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                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    Form 10-K

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

For the fiscal year ended February 1, 1998         Commission File No.   0-25858

                              DAVE & BUSTER'S, INC.

             (Exact name of registrant as specified in its charter)

         Missouri                                             43-1532756
(State or other jurisdiction of                             (I.R.S. employer
incorporation or organization)                            identification number)

2481 Manana Drive, Dallas, Texas                                75220
(Address of principal executive offices)                      (zip code)

                         Registrant's telephone number,
                       including area code (214) 357-9588

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, $0.01 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 the 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 persons other than
directors and officers of registrant (who might be deemed to be affiliates of
registrant) at April 28, 1998 was $295,896,138.

The number of shares of common stock outstanding at April 28, 1998 was
13,045,450 shares.


                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's Proxy Statement dated May 11, 1998, for its annual
meeting of Stockholders on June 9, 1998, are incorporated by reference into Part
III hereof, to the extent indicated herein.




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                                     PART I


Item 1.  BUSINESS.

         General

         Dave & Buster's, Inc. (the "Company") operates 12 large format,
         high-volume Restaurant/Entertainment Complexes ("Complexes") under the
         Dave & Buster's name. Each Dave & Buster's Complex offers a full menu
         of high quality food and beverage items combined with an extensive
         array of entertainment attractions such as pocket billiards,
         shuffleboard, state-of-the-art interactive simulators and virtual
         reality systems, and traditional carnival-style games of skill. The
         Company's current large format, 50,000 to 60,000 square foot prototype
         Complex, is designed to promote easy access to, and maximize customer
         cross-over between, the multiple dining and entertainment areas within
         each Complex. The Company emphasizes high levels of customer service to
         create casual, yet sophisticated, "ideal playing conditions" for
         adults.


         The Dave & Buster's Concept

         The Company seeks to differentiate itself by providing high quality
         dining, bar service and entertainment attractions in a comfortable,
         adult atmosphere. The key factors of the Company's market positioning
         and operating strategy are:

         Distinctive Concept. Each Dave & Buster's offers a distinctive
         combination of dining, bar service and entertainment. A full menu and
         complete bar service are available from early lunch until late at night
         in each restaurant and throughout almost all of the entertainment
         areas. The broad array of attractions, ranging from table and carnival
         games to state-of-the-art virtual reality games, is continuously
         reviewed and updated to maintain a fresh entertainment environment. The
         Company has actively sought to enhance the popularity of its
         traditional games, such as pocket billiards and shuffleboard, by
         providing high quality tables, a clean and comfortable environment and
         a high standard of service.

         A Large, Multiple Attraction Destination. The Complexes range in
         approximate total area from 30,000 square feet to 70,000 square feet,
         with a current prototype of approximately 50,000 to 60,000 square feet.
         The large scale of each operation, together with the numerous food,
         beverage and entertainment options offered, is designed to attract a
         diverse customer base and consolidate multiple-destination customer
         spending into one location. Each Dave & Buster's attracts local
         customers from a wide geographical area (estimated to be a twenty-mile
         radius) along with tourists, conventioneers and business travelers.

         Commitment to Quality. The Company strives to provide its customers
         with good food and an inviting atmosphere. Accordingly, each Dave &
         Buster's offers an extensive menu which features popular, moderately
         priced food and beverage items that are individually prepared with a
         commitment to value and quality. The Company makes a significant
         investment in each Complex, and the Company's facilities are designed
         with an attention to detail. In addition, the customer-participation
         entertainment attractions are tastefully presented in an atmosphere
         that the Company defines as "ideal playing conditions."




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         High Standard of Customer Service. Through intensive personnel
         training, constant monitoring of operations and stringent operational
         controls, the Company strives to maintain a consistently high standard
         of food, beverage and amusement service throughout each Complex. The
         Company's commitment to customer service is evidenced by the
         availability of full food and beverage service in entertainment areas
         as well as the restaurant and bar areas.

         With respect to entertainment, the Company's commitment to customer
         service is demonstrated by service staff in each of the entertainment
         areas who offer assistance in playing and enjoying the games. The
         Company believes its customer service is enhanced by a strong
         commitment to employee motivation and appreciation programs. The
         Company also believes that high service standards are critical to
         promoting customer loyalty and to generating frequent-visiting patterns
         and referrals by customers.

         Comfortable Adult Atmosphere. Each Dave & Buster's is primarily adult
         oriented and, while children are welcome, strict guidelines are
         enforced. Customers under twenty-one years of age must be accompanied
         by a responsible adult at all times during their visit and are not
         allowed in a Dave & Buster's after 10:00 p.m. (11:00 p.m. in the summer
         months). The Company believes that these policies help maintain the
         type of pleasant, relaxed atmosphere that appeals to adult customers.
         The Company also believes that this atmosphere allows it to attract
         groups of customers such as private parties and business organizations.

         Integrated Systems. The Company utilizes centralized information and
         accounting systems that are designed to allow its management to
         efficiently monitor labor, food and other direct operating expenses and
         to provide timely access to financial and operating data. Management
         believes that its integrated computer systems permit it, on both an
         overall and per Complex basis, to efficiently operate the
         Restaurant/Entertainment Complexes.

         Restaurant/Entertainment Concept and Menu

         Dave & Buster's offers a full menu of high quality food and beverage
         items combined with an extensive array of entertainment attractions
         such as pocket billiards, shuffleboard, state-of-the-art interactive
         simulators and virtual reality systems, and traditional carnival-style
         games of skill. The Company's facilities are designed to promote easy
         access to, and maximize customer cross-over between, the multiple
         dining and entertainment areas within each Complex. The Company
         emphasizes high levels of customer service to create casual, yet
         sophisticated, "ideal playing conditions" for adults.

         The Dave & Buster's menu is offered from early lunch until late night
         and features moderately priced food designed to appeal to a wide
         variety of customers. This well-rounded fare includes gourmet pastas,
         individual sized pizzas, burgers, steaks, seafood and chicken.
         Specialties of the house include babyback ribs, blackened chicken
         pasta, mesquite-peppered rib eye steak and a Philadelphia cheesesteak
         sandwich. A wide variety of other appetizers, soups, salads, sandwiches
         and desserts is also available. Entree prices range from $6.50 to
         $16.95, with many entrees in the $7.95 to $9.95 range. In order to
         promote customer flow and complement the entertainment areas, full, sit
         down food service is offered not only in the restaurant areas but also
         throughout Dave & Buster's.  In addition, throughout the restaurant and
         entertainment areas each




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         Dave & Buster's offers full bar service including over 50 different
         beers, an extensive wine selection and a variety of non-alcoholic
         beverages such as its own private label, "D&B Old Fashioned Philly Root
         Beer."

         The entertainment attractions in each Dave & Buster's are geared toward
         customer participation and offer both traditional entertainment and
         "Million Dollar Midway" entertainment. Each Dave & Buster's offers a
         number of traditional entertainment options.

         Traditional Entertainment. Each Dave & Buster's offers a number of
         traditional entertainment options. These traditional offerings include
         "world class" pocket billiards, "championship-style" shuffleboard
         tables, the Show Room which is designed for hosting private social
         parties and business gatherings as well as Company sponsored events,
         and D&B Lanes, which is bowling, Dave & Buster's style. Traditional
         entertainment games are rented by the hour.

         Million Dollar Midway Games. The largest area in each Dave & Buster's
         is the Million Dollar Midway which is designed to provide high-energy,
         escapism entertainment through a broad selection of electronic, skill
         and sports-oriented games. The Dave & Buster's Power Card activates all
         the midway games (with the exception of coin action games) and can be
         recharged for additional play. The Power Card enables customers to
         activate games more easily and encourages extended play of games.
         Customers have increased their initial purchases of game credits and
         frequency of play, resulting in an increase in the Company's total
         revenues and a 4.4% increase in the percentage of the Company's
         revenues derived from amusements, which have a greater operating margin
         than food and beverage revenues, to 49.7% in fiscal year 1997 from
         45.3% in fiscal year 1996. In addition, by replacing coin activation,
         the Power Card has eliminated the technical difficulties and
         maintenance issues associated with coin activated equipment.
         Furthermore, the Power Card feature has increased the Company's
         flexibility in the pricing and promotion of games.

         Attractions within the Million Dollar Midway include fantasy/high
         technology and classic midway entertainment. Fantasy/high-technology
         offerings include simulator games such as formula race cars, off-road
         vehicles, fighter jets and motorcycles; Galaxian Theater, a
         multi-participant, enclosed simulation theater where up to six players
         take part in mock battles with alien invaders; Virtuality, an
         interactive, electronic game designed to simulate an actual battlefield
         environment; Virtual World, a fantasy environment attraction; Iwerks
         Turbo Ride Theatre, a 16 to 18 seat motion simulation theater,
         large-screen interactive electronic games; and "The 19th Hole" which is
         a large, enclosed, state-of-the-art golf simulator.

         Classic midway entertainment includes sports-oriented games of skill;
         carnival-style games, which are intended to replicate the atmosphere
         found in many local county fairs; and D&B Downs which is one of several
         multiple-player race games offered in each Dave & Buster's. At the
         Winner's Circle, players can redeem coupons won from selected games of
         skill for a wide variety of prizes, many of which display the Dave &
         Buster's logo. The prizes include stuffed animals, ballcaps, T-shirts,
         boxer shorts and small electronic items.





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         Locations

         At February 1, 1998, the Company operated twelve locations in nine
         states, which included two in Dallas, and one each in Houston, Atlanta,
         Philadelphia, Hollywood, Florida, North Bethesda, Maryland, Ontario,
         California, Cincinnati, Ohio, Denver, Colorado and two in Chicago.

         Business Development

         The Company continually seeks to identify and evaluate new locations
         for expansion.

         LARGE FORMAT.

         The Company's goal is to open four large format (50,000 to 60,000
         square foot prototype) Complexes in both fiscal years 1998 and 1999 and
         at least five large format Complexes each fiscal year thereafter. The
         Company will open a Complex in Utica (suburban Detroit), Michigan in
         May 1998, and has commenced construction in Irvine, California, and
         Rockland County, New York for Complexes due open in fiscal 1998. The
         Company has signed a long-term lease agreement with Orange City Mills
         Shopping Center in Orange, California for an additional Complex. The
         Orange Complex will open in fiscal 1998. Potential locations for
         openings in fiscal 1999 have been tentatively identified and site
         negotiations are currently in progress.

         The Company believes that the location of its large format Complexes is
         critical to the Company's long-term success and devotes significant
         time and resources to analyzing each prospective site. In general, the
         Company targets high-profile sites within metropolitan areas of at
         least one million people. In addition to carefully analyzing
         demographic information (such as average income levels) for each
         prospective site, the Company considers factors such as visibility,
         accessibility to regional highway systems, zoning, regulatory
         restrictions and proximity to shopping areas, office complexes, tourist
         attractions and residential areas. The Company also carefully studies
         the restaurant and entertainment competition in prospective areas. In
         addition, the Company must select a site of sufficient size to
         accommodate its prototype facility with ample, convenient customer
         parking.

         The typical cost of opening a large format Dave & Buster's ranges from
         approximately $7.0 million to $12.0 million (excluding preopening
         expenses and developer allowances), depending upon the location and
         condition of the premises. The Company will base the decision of owning
         or leasing a site on the projected unit economics. The Complexes opened
         in 1997 and those anticipated in 1998 have been and will be leased
         facilities. Opening a leased facility reduces the Company's capital
         investment in a Complex because the Company does not incur land and
         site improvement costs and might also receive a construction allowance
         from the landlord for improvements. The decor and interior design of a
         large format Dave & Buster's is flexible and can be readily adapted to
         different types of buildings. The Company has opened Complexes in both
         new and existing structures. Complexes are located in both urban and
         suburban areas.




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         SMALL FORMAT.

         The Company's goal is to open one small format (30,000 to 40,000 square
         foot prototype) Complex in fiscal 1998, two small format Complexes in
         fiscal 1999 and at least two small format Complexes each fiscal year
         thereafter. The Company has signed a letter of intent and is currently
         in land purchase contract negotiations for the first small format
         Complex planned to open in Columbus, Ohio, in fiscal year 1998.
         Potential locations for openings in fiscal 1999 have been tentatively
         identified and site negotiations are currently in progress.

         The small format Complex will be the same basic concept and attraction
         as the Company's large format Complexes with some of the standard
         areas, such as pocket billiards, shuffleboard tables and the back of
         the house, being smaller. The main revenue drivers, the Million Dollar
         Midway and food serving areas, will remain the same basic size as the
         Company's large format Complexes.

         The Company believes that the location of its small format Complexes is
         critical to the Company's long-term success and devotes significant
         time and resources to analyzing each prospective site. In general, the
         Company targets high-profile sites within metropolitan areas of at
         least 600,000 people. In addition to carefully analyzing demographic
         information (such as average income levels) for each prospective site,
         the Company considers factors such as visibility, accessibility to
         regional highway systems, zoning, regulatory restrictions and proximity
         to shopping areas, office complexes, tourist attractions and
         residential areas. The Company also carefully studies the restaurant
         and entertainment competition in prospective areas. In addition, the
         Company must select a site of sufficient size to accommodate its
         prototype facility with ample, convenient customer parking.

         The Company estimates the cost of opening a small format Dave &
         Buster's to be approximately $6.0 million to $8.0 million (excluding
         preopening expenses and developer allowances), depending upon the
         location and condition of the premises. The Company will base the
         decision of owning or leasing a site on the projected unit economics.
         The Company's projected fiscal 1998 Complex is a leased facility.
         Opening a leased facility reduces the Company's capital investment in a
         Complex, because the Company does not incur land and site improvement
         costs and might also receive a construction allowance from the landlord
         for improvements. The decor and interior design of a small format Dave
         & Buster's are flexible and can be readily adapted to new and existing
         structures. The Company expects the small format Complexes to be
         located in both urban and suburban areas.

         International

         In August 1995, the Company entered into a license agreement with a
         subsidiary of Bass Plc ("Bass") to license the "Dave & Buster's" name
         and concept in the United Kingdom. Under this agreement, Bass opened
         one Complex in Birmingham, England in May 1997 and has agreed to open a
         total of seven Complexes in the United Kingdom by 2005. Bass has
         scheduled a second Complex to open in Bristol, England in mid-1998.
         Under the license agreement, Bass is required to pay the Company a
         royalty based upon gross revenues, net of value added taxes. The
         royalty rate paid by Bass is a sliding scale which averages 5% of gross
         revenues. The license agreement contains strict operating covenants to
         ensure consistency of the menu and entertainment offerings with those
         in the Company-operated Complexes.



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         In February 1998, the Company entered into a license agreement with the
         TaiMall Development Company ("TaiMall") to license the "Dave &
         Buster's" name and concept in the Pacific Rim. Under this agreement,
         TaiMall expects to open seven Complexes in the Pacific Rim by the year
         2006, the first of which it anticipates opening in early 1999. Under
         the license agreement, TaiMall is required to pay the Company a 5%
         royalty based upon gross revenues. The license agreement contains
         strict operating covenants to ensure consistency of the menu and
         entertainment offerings with those in the Company operated Complexes.

         During 1997, the Company also entered into two letters of intent to
         further expand the Dave & Buster's name internationally. In August
         1997, the Company entered into a letter of intent to license the "Dave
         & Buster's" name and concept in Europe with S.T.A. Salmann Trust. It
         proposes to develop seven locations in Germany, Switzerland and
         Austria, with the first location targeted to open in a mall currently
         under development in Berlin. In October 1997, the Company entered into
         a letter of intent to license the "Dave & Buster's" name and concept in
         Mexico with ECE S.A. de C.V. It proposes to develop five locations,
         with the first location targeted to open in Cancun. There is no
         assurance that these letters of intent will result in definitive
         agreements. The Company is considering entering into agreements to
         license the "Dave & Buster's" name and concept in additional foreign
         countries. The Company does not have any current plans to invest its
         own capital in any foreign operations.

         Operations and Management

         The Company's ability to manage a complex operation including both high
         volume restaurants and bars and diverse entertainment attractions has
         been critical to its overall success. The Company strives to maintain
         quality and consistency in each of its Restaurant/Entertainment
         Complexes through the careful training and supervision of personnel and
         the establishment of, and adherence to, high standards relating to
         personnel performance, food and beverage preparation, entertainment
         productions and equipment, and facilities maintenance. The Company
         believes that it has been able to attract and retain high quality,
         experienced restaurant and entertainment management and personnel
         through its competitive compensation and bonus programs and its policy
         of promoting from within the Company. Staffing levels vary according to
         the size of the location, but a prototype Dave & Buster's is managed by
         one general manager, two assistant general managers, six line managers
         and one business manager.

         In general, each prototype Dave & Buster's also employs one purchasing
         manager, one amusement manager, one assistant amusement manager, one
         Midway auditor, one kitchen manager, two assistant kitchen managers and
         two special events sales managers. The Company has experienced
         relatively little turnover of managerial employees. On average, the
         Company's current general managers possess approximately four and a
         third years of experience with the Company. The general manager of each
         Dave & Buster's reports to a Regional Manager who reports to the Vice
         President, Director of Operations.

         All managers, many of whom are promoted from within, must complete an
         eleven-week training program during which they are instructed in areas
         such as food quality and preparation, customer service, alcoholic
         beverage service, entertainment management and employee relations. The
         Company has also prepared operations manuals relating to food and
         beverage quality and service standards as well as proper operation and
         playing conditions of the Company's entertainment




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         attractions. New sales staff and entertainment personnel participate in
         approximately three weeks of training under the close supervision of
         Company management. Management strives to instill enthusiasm and
         dedication in its employees, regularly solicits employee suggestions
         concerning Company operations and endeavors to be responsive to
         employees' concerns. In addition, the Company has extensive and varied
         programs designed to recognize and reward employees for superior
         performance.

         Efficient, attentive and friendly service is integral to the Company's
         overall concept. In addition to customer evaluations, the Company uses
         a "secret shopper" quality control program to independently monitor
         customer satisfaction. "Secret shoppers" are independent persons who,
         on a periodic basis, test the Company's food, beverage and service as
         customers without the knowledge of restaurant management or personnel,
         and report their findings to corporate management.

         Each Complex uses a variety of integrated management information
         systems. These systems include a computerized point-of-sale system
         which facilitates the movement of customer food and beverage orders
         between the customer areas and kitchen operations, controls cash,
         handles credit card authorizations, keeps track of revenues on a
         per-employee basis for incentive awards purposes and provides
         management with revenue and inventory data.

         Marketing, Advertising and Promotion

         The Company operates its marketing, advertising and promotional
         programs through an in-house corporate marketing department and employs
         a full-time corporate Marketing Director. The Company focuses on three
         primary marketing target audiences in its advertising and promotional
         programs: (1) local market-area customers; (2) out-of-town visitors;
         and (3) corporate and group customers.

         Local Market-Area Customers. Management believes that its strongest
         marketing tool is customer referrals. In addition, the Company
         continually updates its local customer database which is utilized for
         specifically targeted marketing and advertising programs to customers
         in a 10 to 20 mile radius. Through a mix of marketing techniques such
         as direct mailings, point-of-sale materials, outdoor advertising and
         local-market print and broadcast media, the Company promotes seasonal
         events, in-house promotions, special offers and new entertainment
         attractions.

         Out-of-Town Visitors. The Company markets aggressively to attract
         tourists and business travelers by placing advertisements in local
         tourist and special event guides and by otherwise promoting each Dave &
         Buster's as a local "must see" attraction. The Company monitors local
         tourist and visitors bureaus for convention schedulings, festivals and
         special sporting events. Additionally, through the use of local trade
         arrangements such as "concierge referral programs," the Company extends
         its marketing presence into local high-traffic tourist and business
         traveler areas.

         Corporate and Group Marketing. The Complex-based special events sales
         managers book group events such as business seminars, receptions and
         private parties. The Company develops and maintains a database for
         corporate and group bookings. Each Dave & Buster's has hosted events
         for many large multinational, national and regional businesses. Many of
         the Company's corporate and group customers have hosted repeat events.
         In addition to the rapport developed




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         with these clients, the Company stages and promotes its own local group
         marketing opportunities such as "Karaoke Sing-a-Longs", "Murder Mystery
         Dinner Theater", televised sporting events and charity benefits. The
         corporate marketing department is also responsible for budgeting and
         controlling media and production costs. During fiscal 1997, the
         Company's expenditures for advertising and promotions were
         approximately 2.2% of its revenues.

         Competition

         The restaurant and entertainment industries are highly competitive.
         There are a great number of food and beverage service operations and
         entertainment businesses that compete directly and indirectly with the
         Company. Many of these entities are larger and have significantly
         greater financial resources and a greater number of units than does the
         Company. Although there are few other companies presently utilizing the
         concept of combining entertainment and restaurant operations to the
         same extent as the Company, the Company may encounter increased
         competition in the future, which may have an adverse effect on the
         profitability of the Company. In addition, the legalization of casino
         gambling in geographic areas near any restaurant/entertainment company
         would create the possibility for entertainment alternatives, which
         could have a material adverse effect on the Company's business.

         Employees

         At February 1, 1998, the Company employed approximately 3,100 persons,
         82 of whom served in administrative or executive capacities, 314 of
         whom served as restaurant and entertainment management personnel, and
         the remainder of whom were hourly restaurant and entertainment
         personnel.

         None of the Company's employees are covered by collective bargaining
         agreements, and the Company has never experienced an organized work
         stoppage, strike or labor dispute. The Company believes its working
         conditions and compensation packages are competitive with those offered
         by its competitors and considers relations with its employees to be
         very good.

         Seasonality

         As a result of the substantial revenues associated with each new
         Restaurant/Entertainment Complex, the timing of new
         Restaurant/Entertainment Complex openings will result in significant
         fluctuations in quarterly results. The Company expects seasonality to
         be a factor in the operation or results of its business in the future
         due to expected lower third quarter revenues due to the summer season,
         and expects higher fourth quarter revenues associated with the year-end
         holidays. The effects of supplier price increases have not been
         material. The Company believes low inflation rates in its market areas
         have contributed to stable food and labor costs in recent years.
         However, the second increment of the Federal minimum wage increase
         will, implemented in September 1997, cause future labor costs to
         increase and there is no assurance that low inflation rates will
         continue.





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         Intellectual Property

         The Company has registered the servicemark "Dave & Buster's" with the
         United States Patent and Trademark Office and in various foreign
         countries. The Company has registered certain additional servicemarks
         with the United States Patent and Trademark Office and the United
         Kingdom. 

         Government Regulations

         The Company is subject to various federal, state and local laws
         affecting its business. Each Dave & Buster's is subject to licensing
         and regulation by a number of governmental authorities, which may
         include alcoholic beverage control, amusement, health and safety and
         fire agencies in the state or municipality in which the Complex is
         located. Each Dave & Buster's is required to obtain a license to sell
         alcoholic beverages on the premises from a state authority and, in
         certain locations, county and municipal authorities. Typically,
         licenses must be renewed annually and may be revoked or suspended for
         cause at any time. Alcoholic beverage control regulations relate to
         numerous aspects of the daily operations of each Dave & Buster's,
         including minimum age of patrons and employees, hours of operation,
         advertising, wholesale purchasing, inventory control and handling, and
         storage and dispensing of alcoholic beverages. The Company has not
         encountered any material problems relating to alcoholic beverage
         licenses to date. The failure to receive or retain a liquor license in
         a particular location could adversely affect the Company's ability to
         obtain such a license elsewhere.

         The Company is subject to "dram-shop" statutes in the states in which
         Complexes are located. These statutes generally provide a person
         injured by an intoxicated person the right to recover damages from an
         establishment which wrongfully served alcoholic beverages to the
         intoxicated individual. The Company carries liquor liability coverage
         as part of its existing comprehensive general liability insurance which
         it believes is consistent with coverage carried by other entities in
         the restaurant and entertainment industries. Although the Company is
         covered by insurance, a judgment against the Company under a dram-shop
         statute in excess of the Company's liability coverage could have a
         material adverse effect on the Company.

         As a result of operating certain entertainment games and attractions
         including operations which offer redemption prizes, the Company is
         subject to amusement licensing and regulation by the states and
         municipalities in which it has opened Complexes. Certain entertainment
         attractions are heavily regulated and such regulations vary
         significantly between communities. From time to time, existing
         Complexes may be required to modify certain games, alter the mix of
         games or terminate the use of specific games as a result of the
         interpretation of regulations by state or local officials. The Company
         has, in the past, had to seek changes in state or local regulations to
         enable it to open in a given location. To date, the Company has been
         successful in seeking all such regulatory changes.

         The Company's operations are also subject to federal and state laws
         governing such matters as wages, working conditions, citizenship
         requirements and overtime. Some states have set minimum wage
         requirements higher than the federal level, and the federal government
         recently increased the federal minimum wage. In September 1997, the
         second phase of an increase in the minimum wage was implemented in
         accordance with the Federal Fair Labor Standards Act of 1996.
         Significant numbers of hourly personnel at the Company's Complexes are
         paid at rates related to the federal minimum wage and, accordingly,
         increases in the minimum wage have




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         increased labor costs at the Company's Complexes. Other governmental
         initiatives such as mandated health insurance, if implemented, could
         adversely affect the Company as well as the restaurant industry in
         general. The Company is also subject to the Americans With Disabilities
         Act of 1990, which among other things, may require certain minor
         renovations to its Complexes to meet federally mandated requirements.
         The cost of these renovations is not expected to be material to the
         Company.

         RISK FACTORS

         The Company hereby cautions stockholders, prospective investors in the
         Company and other readers of this report that the following important
         factors, among others, could affect the Company's stock price or cause
         the Company's actual results of operations to differ materially from
         those expressed in any forward-looking statements, oral or written,
         made by or behalf of the Company:

                  Expansion Plans; Capital Resource Requirements

                  The Company presently plans to open four large format
                  Complexes during each of fiscal years 1998 and 1999 and at
                  least five large format Complexes each fiscal year thereafter.
                  Also, the Company presently plans to open one small format
                  Complex during fiscal 1998, two in fiscal 1999 and at least
                  two small format Complexes each fiscal year thereafter.
                  Accomplishing these expansion goals will depend upon a number
                  of factors, including the Company's ability to raise
                  sufficient capital, locate and obtain appropriate sites, hire
                  and train additional management personnel and construct or
                  acquire, at reasonable cost, the necessary improvements and
                  equipment for such Restaurant/Entertainment Complexes. In
                  particular, the capital resources required to develop each new
                  Restaurant/Entertainment Complex are significant. The
                  Company's current prototype for large format Complexes has
                  required an initial investment, including land, improvements,
                  and furniture, fixtures and equipment, but excluding
                  preopening expenses, averaging approximately $10 million per
                  Complex.

                  The Company's current prototype for small format Complexes is
                  estimated to require an initial investment, including land,
                  improvements, and furniture, fixtures and equipment, but
                  excluding preopening expenses, of approximately $6 million to
                  $8 million per Complex.

                  There can be no assurance that the Company will be able to
                  complete its planned expansion, that the Company will continue
                  to be successful in its development of new
                  Restaurant/Entertainment Complexes or that new
                  Restaurant/Entertainment Complexes, if completed, will perform
                  in a manner consistent with the Company's most recently opened
                  Restaurant/Entertainment Complexes or make a positive
                  contribution to the Company's operating performance.





                                       11


<PAGE>   12



                  Small Number of Restaurant/Entertainment Complexes

                  As of February 1, 1998 the Company operated twelve
                  Restaurant/Entertainment Complexes. The combination of the
                  relatively small number of locations and the significant
                  investment associated with each new Restaurant/Entertainment
                  Complex may cause the operating results of the Company to
                  fluctuate significantly and adversely affect the profitability
                  of the Company. Due to this relatively small number of
                  locations, poor results of operations at any one
                  Restaurant/Entertainment Complex could materially affect the
                  profitability of the entire Company. New
                  Restaurant/Entertainment Complexes have experienced a drop in
                  revenues after their first year of operation, and the Company
                  does not expect that in subsequent years, any increases in
                  comparable Complex revenues will be meaningful.

                  Future growth in revenues and profits will depend to a
                  substantial extent on the Company's ability to increase the
                  number of its Restaurant/Entertainment Complexes. Because of
                  the substantial up-front financial requirements which are
                  described above, the investment risk related to any one
                  Restaurant/Entertainment Complex is much larger than that
                  associated with most other companies' restaurant or
                  entertainment venues.

                  Dependence Upon Senior Management

                  The Company's future success will depend largely on the
                  efforts and abilities of its existing senior management,
                  particularly David O. "Dave" Corriveau and James W. "Buster"
                  Corley, the Company's Co-Chief Executive Officers and the
                  founders of the Company's business. The loss of the services
                  of certain of the Company's management team could have a
                  material adverse effect on the Company's business. Messrs.
                  Corriveau and Corley are employed pursuant to employment
                  agreements which will expire in June 2000.

                  Edison Brothers' Bankruptcy

                  In October 1997, an entity owned by the creditors of Edison
                  Brothers filed a lawsuit against multiple parties, including
                  former Edison Brothers shareholders and the Company, seeking
                  recovery in connection with the June 1995 spin-off of the
                  Company from Edison Brothers and certain related transactions.
                  Although no assurance can be made with respect to the results
                  of the litigation, the Company believes that the claims
                  asserted against the Company are without merit, and the
                  Company intends to vigorously defend itself.

                  Geographic Concentration; Dependence on Discretionary Spending

                  The Company's profits are dependent on discretionary spending
                  by consumers, particularly by consumers living in the
                  communities in which the Restaurant/Entertainment Complexes
                  are located. A significant weakening in any of the local
                  economies in which the Company operates may cause the
                  Company's patrons to curtail discretionary spending which, in
                  turn, could materially affect the profitability of the entire
                  Company.





                                       12

<PAGE>   13



                  International Expansion; License Agreements

                  In August 1995 and February 1998, the Company entered into
                  agreements with Bass and TaiMall to license the "Dave &
                  Buster's" name and concept in the United Kingdom and Pacific
                  Rim, respectively. In addition, the Company is considering
                  entering into agreements to license the "Dave & Buster's" name
                  and concept in other foreign countries. The Company does not
                  have any current plans to invest its own capital in any
                  foreign operations. The Company's concept is untested outside
                  the United States, and no assurance can be given that any
                  international location will be successful. In addition, the
                  Company's continued success is dependent to a substantial
                  extent on its reputation, and its reputation may be affected
                  by the performance of licensee-owned Restaurant/Entertainment
                  Complexes over which the Company will have limited control.
                  Any international operations of the Company will also be
                  subject to certain external business risks such as exchange
                  rate fluctuations, political instability and a significant
                  weakening of a local economy in which a foreign
                  Restaurant/Entertainment Complex is located. Certain
                  provisions in a license agreement for the benefit of the
                  Company may be subject to restrictions in foreign laws that
                  limit the Company's ability to enforce such contractual
                  provisions. In addition, it may be more difficult to register
                  and protect the Company's intellectual property rights in
                  certain foreign countries.

                  Competition

                  The restaurant and entertainment industries are highly
                  competitive. There are a great number of food and beverage
                  service operations and entertainment businesses that compete
                  directly and indirectly with the Company. Many of these
                  entities are larger and have significantly greater financial
                  resources and a greater number of units than does the Company.
                  Although there are few other companies presently utilizing the
                  concept of combining entertainment and restaurant operations
                  to the same extent as the Company, the Company may encounter
                  increased competition in the future, which may have an adverse
                  effect on the profitability of the Company. In addition, the
                  legislation of casino gambling in geographic areas near any
                  restaurant/entertainment company would create the possibility
                  for entertainment alternatives, which could have a material
                  adverse effect on the Company's business.

                  Government Regulations

                  Various federal, state and local laws and permit and license
                  requirements affect the Company's business. Significant
                  numbers of hourly personnel at the Company's Complexes are
                  paid at rates related to the federal minimum wage and,
                  accordingly, legislated increases in the minimum wage will
                  increase labor costs at the Company's Complexes. Other
                  governmental initiatives such as mandated health insurance, if
                  implemented, could adversely affect the Company as well as the
                  restaurant industry in general.




                                       13

<PAGE>   14



                  Limited Trading History of Common Stock; Stock Price 
                  Volatility

                  The Company's Common Stock has been trading in the public
                  market only since June 26, 1995. The price at which the
                  Company's Common Stock trades is determined in the marketplace
                  and may be influenced by many factors, including the
                  performance of the Company, investor expectations for the
                  Company, the trading volume in the Company's Common Stock,
                  general economic and market conditions and competition.

                  The market price of the Common Stock could fluctuate
                  substantially due to a variety of factors, including quarterly
                  operating results of the Company or other restaurant or
                  entertainment companies, changes in general conditions in the
                  economy, the financial markets or the restaurant or
                  entertainment industries, natural disasters or other
                  developments affecting the Company or its competitors. In
                  addition, in recent years the stock market has experienced
                  extreme price and volume fluctuations. This volatility has had
                  a significant effect on the market prices of securities issued
                  by many companies for reasons unrelated to the operating
                  performance of these companies.

                  Quarterly Fluctuations and Seasonality

                  As a result of the substantial revenues associated with each
                  new Restaurant/Entertainment Complex, the timing of new
                  Restaurant/Entertainment Complex openings will result in
                  significant fluctuations in quarterly results. The Company
                  expects seasonality to be a factor in the operation or results
                  of its business in the future due to expected lower third
                  quarter revenues due to the summer season, and expects higher
                  fourth quarter revenues associated with the year-end holidays.
                  The effects of supplier price increases have not been
                  material. The Company believes low inflation rates in its
                  market areas have contributed to stable food and labor costs
                  in recent years. However, the second increment of the Federal
                  minimum wage increase, implemented in September 1997, will
                  cause future labor costs to increase and there is no assurance
                  that low inflation rates will continue.



I
tem 2.  PROPERTIES.

         As of February 1, 1998 the Company operated a total of twelve Complexes
         located in Texas, Georgia, Pennsylvania, Illinois, Florida, Maryland,
         California, Ohio and Colorado. The Company owns the buildings and the
         underlying real estate for four Dave & Buster's (Dallas I, Houston,
         suburban Atlanta and Addison, Illinois). The Company leases the real
         estate and owns the related facilities for the Hollywood, Florida
         location. The Company leases the real estate and related facilities for
         the Dallas II, Philadelphia, downtown Chicago, North Bethesda,
         Maryland, Ontario, California, Cincinnati, Ohio and Denver, Colorado
         Dave & Buster's from unrelated third parties. The Company is currently
         utilizing all available land at its owned locations. The Dallas II
         lease expires in January 2003 and, with renewal options, may be
         extended to January 2008. The Philadelphia lease expires in January
         2014 and, with a renewal option, may be extended to January 2024. The
         Company also leases additional parking facilities for the Philadelphia
         Complex under an agreement which expires in January 2014. The downtown
         Chicago lease expires in January 2016 and, with renewal options, may be
         extended to January 2026. The Hollywood lease expires April 2016 and,
         with renewal options, may be extended to April 2031.




                                       14

<PAGE>   15



         The North Bethesda lease expires January 2017 and, with renewal
         options, may be extended to January 2032. The Ontario lease expires
         January 2018 and, with renewal options, may be extended to January
         2028. The Cincinnati lease expires January 2018 and, with renewal
         options, may be extended to January 2038. The Denver lease expires
         January 2018 and, with renewal options may be extended to January 2033.

         The Company has also signed 20 year leases for Complexes in each of
         Utica, Michigan, Irvine, California, Rockland County, New, York, and
         Orange, California due to open in fiscal 1998. Third party leases
         typically provide for a minimum base rent, additional rent based on a
         percentage of revenues and payment of certain operating expenses.


Item 3.    LEGAL PROCEEDINGS.

         In 1989, Edison Brothers Stores, Inc. ("Edison Brothers") acquired 80%
         of the Company's operating business and all of the real estate
         interests related to such operating business. In June 1995, Edison
         Brothers distributed to its stockholders all of the shares of the
         Company's Common Stock owned by Edison Brothers (the "Spin-Off"), which
         represented 85% of the shares of the Company's Common Stock then
         outstanding. In November 1995, Edison Brothers and its subsidiaries
         filed petitions under Chapter 11 of the Federal Bankruptcy Code.

         During the pendency of Edison Brothers' bankruptcy, certain of its
         creditors and their representatives alleged that the Spin-Off and
         related transactions could be voidable under fraudulent conveyance
         laws. These claims were assigned to a limited liability corporation
         owned by the Edison Brothers' creditors as part of the confirmation of
         a reorganization plan of Edison Brothers in September 1997.

         In October 1997, the litigation limited liability corporation filed a
         lawsuit against multiple parties, including former Edison Brothers
         shareholders and the Company, seeking recovery in connection with the
         Spin-Off and certain related transactions. The plaintiff's aggregate
         recovery in this lawsuit would be limited to the shortfall received by
         the creditors in the Edison Brothers bankruptcy, and the Company does
         not have access to complete knowledge as to the number of former Edison
         Brothers shareholders who have accepted a proposed settlement offer
         (which would lessen the amount of the shortfall) and as to which former
         Edison Brothers shareholders are included in the purported defendant
         class. For these reasons, the Company is unable to quantify any
         potential exposure from this lawsuit. The Company believes that the
         claims against former Edison Brothers shareholders involve a
         substantially greater amount than the claims against the Company.

         Although no assurance can be made with respect to the results of the
         litigation, the Company believes that the claims asserted against the
         Company are without merit, and the Company intends to vigorously defend
         itself.

         In addition, from time to time, the Company is a defendant in
         litigation arising in the ordinary course of its business, including
         claims resulting from "slip and fall" accidents, claims under federal
         and state laws governing access to public accommodations and
         employment-related claims. To date, none of such litigation, some of
         which is covered by insurance, has had a material effect on the
         Company.




                                       15

<PAGE>   16




Item 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

         None.


                                     PART II


Item 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

         The Company's Common Stock has been traded on the Nasdaq National
         Market under the symbol DANB since June 26, 1995. The following table
         summarizes the high and low sale prices per share of Common Stock for
         the periods indicated, as reported on the Nasdaq National Market:


<TABLE>

<S>                                                    <C>                <C>
         Fiscal Year 1995
         ----------------
         Second Quarter (since June 26, 1995)          $14.83             $7.67
         Third Quarter                                  12.67              9.50
         Fourth Quarter                                 10.75              7.42

         Fiscal Year 1996
         ----------------
         First Quarter                                  16.42              9.33
         Second Quarter                                 19.25             12.67
         Third Quarter                                  16.92             12.33
         Fourth Quarter                                 14.50             11.17

         Fiscal Year 1997
         ----------------
         First Quarter                                  16.92             12.67
         Second Quarter                                 21.83             13.58
         Third Quarter                                  22.50             20.17
         Fourth Quarter                                 27.63             18.38
</TABLE>


         At April 28, 1998, the Company there were 2,317 holders of record.

         The Company has never paid cash dividends on its Common Stock and does
         not currently intend to do so as profits are reinvested into the
         Company to fund future expansion of its restaurant business. Payment of
         dividends in the future will depend upon the Company's growth,
         profitability, financial condition and other factors which the Board of
         Directors may deem relevant.



                                       16

<PAGE>   17




Item 6.  SELECTED FINANCIAL DATA.

The following table sets forth selected consolidated financial data for the
Company. This data should be read in conjunction with the Consolidated Financial
Statements of the Company and the Notes thereto included in Item 8 hereof and

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


<TABLE>
<CAPTION>

                                        Fiscal Year      1997           1996            1995           1994           1993
                                                                   (in thousands except share and store data)

<S>                                                <C>            <C>             <C>            <C>            <C>        
Income Statement Data:
Food and beverage revenues                         $    64,703    $    48,568     $    28,554    $    27,426    $    18,445
Amusement and other revenues                            63,801         40,207          23,990         21,997         14,453
- ---------------------------------------------------------------------------------------------------------------------------
         Total revenues                                128,504         88,775          52,544         49,423         32,898

Cost of revenues                                        24,795         18,003          10,945         10,075          6,800
Operating payroll and benefits                          36,227         25,483          15,999         14,746          9,716
Other restaurant operating expenses                     32,787         20,582          11,481         11,760          7,109
General and administrative expenses                      8,489          5,734           3,905          2,724          2,271
Depreciation and amortization expense                    8,470          5,647           3,538          2,827          1,927
Preopening cost amortization                             3,246          2,605             161          1,128            480
Earn-out and special compensation                          --              --           1,607          2,125          2,655
- ---------------------------------------------------------------------------------------------------------------------------
         Total costs and expenses                      114,014         78,054          47,636         45,385         30,958

Operating income                                        14,490         10,721           4,908          4,038          1,940
Interest income (expense), net                            (179)           (38)            101             59             36
- ---------------------------------------------------------------------------------------------------------------------------

Income before provision for income taxes                14,311         10,683           5,009          4,097          1,976
Provision for income taxes                               5,414          4,343           2,087          1,733            806
- ---------------------------------------------------------------------------------------------------------------------------
         Net income                                $     8,897    $     6,340     $     2,922    $     2,364    $     1,170

Basic net income per share (1)(2)                  $       .77    $       .58     $      .34     $       .30    $       .15
Basic weighted average shares outstanding               11,532         10,901           8,681          7,796          7,796
Diluted net income per share (1)(2)                $       .76    $       .58     $      .34     $       .30    $       .15
Diluted weighted average shares outstanding             11,711         10,969           8,681          7,796          7,796
</TABLE>




                                       17


<PAGE>   18


<TABLE>


<S>                                                <C>            <C>             <C>            <C>            <C>         
Balance Sheet Data:
Working capital (deficit)                          $    26,408    $     1,077     $     5,634    $    (2,637)   $      (112)
Total assets                                           158,989         99,436          76,201         49,030         43,403
Long-term obligations                                   12,000         14,250             500          9,986          8,252
Stockholders' equity (3)                               133,356         75,366          69,008             --             --

Number of Complexes Open at End of Period:
Company operated                                            12              9               7              5              4

</TABLE>


(1) The earnings per share amounts prior to 1997 have been restated as required
to comply with Statement of Financial Accounting Standards No. 128, Earnings Per
Share. For further discussion of earnings per share and the impact of Statement
No. 128, see the notes to the consolidated financial statements.

(2) All share and per share information has been adjusted to give effect to the
three-for-two split in the form of a stock dividend. See the notes to the
consolidated financial statements.

(3) Prior to fiscal 1995, the Company was a subsidiary of Edison Brothers
Stores, Inc.



Item 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS.

Fiscal 1997 Compared to Fiscal 1996

Total revenue for fiscal 1997 increased by 45% over fiscal 1996. The increase in
revenues was attributable to the Hollywood, Florida and North Bethesda, Maryland
Complexes being open for 52 weeks in fiscal 1997 and the opening of the Ontario,
California, Cincinnati, Ohio and Denver, Colorado Complexes in the first, third
and fourth quarters of fiscal 1997, respectively. Increased revenues at
comparable stores and the addition of the Power Card also contributed to the
increase in total revenues. Total revenues also increased due to the opening of
the first store under the Bass licensing agreement. Total revenues for the
fiscal 1997 period from the Bass agreement were $251,000. The Company's revenues
are divided into (i) food and beverage revenues and (ii) amusement and other
revenues. For fiscal 1996, food and non-alcoholic beverage revenues were 34.3%
of total revenues, alcoholic beverage revenues were 20.4%, and amusement and
other revenues were 45.3% of total revenues. For fiscal 1997, food and
non-alcoholic beverage revenues were 32.3% of total revenues, alcoholic beverage
revenues were 18.0%, and amusement and other revenues (including royalty
revenues related to the Complex operated by Bass under a license agreement) were
49.7% of total revenues. Food and beverage revenues, as a percentage of total
revenues, have decreased in comparison to prior year levels as a result of the
higher percentage of floor space devoted to entertainment activities within the
Company's newer Restaurant/Entertainment Complexes, the national trend towards
lower alcoholic beverage consumption and the addition of the Power Card.

Cost of revenues, as a percentage of revenues, decreased to 19.3% in fiscal 1997
from 20.3% in fiscal 1996 due to lower food, beverage and amusement costs. The
shift in revenue mix from food and beverage to the higher margin amusement
revenues also attributed to the decrease. Operating payroll and benefits
decreased to 28.2% from 28.7% in the prior comparable period. Operating payroll
and




                                       18

<PAGE>   19



benefits were lower due to cost reductions in variable labor and leverage from
increased revenues offset partially by higher fixed labor and employee benefits
costs. Other restaurant operating expenses were 25.5% of revenues in fiscal 1997
as compared to 23.2% of revenues in fiscal 1996. Other restaurant operating
expenses were higher due to increased operating expenses at the Complexes and
higher occupancy costs associated with a full year of revenues in the fiscal
1997 period for the Hollywood, Florida and North Bethesda, Maryland Complexes
and the addition of Ontario, California, Cincinnati, Ohio and Denver, Colorado
Complexes in the first, third and fourth quarters of fiscal 1997, respectively.

General and administrative expenses increased $2,755,000 over the prior
comparable period as a result of increased administrative payroll and related
costs for new personnel and additional costs associated with the Company's
future growth plans. As a percentage of revenues, general and administrative
expenses increased to 6.6% in fiscal year 1997 from 6.4% in fiscal year 1996.

Depreciation and amortization expense, as a percentage of revenues, increased to
6.6% from 6.4% for the comparable prior period. The increase was attributable to
the inclusion of the Hollywood, Florida and North Bethesda, Maryland Complexes
for a full year of operation in fiscal year 1997 and the opening of the Ontario,
California, Cincinnati, Ohio and Denver, Colorado Complexes, which opened in the
first, third and fourth quarters of fiscal year 1997, respectively. Power Card
installations completed in the fourth quarter of 1996 and the first quarter of
1997 also contributed to this increase. As a percentage of revenues, preopening
cost amortization decreased to 2.5% compared to 2.9% for the comparable prior
period. The percentage decrease is attributable to the leverage from increased
revenues.

The effective tax rate for fiscal year 1997 was 37.8% as compared to 40.7% in
fiscal year 1996 and was the result of a lower effective state tax rate.

Fiscal 1996 Compared to Fiscal 1995

Total revenues for fiscal 1996 increased by 69% over fiscal 1995. The increase
was attributable to the Chicago locations which were opened at the end of fiscal
1995, the fiscal 1996 openings in Hollywood, Florida and North Bethesda,
Maryland and increased revenues at comparable Complexes. The mix of revenues
moved away from alcoholic beverages which captured 20.4% of the total in fiscal
1996 compared with 21.0% in fiscal 1995.

Cost of revenues, as a percentage of revenues, decreased to 20.3% in fiscal 1996
from 20.8% in fiscal 1995 due to lower food and amusement costs. Operating
payroll and benefits, as a percentage of revenues, decreased to 28.7% in fiscal
1996 as compared to 30.5% in fiscal 1995 due primarily to lower Complex
management costs. Other restaurant operating expenses were 23.2% of revenues in
fiscal 1996 as compared to 21.9% of revenues in fiscal 1995. This increase in
other restaurant operating expense as a percentage of revenues was attributable
to increased marketing costs, equipment rental and higher occupancy costs for
the Company.

General and administrative expenses decreased as a percentage of revenues to
6.4% in fiscal 1996 from 7.4% in fiscal 1995 as a result of increased revenue
leverage. In total dollars, general and administrative costs increased
approximately $1.8 due to the Company operating as an independent public company
for the entire year and the Company's expansion.



                                       19

<PAGE>   20



Preopening cost amortization increased approximately $2.4 million due to
amortization of preopening costs associated with four new Complexes in fiscal
1996. The effective tax rate declined for fiscal 1996 to 40.7% of pretax income
from 41.7% for fiscal 1995 was due to the utilization of federal tax credits.

Liquidity and Capital Resources

Cash flows from operations increased from $13.1 million in fiscal 1996 to $15.7
million in fiscal 1997. The increase was a result of the Hollywood, Florida and
North Bethesda Complexes being open for a full year in fiscal 1997 and the
Ontario, California, Cincinnati, Ohio and Denver, Colorado Complexes opened in
the first, third and fourth quarters of fiscal 1997, respectively.

The Company has a senior revolving credit facility which permits borrowing up to
a maximum of $50,000,000 at a floating rate based on the London Interbank
Offered Rate ("LIBOR") or, at the Company's option, the bank's prime rate plus
in each case a margin based upon financial performance (8.8% at February 1,
1998). The facility, which matures in May 2000, has certain financial covenants
including a minimum consolidated tangible net worth level, a maximum leverage
ratio, a minimum fixed charge coverage ratio and a maximum level of capital
expenditures on new stores. At February 1, 1998, $34,320,000 was available under
the senior revolving credit facility.

On October 16, 1997 the Company completed a public offering of common stock for
the sale of 1,800,000 shares at $24.75 per share for net proceeds of
$41,857,000, after deducting related offering costs. On October 22, 1997, an
additional 300,000 shares of common stock were sold as a result of the Company's
underwriters exercising an option granted by the Company in connection with the
public offering. These shares were sold at $24.75 per share for net proceeds of
$6,998,000, after deducting related offering costs. A portion of the net
proceeds were used by the Company to reduce bank indebtedness with the remaining
portion being used to open new stores and for general corporate purposes.

The Company's plan is to open a total of four large format Complexes and one
small format Complex in fiscal 1998. In fiscal 1999, the Company's goal is to
open four large format Complexes and two small format Complexes. The Company
estimates that its capital expenditures will be approximately $49.2 million and
$69.5 million for 1998 and 1999, respectively. The Company intends to finance
its capital expenditures with income from operations, the proceeds received from
the secondary offering and the Company's credit facility.

Quarterly Fluctuations, Seasonality and Inflation

As a result of the substantial revenues associated with each new Complex, the
timing of new Complex openings will result in significant fluctuations in
quarterly results. The Company expects seasonality to be a factor in the
operation or results of its business in the future due to expected lower third
quarter revenues due to the summer season, and expects higher fourth quarter
revenues associated with the year-end holidays. The effects of supplier price
increases have not been material. The Company believes low inflation rates in
its market areas have contributed to stable food and labor costs in recent
years. However, the second increment of the Federal minimum wage, implemented in
September 1997, increase has caused labor costs to increase and there is no
assurance that low inflation rates will continue.




                                       20

<PAGE>   21



Recent Accounting Pronouncements

In June 1997, the Financial Accounting Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive
Income," which establishes standards for the reporting and display of
comprehensive income and its components (revenue, expenses, gains and losses) in
a separate full set of general-purpose financial statements. The provisions of
this statement are effective for fiscal years beginning after December 15, 1997.
Management believes that the Company currently does not have items of a material
nature that would require presentation in a separate statement of comprehensive
income.

In June 1997, the FASB also issued SFAS No. 131, "Disclosure about Segments of
an Enterprise and Related Information," which establishes standards for the way
that public business enterprises report information about operating segments in
annual financial statements and requires those enterprises to report selected
information about operating segments in interim financial reports issued to
shareholders. The provisions of this statement are effective for fiscal years
beginning after December 15, 1997. Management believes that the Company
currently does not have items of a material nature that would require segment
disclosure.

In April 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued a Statement of Position ("SOP")
98-5 entitled "Reporting on the Costs of Start-Up Activities." The SOP, which is
effective for fiscal years beginning after December 15, 1998, requires entities
to expense as incurred all start-up and preopening costs that are not otherwise
capitalizable as long-lived assets. Restatement of previously issued annual
financial statements is not permitted by the SOP, and entities are not permitted
to report the pro forma effects of the retroactive application of the new
accounting standard. The Company's adoption of the new accounting standard will
involve the recognition of the cumulative effect of the change in accounting
principle required by the SOP as a one-time charge against earnings, net of any
related income tax effect, retroactive to the beginning of the fiscal year.

Impact of the Year 2000 Issue

The Company has determined that it will need to modify or replace significant
portions of its software so that its computer systems will function properly
with respect to dates in the year 2000 and beyond. The Company also has
initiated discussions with its significant suppliers and financial institutions
to ensure that those parties have appropriate plans to remediate Year 2000
issues where their systems interface with the Company's systems or otherwise
impact its operations. The Company is assessing the extent to which its
operations are vulnerable should those organizations fail to remediate their
computer systems properly.

The Company's comprehensive Year 2000 initiative is being managed by a team of
internal staff. The team's activities are designed to ensure that there is no
adverse effect on the Company's core business operations and that transactions
with customers, suppliers and financial institutions are fully supported. The
Company is well under way with these efforts, which are scheduled to be
completed in early 1999. The Company estimates that it will spend approximately
$2.4 million on new software which will replace existing software that may not
be year 2000 compliant. Such costs are being capitalized. While the Company
believes its planning efforts are adequate to address its Year 2000 concerns,
there can be no guarantee that the systems of other companies on which the
Company's systems and operations rely will be converted on a timely basis and
will not have a material effect on the Company. The cost of the





                                       21

<PAGE>   22



Year 2000 initiatives is not expected to be material to the Company's results of
operation or financial position.

"Safe Harbor" Statement Under the Private Securities Litigation Reform Act of
1995

Certain statements in this Annual Report constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks, uncertainties, and
other factors which may cause the actual results, performance, or achievements
of Dave & Buster's, Inc. 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; competition; development and operating costs; adverse
publicity; consumer trial and frequency; availability, locations and terms of
sites for Complex development; quality of management; business abilities and
judgement of personnel; availability of qualified personnel; food, labor and
employee benefit costs; changes in, or the failure to comply with, government
regulations; and other risks indicated in this filing.


I
tem 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

         See Item 14 (a)(1).


Item 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND 
         FINANCIAL DISCLOSURE.

         None.



                                    PART III


Item 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

         The information set under the caption "Directors and Executive
         Officers" in the Company's Proxy Statement dated May 11, 1998, for the
         annual meeting of stockholders on June 9, 1998 is incorporated herein
         by reference.


Item 11.  COMPENSATION INFORMATION.

         The information set under the caption "Directors and Executive
         Officers" in the Company's Proxy Statement dated May 11, 1998, for the
         annual meeting of stockholders on June 9, 1998 is incorporated herein
         by reference.

Item. 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

         The information set under the caption "Beneficial Ownership of Common
         Stock" in the Company's Proxy Statement dated May 11, 1998, for the
         annual meeting of stockholders on June 9, 1998 is incorporated herein
         by reference.




                                       22

<PAGE>   23




                                   SIGNATURES


Pursuant to the requirements of Section 13 or 15(d) 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.

                                        Dave & Buster's, Inc.,
                                        a Missouri corporation




                                        By: /s/ Charles Michel
                                            ------------------------------------
                                            Charles Michel,
                                            Vice President and Chief Financial
                                            Officer


Dated:  May 4, 1998


                                       24

<PAGE>   24



Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons of the registrant and in the
capacities indicated on May 4, 1998.



         Name                                    Title



/s/David O. Corriveau                   Co-Chairman of the Board,
- -------------------------               Co-Chief Executive Officer, President,
David O. Corriveau                      and Director

                                        (Principal Executive Officer)

/s/James W. Corley                      Co-Chairman of the Board,
- -------------------------               Co-Chief Executive Officer, Chief
James W. Corley                         Operating Officer and Director
                                        

/s/Charles Michel                       Vice President and Chief Financial
- -------------------------               Officer
Charles Michel                          (Principal Financial and Accounting
                                        Officer)

- -------------------------               Director
Allen J. Bernstein


/s/Peter A. Edison                      Director
- -------------------------
Peter A. Edison


/s/Walter S. Henrion                    Director
- -------------------------
Walter S. Henrion


/s/ Mark A. Levy                        Director
- -------------------------
Mark A. Levy


- -------------------------               Director
Andrew E. Newman


- -------------------------               Director
Christopher C. Maguire


- -------------------------               Director
Mark B. Vittert





                                       25

<PAGE>   25



                                INDEX TO EXHIBITS


<TABLE>
<CAPTION>

Exhibit
- -------
<S>      <C>
3.1      Restated Articles of Incorporation of the Company.  (1)

3.2      Bylaws of the Company.  (1)

10.2     Tax Sharing Agreement, dated June 16, 1995 (1)

10.3     Merger Agreement, dated June 20, 1995 (1)

10.7     Rights Agreement between the Company and Rights Agent, dated June 16, 
         1995 (1)

10.8     1995 Stock Option Plan.  (2)

10.9     Stock Option Plan for Outside Directors  (4)

10.10    Special Distribution Employee Bonus Plan, dated June 20, 1995.  (1)

10.11    Employment Agreement for Co-Chief Executive Officers, dated June 16, 
         1995 (1)

10.12    Form of Indemnity Agreements with Executive Officers and Directors (2)

10.13    Transaction Agreement, dated July 11, 1994, among the Company, Edison
         Brothers, D&B Holding and certain other parties and first amendment 
         thereto (1)

21.1     Subsidiaries of the Company.  (3)

23       Independent Auditors' Consent.  (3)

27       Financial Data Schedule.  (3)

99       Proxy Statement, dated May 11, 1998.  (5)

</TABLE>



                                       26

<PAGE>   26
'


- --------------------------

(1)      Filed as an Exhibit to the registrant's Form 10-Q for the 13-week 
         period ended April 30, 1995 and incorporated herein by reference.

(2)      Filed as an Exhibit to the registrant's Form 10 filed April 11, 1995 
         and incorporated herein by reference.

(3)      Filed herewith.

(4)      Filed as an Exhibit to the registrant's Form 10-K for the 52-week
         period ended February 1, 1997 and incorporated herein by reference.

(5)      To be filed with the Commission on or before May 11, 1998.


                                       27

<PAGE>   27



Item. 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

         The information set under the caption "Certain Transactions" in the
         Company's Proxy Statement dated May 11, 1998, for the annual meeting of
         stockholders on June 9, 1998 is incorporated herein by reference.


                                     PART IV


Item 14.  EXHIBITS, FINANCIAL STATEMENTS AND REPORTS OF FORM 8-K.

         (a)      (1)  Financial Statements.



<TABLE>
<CAPTION>

                                                                                          Page
                                                                                          ----
<S>                                                                                       <C>
              Consolidated Balance Sheets -
                 February 1, 1998 and February 2, 1997                                     F-1

              Consolidated Statements of Income -
                 Fiscal years ended February 1, 1998, February 2, 1997,
                 and February 4, 1996                                                      F-2

              Consolidated Statements of Stockholders' Equity Fiscal years ended
                 February 1, 1998, February 2, 1997,
                 and February 4, 1996                                                      F-3

              Consolidated Statements of Cash Flows Fiscal years ended February
                 1, 1998, February 2, 1997,
                 and February 4, 1996                                                      F-4

              Notes to Consolidated Financial Statements                                F-5-F-11

              Report of Independent Auditors                                              F-12

</TABLE>


         All schedules are omitted as the required information is inapplicable
         or the information is presented in the financial statements or related
         notes.

         (a)      (3)  Exhibits.

         Reference is made to the Exhibit Index preceding the exhibits attached
         hereto on page 26 for a list of all exhibits filed as a part of this
         Report.

         (b)      Reports of Form 8-K.

        The Company was not required to file a current report on Form 8-K during
        the thirteen weeks ended February 1, 1998.



                                       23

<PAGE>   28
CONSOLIDATED BALANCE SHEETS
DAVE & BUSTER'S, INC.


<TABLE>
<CAPTION>

                                                                                      February 1,   February 2,
in thousands, except share and per share amounts                                         1998          1997
<S>                                                                                   <C>           <C>     
Assets
Current assets:
     Cash and cash equivalents                                                        $ 14,309      $    358
     Short-term investments                                                              8,507          --
     Inventories                                                                         6,222         3,890
     Prepaid expenses                                                                    1,234           881
     Preopening costs                                                                    3,415         1,947
Other current assets                                                                     2,018         1,019
- --------------------------------------------------------------------------------------------------------------
         Total current assets                                                           35,705         8,095
Property and equipment, net (note 2)                                                   114,060        82,037
Goodwill, net of accumulated amortization of $1,121 and $741                             8,587         8,920
Other assets                                                                               637           384
- --------------------------------------------------------------------------------------------------------------
                                                                                      $158,989      $ 99,436


Liabilities and Stockholders' Equity 
Current liabilities:
     Accounts payable                                                                 $  4,075      $  3,174
     Accrued liabilities (note 3)                                                        3,255         1,747
     Income taxes payable (note 5)                                                        --             924
     Deferred income taxes (note 5)                                                      1,967         1,173
- --------------------------------------------------------------------------------------------------------------
         Total current liabilities                                                       9,297         7,018
Deferred income taxes (note 5)                                                           3,530         2,075
Other liabilities                                                                          806           727
Long-term debt (note 4)                                                                 12,000        14,250
Commitments and contingencies (notes 4, 6 and 11) 
Stockholders' equity (note 7):
     Preferred stock, 10,000,000 authorized; none issued                                  --            --
     Common stock, $0.01 par value, 50,000,000 authorized;
        13,019,050 and 10,902,084 shares issued and outstanding
        as of February 1, 1998 and February 2, 1997, respectively                          130           109
     Paid in capital                                                                   116,054        66,963
     Retained earnings                                                                  17,172         8,294
- --------------------------------------------------------------------------------------------------------------
     Total stockholders' equity                                                        133,356        75,366
- --------------------------------------------------------------------------------------------------------------
                                                                                      $158,989      $ 99,436
</TABLE>



See accompanying notes to consolidated financial statements.


                                       F-1



<PAGE>   29



CONSOLIDATED STATEMENTS OF INCOME
DAVE & BUSTER'S, INC.


<TABLE>
<CAPTION>

in thousands, except per share amounts      Fiscal Year 1997          1996            1995

<S>                                               <C>             <C>             <C>      
Food and beverage revenues                        $  64,703       $  48,568       $  28,554
Amusement and other revenues                         63,801          40,207          23,990
- --------------------------------------------------------------------------------------------
     Total revenues                                 128,504          88,775          52,544

Cost of revenues                                     24,795          18,003          10,945
Operating payroll and benefits                       36,227          25,483          15,999
Other restaurant operating expenses                  32,787          20,582          11,481
General and administrative expenses                   8,489           5,734           3,905
Depreciation and amortization expense                 8,470           5,647           3,538
Preopening cost amortization                          3,246           2,605             161
Earn-out and special compensation                      --              --             1,607
- --------------------------------------------------------------------------------------------
     Total costs and expenses                       114,014          78,054          47,636

Operating income                                     14,490          10,721           4,908
Interest income (expense), net                         (179)            (38)            101
- --------------------------------------------------------------------------------------------
Income before provision for income taxes             14,311          10,683           5,009
Provision for income taxes (note 5)                   5,414           4,343           2,087
- --------------------------------------------------------------------------------------------

Net income                                        $   8,897       $   6,340       $   2,922

Basic net income per share (notes 1 and 8)        $     .77       $     .58       $     .34
Basic weighted average shares outstanding            11,532          10,901           8,681
Diluted net income per share (notes 1 and 8)      $     .76       $     .58       $.    .34
Diluted weighted average shares outstanding          11,711          10,969           8,681
</TABLE>




See accompanying notes to consolidated financial statements.






                                       F-2



<PAGE>   30



CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
DAVE & BUSTER'S. INC.



<TABLE>
<CAPTION>
                                                   Common Stock            
                                               --------------------        Paid in       Retained
in thousands                                   Shares        Amount        Capital       Earnings          Total
<S>                                            <C>         <C>            <C>            <C>             <C>      
Balance, January 29, 1995                        --        $    --        $    --        $    --         $    --
Spin-off and related transactions               7,796             78         38,323           --            38,401
Issuance of common stock,
     net of offering costs                      3,105             31         28,622           --            28,653

Net income since June 29, 1995                   --             --             --            1,954           1,954
- --------------------------------------------------------------------------------------------------------------------
Balance, February 4, 1996                      10,901            109         66,945          1,954          69,008


Proceeds from exercising stock option               1           --               18           --                18
Net income                                       --             --             --            6,340           6,340
- --------------------------------------------------------------------------------------------------------------------
Balance, February 2, 1997                      10,902            109         66,963          8,294          75,366


Proceeds from exercising stock options             17           --              203           --               203
Tax benefit related to stock
     option exercises                            --             --               54           --                54
Purchase of fractional shares from
     three-for-two stock split                   --             --             --              (19)            (19)
Issuance of common stock,
     net of offering costs                      2,100             21         48,834           --            48,855

Net income                                       --             --             --            8,897           8,897
- --------------------------------------------------------------------------------------------------------------------
Balance, February 1, 1998                      13,019      $     130      $ 116,054      $  17,172       $ 133,356
</TABLE>


See accompanying notes to consolidated financial statements.









                                       F-3



<PAGE>   31



CONSOLIDATED STATEMENTS OF CASH FLOWS
DAVE & BUSTER'S, INC.


<TABLE>
<CAPTION>


in thousands                                Fiscal Year      1997           1996           1995
<S>                                                       <C>            <C>            <C>     
Cash flows from operating activities
     Net income                                           $  8,897       $  6,340       $  2,922
     Adjustments to reconcile net income to net cash
         provided by operating activities
              Depreciation and amortization                 11,716          8,252          3,699
              Provision for deferred income taxes            2,249          1,241            839
              Changes in assets and liabilities
                  Inventories                               (2,332)        (1,269)          (934)
                  Prepaid expenses                            (353)          (521)          (112)
                  Preopening costs                          (4,714)        (2,606)        (2,038)
                  Other assets                              (1,311)          (198)          (135)
                  Accounts payable                             901            718            838
                  Accrued liabilities                        1,508            393           (513)
                  Income taxes payable                        (924)           924           --
                  Other liabilities                             79           (149)           385
- -----------------------------------------------------------------------------------------------------
Net cash provided by operating activities                   15,716         13,125          4,951
Cash flows from investing activities
     Capital expenditures                                  (40,101)       (30,860)       (19,364)
     Purchase of short-term investments                     (8,507)          --             --
- -----------------------------------------------------------------------------------------------------
Net cash used in investing activities                      (48,608)       (30,860)       (19,364)
- -----------------------------------------------------------------------------------------------------
Cash flows from financing activities
     Net transactions with Edison Brothers                    --             --          (11,648)
     Borrowings under long-term debt                        18,519         16,450         16,000
     Repayments of long-term debt                          (20,769)        (2,700)       (15,500)
     Proceeds from issuance of common stock, net            49,093             18         28,653
- -----------------------------------------------------------------------------------------------------
Net cash provided by financing activities                   46,843         13,768         17,505
- -----------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents            13,951         (3,967)         3,092
Beginning cash and cash equivalents                            358          4,325          1,233
- -----------------------------------------------------------------------------------------------------
Ending cash and cash equivalents                          $ 14,309       $    358       $  4,325

Supplemental disclosures of cash flow information:
     Cash paid for income taxes                           $  4,693       $  1,815       $  1,128
     Interest, net of amounts capitalized                 $    727       $    118       $    146
</TABLE>



See accompanying notes to consolidated financial statements.



                                       F-4



<PAGE>   32




NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DAVE & BUSTER'S, INC.

IN THOUSANDS EXCEPT PER SHARE AMOUNTS

Note 1: Summary of Significant Accounting Policies

   Basis of Presentation -- The consolidated financial statements include the
accounts of Dave & Buster's, Inc. (the "Company") and all wholly-owned
subsidiaries. All material intercompany accounts and transactions have been
eliminated in consolidation. The primary business of the Company is the
ownership and operation of restaurant/entertainment complexes (a "Complex")
under the name "Dave & Buster's" which are located in Texas, Georgia,
Pennsylvania, Illinois, Florida, Maryland, California, Ohio and Colorado.

   Spin-off Transaction -- Prior to June 29, 1995, the Company was a subsidiary
of Edison Brothers Stores, Inc. ("Edison Brothers"). On June 29, 1995, Edison
Brothers distributed all of the outstanding shares of common stock of the
Company owned by Edison Brothers to the holders of common stock of Edison
Brothers (the "Distribution"). The consolidated financial statements for the
period prior to the Distribution have been prepared as if the Company had
operated as a free-standing entity for all periods presented. Edison Brothers
provided certain general and administrative services to the Company prior and
subsequent to the Distribution. Edison Brothers charged rent on certain of the
Company's facilities.

   Use of Estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
certain estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could differ from
those estimates.

   Fiscal Year -- The Company's fiscal year ends on the Sunday after the
Saturday closest to January 31. References to 1997, 1996, and 1995 are to the 52
weeks ended February 1, 1998 and February 2, 1997 and the 53 weeks ended
February 4, 1996, respectively.

   Cash and Cash Equivalents -- Cash equivalents for 1997 consist of investments
which are readily convertible to cash with maturities of three months or less.

    Investments -- Investment securities with original maturities of more than
three months and less than one year on their acquisition date are accounted for
as short-term investments. The Company's investments consisted of a corporate
bond as of February 1, 1998 (there was no difference between cost and estimated
fair value).

   Inventories -- Inventories, which consist of food, beverage, merchandise and
supplies, are reported at the lower of cost or market determined on the
first-in, first-out method.

   Preopening Costs -- Capitalized preopening costs, consisting of promotional
costs, direct costs related to hiring and training the initial workforce, and
other direct costs associated with opening a Complex, are amortized over the one
year period following the opening of the Complex.

   Property and Equipment -- Expenditures for new facilities and those which
substantially increase the useful lives of the property, including interest
during construction, are capitalized. Interest capitalized in 1997, 1996, and
1995 was $851, $377, and $442, respectively. Equipment purchases are capitalized
at cost. Property and equipment lives are estimated as follows: buildings, 40
years; leasehold and building improvements, shorter of 20 years or lease life;
furniture, fixtures and equipment, 5 to 10 years; games, 5 years.

    Goodwill -- Goodwill arose as a result of the Distribution in which the
transaction to issue shares of the Company's common stock to related parties in
exchange for their minority owner's interests in the Company was accounted for
as an acquisition of minority interest. The resulting goodwill of $8,952 is
being amortized over 30 years.

   Depreciation and Amortization -- Property and equipment, excluding most
games, are depreciated on the straight-line method over the estimated useful
lives of the assets. Games are generally depreciated on the
150%-double-declining-balance method over the estimated useful lives of the
assets. Intangible assets are amortized on the straight-line method over
estimated useful lives as follows: trademarks over statutory lives; lease rights
over remaining lease terms.



                                       F-5



<PAGE>   33




   Income Taxes -- The Company uses the liability method which recognizes the
amount of current and deferred taxes payable or refundable at the date of the
financial statements as a result of all events that have been recognized in the
financial statements and as measured by the provisions of enacted tax laws.
Prior to June 29, 1995, the Company was included in the consolidated federal
income tax return of Edison Brothers.

   Stock Option Plan -- The Company has elected to follow Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25) and
related Interpretations in accounting for its employee stock options because the
alternative fair value accounting provided for under SFAS No. 123, "Accounting
for Stock-Based Compensation," requires use of option valuation models that were
not developed for use in valuing employee stock options. Under APB 25, because
the exercise price of the Company's employee stock options equals the market
price of the underlying stock on the date of grant, no compensation expense is
recognized.

   Earnings Per Share -- In 1997, the Financial Accounting Standards Board
issued Statement No. 128, Earnings per Share. Statement 128 replaced the
calculation of primary and fully diluted earnings per share with basic and
diluted earnings per share. Unlike primary earnings per share, basic earnings
per share excludes any dilutive effects of options, warrants and convertible
securities. Diluted earnings per share is very similar to the previously
reported fully diluted earnings per share. All earnings per share amounts for
all periods have been presented and, where appropriate, restated to conform to
the Statement 128 requirements.

   Stock Dividend -- On August 14, 1997, the Company declared a three-for-two
split in the form of a stock dividend to stockholders of record as of August 25,
1997. The stock dividend was distributed September 15, 1997. All share and per
share information has been adjusted to give effect to the three-for-two split in
the form of a stock dividend.

   Revenue Recognition --Foreign license revenues are deferred until the Company
fulfills its obligations under license agreements, which is upon the opening of
the Complex. The license agreements provide for continuing royalty fees based on
percentage of gross revenues and are recognized when assured.

   Recent Accounting Pronouncements -- In April 1998, the Accounting Standards
Executive Committee of the American Institute of Certified Public Accountants
issued Statement of Position ("SOP") 98-5 entitled "Reporting on the Costs of
Start-Up Activities." The SOP, which is effective for fiscal years beginning
after December 15, 1998, requires entities to expense as incurred all start-up
and preopening costs that are not otherwise capitalizable as long-lived assets.
Restatement of previously issued annual financial statements is not permitted by
the SOP, and entities are not permitted to report the pro forma effects of the
retroactive application of the new accounting standard. The Company's adoption
of the new accounting standard will involve the recognition of the cumulative
effect of the change in accounting principle required by the SOP as a one-time
charge against earnings, net of any related income tax effect, retroactive to
the beginning of the fiscal year.


Note 2: Property and Equipment


<TABLE>
<CAPTION>

                                                                                     1997            1996

<S>                                                                             <C>           <C>        
Land ...........................................................................$    8,192    $     8,192
Buildings.......................................................................    25,104          20,503
Leasehold and building improvements.............................................    52,680          29,784
Games...........................................................................    23,376          14,831
Furniture, fixtures and equipment...............................................    25,908          17,276
Construction in progress........................................................     1,536           6,448
- ------------------------------------------------------------------------------------------------------------
     Total cost.................................................................   136,796          97,034
Accumulated depreciation........................................................   (22,736)        (14,997)
- ------------------------------------------------------------------------------------------------------------
                                                                                $  114,060     $    82,037
</TABLE>



                                       F-6




<PAGE>   34




Note 3: Accrued Liabilities

Accrued liabilities consist of the following:


<TABLE>
<CAPTION>
                                                                                     1997         1996
<S>                                                                             <C>           <C>     
Payroll.........................................................................$     686     $    735
Sales and use tax...............................................................    1,031          363
Real estate tax.................................................................      545          335
Other...........................................................................      993          314
- --------------------------------------------------------------------------------------------------------
                                                                                $   3,255     $  1,747
</TABLE>




Note 4: Long-term Debt

The Company has a secured revolving line of credit which permits borrowing up to
a maximum of $50.0 million. At February 1, 1998, $34.3 million was available
under this facility. Borrowings under this facility bear interest at a floating
rate based on LIBOR or, at the Company's option, the bank's prime rate plus in
each case a margin based upon financial performance (8.8% at February 1, 1998)
and is secured by all capital stock or equity interest in the stock of the
Company and its subsidiaries. The facility, which matures in May 2000, has
certain financial covenants including minimum consolidated tangible net worth,
maximum leverage ratio, minimum fixed charge coverage, maximum level of capital
expenditures for new Complexes and restrictions of dividends as well as other
distributions.

Note 5: Income Taxes

The provision for income taxes for 1997 and 1996 reflects the results of
operations of the Company as a stand-alone entity. The provision for income
taxes for 1995 is calculated on a separate return basis, as provided under the
tax sharing agreement with Edison Brothers. The provision for income taxes
consists of:


<TABLE>
<CAPTION>
                                                                            1997           1996           1995
<S>                                                                  <C>            <C>            <C>        
Current Expense
     Federal.........................................................$     2,802    $     2,296    $     2,800
     State and local.................................................        363            806            305

Defferred tax (benefit)..............................................      2,249          1,241         (1,018)
- -----------------------------------------------------------------------------------------------------------------
     Total provision for income taxes................................$     5,414    $     4,343    $     2,087
</TABLE>


Significant components of the deferred tax liabilities and assets in the
consolidated balance sheets are as follows:


<TABLE>
<CAPTION>

                                                                            1997           1996           1995

<S>                                                                  <C>            <C>            <C>        
Accelerated depreciation.............................................$     3,893    $     2,464    $     1,832
Preopening costs.....................................................      1,411            813            769
Prepaid expenses.....................................................        112            185             --
Capitalized interest costs...........................................        463            200             --
- -----------------------------------------------------------------------------------------------------------------
     Total deferred tax liabilities..................................      5,879          3,662          2,601


Workers compensation ................................................        168            235            295
Net asset basis difference at acquisition............................         25             84            110
Other................................................................        189             95            189
- -----------------------------------------------------------------------------------------------------------------
Total deferred tax assets............................................        382            414            594
- -----------------------------------------------------------------------------------------------------------------
Net deferred tax asset (liability)...................................$    (5,497)     $  (3,248)   $    (2,007)
</TABLE>



                                       F-7



<PAGE>   35



Reconciliation of federal statutory rates to effective income tax rates:


<TABLE>
<CAPTION>
                                                                            1997           1996           1995

<S>                                                                        <C>            <C>            <C>  
Federal corporate statutory rate.....................................      35.0%          34.0%          34.0%
State and local income taxes, net
     of federal income tax benefit...................................       1.6%           5.0%           4.0%
Goodwill amortization and other
     nondeductible expenses .........................................       1.8%           1.5%           4.9%
Tax credits..........................................................      (1.4)%         (2.0)%         (1.2)%
Effect of change in deferred tax rate................................       (.5)%            .9%           --

Other................................................................       1.3%            1.3%           --
- -----------------------------------------------------------------------------------------------------------------
Effective tax rate...................................................      37.8%           40.7%         41.7%
</TABLE>


Note 6: Leases

The Company leases certain properties and equipment under operating leases. Some
of the leases include options for renewal or extension on various terms. All
leases require the Company to pay property taxes, insurance and maintenance of
the leased assets. Some leases have provisions for additional percentage rentals
based on revenues; however, payments of percentage rent were minimal during the
three-year period ended February 1, 1998. For 1997, 1996, and 1995, rent expense
for operating leases was $5,404 , $2,751, and $790, respectively. At February 1,
1998, future minimum lease payments required under operating leases are $5,550,
1998; $5,054, 1999; $4,324, 2000; $3,934, 2001; $3,938, 2002; and $57,647,
total.

Note 7: Common Stock

In 1995 the Company adopted the Dave & Buster's, Inc. 1995 Stock Option Plan
(the "Plan") covering 675,000 shares of common stock. In 1997, the Company
increased the shares of common stock covered by the Plan to 1,350,000. The Plan
provides that incentive stock options may be granted at option prices not less
than fair market value at date of grant (110% in the case of an incentive stock
option granted to any person who owns more than 10% of the total combined voting
power of all classes of stock of the Company). Non-qualified stock options may
not be granted for less than 85% of the fair market value of the common stock at
the time of grant and are exercisable 20% per year after one year from the date
of grant.

In connection with the Distribution, the Company granted, on the date of the
Distribution, non-qualified stock options to certain minority shareholders
entitling them to purchase Company common stock equal to 2% of the total Company
common stock outstanding immediately prior to the Distribution (approximately
156,000 shares). The per share exercise price for each such option is $10.00.
Twenty percent of such options were exercisable seven months after the public
offering by the Company of its common stock which was completed in October 1995.
Thereafter, 20% of such options become exercisable on the second, third, fourth
and fifth anniversary of the Distribution.

In 1996 the Company adopted a stock option plan for outside directors (the
"Directors Plan"). A total of 150,000 shares of common stock are subject to the
Directors Plan. The options granted under the Directors Plan vest ratably over a
three year period.

Pro forma information regarding net income and earnings per common share is
required by SFAS 123, and has been determined as if the Company had accounted
for its employee stock options under the fair value method. The fair value for
these options was estimated at the date of grant using a Black-Scholes option
pricing model with the following weighted-average assumptions for 1997, 1996 and
1995, respectively: risk-free interest rates of 6.09%, 5.75% and 5.89%; dividend
yields of 0.0%; volatility factors of the expected market price of the Company's
common stock of .363, .344 and .344; and a weighted-average life of the option
of 4.4, 4.2 and 5.0 years.


                                       F-8



<PAGE>   36



The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no 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 employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value 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. For purposes of pro
forma disclosures, the estimated fair value of the options is amortized to
expense over the option's vesting period. Because SFAS 123 requires compensation
expense to be recognized over the vesting period the impact on pro forma net
income and pro forma earnings per common share as reported below may not be
representative of pro forma compensation expense in future years. The Company's
pro forma information follows:


<TABLE>
<CAPTION>
                                                                                  1997            1996         1995
<S>                                                                             <C>            <C>          <C>      
     Net income, as reported....................................................$  8,897       $   6,340    $   2,922
     Pro forma net income.......................................................$  8,353       $   6,057    $   2,782
     Basic net income per share, as reported....................................$    .77       $     .58    $     .34
     Pro forma basic net income per share.......................................$    .72       $     .56    $     .32
     Diluted net income per share, as reported..................................$    .76       $     .58    $     .34
     Pro forma diluted net income per share.....................................$    .71       $     .55    $     .32
</TABLE>


A summary of the Company's stock option activity, and related information is as
follows:


<TABLE>
<CAPTION>
                                                        1997                          1996                          1995
                                                        Weighted-Average              Weighted-Average             Weighted-Average
                                                Options  Exercise Price       Options  Exercise Price      Options    Exercise Price

<S>                                               <C>      <C>                 <C>        <C>              <C>           <C>     
     Outstanding - beginning of year...........   534      $  11.11            383        $ 11.29          --            $     --
     Granted...................................   432      $  19.41            164        $ 10.74            383         $   11.29
     Exercised.................................   (17)     $  11.91             (1)       $ 12.17          --            $     --
     Forfeited.................................   ---      $    ---            (12)       $ 11.59          --            $     --
     Outstanding end of year...................   949      $  14.88            534        $ 11.11            383         $   11.29
     Exercisable at end of year................   174      $  11.06             75        $ 11.27          --            $     --
     Weighted-average fair value of options
         granted during the year...............            $   7.48                       $  3.89                        $    4.56
</TABLE>


As of February 2, 1997, exercise prices for 724,000 options and 225,000 options
ranged from $10.00 to $14.08 and $20.71 to $24.75, respectively. The
weighted-average remaining contractual life of the options is 8.1 years.

Under a Shareholder Protection Rights Plan adopted by the Company, each share of
outstanding common stock includes a right which entitles the holder to purchase
one one-hundredth of a share of Series A Junior Participating Preferred Stock
for seventy five dollars. Rights attach to all new shares of common stock
whether newly issued or issued from treasury stock and become exercisable only
under certain conditions involving actual or potential acquisitions of the
Company's common stock. Depending on the circumstances, all holders except the
acquiring person may be entitled to 1) acquire such number of shares of Company
common stock as have a market value at the time of twice the exercise price of
each right, or 2) exchange a right for one share of Company common stock or
one-hundredth of a share of the Series A Junior Participating Preferred Stock,
or 3) receive shares of the acquiring company's common stock having a market
value equal to twice the exercise price of each right. The rights remain in
existence until ten years after the Distribution, unless they are redeemed (at
one cent per right).





                                       F-9




<PAGE>   37




Note 8: Earnings per Share

The following table sets forth the computation of basic and diluted earnings per
shares:


<TABLE>
<CAPTION>

                                                                         1997               1996             1995
                                                                         ----               ----             ----

<S>                                                                 <C>                   <C>               <C>     
Numerator - Net Income                                              $    8,897            $  6,340          $  2,922
- -----------------------------------------------------------------------------------------------------------------------
   Denominator:
     Denominator for basic net income per share -
     weighted average shares                                            11,532              10,901             8,681
   Effect of dilutive securities - employee stock options                  179                  68               --
- -----------------------------------------------------------------------------------------------------------------------
   Denominator for diluted earnings per share - adjusted
   weighted average shares                                              11,711              10,969             8,681

   Basic net income per share                                       $      .77            $    .58          $    .34

   Diluted net income per share                                     $      .76            $    .58          $    .34
</TABLE>


Options to purchase 210,000 shares of common stock at prices ranging from $23.63
to $24.75 were outstanding during the second half of 1997 but were not included
in the computation of diluted net income per share because the options would be
antidilutive.


Note 9: Related Party Activity

The Company is party to a consulting agreement with Sandell Investments
("Sandell"), a partnership the principals of which are non-management
stockholders of the Company. Sandell advises the Company with respect to
expansion and site selection, market analysis, improvement and enhancement of
the Dave & Buster's concept and other similar and related activities. Annual
fees of $125 were paid to Sandell in 1997, 1996 and 1995, the maximum fee
provided for under the agreement.

Pursuant to employment agreements executed in connection with its initial
acquisition of the Dave & Buster's operations, the Company was obligated to make
payments (the "Earn-out Compensation") to the Co-Chief Executive Officers of the
Company and, under the consulting agreement discussed in the preceding
paragraph, to Sandell. The Earn-out Compensation was based on a multiple of the
Company's after-tax earnings from the first five Complexes during the one-year
period ending August 1, 1995. Pursuant to an agreement dated July 11, 1994 (the
"Transaction Agreement"), the Company paid an aggregate of $10,000 (less prior
advances and loans by the Company to the Co-Chief Executive Officers of the
Company) as a non-refundable advance against the obligation to pay the Earn-out
Compensation.

Note 10: Employee Benefit Plan

The Company sponsors a plan to provide retirement benefits under the provision
of Section 401(k) of the Internal Revenue Code (the 401(k) Plan) for all
employees who have completed a specified term of service. Company contributions
may range from 0% to 100% of employee contributions, up to a maximum 6% of
eligible employee compensation, as defined. Employees may elect to contribute up
to 20% of their eligible compensation on a pretax basis. Benefits under the
401(k) Plan are limited to the assets of the 401(k) Plan.

                                      F-10




<PAGE>   38




Note 11: Contingencies

In October 1997, a litigation limited liability corporation owned by the Edison
Brother's creditors filed a lawsuit against multiple parties, including former
Edison Brothers shareholders and the Company, seeking recovery in connection
with the Spin-Off and certain related transactions. The plaintiff's aggregate
recovery in this lawsuit would be limited to the shortfall received by the
creditors in the Edison Brothers bankruptcy, and the Company does not have
access to complete knowledge as to the number of former Edison Brothers
shareholders who have accepted a proposed settlement offer (which would lessen
the amount of the shortfall) and as to which former Edison Brothers shareholders
are included in the purported defendant class. For these reasons, the Company is
unable to quantify any potential exposure from this lawsuit. The Company
believes that the claims against the former Edison Brothers shareholders involve
a substantially greater amount than the claims against the CompanyAlthough no
assurance can be made with respect to the results of the litigation, the Company
believes that the claims asserted against the Company are without merit, and the
Company intends to vigorously defend itself.

The Company is subject to certain legal proceedings in addition to the matter
described above and claims that arise in the ordinary course of its business. In
the opinion of management, based on discussions with and advice of legal
counsel, the amount of ultimate liability with respect to all actions will not
materially affect the consolidated results of operations or financial condition
of the Company.


Note 12: Quarterly Financial Information (unaudited)


<TABLE>
<CAPTION>

                                                              First         Second          Third         Fourth
<S>                                                       <C>            <C>             <C>            <C>     
Fiscal 1997
Total revenues............................................$ 28,632       $  29,671       $  30,840      $ 39,361
Operating income..........................................   3,476           3,216           2,655         5,143
Net income................................................   2,001           1,789           1,535         3,572
Basic net income per share................................$    .18       $     .16       $     .14      $    .27
Basic weighted average shares outstanding ................  10,902          10,907          11,300        13,018
Diluted net income per share..............................$    .18       $     .16       $     .13      $    .27
Diluted weighted average shares outstanding...............  10,994          11,061          11,541        13,249
</TABLE>




<TABLE>
<CAPTION>
                                                            First          Second           Third         Fourth
<S>                                                       <C>            <C>             <C>            <C>     
Fiscal 1996
Total revenues.............................................$ 20,217       $  21,145       $  20,096      $ 27,317
Operating income...........................................   2,433           2,370           2,354         3,564
Net income.................................................   1,419           1,418           1,419         2,084
Basic net income per share.................................$    .13       $     .13       $     .13      $    .19
Basic weighted average shares outstanding..................  10,901          10,901          10,902        10,902
Diluted net income per share...............................$    .13       $     .13       $     .13      $    .19
Diluted weighted average shares outstanding................  10,920          11,008          10,993        10,953
</TABLE>


The 1996 and first three quarters of 1997 earnings per share amounts have been
restated to comply with Statement of Financial Accounting Standards No. 128,
Earnings per Share.


                                      F-11




<PAGE>   39





REPORT OF INDEPENDENT AUDITORS



 STOCKHOLDERS AND BOARD OF DIRECTORS
DAVE & BUSTER'S, INC.


We have audited the accompanying consolidated balance sheets of Dave & Buster's,
Inc. as of February 1, 1998 and February 2, 1997, and the related consolidated
statements of income, stockholders' equity and cash flows for each of the three
years in the period ended February 1, 1998. These financial statements are the
responsibility of the company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Dave & Buster's,
Inc. at February 1, 1998 and February 2, 1997, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended February 1, 1998, in conformity with generally accepted accounting
principles.

                                                              Ernst & Young LLP



Dallas, Texas
March 30, 1998











                                      F-12








<PAGE>   1



                                  EXHIBIT 21.1
                           SUBSIDIARIES OF THE COMPANY


1.    Dave & Buster's of Illinois, Inc., a Illinois corporation
2.    Dave & Buster's of Georgia, Inc., a Georgia corporation
3.    Dave & Buster's of Pennsylvania, Inc., a Pennsylvania corporation
4.    DANB Texas, Inc., a Texas corporation
5.    Dave & Buster's of Maryland, Inc., a Maryland corporation
6.    Dave & Buster's of California, Inc., a California corporation
7.    Dave & Buster's of Colorado, Inc., a Colorado corporation
8.    Dave & Buster's of New York, Inc., a New York corporation













<PAGE>   1
                                                                      EXHIBIT 23


                         CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 33-80537) pertaining to the Dave & Buster's, Inc. 1995 Stock Option Plan
of our report dated March 30, 1998 with respect to the consolidated financial
statements of Dave & Buster's, Inc. incorporated by reference in the Annual
Report (Form 10-K) for the year ended February 1, 1998.



                                                           /s/ ERNST & YOUNG LLP

Dallas, Texas
May 1, 1998






<TABLE> <S> <C>

<ARTICLE> 5
       
<S>                             <C>
<PERIOD-TYPE>                   12-MOS
<FISCAL-YEAR-END>                          FEB-01-1998
<PERIOD-END>                               FEB-01-1998
<CASH>                                          14,309
<SECURITIES>                                     8,507
<RECEIVABLES>                                        0
<ALLOWANCES>                                         0
<INVENTORY>                                      6,222
<CURRENT-ASSETS>                                 6,037
<PP&E>                                         136,796
<DEPRECIATION>                                  22,736
<TOTAL-ASSETS>                                 114,060
<CURRENT-LIABILITIES>                            9,297
<BONDS>                                         12,000
<PREFERRED-MANDATORY>                                0
<PREFERRED>                                          0
<COMMON>                                           130
<OTHER-SE>                                     133,356
<TOTAL-LIABILITY-AND-EQUITY>                   158,989
<SALES>                                        128,504
<TOTAL-REVENUES>                               128,504
<CGS>                                           24,795
<TOTAL-COSTS>                                  114,014
<OTHER-EXPENSES>                                     0
<LOSS-PROVISION>                                     0
<INTEREST-EXPENSE>                                   0
<INCOME-PRETAX>                                 14,311
<INCOME-TAX>                                     5,414
<INCOME-CONTINUING>                              8,897
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                     8,897
<EPS-PRIMARY>                                      .77
<EPS-DILUTED>                                      .76
        

</TABLE>