---

---

UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWashington, 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 29, 2001

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)

Delaware(State or Other Jurisdiction of Incorporation or Organization)

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

84115(Zip Code)


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

---

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

(Title of Each Class): Common Stock $.001 par value

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the
past 90 days. Yes /x/  No / /

Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of
registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /

The
aggregate market value of the voting stock held by non-affiliates of the registrant as of April 16, 2001, was $3,062,000.

The
number of shares outstanding of the registrant's common stock was 2,950,000 shares as of April 16, 2001.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's Proxy Statement for the 2001 Annual Meeting of Stockholders, which will be filed with the Securities and Exchange Commission
within 120 days after January 29, 2001, are incorporated by reference into Part III of this Report.

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

---

---

---

STAR BUFFET, INC., AND SUBSIDIARIES

Index to Annual Report on Form 10-K

For the Fiscal Year Ended January 29, 2001

|         |  |                                                                                       |  | Page
|-------- |  | ------------------------------------------------------------------------------------- |  | ----
|PART I  
|ITEM 1.  |  | BUSINESS                                                                              |  | 1   
|ITEM 2.  |  | PROPERTIES                                                                            |  | 11  
|ITEM 3.  |  | LEGAL PROCEEDINGS                                                                     |  | 12  
|ITEM 4.  |  | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS                                   |  | 12  
|PART II 
|ITEM 5.  |  | MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS                 |  | 13  
|ITEM 6.  |  | SELECTED FINANCIAL DATA                                                               |  | 13  
|ITEM 7.  |  | MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |  | 16  
|ITEM 8.  |  | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                                           |  | 20  
|ITEM 9.  |  | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE  |  | 20  
|PART III
|ITEM 10. |  | DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT                                    |  | 21  
|ITEM 11. |  | EXECUTIVE COMPENSATION                                                                |  | 21  
|ITEM 12. |  | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT                        |  | 21  
|ITEM 13. |  | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                                        |  | 21  
|PART IV 
|ITEM 14. |  | EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K                      |  | 22  

i

---



PART I

Item 1.Business

Overview

Star Buffet, Inc., a Delaware corporation ("Star" and collectively with its subsidiaries, the "Company") is engaged in the restaurant industry. As of
January 29, 2001, the Company owned and operated 16 franchised HomeTown Buffet restaurants, 15 BuddyFreddys restaurants, ten JB's restaurants, six JJ North's Country Buffet restaurants, two
North's Star Buffet restaurants, two Holiday House restaurants and two Mexican-themed restaurants operated under the Casa Bonita name. As of January 29, 2001, one of the 15 BuddyFreddys
restaurants and one of the two North's Star Buffet restaurants were closed for remodeling and repositioning. The Company's restaurants are located in nine western states, Oklahoma and Florida and are
focused upon providing customers with a wide variety of fresh, high quality food at moderate prices.

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; success of integrating newly acquired under performing or unprofitable
restaurants; the impact of competitive products and pricing; success of operating initiatives; advertising and promotional efforts; adverse publicity; changes in business strategy or development
plans; quality of management; availability, terms and deployment of capital; changes in prevailing interest rates and the availability of financing; food, labor, and employee benefits costs; changes
in, or the failure to comply with, government regulations; weather conditions; construction schedules; implementation of the Company's acquisition and strategic alliance strategy; the
effect of the Company's accounting polices and other risks detailed in the Company's Prospectus dated September 24, 1997 and other filings with the Securities and Exchange Commission.

Recent Developments

On February 16, 2000, the Company moved from the Nasdaq National Market to the Nasdaq Smallcap Market effective February 17, 2000. The move was
due to noncompliance regarding the minimum market value of public float.

Business

The Company's objective is to become a leading operator of regional buffet restaurant brands through the acquisition of established regional concepts and
subsequent development of additional restaurants within existing or new markets. The Company believes that certain uniformly applied business practices can be used successfully to improve the
financial performance of its past and future acquisitions. Key elements of the Company's business practices 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:



1

---



Management Practices.The Company's management team has implemented a series of management practices that have improved
the operations of acquired restaurants. The key elements of these management practices are:



Brand Management.The Company's strategy is to separately manage each of its restaurant brands to create a unique
presence in the marketplace. Although each of the companies' and its brands is positioned somewhat differently in the market, the Company utilizes many of the same marketing techniques such as local
store marketing, radio advertising and promotional mailers to increase customer awareness and loyalty.

Growth Strategy

The Company's objective is to become a leading operator of regional buffet restaurant brands through (i) acquisitions of existing buffet restaurant
chains which management believes can benefit from the Company's management practices, (ii) the acquisitions of exiting restaurant properties that can be converted to buffet brands operated or
under development by the Company and (iii) minority investments in or strategic alliances with other restaurant chains. The Company's growth strategy is designed to capitalize on the
opportunities management perceives in the fragmented buffet segment of the restaurant industry.

Acquisition Strategy.Management believes that the Company will be able to capitalize on the successful attributes of
acquired buffet chains while increasing their focus on operations, customer service and quality. Management believes that a number of acquisition opportunities exist due to the

2

---

fragmentation of the buffet, cafeteria and grill-buffet segments of the restaurant industry, which are comprised of a substantial number of regional chains. The Company believes that many of these
regional chains are privately owned and may be available for acquisition because they lack the financial and operational structure to compete with larger regional and national chains.

Restaurant Conversions.In recent years, a number of chains in the family dining and budget steakhouse segments of the
restaurant industry have experienced operational difficulties and declining performance. Management believes that these difficulties are the result of increasing competition for these concepts from
the rapid growth of lower priced casual dining chains and casual steakhouses which offer superior product quality and service at only moderately higher prices. Many of these family dining restaurants
and budget steakhouses occupy desirable locations and provide opportunities to acquire desirable restaurant locations at attractive prices. Management believes that these locations can be acquired and
converted at lower prices or leased at rates lower than those available when compared to the cost of new construction.

Minority Investments and Strategic Alliances.Management intends to seek minority investments in or strategic alliances
with other restaurant chains. Management believes that minority investments can provide an attractive investment opportunity for the Company and may lower the acquisition cost of such chains should
the Company ultimately seek to acquire those chains. Management believes that strategic alliances can be an excellent corporate arrangement to facilitate (i) more productive use of
under-performing restaurant properties at lower cost and less risk than outright acquisition and (ii) reduce corporate overhead or improve purchasing economies.

HomeTown Buffet Restaurants

General.The Company, through its subsidiary HTB Restaurants, Inc. ("HTB") has a franchise agreement with
HomeTown Buffet, Inc., a wholly-owned subsidiary of Buffets, Inc., under which HTB operates HomeTown Buffet restaurants in Arizona, Colorado, New Mexico, Utah and Wyoming.

HTB
entered into a franchise agreement for each location which requires among other items, the payment of a continuing royalty fee. The royalty fee is based on the aggregate gross
sales of all the Company's HomeTown Buffet restaurants. Each of the franchise agreements has a 20-year term (with two five-year renewal options). HTB provides weekly sales
reports to the HomeTown franchisor as well as periodic and annual financial statements. HTB is obligated to operate its Hometown Buffet restaurants in compliance with the franchisor's requirements.

The
franchisor may terminate a franchise agreement for a number of reasons, including the failure to pay royalty fees when due, failure to comply with applicable laws or repeated
failure to comply with one or more requirements of the franchise agreement. Many state franchise laws limit the ability of a franchisor to terminate or refuse to renew a franchise. Generally, a
franchisor may terminate a franchise agreement only if the franchisee violates a material and substantial provision of the agreement and fails to remedy the violation within a specified period.

Concept and Menu.HomeTown Buffet restaurants are located both in shopping "strip centers" and as freestanding
restaurants. HTB's typical restaurant format is approximately 10,200 square feet with seating for approximately 375 customers. The restaurant design is based upon standardized construction plans, with
modifications made for each particular site. The restaurants offer fixed price lunch, dinner and breakfast menus that entitle each customer to unlimited servings of all menu items and beverages. The
average check price is approximately $6.15. The restaurants offer reduced prices to children under age 12 and to senior citizens.

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

3

---

required to attend formal training sessions in management and operations of the restaurant. In addition, each restaurant manager is required to comply with specific franchisor-provided guidelines to
assure uniformity of operations and consistent high quality of products. The Company has a performance based incentive program covering its general and assistant managers in addition to a competitive
base salary.

Individual
restaurants typically employ between 70 and 110 non-management hourly employees (made up of a mix of part-time and full-time workers),
depending on restaurant size and traffic.

Casa Bonita

Concept and Menu.The Company's two Casa Bonita restaurants are located in Denver, Colorado and Tulsa, Oklahoma and
contain 52,000 and 26,000 square feet, respectively. The restaurants are designed to recreate the atmosphere of a Mexican village at night. The restaurants also feature entertainment daily, including
strolling mariachis, authentic Mexican dancers, magicians, games and cliff divers. The restaurants' entertainment, combined with high quality, authentic Mexican food, is designed to attract a diverse
customer base, including tourists and local customers. In addition to typical Mexican menu offerings, these restaurants feature all-you-can-eat dinners which offer
customers unlimited servings of selected menu items.

The
Company focuses on three primary target audiences in its advertising and promotional programs for its Casa Bonita restaurants: (i) local customers; (ii) tourists;
and (iii) groups and parties. The Company markets over a broad regional territory to attract tourists by placing advertisements in tourist and special event guides and by otherwise promoting
each Casa Bonita restaurant as a major destination attraction. With its large dining areas and private rooms, the Company also promotes Casa Bonita as an ideal setting for banquets, private parties
and other group events.

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

North's Star Division

General.The North's Star Division consists of six JJ North's Country Buffet restaurants and two North's Star Buffet
restaurants. The Company's six JJ North's Country Buffet Restaurants are located in Idaho (3), Washington (2), and Oregon (1). The restaurants are approximately 6,500 to 9,000 square feet and seat
approximately 210 to 320 customers. The Company's two North's Star Buffet restaurants are located in Utah and Arizona. As of January 29, 2001, one North's Star Buffet was closed for remodeling
and repositioning. The restaurants are approximately 4,800 to 9,000 square feet and seat approximately 150 to 320 customers.

Concept and Menu.Both JJ North's Country Buffet and North's Star Buffet restaurants offer fixed price lunch, dinner
and weekend breakfast menus that entitle each customer to unlimited servings of all menu items and beverages. Prices are approximately $5.59 for lunch and approximately $7.99 for dinner, and may vary
depending on restaurant location. The average check for JJ North's Country Buffet is $6.10. The average check in North's Star Buffet is $5.90. The restaurants offer reduced prices to children under
age 12 and to senior citizens.

Both
JJ North's Country Buffet and North's Star Buffet restaurants seek to differentiate themselves from other buffet and cafeteria restaurants by the quality and variety of their
food offerings. The restaurants feature a "scatter bar" buffet system with separate food islands in an "all-you-can-eat" format. Menus emphasize traditional
American "home cooking" and include soups, salads, entrees, vegetables, non-alcoholic beverages and desserts. Customers can choose from multiple entree choices,

4

---

including fried and baked chicken and fish, roast beef, turkey and ham. Additional entrees, such as lasagna, barbecued ribs and other regional or seasonal dishes, are featured on particular days of
the week. In addition to entrees, each meal period includes freshly-prepared soups, assorted vegetable and potato dishes, hot bread and an extensive salad bar. Dessert selections include pudding,
assorted cobblers, cakes, cookies and soft-serve frozen dairy desserts and various sundae toppings.

Florida Buffets Division

General.The Company, through several transactions, has acquired seventeen properties in Florida which currently
operate under the brand names BuddyFreddys Country Buffet (13), BuddyFreddys (2) and Holiday House (2). Two of the 13 BuddyFreddys Country Buffet restaurants are closed for remodeling and
repositioning. BuddyFreddys restaurants average approximately 10,000 square feet with seating for approximately 350 guests. Holiday House restaurants average approximately 5,500 square feet with
seating for approximately 170 guests.

Concept and Menu.The 13 BuddyFreddys Country Buffet restaurants offer a buffet menu specializing in local dishes and
southern-style cooking. Each location also offers a small gift shop selling a variety of BuddyFreddys apparel, snacks and specialty merchandise. The two BuddyFreddys differ from BuddyFreddys Country
Buffets in that they offer a full a la carte menu in addition to the "all-you-can-eat" buffet. The two Holiday House restaurants also operate in a buffet format and
specialize in offering the customer a wide variety of meat entrees including ham, roast beef, turkey and its signature leg of lamb. The average check price for BuddyFreddys and Holiday House is
approximately $6.60.

JB's Restaurants

General.The Company, through its subsidiary Summit Family Restaurants, Inc. ("Summit") operates 10 JB's
Restaurants in Arizona, Montana, New Mexico, Utah and Wyoming. In connection with the acquisition of certain JB's Restaurants in 1998 from CKE Restaurants, Inc., the Company entered into a
one-year franchise agreement for each location which required among other items, the payment of royalty fees.

Subsequent
to the acquisition of certain JB's Restaurants, the Company negotiated a ten-year option for annual renewable franchise agreements for each of the JB's
Restaurants the Company operates. In February 2000, the annual renewable franchise agreement expired and to date, the Company has elected not to renew these franchise agreements, but instead
has entered into negotiations to acquire a long-term license agreement to utilize the JB's Restaurant name. To date, the negotiations have not been finalized with respect to a license
agreement.

Concept and Menu.JB's Restaurants offer a variety of breakfast, lunch and dinner selections at moderate prices. The
breakfast menu features an "all-you-can-eat" breakfast buffet along with other traditional breakfast fare. The lunch and dinner menu has a variety of sandwiches as
well as steak, chicken, pasta and seafood entrees. All JB's Restaurants offer an "all-you-can-eat" soup and salad bar during the lunch and dinner. With the
exception of the breakfast buffet and the "all-you-can-eat" soup
and salad bar, all entrees are cooked to order and served by a wait staff. The average check is approximately $5.90.

Operations.The JB's Restaurants are supervised by a Vice President of Operations who reports to the Company's
President. Each restaurant has a general manager and at least two assistant managers. Each restaurant employs between 20 and 50 hourly employees (made up of a mix of part-time and
full-time workers) depending on restaurant size and traffic.

5

---

Licenses, Trademarks and Service Marks

The Company owns the trademarks and service marks for Casa Bonita, BuddyFreddys and Holiday House and has a license agreement with CKE for use of the "Star"
name and design. The Company has an agreement with North's Restaurants, Inc. for a royalty-free, transferable license to use the intangible property of JJ North's and is negotiating
to acquire a license to operate restaurants under the JB's name. The Company utilizes the HomeTown Buffet mark pursuant to various franchise agreements.

Seasonality

The Company's business is moderately seasonal in nature with the first and second fiscal quarters being the highest volume periods. The Company's lowest volume
periods typically occur during the third and fourth fiscal quarters.

Employees

As of April 16, 2001, the Company employed approximately 2,800 persons, of whom approximately 2,640 were restaurant employees, and approximately 160
were restaurant management, supervisory and corporate personnel. Restaurant employees include both full-time and part-time workers paid on an hourly basis. No Company employees
are covered by collective bargaining agreements. The Company believes that its relations with its employees are generally good.

Directors and Executive Officers

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

Name

Age

PositionRobert E. Wheaton

49

Chief Executive Officer, President and ChairmanRonald E. Dowdy

44

Group Controller, Treasurer and SecretaryJack M. Lloyd

50

DirectorThomas G. Schadt

59

DirectorPhillip "Buddy" Johnson

48

DirectorCraig B. Wheaton

43

Director


Robert E. Wheatonhas served as the Chief Executive Officer and President and as a director of the Company since its formation in
July 1997. Mr. Wheaton has been Chairman of the Board since September 1998. Mr. Wheaton served as Executive Vice President of CKE from January 1996 through
January 1999. From April 1995 to January 1996, he served as Vice President and Chief Financial Officer of Denny's Inc., a subsidiary of Flagstar Corporation. From 1991 to
1995, Mr. Wheaton served as President and Chief Executive Officer, and from 1989 to 1991 as Vice President and Chief Financial Officer of The Bekins Company.

Ronald E. Dowdyhas served as the Group Controller since June 1998 and as Treasurer and Secretary since February 1999.
Mr. Dowdy served as Controller to Holiday House Corporation for nineteen years prior to joining Star Buffet.

Thomas G. Schadthas served as a director of the Company since the completion of the Company's initial public offering in
September 1997. Mr. Schadt has been the Chief Executive Officer of a privately-held beverage distribution company, Bear Creek, L.L.C., since 1995. From 1976 to 1994, he held
several positions with PepsiCo, Inc., most recently, Vice President of Food Service.

6

---

Jack M. Lloydhas served as a director of the Company since the completion of the Company's initial public offering in
September 1997. Mr. Lloyd served as Chairman of the Board of DenAmerica Corp. from July 1996 until September 2000 and as President, Chief Executive Officer and a director of DenAmerica
Corp. from March 1996, until September 2000. Mr. Lloyd served as Chairman of the Board and Chief Executive Officer of Denwest Restaurant Corp. ("DRC") from 1987 until the March 1996
merger of DRC and DenAmerica and as President of DRC from 1987 until November 1994. Mr. Lloyd engaged in commercial and residential real estate development and property management as
President of First Federated Investment Corporation during the early and mid-1980's. Mr. Lloyd also currently serves as a director of Action Performance Companies, Inc.
DenAmerica Corp. changed its name to Phoenix Restaurant Group in June 1999.

Phillip "Buddy" Johnsonhas served as a Director of the Company since February 1999 and as President of the BuddyFreddys
Division since it was acquired in April 1998 until March 2001. Mr. Johnson is the Director of the Division of Real Estate in the Florida Department of Business and Professional
Regulations. From 1980 until 1998, he was the founding Chairman and CEO of BuddyFreddys Enterprises. From 1991 to 1996, Mr. Johnson served as Republican floor leader in the Florida House of
Representatives. Mr. Johnson also served on the executive committee of The Foundation for Florida's Future, a non-profit corporation established in 1995 by now Governor Jeb Bush.

Craig B. Wheatonhas served as a director of the Company since February 1999. Mr. Wheaton is a partner in the law firm
Kilpatrick Stockton LLP. His main areas of practice include employee benefits, executive compensation and general corporate law. Mr. Wheaton received his B.A. degree, with honors, from the
University of Virginia and his J.D. degree from Wake Forest University. Mr. Wheaton was a member of the Tax Council of the North Carolina Bar Association Section on Taxation
("93-'98) and chair of its Employee Benefits Committee ("95-'97). He is a member and former president of the Triangle Benefits Forum. He is a member of the Southern Employee
Benefits Conference, the Employee Benefits Committee of the American Bar Association's Section of Taxation, the National Pension Assistance Project's National Lawyers Network, and the National
Association of Stock Plan
Professionals. Mr. Wheaton is the brother of Robert E. Wheaton, the Company's Chairman, President and Chief Executive Officer.

Risks

Growth via Acquisitions.The Company intends to pursue a strategy of moderate growth, primarily through acquisitions.
The success of this strategy will depend in part on the ability of the Company to acquire additional buffet restaurants or to convert acquired sites into buffet restaurants, both within existing and
new markets. The success of the Company's growth strategy is dependent upon numerous factors, many of which are beyond the Company's control, including the availability of suitable acquisition
opportunities, the availability of appropriate financing and general economic conditions. The Company must compete with other restaurant operators for acquisition opportunities and with other
restaurant operators, retail stores, companies and developers for desirable site locations. Many of these entities have substantially greater financial and other resources than the Company. There can
be no assurance that the Company will be able to identify, negotiate and consummate acquisitions of additional buffet restaurants or that acquired restaurants or converted restaurants can be operated
profitably and successfully integrated into the Company's operations. Many of its acquired restaurants will be located in geographic markets in which the Company has limited or no operating
experience. In addition, the Company's acquisition strategy includes the identification of companies or properties that are viewed as underperforming by the Company. This element of the Company's
strategy increases the risks involved with the Company's acquisitions.

Acquisitions
involve a number of special risks that could adversely affect the Company's business, results of operations and financial condition, including the diversion of
management's attention, the

7

---

assimilation of the operations and personnel of the acquired restaurants, the amortization of acquired intangible assets and the potential loss of key employees. In particular, the failure to maintain
adequate operating and financial control systems or unexpected difficulties encountered during expansion could materially and adversely affect the Company's business, financial condition and results
of operations. There can be no assurance that any acquisition will not materially and adversely affect the Company or that any such acquisition will enhance the Company's business. Furthermore, the
Company is unable to predict the likelihood of any additional acquisitions being proposed or completed in the near future.

A
strategy of growth through acquisitions requires access to significant capital resources. If the Company determines to make a sizeable acquisition, the Company may be required to
sell additional equity or debt securities or obtain additional credit facilities. The sale of additional equity or
convertible debt securities could result in additional dilution to the Company's stockholders. At present, the Company has only limited availability under its credit facilities and such availability
will be restricted in the future given scheduled principal repayments. As a result, there can be no assurance that adequate financing under its credit facilities would be available to the Company for
any such acquisition.

From
February 1998 to January 2001, the Company has acquired 29 restaurants in seven states, including 17 units in Florida. As a result of the acquisitions, the Company
is more complex and diverse, and the integration of the acquisitions has presented difficult challenges for the Company's management due to the increased time and resources required in management
effort. In order to improve profitability, the Company will need to successfully integrate and streamline restaurant functions. There can be no assurance that integration will be successfully
accomplished. The difficulties of such integration have been increased by the necessity of coordinating geographically separate organizations. The integration of certain operations following the
acquisitions required the dedication of management resources which has temporarily distracted attention from the day-to-day business of the Company. The failure to effectively
integrate the operations of the Company or to improve the results of operations of the acquired restaurants could have a material adverse effect on the Company's business, financial condition and
results of operations.

Dependence Upon and Restrictions Resulting from Franchisors.The Company owns and operates 16 out of its 53 restaurants
pursuant to the terms of franchise agreements. The Company operates its 16 HomeTown Buffet Restaurants through its wholly-owned subsidiary, HTB Restaurants, Inc., which is a party to a
Franchise Agreement with the HomeTown Franchisor for each such restaurant.

The
performance of the Company's HomeTown Buffet restaurant operations is directly related to the success of the HomeTown Buffet restaurant system, including the management and
financial condition of HomeTown as well as restaurants operated by HomeTown and their franchisees. The inability of such restaurants to compete effectively would have a material adverse effect on the
Company's operations. The success of the Company's HomeTown Buffet restaurants depends in part on the effectiveness of the HomeTown Franchisor's marketing efforts, new product development programs,
quality assurance and other operational systems over which the Company has no control. For example, adverse publicity involving HomeTown restaurants operated by the franchisor or their other
franchisees could have a material adverse effect on the Company's business, financial condition and results of operations.

The
Company's operations with respect to its HomeTown restaurants are subject to certain restrictions imposed by policies and procedures of HomeTown as in effect from time to time.
These restrictions limit the Company's ability to modify the menu items and decor of its restaurants and may have the effect of limiting the Company's ability to pursue its business plan. Furthermore,
the Franchise Agreement with the HomeTown franchisor imposes substantial restrictions on the Company's ability to operate certain restaurant formats and to open additional restaurants in certain
geographical areas.

8

---

The Company, through its subsidiary Summit Family Restaurants, Inc. ("Summit") operates 10 JB's Restaurants in Arizona, Montana, New Mexico, Utah and Wyoming. In connection
with the acquisition of certain JB's Restaurants in 1998 from CKE Restaurants, Inc., the Company entered into a one-year franchise agreement for each location which required among
other items, the payment of royalty fees. Subsequent to the acquisition of certain JB's Restaurants, the Company negotiated a ten-year option for annual renewable franchise agreements for
each of the JB's Restaurants the Company operates. In February 2000, the annual renewable franchise agreement expired and to date, the Company has elected not to renew these franchise
agreements, but instead has entered into negotiations to acquire a long-term license agreement to utilize the JB's Restaurant name. To date, the negotiations have not been finalized with
respect to a license agreement.

Fluctuations in Quarterly Results.The Company has in the past experienced, and expects to continue to experience,
significant fluctuations in restaurant revenues and results of operations from quarter to quarter. In particular, the Company's quarterly results can vary as a result of acquisitions, costs incurred
to integrate newly acquired entities, and seasonal patterns. A large number of the Company's restaurants are located in areas which are susceptible to severe winter weather conditions or tropical
storm patterns which may have a negative impact on customer traffic and restaurant revenues. Accordingly, the Company believes that period-to-period comparisons of its
operating results are not necessarily meaningful and that such comparisons cannot be relied upon as indicators of future performance. There can be no assurance that future seasonal and quarterly
fluctuations will not have a material adverse effect on the Company's business, results of operation and financial condition.

Competition.The restaurant industry is highly competitive. The Company competes on the basis of the quality and value
of food products offered, price, service, location, ambiance and overall dining experience. The Company's competitors include a large and diverse group of restaurant chains and individually owned
restaurants, including chains and individually owned restaurants that use a buffet format. The number of buffet restaurants with operations generally similar to the Company's has grown considerably in
the last several years and the Company believes competition among buffet-style restaurants is increasing. As the Company and its principal competitors expand operations in various geographic areas,
competition, including competition among buffet-style restaurants, can be expected to intensify. Such intensified competition could increase the Company's operating costs or adversely affect its
revenues. A number of competitors have been in existence longer than the Company and have substantially greater financial, marketing and other resources and wider geographical diversity than does the
Company. In addition, the restaurant industry has few noneconomic barriers to entry and is affected by changes in consumer tastes, national, regional and local economic conditions and market trends.
The Company's significant investment in, and long term commitment to, each of its restaurant sites limits its ability to respond quickly or effectively to changes in local competitive conditions or
other changes that could affect the Company's operations.

Restaurant Industry.Food service businesses are often affected by changes in consumer tastes, national, regional and
local economic conditions and demographic trends. The performance of individual restaurants may be adversely affected by factors such as traffic patterns, demographic considerations and the type,
number and location of competing restaurants. Multi-unit food service businesses such as the Company's can also be materially and adversely affected by publicity resulting from poor food
quality, illness, injury or other health concerns or operating issues stemming from one restaurant or a limited number of restaurants. Dependence on frequent deliveries of fresh produce and groceries
subjects food service businesses such as the Company's to the risk that shortages or interruptions in supply, caused by adverse weather or other conditions, could adversely affect the availability,
quality and cost of ingredients. The Company's profitability is highly sensitive to increases in food, labor and other operating costs that cannot always be passed on to its guests in the form of
higher prices or otherwise compensated for. In addition, unfavorable trends or developments concerning factors such as inflation, increased food, labor, employee benefits and utility costs (including

9

---

increases in hourly wage and unemployment tax rates), increases in the number and locations of competing buffet-style restaurants, regional weather conditions and the availability of experienced
management and hourly employees may also adversely affect the food service industry in general and the Company's business, financial condition and results of operations in particular. Changes in
economic conditions affecting the Company's guests could reduce traffic in some or all of the Company's restaurants or impose practical limits on pricing, either of which could have a material adverse
effect on the Company's business, financial condition and results of operations. The success of the Company will depend in part on the ability of the Company's management to anticipate, identify and
respond to changing conditions. There can be no assurance that management will be successful in this regard.

Dependence on Key Personnel.The Company believes that its success will depend in part on the services of its key
executives, including Robert E. Wheaton, Chairman of the Board, President and Chief Executive Officer. The Company does not maintain any key man life insurance. The loss of the services of
Mr. Wheaton could have a material adverse effect upon the Company's business, financial condition and results of operations, and there can be no assurance that a qualified replacement would be
available in a timely manner if at all. The Company's continued growth will also depend in part on its ability to attract and retain additional skilled management personnel.

Government Regulation.The restaurant industry is subject to federal, state and local government regulations, including
those relating to the preparation and sale of food and building and zoning requirements. In addition, the Company is subject to laws governing its relationship with employees, including minimum wage
requirements, overtime, working and safety conditions and citizenship requirements. The failure to obtain or retain food licenses or an increase in the minimum wage rate, employee benefit costs or
other costs associated with employees, could have a material adverse effect on the Company's business, financial condition and results of operations. Many of the Company's
employees are paid hourly rates based upon the federal and state minimum wage laws. Recent legislation increasing the minimum wage has resulted in higher labor costs to the Company.

Effect of Certain Charter and Bylaw Provisions.Certain provisions of the Company's Certificate of Incorporation and
Bylaws may have the effect of making it more difficult for a third party to acquire, or of discouraging a third party from attempting to acquire, control of the Company. Such provisions could limit
the price that certain investors might be willing to pay in the future for shares of the Company's Common Stock. The Company's Certificate of Incorporation allows the Company to issue up to 1,500,000
shares of currently undesignated Preferred Stock, to determine the powers, preferences and rights and the qualifications, limitations or restrictions granted to or imposed on any unissued series of
that Preferred Stock, and to fix the number of shares constituting any such series and the designation of such series, without any vote or future action by the stockholders. The Preferred Stock could
be issued with voting, liquidation, dividend and other rights superior to the rights of the Common Stock. The Certificate of Incorporation also eliminates the ability of stockholders to call special
meetings. The Company's Bylaws require advance notice to nominate a director or take certain other actions. Such provisions may make it more difficult for stockholders to take certain corporate
actions and could have the effect of delaying or preventing a change in control of the Company. In addition, the Company has not elected to be excluded from the provisions of Section 203 of the
Delaware General Corporation Law, which imposes certain limitations on transactions between a corporation and "interested" stockholders, as defined in such provisions.

Possible Volatility of Stock Price.The stock market has from time to time experienced significant price and volume
fluctuations that are unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the market price of the Company's Common Stock. Factors such
as fluctuations in the Company's operating results, failure of such operating results to meet the expectations of stock market analysts and investors, changes in stock market analyst

10

---

recommendations regarding the Company, its competitors and other companies in the restaurant industry, as well as changes in general economic or market conditions and changes in the restaurant
industry may have a significant adverse effect on the market price of the Common Stock.

Sale of a Substantial Number of Shares of Our Common Stock Could Cause the Market Price to Decline.Sales of a substantial number of
shares of our common stock in the public market could substantially reduce the prevailing market price of our common stock. As of April 16, 2001, 2,950,000 shares of Common Stock were
outstanding and 683,000 shares were issuable upon exercise of outstanding options at exercise prices ranging from $5.00 to $12.00. The company cannot predict the effect, if any, that sales of shares
of the Company's common stock or the availability of such shares for sale will have on prevailing market prices. However, substantial amounts of the Company's common stock could be sold in the public
market, which may adversely affect prevailing market prices for the common stock.

Control by One Principal Stockholder.Robert E. Wheaton, our Chairman, Chief Executive Officer and President, currently
beneficially owns approximately 42.6% of our total equity securities, assuming exercise of vested employee stock options, and possesses approximately 42.6% of the total voting power. Thus
Mr. Wheaton has the ability to control or significantly influence all matters requiring the approval of our stockholders, including the election of our directors.

Item 2.Properties

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

The
Company's restaurants are primarily freestanding locations. As of January 29, 2001 most of the Company's restaurant facilities were leased. The leases expire on dates
ranging from 2001 to 2014 with the majority of the leases providing for renewal options. All leases provide for specified periodic rental payments, and most call for additional rent based upon revenue
volume. Most leases require the Company to maintain the property and pay for the cost of insurance and taxes.

The
following is a summary of the Company's restaurant properties as of January 29, 2001:

HomeTown
Buffet

Casa
Bonita

North's
Star

Florida
Buffets

JB's

TotalOwned





1

5

3

9Leased

16

2

7

12

7

44


As
of January 29, 2001, the Company's restaurants are located in the following states:

Number of RestaurantsState

HomeTown
Buffet

Casa
Bonita

North's
Star

Florida
Buffets

JB's

TotalArizona

8



1



1

10Colorado

2

1







3Florida







17



17Idaho





3





3Montana









3

3New Mexico

2







1

3Oklahoma



1







1Oregon





1





1Utah

3



1



4

8Washington





2





2Wyoming

1







1

2Total

16

2

8

17

10

53


11

---

Item 3.Legal Proceedings

On November 12, 1998, North's Restaurants, Inc. ("North's") filed a Demand for Arbitration against the Company with the American Arbitration
Association, Irvine, California (District No. 949-251-9840), alleging breach of contract in connection with the Company's failure to perform under a Business Services
Agreement between North's and the Company dated July 24, 1997. On June 22, 1999, the parties agreed to dismiss the Arbitration Proceeding without prejudice since the issues related to
the Business Service Agreement were being litigated in the Utah action described below.

On
November 25, 1998, the Company filed an action against North's Restaurants, Inc. ("North's") in the United States District Court, District of Utah, Case
No. 2-98-CV-893, seeking damages for breach of a promissory note and an Amended and Restated Credit Agreement (collectively, the "Credit Agreements") in the
amount of $3,570,935. On December 31, 1998, North's filed an answer to the Company's Complaint, denying generally the allegations, and filed counterclaims against the Company alleging
(i) the Company fraudulently induced North's to enter into various agreements with the Company relating to the Company's acquisition of seven JJ North's Grand Buffet Restaurants and an option
to acquire nine additional restaurants operated by North's and (ii) the Company had breached the Business Services Agreement. On January 26, 2001, the parties entered into a Settlement
Agreement (the "Settlement Agreement"). The Settlement Agreement provides, among other things, that the Credit Agreement and Revolving Note terminate concurrently with the execution of the Settlement
Agreement, that the Term Note be amended and restated, that the terms of the Term Note have no further force or effect and that the security interest transferred to Star Buffet pursuant to the
Assignment Agreement dated September 30, 1997 between Star Buffet and U.S. Bank National Association be amended and restated pursuant to an Amended and Restated Star Buffet Security Agreement
(the "Security Agreement"). The Company and North's have agreed that the Star Buffet Debt be reduced to a total amount of $3,500,000.00, and that such reduced obligation be payable by North's pursuant
to the terms of the Amended and Restated Promissory Note. The Company recorded no gain or loss on the settlement as the recorded balance of the note was approximately $3.5 million at
the time of the settlement. The Company and North's have agreed that the Company's existing liens encumbering certain property of North's remain in place and continue to secure North's obligations to
the Company, and the Company and North's reserve all rights, claims and defenses with respect to the extent and validity of such existing liens.

The
Company is from time to time the subject of complaints or litigation from customers alleging injury on properties operated by the Company, illness or other food quality, health or
operational concerns. Adverse publicity resulting from such allegations may materially adversely affect the Company and its restaurants, regardless of whether such allegations are valid or whether the
Company is liable. The Company also is the subject of complaints or allegations from employees from time to time. The Company believes that the lawsuits, claims and other legal matters to which it has
become subject in the course of its business are not material to the Company's business, financial condition or results of operations, but an existing or future lawsuit or claim could result in an
adverse decision against the Company that could have a material adverse effect on the Company's business, financial condition and results of operations.

Item 4.Submission of Matters to a Vote of Security Holders

None.

12

---



PART II

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

The Company's Common is listed on the NASDAQ smallcap market under the symbol "STRZ". As of April 16, 2001, there were approximately 550 record holders
of the Company's Common Stock. The following table sets forth the high and low bid quotations for the Common Stock, as reported by NASDAQ.

Fiscal Year

2001

2000

1999High

Low

High

Low

High

LowFirst Quarter

$
3
7/8
$
2
1/2
$
6
1/8
$
4

$
17
1/4
$
11
7/8Second Quarter


3
5/8

2
3/8

6
15/16

4
7/8

15
7/8

6
7/8Third Quarter


3
9/16

2
13/16

5
1/2

3
1/16

8
3/8

3
5/8Fourth Quarter


3
1/16

2
7/16

4
5/8

3
3/16

7
5/16

5
3/8


In
connection with the Company's Initial Public Offering, the Company declared and paid a cash dividend of $9.3 million to CKE. Other than this dividend, the Company has never
declared or paid dividends on its Common Stock. The Company expects future earnings, if any, will be retained to finance the operation and expansion of the Company's business and, accordingly, does
not intend to declare or pay any cash dividends on the Common Stock in the foreseeable future.

Item 6.Selected Financial Data

The selected financial information and other data presented below should be read in conjunction with the "Consolidated Financial Statements", and "Management's
Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this Form 10-K. The operating results for the 52-week period ended
January 29, 2001 included 52 weeks of operations for the Company's 16 franchised HomeTown Buffet restaurants, ten JB's restaurants, ten BuddyFreddys Country Buffet restaurants, six JJ North's
Country Buffet restaurants, two BuddyFreddys restaurants, two Casa Bonita restaurants, two Holiday House restaurants and one North's Star Buffet restaurant. The results also include 14 weeks for one
North's Star Buffet restaurant which was closed for remodeling and 15 weeks for one JB's restaurant which closed when the lease terminated. In addition, results include 49, 31, 18, 12 and 12 weeks
respectively for five BuddyFreddys Country Buffet restaurants. Two restaurants were closed at the end of the fiscal year for remodeling and repositioning. During the first quarter of fiscal 2002, an
additional restaurant was closed for remodeling and repositioning.

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

The
operating results for the 52-week period ended January 25, 1999 included 52 weeks of operations for the Company's 16 franchised HomeTown Buffet restaurants, two
Casa Bonita restaurants and six JJ North's Country Buffet restaurants. The results also included 48 weeks of operations for the nine franchised JB's Restaurants operated by the Company; 50 weeks for
three Stacey's Buffets that

13

---

were converted to BuddyFreddys Country Buffet; 48 weeks for two Maggies Buffets that were converted; 43 weeks for two BuddyFreddys; 8 weeks for one BuddyFreddys Country Buffet; 3 weeks of operations
for one BuddyFreddys Country Buffet; 50 weeks for one North's Star Buffet; 48 weeks for one North's Star Buffet; 36 weeks for one North's Star Buffet; 31 weeks for one North's Star Buffet; 24 weeks
for one North's Star Buffet; and 3 weeks for three Holiday House restaurants.

The
52-week period ended January 26, 1998 includes the results of operations of 16 franchised HomeTown Buffet restaurants, two Casa Bonita restaurants and seven JJ
North's Grand Buffet Restaurants operated by the Company from September 30, 1997, (the date of JJ North's acquisition).

Operating
statement data for periods beginning after July 15, 1996 are herein referred to as the Successor Company or Successor. The operating statement data for the
28-weeks ending January 27, 1997 include the results of operations of 16 franchised HomeTown Buffet restaurants and the results of operations of the two Casa Bonita restaurants from
October 1, 1996, (the date of the Casa Bonita acquisition). The operating results for the 30-week period ending July 15, 1996 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").

14

---

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

|                                            |                                                                | Successor Company        |        | Predecessor Company |       
|------------------------------------------- | -------------------------------------------------------------- | ------------------------ | ------ | ------------------- | ------
|
|
|Consolidated Statements of Income Data:     |                                                                |                          |        |                     |       
|Total revenues                              |                                                                | $                        | 94,039 |                     | $     
|Costs and expenses:                         |                                                                |                          |        |                     |       
|                                            | Food costs                                                     |                          |        | 30,899              |       
|                                            | Labor costs                                                    |                          |        | 32,301              |       
|                                            | Occupancy and other expenses                                   |                          |        | 18,880              |       
|                                            | General and administrative                                     |                          |        | 4,108               |       
|                                            | Depreciation, amortization and impairment of long-lived assets |                          |        | 4,240               |       
|                                            |                                                                |                          |        |                     |       
|                                            |                                                                | Total costs and expenses |        |                     | 90,428
|                                            |                                                                |                          |        |                     |       
|Income from operations                      |                                                                |                          | 3,611  |                     |       
|Interest expense                            |                                                                |                          | (1,556 | )                   |       
|Other Income                                |                                                                |                          | 52     |                     |       
|                                            |                                                                |                          |        |                     |       
|Income before income taxes                  |                                                                |                          | 2,107  |                     |       
|Income tax expense                          |                                                                |                          | 705    |                     |       
|                                            |                                                                |                          |        |                     |       
|Net Income                                  |                                                                | $                        | 1,402  |                     | $     
|                                            |                                                                |                          |        |                     |       
|Net Income per common sharediluted         |                                                                | $                        | 0.48   |                     | $     
|                                            |                                                                |                          |        |                     |       
|Weighted average shares outstandingdiluted |                                                                |                          | 2,950  |                     |       
|Balance sheet data:                         |                                                                |                          |        |                     |       
|Total assets                                |                                                                | $                        | 46,002 |                     | $     
|Total debt including current portion        |                                                                |                          | 14,728 |                     |       
|Stockholders' equity                        |                                                                | $                        | 21,380 |                     | $     
|Other data:                                 |                                                                |                          |        |                     |       
|Operating units(1)                          |                                                                |                          |        |                     |       
|                                            | HomeTown Buffet                                                |                          |        | 16                  |       
|                                            | Casa Bonita                                                    |                          |        | 2                   |       
|                                            | North's Star Division                                          |                          |        | 7                   |       
|                                            | Florida Buffets Division                                       |                          |        | 16                  |       
|                                            | JB's Restaurants                                               |                          |        | 10                  |       
|                                            | Non-Operating                                                  |                          |        | 2                   |       
|                                            |                                                                |                          |        |                     |       
|Total                                       |                                                                |                          | 53     |                     |       
|                                            |                                                                |                          |        |                     |       

---

15

---

Supplemental Quarterly Financial Data (Unaudited).Quarterly financial results for the 52 weeks ended
January 25, 2001 and the 53 weeks ended January 31, 2000, are summarized below.

(In
Thousands Except Per-Share Data)

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

(In
Thousands Except Per-Share Data)

|                           |         | For the 53 Weeks Ended January 31, 2000
|-------------------------- | ------- | ---------------------------------------
|
|Revenues                   |         | $                                      
|                           |         |                                        
|Income from operations     |         | $                                      
|                           |         |                                        
|Income before income taxes |         | $                                      
|Provision for income taxes |         |                                        
|                           |         |                                        
|Net income                 |         | $                                      
|                           |         |                                        
|Earnings per share:        |         |                                        
|                           | Basic   |                                        
|                           | Diluted |                                        

Amounts
indicated may not foot due to quarterly rounding.

Item 7.Management's Discussion and Analysis of Financial Condition and Results of Operations

The following Management's Discussion and Analysis should be read in conjunction with the consolidated financial statements, and the notes thereto, presented
elsewhere in this Form 10-K. The operating results for the 52-week period ended January 29, 2001 included 52 weeks of operations for the Company's 16 franchised
HomeTown Buffet restaurants, ten JB's restaurants, ten BuddyFreddys Country Buffet restaurants, six JJ North's Country Buffet restaurants, two BuddyFreddys restaurants, two Casa Bonita restaurants,
two Holiday House restaurants and one North's Star Buffet restaurant. The results also include 14 weeks for one North's Star Buffet restaurant which was closed for remodeling and 15 weeks for one JB's
restaurant which closed when the lease terminated. In addition, results include 49, 31, 18, 12 and 12 weeks respectively for five BuddyFreddys Country Buffet restaurants.

The
operating results for the 53-week period ended January 31, 2000 ("fiscal 2000") included 53 weeks of operations for the Company's 16 franchised HomeTown Buffet
restaurants, nine franchised JB's restaurants, six JJ North's Country Buffet restaurants, five BuddyFreddys Country Buffet restaurants, two BuddyFreddys restaurants, two North's Star Buffet
restaurants, two Casa Bonita restaurants and two Holiday House restaurants. The results also included 3 weeks of operations for 2 North's Star Buffet restaurants that were converted back to JB's
Restaurants operating for 28 and 13

16

---

weeks respectively in fiscal 2000; 17 weeks of operations for one Holiday House that was converted to a BuddyFreddys Country Buffet restaurant operating for 34 weeks; and 46, 45, 40, 32, 25, 21 and 14
weeks respectively for seven BuddyFreddys Country Buffet restaurants.

The
operating results for the 52-week period ended January 25, 1999 ("fiscal 1999") included 52 weeks of operations for the Company's 16 franchised HomeTown Buffet
restaurants, two Casa Bonita restaurants and six JJ North's Country Buffet restaurants operated by the Company (one store was converted to a North's Star Buffet restaurant). The results also included
48 weeks of operations for the nine franchised JB's Restaurants operated by the Company; 50 weeks for three Stacey's Buffets that
were converted to BuddyFreddys Country Buffet; 48 weeks for two Maggies Buffets that were converted; 43 weeks for two BuddyFreddys; 8 weeks for one BuddyFreddys Country Buffet; 3 weeks of operations
for one BuddyFreddys Country Buffet; 50 weeks for one North's Star Buffet; 48 weeks for one North's Star Buffet; 36 weeks for one North's Star Buffet; 31 weeks for one North's Star Buffet; 24 weeks
for one North's Star Buffet; and 3 weeks for three Holiday House restaurants.

The
implementation of the Company's acquisition and strategic alliance strategies, and the costs associated with integrating new, under performing, or unprofitable restaurants,
acquired or otherwise operated by the Company may affect the comparability of future periods and have a material adverse effect on the Company's results of operations.

Results of Operations

The following table summarizes the Company's results of operations as a percentage of total revenues for the fifty-two weeks ended
January 29, 2001 ("fiscal 2001"), fifty-three weeks ended January 31, 2000 ("fiscal 2000") and fifty-two weeks ended January 25, 1999 ("fiscal 1999").

Fifty-Two
Weeks Ended
January 29,
2001

Fifty-Three
Weeks Ended
January 31,
2000

Fifty-Two
Weeks Ended
January 25,
1999Total revenues

100.0
%
100.0
%
100.0
%Costs and expenses:Food costs

32.9

32.9

33.5Labor costs

34.3

34.0

32.8Occupancy and other expenses

20.1

20.6

20.7General and administrative expenses

4.4

5.2

5.0Depreciation and amortization

3.9

3.8

3.5Impairment of long-lived assets

0.6



0.1Total costs and expenses

96.2

96.5

95.6Income from operations

3.8

3.5

4.4Interest expense

(1.6
)
(1.4
)
(0.7
)Other income

0.0

0.2

1.1Income before income taxes

2.2

2.3

4.8Income tax expense

(0.7
)
(0.8
)
(1.9
)Net income

1.5
%
1.5
%
2.9
%


Comparison of Fiscal 2000 to Fiscal 2001

Total revenues decreased $5.0 million or 5.1% from $99.1 million in fiscal 2000 to $94.0 million in fiscal 2001. The decrease was
primarily attributable to a decrease in the number of restaurants open and operating in fiscal 2001 and an additional week of operating results in fiscal 2000.

Food
costs as a percent of total revenues remained at 32.9% in fiscal 2000 and fiscal 2001.

17

---

Labor costs as a percent of total revenues increased from 34.0% in fiscal 2000 to 34.3% in fiscal 2001. The increase was primarily attributable to higher management and benefit costs.

Occupancy
and other expenses as a percent of total revenues decreased from 20.6% in fiscal 2000 to 20.1% in fiscal 2001. The decrease is primarily attributable to a decrease in
operating units in the North's Star and Florida divisions.

General
and administrative expenses as a percentage of total revenues decreased from 5.2% in fiscal 2000 to 4.4% in fiscal 2001. The decrease is primarily attributable to decreases in
legal expenses due to the end of an arbitration case with HomeTown Buffet Restaurants, Inc. in fiscal 2000.

Depreciation
and amortization as a percent of total revenues increased from 3.8% in fiscal 2000 to 3.9% in fiscal 2001. The increase is primarily attributable to decreased revenues.

Impairment
of long-lived assets increased from 0.0% in fiscal 2000 to 0.6% in fiscal 2001. The impairment in fiscal 2001 was a result of closing three stores in Florida and one in
Utah.

Interest
expense as a percent of total revenues increased from 1.4% in fiscal 2000 to 1.6% in fiscal 2001. The increase is primarily attributable to higher interest rates on the Term
Loan Facility and Revolving Credit Facility financed by Fleet National Bank. as discussed in Item 1.

Other
income as a percent of total revenues decreased from 0.2% in fiscal 2000 to 0.0% in fiscal 2001. The decrease is primarily attributable to an insurance refund in fiscal 2000 for
loss of income.

Income
taxes decreased from 36.7% of earnings before taxes in fiscal 2000 to 33.5% of earnings before taxes in fiscal 2001.

Comparison of Fiscal 1999 to Fiscal 2000

Total revenues increased $13.7 million or 16.0% from $85.4 million in fiscal 1999 to $99.1 million in fiscal 2000. The increase was
primarily attributable to an increase in the number of restaurants open and operating in fiscal 2000 and an additional week of operating results in fiscal 2000.

Food
costs as a percent of total revenues decreased from 33.5% in fiscal 1999 to 32.9% in fiscal 2000. The decrease is primarily attributable to improvement in the Florida Division.

Labor
costs as a percent of total revenues increased from 32.8% in fiscal 1999 to 34.0% in fiscal 2000. The increase was primarily attributable to higher management and benefit costs.

Occupancy
and other expenses as a percent of total revenues decreased from 20.7% in fiscal 1999 to 20.6% in fiscal 2000. The decrease is primarily attributable to the increase in
revenues.

General
and administrative expenses as a percentage of total revenues increased from 5.0% in fiscal 1999 to 5.2% in fiscal 2000. The increase is primarily attributable to increases in
legal expenses in connection with the HomeTown Buffet Restaurants, Inc. arbitration case.

Depreciation
and amortization as a percent of total revenues increased from 3.5% in fiscal 1999 to 3.8% in fiscal 2000. The increase is primarily attributable to the acquisition and
conversion of restaurants in Florida.

Interest
expense as a percent of total revenues increased from 0.7% in fiscal 1999 to 1.4% in fiscal 2000. The increase is primarily attributable to the Term Loan Facility and
Revolving Credit Facility financed by BankBoston, N.A. as discussed in Item 1.

Other
income as a percent of total revenues decreased from 1.1% in fiscal 1999 to 0.2% in fiscal 2000. The decrease is primarily attributable to the termination of management
contracts with North's Restaurants, Inc.

Income
taxes decreased from 40.0% of earnings before taxes in fiscal 1999 to 36.7% of earnings before taxes in fiscal 2000.

18

---



FINANCIAL CONDITION

Liquidity and Capital Resources

The Company has historically financed operations through a combination of cash on hand, cash provided from operations and available borrowings under bank lines
of credit. As of January 29, 2001, the Company had $1,101,000 in cash, and as of January 31, 2000, the Company had $1,039,000 in cash and cash equivalents. During fiscal 2001, the
Company used approximately $2.5 million to fund the acquisition of one restaurant and fund capital improvements to existing and acquired restaurants. During fiscal 2000, the Company used
approximately $8.2 million to fund the acquisition of six restaurants and fund capital improvements to existing and acquired restaurants.

Cash
provided by operations was approximately $6.5 million for fiscal 2001 and approximately $6.9 million for fiscal 2000.

The
Company intends to modestly expand operations through the acquisition of regional buffet chains or through the purchase of existing restaurants which would be converted to one of
the Company's existing restaurant concepts. In many instances, management believes that existing restaurant locations can be acquired and converted to the Company's prototype at a lower cost.
Management estimates the cost of acquiring and converting leased property to one of the existing concepts to be approximately $150,000 to $450,000. These costs consist primarily of exterior and
interior appearance modifications, new table, chairs and food bars and the addition of certain kitchen and food service equipment. There can be no assurance that the Company will be able to acquire
additional restaurant chains or locations or, if acquired, that these restaurants will have a positive contribution to the Company's results of operations.

On
October 23, 1998, the Company entered into a $20 million syndicated bank financing agreement led by FleetBoston Financial Corporation (formerly known as BankBoston,
N.A.). The credit facility consists of a $13 million, 5-year term loan (the "Term Loan Facility") and a $7 million, 5-year revolving credit facility (the
"Revolving Credit Facility"). The Term Loan Facility refinanced existing indebtedness and provided capital for the repurchase of Star Buffet common stock and acquisitions. The Term Loan Facility
balance was $6,950,000 as of April 16, 2001. Principal payments under the Term Loan Facility
are due in quarterly installments until the final maturity in October 2003. Borrowings under the Revolving Credit Facility have been used for the Company's new unit development and working
capital needs. All outstanding amounts under the Revolving Credit Facility will become due in October 2003. The Revolving Credit Facility balance was $4,650,000 on April 16, 2001.

The
Company believes that available cash, cash flow from operations and amounts available under the Term Loan Facility and Revolving Credit Facility will be sufficient to satisfy its
working capital, and capital expenditure requirements for the foreseeable future. If the Company requires additional funds to support its working capital requirements or for other purposes, it may
seek to raise such additional funds through public or private equity and/or debt financing or from other sources. There can be no assurance, however, that changes in the Company's operating plans, the
unavailability of a credit facility, the acceleration of the Company's expansion plans, lower than anticipated revenues, increased expenses, potential acquisitions of other events will not cause the
Company to seek additional financing sooner than anticipated. There can be no assurance that additional financing will be available on acceptable terms or at all.

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

19

---

those factors have impacted nearly all restaurant companies. However, management has emphasized cost controls rather than price increases, given the competitive pressure within the quick-service
restaurant industry.

New Accounting Pronouncement

The Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments
and Hedging Activities, in 1998. SFAS No. 133, as amended by SFAS Nos. 137 and 138, establishes accounting and reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts (collectively referred to as derivatives), and for hedging activities. It requires that an entity recognize all derivatives as either assets or liabilities in
the statement of financial position and measure those instruments at fair value. For a derivative not designated as a hedging instrument, changes in the fair value of the derivative are recognized in
earnings in the period of change. Because the Company does not currently hold any
derivative instruments and does not engage in hedging activities, the adoption of SFAS No. 133, on January 30, 2001, did not have a material impact on the Company's consolidated
financial position, results of operations, or cash flows.

Interest Rate Risk

The Company's principal exposure to financial market risks is the impact that interest rate changes could have on our $20.0 million credit facility, of
which $11,600,000 remained outstanding as of April 16, 2001. Borrowings under our credit facility bear interest at the prime rate or at LIBOR plus an applicable margin based on certain
financial ratios (averaging 8.7% in fiscal 2001). A hypothetical increase of 100 basis points in short-term interest rates would result in a reduction of approximately $116,000 in annual
pre-tax earnings. The estimated reduction is based upon the outstanding balance of our credit facility and assumes no change in the volume, index or composition of debt at April 16,
2001. All of our business is transacted in U.S. dollars. Accordingly, foreign exchange rate fluctuations have never had a significant impact on us and are not expected to in the foreseeable future.

Commodity Price Risk

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

Item 8.Financial Statements and Supplementary Data

See the Index included at "Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K."

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

None.

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 2001 Annual Meeting of Stockholders, to be filed with the Commission within 120 days of January 29, 2001. 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 2001 Annual Meeting of Stockholders, to be filed with the Commission within 120 days of January 29, 2001.

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 2001 Annual Meeting of Stockholders, to be filed with the Commission within 120 days of January 29, 2001.

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 2001 Annual Meeting of Stockholders, to be filed with the Commission within 120 days of January 29, 2001.

21

---

PART IV

Item 14.Exhibits, Financial Statement Schedules and Reports on Form 8-K

(a)(1)  Index to Consolidated Financial Statements:

|                                                                                                                                                             |  | Page Number
|------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -----------
|Independent Auditors' Report                                                                                                                                 |  | F-1        
|Consolidated Balance Sheetsas of January 29, 2001 and January 31, 2000                                                                                      |  | F-2        
|Consolidated Statements of Incomefor the 52-weeks ended January 29, 2001, 53-weeks ended January 31, 2000 and 52-weeks ended January 25, 1999               |  | F-3        
|Consolidated Statements of Stockholders' Equityfor the 52-weeks ended January 29, 2001, 53-weeks ended January 31, 2000 and 52-weeks ended January 25, 1999 |  | F-4        
|Consolidated Statements of Cash Flowsfor the 52-weeks ended January 29, 2001, 53-weeks ended January 31, 2000 and 52-weeks ended January 25, 1999           |  | F-5        
|Notes to Consolidated Financial Statements                                                                                                                   |  | F-6        

(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:

None.

22

---



SIGNATURES

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

|               |  | STAR BUFFET, INC.(Registrant)
|-------------- |  | -----------------------------
|April 30, 2001 |  | By:                          

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

|Signature                                         |  | Title                                              |  | Date          
|------------------------------------------------- |  | -------------------------------------------------- |  | --------------
|                                                  |  |                                                    |  |               
|/s/ROBERT E. WHEATONRobert E. Wheaton             |  | President and Chief Executive
Officer and Director |  | April 25, 2001
|/s/RONALD E. DOWDYRonald E. Dowdy                 |  | Group Controller, Treasurer and Secretary          |  | April 25, 2001
|/s/JACK M. LLOYDJack M. Lloyd                     |  | Director                                           |  | April 26, 2001
|/s/THOMAS G. SCHADTThomas G. Schadt               |  | Director                                           |  | April 26, 2001
|                                                  |  |                                                    |  |               
|/s/PHILLIP "BUDDY" JOHNSONPhillip "Buddy" Johnson |  | Director                                           |  | April 26, 2001
|/s/CRAIG B. WHEATONCraig B. Wheaton               |  | Director                                           |  | April 26, 2001

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 as of January 29, 2001 and January 31, 2000, and the related
consolidated statements of income, stockholders' equity and cash flows for the 52-week period ended January 29, 2001, the 53-week period ended January 31, 2000,
and the 52-week period ended January 25, 1999. 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 auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In
our opinion, the consolidated financial statements referred to above present fairly, in all material repects, the financial position of Star Buffet, Inc. and subsidiaries as
of January 29, 2001 and January 31, 2000, and the results of their operations and their cash flows, in conformity with accounting principles generally accepted in the United States of
America.

/s/
KPMG LLP

Salt
Lake City, Utah
March 16, 2001

F-1

---

STAR BUFFET, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

|                                                                                             |                                                                                                                                                                                   | January 29,
2001 |            | January 31,
2000 |  
|-------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------- | ---------- | ---------------- | -
|ASSETS                                                                                       |                                                                                                                                                                                   |                  |            |                  |  
|Current assets:                                                                              |                                                                                                                                                                                   |                  |            |                  |  
|                                                                                             | Cash and cash equivalents                                                                                                                                                         |                  | $          | 1,101,000        |  
|                                                                                             | Current portion of notes and other receivables                                                                                                                                    |                  |            | 1,214,000        |  
|                                                                                             | Inventories                                                                                                                                                                       |                  |            | 937,000          |  
|                                                                                             | Deferred income taxes, net                                                                                                                                                        |                  |            | 172,000          |  
|                                                                                             | Prepaid expenses                                                                                                                                                                  |                  |            | 215,000          |  
|                                                                                             |                                                                                                                                                                                   |                  |            |                  |  
|Total current assets:                                                                        |                                                                                                                                                                                   |                  | 3,639,000  |                  |  
|Property, buildings and equipment, at cost, less accumulated depreciation                    |                                                                                                                                                                                   |                  | 33,131,000 |                  |  
|Real property and equipment under capitalized leases, at cost, less accumulated amortization |                                                                                                                                                                                   |                  | 1,627,000  |                  |  
|Notes receivable, net of current portion                                                     |                                                                                                                                                                                   |                  | 2,974,000  |                  |  
|Deposits and other                                                                           |                                                                                                                                                                                   |                  | 286,000    |                  |  
|Goodwill, less accumulated amortization                                                      |                                                                                                                                                                                   |                  | 3,862,000  |                  |  
|Other intangible assets, less accumulated amortization                                       |                                                                                                                                                                                   |                  | 483,000    |                  |  
|                                                                                             |                                                                                                                                                                                   |                  |            |                  |  
|Total assets                                                                                 |                                                                                                                                                                                   | $                | 46,002,000 |                  | $
|                                                                                             |                                                                                                                                                                                   |                  |            |                  |  
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                         |                                                                                                                                                                                   |                  |            |                  |  
|Current liabilities:                                                                         |                                                                                                                                                                                   |                  |            |                  |  
|                                                                                             | Accounts payable-trade                                                                                                                                                            |                  | $          | 5,410,000        |  
|                                                                                             | Payroll and related taxes                                                                                                                                                         |                  |            | 1,738,000        |  
|                                                                                             | Sales and property taxes                                                                                                                                                          |                  |            | 1,077,000        |  
|                                                                                             | Rent, licenses and other                                                                                                                                                          |                  |            | 736,000          |  
|                                                                                             | Income tax payable                                                                                                                                                                |                  |            | 546,000          |  
|                                                                                             | Current maturities of obligations under capital leases and long-term debt                                                                                                         |                  |            | 3,024,000        |  
|                                                                                             |                                                                                                                                                                                   |                  |            |                  |  
|Total current liabilities                                                                    |                                                                                                                                                                                   |                  | 12,531,000 |                  |  
|Deferred income taxes, net                                                                   |                                                                                                                                                                                   |                  | 387,000    |                  |  
|Capitalized lease obligations, net of current maturities                                     |                                                                                                                                                                                   |                  | 1,729,000  |                  |  
|Long-term debt, net of current maturities                                                    |                                                                                                                                                                                   |                  | 9,975,000  |                  |  
|Stockholders' equity:                                                                        |                                                                                                                                                                                   |                  |            |                  |  
|                                                                                             | Preferred stock, $.001 par value; authorized 1,500,000 shares; none issued or outstanding                                                                                         |                  |            |                 |  
|                                                                                             | Common stock, $.001 par value; authorized 8,000,000 shares in 2001 and 18,500,000 shares in 2000; issued and outstanding 2,950,000    shares in 2001 and 2,950,000 shares in 2000 |                  |            | 3,000            |  
|                                                                                             | Additional paid-in capital                                                                                                                                                        |                  |            | 16,351,000       |  
|                                                                                             | Officer's note receivable                                                                                                                                                         |                  |            | (918,000         | )
|                                                                                             | Retained earnings                                                                                                                                                                 |                  |            | 5,951,000        |  
|                                                                                             | Treasury stock, at cost, 1,104 shares in 2001 and 15,698 shares in 2000                                                                                                           |                  |            | (7,000           | )
|                                                                                             |                                                                                                                                                                                   |                  |            |                  |  
|Total stockholders' equity                                                                   |                                                                                                                                                                                   |                  | 21,380,000 |                  |  
|Total liabilities and stockholders' equity                                                   |                                                                                                                                                                                   | $                | 46,002,000 |                  | $
|                                                                                             |                                                                                                                                                                                   |                  |            |                  |  

See
accompanying notes to consolidated financial statements.

F-2

---



STAR BUFFET, INC. AND SUBSIDIARIES    CONSOLIDATED STATEMENTS OF INCOME

|                                            |                                     | Fifty-Two
Weeks Ended
January 29, 2001 |            | Fifty-Three
Weeks Ended
January 31, 2000 |   | Fifty-Two
Weeks Ended
January 25, 1999 |           
|------------------------------------------- | ----------------------------------- | -------------------------------------- | ---------- | ---------------------------------------- | - | -------------------------------------- | ----------
|Total revenues                              |                                     | $                                      | 94,039,000 |                                          | $ | 99,066,000                             |           
|                                            |                                     |                                        |            |                                          |   |                                        |           
|Costs and expenses                          |                                     |                                        |            |                                          |   |                                        |           
|                                            | Food costs                          |                                        |            | 30,899,000                               |   |                                        | 32,644,000
|                                            | Labor costs                         |                                        |            | 32,301,000                               |   |                                        | 33,650,000
|                                            | Occupancy and other expenses        |                                        |            | 18,880,000                               |   |                                        | 20,434,000
|                                            | General and administrative expenses |                                        |            | 4,108,000                                |   |                                        | 5,148,000 
|                                            | Depreciation and amortization       |                                        |            | 3,650,000                                |   |                                        | 3,733,000 
|                                            | Impairment of long-lived assets     |                                        |            | 590,000                                  |   |                                        |          
|                                            |                                     |                                        |            |                                          |   |                                        |           
|Total costs and expenses                    |                                     |                                        | 90,428,000 |                                          |   | 95,609,000                             |           
|                                            |                                     |                                        |            |                                          |   |                                        |           
|Income from operations                      |                                     |                                        | 3,611,000  |                                          |   | 3,457,000                              |           
|Interest expense                            |                                     |                                        | (1,556,000 | )                                        |   | (1,419,000                             | )         
|Interest income                             |                                     |                                        | 44,000     |                                          |   | 43,000                                 |           
|Other income                                |                                     |                                        | 8,000      |                                          |   | 170,000                                |           
|                                            |                                     |                                        |            |                                          |   |                                        |           
|Income before income taxes                  |                                     |                                        | 2,107,000  |                                          |   | 2,251,000                              |           
|Income tax expense                          |                                     |                                        | 705,000    |                                          |   | 826,000                                |           
|                                            |                                     |                                        |            |                                          |   |                                        |           
|Net income                                  |                                     | $                                      | 1,402,000  |                                          | $ | 1,425,000                              |           
|                                            |                                     |                                        |            |                                          |   |                                        |           
|Net income per common sharebasic           |                                     | $                                      | 0.48       |                                          | $ | 0.48                                   |           
|                                            |                                     |                                        |            |                                          |   |                                        |           
|Weighted average shares outstandingbasic   |                                     |                                        | 2,950,000  |                                          |   | 2,950,000                              |           
|                                            |                                     |                                        |            |                                          |   |                                        |           
|Net income per common sharediluted         |                                     | $                                      | 0.48       |                                          | $ | 0.48                                   |           
|                                            |                                     |                                        |            |                                          |   |                                        |           
|Weighted average shares outstandingdiluted |                                     |                                        | 2,950,000  |                                          |   | 2,950,000                              |           
|                                            |                                     |                                        |            |                                          |   |                                        |           

See
accompanying notes to consolidated financial statements.

F-3

---

STAR BUFFET, INC. AND SUBSIDIARIES    CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

|                                                              |  | Common Stock |   |   |        |   |   |             |   |   |          |   |  
|------------------------------------------------------------- |  | ------------ | - | - | ------ | - | - | ----------- | - | - | -------- | - | -
|
|
|Balance at January 26, 1998                                   |  | 5,450,000    |   | $ | 5,000  |   | $ | 31,768,000  |   | $ |         |   | $
|Redemption and retirement of stock from principal stockholder |  | (2,000,000   | ) |   | (2,000 | ) |   | (12,498,000 | ) |   |         |   |  
|Purchase and retirement of stock                              |  | (500,000     | ) |   | (500   | ) |   | (2,919,000  | ) |   |         |   |  
|Purchase of treasury stock                                    |  |             |   |   |       |   |   |            |   |   |         |   |  
|Net income                                                    |  |             |   |   |       |   |   |            |   |   |         |   |  
|                                                              |  |              |   |   |        |   |   |             |   |   |          |   |  
|Balance at January 25, 1999                                   |  | 2,950,000    |   |   | 3,000  |   |   | 16,351,000  |   |   |         |   |  
|Loan to Officer to purchase stock                             |  |             |   |   |       |   |   |            |   |   | (813,000 | ) |  
|Sale of treasury stock                                        |  |             |   |   |       |   |   |            |   |   |         |   |  
|Net income                                                    |  |             |   |   |       |   |   |            |   |   |         |   |  
|                                                              |  |              |   |   |        |   |   |             |   |   |          |   |  
|Balance at January 31, 2000                                   |  | 2,950,000    |   |   | 3,000  |   |   | 16,351,000  |   |   | (813,000 | ) |  
|Loan to Officer to purchase stock                             |  |             |   |   |       |   |   |            |   |   | (105,000 | ) |  
|Sale of treasury stock                                        |  |             |   |   |       |   |   |            |   |   |         |   |  
|Net income                                                    |  |             |   |   |       |   |   |            |   |   |         |   |  
|                                                              |  |              |   |   |        |   |   |             |   |   |          |   |  
|Balance at January 29, 2001                                   |  | 2,950,000    |   | $ | 3,000  |   | $ | 16,351,000  |   | $ | (918,000 | ) | $
|                                                              |  |              |   |   |        |   |   |             |   |   |          |   |  

See accompanying notes to consolidated financial statements.

F-4

---

STAR BUFFET, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

|                                                                                  |                                                  | Fifty-Three
Weeks Ended
January 29,
2001 |            | Fifty-Three
Weeks Ended
January 31,
2000 |          | Fifty-Two
Weeks Ended
January 25,
1999 |           
|--------------------------------------------------------------------------------- | ------------------------------------------------ | ---------------------------------------- | ---------- | ---------------------------------------- | -------- | -------------------------------------- | ----------
|Cash flows from operating activities:                                             |                                                  |                                          |            |                                          |          |                                        |           
|Net income                                                                        |                                                  | $                                        | 1,402,000  |                                          | $        | 1,425,000                              |           
|Adjustments to reconcile net income to net cash provided by operating activities: |                                                  |                                          |            |                                          |          |                                        |           
|                                                                                  | Depreciation and amortization                    |                                          |            | 3,650,000                                |          |                                        | 3,733,000 
|                                                                                  | Impairment of long-lived assets                  |                                          |            | 590,000                                  |          |                                        |          
|                                                                                  | Amortization of loan cost                        |                                          |            | 118,000                                  |          |                                        | 99,000    
|                                                                                  | Amortization of royalty fee                      |                                          |            |                                         |          |                                        | 23,000    
|                                                                                  | Change in operating assets and liabilities:      |                                          |            |                                          |          |                                        |           
|                                                                                  |                                                  | Receivables                              |            |                                          | 890,000  |                                        |           
|                                                                                  |                                                  | Inventories                              |            |                                          | 113,000  |                                        |           
|                                                                                  |                                                  | Prepaid expenses                         |            |                                          | (131,000 | )                                      |           
|                                                                                  |                                                  | Deposits and other                       |            |                                          | (24,000  | )                                      |           
|                                                                                  |                                                  | Deferred income taxes                    |            |                                          | (96,000  | )                                      |           
|                                                                                  |                                                  | Accounts payable-trade                   |            |                                          | 246,000  |                                        |           
|                                                                                  |                                                  | Income tax payable                       |            |                                          | 546,000  |                                        |           
|                                                                                  |                                                  | Other accrued liabilities                |            |                                          | (767,000 | )                                      |           
|                                                                                  |                                                  |                                          |            |                                          |          |                                        |           
|Net cash provided by operating activities                                         |                                                  |                                          | 6,537,000  |                                          |          | 6,919,000                              |           
|Cash flows used in investing activities:                                          |                                                  |                                          |            |                                          |          |                                        |           
|                                                                                  | Increase (decrease) in notes receivable          |                                          |            | 289,000                                  |          |                                        | 1,121,000 
|                                                                                  | Acquisition of property, buildings and equipment |                                          |            | (2,455,000                               | )        |                                        | (8,156,000
|                                                                                  | Purchase of short-term investments               |                                          |            |                                         |          |                                        | (27,000   
|                                                                                  | Loans to officers                                |                                          |            | (105,000                                 | )        |                                        | (813,000  
|                                                                                  |                                                  |                                          |            |                                          |          |                                        |           
|Net cash used in investing activities                                             |                                                  |                                          | (2,271,000 | )                                        |          | (7,875,000                             | )         
|Cash flows from financing activities:                                             |                                                  |                                          |            |                                          |          |                                        |           
|                                                                                  | Payments on long-term debt                       |                                          |            | (9,475,000                               | )        |                                        | (4,300,000
|                                                                                  | Proceeds from issuance of long-term debt         |                                          |            | 5,375,000                                |          |                                        | 6,500,000 
|                                                                                  | Capitalized loan costs                           |                                          |            | (30,000                                  | )        |                                        | (33,000   
|                                                                                  | Redemption of common stock                       |                                          |            |                                         |          |                                        |          
|                                                                                  | Sale of treasury stock                           |                                          |            | 45,000                                   |          |                                        | 63,000    
|                                                                                  | Purchase of treasury stock                       |                                          |            |                                         |          |                                        |          
|                                                                                  | Principal payment on capital leases              |                                          |            | (119,000                                 | )        |                                        | (389,000  
|                                                                                  |                                                  |                                          |            |                                          |          |                                        |           
|Net cash provided by (used in) financing activities                               |                                                  |                                          | (4,204,000 | )                                        |          | 1,841,000                              |           
|                                                                                  |                                                  |                                          |            |                                          |          |                                        |           
|Net increase (decrease) in cash and cash equivalents                              |                                                  |                                          | 62,000     |                                          |          | 885,000                                |           
|Cash and cash equivalents at beginning of period                                  |                                                  |                                          | 1,039,000  |                                          |          | 154,000                                |           
|                                                                                  |                                                  |                                          |            |                                          |          |                                        |           
|Cash and cash equivalents at end of period                                        |                                                  | $                                        | 1,101,000  |                                          | $        | 1,039,000                              |           
|                                                                                  |                                                  |                                          |            |                                          |          |                                        |           

See
accompanying notes to consolidated financial statements.

F-5

---

STAR BUFFET, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

A summary of certain significant accounting policies not disclosed elsewhere in the footnotes to the consolidated financial statements is set forth below.

Basis of Presentation

The accompanying consolidated financial statements include the accounts for Star Buffet, Inc., together with its direct and indirect wholly owned
subsidiaries Summit Family Restaurants Inc. ("Summit"), HTB Restaurants, Inc. ("HTB"), Northstar Buffet, Inc. ("NSBI") and Star Buffet Management, Inc. ("SBMI")
(collectively the "Company"). The accompanying financial statements include the results of operations
and assets and liabilities of the Company's operations. Certain estimates, assumptions and allocations were made in preparing such financial statements.

Organization and Nature of Operations

The Company was formed by CKE Restaurants, Inc. ("CKE") in July 1997 in connection with the reorganization of CKE's buffet-style restaurant
business. Pursuant to a contribution agreement among the Company and CKE and certain respective subsidiaries, CKE transferred to Summit the net assets of its two Casa Bonita Mexican theme restaurants,
and Summit transferred substantially all of its assets and liabilities (primarily those relating to the JB's Restaurant system and Galaxy Diner restaurants, but excluding 16 HomeTown Buffet
restaurants operated by HTB) to a newly formed subsidiary of CKE. All of the parties to the foregoing transactions (the "Formation Transactions") were, upon completion thereof, direct or indirect
wholly owned subsidiaries of CKE, and such Formation Transactions were accounted for as a reorganization among companies under common control. Furthermore, the results of operations include seven
JJ North's Country Buffet Restaurants operated by the Company only from September 30, 1997 (the date of acquisition by the Company).

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

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

F-6

---

The operating results for the 52-week period ended January 25, 1999 include 52 weeks of operations for the 16 franchised HomeTown Buffet restaurants, two Casa
Bonita restaurants and six JJ North's Country Buffet restaurants. The results also include 48 weeks of operations for nine franchised JB's Restaurants; 50 weeks for three Staceys Buffets that
were converted to BuddyFreddys Country Buffet; 48 weeks for two Maggies Buffets that were converted to BuddyFreddys Country Buffet; 43 weeks for two BuddyFreddys; 8 weeks for one BuddyFreddys Country
Buffet; 3 weeks of operations for one BuddyFreddys Country Buffet; 50 weeks for one North's Star Buffet; 48 weeks for one North's Star Buffet; 36 weeks for one North's Star Buffet; 31 weeks for one
North's Star Buffet; 24 weeks for one North's Star Buffet; and 3 weeks for three Holiday House restaurants.

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.

Inventories

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

Property, Buildings and Equipment

Property and equipment and real property under capitalized leases are carried at cost, less accumulated depreciation and amortization. Depreciation and
amortization are provided using the straight-line method over the following useful lives: buildings and leasehold improvementslesser of lease life or 40 years;
furniture, fixtures and equipmentfive to eight years; capitalized leaseslesser of lease life or 20 years. Lease renewal option periods are included in determining
leasehold improvement useful lives when, in management's opinion, such renewal options will be exercised.

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

Goodwill

Goodwill represents costs in excess of fair value of net assets acquired and is amortized on the straight-line basis over 40 years. The
company determines recoverability using undiscounted future cashflows. The Company periodically reviews goodwill for recoverability in connection with its review of impairment of
long-lived assets.

Accumulated
amortization of goodwill totaled $375,000 at January 29, 2001 and $203,000 at January 31, 2000.

F-7

---

Other Intangible Assets

Other intangible assets are comprised of franchise fees and loan costs. Franchise fees are amortized using the straight-line method over the
remaining terms of the franchise agreements, which range typically from 8 to 16 years. Loan costs are amortized using the straight-line method over 5 years.

Accumulated
amortization of these other intangible assets totaled $427,000 at January 29, 2001 and $283,000 at January 31, 2000.

Impairment of Long-Lived Assets

The Company determines that an impairment write down is necessary for locations whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the
asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceed the fair value of the assets.

Pre-Opening Costs

The Company incurred approximately $223,000, $654,000 and $1,000,000 of pre-opening costs during fiscal 2001, 2000 and 1999, respectively, which
were expensed.

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. Amounts charged to operations totaled $1,412,000, $2,210,000 and $1,965,000, for the 52 weeks ended
January 29, 2001, the 53 week period ended January 31, 2000 and the 52 week period ended January 25, 1999, respectively.

Use of Estimates

Management of the Company has made a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent
assets and liabilities to prepare these consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. Actual results could differ from
those estimates.

Earnings per Share

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

F-8

---

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

Fifty-Two
Weeks Ended
January 29, 2001

Fifty-Three
Weeks Ended
January 31, 2000

Fifty-Two
Weeks Ended
January 25, 1999Weighted average common shares outstanding

2,950,000

2,950,000

4,601,000Dilutive effect of stock options





Common shares assuming dilution

2,950,000

2,950,000

4,601,000


Average
shares used in the fifty-two weeks ended January 29, 2001, fifty-three weeks ended January 31, 2000 and the fifty-two weeks ended
January 25, 1999 diluted earnings per share computations exclude stock options to purchase 742,000 shares, 743,000 shares and 500,000 shares of common stock, respectively, due to their
antidilutive effect.

Segment Reporting

The Company's reportable segments are based on brand similarities.

Comprehensive Income

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

Stock-Based Compensation

The Company uses the intrinsic value method prescribed by Accounting Principles Board (APB) Opinion No. 25 when recognizing expense for employee stock
compensation plans. As such, compensation expense is generally only recognized on the date of grant when the current market price of the stock exceeds the exercise price.

Reclassifications

Certain amounts in fiscal 2000 and 1999 have been reclassed to conform with fiscal 2001 presentation.

NOTE 2ACQUISITIONS

On February 13, 1998, the Company acquired the leasehold interests of three restaurants located in Florida for $1,004,000. The Company accounted for the
acquisition as a purchase. In addition, the Company acquired leasehold interests of two restaurants in Florida for a purchase price of $463,000. The Company accounted for the acquisition as a
purchase.

On
February 24, 1998, the Company acquired twelve JB's Restaurants from JB's Restaurants, Inc., a wholly-owned subsidiary of CKE, for $4,265,000, subject to adjustment.
At the time of acquisition, the Company prepaid royalty fees for one year in the amount of $485,000. The Company accounted for the acquisition as a purchase. During fiscal 1999, the Company completed
three conversions of JB's

F-9

---

restaurants to North's Star Buffet restaurantsthe Company's small-format buffet concept. In February 1999, two of the three restaurants were closed due to their failure to meet
performance expectations and were converted back to JB's Restaurants. In May 2000, one restaurant closed upon termination of the building lease. The Company, through its subsidiary Summit
Family Restaurants, Inc. ("Summit") operates 10 JB's Restaurants in Arizona, Montana, New Mexico, Utah and Wyoming. In connection with the acquisition of certain JB's Restaurants in 1998 from
CKE Restaurants, Inc., the Company entered into a one-year franchise agreement for each location which required among other items, the payment of royalty fees. Subsequent to the
acquisition of certain JB's Restaurants, the Company negotiated a ten-year option for annual renewable franchise agreements for each of the JB's Restaurants the Company operates. In
February 2000, the annual renewable franchise agreement expired and to date, the Company has elected not to renew these franchise agreements, but instead has entered into negotiations to
acquire a long-term license agreement to utilize the JB's Restaurant name. To date, the negotiations have not been finalized with respect to a license agreement.

On
April 1, 1998, the Company acquired two family-dining restaurants located in Florida which operate under the brand name of BuddyFreddys. The purchase price was
$1.6 million, subject to adjustments. The Company accounted for the acquisition as a purchase.

In
January 1999, the Company completed the Holiday House transaction acquiring three Holiday House restaurants in Florida for a purchase price of $1,166,000. The Company
accounted for the acquisition as a purchase.

The
total goodwill recognized in connection with the acquisitions in fiscal 1999 was $2,839,000.

NOTE 3NOTES RECEIVABLE

Notes receivable at January 29, 2001 consists of the following:

January 29, 2001

January 31, 2000Notes receivable from North's Restaurants, Inc.

$
3,205,000

$
3,494,0003,205,000


3,494,000Less current portion


231,000


$
2,974,000

$
3,494,000


The
receivable from North's Restaurants, Inc. ("North's") included $3,123,000 for a term note and $371,000 on a line of credit that was converted to a note receivable. As a
result of a dispute with North's Restaurants, Inc. Management had stopped accruing the interest pending resolution of the dispute with North's Restaurants, Inc. (See Note 14). As
part of a Settlement Agreement entered on January 26, 2001, North's promises to pay the Company the principal sum of $3,500,000.00, with an interest rate of 8% per annum. North's paid the
Company $295,000 pursuant to the terms of the Settlement Agreement and such payment was applied to reduce the principal amount owing. The $3.5 million note receivable stipulates that monthly
payments of principal and interest be made in the amount of $39,954.06. The loan calls for monthly payments to start on February 26, 2001 and continue on the 26th day of each
month thereafter, with a final payment of all remaining unpaid principal, accrued interest and other sums due under the Note due and payable on September 26, 2010.

F-10

---

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

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

January 29,
2001

January 31,
2000Property and equipment:Furniture, fixtures and equipment

$
16,552,000

$
15,659,000Land


4,241,000


3,374,000Buildings and leasehold improvements


26,418,000


26,030,00047,211,000


45,063,000Less accumulated depreciation and amortization


(14,080,000
)

(10,696,000
)$
33,131,000

$
34,367,000Real property and equipment under capitalized leases

$
3,193,000

$
3,193,000Less accumulated amortization


(1,566,000
)

(1,401,000
)$
1,627,000

$
1,792,000


NOTE 5LONG-TERM DEBT

On October 23, 1998, the Company entered into a $20 million syndicated bank financing agreement led by FleetBoston Financial Corporation
(formerly known as BankBoston, N.A.). The credit facility consists of a $13 million, 5-year term loan (the "Term Loan Facility") and a $7 million, 5-year
revolving credit facility (the "Revolving Credit Facility"). The Term Loan Facility balance was $7,350,000 as of January 29, 2001. Principal payments under the Term Loan Facility are due in
quarterly installments until the final maturity in October 2003, with interest at the Bank's Base Rate plus 0.00% to 0.75%, or the Eurodollar Rate plus 1.25% to 2.00% at the Company's option.
Borrowings under the Revolving Credit Facility bear interest at approximately 8.0% to 9.0%. All outstanding amounts under the Revolving Credit Facility become due in October 2003. The Revolving
Credit Facility balance was $5,525,000 on January 29, 2001. The secured Term Loan Facility and Revolving Credit Facility are collateralized by tangible and intangible personal property of the
Company and require the Company to maintain specified minimum levels of net worth, limit the amount of capital expenditures, and meet other financial covenants. The Revolving Credit Facility includes
an annual commitment fee of $30,000 per year plus a percentage of .375% to 0.50% of any unused balance.

Long
term debt matures in fiscal years ending after January 29, 2001 as follows:

Fiscal Year2002


2,900,0002003


3,750,0002004


6,225,000Total

$
12,875,000


F-11

---

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 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 29, 2001 are as follows:

Fiscal year

Capital

Operating2002


272,000


3,991,0002003


272,000


4,005,0002004


248,000


3,769,0002005


235,000


3,581,0002006


235,000


3,771,000Thereafter


1,577,000


13,616,000Total minimum lease payments:


2,839,000

$
32,733,000Less amount representing interest:


986,000Present value of minimum lease payments:


1,853,000Less current portion


124,000Capital lease obligation excluding current portion

$
1,729,000


Aggregate
rent expense under noncancelable operating leases during fiscal 2001, 2000 and 1999 are as follows:

Fifty-Two
Weeks Ended
January 29,
2001

Fifty-Three
Weeks Ended
January 31,
2000

Fifty-Two
Weeks Ended
January 25,
1999Minimum rentals

$
4,034,000

$
4,473,000

$
3,995,000Contingent rentals


211,000


273,000


281,000$
4,245,000

$
4,746,000

$
4,276,000


F-12

---

NOTE 7INCOME TAXES

Income tax expense (benefit) is comprised of the following:

Fifty-Two
Weeks Ended
January 29, 2001

Fifty-Three
Weeks Ended
January 31, 2000

Fifty-Two
Weeks Ended
January 25, 1999Current:Federal

$
679,000

$
516,000

$
1,009,000State


122,000


104,000


192,000801,000


620,000


1,201,000Deferred:Federal


(91,000
)

175,000


354,000State


(5,000
)

31,000


68,000(96,000
)

206,000


422,000$
705,000

$
826,000

$
1,623,000


A
reconciliation of income tax expense at the federal statutory rate to the Company's provision for taxes on income is as follows:

Fifty-Two
Weeks Ended
January 29, 2001

Fifty-Two
Weeks Ended
January 25, 1999

Fifty-Two
Weeks Ended
January 25, 1999Income taxes at statutory rate

$
716,000

$
766,000

$
1,380,000State income taxes


77,000


90,000


172,000Other


(88,000
)

(30,000
)

79,000Change in valuation allowance








(8,000
)$
705,000

$
826,000

$
1,623,000


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

Fifty-Two
Weeks Ended
January 29, 2001

Fifty-Three
Weeks Ended
January 31, 2000Deferred tax assets:Leases

$
671,000

$
745,000Reserves


109,000


115,000Accrued Vacation


76,000


106,000Other


44,000


Total deferred tax assets


900,000


966,000Deferred tax liabilities:Depreciation and amortization


(1,004,000
)

(1,159,000
)Other


(111,000
)

(118,000
)Total deferred tax liabilities


(1,115,000
)

(1,277,000
)Net deferred tax liabilities

$
(215,000
)
$
(311,000
)


F-13

---

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 benefit of the existing deferred tax assets at January 29, 2001 based on the Company's current and future pre-tax earnings.

NOTE 8SEGMENT AND RELATED REPORTING

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

The
HomeTown Buffet segment includes the Company's 16 franchised HomeTown Buffet restaurants. The Casa Bonita segment includes two Casa Bonita restaurants. The North's Star segment
includes six JJ North's Country Buffet restaurants and two North's Star Buffet Restaurants. The Florida Buffets Division includes two BuddyFreddys restaurants, 13 BuddyFreddys Country Buffet
restaurants and two Holiday House restaurants. The JB's Restaurants segment includes the Company's 10 JB's Restaurants.

The
accounting policies of the reportable segments are the same as those described in Note 1. The Company evaluates the performance of its operating segments based on income
before income taxes.

Summarized
financial information concerning the Company's reportable segments is shown in the following table. The other assets presented in the consolidated balance sheet and not in
the reportable

F-14

---

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

|52 Weeks Ended January 29, 2001                               |  | HomeTown
Buffet |        | Casa Bonita |   | North's
Star |  | Florida
Buffet |        | JB's |   | Other  |   | Total |       
|------------------------------------------------------------- |  | --------------- | ------ | ----------- | - | ------------ |  | -------------- | ------ | ---- | - | ------ | - | ----- | ------
|
|Revenues                                                      |  | $               | 41,682 |             | $ | 11,248       |  | $              | 9,670  |      | $ | 20,584 |   | $     | 10,855
|Interest income                                               |  |                 | 5      |             |   | 1            |  |                |       |      |   |       |   |       |      
|Interest expense                                              |  |                 | (146   | )           |   |             |  |                |       |      |   |       |   |       | (8    
|Deprecation, amortization and impairment of long-lived assets |  |                 | 1,517  |             |   | 189          |  |                | 567    |      |   | 1,599  |   |       | 341   
|Income before income taxes                                    |  |                 | 4,117  |             |   | 1,845        |  |                | 49     |      |   | (951   | ) |       | 614   
|Total assets                                                  |  |                 | 13,217 |             |   | 2,043        |  |                | 7,858  |      |   | 16,855 |   |       | 5,316 
|53 Weeks Ended January 31, 2000                               |  |                 |        |             |   |              |  |                |        |      |   |        |   |       |       
|Revenues                                                      |  | $               | 42,854 |             | $ | 11,618       |  | $              | 11,334 |      | $ | 22,506 |   | $     | 10,754
|Interest income                                               |  |                 |       |             |   |             |  |                | 7      |      |   |       |   |       |      
|Interest expense                                              |  |                 | (176   | )           |   |             |  |                | (5     | )    |   | (11    | ) |       | (10   
|Deprecation, amortization and impairment of long-lived assets |  |                 | 1,717  |             |   | 161          |  |                | 449    |      |   | 1,044  |   |       | 257   
|Income before income taxes                                    |  |                 | 4,653  |             |   | 1,932        |  |                | (19    | )    |   | (553   | ) |       | 559   
|Total assets                                                  |  |                 | 14,130 |             |   | 2,024        |  |                | 8,799  |      |   | 16,771 |   |       | 5,597 
|52 Weeks Ended January 25, 1999                               |  |                 |        |             |   |              |  |                |        |      |   |        |   |       |       
|Revenues                                                      |  | $               | 41,039 |             | $ | 11,835       |  | $              | 11,207 |      | $ | 11,350 |   | $     | 9,978 
|Interest income                                               |  |                 |       |             |   |             |  |                | 197    |      |   | 146    |   |       |      
|Interest expense                                              |  |                 | (192   | )           |   |             |  |                | (7     | )    |   | (39    | ) |       | (11   
|Deprecation, amortization and impairment of long-lived assets |  |                 | 1,811  |             |   | 133          |  |                | 639    |      |   | 171    |   |       | 201   
|Income before income taxes                                    |  |                 | 4,261  |             |   | 2,190        |  |                | 304    |      |   | (1,369 | ) |       | 559   

NOTE 9STOCKHOLDERS EQUITY

Common Stock

Holders of Common Stock are entitled to one vote per share on all matters to be voted upon by the stockholders and do not have cumulative voting rights.
Subject to preferences that may be applicable to the holders of outstanding shares of Preferred Stock, if any, at the time holders of Common Stock are entitled to receive ratably such dividends, if
any, as may be declared from time to time by the Board of Directors out of funds legally available therefor. In the event of a liquidation, dissolution or winding up of the Company, the holders of
Common Stock shall be entitled to assets of the Company remaining after payment of the Company's liabilities and the liquidation preference, if any, of any outstanding Preferred Stock. All outstanding
shares of Common Stock, are, and the shares of Common Stock offered by the Company hereby will be, when issued and paid for, fully paid and

F-15

---

nonassessable. Holders of Common Stock have no preemptive, subscription, redemption or conversion rights. The rights, preferences and privileges of holders of Common Stock are subject to, and may be
adversely affected by, the rights of the holders of shares of any series of Preferred Stock which the Company may designate and issue in the future.

Preferred Stock

The Board of Directors has the authority, without further vote or action by the stockholders, to provide for the issuance of up to 1,500,000 shares of
Preferred Stock from time to time in one or more series with such designations, rights, preferences and privileges and limitations as the Board of Directors may determine, including the consideration
received therefor. The Board of Directors also will have the authority to determine the number of shares comprising each series, dividend rates, redemption provisions, liquidation preferences, sinking
fund provisions, conversion rights and voting rights without approval by the holders of Common Stock. Although it is not possible to state the effect that any issuance of Preferred Stock might have on
the rights of holders of Common Stock, the issuance of Preferred Stock may have one or more of the following effects: (i) to restrict the payment of dividends on the Common Stock,
(ii) to dilute the voting power and equity interests of holders of Common Stock, (iii) to prevent holders of Common Stock from participating in any distribution of the Company's assets
upon liquidation until any liquidation preferences granted to holders of Preferred Stock are satisfied, or (iv) to require approval by the holders of Preferred Stock for certain matters such as
amendments to the Company's Certificate of Incorporation or any reorganization, consolidation, merger or other
similar transaction involving the Company. As a result, the issuance of Preferred Stock may, under certain circumstances, have the effect of delaying, discouraging or preventing bids for the Common
Stock at a premium over the market price thereof, or a change in control of the Company, and could have a material adverse effect on the market price for the Common Stock.

Officer's Note Receivable

In connection with the Company's employment contract with Mr. Robert E. Wheaton, the Company's President and Chief Executive Officer, the Company has
agreed to provide Mr. Wheaton loans solely for the purchase of the Company's common stock. The loans are secured and bear interest at the prevailing rate set forth in the Company's credit
facility with FleetBoston. The average rate for fiscal 2001 was approximately 8.7%. The loans totaled $918,000 as of January 29, 2001.

Common Stock Repurchase

During fiscal 1999, the Company purchased and retired 2,000,000 shares of common stock acquired from CKE and 500,000 shares acquired on the open market for
$12,500,000 and $2,919,000, respectively. The Company purchased 31,000 shares of treasury stock in the open market for $190,000. On December 7, 1999, the Company's Board of Directors authorized
the repurchase of up to an additional 500,000 shares of the Company's Common Stock to be effected in the open market, in private transactions or through alternative repurchase transactions approved by
the Board of Directors. As of January 29, 2001, no additional shares have been purchased.

F-16

---

NOTE 10EMPLOYEE BENEFIT PLANS

401(k) Plan

In May 1998, the Company established a 401(k) plan available to certain employees who have attained age 21, work 30 hours or more per week, and
have met certain minimum service requirements. The plan allows participants to allocate up to 15% of their annual compensation before taxes for investment in several investment alternatives. The
Company incurred approximately $35,000, $41,000, and $18,000 in costs for fiscal 2001, 2000 and 1999, respectively.

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 750,000 shares of
Common Stock. The Purchase Plan is intended to provide participants with incentives to acquire a proprietary interest in, and continue to provide services to, the Company. The Company incurred
approximately $13,000, $12,000 and $0 in costs for fiscal 2001, 2000 and 1999, respectively.

Employees
are eligible to participate if they (i) are employed on an hourly basis as a restaurant employee for at least 30 hours per week and if they have been employed
by the Company since September 30, 1997 or for at least one year; (ii) are employed on an hourly basis as a non-restaurant employee for at least 30 hours per week and
have been so employed continuously during the preceding 90 days; or (iii) are exempt from the overtime and minimum wage requirements under federal and state laws and have been so
employed by the Company continuously during the preceding 90 days. The Purchase Plan permits eligible employees to purchase common stock through payroll deductions, which range from 3% to 10%
of the employee's base earnings as defined in the Purchase Plan. The price of
stock purchased under the Purchase Plan shall be at the then current market value. Each participant who remains an employee of the Company for at least one year after the end of a particular quarterly
offering period shall receive, on the one-year anniversary date of the end of such offering period, a matching contribution from the Company to purchase stock totaling one-half
of a participating Officer's or Director's contribution, and one-third of other participant's contributions. Employees may withdraw from the Purchase Plan, effective at the end of a
quarterly offering period, by delivering a notice to the Company no later than the 15th day prior to the end of such quarterly offering period, and participation ends automatically on termination of
employment. The Board of Directors may at any time amend or terminate the Purchase Plan, and upon such termination, each participant is entitled to receive the funds in such participant's account
which have not been used to purchase Common Stock but shall not be entitled to any future matching contribution.

1997 Stock Incentive Plan

In fiscal year 1998, the Company adopted the 1997 Stock Incentive Plan (the "1997 Plan"), which grants options to purchase up to 750,000 shares of Common
Stock. The 1997 Plan provides for "incentive stock options," within the meaning of section 422 of the Internal Revenue Code of 1986, as amended (the "Code") and non-statutory
options to directors, officers, employees and consultants of the Company, except that incentive stock options may not be granted to non-employee directors or consultants. The 1997 Plan
provides participants with incentives which will encourage them to acquire a proprietary interest in, and continue to provide services to, the Company. The Board of Directors has sole discretion and
authority, consistent with the provisions of the 1997 Plan, to determine which

F-17

---

eligible participants will receive options, time when options will be granted, terms of options granted and number of shares which will be subject to options granted under the 1997 Plan.

A
summary of the status of the Company's stock options is presented below (shares in thousands):

Fifty-Two
Weeks Ended
January 29, 2001

Fifty-Three
Weeks Ended
January 31, 2000

Fifty-Two
Weeks Ended
January 25, 1999Shares

Wgtd. Avg.
Exer. Price

Shares

Wgtd. Avg.
Exer. Price

Shares

Wgtd. Avg.
Exer. PriceOutstanding at beginning of year

743

$
9.71

500

$
12.00

608

$
12.00Granted






243


5.00




12.00Cancelled

1


12.00






(108
)

12.00Outstanding at end of year

742


9.71

743


9.71

500


12.00Options exercisable at year end

683


10.11

626


10.11

339


12.00


The
Company applies the intrinsic value method in accounting for its Plan and, accordingly, no compensation cost has been recognized for stock options in the financial statements. Had
the Company determined compensation cost based on the fair value method at the grant date for its stock options, the Company's net income and earnings per share would have been reduced to the pro
forma amounts indicated below:

Fifty-Two
Weeks Ended
January 29, 2001

Fifty-Three
Weeks Ended
January 31, 2000

Fifty-Two
Weeks Ended
January 25, 1999Net income as reported

$
1,402,000

$
1,425,000

$
2,435,000Earnings per sharebasic as reported


.48


.48


.53Earnings per sharediluted as reported


.48


.48


.53Pro forma net income


1,382,000


1,004,000


1,874,000Earnings per sharebasic as reported


.47


.34


.41Earnings per sharediluted as reported


.47


.34


.41


For
purposes of the preceding pro forma disclosures, the fair value of each stock option has been estimated on the date of grant using the Black-Scholes option-pricing model with the
following assumptions: no projected annual dividends, expected volatility of 15%, a risk free interest rate of 5.98% for grants in fiscal 2000 and 5.83% for grants in fiscal 1998 and an expected life
of five years for grants in fiscal 2000 and three years for grants in fiscal 1998.

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.

F-18

---

NOTE 11SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

|                                                            |                                                                     | Fifty-Two
Weeks Ended
January 29,
2001 |           | Fifty-Three
Weeks Ended
January 31,
2000 |   | Fifty-Two
Weeks Ended
January 25,
1999
|----------------------------------------------------------- | ------------------------------------------------------------------- | -------------------------------------- | --------- | ---------------------------------------- | - | --------------------------------------
|Cash paid for income taxes                                  |                                                                     | $                                      | 37,000    |                                          | $ | 60,000                                
|Cash paid for interest                                      |                                                                     |                                        | 1,100,000 |                                          |   | 1,450,000                             
|Non-cash investing and financing activities are as follows: |                                                                     |                                        |           |                                          |   |                                       
|                                                            | Exchange of receivables for three restaurants                       |                                        | $         |                                         |   | $                                     
|                                                            | Acquisition of BuddyFreddys assets                                  |                                        |           |                                         |   |                                       
|                                                            | Acquisition of 2,000,000 shares of common stock                     |                                        |           |                                         |   |                                       
|                                                            | Acquisition of Holiday House assets                                 |                                        |           |                                         |   |                                       
|                                                            | Use of deposit to buy assets                                        |                                        |           |                                         |   |                                       
|                                                            | Exchange of note receivable for real estate                         |                                        |           |                                         |   |                                       
|                                                            | Exchange of deposit for note payable                                |                                        |           |                                         |   |                                       
|                                                            | Exchange of receivables from Phoenix Restaurant Group for equipment |                                        |           | 185,000                                  |   |                                       

NOTE 12FAIR VALUE OF FINANCIAL INSTRUMENTS

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

The
carrying amount of the Company's notes receivable, long-term debt and capital lease obligations approximates fair value and is based on discounted cash flows using
market rates at the balance sheet date. The use of discounted cash flows can be significantly affected by the assumptions used, including the discount rate and estimates of future cash flows. The
derived fair values estimates cannot be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instrument.

NOTE 13RELATED PARTY TRANSACTION

The Company entered into an agreement with a company whose former chief executive officer is a member of the Company's Board of Directors. Under the agreement,
the Company operated three of the related party's restaurants as BuddyFreddys Country Buffet restaurants. Revenues and expenses of the restaurants are included in the Company's financial statements.
The Company and the related party divide income and losses based on an agreed upon formula. Included in notes and other receivables is $323,000 due from the related party as a result of the agreement.
The joint venture was terminated in the first quarter of fiscal 2001.

NOTE 14COMMITMENTS AND CONTINGENCIES

The Company is engaged in ordinary and routine litigation incidental to its business. Management does not anticipate that any resolution will require payments
that will have a material effect on the Company's consolidated statements of income or financial position or liquidity.

F-19

---

On November 25, 1998, the Company filed an action against North's Restaurants, Inc. ("North's") in the United States District Court, District of Utah, Case
No. 2-98-CV-893, seeking damages for breach of a promissory note and an Amended and Restated Credit Agreement (collectively, the "Credit Agreements") in the
amount of $3,570,935. On December 31, 1998, North's filed an answer to the Company's Complaint, denying generally the allegations, and filed counterclaims against the Company alleging
(i) the Company fraudulently induced North's to enter into various agreements with the Company relating to the Company's acquisition of seven JJ North's Grand Buffet Restaurants and an option
to acquire nine additional restaurants operated by North's and (ii) the Company had breached the Business Services Agreement. On January 26, 2001, the parties entered into a Settlement
Agreement (the "Settlement Agreement"). The Settlement Agreement provides, among other things, that the Credit Agreement and Revolving Note terminate concurrently with the execution of the Settlement
Agreement, that the Term Note be amended and restated, that the terms of the Term Note have no further force or effect and that the security interest transferred to Star Buffet pursuant to the
Assignment Agreement dated September 30, 1997 between Star Buffet and U.S. Bank National Association be amended and restated pursuant to an Amended and Restated Star Buffet Security Agreement
(the "Security Agreement"). The Company and North's have agreed that the Star Buffet Debt be reduced to a total amount of $3,500,000.00, and that such reduced obligation be payable by North's pursuant
to the terms of the Amended and Restated Promissory Note. The Company recorded no gain or loss on the settlement as the recorded balance of the note was approximately $3.5 million at the time
of the settlement. The Company and North's have agreed that the Company's existing liens encumbering certain property of North's remain in place and continue to secure North's obligations to the
Company, and the Company and North's reserve all rights, claims and defenses with respect to the extent and validity of such existing liens.

F-20

---



EXHIBIT INDEX

|Exhibit
No. |  | Description                                                                                                                                                                                                                                                                                                        
|----------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1         |  | Certificate of Incorporation*                                                                                                                                                                                                                                                                                      
|3.2         |  | Bylaws, as amended on September 22, 1997*                                                                                                                                                                                                                                                                          
|4.1         |  | Form of Common Stock Certificate**                                                                                                                                                                                                                                                                                 
|10.1        |  | Star Buffet, Inc. 1997 Stock Incentive Plan (the "1997 Plan")**                                                                                                                                                                                                                                                    
|10.2        |  | Form of Stock Option Agreement for the 1997 Plan**                                                                                                                                                                                                                                                                 
|10.3        |  | Form of Indemnification Agreement**                                                                                                                                                                                                                                                                                
|10.4        |  | Management Services Agreement with CKE**                                                                                                                                                                                                                                                                           
|10.5        |  | Form Of Franchise Agreement with HomeTown Buffet, Inc.**                                                                                                                                                                                                                                                           
|10.6        |  | Asset Purchase Agreement with North's Restaurants, Inc. dated July 24, 1997**                                                                                                                                                                                                                                      
|10.6.1      |  | Amendment No. 1 to Asset Purchase Agreement dated as of September 30, 1997 (incorporated by reference to the Company's filing on Form 8-K on October 17, 1997)                                                                                                                                                     
|10.6.2      |  | Amended and Restated Credit Agreement dated as of September 30, 1997 between the Company and North's Restaurants, Inc. (incorporated by reference to the Company's filing on Form 8-K on October 17, 1997)                                                                                                         
|10.7        |  | Form of Credit Agreement with Stacey's Buffet, Inc.*                                                                                                                                                                                                                                                               
|10.8        |  | Form of Contribution Agreement among CKE Restaurants, Inc., Summit Family Restaurants Inc. and the Company*                                                                                                                                                                                                        
|10.9        |  | Form of Bill of Sale and Assumption Agreement between Summit Family Restaurants Inc. and Taco Bueno Restaurants, Inc. (formerly known as Casa Bonita Incorporated)*                                                                                                                                                
|10.11       |  | Form of Bill of Sale and Assumption Agreement between Summit Family Restaurants Inc. and JB's Restaurants, Inc.*                                                                                                                                                                                                   
|10.12       |  | License Agreement with CKE (incorporated by reference to the Company's filing on Form 10-K on April 24, 1998)                                                                                                                                                                                                      
|10.13       |  | Settlement Agreement with HomeTown Buffet, Inc. (incorporated by reference to the Company's filing on Form 10-K on April 24, 1998)                                                                                                                                                                                 
|10.14       |  | Asset Purchase Agreement among Summit Family Restaurants Inc. and JB's Family Restaurants, Inc., dated February 10, 1998 (incorporated by reference to the Company's filing on Form 8-K on March 9, 1998)                                                                                                          
|10.15       |  | Stock Repurchase Agreement between Star Buffet, Inc. and CKE Restaurants, Inc., dated September 10, 1998 (incorporated by reference to the Company's filing on Form 10-K on September 28, 1998)                                                                                                                    
|10.16       |  | Credit Agreement (Portions of this Exhibit are omitted and were filed separately with the Secretary of the Commission pursuant to the Company's application for confidential treatment under Rule 24b-2 of the Exchange Act.)
(incorporated by reference to the Company's filing on Form 10-Q on December 17, 1998)
|11.0        |  | Computation of Earnings Per Share Income                                                                                                                                                                                                                                                                           
|21.1        |  | List of Subsidiaries*                                                                                                                                                                                                                                                                                              
|23.4        |  | Consent of KPMG LLP                                                                                                                                                                                                                                                                                                

---

E-1

---

QuickLinks