
served as a director of Stacey's Buffet, Inc. from October 31, 1997 to February
4, 1998 and as interim Chief Executive Officer of Stacey's from December 24,
1997 to February 4, 1998. Mr. Wheaton has served as an Executive Vice President
of CKE since January 1996. 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.
 
     Theodore Abajian has served as the Chief Financial Officer of the Company
since its formation in July 1997. Mr. Abajian also served as a director of
Stacey's Buffet, Inc. from October 31, 1997 to February 4, 1998. Mr. Abajian has
been the Vice President and Controller of Summit Family Restaurants Inc. since
1994. From 1983 to 1994, he held several positions with Family Restaurants,
Inc., including Director of Financial Analysis, Planning and Reporting for the
family restaurant division, which included approximately 350 Carrows and Coco's
restaurants.
 
     Charlotte L. Miller has been Vice President, General Counsel and Secretary
of the Company since its formation in July 1997. Ms. Miller has been Sr. Vice
President and Chief Administrative Officer of Summit Family Restaurants Inc.
since July 1996 and prior to that time was Sr. Vice President and General
Counsel of Summit.
 
     C. Thomas Thompson has been a director of the Company since its formation
in July 1997. Mr. Thompson has served as the President and Chief Operating
Officer of CKE since October 1994. Mr. Thompson has been a franchisee of CKE
since 1984, and currently operates 15 Carl's Jr. Restaurants in
 
                                        8
<PAGE>   11
 
the San Francisco Bay Area. Mr. Thompson also currently serves as Vice Chairman
of the Board of Checkers Drive-In Restaurants, Inc. and a member of the Board of
Directors of Rally's Hamburgers, Inc. Mr. Thompson has more than 25 years of
experience in the restaurant industry. He previously held positions with
Jack-in-the-Box.
 
     Stuart W. Clifton has served as a director of the Company since the
completion of the Company's Initial Public Offering in September, 1997. Since
1987, Mr. Clifton has been the Chief Executive Officer and President and a
member of the Board of Directors of DataWorks Corporation, a supplier of
information systems to manufacturing companies.
 
     Thomas G. Schadt has served as a director of the Company since the
completion of the Company's Initial Public Offering in September, 1997. Mr.
Schadt has been the Chief Executive Officer of a privately-held beverage
distribution company, Bear Creek, L.L.C., since 1995. From 1976 to 1994, he held
several positions with Pepsico, Inc., most recently, Vice President of Food
Service.
 
     Norman N. Habermann has served as a director of the Company since the
completion of the Company's Initial Public Offering in September, 1997. Since
February 1994, Mr. Habermann has been the President of Scobrett Associates,
Inc., which is involved in venture capital and consulting activities. From
December 1986 to January 1994, Mr. Habermann was President and Chief Executive
Officer of the Restaurant Enterprises Group, Inc. and its predecessors. From
November 1994 until its acquisition by CKE in July 1996, Mr. Habermann was a
director of Summit. Mr. Habermann also serves as a director of International
Food & Beverage, Inc.
 
     Jack M. Lloyd has served as a director of the Company since the completion
of the Company's Initial Public Offering in September, 1997. Mr. Lloyd has
served as Chairman of the Board of DenAmerica Corp. since July 9, 1996 and as
President, Chief Executive Officer and a director of DenAmerica Corp. since
March 29, 1996. Mr. Lloyd served as Chairman of the Board and Chief Executive
Officer of Denwest Restaurant Corp. ("DRC") from 1987 until the March 1996
merger of DRC and DenAmerica and served as President of DRC from 1987 until
November 1994. Mr. Lloyd engaged in commercial and residential real estate
development and property management as President of First Federated Investment
Corporation during the early and mid-1980's. Mr. Lloyd also currently serves as
a director of Action Performance Companies, Inc.
 
     John F. North, Jr. has served as a director of the Company since the
completion of the Company's initial public offering in September, 1997. Mr.
North is the co-founder of JJ North's Grand Buffet and, since 1978, has served
as the President and Co-Chairman of the Board of Directors of North's
Restaurants, Inc.
 
ITEM 2. PROPERTIES
 
     The Company's headquarters is located in Salt Lake City, Utah.
 
     The Company's restaurants are primarily freestanding locations. As of
January 26, 1998 all of the Company's restaurant facilities were leased in order
to reduce the initial costs of development. The leases expire on dates ranging
from 2000 to 2014 with the majority of the leases providing for renewal options.
All leases provide for specified periodic rental payments, and most call for
additional rental based upon revenue volume. Most of the leases require the
Company to maintain the property and to pay for the cost of insurance and taxes.
In addition, the Company seeks to obtain construction allowances from the
landlord in order to defray the cost of improvements.
 
                                        9
<PAGE>   12
 
     As of January 26, 1998, the Company's restaurants are located in the
following states:
 
<TABLE>
<CAPTION>
                                                          NUMBER OF RESTAURANTS
                                               -------------------------------------------
                                               HOMETOWN      JJ
                    STATE                       BUFFET     NORTH'S    CASA BONITA    TOTAL
                    -----                      --------    -------    -----------    -----
<S>                                            <C>         <C>        <C>            <C>
Arizona......................................     8          --           --           8
Colorado.....................................     2          --            1           3
Idaho........................................     --          3           --           3
New Mexico...................................     2          --           --           2
Oklahoma.....................................     --         --            1           1
Oregon.......................................     --          1           --           1
Utah.........................................     3           1           --           4
Washington...................................     --          2           --           2
Wyoming......................................     1          --           --           1
                                               --------    -------    -----------    -----
          Total..............................     16          7            2          25
                                               ========    =======    ===========    =====
</TABLE>
 
ITEM 3. LEGAL PROCEEDINGS
 
     On October 8, 1997, the Company's subsidiaries, HTB and Summit Family
Restaurants Inc. ("Summit"), entered into a settlement agreement with HomeTown
Buffet, Inc., and Buffets, Inc., thereby resolving litigation that had been
initiated by HTB, Summit and CKE on August 9, 1996, in the United States
District Court for the District of Utah, Central Division against Buffets, Inc.
and HomeTown Buffet, Inc. for violation of federal and state antitrust laws and
other claims. The settlement agreement clarified certain relationships between
the parties and certain information to be provided by HTB to HomeTown Buffet,
Inc. No money damages were paid as part of the settlement.
 
     The Company is from time to time the subject of complaints or litigation
from customers alleging illness, injury 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.
 
                                       10
<PAGE>   13
 
                                    PART II
 
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
 
     The Company's Common Stock which began trading on September 30, 1997 after
the completion of the Company's Initial Public Offering, is listed on the NASDAQ
National Market System under the symbol "STRZ". As of March 31, 1998, there were
approximately four record holders of the Company's Common Stock. The following
table sets forth the high and low bid quotations for the Common Stock, as
reported by NASDAQ.
 
<TABLE>
<CAPTION>
                                                                HIGH     LOW
                                                                -----   -----
<S>                                                             <C>     <C>
FISCAL 1998
  First Quarter.............................................       --      --
  Second Quarter............................................       --      --
  Third Quarter.............................................    $16 1/2 $13 1/4
  Fourth Quarter............................................     13 5/8  11 3/8
</TABLE>
 
     In connection with the Company's Initial Public Offering, the Company
declared and paid a cash dividend of $9.3 million to CKE. Other than this
dividend, the Company has never declared or paid dividends on its Common Stock.
The Company expects future earnings, if any, will be retained to finance the
operation and expansion of the Company's business and, accordingly, does not
intend to declare or pay any cash dividends on the Common Stock in the
foreseeable future.
 
ITEM 6. SELECTED FINANCIAL DATA
 
     The selected financial information and other data presented below should be
read in conjunction with the "Consolidated Financial Statements", and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations' included elsewhere in this Form 10-K. The selected consolidated
financial data presented below, except store data, has been derived from the
historical consolidated financial statements of the Company and its predecessor.
The operating statement data for the periods ending July 15, 1996, and prior
include only the results of operations of HTB Restaurants, Inc., an operator of
franchised HomeTown Buffet restaurants, and are referred to herein as the
Predecessor Company or Predecessor. Summit Family Restaurants Inc. and its
wholly-owned subsidiary HTB was acquired by CKE on July 15, 1996 (the "Summit
Acquisition"). Operating statement data for periods beginning after July 15,
1996 are herein referred to as the Successor Company or Successor. The operating
statement data for the twenty-eight weeks ending January 27, 1997 include the
results of operations of HTB and the results of operations of the two Casa
Bonita restaurants from October 1, 1996, (the date of the Casa Bonita
acquisition). The fifty-two week period ended January 26, 1998 includes the
results of operations of seven JJ North's Grand Buffet Restaurants operated by
the Company from September 30, 1997, (the date of JJ North's acquisition).
 
     The table also sets forth the pro forma income statement data for the
fifty-two week period ended January 27, 1997, which combines the results of
operations for the Predecessor Company and the Successor Company as if the Casa
Bonita acquisition had occurred on January 26, 1996. The pro forma data set
forth below for the period presented is unaudited and has been prepared by
management solely to facilitate period-to-period comparison and do not purport
to be indicative of the consolidated results of operations that would have
occurred had the acquisition occurred at January 26, 1996, or which may be
expected to occur in the future.
 
                                       11
<PAGE>   14
 
                            SELECTED FINANCIAL DATA
          (IN THOUSANDS EXCEPT PER SHARE AMOUNTS AND RESTAURANT DATA)
 
<TABLE>
<CAPTION>
                                                     SUCCESSOR                           PREDECESSOR
                                            -----------------------------   -------------------------------------
                                                             TWENTY-EIGHT    THIRTY   
                                             FIFTY-TWO        WEEKS FROM     WEEKS       FIFTY-TWO WEEKS ENDED       PRO FORMA
                                               WEEKS        JULY 16, 1996    ENDED    ---------------------------    YEAR ENDED
                                               ENDED              TO        JULY 15,   DEC. 18,  DEC. 19,  DEC. 20,   JAN. 27,
                                           JAN. 26, 1998    JAN. 27, 1997     1996      1995      1994      1993        1997
                                           -------------    -------------   --------   -------   -------   -------   ----------
<S>                                         <C>             <C>             <C>       <C>       <C>       <C>        <C>
CONSOLIDATED STATEMENTS OF EARNINGS DATA:
Total revenues............................     $54,659         $23,632      $23,207   $36,741   $30,871   $13,167    $50,938
Costs and expenses:
    Food costs............................      18,024           8,371        8,569    13,769    11,469     4,918     17,358
    Labor costs...........................      17,301           7,565        6,810    10,878     9,089     3,732     15,792
    Occupancy and other expenses..........      10,829           4,732        5,030     8,954     6,769     2,695     10,154
    General and administrative............       2,291           1,062        1,193     1,666     1,762       980      2,424
    Depreciation and amortization.........       2,109             988          914     1,232       821       384      1,975
                                               -------         -------      -------   -------   -------   -------    -------
        Total costs and expenses..........      50,554          22,718       22,516    36,499    29,910    12,709     47,703
                                               -------         -------      -------   -------   -------   -------    -------
Income from operations....................       4,105             914          691       242       961       458      3,235
Interest expense..........................        (200)           (106)        (145)     (192)     (203)     (110)      (220)
Other Income..............................         593              --           --        --        --        --         --
                                               -------         -------      -------   -------   -------   -------    -------
Income before income taxes................       4,498             808          546        50       758       348      3,015
Income taxes..............................       1,799             338          216        22       301       139      1,206
                                               -------         -------      -------   -------   -------   -------    -------
Net Income................................     $ 2,699         $   470      $   330   $    28   $   457   $   209    $ 1,809
                                               =======         =======      =======   =======   =======   =======    =======
Net Income per common share -- diluted....     $  0.76         $  0.18
                                               =======         =======
Weighted average shares outstanding -
  diluted.................................       3,528           2,600
BALANCE SHEET DATA:
Total assets..............................     $40,969         $16,783                $16,283   $13,003   $ 9,026
Total debt including current portion......       2,368           2,609                 11,150     6,714     5,076
Stockholders' equity......................     $32,537         $ 9,742                $ 1,806   $ 1,801   $ 2,134
OTHER DATA:
Operating units(1)
    HomeTown Buffet.......................          16              16           16        16        14         7         16
    JJ North's Grand Buffet...............           7              --           --        --        --        --         --
    Casa Bonita...........................           2               2           --        --        --        --          2
                                               -------         -------      -------   -------   -------   -------    -------
TOTAL.....................................          18              18           16        16        14         7         18
                                               =======         =======      =======   =======   =======   =======    =======
</TABLE>
 
---------------
(1) At the end of the respective periods.
 
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 of the Company, and the
notes thereto, presented elsewhere in this Form 10-K. The pro forma results of
operations for the fifty-two weeks ended January 27, 1997, ("Pro Forma Fiscal
1997") include fifty-two weeks of operations for both the Company's sixteen
franchised Hometown Buffet Restaurants and the Company's two Casa Bonita
Restaurants. The results of operations for the period ended January 26, 1998,
("Fiscal 1998") include fifty-two weeks of operations for the Company's sixteen
franchised Hometown Buffet Restaurants, fifty-two weeks of operations for the
Company's two Casa Bonita Restaurants and seventeen weeks of operations for the
seven JJ North's Grand Buffet restaurants operated by the Company. Comparability
of future periods may also from time to time be affected by the implementation
of the Company's acquisition and strategic alliance strategies, and the costs
associated with integrating new restaurants or under performing or unprofitable
restaurants, if any, acquired or otherwise operated by the Company may have a
material adverse effect on the Company's results of operations.
 
                                       12
<PAGE>   15
 
RESULTS OF OPERATIONS
 
     The following table summarizes the Company's results of operations as a
percentage of total revenues for Pro Forma Fiscal 1997, the twenty-eight weeks
ended January 27, 1997, and Fiscal 1998.
 
<TABLE>
<CAPTION>
                                                                 THE COMPANY
                                                     -----------------------------------      PRO FORMA
                                                        FIFTY-TWO                             FIFTY-TWO
                                                          WEEKS           TWENTY-EIGHT          WEEKS
                                                          ENDED           WEEKS ENDED           ENDED
                                                     JANUARY 26, 1998   JANUARY 27, 1997   JANUARY 27, 1997
                                                     ----------------   ----------------   ----------------
<S>                                                  <C>                <C>                <C>
TOTAL REVENUES.....................................       100.0%             100.0%             100.0%
                                                          -----              -----              -----
Costs and expenses:
     Food costs....................................        33.0               35.4               34.1
     Labor costs...................................        31.6               32.0               31.0
     Occupancy and other expenses..................        19.8               20.0               19.9
     General and administrative expenses...........         4.2                4.5                4.8
     Depreciation and amortization.................         3.9                4.2                3.9
                                                          -----              -----              -----
TOTAL COSTS AND EXPENSES...........................        92.5               96.1               93.7
                                                          -----              -----              -----
INCOME FROM OPERATIONS.............................         7.5                3.9                6.3
     Interest expense..............................        (0.4)              (0.5)              (0.4)
     Other income..................................         1.1                 --                 --
                                                          -----              -----              -----
     Income before income taxes....................         8.2                3.4                5.9
INCOME TAX EXPENSE.................................        (3.3)              (1.4)              (2.4)
                                                          -----              -----              -----
NET INCOME.........................................         4.9%               2.0%               3.5%
                                                          =====              =====              =====
</TABLE>
 
Comparison of Pro Forma Fiscal 1997 to Fiscal 1998
 
     Total revenues increased $3.7 million or 7.3% from $50.9 million in Pro
Forma Fiscal 1997 to $54.6 million in fiscal 1998. The increase was attributable
to the addition of seven JJ North's grand Buffet Restaurants in Fiscal 1998
($2.7 million) and a 2.5% or $1.0 million increase in same store sales at the
Company's HomeTown Buffet Restaurants.
 
     Food costs as a percent of total revenues decreased from 34.1% in Pro Forma
Fiscal 1997 to 33.0% in Fiscal 1998. The decrease is primarily attributable to a
1.7% decrease in food cost in the Company's HomeTown Buffet restaurants
resulting from improved restaurant operations and purchasing economies.
 
     Labor costs as a percent of total revenues increased from 31.0% in Pro
Forma Fiscal 1997 to 31.6% in Fiscal 1998. The increase was primarily
attributable to addition of seven JJ North's Restaurants which operate at a
higher labor cost than the Company's sixteen HomeTown Buffet Restaurants.
 
     General and administrative expenses as a percentage of total revenues
decreased from 4.8% in Pro Forma Fiscal 1997 to 4.2% in Fiscal 1998. The
decrease is primarily attributable to lower general and administrative costs
resulting from the July 1996 acquisition of the Predecessor by CKE.
 
     Other income in Fiscal 1998 represents interest income on cash balances and
notes receivable ($321,000) and management fee income ($272,000) resulting from
the Company's strategic alliance with Stacey's Buffet, Inc.
 
Comparison of the twenty-eight weeks ended January 27, 1997, to Fiscal 1998
 
     Due to the differing lengths of time included in each period presented, the
comparison of these periods may not be meaningful or indicative of future
results.
 
     Revenues increased $31.1 million or 131.8% from $23.6 million for the
twenty-eight weeks ended January 27, 1997, to $54.7 million for Fiscal 1998. The
increase is attributable to the full year impact of the Company's HomeTown
Buffet and Casa Bonita restaurants, $18.9 million and $8.5 million respectively,
the
 
                                       13
<PAGE>   16
 
addition of seven JJ North's Grand Buffet Restaurants in Fiscal 1998 ($2.7
million) and a 2.5% or $1.0 million increase in same store sales at the
Company's HomeTown Buffet Restaurants.
 
     Food costs as a percentage of total revenues decreased from 35.4% for the
twenty-eight weeks ended January 27, 1997, to 33.0% for Fiscal 1998. The
decrease is attributable to the inclusion of Casa Bonita for a full year, which
operates at a lower level of food costs.
 
     Labor costs as a percentage of total revenues decreased from 32.0% for the
twenty-eight weeks ended January 27, 1997, to 31.6% for Fiscal 1998. The
decrease is attributable to a consistent improvement in labor costs in the Casa
Bonita restaurants.
 
     Occupancy and other, general and administrative and depreciation and
amortization expenses as a percentage of total revenues have all decreased in
Fiscal 1998 as compared to the twenty-eight weeks ended January 27, 1997. These
decreases are attributable to the inclusion of Casa Bonita for a full year.
 
     Other income in Fiscal 1998 represents interest income on cash balances and
notes receivable ($321,000) and management fee income ($272,000) resulting from
the Company's strategic alliance with Stacey's Buffet, Inc.
 
                                       14
<PAGE>   17
 
                              FINANCIAL CONDITION
 
LIQUIDITY AND CAPITAL RESOURCES
 
     The Company, prior to the reorganization, historically financed operations
through a combination of cash on hand, cash provided from operations and
available borrowings under bank lines of credit. As of January 26, 1998, the
Company had $15.4 million in cash and cash equivalents.
 
     Cash provided by operations was approximately $6.0 million for Fiscal 1998
and approximately $1.9 million for the twenty-eight weeks ended January 27,
1997. The Company completed an Initial Public Offering on September 30, 1997
generating net proceeds after commissions and offering expenses of $30.8
million. Concurrent with the Initial Public Offering, the Company used $9.3
million to pay a dividend to CKE, $4.5 million to acquire certain JJ North's
restaurants, $1.1 million to acquire the net assets of two Casa Bonita
restaurants and $2.0 million to fund capital additions. As of January 26, 1998,
the Company has loaned $3.4 million to North's and $710,000 to Stacey's. In
addition, the Company, through its credit agreement with North's has committed
to lend up to an additional $350,000 to North's. The Company expects to provide
these funds through available cash on hand.
 
     On February 13, 1998, the Company acquired three Stacey's Buffet
restaurants located in Florida from Stacey's for $1.0 million. The purchase
price was paid by cancellation of Stacey's debt to the Company which was
incurred as part of the strategic alliance between the two companies. The
company and Stacey's have mutually agreed to terminate their strategic alliance
including any future obligations of the Company to make loans to Stacey's.
 
     During the first quarter of fiscal 1999, the Company completed several
acquisitions of restaurants utilizing, in aggregate, approximately $8.9 million
in cash (see Note 11 -- Subsequent Events included in the Notes to Consolidated
Financial Statements). The largest of the acquisitions was twelve JB's
Restaurants from CKE. These restaurants will be converted to the Company's
small-format buffet concept at a cost of $250,000 to $300,000 each. One of these
conversions was completed in the first quarter of fiscal 1999.
 
     The Company does not currently have a bank line of credit or other working
capital facility available to it. The Company intends to obtain a bank credit
facility to support its working capital requirements. Management anticipates
that the credit facility will contain customary affirmative and negative
covenants, including maintaining certain minimum working capital, net worth and
financial ratios and restrictions on the Company's ability to pay dividends on
the Company's common stock. There can be no assurance that the Company will be
able to arrange a credit facility when required or on terms acceptable to the
Company.
 
     The Company intends to expand its operations through the opening of new
restaurants and the acquisition of regional buffet chains. In addition, the
Company may expand through the purchase of existing restaurant sites, which
would be converted to one of the Company's restaurant concepts. Management
estimates the cost of opening its prototype restaurant to be approximately $1.5
million to $1.7 million assuming leased real estate. In many instances,
management believes that existing restaurant locations can be acquired and
converted to the Company's prototype at a lower cost than new unit openings.
These costs consist primarily of exterior and interior appearance modifications
and certain kitchen and food service equipment. There can be no assurance that
the Company will be able to acquire additional restaurant chains or locations
or, if acquired, that these restaurants will have a positive contribution to the
Company's results of operations.
 
     The Company believes that the proceeds from the Initial Public Offering and
its cash flow from operations will be sufficient to satisfy its working capital,
and capital expenditure requirements for at least the next twelve months. If
those sources of capital are insufficient to satisfy the Company's capital
spending and working capital requirements, or if the Company determines to make
any significant acquisitions, or investments in other businesses, the Company
may seek to raise additional funds through public or private equity and/or debt
financings or from other sources. There can be no assurance, however, that
changes in the Company's operating plans, the unavailability of a credit
facility, the acceleration of the Company's expansion plans, lower than
anticipated revenues, increased expenses, potential acquisitions or other events
will not cause
 
                                       15
<PAGE>   18
 
the Company to seek additional financing sooner than anticipated. There can be
no assurance that additional financing will be available on acceptable terms or
at all.
 
YEAR 2000
 
     The Company is currently working to resolve the potential impact of the
year 2000 on the processing of data-sensitive information by the Company's
computerized information systems. The year 2000 problem is the result of
computer programs being written using two digits (rather than four) to define
the applicable year. Any of the Company's programs that have time-sensitive
software may recognize a date using "00" as the year 1900 rather than the year
2000, which could result in miscalculations or system failures. Based on
preliminary information, costs of addressing potential problems are not
currently expected to have a material adverse impact on the Company's financial
position, results of operations or cash flows in future periods. However, the
inability of the Company or its suppliers or distributors and other vendors to
resolve such processing issues in a timely manner could have a material adverse
impact on the Company. Accordingly, the Company plans to devote the necessary
resources to resolve all significant year 2000 issues in a timely manner.
 
IMPACT OF INFLATION
 
     Management recognizes that inflation has an impact on food, construction,
labor and benefit costs, all of which can significantly affect the Company's
operations. Historically, the Company has been able to pass any associated
higher costs due to these inflationary factors along to its customers because
those factors have impacted nearly all restaurant companies, During fiscal 1998
and fiscal 1997, however, management has emphasized cost controls rather than
price increases, given the competitive pressure within the buffet style
restaurant industry.
 
NEW ACCOUNTING PRONOUNCEMENTS
 
     In June 1997, the Financial Accounting Standards Board (the "FASB") issued
Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" ("SFAS 130"). SFAS 130 establishes standards for the reporting and
display of comprehensive income and its components (revenues, expenses, gains
and losses) in a full set of general- purpose financial statements. SFAS 130
requires all items that are required to be recognized under accounting standards
as components of comprehensive income to be reported in a financial statement
that is displayed with the same prominence as other financial statements. SFAS
130 does not require a specific format for that financial statement but requires
that an enterprise display an amount representing total comprehensive income for
the period covered by that financial statement. SFAS 130 requires an enterprise
to (a) classify items of other comprehensive income by their nature in a
financial statement and (b) display the accumulated balance of other
comprehensive income separately from retained earnings and additional paid-in
capital in the equity section of a statement of financial position. SFAS 130 is
effective for fiscal years beginning after December 15, 1997. Management has not
determined whether the adoption of SFAS 130 will have a material impact on the
Company's consolidated financial position or results of operations.
 
     In June 1997, the FASB issued Statement of Financial Accounting Standards
No. 131, "Disclosures about Segments of an Enterprise and Related Information"
("SFAS 131"). SFAS 131 establishes standards for public business enterprises to
report information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports issued to shareholders. It also
establishes standards for related disclosures about products and services,
geographic areas and major customers. This statement supersedes Statement of
Financial Accounting Standards No. 14, Financial Reporting for Segments of a
Business Enterprise, but retains the requirement to report information about
major customers. It amends Statement of Financial Accounting Standards No. 94,
Consolidation of All Majority-Owned Subsidiaries, to remove the special
disclosure requirements for previously unconsolidated subsidiaries. SFAS 131
requires, among other items, that a public business enterprise report a measure
of segment profit or loss, certain specific revenue and expense items, and
segment assets, information about the revenues derived from the enterprise's
products or services, and major customers. SFAS 131 also requires that the
enterprise report descriptive information about the way that the operating
                                       16
<PAGE>   19
 
segments were determined and the products and services provided by the operating
segments. SFAS 131 is effective for financial statements for periods beginning
after December 15, 1997. In the initial year of application, comparative
information for earlier years is to be restated. SFAS 131 need not be applied to
interim financial statements in the initial year of its application, but
comparative information for interim periods in the initial year of application
is to be reported in financial statements for interim periods in the second year
of application. Management has not determined whether the adoption of SFAS 131
will have a material impact on the Company's segment reporting.
 
     In December 1997, the American Institute of Certified Public Accountants
(the "AICPA") approved for issuance the Statement of Position ("SOP"), Reporting
on the Costs of Start-Up Activities. The SOP requires that costs incurred during
a start-up activity (including organization costs) be expensed as incurred. The
SOP is effective for fiscal years beginning after December 15, 1998. The Company
currently amortizes pre-opening costs over one year from the time they are
incurred. Management has not determined whether the adoption of this SOP will
have a material impact on the Company's consolidated financial position or
results of operations.
 
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
 
     See the Index included at "Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K."
 
     The following table presents summarized quarterly results for the Successor
Company.
 
<TABLE>
<CAPTION>
                                                                          UNAUDITED
                                                            -------------------------------------
                                                              1ST       2ND       3RD       4TH
                                                            -------   -------   -------   -------
                                                                   (DOLLARS IN THOUSANDS,
                                                                  EXCEPT PER SHARE AMOUNTS)
<S>                                                         <C>       <C>       <C>       <C>
FISCAL YEAR 1998
Total Revenues............................................  $16,581   $12,726   $12,178   $13,174
Operating Income..........................................    1,553     1,433       684       435
Net Income................................................      895       832       440       532
Net Income per share -- basic.............................  $  0.35   $  0.32   $  0.12   $  0.10
                                                            -------   -------   -------   -------
Net Income per share -- diluted...........................  $  0.35   $  0.32   $  0.12   $  0.10
                                                            -------   -------   -------   -------
FISCAL YEAR 1997
Total Revenues............................................      N/A   $ 3,026   $ 9,573   $11,033
Operating Income..........................................      N/A        64       302       548
Net Income................................................      N/A        18       151       301
Net Income per share -- basic.............................      N/A   $  0.01   $  0.06   $  0.12
                                                                      -------   -------   -------
Net Income per share -- diluted...........................      N/A   $  0.01   $  0.06   $  0.12
                                                                      -------   -------   -------
</TABLE>
 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
 
     None
 
                                       17
<PAGE>   20
 
                                    PART III
 
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
 
     The information pertaining to directors and executive officers of the
registrant is hereby incorporated by reference to the Company's Proxy Statement
to be used in connection with the Company's 1998 Annual Meeting of Stockholders,
to be filed with the Commission within 120 days of January 26, 1998. Information
concerning the current executive officers of the Company is contained in Item 1
of Part I of this Annual Report on Form 10-K.
 
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 1998 Annual Meeting of Stockholders, to be filed with the Commission
within 120 days of January 26, 1998.
 
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
     The information pertaining to security ownership of certain beneficial
owners and management is hereby incorporated by reference to the Company's Proxy
Statement to be used in connection with the Company's 1998 Annual Meeting of
Stockholders, to be filed with the Commission within 120 days of January 26,
1998.
 
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 1998 Annual Meeting of
Stockholders, to be filed with the Commission within 120 days of January 26,
1998.
 
                                       18
<PAGE>   21
 
                                    PART IV
 
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
 
     (A)(1)  INDEX TO CONSOLIDATED FINANCIAL STATEMENTS:
 
<TABLE>
<CAPTION>
                                                              PAGE NUMBER
                                                              -----------
<S>                                                           <C>
Independent Auditors' Report................................      F-1
Consolidated Balance Sheets -- as of January 26, 1998 and
  January 27, 1997..........................................      F-2
Consolidated Statements of Income -- for the 52-weeks ended
  January 26, 1998, 28-weeks ended January 27, 1997,
  30-weeks ended July 15, 1996 and 52-weeks ended December
  18, 1995..................................................      F-4
Consolidated Statements of Stockholders' Equity -- for the
  52-weeks ended January 26, 1998, 28-weeks ended January
  27, 1997, 30-weeks ended July 15, 1996 and 52-weeks ended
  December 18, 1995.........................................      F-5
Consolidated Statements of Cash Flows -- for the 52-weeks
  ended January 26, 1998, 28-weeks ended January 27, 1997,
  30-weeks ended July 15, 1996 and 52-weeks ended December
  18, 1995..................................................      F-6
Notes to Consolidated Financial Statements..................      F-7
</TABLE>
 
     (A)(2)  INDEX TO FINANCIAL STATEMENT SCHEDULES:
 
             All schedules are omitted since the required information is not
             present in amounts sufficient to require submission of the
             schedule, or because the information required is included in the
             consolidated financial statements or the notes thereto.
 
     (A)(3)  EXHIBITS:
 
             An "Exhibit Index" has been filed as a part of this Form 10-K
             beginning on Page E-1 hereof and is incorporated herein by
             reference.
 
     (B)     CURRENT REPORTS ON FORM 8-K:
 
             A current report on Form 8-K dated November 17, 1997 was filed
             during the fourth quarter of the fiscal year to report the
             Company's Strategic alliance and credit agreement with Stacey's
             Buffet, Inc.
 
             A current report on Form 8-K/A dated December 12, 1997 was filed
             during the fourth quarter of the fiscal year to amend a report on
             Form 8-K filed on October 17, 1997.
 
                                       19
<PAGE>   22
 
                                   SIGNATURES
 
     Pursuant to the requirements of the Securities Exchange Act of l934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
 
                                          STAR BUFFET, INC.
                                          (Registrant)
 
April 24, 1998                            By:     /s/ ROBERT E. WHEATON
                                            ------------------------------------
                                                     Robert E. Wheaton
                                               President and Chief Executive
                                                           Officer
                                               (principal executive officer)
 
April 24, 1998                            By:     /s/ THEODORE ABAJIAN
                                            ------------------------------------
                                                      Theodore Abajian
                                              Chief Financial Officer Officer
                                               (principal financial officer)
 
     Pursuant to the requirements of the Securities Exchange Act of l934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
 
<TABLE>
<CAPTION>
                      SIGNATURE                                       TITLE                      DATE
                      ---------                                       -----                      ----
<S>                                                      <C>                                <C>
              /s/ William P. Foley, II                        Chairman of the Board         April 24, 1998
-----------------------------------------------------
                William P. Foley, II
 
                /s/ ROBERT E. WHEATON                     President and Chief Executive     April 24, 1998
-----------------------------------------------------         Officer and Director
                  Robert E. Wheaton
 
                /s/ STUART W. CLIFTON                               Director                April 24, 1998
-----------------------------------------------------
                  Stuart W. Clifton
 
                  /s/ JACK M. LLOYD                                 Director                April 24, 1998
-----------------------------------------------------
                    Jack M. Lloyd
 
                /s/ THOMAS G. SCHADT                                Director                April 24, 1998
-----------------------------------------------------
                  Thomas G. Schadt
 
                                                                    Director                April   , 1998
-----------------------------------------------------
                 Norman N. Habermann
 
               /s/ JOHN F. NORTH, JR.                               Director                April 24, 1998
-----------------------------------------------------
                 John F. North, Jr.
</TABLE>
 
                                       20
<PAGE>   23
 
                         REPORT OF INDEPENDENT AUDITORS
 
The Stockholders and Board of Directors
Star Buffet, Inc.:
 
     We have audited the accompanying consolidated balance sheets of Star
Buffet, Inc. and subsidiaries (Successor Company) as of January 26, 1998 and
January 27, 1997, and the related consolidated statements of income,
stockholders' equity and cash flows for the 52-week period ended January 26,
1998 and the 28-week period ended January 27, 1997 (Successor Period) and the
statements of income, stockholders' equity and cash flows of HTB Restaurants,
Inc. (Predecessor Company) for the 30-week period ended July 15, 1996 and the
52-week period ended December 18, 1995 (Predecessor Period). These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
 
     We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
 
     In our opinion, the aforementioned Successor consolidated financial
statements present fairly, in all material aspects, the financial position of
Star Buffet, Inc. (and CKE operations that became Star) and subsidiaries as of
January 26, 1998 and January 27, 1997, and the results of their operations and
their cash flows for the Successor Period, in conformity with generally accepted
accounting principles. Further, in our opinion, the aforementioned Predecessor
consolidated financial statements present fairly, in all material respects, the
results of operations and cash flows of HomeTown Buffet, Inc. for the
Predecessor Period, in conformity with generally accepted accounting principles.
 
     As discussed in Note 1 to the consolidated financial statements, effective
July 16, 1996, CKE acquired all of the outstanding stock of HTB Restaurants,
Inc. in a business combination accounted for as a purchase. As a result of the
acquisition, the consolidated financial information for the periods after the
acquisition is presented on a different cost basis than that for the periods
before the acquisition and, therefore, is not comparable.
 
KPMG Peat Marwick LLP
 
Salt Lake City, Utah
March 16, 1998
 
                                       F-1
<PAGE>   24
 
                       STAR BUFFET, INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
 
<TABLE>
<CAPTION>
                                                              JANUARY 26,   JANUARY 27,
                                                                 1998          1997
                                                              -----------   -----------
<S>                                                           <C>           <C>
ASSETS
Current assets:
  Cash and cash equivalents.................................  $15,387,000   $   353,000
  Short term investments....................................           --       180,000
  Current portion of notes and other receivables............      336,000        71,000
  Inventories...............................................      493,000       383,000
  Deferred income taxes, net................................      110,000       193,000
  Prepaid expenses..........................................      204,000        84,000
                                                              -----------   -----------
Total current assets:.......................................   16,530,000     1,264,000
Property, buildings and equipment, at cost, less accumulated
  depreciation..............................................   15,077,000    12,430,000
Real property and equipment under capitalized leases, at
  cost, less accumulated amortization.......................    2,287,000     2,396,000
Notes receivable, net of current portion....................    3,235,000            --
Deposits and other..........................................    2,167,000       375,000
Goodwill, less accumulated amortization.....................    1,380,000            --
Franchise costs less accumulated amortization...............      293,000       318,000
                                                              -----------   -----------
Total assets................................................  $40,969,000   $16,783,000
                                                              ===========   ===========
</TABLE>
 
     See accompanying notes to consolidated financial statements.
 
                                       F-2
<PAGE>   25
 
                       STAR BUFFET, INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS
 
<TABLE>
<CAPTION>
                                                              JANUARY 26,   JANUARY 27,
                                                                 1998          1997
                                                              -----------   -----------
<S>                                                           <C>           <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
  Accounts payable-trade....................................  $ 2,212,000   $ 2,226,000
  Payroll and related taxes.................................    1,643,000     1,207,000
  Sales and property taxes..................................    1,178,000       632,000
  Rent, licenses and other..................................      822,000       367,000
  Current maturities of obligations under capital leases....      259,000       239,000
  Other current liabilities.................................      209,000            --
                                                              -----------   -----------
Total current liabilities...................................    6,323,000     4,671,000
Capitalized lease obligations, net of current maturities....    2,109,000     2,370,000
Stockholders' Equity:
  Preferred stock, $.001 par value; authorized 1,500,000
     shares; none issued or outstanding.....................           --            --
  Common stock, $.001 par value; authorized 18,500,000
     shares; issued and outstanding 5,450,000 shares in 1998
     and 2,600,00 shares in 1997............................        5,000         2,000
  Additional paid-in capital................................   31,768,000     9,270,000
  Retained earnings.........................................      764,000       470,000
                                                              -----------   -----------
Total stockholders' equity..................................   32,537,000     9,742,000
Total liabilities and stockholders' equity..................  $40,969,000   $16,783,000
                                                              ===========   ===========
</TABLE>
 
     See accompanying notes to consolidated financial statements.
 
                                       F-3
<PAGE>   26
 
                       STAR BUFFET, INC. AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF INCOME
 
<TABLE>
<CAPTION>
                                                   SUCCESSOR COMPANY                 PREDECESSOR COMPANY
                                       -----------------------------------   ---------------------------------
                                           FIFTY-TWO        TWENTY-EIGHT        THIRTY          FIFTY-TWO
                                             WEEKS             WEEKS             WEEKS             WEEKS
                                             ENDED             ENDED             ENDED             ENDED
                                       JANUARY 26, 1998   JANUARY 27, 1997    JULY 15, 1996  DECEMBER 18, 1995
                                       ----------------   ----------------   --------------  -----------------
<S>                                    <C>                <C>                <C>               <C>
Total revenues.......................    $54,659,000        $23,632,000       $23,207,000       $36,741,000
                                         -----------        -----------       -----------       -----------
Costs and expenses
  Food costs.........................     18,024,000          8,371,000         8,569,000        13,769,000
  Labor costs........................     17,301,000          7,565,000         6,810,000        10,878,000
  Occupancy and other expenses.......     10,829,000          4,732,000         5,030,000         8,954,000
  General and administrative
     expenses........................      2,291,000          1,062,000         1,193,000         1,666,000
  Depreciation and amortization......      2,109,000            988,000           914,000         1,232,000
                                         -----------        -----------       -----------       -----------
Total costs and expenses.............     50,554,000         22,718,000        22,516,000        36,499,000
                                         -----------        -----------       -----------       -----------
Income from operations...............      4,105,000            914,000           691,000           242,000
Interest expense.....................       (200,000)          (106,000)         (145,000)         (192,000)
Interest income......................        321,000                 --                --                --
Other income.........................        272,000                 --                --                --
                                         -----------        -----------       -----------       -----------
Income before income taxes...........      4,498,000            808,000           546,000            50,000
Income tax expense...................      1,799,000            338,000           216,000            22,000
                                         -----------        -----------       -----------       -----------
Net income...........................    $ 2,699,000        $   470,000       $   330,000       $    28,000
                                         ===========        ===========       ===========       ===========
Net income per common
  share -- basic.....................    $      0.77        $      0.18
                                         ===========        ===========
Weighted average shares outstanding--
  basic..............................      3,515,000          2,600,000
                                         -----------        -----------
Net income per common
  share -- diluted...................    $      0.76        $      0.18
                                         ===========        ===========
Weighted average shares outstanding -
  diluted............................      3,528,000          2,600,000
                                         -----------        -----------
</TABLE>
 
     See accompanying notes to consolidated financial statements.
 
                                       F-4
<PAGE>   27
 
                       STAR BUFFET, INC. AND SUBSIDIARIES
                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
 
<TABLE>
<CAPTION>
                                         COMMON STOCK      ADDITIONAL                       TOTAL
                                      ------------------     PAID-IN       RETAINED     SHAREHOLDERS'
                                       SHARES     AMOUNT     CAPITAL       EARNINGS        EQUITY
                                      ---------   ------   -----------   ------------   -------------
<S>                                   <C>         <C>      <C>           <C>            <C>
PREDECESSOR COMPANY
-----------------------
Beginning Balance
  December 19, 1994.................         10   $    0   $ 1,000,000   $    778,000   $  1,778,000
Net Income..........................         --       --            --         28,000         28,000
                                      ---------   ------   -----------   ------------   ------------
Beginning Balance
  December 18, 1995.................         10   $    0     1,000,000        806,000      1,806,000
Net Income..........................         --       --            --        330,000        330,000
                                      ---------   ------   -----------   ------------   ------------
Ending Balance
July 15, 1996.......................         10   $    0   $ 1,000,000   $  1,136,000   $  2,136,000
                                      =========   ======   ===========   ============   ============
=====================================================================================================
SUCCESSOR COMPANY
---------------------
Beginning Balance
  July 15, 1996.....................  2,600,000   $2,000   $ 8,025,000   $         --   $  8,027,000
Net Activity with Principal
  Stockholder.......................         --       --     1,245,000             --      1,245,000
Net Income..........................         --       --            --        470,000        470,000
                                      ---------   ------   -----------   ------------   ------------
Beginning Balance
  January 27, 1997..................  2,600,000    2,000     9,270,000        470,000      9,742,000
Net Activity with Principal
  Stockholder.......................         --       --    (8,272,000)    (2,405,000)   (10,677,000)
Issuance of common stock............  2,850,000    3,000    30,770,000             --     30,773,000
Net Income..........................         --       --            --      2,699,000      2,699,000
                                      ---------   ------   -----------   ------------   ------------
Ending Balance
  January 26, 1998..................  5,450,000   $5,000   $31,768,000   $    764,000   $ 32,537,000
                                      =========   ======   ===========   ============   ============
</TABLE>
 
     See accompanying notes to consolidated financial statements.
 
                                       F-5
<PAGE>   28
 
                       STAR BUFFET, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENT OF CASH FLOWS
 
<TABLE>
<CAPTION>
                                                    SUCCESSOR COMPANY           PREDECESSOR COMPANY
                                               ---------------------------   --------------------------
                                                              TWENTY-EIGHT                  FIFTY-TWO
                                                FIFTY-TWO        WEEKS         THIRTY         WEEKS
                                               WEEKS ENDED       ENDED       WEEKS ENDED      ENDED
                                               JANUARY 26,    JANUARY 27,     JULY 15,     DECEMBER 18,
                                                   1998           1997          1996           1995
                                               ------------   ------------   -----------   ------------
<S>                                            <C>            <C>            <C>           <C>
Cash flows from operating activities:
Net income...................................  $  2,699,000    $  470,000     $330,000      $   28,000
Adjustments to reconcile net income to net
  cash provided by operating activities:
     Depreciation and amortization...........     2,109,000       988,000      914,000       1,232,000
     Provision for losses on other assets....        75,000            --           --         100,000
     Non-cash investment income..............       (78,000)           --           --              --
     Change in operating assets and
       liabilities:
       Receivables...........................       207,000      (114,000)      21,000         (22,000)
       Inventories...........................      (109,000)       (5,000)      39,000         (48,000)
       Prepaid expenses......................      (154,000)      178,000     (202,000)        138,000
       Deposits..............................       (24,000)           --           --              --
       Deferred taxes........................      (124,000)      100,000      (78,000)       (136,000)
       Accounts payable-trade................       (14,000)      273,000     (280,000)        183,000
       Other accrued liabilities.............     1,377,000        27,000       72,000         123,000
                                               ------------    ----------     --------      ----------
Net cash provided by operating activities....  $  5,964,000    $1,917,000     $816,000      $1,598,000
Cash flows used in investing activities:
     Loan to JJ North's: note and line of
       credit................................    (3,400,000)           --           --              --
     Deposits on future acquisitions.........    (1,936,000)           --           --              --
     Acquisition of six JJ North's
       restaurants net of cash acquired......    (3,590,000)           --           --              --
     Acquisition of property, buildings and
       equipment.............................    (1,972,000)     (103,000)     (68,000)     (3,527,000)
     Deferred organization and franchise
       costs.................................       (67,000)           --           --        (125,000)
     Sale (Purchase) of Short Term
       Investments...........................       180,000      (180,000)          --              --
                                               ------------    ----------     --------      ----------
Net cash used in investing activities........   (10,785,000)     (283,000)     (68,000)     (3,652,000)
Cash flows from financing activities:
     Proceeds from issuance of common
       stock.................................    30,773,000            --           --              --
     Net activity with principle
       shareholder...........................   (10,677,000)   (1,245,000)    (546,000)      1,998,000
     Principal payment on capital leases.....      (241,000)     (245,000)    (110,000)        (46,000)
                                               ------------    ----------     --------      ----------
     Net cash provided by (used in) by
       financing activities..................    19,855,000    (1,490,000)    (656,000)      1,952,000
Net increase in cash and cash equivalents....    15,034,000       144,000       92,000        (102,000)
Cash and cash equivalents at beginning of
  period.....................................       353,000       209,000      117,000         219,000
                                               ------------    ----------     --------      ----------
Cash and cash equivalents at end of period...  $ 15,387,000    $  353,000     $209,000      $  117,000
                                               ============    ==========     ========      ==========
</TABLE>
 
     See accompanying notes to consolidated financial statements.
 
                                       F-6
<PAGE>   29
 
                       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 of the Successor Company
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"). Certain
reclassifications have been made to the fiscal 1997 consolidated financial
statements to conform to the fiscal 1998 presentation.
 
ORGANIZATION AND NATURE OF OPERATIONS
 
     The Successor Company was formed by CKE Restaurants, Inc. ("CKE") in July
1997 in connection with the reorganization of CKE's buffet-style restaurant
business. Pursuant to a contribution agreement among the Company and CKE and
certain of their respective subsidiaries, CKE transferred to Summit the net
assets of its two Casa Bonita Mexican theme restaurants (which were acquired by
CKE on October 1, 1996), and Summit transferred substantially all of its assets
and liabilities (primarily those relating to the JB's Restaurant system and
Galaxy Diner restaurants, but excluding 16 HomeTown Buffet restaurants operated
by HTB) to a newly formed subsidiary of CKE. Summit was acquired by CKE on July
15, 1996. Then, CKE contributed the outstanding shares of Summit to the Company
in exchange for 2,600,000 shares of the Company's Common Stock. All of the
parties to the foregoing transactions (the "Formation Transactions") were, upon
completion thereof, direct or indirect wholly-owned subsidiaries of CKE, and
such Formation Transactions were accounted for as a reorganization among
companies under common control. Accordingly, the Successor Period presents
results of operations for the period commencing on July 15, 1996 (the date of
CKE's acquisition of Summit), and include results of operations of the two Casa
Bonita Mexican theme restaurants only from October 1, 1996 (the date of
acquisition by CKE) and the results of operations of seven JJ North's Grand
Buffet Restaurants operated by the Company from September 30, 1997 (the date of
acquisition by the Company.
 
     The operating results for the fifty-two week period ended January 26, 1998,
include 52 weeks of operations for the Company's 16 franchised HomeTown Buffet
restaurants, 52 weeks of operations for the Company's two Casa Bonita
restaurants and 17 weeks of operations for the seven JJ North's Grand Buffet
restaurants operated by the Company. The operations for the 28 week period ended
January 27, 1997, include 28 weeks of operations for the Company's 16 franchised
HomeTown Buffet restaurants, and 17 weeks of operations for the Company's two
Casa Bonita restaurants, but do not include the operations for JJ North's Grand
Buffet restaurants.
 
     The Predecessor Company, HTB Restaurants, Inc., has been a wholly-owned
subsidiary of Summit Family Restaurants Inc. ("Summit") since October 9, 1991.
The Predecessor Company operated 16 buffet style restaurants in five western
states as a franchisee of HomeTown Buffet, Inc. and utilized a 52/53-week fiscal
year which ends in December. The fiscal year ended December 18, 1995 contained
52 weeks. The period ended July 15, 1996 contained 30 weeks.
 
     On October 31, 1997, the Company entered into a strategic alliance (the
"Alliance") with Stacey's Buffet, Inc. ("Stacey's") whereby, among other things,
the Company agreed to provide certain services for 23 Stacey's restaurants and
make loans to Stacey's from time to time up to an aggregate principal amount of
$4,500,000. On February 13, 1998, the Company acquired three Stacey's
restaurants, and the Company and Stacey's mutually agreed to terminate the
Alliance, including cancellation of any future obligations of the
 
                                       F-7
<PAGE>   30
 
Company to make loans to Stacey's. The Company paid the purchase price for the
three restaurants by the cancellation of Stacey's outstanding indebtedness to
the Company which was incurred as part of the Alliance.
 
FISCAL YEAR
 
     The Company utilizes a 52/53 week fiscal year which ends on the last Monday
in January. The first quarter of each year contains 16 weeks while the other
three quarters each contain 12 weeks.
 
CASH EQUIVALENTS
 
     For purposes of reporting cash flows, highly liquid investments purchased
with original maturities of three months or less are considered cash
equivalents. The carrying amounts reported in the consolidated balance sheets
for these instruments approximate their fair value.
 
SHORT-TERM INVESTMENTS
 
     Short-term investments (consisting primarily of certificates of deposits,
with original maturities of greater than three months) are held-to-maturity
securities and, accordingly, have been stated at cost.
 
INVENTORIES
 
     Inventories consist of food, beverages and restaurant supplies and are
valued at cost, determined by the first-in, first-out method.
 
PROPERTY AND EQUIPMENT
 
     Property and equipment and real property under capitalized leases are
carried at cost, less accumulated depreciation and amortization. Depreciation
and amortization are provided using the straight-line method over the following
useful lives: buildings and leasehold improvements -- lesser of lease life or 20
years; furniture, fixtures and equipment -- five to eight years; capitalized
leases -- lesser of lease life or 20 years. Lease renewal option periods are
included in determining leasehold improvement useful lives when, in management's
opinion, such renewal options will be exercised.
 
     Repairs and maintenance are charged to operations as incurred. Remodeling
costs are generally capitalized.
 
INTANGIBLE ASSETS
 
     Franchise fees are amortized using the straight-line method over the
remaining terms of the franchise agreements, which range from nine to 17 years.
Lease acquisition costs are amortized using the straight-line method over the
respective lease terms. Goodwill is amortized using the straight-line method
over 40 years.
 
     Accumulated amortization of these intangible assets totaled $127,000 at
January 26, 1998 and $128,000 at January 27, 1997.
 
PRE-OPENING COSTS
 
     Pre-opening costs, which represent expenses incurred for hiring and
training personnel relating to new restaurants and expenses for promotion of new
store openings, are capitalized and amortized over the restaurant's first year
of operation.
 
FRANCHISE EXPENSES
 
     Royalty costs and all other franchise costs are charged to operations as
incurred.
 
                                       F-8
<PAGE>   31
 
GENERAL AND ADMINISTRATIVE EXPENSES
 
     General and administrative expenses include certain expenses directly
related to the Company and other corporate overhead. Allocations of expenses are
made by Summit to HTB and by CKE to the Company after September 22, 1997 for
certain corporate services and overhead incurred by the Company. Total corporate
allocations included in general and administrative expenses in the accompanying
consolidated statements of earnings amounted to approximately $437,000,
$252,000, $951,000 and $808,000 for the periods ended January 26, 1998, January
27, 1997, July 14, 1996 and December 18, 1995, respectively. These allocations
were based on, among other things, percentage of revenues, number of stores,
number of employees or the amount of capital expenditures in relation to the
total of the respective amounts of Summit on a combined basis. Included in the
allocation for the period ended January 27, 1997, is $15,000 of general and
administrative expenses relating to the two Casa Bonita restaurants. Allocations
are made on a basis that management of the Company believes to be reasonable;
however, such allocations are not necessarily indicative of the expenses which
might have been incurred by the Company had they operated on a stand-alone
basis.
 
INCOME TAXES
 
     The Company accounts for income taxes using the asset and liability method.
Under this method, income tax assets and liabilities are recognized using
enacted tax rates for the expected future tax consequences attributable to
temporary differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases. A change in tax
rates is recognized in income in the period that includes the enactment date.
 
ADVERTISING EXPENSES
 
     Advertising costs are charged to operations as incurred.
 
USE OF ESTIMATES
 
     Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these consolidated financial
statements in conformity with generally accepted accounting principles. Actual
results could differ from those estimates.
 
EARNINGS PER SHARE
 
     The Company adopted Statement of Financial Accounting Standards No. 128
"Earnings per Share" ("SFAS 128") in fiscal 1998. SFAS 128 requires the
presentation of "basic" earnings per share which represents net earnings divided
by the weighted average shares outstanding excluding all common stock
equivalents. Dual presentation of "diluted" earnings per share reflecting the
dilutive effect of all common stock equivalents is also required.
 
NOTE 2 -- INITIAL PUBLIC OFFERING
 
     On September 30, 1997, the Company completed an initial public offering
(the "IPO") of 3,000,000 shares of its Common Stock at an IPO price of $12.00
per share. Of the 3,000,000 share offering, 2,400,000 shares were sold by the
Company and 600,000 shares were sold by CKE. On October 7, 1997, the
underwriters exercised their over-allotment option and acquired an additional
450,000 shares of Common Stock. The IPO generated total net proceeds to the
Company of $30.8 million after commissions and offering expenses. The Company
has used a portion of the proceeds to pay a dividend to CKE and to repay
indebtedness assumed in connection with the acquisition of restaurants. The
remaining proceeds are being used for working capital and general corporate
purposes.
 
                                       F-9
<PAGE>   32
 
USE OF PROCEEDS
 
     Of the net proceeds received by the Company from the IPO, the Company made
payments to CKE totaling $10.7 million, which included a dividend of $9.3
million. The nature of these payments was in effect to reimburse CKE for its
equity in HomeTown Buffet and Casa Bonita at the date of the IPO. As a result of
these payments, the stockholders' equity section of the Company at January 26,
1998, reflects the earnings of the Company since the date of the IPO and the net
proceeds from the IPO.
 
NOTE 3 -- NORTH'S ACQUISITION
 
     Concurrent with the Initial Public Offering, the Company acquired six JJ
North's Grand Buffet Restaurants from North's Restaurants, Inc., ("North's"),
and completed a management agreement for a seventh restaurant. The total cash
consideration paid to North's was approximately $4.5 million which generated
$1.3 million of goodwill. The acquisition was accounted for as a purchase. In
connection with the North's acquisition, the Company has provided a $3.0 million
term loan and a $750,000 line of credit to North's. The term loan and line of
credit are secured by North's remaining restaurants and bear interest at 8.0%.
 
     Selected unaudited proforma combined results of operations for the
fifty-two week period ended January 26, 1998 and the twenty-eight weeks ended
January 27, 1997, as if the acquisition occurred on July 16, 1996, using actual
restaurant-level margins and general and administrative expenses prior to the
acquisition are presented as follows:
 
<TABLE>
<CAPTION>
                                                       FIFTY-TWO
                                                         WEEKS            TWENTY-EIGHT
                                                         ENDED            WEEKS ENDED
                                                      JANUARY 26,         JANUARY 27,
                                                         1998                 1997
                                                      -----------         ------------
<S>                                             <C>   <C>           <C>   <C>
Total revenues................................        $60,866,000         $26,249,000
Net income....................................        $ 2,452,000         $   467,000
Net income per common share -- basic..........        $       .70         $       .18
Net income per common share -- diluted........        $       .70         $       .18
</TABLE>
 
NOTE 4 -- NOTES RECEIVABLE Notes receivable at January 26, 1998 consists of the
following:
 
<TABLE>
<S>                                                           <C>
Note receivable from JJ North's.............................  $3,078,000
Line of credit due from JJ North's..........................     400,000
                                                              ----------
                                                               3,478,000
  Less current portion......................................     243,000
                                                              ----------
                                                              $3,235,000
                                                              ==========
</TABLE>
 
     The $3.0 million note receivable stipulates that interest accruing on the
loan will be added to the note balance for the first six months. Interest on the
aggregate balance will then be payable monthly for the next six months.
Beginning November 1, 1999, principal and interest payments will be due monthly
for five years until the loan is fully repaid in October 2003.
 
     The interest on the line of credit is payable monthly for the first six
months with principal and interest payments due monthly thereafter until the
line is repaid by February 2000.
 
                                      F-10
<PAGE>   33
 
NOTE 5 -- PROPERTY AND EQUIPMENT AND REAL PROPERTY UNDER CAPITALIZED LEASES
 
     The components of property and equipment and real property under
capitalized leases are as follows:
 
<TABLE>
<CAPTION>
                                                              JANUARY 26,   JANUARY 27,
                                                                 1998          1997
                                                              -----------   -----------
<S>                                                           <C>           <C>
Property and equipment:
  Buildings and leasehold improvements......................  $12,535,000   $10,255,000
  Furniture, fixtures and equipment.........................    7,648,000     3,012,000
                                                              -----------   -----------
                                                               20,183,000    13,267,000
  Less accumulated depreciation and amortization............   (5,106,000)     (837,000)
                                                              -----------   -----------
                                                              $15,077,000   $12,430,000
                                                              ===========   ===========
Real property and equipment under capitalized leases........  $ 3,031,000   $ 2,547,000
  Less accumulated amortization.............................     (744,000)     (151,000)
                                                              -----------   -----------
                                                              $ 2,287,000   $ 2,396,000
                                                              ===========   ===========
</TABLE>
 
NOTE 6 -- LEASES
 
     The Company occupies certain restaurants under long-term leases expiring at
various dates through 2014. Most restaurant leases have renewal options for
terms of 5 to 20 years, and substantially all require the payment of real estate
taxes and insurance. Certain leases require the rent to be the greater of a
stipulated minimum rent or a specified percentage of sales.
 
     Minimum lease payments for all leases and the present value of net minimum
lease payments for capital leases as of January 26, 1998 (Successor Company) are
as follows:
 
<TABLE>
<CAPTION>
                     FISCAL YEAR                        CAPITAL      OPERATING
                     -----------                       ----------   -----------
<S>                                                    <C>          <C>
1999.................................................  $  439,000   $ 3,125,000
2000.................................................     405,000     2,752,000
2001.................................................     235,000     2,614,000
2002.................................................     235,000     2,546,000
2003.................................................     235,000     2,573,000
Thereafter...........................................   2,282,000    19,217,000
                                                       ----------   -----------
          Total minimum lease payments:..............   3,831,000   $32,827,000
                                                       ==========   ===========
Less amount representing interest:...................   1,463,000
                                                       ----------
Present value of minimum lease payments:.............   2,368,000
Less current portion.................................     259,000
                                                       ----------
Capital lease obligation excluding current portion...  $2,109,000
                                                       ==========
</TABLE>
 
                                      F-11
<PAGE>   34
 
     Aggregate rents under noncancelable operating leases during fiscal 1998 and
1997 are as follows:
 
<TABLE>
<CAPTION>
                                                    SUCCESSOR COMPANY           PREDECESSOR COMPANY
                                                --------------------------   --------------------------
                                                              TWENTY-EIGHT                  FIFTY-TWO
                                                 FIFTY-TWO       WEEKS         THIRTY         WEEKS
                                                WEEKS ENDED      ENDED       WEEKS ENDED      ENDED
                                                JANUARY 26,   JANUARY 27,     JULY 15,     DECEMBER 18,
                                                   1998           1997          1996           1995
                                                -----------   ------------   -----------   ------------
<S>                                             <C>           <C>            <C>           <C>
Minimum rentals...............................  $2,967,000     $  978,000    $1,617,000     $3,316,000
Contingent rentals............................     114,000         41,000        28,000         46,000
                                                ----------     ----------    ----------     ----------
                                                $3,081,000     $1,019,000    $1,645,000     $3,362,000
                                                ==========     ==========    ==========     ==========
</TABLE>
 
NOTE 7 -- INCOME TAXES
 
     Income tax expense (benefit) is comprised of the following:
 
<TABLE>
<CAPTION>
                                                SUCCESSOR COMPANY         PREDECESSOR COMPANY
                                            -------------------------   -----------------------
                                            JANUARY 26,   JANUARY 27,   JULY 15,   DECEMBER 18,
                                               1998          1997         1996         1995
                                            -----------   -----------   --------   ------------
<S>                                         <C>           <C>           <C>        <C>
Current:
  Federal.................................  $1,643,000     $196,000     $226,000     $132,000
  State...................................     440,000       35,000       68,000       26,000
                                            ----------     --------     --------     --------
                                             2,083,000      231,000      294,000      158,000
Deferred:
  Federal.................................    (238,000)      81,000      (55,000)    (115,000)
  State...................................     (46,000)      26,000      (23,000)     (21,000)
                                            ----------     --------     --------     --------
                                              (284,000)     107,000      (78,000)    (136,000)
                                            ----------     --------     --------     --------
                                            $1,799,000     $338,000     $216,000     $ 22,000
                                            ==========     ========     ========     ========
</TABLE>
 
     A reconciliation of income tax expense at the federal statutory rate to the
Company's provision for taxes on income is as follows:
 
<TABLE>
<CAPTION>
                                                        SUCCESSOR COMPANY         PREDECESSOR COMPANY
                                                    -------------------------   -----------------------
                                                    JANUARY 26,   JANUARY 27,   JULY 15,   DECEMBER 18,
                                                       1998          1997         1996         1995
                                                    -----------   -----------   --------   ------------
<S>                                                 <C>           <C>           <C>        <C>
Income taxes at statutory rate....................  $1,529,000     $274,000     $186,000     $17,000
State income taxes................................     273,000       47,000       29,000       3,000
Other.............................................     (11,000)      17,000        1,000       2,000
Increase in reserve...............................       8,000           --           --          --
                                                    ----------     --------     --------     -------
                                                    $1,799,000     $338,000     $216,000     $22,000
                                                    ==========     ========     ========     =======
</TABLE>
 
                                      F-12
<PAGE>   35
 
     Temporary differences give rise to a significant amount of deferred tax
assets and liabilities as set forth below:
 
<TABLE>
<CAPTION>
                                                              JANUARY 26,   JANUARY 27,
                                                                 1998          1997
                                                              -----------   -----------
<S>                                                           <C>           <C>
Deferred tax assets:
  Leases....................................................  $  922,000    $  971,000
  Insurance reserves........................................     113,000            --
  Accrued Vacation..........................................      70,000        45,000
  State Taxes...............................................      43,000        28,000
  Litigation Reserve........................................          --        25,000
                                                              ----------    ----------
  Less valuation allowance..................................      (8,000)           --
                                                              ----------    ----------
          Total deferred tax assets.........................   1,140,000     1,069,000
                                                              ----------    ----------
Deferred tax liabilities:
  Depreciation..............................................     799,000       876,000
  Other.....................................................      24,000            --
                                                              ----------    ----------
          Total deferred tax liabilities....................     823,000       876,000
                                                              ----------    ----------
Net deferred tax assets.....................................  $  317,000    $  193,000
                                                              ==========    ==========
</TABLE>
 
     While there can be no assurance that the Company will generate any earnings
or any specific level of earnings in the future years, management believes it is
more likely than not that the Company will realize the majority of the benefit
of the existing net deferred tax assets at January 26, 1998 based on the
Company's current and future pre-tax earnings.
 
NOTE 8 -- DEPOSITS AND OTHER
 
     Deposits and other consists of the following:
 
<TABLE>
<CAPTION>
                                                              JANUARY 26,   JANUARY 27,
                                                                 1998          1997
                                                              -----------   -----------
<S>                                                           <C>           <C>
Deposit on the acquisition of three Stacey's restaurants....  $1,006,000     $     --
Deposit on acquisition of JJ North's Olympia restaurant.....     929,000           --
Deferred taxes, non current.................................     207,000           --
Miscellaneous deposits......................................      25,000      375,000
                                                              ----------     --------
                                                              $2,167,000     $375,000
                                                              ==========     ========
</TABLE>
 
NOTE 9 -- STOCKHOLDERS EQUITY
 
     The authorized capital stock of the Company consists of 18,500,000 shares
of Common Stock, par value $0.001 per share, and 1,500,000 shares of Preferred
Stock, par value $0.001 per share.
 
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
 
                                      F-13
<PAGE>   36
 
outstanding shares of Common Stock, are, and the shares of Common Stock offered
by the Company hereby will be, when issued and paid for, fully paid and
nonassessable. Holders of Common Stock have no preemptive, subscription,
redemption or conversion rights. The rights, preferences and privileges of
holders of Common Stock are subject to, and may be adversely affected by, the
rights of the holders of shares of any series of Preferred Stock which the
Company may designate and issue in the future.
 
PREFERRED STOCK
 
     The Board of Directors has the authority, without further vote or action by
the stockholders, to provide for the issuance of up to 1,500,000 shares of
Preferred Stock from time to time in one or more series with such designations,
rights, preferences and privileges and limitations on the Board of Directors may
determine, including the consideration received therefor. The Board of Directors
also will have the authority to determine the number of shares comprising each
series, dividend rates, redemption provisions, liquidation preferences, sinking
fund provisions, conversion rights and voting rights without approval by the
holders of Common Stock. Although it is not possible to state the effect that
any issuance of Preferred Stock might have on the rights of holders of Common
Stock, the issuance of Preferred Stock may have one or more of the following
effects: (i) to restrict the payment of dividends on the Common Stock, (ii) to
dilute the voting power and equity interests of holders of Common Stock, (iii)
to prevent holders of Common Stock from participating in any distribution of the
Company's assets upon liquidation until any liquidation preferences granted to
holders of Preferred Stock are satisfied, or (iv) to require approval by the
holders of Preferred Stock for certain matters such as amendments to the
Company's Certificate of Incorporation or any reorganization, consolidation,
merger or other similar transaction involving the Company. As a result, the
issuance of Preferred Stock may, under certain circumstances, have the effect of
delaying, discouraging or preventing bids for the Common Stock at a premium over
the market price thereof, or a change in control of the Company, and could have
a material adverse effect on the market price for the Common Stock.
 
NOTE 10 -- EMPLOYEE BENEFIT PLANS
 
401(K) PLAN
 
     Beginning in May 1998, the Company has a 401(k) plan available to certain
employees who have attained age 21, work 30 hours or more per week, and have met
certain minimum service requirements. The plan allows participants to allocate
up to 15% of their annual compensation before taxes for investment in several
investment alternatives.
 
1997 EMPLOYEE STOCK PURCHASE PLAN
 
     The Company's Employee Stock Purchase Plan (the "Purchase Plan"), was
adopted by the Board of Directors on January 15, 1998, covering an aggregate of
750,000 shares of Common Stock. The Purchase Plan, which is not intended to
qualify as an "employee stock purchase plan" under Section 423 of the Internal
Revenue Code, will be implemented by quarterly offerings with purchases
coinciding with the Company's fiscal quarters commencing on the effective date
of the Purchase Plan. The purpose of the Purchase Plan is to provide
participants with incentives which will encourage them to acquire a proprietary
interest in, and continue to provide services to, the Company. The Purchase Plan
will be administered by the Board of Directors or a committee appointed by the
Board of Directors.
 
     Employees are eligible to participate if they (i) are employed on an hourly
basis as a restaurant employee for at least 30 hours per week and if they have
been employed by the Company since September 30, 1997 or for at least one year;
(ii) are employed on an hourly basis as a non-restaurant employee for at least
30 hours per week and have been so employed continuously during the preceding 90
days; or (iii) are exempt from the overtime and minimum wage requirements under
federal and state laws and have been so employed by the Company continuously
during the preceding 90 days. The Purchase Plan permits eligible employees to
purchase Common Stock through payroll deductions, which range from 3% to 10% of
the employee's Base Earnings as defined in the Purchase Plan. The price of stock
purchased under the Purchase Plan shall be at the then current fair market
value. Each participant who remains an employee of the Company for at least one
 
                                      F-14
<PAGE>   37
 
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 totaling one-half of a participating Officer's or
Director's contribution, and one-third of other participant's contributions.
Employees may withdraw from the Purchase Plan, effective at the end of a
quarterly offering period, by delivering a notice to the Company no later than
the 15th day prior to the end of such quarterly offering period, and
participation ends automatically on termination of employment. The Board of
Directors may at any time amend or terminate the Purchase Plan, and upon such
termination, each participant is entitled to receive the funds in such
participant's account which have not been used to purchase Common Stock but
shall not be entitled to any future matching contribution.
 
1997 STOCK INCENTIVE PLAN
 
     The Company recently adopted the 1997 Stock Incentive Plan (the "1997
Plan"), which provides for the grant of options to purchase an aggregate of
750,000 shares of Common Stock. The 1997 Plan provides for the granting of
"incentive stock options," within the meaning of section 422 of the Internal
Revenue Code of 1986, as amended (the "Code") and non-statutory options to
directors, officers, employees and consultants of the Company, except that
incentive stock options may not be granted to non-employee directors or
consultants. The purpose of the 1997 Plan is to provide participants with
incentives which will encourage them to acquire a proprietary interest in, and
continue to provide services to, the Company. The 1997 Plan is administered by
the Board of Directors, which has sole discretion and authority, consistent with
the provisions of the 1997 Plan, to determine which eligible participants will
receive options, the time when options will be granted, the terms of options
granted and the number of shares which will be subject to options granted under
the 1997 Plan.
 
<TABLE>
<CAPTION>
                                                              NUMBER OF SHARES
                                                              ----------------
<S>                                                           <C>
Outstanding on January 27, 1997.............................            --
Options granted at IPO......................................       608,308
Canceled....................................................            --
Exercised...................................................            --
                                                                  --------
Outstanding on January 26, 1998.............................       608,308
                                                                  ========
Exercisable on January 26, 1998.............................       263,240
                                                                  ========
Exercise price..............................................      $  12.00
                                                                  ========
Weighted average remaining contractual life in years........          9.68
                                                                  ========
</TABLE>
 
     The Company applies the intrinsic value method under Accounting Principles
Board Opinion No. 25 in accounting for its Plan and, accordingly, no
compensation cost has been recognized for it's stock options in the financial
statements. Had the Company determined compensation cost based on the fair value
method under Statement of Financial Accounting Standards No. 123, "Accounting
for Stock-Based Compensation," ("SFAS 123") at the grant date for its stock
options, the Company's net income would have been reduced to the pro forma
amounts indicated below:
 
<TABLE>
<CAPTION>
                                                              JANUARY 26,   JANUARY 27,
                                                                 1998          1997
                                                              -----------   -----------
<S>                                                           <C>           <C>
Net Income as reported......................................  $2,699,000    $   470,000
Earnings per share -- basic as reported.....................  $      .77    $       .18
Earnings per share -- diluted as reported...................  $      .76    $       .18
Pro forma net income........................................  $2,285,000    $   470,000
Earnings per share-basic as reported........................  $      .65    $       .18
Earnings per share-diluted as reported......................  $      .65    $       .18
</TABLE>
 
                                      F-15
<PAGE>   38
 
     For purposes of the preceding pro forma disclosures required by SFAS 123
the fair value of each stock option has been estimated on the date of grant
using the Black-Scholes option-pricing model with the following assumptions: no
projected annual dividends, expected volatility of 15%, a risk free interest
rate of 5.83% and an expected life of three years.
 
     Since the pro forma compensation expense for stock-based compensation plans
is recognized over a three year vesting period, the foregoing pro forma
reductions in the Company's net income are not representative of anticipated
amounts in future years.
 
     The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options that do not have vesting
restrictions and are fully transferable. In addition, option valuation models
require the input of highly subjective assumptions including the expected stock
price volatility. Because the Company's stock options have characteristics
significantly different from those of traded options and because changes in the
subjective input assumptions can materially affect the value of an estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
 
NOTE 11 -- SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
 
<TABLE>
<CAPTION>
                                                   SUCCESSOR PERIOD              PREDECESSOR PERIOD
                                           ---------------------------------   -----------------------
                                           JANUARY 26,       JANUARY 27,       JULY 15,   DECEMBER 18,
                                              1998              1997             1996         1995
                                           -----------   -------------------   --------   ------------
<S>                                        <C>           <C>        <C>        <C>        <C>
Cash paid for income taxes...............  $1,020,000          --                    --           --
Cash paid for interest...................          --          --              $145,000     $192,000
Non-cash investing and financing
  activities are as follows:
  Transfer of current assets and current
     liabilities to primary
     stockholder.........................  $  335,000          --                    --           --
  Use of deposit to buy out operating
     equipment leases....................     375,000          --                    --           --
</TABLE>
 
NOTE 12 -- 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
statement of operations or financial position or liquidity.
 
NOTE 13 -- SUBSEQUENT EVENTS
 
     On October 31, 1997, the Company entered into a strategic alliance (the
"Alliance") with Stacey's Buffet, Inc. ("Stacey's") whereby, among other things,
the Company agreed to provide certain services for 23 Stacey's restaurants and
make loans to Stacey's from time to time up to an aggregate principal amount of
$4,500,000. On February 13, 1998, the Company acquired three Stacey's
restaurants, and the Company and Stacey's mutually agreed to terminate the
Alliance, including cancellation of any future obligations of the Company to
make loans to Stacey's. The Company paid the purchase price for the three
restaurants by the cancellation of Stacey's outstanding indebtedness to the
Company which was incurred as part of the Alliance.
 
     On February 24, 1998, the Company acquired twelve JB's Restaurants from
JB's Restaurants, Inc., a wholly-owned subsidiary of CKE, for $4,265,000,
subject to adjustment. At the time of acquisition, the Company prepaid royalty
fees for one year in the amount of $485,000. The Company will operate the
restaurants under franchise agreements with JB's Family Restaurants, Inc. until
such time as they are converted to the Company's small-format buffet concept.
The Company has completed one of the conversions and expects to complete
additional conversions during fiscal 1999.
 
                                      F-16
<PAGE>   39
 
     In addition, during February 1998, the Company, in three separate
transactions, acquired three additional restaurants in the state of Florida. The
purchase price for these restaurants, one of which is a fee property, was
approximately $1.8 million. Two of the restaurants are operated as Maggie's
Buffet restaurants and the third restaurant, which was formerly operated as a
Stacey's Buffet restaurant prior to being closed in 1996, will be converted to
one of the Company's buffet concepts and re-opened during fiscal 1999.
 
     On April 1, 1998, the Company acquired two buffet restaurants located in
Florida, which operate under the brand name of BuddyFreddys. The purchase price
was $1.6 million, subject to adjustment, of which, $400,000 was paid in cash at
closing and the remaining $1.2 million will be paid in equal monthly
installments of $100,000 each beginning April 15, 1998 and continuing through
March 15, 1999. In addition, the Company has loaned the seller $2.4 million. The
loan has a term of one year, is secured by the real property of the purchased
restaurants and bears interest at 8.5% for the first 90 days and 10.0% for the
remainder of the term. It is anticipated that the Company will convert certain
of its other restaurants in the Florida market to the BuddyFreddys concept.
 
                                      F-17
<PAGE>   40
 
                                 EXHIBIT INDEX
 
<TABLE>
<CAPTION>
    EXHIBIT
      NO.                              DESCRIPTION
    -------                            -----------
  <S>          <C>
   3.1         Certificate of Incorporation*
   3.2         Bylaws, as amended on September 22, 1997
   4.1         Form of Common Stock Certificate**
  10.1         Star Buffet, Inc. 1997 Stock Incentive Plan (the "1997
               Plan")**
  10.2         Form of Stock Option Agreement for the 1997 Plan**
  10.3         Form of Indemnification Agreement**
  10.4         Management Services Agreement with CKE**
  10.5         Form Of Franchise Agreement with HomeTown Buffet, Inc.**
  10.6         Asset Purchase Agreement with North's Restaurants, Inc.
               dated July 24, 1997**
  10.6.1       Amendment No. 1 to Asset Purchase Agreement dated as of
               September 30, 1997 (incorporated by reference to the
               Company's filing on Form 8-K on October 17, 1997)
  10.6.2       Amended and Restated Credit Agreement dated as of September
               30, 1997 between the Company and North's Restaurants, Inc.
               (incorporated by reference to the Company's filing on Form
               8-K on October 17, 1997)
  10.7         Form of Credit Agreement with Stacey's Buffet, Inc.*
  10.8         Form of Contribution Agreement among CKE Restaurants, Inc.,
               Summit Family Restaurants Inc. and the Company*
  10.9         Form of Bill of Sale and Assumption Agreement between Summit
               Family Restaurants Inc. and Taco Bueno Restaurants, Inc.
               (formerly known as Casa Bonita Incorporated)*
  10.11        Form of Bill of Sale and Assumption Agreement between Summit
               Family Restaurants Inc. and JB's Restaurants, Inc.*
  10.12        License Agreement with CKE
  10.13        Settlement Agreement with HomeTown Buffet, Inc.
  11.0         Computation of Earnings Per Share Income
  21.1         List of Subsidiaries*
  23.4         Consent of KPMG Peat Marwick LLP
  27.1         Financial Data Schedules (included only with electronic
               filing)
</TABLE>
 
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*    Previously filed as an exhibit to the Registration Statement on Form S-1,
     Amendment No. 1 (Registration No. 333- 32249).
 
**   Previously filed as an exhibit to the Registration Statement on Form S-1,
     Amendment No. 2 (Registration No. 333- 32249).
 
                                       E-1