The following Management's Discussion and Analysis of Financial Condition and Results of Operations 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 26, 2009 and for the 52-week period ended January 28, 2008 are as follows:

The operating results for the 52-week period ended January 26, 2009 included 52 weeks of operations for the Company's 14 Barnhill's Buffet restaurants, 11 franchised HomeTown Buffet restaurants, six JB's restaurants, three 4B'S restaurants, three BuddyFreddys restaurants, two Whistle Junction restaurants, two Western Sizzlin restaurants, two K-BOB'S Steakhouses, two Holiday House restaurants, two JJ North's Grand Buffet restaurant, one Pecos Diamond Steakhouse, one Bar-H Steakhouse and one Casa Bonita Mexican theme restaurant. The results also included the following, four Barnhill's Buffet restaurants for 47 weeks, one 4B's restaurant for 34 weeks, one Casa Bonita Mexican theme restaurant for 26 weeks and one K-BOB'S Steakhouse for 11 weeks. In addition, operating results include 41 weeks for one Barnhill's Buffet restaurant, 38 weeks for one HomeTown Buffet restaurant, 37 weeks for one Western Sizzlin restaurant, 27 weeks for one Whistle Junction restaurant, 24 weeks for two Whistle Junction restaurants, 17 weeks for one BuddyFreddys restaurant, 15 weeks for one Holiday House restaurant and 11 weeks for one JB'S restaurant closed during the fiscal year 2009. The Company also had four restaurants closed for remodeling and repositioning, one restaurant leased to a third-party operator and one restaurant closed and reported as property held for sale.

The operating results for the 52-week period ended January 28, 2008 included 52 weeks of operations for the Company's 12 franchised HomeTown Buffet restaurants, six JB's restaurants, five Whistle Junction restaurants, two BuddyFreddys restaurants, two BuddyFreddys Country Buffet restaurants, two Western Sizzlin restaurants, two K-BOB'S Steakhouses, two Holiday House restaurants, one JJ North's Grand Buffet restaurant, one Pecos Diamond Steakhouse and one Casa Bonita Mexican theme restaurant. The results also included the following, one Western Sizzlin restaurant for 32 weeks, one Holiday House restaurant for 40 weeks, one Bar-H Steakhouse for 35 weeks, one JB'S restaurant for 35 weeks, two 4B'S restaurants for 26 weeks, one 4B'S restaurant for 15 weeks and one JJ North's Grand Buffet for 18 weeks. In addition, operating results included 39 weeks for one K-BOB'S Steakhouse, 36 weeks for one K-BOB'S Steakhouse, 36 weeks for one HomeTown Buffet restaurant, 27 weeks for one HomeTown Buffet restaurant, 27 weeks for one Oklahoma Steakhouse restaurant and 16 weeks for one Whistle Junction restaurant closed during the fiscal year 2008. The Company also had five restaurants closed for remodeling and repositioning, three restaurants leased to a third-party operators and one restaurant closed and reported as property held for sale.

Consolidated net income for fiscal 2009 improved approximately $2.9 million to net income of $943,000 or $0.29 per diluted share as compared with a net loss of $(2,001,000) or $(0.63) per diluted share for the comparable prior year period. The improvement in net income is due to an increase in income from operations of approximately $5.3 million primarily from new acquisitions which included lower impairment expense of approximately $1.2 million partially offset by higher interest expense and an increase in income taxes of approximately $1.7 million. Total revenues increased approximately $29.1 million or 42.4% from $68.7 million in fiscal 2008 to $97.8 million in fiscal 2009. The increase in revenues was primarily attributable to 3 new store openings and 27 newly acquired stores that resulted in additional sales of approximately $36.7 million, partially offset by declines in comparable same store sales of approximately $3.5 million primarily in the HomeTown Buffet restaurants and the closure of 14 restaurants. The decline in sales from the 14 closed stores was approximately $4.2 million. The Company believes the decline in same store sales is a result of weaker economic conditions and new restaurant competition in certain markets. The decline in sales on a same store basis significantly impacts consolidated net income because occupancy, salaries, benefits, and other expenses are primarily fixed in nature and generally do not vary significantly with restaurant sales volume. Occupancy and other expense includes major expenditures such as rent, insurance, property taxes, utilities, maintenance and advertising.

Results of Operations

The following table summarizes the Company's results of operations as a percentage of total revenues for the fifty-two weeks ended January 26, 2009 ("fiscal 2009"), and for the fifty-two weeks ended January 28, 2008 ("fiscal 2008").

                                                           Fifty-Two              Fifty-Two
                                                             Weeks                  Weeks
                                                             Ended                  Ended
                                                        January 26, 2009       January 28, 2008
Total revenues                                                      100.0 %                100.0 %
Costs and expenses:
  Food costs                                                         38.9                   36.9
  Labor costs                                                        32.5                   34.8
  Occupancy and other expenses                                       20.2                   22.1
  General and administrative expenses                                 3.0                    5.2
  Depreciation and amortization                                       2.7                    3.0
  Impairment of long-lived assets                                     0.2                    2.0
Total costs and expenses                                             97.5                  104.0
Income (loss) from operations                                         2.5                   (4.0 )
  Interest expense                                                   (1.2 )                 (1.2 )
  Other income, net                                                   0.1                    0.4
Net (loss) income                                                     1.4                   (4.8 )
Income taxes (benefit)                                                0.4                   (1.9 )
(Loss) income before income taxes (benefit)                           1.0 %                 (2.9 ) %

Summarized financial information concerning the Company's reportable segments is shown in the following table. Also certain corporate overhead income and expenses in the consolidated statements of operations are not included in the reportable segments.

                                                    (Dollars in Thousands)
     52 Weeks Ended
     January 26, 2009         Buffets(1)       Non-Buffets(2)          Other             Total
Revenues                    $       69,467     $        28,389     $           -     $      97,856
Food cost                           28,643               9,441                 -            38,084
Labor cost                          21,445              10,409                 -            31,854
Interest income                          -                   -                13                13
Interest expense                        (6 )                 -            (1,147 )          (1,153 )
Depreciation &
amortization                         1,927                 650                45             2,622
Impairment of long-lived
assets                                 198                  14                 -               212
Income (loss) before
income taxes                         2,560               2,352            (3,575 )           1,337

                                                      (Dollars in Thousands)
            52 Weeks Ended
            January 28, 2008           Buffets       Non-Buffets       Other        Total
   Revenues                            $ 42,859     $      25,873     $      -     $ 68,732
   Food cost                             16,740             8,616            -       25,356
   Labor cost                            14,623             9,290            -       23,913
   Interest income                            -                 -           24           24
   Interest expense                        (151 )               -         (707 )       (858 )
   Depreciation & amortization            1,402               626           70        2,098
   Impairment of long-lived assets          647               754            -        1,401
   Income (loss) before income taxes     (1,853 )           1,694       (3,157 )     (3,316 )

(1) The sales increase in the Buffet segment was primarily from the acquisition of 20 Barnhill's Buffet restaurants. The food cost as a percentage of revenue increased this year primarily due to increases in wholesale food prices as compared to the prior year. Labor cost decreased as a percentage of revenue this year primarily due to a lower labor cost in the Barnhill's Buffet restaurants as compared to our existing buffet restaurants. Income (loss) before income taxes increased primarily from the additional income from the Barnhill acquisition.

(2) The food cost as a percentage of revenue in the Non-Buffet segment decreased this year primarily due to the addition of one Casa Bonita restaurant which has lower food cost than the other Non-Buffet restaurants offset by increases in wholesale food prices as compared to the prior year. Labor cost increased as a percentage of revenue this year primarily due to minimum wage increases in the applicable markets. Income (loss) before income taxes increased primarily as a result of lower impairment costs in the current fiscal year compared to the prior fiscal year.

Comparison of Fiscal 2009 to Fiscal 2008

Total revenues increased $29.1 million or 42.4% from $68.7 million in fiscal 2008 to $97.8 million in fiscal 2009. Sales from the Company's 3 new store openings and 27 newly acquired stores in fiscal 2009 and fiscal 2008 were a net increase of approximately $36.7 million. Sales lost from 14 closed stores represented a net decrease of approximately $4.2 million. Same store sales decreased approximately 6.4% primarily due to macro economic factors and increased competition in certain markets.

Food costs as a percentage of total revenues increased from 36.9% during in fiscal 2008 to 38.9% in fiscal 2009. The increase in food costs as a percentage of total revenue was primarily attributable to the higher wholesale prices for most commodities.

Labor costs as a percentage of total revenues decreased from 34.8% in fiscal 2008 to 32.5% in fiscal 2009 while actual labor costs increased by $7.9 million. The decrease as a percentage of total revenues was primarily attributable to lower labor costs in the newly acquired Barnhill restaurants as compared to the existing restaurants. Labor costs decreased as a percentage of total revenues despite minimum wage increases in every state in which the Company operated in fiscal 2009 and fiscal 2008. In response to the increased costs, the Company has and will continue to attempt to increase menu pricing with the goal of maintaining food and labor costs as a percentage of sales consistent with prior results, although there can be no assurance that expected results will actually occur (see the discussion under "Risk Factors").

Occupancy and other expenses as a percent of total revenues decreased from 22.1% in fiscal 2008 to 20.2% in fiscal 2009. The decrease as a percentage of total revenues was primarily attributable to a decrease in facility costs as a percentage of revenues in the current year compared to the prior year. The lower facility cost as percentage of revenue was the result of lower negotiated and straight-line rent expense.

General and administrative expenses as a percentage of total revenues decreased from 5.2% in fiscal 2008 to 3.0% in fiscal 2009. While the Company has added 30 new stores and closed 14 stores, there has been no significant increase in administrative costs or personnel.

Impairment of long-lived assets decreased from 2.0% in fiscal 2008 to 0.2% in fiscal 2009. The impairment in fiscal 2008 totaled $238,000 for the impairment of one restaurant's leasehold improvements and $8,000 for franchise costs where projected undiscounted cash flows were less than the net book value of the assets and approximately $29,000 of impairment to equipment held for future use and approximately $1,126,000 for the impairment of goodwill. The impairment in fiscal 2009 totaled $212,000 for leasehold improvements.

Interest expense as a percent of total revenues was 1.2% in fiscal 2008 and in fiscal 2009. Interest expense increased from $858,000 in fiscal 2008 to $1,153,000 in fiscal 2009 primarily from the Wells Fargo debt used to acquire 20 Barnhill's Buffet restaurants. However, the interest expense as a percent of total revenue remained the same because the revenues also increased primarily from the Barnhills acquisition.

The income tax provision (benefit) totaled $394,000 or 29.5% of pre-tax income in fiscal 2009 as compared to $(1,315,000) or (39.7%) of pre-tax income in fiscal 2008.

Liquidity and Capital Resources

In recent years, the Company has financed operations through a combination of cash on hand, cash provided from operations, available borrowings under bank lines of credit and loans from the principal shareholder.

As of January 26, 2009, the Company had $1,118,000 in cash. Cash and cash equivalents increased by $382,000 during the fiscal year ended January 26, 2009. The net working capital deficit was $(9,041,000) and $(8,348,000) at January 26, 2009 and January 28, 2008, respectively. The Company spent approximately $7.7 million on capital expenditures in fiscal 2009 including approximately $5.7 million to purchase 20 Barnhill's Buffet restaurants.

Cash provided by operations was $3.6 million for fiscal 2009 and $3.0 million for fiscal 2008.

The Company had a $3,000,000 unsecured revolving line of credit with M&I Marshall & Ilsley Bank. The M&I revolving line of credit bore interest at LIBOR plus two percent per annum. The Company replaced the M&I revolving line of credit on January 31, 2008 with a Credit Facility with Wells Fargo Bank, N.A. The Credit Facility included a $7,000,000 term loan and a $2,000,000 revolving line of credit. The Credit Facility was utilized to retire the Company's unsecured revolving line of credit with M&I Marshall & Ilsley Bank; to fund the acquisition of assets associated with sixteen (16) Barnhill's Buffet restaurants; and to provide additional working capital. On February 29, 2008 the Company amended its Credit Facility with Wells Fargo Bank N.A., increasing the term loan principal from $7,000,000 to $8,000,000. The increase in the Credit Facility was used to fund the acquisition of four Barnhill's Buffet by its newly formed, wholly-owned, independently capitalized subsidiary, Starlite Holdings, Inc. The Credit Facility is guaranteed by Star Buffet's subsidiaries and bears interest, at the Company's option, at Wells Fargo's base rate plus 0.25% or at LIBOR plus 2.00%. The Credit Facility is secured by a first priority lien on all of the Company's assets, except for those assets that are currently pledged as security for existing obligations, in which case Wells Fargo has a second lien. The term loan matures on January 31, 2012 and provides for principal to be amortized at $175,000 per quarter for the initial six quarters; $225,000 for the next nine quarters; with any remaining balance due at maturity. Interest is payable monthly. The term loan balance was $5,475,000 on April 22, 2009. The $2,000,000 revolving line of credit matures on January 31, 2012. Interest on the revolver is payable monthly. As of April 22, 2009, the revolving line of credit balance was $700,000.

On February 1, 2001, the Company entered into a $460,000 15 year fixed rate first real estate mortgage with Victorium Corporation. The mortgage has monthly payments including interest of $6,319. The interest rate is 7.5%. The mortgage is secured by the Company's restaurant in Ocala, Florida. The balance at January 26, 2009 and January 28, 2008 was $282,000 and $311,000, respectively.

On May 2, 2002, the Company entered into a $1,500,000 ten year fixed rate first real estate mortgage with M&I Marshall & Ilsley Bank. The mortgage has monthly payments including interest of $17,894. The interest rate is7.5% for the first five years with interest for years six to ten calculated at the five year LIBOR rate plus 250 basis points with a floor of 7.5%. The mortgage is secured by the Company's HomeTown Buffet restaurant in Scottsdale, Arizona. The balance at January 26, 2009 and January 28, 2008 was $451,000 and $624,000, respectively.

On February 25, 2004, the Company entered into a $1,250,000 seven year fixed rate first real estate mortgage with M&I Marshall & Ilsley Bank. The mortgage has monthly payments including interest of $18,396. The interest rate is 6.1%. The mortgage is secured by the Company's HomeTown Buffet restaurant in Yuma, Arizona. The balance at January 26, 2009 and January 28, 2008 was $203,000 and $404,000, respectively.

On July 29, 2004, the Company entered into a $550,000 ten year fixed rate first real estate mortgage with Heritage Bank. The mortgage had monthly payments including interest of $6,319. The interest rate was 6.75%. The mortgage was secured by the Company's JB's Restaurant in Great Falls, Montana. The mortgage was paid in full with a loan from Stockman Bank on August 15, 2008.

On October 27, 2004, the Company entered into a $1,275,000 five year fixed rate first real estate mortgage with Bank of Utah. The mortgage has monthly payments including interest of $14,371 with a balloon payment of $719,000 due on October 26, 2009. The interest rate is 6.25%. The mortgage requires the Company to maintain specified minimum levels of net worth, limits the amount of capital expenditures and requires the maintenance of certain fixed charge coverage ratios. The mortgage is secured by the Company's HomeTown Buffet restaurant in Layton, Utah. The balance at January 26, 2009 and January 28, 2008 was $719,000 and $840,000, respectively. The Company refinanced the mortgage in the first quarter of fiscal 2010 for five years.

On September 16, 2005, the Company entered into a $300,000 five year fixed rate real estate mortgage with Naisbitt Investment Company. The mortgage has monthly payments including interest of $5,870. The interest rate is 6.5%. The mortgage is secured by the Company's JB's Restaurant in Rexburg, Idaho. The balance at January 26, 2009 and January 28, 2008 was $108,000 and $169,000, respectively.

On June 1, 2006, the Company entered into a $564,000 five year fixed rate first real estate mortgage with Dalhart Federal Savings and Loan. The mortgage has monthly payments including interest of $6,731. The interest rate is 7.63%. The mortgage is secured by the Company's K-BOB'S Steakhouse in Dumas, Texas. The balance at January 26, 2009 and January 28, 2008 was $449,000 and $497,000, respectively.

On November 8, 2006, the Company entered into a $595,000 five year fixed rate first real estate mortgage with Wells Fargo Bank. The mortgage has monthly payments including interest of $8,055. The interest rate is 7.5%. The mortgage is secured by the Company's Pecos Diamond Steakhouse in Artesia, New Mexico. The balance at January 26, 2009 and January 28, 2008 was $401,000 and $461,000, respectively.

On January 30, 2007, the Company entered into a $900,000 five year fixed rate real estate mortgage with Fortenberry's Beef of Magee, Inc. The mortgage has monthly payments including interest of $17,821. The interest rate is 7%. The mortgage is secured by the Company's Western Sizzlin restaurant in Magee, Mississippi. The balance at January 26, 2009 and January 28, 2008 was $573,000 and $740,000, respectively.

On May 29, 2007, the Company entered into a $500,000 five year fixed rate real estate mortgage with Dalhart Federal Savings and Loan Association. The mortgage has monthly payments including interest of $5,903 with a balloon payment of $301,345 due on June 1, 2012. The interest rate is 7.38%. The mortgage is secured by the Company's Bar-H Steakhouse restaurant in Dalhart, Texas. The balance at January 26, 2009 and January 28, 2008 was $440,000 and $477,000, respectively.

On June 19, 2007, the Company entered into a $520,000 five year fixed rate real estate mortgage with Farmers Bank and Trust. The mortgage has monthly payments including interest of $4,676 with a balloon payment of $407,313 due on June 19, 2012. The interest rate is 7%. The mortgage is secured by the Company's Western Sizzlin restaurant in Magnolia, Arkansas. On July 11, 2008, the Company entered into a $604,000 five year fixed rate real estate mortgage with Farmers Bank and Trust. The mortgage has monthly payments including interest of $5,264. The interest rate is 6.5%. The mortgage is secured by the Company's Western Sizzlin restaurant in Magnolia, Arkansas. The balance at January 26, 2009 and January 28, 2008 was $587,000 and $508,000, respectively.

During fiscal 2008, the Company borrowed approximately $1,400,000 from Mr. Robert E. Wheaton, a principal shareholder, officer and director of the Company. This loan dated June 15, 2007 is subordinated to the obligation to Wells Fargo Bank, N.A. and bears interest at 8.5%. In June, 2008, the Company borrowed an additional $592,000 from Mr. Wheaton under the same terms. This resulted in an increase in the subordinated note balance from $1,400,000 to $1,992,000. The Company expensed and paid $154,000 to Mr. Wheaton for interest during fiscal 2009. The principal balance and any unpaid interest is due and payable in full on June 5, 2012. The Company used the funds borrowed from Mr. Wheaton for working capital requirements.

The Company believes that cash on hand, availability under the revolving line of credit and cash flow from operations will be sufficient to satisfy working capital, capital expenditure and refinancing requirements during the next 12 months. Additionally, management does not believe that the net working capital deficit will have any material effect on the Company's ability to operate the business or meet obligations as they come due. However, there can be no assurance that cash on hand, availability under the revolving line of credit and cash flow from operations will be sufficient to satisfy its working capital, capital expenditure and refinancing requirements. Furthermore, given uncertain financial market conditions on February 20, 2009, the Board of Directors voted to indefinitely suspend the annual dividend on the outstanding common stock of the Company.

Off-balance Sheet Arrangements

As of January 26, 2009, the Company did not have any off-balance sheet arrangements as defined in Item 303(a) (4) (ii) of Regulation S-K.

Commitments and Contractual Obligations

The Company's contractual obligations and commitments principally include
obligations associated with our outstanding indebtedness and future minimum
operating and capital lease obligations as set forth in the following table:

                                                       (Dollars in thousands)
                                           Less than         One to           Three to       Greater than
Contractual Obligations:     Total         one year        three years       five years       five years

Long-term debt (1)(2)      $   15,591     $     3,548     $       3,158     $      7,638     $       1,247
Operating leases (3)           13,991           2,858             3,932            3,050             4,151
Capital leases (3)                 54              54                 -                -                 -
Purchase commitments                -               -                 -                -                 -
Total contractual cash
obligations                $   29,636     $     6,460     $       7,090     $     10,688     $       5,398

(1) See Note 5 to the consolidated financial statements for additional information.
(2) Long-term debt includes note payable to officer.
(3) See Note 6 to the consolidated financial statements for additional information.

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 on certain increased costs due to these inflationary factors along to its customers because those factors have impacted nearly all restaurant companies.

Critical Accounting Policies and Judgments

The Company prepares its consolidated financial statements in conformity with accounting principles generally accepted in the United States of America. The . . .