DAVE & BUSTERS INC - 10-K Annual Report

Back to GetFilings.com

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 3, 2002 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:

Title of Each Class
-------------------
Common Stock, $0.01 par value

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

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 Regulations 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 non-affiliates of
registrant at April 17, 2002 was $121,999,320.

The number of shares of common stock outstanding at April 17, 2002 was
13,266,641 shares.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant's Proxy Statement for its annual meeting of
Stockholders on June 11, 2002, are incorporated by reference into Part III
hereof, to the extent indicated herein.

PART I
Item 1. BUSINESS

General

Dave & Buster's, Inc. (the "Company") operates large format,
high-volume Restaurant/Entertainment Complexes ("Complexes" or
"Stores") 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 large format is designed to promote easy access to, and
maximize customer crossover 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. As of February 3, 2002, the Company had
31 stores across the United States. Additionally, the Company licenses
the Dave & Buster's concept internationally through area licensing
agreements and as of February 3, 2002, there were two Dave & Buster's
in operation outside the United States.

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 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 also
actively seeks 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 31,000 square feet to 70,000 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".

2

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 parent or guardian (a person 25 years of age or older who agrees
to be responsible for the conduct and safety of the underage guest) 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 attracts 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.

Attractive Venue for Special Events. Each Dave & Buster's offers
Special Events Planning for companies and private individuals. The
varied menu and many amusement opportunities make Dave & Buster's
attractive locations for groups of between 10 and 2,000. In addition,
most Dave & Buster's include a Show Room with a stage, audiovisual
capability and private refreshment area. Dave & Buster's has developed
innovative packages that combine food, beverage and entertainment
components and markets these to groups and individuals.

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 crossover 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,
burgers, steaks, seafood, chicken and an outstanding selection of
desserts. The menu is updated to reflect current trends and guest
favorites. It places special emphasis on quality products such as the
Nebraska Corn Fed Beef program. All steaks and burgers are produced
under these guidelines, which insures a consistently superior product.
Other items

3

among our guests' favorites are the Classic BBQ Ribs, the Philly
Cheesesteak sandwich, Chicken Scallopini and our Grilled Mahi-Mahi. We
also feature lunch specials with an emphasis on quality food done
quickly. Sunday brunch in selected locations, and an extensive offering
of buffets for special events and private parties.

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 throughout the entire Complex. In addition,
throughout the restaurant and entertainment areas each 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.

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, and the Show Room or other special event rooms which are
designed for hosting private social parties and business gatherings as
well as Company sponsored events. 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. 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 pricing and promoting 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 Theater, a 16 to 18 seat motion simulation theater;
large-screen interactive electronic games; and "The 19th Hole", a
state-of-the-art golf simulator. The Company also contracts for
exclusive games designed to build customer loyalty and repeat customer
visits.

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, clothing, and small
electronic and novelty items.

4

Locations

As of February 3, 2002, the Company operates the following 31 Complexes
located in 14 states:

Business Development

The Company continually seeks to identify and evaluate new locations
for expansion. The Company signed a 20-year lease for a Complex due to
open in fiscal 2002 on Long Island, New York and signed a 20-year lease
for a Complex scheduled to open in fiscal 2004 in Ft. Worth, Texas.

The Company believes that the location of its Complexes is critical to
the Company's long-term success. Significant time and resources are
devoted to analyzing each prospective site. In

5

general, the Company targets high-profile sites within metropolitan
areas of less than one million people for intermediate-size models and
at least one million people for mega-size models. The Company carefully
analyzes 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 mega-size Dave & Buster's ranges from
approximately $7.5 million to $13.0 million (excluding preopening
expenses and developer allowances), depending upon the location and
condition of the premises. For intermediate-size models, the typical
cost ranges from approximately $6.5 million and $12.5 million
(excluding pre-opening 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 and availability of the site for purchase. The Complexes
opened in 2001 are all 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 may also
receive a construction allowance from the landlord for improvements.
The exterior and interior layout of a Dave & Buster's is flexible and
can be readily adapted to different types of buildings. The Company
opens Complexes in both new and existing structures, in both urban and
suburban areas.

International

To facilitate international expansion, the Company has elected to
pursue territorial development and franchise agreements with
independent franchisees located in various countries outside of the
United States. Under such agreements, the Company will license the Dave
& Buster's name and concept for a specified territory in exchange for
an initial development fee and a commitment to develop a minimum number
of Complexes. A typical Dave & Buster's development agreement requires
the developer/franchisee to construct and open 5-7 new Complexes in a
specified geographic area over a several year period. Once a site is
identified and approved, the area developer enters into a separate
license agreement for the individual property and agrees to pay an
initial license fee and continuing royalties to the Company based on
the gross revenues of that location. Each license agreement also
contains strict operating covenants to promote the consistency of the
menu and entertainment offerings with those of Company-operated
Complexes. In exchange, the Company provides certain proprietary
materials and supervisory services to help ensure the quality of the
Dave & Buster's concept. All costs of building, opening and operating
the licensed Complexes are borne by the franchisees.

In October 2001, the Company entered into a development agreement with
TEP Incorporated (TEP) to license the "Dave & Buster's" name and
concept in Korea. Under the agreement, TEP has agreed to open five
Complexes by the year 2009. The license agreement contains strict
operating covenants to ensure consistency of the menu and entertainment
offerings with those in the Company operated Complexes.

In September 2000, the Company entered into a development agreement
with Grupo Ildomani S. de R.L. de C.V., limited liability company
("Grupo Ildomani") to license the "Dave & Buster's" name and concept in
Mexico. Under this agreement, Grupo Ildomani has agreed to open five
Complexes by the year 2006. The license agreement contains strict
operating covenants to ensure consistency of the menu and entertainment
offerings with those in the Company operated Complexes.

6

In July 2000, the Company entered into a development agreement with
Al-Mal Entertainment Enterprises, K.C.S. ("Al-Mal") to license the
"Dave & Buster's" name and concept in the Middle East. Under this
agreement, Al-Mal has agreed to open six Complexes by the year 2009.
The license agreement contains strict operating covenants to ensure
consistency of the menu and entertainment offerings with those in the
Company operated Complexes.

In March 1999, the Company entered into a development agreement with
Funtime Hospitality Corp. ("Funtime") to license the "Dave & Buster's"
name and concept in Canada. Under this agreement, Funtime opened a
Complex in Toronto, Ontario in June 2000, and has agreed to open four
additional Complexes by the year 2005. The license agreement contains
strict operating covenants to ensure consistency of the menu and
entertainment offerings with those in the Company operated Complexes.

In February 1998, the Company entered into a development agreement with
the TaiMall Development Company ("TaiMall") to license the "Dave &
Buster's" name and concept in the Pacific Rim. Under this agreement,
TaiMall opened a Complex in Taipei, Taiwan in December 1999, and has
agreed to open six additional Complexes in the Pacific Rim by the year
2006. The license agreement contains strict operating covenants to
ensure consistency of the menu and entertainment offerings with those
in the Company operated Complexes.

In August 1995, the Company entered into a development agreement with a
subsidiary of Bass Plc ("Bass") to license the "Dave & Buster's" name
and concept in the United Kingdom. In October 2000, Bass terminated
this agreement for internal operating reasons and closed the two United
Kingdom Dave & Buster's locations. In September 1998, the Company
entered into a license agreement with the SVAG Development Corporation
("SVAG") to license the "Dave & Buster's" name and concept in Germany,
Switzerland and Austria. In March 2001, SVAG terminated this agreement
due to lack of financing.

The Company will continue to consider opportunities to license the
"Dave & Buster's" name and concept to qualified parties in additional
foreign countries. The Company does not have any current plans to
invest its own capital in any foreign operations.

There can be no assurance that these development agreements will be
completed by the licensees.

Operations and Management

The Company's ability to manage a complex operation, that includes both
high volume restaurants, bars and diverse entertainment attractions, is
critical to its overall success. The Company strives to maintain
quality and consistency in each of its Complexes through careful
training and supervision of personnel and the establishing and adhering
to high standards relating to personnel performance, food and beverage
preparation, entertainment productions and equipment, and facilities
maintenance. The Company believes that it is 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 principally from within the Company. Staffing
levels vary according to the size of the location, but a mega-size Dave
& Buster's is managed by one general manager, two assistant general
managers, seven line managers and one business manager.

In general, each mega-size Dave & Buster's also employs one purchasing
agent, one amusement manager, one assistant amusement manager, one
kitchen manager, one or two assistant kitchen managers, and one special
events sales manager. On average, the Company's current general

7

managers possess approximately four years of experience with the
Company. The general manager of each Dave & Buster's reports to a
Regional Operations Director 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 attractions. New
sales staff and entertainment personnel participate in approximately
two 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.

The Company also participates in a guest satisfaction survey that is
conducted by a nationally renowned organization. Recent results from
the fourth quarter 2001 guest survey reflect that Dave & Buster's
guests overwhelmingly believe Dave & Buster's provides quality service
and treats them as welcome guests. Overall satisfaction with their Dave
& Buster's experience is very high, as is the likelihood to return and
to recommend.

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, and provides management with
revenue and inventory data.

Marketing, Advertising and Promotion

The Company operates its marketing, advertising, and promotional
programs through the corporate marketing department with the assistance
of an external advertising agency, media planning/buying service and a
national public relations firm.

The corporate marketing department is also responsible for controlling
media and production costs. During fiscal 2001, the Company's
expenditures for advertising and promotions were approximately 3.7% of
its revenues.

In order to expand its customer base, the Company focuses marketing
efforts in three key areas: (1) advertising and system-wide promotions;
(2) field marketing and local promotions and (3) corporate and group
customers (special events).

Advertising and System-wide Promotions. In fiscal 2002, the Company
will strategically evolve its advertising message in order to increase
customer counts through increasing party size and utilizing physical
capacity during off-peak time periods. A new advertising campaign was

8

launched in March 2002 featuring the tag line "It's always a good
time". This campaign includes television, radio, print and outdoor in
select markets and is designed to position Dave & Buster's as an
everyday destination for any combination of food, beverages or
amusements.

In addition, quarterly in-store system wide promotions and
point-of-sale promotions are implemented to increase visit frequency
and check average.

Corporate and Group Marketing (Special Events). The Company drives its
corporate and group sales programs through the business development
department, which provides direction, training and support to the
Special Events Managers and their team within each store. Primary focus
for the Special Events Sales team is to identify and contact
corporations, associations, organizations and community groups within
their marketplace for the purposes of booking group events. The Special
Events Sales teams pursue corporate and social group bookings through a
variety of sales initiatives including outside sales calls and
cultivating repeat business. The marketing department supports these
efforts through promotional materials and advertising. The Company
develops and maintains a database of corporate and group bookings. Each
Dave & Buster's location hosts events for many multi-national, national
and regional businesses. Many of the Company's corporate and group
customers schedule repeat events.

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 a 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 3, 2002, the Company employed approximately 7,500 persons,
approximately 180 of whom served in administrative or executive
capacities, approximately 550 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.

Intellectual Property

The Company registered the trademark "Dave & Buster's" with the United
States Patent and Trademark Office and in various foreign countries.
The Company registered and/or applied for certain additional trademarks
with the United States Patent and Trademark Office and in various
foreign countries. The Company considers its tradename and signature
"bullseye" logo to be an important feature of its goodwill and seeks to
actively monitor and protect its interest in this property in the
various jurisdictions where the Company operates.

9

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 operations
and its ability to obtain such a license in other locations.

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 a given location. To date, the Company has been
successful in seeking all such regulatory changes.

The Company is subject to federal and state environmental regulations,
but these have not had a materially negative effect on the Company's
operations. More stringent and varied requirements of local and state
governmental bodies with respect to zoning, land use and environmental
factors could delay or prevent development of new restaurants in
particular locations. The Company is subject to the Fair Labor
Standards Act which governs such matters as minimum wages, overtime and
other working conditions, along with the American With Disabilities Act
and various family leave mandates. Although the Company expects
increases in payroll expenses as a result of federal and state mandated
increases in the minimum wage, such increases are not expected to be
material. However, the Company is uncertain of the repercussion, if
any, on other expenses as vendors are impacted by higher minimum wage
standards.

Executive Officers Of The Registrant

David O. Corriveau, 50, a co-founder of the Dave & Buster's concept in
1982, has served as Co-Chief Executive Officer and President since June
1995, and as a director of the Company since May 1995 and as
Co-Chairman of the Board since February 1996. Mr. Corriveau served as

10

President and Chief Executive Officer of D&B Holding (a predecessor of
the Company) from 1989 through June 1995. From 1982 to 1989, Messrs.
Corriveau and Corley operated the Company's business.

James W. Corley, 51, a co-founder of the Dave & Buster's concept in
1982, has served as Co-Chief Executive Officer and Chief Operating
Officer since June 1995, and as a director of the Company since May
1995 and as Co-Chairman of the Board since February 1996. Mr. Corley
served as Executive Vice President and Chief Operating Officer of D&B
Holding from 1989 through June 1995. From 1982 to 1989, Messrs. Corley
and Corriveau operated the Company's business.

Barry N. Carter, 54, has served as Vice President of Purchasing since
November 2000 and as Vice President of Store Support since June 1995.
He served as Vice President and Director of Store Support of D&B
Holding from November 1994 to June 1995. From 1982 to November 1994, he
served in operating positions of increasing responsibilities for the
Company and its predecessors.

Barbara G. Core, 43, has served as Vice President of Information
Technology since September 2000 and Assistant Vice President of
Information Technology since November 1999. She served as Senior
Director of I.T. from February 1999 to November 1999 and from April
1998 to February 1999 as PeopleSoft Implementation Team Director. From
November 1997 to February 1999 she served as Director of I.T. From
January 1990 to November 1997 she served in operations positions of
increasing responsibilities for the Company and its predecessors.

John S. Davis, 45, has served as Vice President, General Counsel and
Secretary of the Company since April 2001. Mr. Davis served as Vice
President and General Counsel of Cameron Ashley Building Products,
Inc., an NYSE-listed building products distributor, from 1994 to 2000
and as Associate Counsel - Mergers and Acquisitions for Electronic Data
Systems Corp. (EDS), a technology services firm, from 1990 to 1994.
Prior to 1990, Mr. Davis was engaged in the private practice of law.

Nancy J. Duricic, 47, has served as Vice President of Human Resources
since December 1997. From June 1989 to June 1997, she served in human
resources positions of increasing responsibilities in other companies,
most recently as Vice President of Human Resources for Eljer
Industries, Inc.

William C. Hammett, Jr., age 55, has served as Vice President, Chief
Financial Officer of the Company since December 2001. He served has
Vice Chairman of the Board of Directors of Pegasus Solutions, Inc.
since March 2001 and as a Director of Pegasus since October 1995. From
May 1998 to March 2001, he served as Chairman of the Board of Directors
of Pegasus. From October 1995 to May 1998, he served as Vice Chairman
of the Board of Directors of Pegasus. From August 1996 through
September 1997, he served as Senior Vice President and Chief Financial
Officer of LaQuinta Inns, Inc. From June 1992 through August 1996, he
served as Senior Vice President, Accounting and Administration of
LaQuinta Inns, Inc.

Cory J. Haynes, 41, has served as Vice President of International
Operations since March, 2000 and as Vice President of Midway Operations
since July 2001. He served as Vice President of Beverage Operations
from May 1998 to March 2000, as Vice President, Assistant Director of
Operations from September 1996 to May 1998, and from January 1996 to
September 1996, as Corporate Director of Management and Development.
From 1982 to January 1996, he served in operating positions of
increasing responsibilities for the Company and its predecessors.

11

Deborah Inzer, 51, has served as Vice President of Accounting,
Controller of the Company since January 2002. She served as Assistant
Vice President, Assistant Controller from November 2000 to January 2002
and as Assistant Controller from July 1999 to November 2000. Ms. Inzer
served as Senior Vice President of Finance at AmBrit Energy Corporation
from 1989 to 1999.

Jeffrey A. Jahnke, 47, has served as Vice President of Finance,
Treasurer of the Company since January 2002. He served as Controller,
Vice President of Accounting for the Company from January 2000 to
January 2002. From May 1998 to December 1999 he was a consultant
primarily in the hospitality business. Mr. Jahnke was employed by
ClubCorp International, Inc. from 1983 to 1998 in various financial
positions of increasing responsibilities, his most recent position
being Vice President of Accounting.

Vicki L. Johnson, 48, has served as Vice President of Business
Development since August 2001. Ms Johnson was employed by ClubCorp,
Inc. from January 1987 to July 2001, in various management, marketing
and sales positions of increasing responsibilities, her most recent
position being President, COO of Associate Clubs International, a
division of ClubCorp and Senior Vice President, ClubCorp, Inc.

Margo Manning, 37, has served as Vice President of Management
Development since September 2001 and as Assistant Vice President of
Team Development from November 1999 to September 2001. From 1991 to
October 1998, Ms. Manning served in positions of increasing
responsibilities for the Company and its predecessors.

Reginald M. Moultrie, 46, has served as Vice President of Amusements
since January 1999, as Vice President of Games and Merchandising from
April 1998 to January 1999, and as Director of Amusements from February
1997 to April 1998. Mr. Moultrie served as Vice President of Sales for
Skeeball, Inc. from 1993 to 1997.

Stuart A. Myers, 41, has served as Vice President of Marketing since
January 2000. From September 1996 to December 1999 he served as Vice
President of Marketing for Whataburger, Inc. Mr. Myers served as Senior
Vice President/Restaurant Group Account Director at Levenson & Hill
Advertising from July 1993 to September 1996.

R. Lee Pitts, 37, has served as Vice President of Training and New
Store Openings since September 2000 and as Assistant Vice President and
Director of Training from March 1998 to September 2000. From 1991 to
March 1998 Mr. Pitts served in operating positions of increasing
responsibility for the Company and its predecessors.

J. Michael Plunkett, 51, has served as Vice President of Kitchen
Operations since November 2000. He served as Vice President of
Information Systems from November 1996 to November 2000, as Vice
President, Director of Training from June 1995 until November 1996 and
as Vice President and Director of Training of D&B Holding from November
1994 to June 1995. From 1982 to November 1994, he served in operating
positions of increasing responsibilities for the Company and its
predecessors.

Sterling R. Smith, 49, has served as Vice President of Operations since
June 1995 and as Vice President and Director of Operations of D&B
Holding from November 1994 to June 1995. From 1983 to November 1994,
Mr. Smith served in operating positions of increasing responsibility
for the Company and its predecessors.

Bryan L. Spain, 54, has served as Vice President of Real Estate since
March 1997. From 1993 until joining Dave & Buster's, Mr. Spain managed
the Real Estate Acquisition and Development

12

Program for Incredible Universe and Computer City Divisions of Tandy
Corporation. In addition, from 1991 to 1993, Mr. Spain served as
Director, Real Estate Financing for Tandy Corporation.

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:

Our growth depends upon our ability to open new Complexes - The
Company currently plans to open one Complex in fiscal 2002, and up
to three in fiscal 2003. Our ability to achieve this expansion
goal depends upon our access to sufficient capital, locating and
obtaining appropriate sites, hiring and training additional
management personnel, and constructing or acquiring, at reasonable
cost, the necessary improvements and equipment for these
Complexes. In particular, the capital resources required to
develop each new Complex are significant. There is no assurance
that we can complete our planned expansion or that new Complexes
will perform in a manner consistent with our most recently opened
Restaurant/Entertainment Complexes or make a positive contribution
to our operating performance.

We operate a relatively small number of Complexes - As of February
3, 2002, the Company operates 31 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 our operating results
to fluctuate significantly. Due to this relatively small number of
locations, poor results of operations at any one
Restaurant/Entertainment Complex could materially affect our
profitability. Historically, new Restaurant/Entertainment
Complexes experience a drop in revenues after their first year of
operation, and we do not expect that in subsequent years, any
increases in comparable Complex revenues will be meaningful.
Additionally, because of the substantial up-front financial
requirements to open new Complexes, the investment risk related to
any one Restaurant/Entertainment Complex is much larger than that
associated with most other companies' restaurant or entertainment
venues.

Our results of operations are dependent upon consumer
discretionary spending - Our results of operations are dependent
upon discretionary spending by consumers, particularly by
consumers living in communities in which the
Restaurant/Entertainment Complexes are located. A significant
weakening in any of the local economies in which we operate may
cause our customers to curtail discretionary spending which in
turn could materially affect our profitability.

We compete against many larger entities - The restaurant and
entertainment industries are highly competitive. We compete
against many food and beverage service operations and
entertainment businesses that are larger and have significantly
greater financial resources and a greater number of units than we.
In addition, the legislation of casino gambling in geographic
areas near any of our Complexes creates the likelihood of an
additional entertainment alternative, which could have a material
adverse effect on our business.

Our operations are subject to many government regulations -
Various federal, state and local laws and permitting and license
requirements affect our business. Significant numbers of our

13

hourly personnel are paid at rates related to the federal minimum
wage and, accordingly, legislated increases in the minimum wage
will increase labor costs at our Complexes. Other governmental
initiatives such as mandated health insurance, if implemented,
could adversely affect us and the restaurant industry in general.

Our results of operations fluctuate in accordance with Complex
openings and seasonality As a result of the substantial revenues
associated with each new Restaurant Entertainment Complex, the
timing of new Complex openings will result in significant
fluctuations in quarterly results. We also expect seasonality to
be a factor in our results of operations due to lower third
quarter revenues in the fall season, and higher fourth quarter
revenues associated with the year-end holidays.

Our results of operations are dependent upon the efforts of our
senior management - Our future success will depend largely on the
efforts and abilities of our existing senior management,
particularly David O. "Dave" Corriveau and James W. "Buster"
Corley, the Co-Chief Executive Officers and founders of our
business.

Our common stock price may experience volatility - The market
price of our Common Stock has fluctuated substantially due to a
variety of factors, including the quarterly operating results of
the Company, the results of other restaurant or entertainment
companies, changes in general economic conditions or the financial
markets and other factors. 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.

14

Item 2. PROPERTIES

As of February 3, 2002, the Company operates a total of 31 Complexes
located in 14 states. The Company is currently utilizing all available
land at its owned locations. The Company's real estate leases are with
unaffiliated third parties except where noted.

* The Company also leases additional parking facilities which expires
January 2014.

** The Company owns the building and leases the real property.

The Company also leases a 47,000 square foot office building and 30,000
square foot warehouse facility in Dallas, Texas for use as its
corporate headquarters and distribution center.

Item 3. LEGAL PROCEEDINGS.

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, consumer claims and employment-related claims.
To date,

15

none of such litigation, some of which is covered by insurance, has had
or is expected to have a material effect on the Company and its
operations.

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

There were no matters submitted for a vote of security holders during
the fourth quarter ended February 3, 2002.

PART II

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

The Company's Common Stock traded on the Nasdaq National Market under
the symbol DANB from June 26, 1995 until June 3, 1999. Since June 4,
1999, the Company's Common Stock is traded on the New York Stock
Exchange ("NYSE") under the symbol DAB. The following table summarizes
the high and low sales prices per share of Common Stock for the
applicable periods indicated, as reported on the Nasdaq National Market
and by the NYSE.

At April 17, 2002, there were 1,943 holders of record of the Common
Stock.

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

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.

17

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (DOLLARS IN THOUSANDS)

Management's Discussion and Analysis of Financial Condition and Results
of Operations discusses our consolidated financial statements, which
have been prepared in accordance with generally accepted accounting
principles. The preparation of these financial statements requires
management to make certain estimates and assumptions that affect the
amounts reported in the financial statements and accompanying notes. On
an ongoing basis, management evaluates its estimates and judgements,
including those that relate to depreciable lives, goodwill and debt
covenants. The estimates and judgements made by management are based on
historical data and on various other factors believed to be reasonable
under the circumstances.

Management believes the following critical accounting policies, among
others, affect its more significant judgements and estimates used in
the preparation of its consolidated financial statements.

Depreciable lives - expenditures for new facilities and those which
substantially increase the useful lives of the property, including
interest during construction, are capitalized along with equipment
purchases at cost. These costs are depreciated over various methods
based on an estimate of the depreciable life, resulting in a charge to
the operating results of the Company. The actual results may differ
from these estimates under different assumptions or conditions. The
depreciable lives are as follows:

Property and Equipment
Games 5 years
Buildings 40 years
Furniture, fixtures and equipment 5 to 10 years
Leasehold and building improvements Shorter of 20 years or lease life
Intangible Assets
Trademarks Over statutory lives
Lease Rights Over remaining lease term

Goodwill - is being amortized over 30 years. Whenever there is an
indication of impairment, the Company evaluates the recoverability of
goodwill using future undiscounted cash flows. Any resulting impairment
loss could have a material adverse impact on our financial condition
and results of operations, however an impairment charge was not
considered necessary under FAS 121 as of February 3, 2002.

In June 2001, the Financial Accounting Standards Board issued
Statements of Financial Accounting Standards No. 141, Business
Combinations and No. 142, Goodwill and Other Intangible Assets
("Statements"), effective for fiscal years beginning after December 15,
2001. Under the new rules, goodwill and intangible assets deemed to
have indefinite lives will no longer be amortized but will be subject
to annual impairment tests in accordance with the Statements. Other
intangible assets will continue to be amortized over their useful
lives.

The Company will apply the new standards on accounting for goodwill and
other intangible assets beginning in the first quarter of 2002.
Application of the nonamortization provisions of the Statements is
expected to result in an increase in income before tax of $349 ($.03
per diluted share) in 2002 as a result of nonamortization of existing
goodwill. During the first quarter 2002, the Company will perform the
required impairment test of goodwill as of February 3, 2002. Based on
current analysis, the Company will record an expense to "Cumulative
effect of a change

18

in accounting principle" of $4,541 net of income tax benefit of $2,555
($.35 per diluted share), upon the adoption of the new standard.

Debt Covenants - of the Company's facility agreement require compliance
with certain financial covenants including a minimum consolidated
tangible net worth level, maximum leverage ratio, minimum fixed charge
coverage and maximum level of capital expenditures. The Company was in
compliance with the covenants for the fiscal year ended February 3,
2002. The Company believes the results of operations for the fiscal
year ending February 2, 2003 and thereafter would enable us to remain
in compliance with the existing covenants absent any material negative
event affecting the U.S. economy as a whole. However, the Company's
expectations of future operating results and continued compliance with
the debt covenants cannot be assured and our lenders' actions are not
controllable by us. If the projections of future operating results are
not achieved and the debt is placed in default, the Company would
experience a material adverse impact on our reported financial position
and results of operations.

FISCAL 2001 COMPARED TO FISCAL 2000

Total revenues increased to $358,009 for fiscal 2001 from $332,303 for
fiscal 2000, an increase of $25,706 or 7.7%. New stores opened in
fiscal 2001 increased revenues by $28,431. Revenues from comparable
stores decreased by 2.8% in fiscal 2001. The decrease in comparable
stores revenues is primarily attributed to the attack on New York and
Washington, D.C. on September 11th resulting in a decline in corporate
events of 15.4%. Total revenues from licensing agreements were $537.

Costs of revenues increased to $66,939 for fiscal 2001 from $61,547 for
fiscal 2000, an increase of $5,392 or 8.8%. The increase was
principally attributed to opening four new stores during the year. As a
percentage of revenues, cost of revenues were up .2% to 18.7% for
fiscal 2001 versus 18.5% in fiscal 2000 due to freight costs and higher
amusement costs associated with redemption, offset by lower food costs.

Operating payroll and benefits increased to $110,478 for fiscal 2001
from $101,143 for fiscal 2000, an increase of $9,335 or 9.2%. As a
percentage of revenue, operating payroll and benefits were 30.9% in
fiscal 2001 up .5% from 30.4% in fiscal 2000 due to higher store fixed
labor and benefits.

Other store operating expenses increased to $106,971 for fiscal 2001
from $90,581 for fiscal 2000, an increase of $16,390 or 18.1%. As a
percentage of revenues, other store operating expenses were 29.9% in
fiscal 2001 as compared to 27.3% in fiscal 2000. The increase in other
store operating expenses is due to increases in utilities, marketing
and occupancy costs.

General and administrative expenses increased to $20,653 in fiscal 2001
from $20,019 for fiscal 2000, an increase of $634 or 3.2%. As a
percentage of revenues, general and administrative expenses for fiscal
2001 were 5.8% and 6.0% for fiscal 2000.

Depreciation and amortization expense increased $2,977 to $28,693 in
fiscal 2001 from $25,716 in fiscal 2000. As a percentage of revenues,
depreciation and amortization increased to 8.0% from 7.7% for the
comparable period due to new store openings.

Preopening costs decreased to $4,578 for fiscal 2001 from $5,331 for
fiscal 2000, a decrease of $753 or 14.1%. As a percentage of revenues,
preopening costs were 1.3% for fiscal 2001 as compared to 1.6% for
fiscal 2000. This decrease is due to timing of store openings and only
one store scheduled to open in fiscal 2002.

19

Interest expense-net decreased to $7,820 for fiscal 2001 from $8,712
for fiscal 2000. The decrease was due to lower interest rates in fiscal
year 2001.

The effective tax rate for fiscal 2001 was 36.2% as compared to 36.4%
for fiscal 2000 and was the result of a lower effective state tax rate.

FISCAL 2000 COMPARED TO FISCAL 1999

Total revenues increased to $332,303 for fiscal 2000 from $247,134 for
fiscal 1999, an increase of $85,169 or 34%. New stores opened in fiscal
2000 and in fiscal 1999 accounted for 91% of the increase. Revenues at
comparable stores increased 3.6% for fiscal 2000. Increases in revenues
were also attributable to a 2% overall price increase and a higher
average guest check. Total revenues for fiscal 2000 from licensing
agreements were $966.

Cost of revenues increased to $61,547 for fiscal 2000 from $45,720 for
fiscal 1999, an increase of $15,827 or 35%. The increase was
principally attributable to the 34% increase in revenues. As a
percentage of revenues, cost of revenues were the same for fiscal 2000
and fiscal 1999 at 18.5%.

Operating payroll and benefits increased to $101,143 for fiscal 2000
from $76,242 for fiscal 1999, an increase of $24,901 or 33%. As a
percentage of revenue, operating payroll and benefits decreased to
30.4% in fiscal 2000 from 30.9% in fiscal 1999 due to lower fixed labor
costs, taxes and benefits offset by higher variable labor costs.

Other store operating expenses increased to $90,581 for fiscal 2000
from $65,292 for fiscal 1999, an increase of $25,289 or 39%. As a
percentage of revenues, other store operating expenses were 27.3% of
revenues in fiscal 2000 as compared to 26.4% of revenues in fiscal
1999. Other store operating expenses were higher due to higher
marketing costs associated with the Company's 2000 marketing campaign.

General and administrative expenses increased to $20,019 for fiscal
2000 from $14,988 for fiscal 1999, an increase of $5,031 or 34%. The
increase over the prior comparable period resulted from 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 decreased
to 6.0% in fiscal year 2000 from 6.1% in fiscal year 1999.

Depreciation and amortization expense increased to $25,716 for fiscal
2000 from $19,884 for fiscal 1999, an increase of $5,832 or 29%. The
increase was attributable to new stores opened in fiscal 2000 and in
fiscal 1999. As a percentage of revenues, depreciation and amortization
decreased to 7.7% from 8.0% for the comparable prior period.

Preopening costs decreased to $5,331 for fiscal 2000 from $6,053 for
fiscal 1999, a decrease of $722 or 12%. As a percentage of revenues,
preopening costs were 1.6% for fiscal 2000 as compared to 2.4% for
fiscal 1999. This decrease was due to the lesser number of new stores
opened in 2000 compared to 1999.

Interest expense - net increased to $8,712 for fiscal 2000 from $3,339
for fiscal 1999. The increase was due to a higher average debt balance
and higher interest rates in 2000 versus 1999.

20

The effective tax rate for fiscal year 2000 was 36.4% as compared to
36.7% for fiscal year 1999 and was the result of a lower effective
state tax rate.

LIQUIDITY AND CAPITAL RESOURCES

Net cash provided by operating activities increased to $44,917 in 2001
compared to $36,678 in 2000 and $24,940 in 1999. Operating cash flows
in 2001 increased primarily due to the timing of accounts payable
disbursements. The increase in 2000 was attributable to improvement in
profitability and timing of operational receipts and payments.

Cash used in investing activities was $25,727 in 2001 and $53,574 in
2000 compared to $73,798 in 1999. All investing expenditures are
related to opening of new stores and normal recurring maintenance at
previously existing stores.

Financing activities provided cash of $47,440 in 1999 and $16,984 in
2000 compared to a use of cash of $17,407 in 2001. Net use of cash by
financing activities in 2001 was directly attributed to repayment of
long-term debt of $41,648 offset by borrowings from long-term debt of
$24,060. Net cash provided by financing activities in 2000 and 1999 was
due to borrowings under long-term debt exceeding any repayments during
each year.

The Company has a $110,000 senior secured revolving credit and term
loan facility. The facility includes a five-year revolver and five and
seven-year term debt. The facility agreement calls for quarterly
payments of principal on the term debt through maturity. Borrowing
under the facility bears interest at a floating rate based on LIBOR
(1.77% at February 3, 2002) or, at the Company's option, the bank's
prime rate (4.75% at February 3, 2002) plus, in each case, a margin
based upon financial performance. The facility is secured by all assets
of the Company. The facility has certain financial covenants including
a minimum consolidated tangible net worth level, a maximum leverage
ratio, minimum fixed charge coverage and maximum level of capital
expenditures. On November 19, 2001, the Company amended the facility to
allow proceeds from sale/leaseback transactions to be applied to both
the revolving credit and the term loans for a limited period. At
February 3, 2002, $5,208 was available under this facility.

The Company has entered into an agreement that expires in 2007, to
change a portion of its variable rate debt to fixed-rate debt. Notional
amounts aggregating $51,255 are fixed at 5.44%. The Company is exposed
to credit losses for periodic settlements of amounts due under the
agreements if LIBOR decreases. A charge of $858 to interest expense was
incurred in fiscal 2001 under the agreement.

The market risks associated with the agreements are mitigated because
increased interest payments under the agreement resulting from
reductions in LIBOR are effectively offset by a reduction in interest
expense under the debt obligation.

The Company plans to open one new store during the fiscal year ended
February 2, 2003. The preopening and construction costs of the new
store will be provided from internal cash flow. Subsequent to the
fiscal year ending February 2, 2003, the Company intends to open up to
three stores per year, if adequate external financing can be secured to
supplement internally generated cash flow.

21

SALE/LEASEBACK TRANSACTIONS

During the year ended February 3, 2002, the Company completed the
sale/leaseback of two stores (Atlanta and Houston) and the corporate
headquarters in Dallas. Cash proceeds of $18,474 were received along
with $5,150 in twenty year interest bearing notes receivable at 7-7.5%.
The locations were sold to non-affiliated entities. No revenue or
profit was recorded at the time of the transaction.

Upon execution of the sale/leaseback transactions, property costs of
$27,360 and accumulated depreciation of $3,832 were removed from the
Company's books resulting in a loss of $272 which was recognized in
2001 and a gain of $713 on one facility being amortized over the term
of the operating lease.

Future operating lease obligations under the lease agreements are as
follows: $2,917 in 2002, $2,957 in 2003, $2,997 in 2004, $3,037 in
2005, $3,078 in 2006 and $50,976 thereafter. Future minimum note
payments and interest income associated with the sale/leasebacks at
Houston and Atlanta are as follows: $488 in 2002, $488 in 2003, $488 in
2004, $488 in 2005 and $7,782 thereafter.

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS

The following tables set forth the Company's contractual obligations
and commercial commitments (in thousands):

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 fall season,
and expects higher fourth quarter revenues associated with the year-end
holidays. The effects of supplier price increases are not expected to
be material. The Company believes low inflation rates in its market
areas have contributed to stable food and labor costs in recent years.
However, there is no assurance that low inflation rates will continue
or that the Federal minimum wage rate will not increase.

22

MARKET RISK

The Company's market risk exposure relates to changes in the general
level of interest rates. The Company's earnings are affected by changes
in interest rates due to the impact those changes have on its interest
expense from variable-rate debt. The Company's agreement to fix a
portion of its variable-rate debt mitigates this exposure.

"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM
ACT OF 1995

Certain statements in this Annual Report are not based on historical
facts but are "forward-looking statements" that are based on numerous
assumptions made as of the date of this report. Forward looking
statements are generally identified by the words "believes", "expects",
"intends", "anticipates", "scheduled", and similar expressions. 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; availability of capital; locations and terms
of sites for Complex development; quality of management; changes in, or
the failure to comply with, government regulations; and other risks
indicated in this filing.

Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company's market risk exposure relates to changes in the general
level of interest rates. The Company's earnings are affected by changes
in interest rates due to the impact those changes have on its interest
expense from variable-rate debt. The Company's agreement to fix a
portion of its variable-rate debt mitigates this exposure.

Item 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 "Director and Nominee
Information" appearing in the Company's Proxy Statement for the Annual
Meeting of Stockholders to be held on June, 11, 2002 is incorporated
herein by reference. Certain information with respect to the executive
officers of the Company is included in Part I hereof under the caption
"Executive Officers of the Registrant".

23

Item 11. EXECUTIVE COMPENSATION

The information set under the captions "Summary of Executive
Compensation" and "Director Compensation" appearing in the Company's
Proxy Statement for the Annual Meeting of Stockholders to be held on
June 11, 2002 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" appearing in the Company's Proxy Statement for the Annual
Meeting of Stockholders to be held on June 11, 2002 is incorporated
herein by reference.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The information set under the captions "Compensation Committee
Interlocks and Insider Participation" and "Certain Transactions"
appearing in the Company's Proxy Statement for the Annual Meeting of
Stockholders to be held on June 11, 2002 is incorporated herein by
reference.

PART IV

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

(a)(1) Financial Statements Page

Consolidated Balance Sheets -
February 3, 2002 and February 4, 2001 F-1

Consolidated Statement of Income -
Fiscal years ended February 3, 2002, February 4, 2001
and January 30 ,2002. F-2

Consolidated Statements of Stockholders' Equity - Fiscal years
ended February 3, 2002, February 4, 2001
and January 30, 2000 F-3

Consolidated Statements of Cash Flows -
Fiscal years ended February 2, 2002, February 4, 2001
and January 30, 2000 F-4

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

Report of Independent Auditors F-12

(a)(2) Financial Statement

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 incorporated by reference or filed with this Report

The exhibits listed below are filled with or incorporated by
reference into this Annual Report on Form 10K. Exhibits
denominated with numbered footnotes are incorporated

24

by reference to the other filings with the Commission set
forth below. Unless otherwise indicated, the exhibit number
below corresponds to the exhibit number incorporated by
reference. ITEMS LISTED IN BOLDFACE ARE MANAGEMENT CONTRACTS
OR COMPENSATORY PLANS OR ARRANGEMENTS REQUIRED TO BE FILED
PURSUANT TO ITEM 14(c) OF THIS REPORT.

3.1 Restated Articles of Incorporation of the Company. (1)

3.2 Bylaws of the Company. (1)

10.1 Revolving Credit and Term Loan Agreement, dated June
30, 2000, among the Company and its subsidiaries,
Fleet National Bank (as agent) and the financial
institutions named therein. (2)

10.1.1 Amendment No. 1 to Revolving Credit and Term Loan
Agreement dated May 31, 2001 by and among the Company
and its subsidiaries, Fleet National Bank (as agent)
and the financial institutions named therein. (7)

10.1.2 Amendment No. 2 to Revolving Credit and Term Loan
Agreement dated November 19, 2001 by and among the
Company and its subsidiaries, Fleet National Bank (as
agent) and the financial institutions names therein.
(8)

10.2 - 10.6 Intentionally omitted.

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

10.8 1995 STOCK OPTION PLAN (AS AMENDED AND RESTATED APRIL
26, 2000). (3)

10.9 STOCK OPTION PLAN FOR OUTSIDE DIRECTORS. (4)

10.11 EMPLOYMENT AND EXECUTIVE RETENTION AGREEMENTS FOR
CO-CHIEF EXECUTIVE OFFICERS, DATED JUNE 16, 1995. (5)

10.12 FORM OF INDEMNITY AGREEMENTS WITH EXECUTIVE OFFICERS
AND DIRECTORS. (6)

10.13 Intentionally Omitted.

10.14 EXECUTIVE RETENTION AGREEMENT FOR STERLING R. SMITH
DATED JUNE 11, 2001 (8)

10.15 Intentionally Omitted.

10.16 Agreement of Sale and Purchase dated October 1, 2001
between the Company, as seller, and General Electric
Capital, Business Asset Funding Corporation, as
purchaser, for the Company's corporate headquarters in
Dallas, Texas. (8)

10.17 Lease Agreement dated October 1, 2001 between General
Electric Capital Business Asset Funding Corporation,
as landlord, and the Company, as tenant for the
Company's corporate headquarters in Dallas, Texas. (8)

25

10.18 Agreement of Sale and Purchase dated November 12, 2001
between D&B Realty Holding, Inc., as seller and KAZA
I, Ltd. As purchaser for Houston, Texas property. (9)

10.19 Lease Agreement dated December 14, 2001 between KAZA I
L.P. as landlord, and Dave & Buster's I, L.P. as
tenant for Houston, Texas property. (9)

10.20 Agreement of Sale and Purchase dated as of December
17, 2001 between D&B Realty Holding, Inc., as seller,
and Landfair, LLC as purchaser for Marietta, Georgia
property. (9)

10.21 Lease Agreement dated December 17, 2001 between
Landfair LLC, as landlord, and Dave & Buster's I,
L.P., as tenant, for Marietta, Georgia property. (9)

10.22 EXECUTIVE RETENTION AGREEMENT DATED JUNE 7, 2001
BETWEEN THE COMPANY AND JOHN S. DAVIS. (9)

10.23 EXECUTIVE RETENTION AGREEMENT DATED DECEMBER 3, 2001
BETWEEN THE COMPANY AND W. C. HAMMETT, JR. (9)

21.1 Subsidiaries of the Company. (9)

23 Independent Auditors' Consent. (9)

(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 3, 2002.

(c) Exhibits.

The Index of Exhibits filed or incorporated by reference
pursuant to Item 601 of Regulation S-K and the Exhibits being
filed with this Report are included following the financial
statement pages of this Form 10-K.

(d) Financial Statements of Subsidiaries or Affiliates.

Not applicable.

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

(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-Q for the 13-week period
ended July 30, 2000 and incorporated herein by reference.

(3) Filed as an Exhibit to the registrant's Proxy Statement dated April 28,
2000 and incorporated herein by reference.

26

(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) Filed as an Exhibit to the registrants Form 10-K for the fiscal year ended
February 4, 2001.

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

(7) Filed as an Exhibit to the registrant's Form 10-Q for the 13 week period
ended August 5, 2001.

(8) Filed as an Exhibit to the registrant's From 10-Q for the 13 week period
ended November 4, 2001.

(9) Filed herewith.

27

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/ W.C. Hammett, Jr.
-------------------------
W. C. Hammett, Jr.,
Vice President, Chief
Financial Officer

Date: April 22, 2002

28

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated on April 22, 2002.

29

CONSOLIDATED BALANCE SHEETS
DAVE & BUSTER'S, INC.

See accompanying notes to consolidated financial statements.

F-1

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

See accompanying notes to consolidated financial statements.

F-2

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

See accompanying notes to consolidated financial statements.

F-3

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

See accompanying notes to consolidated financial statements.

F-4

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. and all wholly-owned subsidiaries (the
"Company"). All material intercompany accounts and transactions have been
eliminated in consolidation. The Company's one industry segment is the ownership
and operation of restaurant/entertainment complexes (a "Complex" or "Store")
under the name "Dave & Buster's," which are principally located in the United
States.

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 2001, 2000 and 1999 are to the 52 weeks
ended February 3, 2002 and to the 53 weeks ended February 4, 2001 and to the 52
weeks ended January 30, 2000, respectively.

INVENTORIES - Inventories, which consist of food, beverage and merchandise are
reported at the lower of cost or market determined on a first-in, first-out
method. Static supplies inventory is capitalized at each store opening date and
reviewed periodically for valuation.

PREOPENING COSTS - The Company adopted Statement of Position 98-5 ("SOP 98-5"),
"Reporting on the Costs of Start-Up Activities", in the first quarter of fiscal
1999. This accounting standard requires the Company to expense all start-up and
preopening costs as they are incurred. The Company previously deferred such
costs and amortized them over the twelve-month period following the opening of
each store. The cumulative effect of this accounting change, net of income tax
benefit of $2,928, was $4,687 in fiscal 1999.

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 2001, 2000 and
1999 was $892, $1,555 and $1,623, 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 of $9,708 is being amortized over 30 years. Whenever there
is an indication of impairment, the Company evaluates the recoverability of
goodwill using future undiscounted cash flows. In June 2001, the Financial
Accounting Standards Board issued Statements of Financial Accounting Standards
No. 141, Business Combinations and No. 142, Goodwill and Other Intangible Assets
("Statements"), effective for fiscal years beginning after December 15, 2001.
Under the new rules, goodwill and intangible assets deemed to have indefinite
lives will no longer be amortized but will be subject to annual impairment tests
in accordance with the Statements. Other intangible assets will continue to be
amortized over their useful lives.

The Company will apply the new standards on accounting for goodwill and other
intangible assets beginning in the first quarter of 2002. Application of the
nonamortization provisions of the Statements is expected to result in an
increase in income before tax of $349 ($.03 per diluted share) in 2002 as a
result of nonamortization of existing goodwill. During the first quarter of
2002, the Company will perform the required impairment test of goodwill as of
February 3, 2002. Based on current analysis, the Company will record an expense
to "Cumulative effect of a change in accounting principle" of $4,541 net of
income tax benefit of $2,555 ($.35 per diluted share), upon the adoption of the
new standard.

DEPRECIATION AND AMORTIZATION - Property and equipment, excluding most games,
are depreciated on the straight-line method over the estimated useful life 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

F-5

straight-line method over estimated useful lives as follows: trademarks over
statutory lives and lease rights over remaining lease terms.

INTEREST RATE SWAP AGREEMENTS - The Company adopted Statement of Financial
Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging
Activities ("FAS 133") effective February 5, 2001. FAS 133 requires the Company
to recognize all derivatives on the balance sheet at fair value. Derivatives
that are not hedges must be adjusted to fair value through income. If the
derivative is a hedge, depending on the nature of the hedge, changes in fair
value of derivatives will either be offset against the change in fair value of
the hedged assets, liabilities, or firm commitments through earnings or
recognized in other comprehensive income until the hedged item is recognized in
earnings. The ineffective portion of a derivative's change in fair value will be
immediately recognized in earnings. During the year, the Company has entered
into an agreement that expires in 2007, to fix its variable-rate debt to
fixed-rate debt (5.44% at February 3, 2002) on notional amounts aggregating
$51,255. The market risks associated with the agreements are mitigated because
increased interest payments under the agreement resulting from reductions in
LIBOR are effectively offset by reduction in interest expense under the debt
obligation.

The Company is exposed to credit losses for periodic settlements of amounts due
under the agreements. A charge of $858 to interest expense was incurred in
fiscal 2001 under the agreement.

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 are recognized in the financial
statements and as measured by the provisions of enacted tax laws.

STOCK OPTION PLAN - The Company 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.

REVENUE RECOGNITION - Food, beverage and amusement revenues are recorded at
point of service. 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
a percentage of gross revenues and are recognized when assured.

ADVERTISING COSTS - In accordance with SOP 93-7 "Reporting on Advertising
Costs", all costs of advertising are recorded as expense in the period in which
the costs are incurred or the first time the advertising takes place. For fiscal
2001 and 2000, such expenses are 3.7% and 3.3% of revenue, respectively.

TREASURY STOCK - During fiscal 1999, the Company's Board of Directors approved a
plan to repurchase up to 1,000 shares of the Company's common stock. Pursuant to
the plan, the Company repurchased 175 shares of its common stock for
approximately $1,846 during fiscal 1999.

NOTE 2: PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

F-6

NOTE 3: ACCRUED LIABILITIES

Accrued liabilities consist of the following:

NOTE 4: LONG-TERM DEBT

In 2000, the Company secured a $110,000 senior secured revolving credit and term
loan facility. On November 19, 2001, the Company amended its senior secured
revolving credit and term loan facility to allow proceeds from sale/leaseback
transactions to be applied to both the revolving credit and term loans. The
facility includes a five-year revolver and five and seven-year term debt. The
facility agreement calls for quarterly payments of principal on the term debt
through the maturity date. Borrowing under the facility bears interest at a
floating rate based on LIBOR (1.77% at February 3, 2002) or, at the Company's
option, the bank's prime rate (4.75% at February 3, 2002) plus, in each case, a
margin based upon financial performance. The facility is secured by all assets
of the Company. The facility has certain financial covenants including a minimum
consolidated tangible net worth level, a maximum leverage ratio, minimum fixed
charge coverage and maximum level of capital expenditures. At February 3, 2002,
$5,208 was available under this facility. The fair value of the Company's
long-term debt approximates its carrying value.

The Company has entered into an agreement that expires in 2007, to change a
portion of its variable rate debt to fixed-rate debt. Notional amounts
aggregating $51,255 are fixed at 5.44%. The Company is exposed to credit losses
for periodic settlements of amounts due under the agreements if LIBOR decreases.
A charge of $858 to interest expense was incurred in 2001 under the agreement.

NOTE 5: INCOME TAXES

The provision for income taxes is as follows:

F-7

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

Reconciliation of federal statutory rates to effective income tax rates:

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. Most
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 3, 2002. For 2001, 2000 and 1999, rent expense
for operating leases was $19,469, $14,295 and $11,119, respectively. At February
3, 2002, future minimum lease payments required under operating leases are
$22,391 in 2002; $21,892 in 2003; $21,675 in 2004; $21,368 in 2005; $21,313 in
2006 and $301,957 thereafter.

During the year ended February 3, 2002, the Company completed the sale/leaseback
of two stores (Atlanta and Houston) and the corporate headquarters in Dallas.
Cash proceeds of $18,474 were received along with $5,150 in twenty year interest
bearing notes receivable at 7-7.5%. The locations were sold to non-affiliated
entities. No revenue or profit was recorded at the time of the transaction.

Upon execution of the sale/leaseback transactions, property costs of $27,360 and
accumulated depreciation of $3,832 were removed from the Company's books
resulting in a loss of $272 which was recognized in 2001 and a gain of $713 on
one facility being amortized over the term of the operating lease.

Future operating lease obligations under the lease agreements are as follows:
$2,917 in 2002, $2,957 in 2003, $2,997 in 2004, $3,037 in 2005, $3,078 in 2006
and $50,976 thereafter. Future minimum note payments and interest income
associated with the sale/leasebacks at Houston and Atlanta are as follows: $488
in 2002, $488 in 2003, $488 in 2004, $488 in 2005 and $7,782 thereafter.

F-8

NOTE 7: COMMON STOCK

In 1995, the Company adopted the Dave & Buster's, Inc. 1995 Stock Option Plan
(the "Plan") covering 675 shares of common stock. In 1997, 1998 and 2001, the
Company increased the shares of common stock covered by the Plan to 1,350, 2,350
and 2,950 respectively. 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 primarily
exercisable over a three to five year period from the date of the grant.

In 1996, the Company adopted a stock option plan for outside directors (the
"Directors' Plan"). A total of 150 shares of common stock are subject to the
Directors Plan. The options granted under the Directors' Plan vest ratably over
a three year period. In 2001, the Company increased the shares of common stock
subject to the Directors' Plan from 150 shares to 190 shares.

In 2000, the Company amended and restated the Dave & Buster's, Inc. 1995 Stock
Incentive Plan to allow the Company to grant restricted stock awards. These
restricted stock awards will fully vest at the end of the vesting period or the
attainment of one or more performance targets established by the Company.
Recipients are not required to provide consideration to the Company other than
render service and have the right to vote the shares and to receive dividends.
The Company issued in 2001 and 2000, 63.5 and 267 shares of restricted stock at
a market value of $6.45 - $7.90 and $6.75, respectively, which vest at the
earlier of attaining certain performance targets or seven years. The total
market value of the restricted shares, as determined at the date of issuance, is
treated as unearned compensation and is charged to expense over the vesting
period. The charge to expense for the unearned compensation was $139 and $243 in
2001 and 2000, respectively.

Pro forma information regarding net income and earnings per common share is
required by SFAS 123, and is used as if the Company had accounted for its
employee stock options under the fair value method. The fair value for these
options is estimated at the date of grant using a Black-Scholes option pricing
model with the following weighted-average assumptions for 2001, 2000 and 1999,
respectively: risk-free interest rates of 4.59%, 6.30%, and 5.39%; dividend
yields of 0.0%; volatility factors of the expected market price of the Company's
common stock of .650, .740, and .494; and a weighted-average life of the option
of 3.2, 2.7, and 4.4 years.

The Black-Scholes option valuation model is used 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 is as follows:

F-9

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

As of February 3, 2002, exercise prices for 2,925 options ranged from $6.10 to
$25.32. The weighted-average remaining contractual life of the options is 7.6
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 commons 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
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).

NOTE 8: EARNINGS PER SHARE

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

Options to purchase 1,529, 1,346 and 925 shares of common stock for 2001, 2000
and 1999, respectively, were not included in the computation of diluted net
income per share because the options would have been antidilutive.

NOTE 9: RELATED PARTY ACTIVITY

During 2000, the Company was party to a consulting agreement with Sandell
Investments ("Sandell"), a partnership whose controlling partner is a director
of the Company. Sandell advises the Company with respect to expansion and

F-10

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 2000 and 1999, the maximum fee provided for under the
agreement.

The Company was a party to a sale/leaseback transaction with Cypress Equities,
Inc. for its San Diego, California location, whereby the Company received $8,000
in exchange for committing to lease payments of approximately $6,300 over 20
years with options for renewal. A director of the Company is the managing member
of Cypress Equities, Inc. Payments to Cypress Equities, Inc. in 2001 and 2000
were $1,242 and $349, respectively.

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 of 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.

NOTE 11: CONTINGENCIES

The Company is subject to certain legal proceedings and claims that arise in the
ordinary course of its business. In the opinion of management, 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)

F-11

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 3, 2002 and February 4, 2001, and the related consolidated
statements of income, stockholders' equity and cash flows for each of the three
years in the period ended February 3, 2002. These financial statements are the
responsibility of the company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. 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 3, 2002 and February 4, 2001 and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended February 3, 2002, in conformity with accounting principles generally
accepted in the United States.

Ernst & Young LLP

Dallas, Texas
March 27, 2002

F-12

INDEX OF EXHIBITS

10.20 Agreement of Sale and Purchase dated as of December 17, 2001
between D&B Realty Holding, Inc., as seller, and Landfair, LLC
as purchaser for Marietta, Georgia property. (9)

10.21 Lease Agreement dated December 17, 2001 between Landfair LLC,
as landlord, and Dave & Buster's I, L.P., as tenant, for
Marietta, Georgia property. (9)

10.22 EXECUTIVE RETENTION AGREEMENT DATED JUNE 7, 2001 BETWEEN THE
COMPANY AND JOHN S. DAVIS. (9)

10.23 EXECUTIVE RETENTION AGREEMENT DATED DECEMBER 3, 2001 BETWEEN
THE COMPANY AND W. C. HAMMETT, JR. (9)

21.1 Subsidiaries of the Company. (9)

23 Independent Auditors' Consent. (9)

- ----------

(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-Q for the 13-week period
ended July 30, 2000 and incorporated herein by reference.

(3) Filed as an Exhibit to the registrant's Proxy Statement dated April 28,
2000 and incorporated herein by reference.

(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) Filed as an Exhibit to the registrants Form 10-K for the fiscal year ended
February 4, 2001.

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

(7) Filed as an Exhibit to the registrant's Form 10-Q for the 13 week period
ended August 5, 2001.

(8) Filed as an Exhibit to the registrant's From 10-Q for the 13 week period
ended November 4, 2001.

(9) Filed herewith.