<PAGE>

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K
             FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS
               13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

        [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
            THE SECURITIES EXCHANGE ACT OF 1934
            FOR THE FISCAL YEAR ENDED FEBRUARY 3, 2001

                                       OR

        [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
            THE SECURITIES EXCHANGE ACT OF 1934
            FOR THE TRANSITION PERIOD FROM __________ TO__________


                        COMMISSION FILE NUMBER: 000-24603


                       ELECTRONICS BOUTIQUE HOLDINGS CORP.
                       -----------------------------------
             (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

              DELAWARE                                      51-0379406
              --------------------------------------------------------
        (STATE OF INCORPORATION)    (IRS EMPLOYER IDENTIFICATION NUMBER)

               931 SOUTH MATLACK STREET
               WEST CHESTER, PENNSYLVANIA                     19382
               -------------------------------------------------------
               (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)     (ZIP CODE)

        REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 610/430-8100

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:       None
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

                          COMMON STOCK, $.01 PAR VALUE
                                (Title of Class)

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 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  [ ]

THE AGGREGATE MARKET VALUE OF COMMON STOCK HELD BY NON-AFFILIATES, BASED UPON
THE CLOSING SALE PRICE AS REPORTED ON THE NASDAQ NATIONAL MARKET ON APRIL 19,
2000, WAS APPROXIMATELY $202,560,204.

AT APRIL 19, 2001, THERE WERE 22,368,040 SHARES OF COMMON STOCK OUTSTANDING.
                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive Proxy Statement for the 2001 Annual Meeting of
Shareholders are incorporated by reference in Part III hereof.

<PAGE>

                                    FORM 10-K
                   FOR THE FISCAL YEAR ENDED FEBRUARY 3, 2001
                                      INDEX

PART I                                                              PAGE
                                                                    ----
Item 1 -     Business                                                  1
Item 1A -    Executive Officers of the Company                        14
Item 2 -     Properties                                               15
Item 3 -     Legal Proceedings                                        15
Item 4 -     Submission of Matters to a Vote of Security              15
             Holders

PART II
Item 5 -     Market for the Registrant's Common Equity and
             Related Stockholder Matters                              16
Item 6 -     Selected Financial Data                                  17
Item 7 -     Management's Discussion and Analysis of
             Financial Condition and Results of Operations            19
Item 7A -    Quantitative and Qualitative Disclosures About           23
             Market Risk
Item 8 -     Consolidated Financial Statements and                    24
             Financial Statement Schedule
Item 9 -     Changes in and Disagreements with Accountants
             on Accounting and Financial Disclosure                   41

PART III
Item 10-     Directors and Executive Officers of the Company          41
Item 11-     Executive Compensation                                   41
Item 12-     Security Ownership of Certain Beneficial                 41
             Owners and Management
Item 13-     Certain Relationships and Related Transactions           41

PART IV
Item 14 -    Exhibits and Reports on Form 8-K                         41

SIGNATURES                                                            43


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                                     PART I

PRELIMINARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

    WHEN USED IN THIS ANNUAL REPORT ON FORM 10-K, THE WORDS "EXPECT,"
"ESTIMATE," "ANTICIPATE," "INTEND," "PREDICT," "BELIEVE," AND SIMILAR
EXPRESSIONS AND VARIATIONS THEREOF ARE INTENDED TO IDENTIFY FORWARD-LOOKING
STATEMENTS WITHIN THE MEANING OF AND SUBJECT TO THE SAFE HARBOR CREATED BY THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. FORWARD-LOOKING STATEMENTS
APPEAR IN A NUMBER OF PLACES IN THIS ANNUAL REPORT ON FORM 10-K AND INCLUDE
STATEMENTS REGARDING THE INTENT, BELIEF OR CURRENT EXPECTATIONS OF ELECTRONICS
BOUTIQUE, ITS DIRECTORS OR ITS OFFICERS WITH RESPECT TO, AMONG OTHER THINGS: (I)
TRENDS AFFECTING ELECTRONICS BOUTIQUE'S FINANCIAL CONDITION OR RESULTS OF
OPERATIONS; AND (II) ELECTRONICS BOUTIQUE'S BUSINESS AND GROWTH STRATEGIES.
READERS ARE CAUTIONED THAT ANY SUCH FORWARD-LOOKING STATEMENTS ARE NOT
GUARANTEES OF FUTURE PERFORMANCE AND INVOLVE RISKS AND UNCERTAINTIES, AND THAT
ACTUAL RESULTS OR OUTCOMES MAY DIFFER MATERIALLY FROM THOSE PROJECTED IN THE
FORWARD-LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS, INCLUDING THOSE SET
FORTH IN ITEM 1. "BUSINESS - RISK FACTORS".

ITEM 1.   BUSINESS

GENERAL

    Electronics Boutique Holdings Corp. ("Electronics Boutique") believes it is
among the world's largest specialty retailers of electronic games. We sell video
games and PC entertainment software, supported by the sale of video game
hardware, PC productivity software, PC accessories and related products. We
offer our products through our large and growing store base, which, as of
February 3, 2001, included 737 stores located in 46 states, Puerto Rico, Canada,
Australia, New Zealand and South Korea, operating primarily under the names
Electronics Boutique, EB GameWorld and Stop 'N Save Software and through our web
site at WWW.EBGAMES.COM, formerly known as WWW.EBWORLD.COM. In addition to our
retailing activities, we provide management services for Electronics Boutique,
plc ("EB-UK"), a leading specialty retailer of electronic games in the United
Kingdom, Sweden and Ireland. Our stores are primarily located in high traffic
areas in regional shopping malls and average 1,200 square feet in size.

    Our core customer is the electronic game enthusiast who demands immediate
access to new title releases and who generally purchases more video game titles
and PC entertainment software than the average electronic game consumer. We
believe that we attract the core game enthusiast due to our:

    - specialty store focus on the electronic game category,
    - ability to stock sought-after new releases,
    - breadth of product selection, and
    - knowledgeable sales associates.

    Our "FIRST TO MARKET" strategy establishes our stores and web site as the
destination of choice for electronic game enthusiasts. We believe that our
vendors recognize the importance of our core game enthusiast customer base and,
consequently, often reward us with disproportionately large allocations of
newly-released products. We plan to grow our revenues and operating income by:

    - expanding our domestic new store base,
    - focusing on online retailing,
    - increasing store productivity, and
    - pursuing international opportunities.

    We believe we were one of the first video game and PC entertainment software
specialty retailers to offer a web site with product reviews and online
purchasing. Our core customer tends to be Internet savvy, making e-commerce a
necessary and natural progression of our retailing platform. We believe our
success in store-based retailing, our strong market identity and existing
infrastructure differentiates EBGAMES.COM from other online retailers.


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RISK FACTORS

    DEPENDENCE ON NEW PRODUCT INTRODUCTIONS. We are highly dependent on the
introduction of new and enhanced video game and PC hardware and software for our
success. If manufacturers fail to introduce new games and systems, we would have
difficulty attracting and retaining customers to buy the products we sell. Any
failure to attract and retain customers could adversely affect our business.
Many of the factors that impact our ability to offer new products, and to
attract and retain customers, are largely beyond our control. These factors
include:

    - our dependence upon manufacturers to introduce new or enhanced video game
      systems,
    - our reliance upon continued technological development and the continued
      use of PCs,
    - our dependence upon software publishers to develop popular game and
      entertainment titles for future generation game systems or PCs, and
    - our the availability and timeliness of new product releases at our stores.

    VIDEO GAME SYSTEMS AND SOFTWARE PRODUCT CYCLES. Demand for video game
systems and software fluctuates in relation to the introduction of
next-generation hardware and related software titles. Following the introduction
of next-generation products, sales of the new products increase steadily, while
sales of the prior-generation products steadily decrease. Manufacturers have
historically introduced next-generation systems every four to five years. Peak
sales of prior-generation hardware tend to occur in the year of introduction of
next-generation systems, while peak sales of prior-generation software titles
tend to occur in the year following the peak of prior-generation hardware. If
leading video game systems manufacturers fail to introduce next-generation
systems, or fail to make significant enhancements to existing systems, our sales
of hardware systems and related titles will decrease, which decrease could have
a negative effect on our results of operations and financial condition.

    TECHNOLOGICAL OBSOLESCENCE. The video game and PC industries are
characterized by swiftly changing technology, evolving industry standards,
frequent new product introductions and rapid product obsolescence. These
characteristics require us to respond quickly to technological changes and to
understand their impact on our customers' preferences. In particular, many video
games and other entertainment software are readily available on the Internet.
The ability to download electronic games onto PCs or video game console systems
could make the retail sale of video games and PC entertainment software
obsolete. If this technology continues to expand our customers' ability to
access software through other sources, our revenues and earnings could decline.

    NEW STORE OPENINGS. Our growth will depend on our ability to open and
operate new stores profitably. We currently intend to open approximately 175 new
stores in the current fiscal year. Our ability to open new stores timely and
profitably depends upon several contingencies, many of which are beyond our
control. The contingencies include:

    - our ability to locate suitable store sites, negotiate acceptable lease
      terms, and build out or refurbish sites on a timely and cost-effective
      basis,

    - our ability to hire, train and retain skilled associates, and

    - our ability to integrate new stores into its existing operations.

    In addition, our services agreement with EB-UK significantly restricts our
ability to open stores in Europe. We cannot assure you that we will be able to
achieve our planned expansion or that our new stores will achieve sales and
profitability levels comparable to our existing stores.

    COMPETITION. The electronic game industry is intensely competitive and
subject to rapid changes in consumer preferences and frequent new product
introductions. We compete with:

    - video game and PC software specialty stores located in malls and other
      locations,
    - mass merchants,
    - toy retail chains,
    - online retailers,
    - mail-order businesses,
    - catalogs,
    - direct-to-consumer software publishers, and


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    - office supply, computer product and consumer electronics superstores.

    Increased competition may lead to reduced profit margins on video games and
PC entertainment software. In addition, customers can rent video games from many
video stores and cable television providers. Further, it is likely that other
methods of distribution will emerge in the future, which would result in
increased competition. Many of our competitors have longer operating histories
and significantly greater financial, managerial, creative, sales and marketing
and other resources than we have. We also compete with other forms of
entertainment activities, including movies, television, theater, sporting events
and family entertainment centers. If we do not compete effectively, our revenues
and earnings may be negatively affected.

    SEASONALITY AND QUARTERLY RESULTS. Our business is affected by seasonal
patterns. We historically generate our highest net sales, management fees and
net income during the fourth quarter, which includes the holiday selling season.
During the year ended February 3, 2001 ("fiscal 2001"), approximately 43% of our
net sales and all of our operating income were generated during the fourth
quarter. Accordingly, any negative trend in net sales during the holiday selling
season could hurt our results of operations for the quarter as well as for the
entire year.

In addition, our results of operations may fluctuate from quarter to quarter
depending upon a variety of factors, most of which we cannot control. These
factors include:

    - the timing of new product introductions and new store openings,
    - net sales contributed by new stores,
    - increases or decreases in comparable store sales,
    - poor weather conditions,
    - shifts in the timing of certain holidays or promotions, and
    - changes in merchandise mix.

    Any one or more of these factors could affect our business, financial
condition and results of operations, and this makes the prediction of our
results of operations on a quarterly basis difficult. Also, it is possible that
our quarterly results of operations may be below the expectations of public
market analysts and investors. This could negatively affect the price of our
common stock.

    DEPENDENCE ON SUPPLIERS. We rely heavily upon our suppliers to provide us
with new products as quickly as possible. We purchase a significant amount of
products from Nintendo of America ("Nintendo"), Electronic Arts, Inc.
("Electronic Arts"), Sega of America, Inc. ("Sega"), and Sony Computer
Entertainment ("Sony") and often receive shipments of new release products which
are disproportionately large relative to our share of the overall consumer
market. During fiscal 2001, we purchased products from Sony, Electronic Arts,
Nintendo and Sega, which represented 12.5%, 9.9%, 9.3% and 7.1%, respectively,
of our net purchases. We believe that the loss of any of these suppliers could
reduce our product offerings, which could cause us to be at a competitive
disadvantage. In addition, our financial performance largely depends upon the
business terms we obtain from suppliers, including competitive prices, unsold
product return policies, advertising and market development allowances, freight
charges and payment terms. Our failure to maintain favorable business terms with
our suppliers could negatively affect our ability to offer products to consumers
at competitive prices.

    During fiscal 2001, approximately one-third of our product purchases were
from domestic distributors of products manufactured overseas, primarily in Asia.
To the extent that our distributors rely on overseas sources for a large portion
of their products, any event causing a disruption of imports, including the
imposition of import restrictions, could hurt our business. In addition, in the
recent past, many Asian currencies were devalued significantly in relation to
the U.S. dollar, and financial markets in Asia experienced significant turmoil.
We cannot assure you that these events will not occur again in the future, and
if these events do occur, our business could be harmed. Trade restrictions in
the form of tariffs or quotas, or both, applicable to the products we sell could
also affect the importation of those products generally and could increase our
cost and reduce our supply of products available to us.

    GROWTH OF INTERNET AS MEANS OF E-COMMERCE. If the e-commerce market does not
grow or grows more slowly than we expect, our business may not grow as quickly
as we anticipate. A number of factors could prevent the acceptance and growth of
e-commerce, including the following:


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    - e-commerce is at an early stage and buyers may be unwilling to shift
      their traditional purchasing to online purchasing,

    - increased government regulation or taxation may adversely affect the
      viability of e-commerce, and

    - negative publicity and consumer concern about the reliability, cost,
      ease of access, quality of services, capacity, performance and security
      of e-commerce transactions could discourage its acceptance and growth.

    E-COMMERCE STRATEGY. Our e-commerce strategy depends in part on achieving
sales growth while reducing marketing costs and controlling other operating
expenses. If the growth in online sales is not sufficient to offset increases in
these expenses, our results of operations will be negatively affected.

    RISK OF INTERNATIONAL OPERATIONS. We have retail operations in various
foreign countries, including Canada, South Korea, New Zealand and Australia, and
we intend to pursue opportunities that may arise in these and other countries.
Net sales in these foreign countries represented 14.3% of our net sales in
fiscal 2001. We are subject to the risks inherent in conducting business across
national boundaries, any one of which could negatively impact our business.
These risks include:

    - economic downturns,
    - currency exchange rate fluctuations,
    - changes in governmental policy,
    - international incidents,
    - military outbreaks,
    - government instability,
    - nationalization of foreign assets, and
    - government protectionism.

    We cannot assure you that one or more of these factors will not impair our
current or future international operations and, as a result, harm our overall
business.

    LEASE EXPIRATIONS AND TERMINATIONS. As of February 3, 2001, 91 of our stores
(12.3% of all stores) were operated under leases with terms that expire in less
than one year. We cannot assure you that we will be able to maintain our
existing store locations as leases expire, that we will be able to locate
suitable alternative sites on acceptable terms or find additional sites for new
store expansion. If we fail to maintain existing store locations, locate to
alternative sites or find additional sites for new store expansion, our revenues
and earnings may decline.

    DEPENDENCE ON KEY PERSONNEL. Our success depends upon our ability to
attract, motivate and retain key management associates for our stores and
skilled merchandising, marketing and administrative personnel at our
headquarters. In the past, we have been successful in maintaining the continuity
of our management team, including our executive officers, Joseph J. Firestone,
our President and Chief Executive Officer, Jeffrey W. Griffiths, our Senior Vice
President of Merchandising and Distribution, Seth P. Levy, our Senior Vice
President and Chief Information Officer and the President of EBWORLD.COM, John
R. Panichello, our Senior Vice President and Chief Financial Officer and
President of BC Sports Collectibles and EB GameWorld, James A. Smith, our Senior
Vice President of Finance and Steve Morgan, our Senior Vice President of Stores.
However, we cannot assure you that we will continue to be successful in
attracting and retaining such personnel.

    CONTROL BY MAJORITY SHAREHOLDER. EB Nevada Inc. ("EB Nevada"), a company
indirectly controlled by James Kim, his wife and certain trusts for the benefit
of his children, beneficially own approximately 61.1% of the outstanding shares
of common stock. Accordingly, the Kim family effectively controls Electronics
Boutique. Under a credit facility we have with Fleet Capital Corporation, the
Kim family is obligated to own, directly or indirectly, not less than 25% of the
issued and outstanding capital stock of Electronics Boutique.


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INDUSTRY OVERVIEW

    The electronic game industry is segmented into two primary product
platforms: video games and PC entertainment software.

    VIDEO GAMES. Video game play requires two components, video game consoles,
known as hardware, and video game titles, known as software. Video game consoles
are connected to a free-standing monitor or, typically, a television set. Video
game titles are small cartridges or CD-Roms that are inserted into a video game
console. From 1996 to September 1999, the video game market was dominated by two
manufacturers, Nintendo and Sony, each of which manufactures proprietary
hardware in the form of console systems and publishes game titles that run on
their console systems but cannot run on their competitors' systems. In September
1999, the Sega Dreamcast console system was introduced in the U.S, and in
October of 2000, Sony introduced the PlayStation 2. Third-party publishers also
produce a wide range of game titles for each of these major hardware systems.
Growth in the industry has been driven by the continued improvements in systems
technology, the substantial growth in the number of titles available across game
categories and the emergence of well-capitalized software publishers with
significant advertising budgets to support new releases.

    Total domestic retail sales of video game titles, hardware and accessories
were approximately $6.3 billion in 2000, which represents a decrease of 6% from
1999. This decrease was primarily the result of delays in the shipments of the
new Sony PlayStation 2 system. Up until 30 days prior to the launch, Sony was
planning to have one million units available at launch and 2 million units sold
by the end of the calendar year. However, Sony only delivered half of each of
these amounts. In addition the Sega Dreamcast console and related software
titles failed to achieve expectations in its first full year of sales and Sega
announced that they were discontinuing the Dreamcast in 2001. However, as with
each prior generation, the introduction of a new hardware technology has led to
an increase in the installed base of game console systems. Enhanced
technological features of new hardware expand gaming capabilities, encourage
existing players to upgrade their hardware platforms, and simultaneously attract
new video game players to purchase their first systems. Sony, even with the
initial product shortage problems, is well positioned to take advantage of these
opportunities in 2001.

    The PlayStation 2 represents a significant improvement in graphics
performance, processing power and audio quality over the current 32/64 bit
systems. Nintendo and Microsoft have also announced plans to introduce their
next-generation consoles. Nintendo's Gamecube console, expected to be launched
in the third quarter of 2001, will also feature significant performance
enhancements over the current N64 system and will be based on CD technology as
compared to the current cartridge-based technology. Microsoft's X-Box, also
expected to be introduced in the third quarter of 2001, is expected to provide
significant graphical improvement over current generation systems as well as
internet connectivity. Finally, Nintendo has announced the launch of the Game
Boy Advance for June 2001. This is the successor of the highly successful Game
Boy that was first launched in 1989. The launch of four major platforms in a
twelve month span is unprecedented in the history of this industry thus
beginning a new expansion cycle.

    At year end 2000, the current installed base of video game hardware systems
in the United States totaled 24.9 million Sony PlayStation units, 15.7 million
Nintendo 64 units, 2.4 million Sega Dreamcast units, and 32 million Game Boy
Color units.

    PC ENTERTAINMENT SOFTWARE. PC entertainment software is generally sold in
the form of CD-Roms and played on multimedia PCs featuring fast processors,
expanded memories, and enhanced graphics and audio capabilities. The domestic
installed base of multimedia PCs has increased from approximately 14 million
units in 1995 to approximately 50.7 million units in 2000. Domestic unit sales
of PC entertainment software have increased from approximately 23 million units
in 1995 to approximately 66 million units in 2000. Domestic retail sales of PC
entertainment software totaled approximately $1.4 billion in 2000, an increase
of approximately 5.6% over 1999. We believe that multimedia PCs priced well
below $1,000 will contribute to growth in PC unit sales and broaden the appeal
of home PCs as an alternative source of in-home entertainment. Worldwide, the
installed base of multimedia PCs and sales of PC entertainment software has
grown at a rate comparable to the rate of growth in the United States.


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    CUSTOMERS. We believe the typical electronic game consumer is male, between
the ages of 14 and 34, and lives in a household with annual income in excess of
$50,000. According to the Millennium Gamer Study, owners of video game hardware
systems purchase an average of 3.2 game titles per year. We believe that many
electronic game players purchase video game titles as well as PC entertainment
software. Electronic games are principally sold through retail channels,
including specialty retailers like Electronics Boutique, as well as mass
merchants, toy retail chains, electronics retailers, computer retailers,
wholesale clubs, the Internet and mail order.

BUSINESS STRATEGY

    We seek to enhance our position as one of the world's largest specialty
retailers of video game titles and PC entertainment software.

    BREADTH OF TITLE SELECTION. We offer our customers an extensive selection of
video game titles and PC entertainment software at competitive prices. Our
typical store offers approximately 1,350 titles at any given time from over 90
video game and PC entertainment software vendors. Most of these titles are also
available on our web site. We continuously update our title selection in each
store to reflect the tastes and buying patterns of the store's local market. We
carry game titles, which are compatible with all major video game hardware
systems and PCs. In addition to video game titles and PC entertainment software,
we offer a complementary line of productivity and educational software and PC
and video game accessories and peripheral products, including graphics
accelerators, joysticks, memory cards, books and magazines. By offering all
major video game hardware systems and providing a broad but focused assortment
of electronic game software and accessories, we seek to establish our stores and
web site as the destination of choice for electronic game enthusiasts.

    IMMEDIATE AVAILABILITY OF NEW RELEASES. We strive to be the first in our
markets to offer new video game and PC entertainment software titles upon their
release. New release titles are often preceded by substantial publicity in the
form of print advertisements and reviews in publications and, increasingly, are
promoted through television advertisements. This publicity tends to create high
levels of demand for new releases among electronic game enthusiasts, often well
in advance of release dates. This demand has afforded us an important marketing
opportunity to create excitement surrounding our stores and our web site. To
assure our customers immediate access to new releases, we offer our customers
the opportunity to purchase video games and PC software prior to their release
through the "EB Pre-Sell Program," which guarantees customers a copy of a new
release immediately after its launch. We also have established the "EB Reserve
List," which entitles participants on this list to be notified when a game has
arrived in our stores. On average, we introduce 20 new game titles in our stores
and on our web site each week.

    HIGHLY EFFECTIVE INVENTORY MANAGEMENT SYSTEM. We emphasize strict inventory
policies in order to manage over 2,000 SKUs, including video game titles, PC
entertainment software, video game consoles, accessories and related products.
Our inventory management system enables us to maximize sales of new-release
titles and avoid markdowns as titles mature. We minimize our inventory risk by:

    - conducting extensive research on new-release titles to forecast
      anticipated daily sell-through,
    - utilizing POS polling technology to provide daily sales, margin and
      inventory reports to our merchandising staff,
    - managing inventory on a store-by-store basis to address local customer
      merchandise preferences, and
    - replenishing store-level inventories daily from our fully-automated
      distribution centers.

We introduce an average of 10 new SKUs in our stores and on our web site each
day. As a result of these inventory management initiatives, we have achieved
desired in-stock positions and our inventory turns in fiscal 2001 were 4.8x. In
addition, our fiscal 2001 inventory shortage was less than 0.6% as a percentage
of sales.

    DISCIPLINED STORE OPERATIONS. Our management team exercises significant
control over all aspects of our store operations, from product research,
purchasing and distribution to real estate selection, store development, POS
financial reporting and sales training. We believe that this commitment to
operational control enables us to:

    - operate substantially all of our stores on a profitable basis,
    - identify opportunities to improve store productivity quickly, and


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    - react to shifts in product pricing and consumer purchasing trends.

    KNOWLEDGEABLE SALES ASSOCIATES. We believe that our knowledgeable sales
associates provide us with an important competitive advantage over mass
merchants, toy retail chains and office supply, computer product and consumer
electronics superstores, all of which compete with us, but generally offer much
lower levels of customer service in the electronic game category than we do. We
provide all of our sales associates extensive training on video game and PC
entertainment software products, system requirements and selling techniques.
Many of our sales associates are also electronic game enthusiasts. We facilitate
training through vendor-sponsored EB University seminars, held for store
managers and field management associates, and through regularly scheduled
in-store seminars conducted by our District Managers. In addition, we encourage
sales associates to learn about their customers' game preferences. With this
knowledge, sales associates can introduce customers to a selection of electronic
games and accessories that may suit their preferences or enhance customers'
overall game experience. In addition, our sales associates advise customers of
pending new releases suited to the customer's expressed interests.

    VALUE PRICING AND AFFINITY PROGRAMS. In an effort to offer maximum value to
our customers and discourage comparison shopping, we maintain an everyday low
pricing policy and support this policy with our EB Pre-Sell and EB Reserve List
affinity programs. An extensive selection of merchandise and a high level of
customer service complement our "everyday low price" policy.

GROWTH STRATEGY

    DOMESTIC NEW STORE EXPANSION. We plan to expand our domestic retail
operations by opening approximately 135 stores in both existing and new markets
in the year ending February 2, 2002 ("fiscal 2002"). In fiscal 2001, we opened
84 net new domestic stores. Our real estate team applies standardized
site-selection criteria to secure the best location for our stores when entering
a new market or expanding within an existing market. We believe our store
formats can operate profitably in high traffic/high rent malls as well as in
lower traffic/lower rent malls, central business districts and strip shopping
centers. This flexibility provides us with an extensive selection of locations
for future store openings.

    EXPANSION OF ONLINE RETAILING. We believe that our core customer base
maintains a strong interest in transacting purchases online, and we have gone
far to surpass user expectations. As a result, growth of both audience and
revenue continues to be substantial. We believe our e-commerce web site,
WWW.EBGAMES.COM, has set the standard for quality in the category, in terms of
both information and design, leveraging all that the Web can facilitate, in
combination with Electronics Boutique's industry expertise. Online information
and the ability to both pre-order and purchase are elements demanded by our
highly aware audience, and as the overall gamer audience grows, so will the
importance of this resource. In the future, we expect to maintain our leadership
with the core audience, even as channels of distribution diversify. While online
distribution of game content may increase, we believe that there continues to be
a place for an aggregator of entertainment product possessing our unique
understanding of this group.

    STORE PRODUCTIVITY. We constantly strive to increase the productivity of our
stores by focusing on the following areas:

    - Inventory Management and Controls. We use our POS and inventory management
systems, including our fully automated distribution centers, to improve our
merchandise mix and in-stock positions, increase inventory turns and drive down
shrinkage which, at less than 0.6% as a percentage of sales in fiscal 2001, we
believe is among the lowest of mall-based retailers.

    - Managing Store Payroll. We seek to optimize store payroll expense by
utilizing our POS reporting systems to assure the best possible match of sales
associate floor coverage to customer traffic. In an effort to enhance our store
payroll strategy, we utilize a system, known as ShopperTrak, that electronically
measures store customer traffic throughout the day and provides us with an
analysis of sales conversion rates by store and by sales associate. This system
allows us to monitor and to improve our sales conversion rates.

    - Pre-owned Electronic Games. As a result of the proliferation of new titles
and the tendency of electronic game players to seek new game challenges after
mastering a particular title, a growing market for pre-owned video game


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titles has evolved in recent years. We offer our customers a store credit for
their pre-owned video game titles. Sales of pre-owned video game titles generate
higher margins than new titles and their availability in our stores tends to
attract our core game enthusiast customer. We believe that a significant
opportunity continues to exist to increase sales of pre-owned game titles and we
have implemented a number of marketing and merchandising programs to increase
our participation in the growing market for pre-owned titles.

    INTERNATIONAL OPPORTUNITIES. As of February 3, 2001, we operated 56 stores
in Australia, 69 stores in Canada, nine stores in New Zealand and two stores in
South Korea. In fiscal 2001, we opened 13 net new stores in Australia, nine
stores in New Zealand and 15 stores in Canada. We intend to open approximately
15 stores in Australia, five stores in New Zealand, and 20 stores in Canada
during fiscal 2002. We also provide management services to EB-UK which, as of
February 3, 2001, operated over 300 stores in the United Kingdom, Ireland and
Sweden. We believe that our current international presence will enable us to
leverage our existing distribution and management infrastructure for further
expansion.

RETAIL OPERATIONS

    As of February 3, 2001, we operated a total of 737 stores in 46 states,
Puerto Rico, Canada, Australia, New Zealand and South Korea, primarily under the
names Electronics Boutique, EB GameWorld and Stop 'N Save Software.

    STORE FORMATS. Electronics Boutique stores are specialty retail stores that
offer video game hardware and game titles, PC entertainment, educational and
productivity software, and video game and PC accessories. Electronics Boutique
and EBX stores are located primarily in high traffic areas in regional shopping
malls and generally stock over 2,000 SKUs. The typical mall-based Electronics
Boutique store is approximately 1,200 square feet, but stores range in size from
425 square feet to 2,800 square feet, with retail selling space averaging
approximately 90% of total square footage. We believe that our stores generate
sales per square foot that are among the highest of any mall-based retailer.

    Stop 'N Save Software and EB GameWorld stores are generally larger-format
stores located in urban areas, central business districts, and strip and power
shopping centers. We opened our first Stop 'N Save Software store in 1995 and
our first EB GameWorld store in 2000. Our merchandising strategy at these stores
resembles our merchandising strategy at our Electronics Boutique stores. Stop 'N
Save Software and EB GameWorld stores range in size from 1,250 to 5,000 square
feet, with retail selling space averaging approximately 90% of total square
footage.

    In addition, we operate 19 stores that sell sports collectibles and
memorabilia under the name BC Sports Collectibles. We believe the customer base
of BC Sports Collectibles shares many of the same demographic characteristics as
the customer base of our Electronics Boutique stores. We believe BC Sports
Collectibles stores generate higher sales volumes if they are located in
metropolitan areas, which are in close proximity to cities with several
professional sports franchises. We locate our BC Sports Collectibles stores in
malls and strip and power shopping centers. The stores generally range in size
from 1,000 to 5,000 square feet.

    EBKids is a new concept which offers an assortment of interactive and
developmental toys and family-friendly, non-violent software that we believe
will appeal to a younger customer, ages 2-12 years old. This new store format
and product offering is designed to give parents and young children a shopping
destination which is family-friendly, free of game titles that include mature
content and which capitalizes on the Electronics Boutique brand name. We opened
our first EBKids store in September 1999 and 17 more in fiscal 2001.

    SITE SELECTION. We visit numerous mall and strip and power shopping center
sites throughout the year in the United States and in several foreign countries
in search of suitable store locations. Our standardized site selection criteria
include:

    - lease terms,
    - population demographics,
    - psychographics,
    - traffic count,


                                       8
<PAGE>

    - store-front visibility and presence,
    - adjacencies,
    - competition, and
    - accessible parking.

    We believe our store formats can operate profitably in high traffic/high
rent malls as well as lower traffic/lower rent malls and shopping centers.
Accordingly, we believe that there are a large selection of locations available
for future sites. We view lease terms as the most critical element in our site
selection process. We have used our knowledge of our market areas to negotiate
favorable lease terms at many of our store locations, which has resulted in
lower occupancy costs. We regularly review the profitability and prospects of
each of our stores and evaluate whether any underperforming stores should be
closed or relocated to more desirable locations.

    STORE ECONOMICS. We believe that our store concepts offer attractive unit
economics. We estimate that the average Electronics Boutique store had net sales
of approximately $1.2 million in fiscal 2001. The average cost to open an
Electronics Boutique store in fiscal 2001 (exclusive of inventory costs) was
approximately $144,000. These costs include furniture, fixtures, leasehold
improvements and equipment. Our stores have an average opening inventory of
$150,000. The cost to open an international store is approximately the same in
U.S. dollars as the cost to open a domestic store. Typically, our new stores
have generated a positive store operating contribution within the first 12
months of operations.

    STORE OPERATIONS. Our North American store base (in the U.S., Canada, and
Puerto Rico) is divided into 10 geographic regions. These regions are supervised
by a Senior Vice President of Stores, 11 Regional Vice Presidents/Directors and
60 District Managers. Each District Manager is responsible for approximately 11
stores. Our stores in Australia, New Zealand and South Korea are supervised by a
Managing Director, a District Manager and six Area Managers. Each of our stores
has a full-time manager and a full-time assistant manager in addition to hourly
sales associates, most of whom work part-time. The number of hourly sales
associates fluctuates depending on our seasonal needs. Our domestic stores are
open seven days per week and generally ten hours each day. We operate our
international stores in a manner substantially similar to our domestic stores.

ONLINE RETAILING

    In April 1999, we established EBWorld.com as a separate e-commerce
subsidiary to accelerate the growth of our Internet business. In fiscal 2001, we
recorded 42.5 million visits to our web site compared to 19.6 million in fiscal
2000. In addition, revenues from our web site in fiscal 2001 were $25 million
compared to revenues of $14.1 million in fiscal 2000. In February 2001, we
re-branded our e-commerce web site to EBGAMES.COM.

    The Internet represents a logical extension of our traditional store-based
retail business. We believe that our customers are generally more familiar with
the Internet and with online retailing than are most consumers. In-store and
online research confirms that our web site's detailed product reviews, game
previews, new release schedules, product notification services, industry news
and advanced search capabilities appeal to a significant portion of the
"enthusiast" audience. Store buying power provides us with a significant
advantage over online-only competitors. Experience has proven that the breadth
of our store-based operations and the strength of the Electronics Boutique brand
name differentiate EBGAMES.COM from other online competition. Our successes
enabled us to purchase the largest "pure Internet play" competitor in the
category; The Gamedealer.com brand was acquired mid-year and continues to
generate sales daily. EBGAMES.COM utilizes our merchandising expertise to
leverage our strong vendor relationships and provide online customers with an
extensive selection of titles. Further, EBGAMES.COM leverages our distribution
and order fulfillment capabilities, which have supported our direct-to-consumer
catalog operations for more than 10 years.

    Our focus is on strategic relationships enabling growth, which take a
variety of forms. Relationships in which we provided commerce functionality for
both hardware and software vendors both broadened our reach and drove
incremental sales at minimal or no cost. A partnership enabling sales of a broad
range of consumer electronics products through 800.com has exceeded expectations
of return. As we look ahead, we anticipate further opportunities for
capitalizing on the credibility of EBGAMES.COM, and the relationships of
Electronics Boutique as a whole, to drive our positioning in all forms of online
game sales. We support these efforts with integrated marketing placements in
Snowball (IGN.com), MSN's Internet Game Zone, and AOL.


                                       9
<PAGE>

MANAGEMENT SERVICES

    As of February 3, 2001, we provided management services for over 300 stores
and department store-based concessions in the United Kingdom, Ireland and Sweden
under a contract with EB-UK, a corporation organized under the laws of the
United Kingdom.

    EB-UK is one of the leading specialty retailers of electronic games in the
United Kingdom and Ireland. EB-UK's business strategy is substantially similar
to our business strategy. EB-UK strives to offer its customers an extensive
selection of video games and PC entertainment software, immediate availability
of new releases, knowledgeable sales associates, value pricing and other
customer incentive programs. EB-UK also has a highly effective inventory
management system and distribution center. EB-UK stores are generally located in
malls and "high street" shopping districts.

    Under the terms of the UK Services Agreement, we provide management services
to EB-UK, including assistance with ordering and purchasing inventory, store
design and acquisition, advertising, promotion, publicity and information
systems. In exchange, EB-UK is responsible for the payment of fees, payable, at
our option, in cash or EB-UK stock, equal to 1.0% of net sales plus a bonus
calculated on the basis of net income in excess of a pre-established target set
by EB-UK. In May 1999, EB-UK acquired a competitor in the United Kingdom, which
should serve to increase EB-UK's net sales in the future. The UK Services
Agreement provides for EB-UK to have a right of first refusal on any business
opportunity of which we become aware in Europe (excluding Scandinavia) relating
to electronic game retailing. The UK Services Agreement prohibits us from
competing with EB-UK in the United Kingdom or Ireland during the term of the UK
Services Agreement, and for one year after its termination. The UK Services
Agreement has an initial term expiring on January 31, 2006. EB-UK's right to use
the Electronics Boutique name terminates six months after the UK Services
Agreement expires on January 31, 2006.

PRODUCTS

    Our product line consists of video game titles, PC entertainment software
titles, video game hardware systems, related products and toys, trading cards,
and accessory products. We also market selected PC productivity and educational
software titles. Our in-store inventory at any given time consists of over 2,000
SKUs.

    VIDEO GAME TITLES AND PC ENTERTAINMENT SOFTWARE. We carry over 650 video
game titles (excluding pre-owned games) and over 1,000 active PC entertainment
software SKUs at any given time. We purchase video game titles directly from the
leading manufacturers, which include Nintendo, Sega and Sony, as well as a
variety of third-party game publishers, such as Electronic Arts, THQ Inc. and
Activision, Inc. We rank as one of the larger domestic customers of video game
products from these publishers. We currently purchase titles from approximately
90 vendors. We market electronic games across a variety of genres, including
Action, Strategy, Adventure/Role Playing, Simulation, Sports, Children's
Entertainment and Family Entertainment. We maintain a broad selection of popular
new-release titles, which we define as titles that have been available for no
more than six weeks from the date of their release.

    VIDEO GAME HARDWARE. We offer the video game hardware systems of all major
manufacturers, including Sony's PlayStation 2 and PlayStation one, Nintendo 64,
Nintendo Game Boy and the Sega Dreamcast. In support of our strategy to be the
destination of choice for electronic game enthusiasts, we aggressively promote
the sale of video game hardware systems. We believe that this policy increases
store traffic and promotes customer loyalty, leading to increased sales of video
game titles, which typically have higher gross margins than video game hardware
systems. We also offer extended service agreements and extensions of
manufacturer warranties of the video game systems.

    RELATED PRODUCTS AND TRADING CARDS. We offer an assortment of trading cards,
such as Pokemon and Star Wars products, that appeal to the same core customer
group as our video game customer. We also offer action figures that are related
to video game characters.

    PC EDUCATION AND PRODUCTIVITY SOFTWARE. In addition to our category dominant
assortment of video game and PC entertainment software titles, we offer a
complementary selection of educational, personal productivity and finance
software titles. We believe that these titles also appeal to our core customer
base.


                                       10
<PAGE>

    ACCESSORIES. In recent years, the growing popularity of electronic games has
led to an increase in sales of accessory products, which generally have higher
gross margins than hardware and software products. Accessory products enhance
the total gaming experience. Presently, we offer approximately 500 accessory
product SKUs, including 3-D graphics accelerators, memory cards and joysticks.
We also market instructional books on the most popular electronic game titles.

INVENTORY MANAGEMENT AND DISTRIBUTION

    INVENTORY MANAGEMENT. We carefully manage our inventory to minimize the risk
associated with introducing new products. Our merchandising staff evaluates
potential products by testing many pre-release samples received from publishers,
reading game reviews, interviewing customers and store associates, and studying
vendor marketing plans. Our centralized merchandising staff also analyzes the EB
Pre-Sell Program and EB Reserve List information and other data to estimate
initial demand and the life cycle for a new release. We then use our new product
analyses to plan initial allocations among our stores and web site of the total
initial purchase of a newly-released title.

    In 2000, we implemented a highly sophisticated allocation and forecasting
tool, SCORE, which was developed by Supply Chain Solutions. This is a
significant enhancement over our already highly regarded previous package. SCORE
provides the merchandise staff with a greater level of detail and enables us to
specifically design individual store inventory mix based upon a number of
criteria including history, competition, and time in transit, as examples.
Previously our system was reactive and based its actions on prior sales
activity. SCORE will anticipate those sales and make purchasing and allocation
recommendations resulting in increased sales opportunities and savings in
freight, handling, markdowns and returns.

    DISTRIBUTION. Our primary distribution center occupies approximately 93,000
square feet of our facility located in West Chester, Pennsylvania. We opened an
additional 80,000 square foot distribution facility at our West Chester,
Pennsylvania site in November 1999. In addition, in May 2000, we leased a
200,000 square foot distribution center in Louisville, Kentucky to support flow
through operations on new releases, top selling products, and web fulfillment.
Also in 2000, we expanded our international distribution support by building a
120,000 square foot facility in Canada and a 70,000 square foot facility in
Australia. These facilities allow us to replenish our stores on a daily basis,
thereby reducing inventory levels and increasing inventory turns, while
supporting our "FIRST TO MARKET" new-release strategy. Our rapid processing
capability in our distribution center is facilitated by several advanced
inventory management technologies, including paperless picking and radio
frequency support. Our ability to rapidly process incoming shipments of
new-release titles quickly and distribute them to all of our stores either that
same day or by the next morning enables us to meet peak demand. We also
implemented a new Warehouse Management System, LogPro from Intrepa in 2000. This
powerful tool will enable us to better plan our work and make more efficient use
of carriers, thus providing improved productivity and labor and freight savings.
We also believe that our distribution network provides a competitive advantage
for EBGAMES.COM since our distribution and inventory management systems enable
us to provide immediate delivery service to our online customers.

    During peak sales periods, we may enter into short-term arrangements for
additional retail distribution centers to ensure timely restocking of all of our
stores. We have also developed a flexible third-party network to provide
additional regional distribution support for new product releases.

MARKETING

    IN-STORE PROMOTIONS. Our Electronics Boutique stores are primarily located
in high traffic, high visibility areas in regional shopping malls. Accordingly,
our marketing efforts are designed to draw mall patrons into our stores through
the use of window displays and other attractions visible to shoppers in the mall
concourse. Inside the stores, we feature selected products through the use of
vendor displays, signs, fliers, point of purchase materials and end-cap
displays. We receive cooperative advertising and market development funds from
manufacturers, distributors, software publishers and accessory suppliers to
promote their respective products.

    THE EB PRE-SELL PROGRAM AND THE EB RESERVE LIST. The EB Pre-Sell Program
offers our customers the opportunity to purchase video games and PC software
prior to their release, and the EB Reserve List entitles participants to be
notified when a game has arrived in our stores. Customers who participate in the
EB Pre-Sell


                                       11
<PAGE>

Program pay for a game prior to its release and may receive a promotional gift
in connection with the purchase (such as a t-shirt). The EB Pre-Sell Program and
the EB Reserve List enable our customers to receive a new product on the first
day it is available in our stores and on our web site, and are designed to
enhance our reputation as the destination of choice for electronic game
enthusiasts.

    CATALOGS. We publish eight or more full color catalogs each year, which
range in size from 48 to 100 pages and feature a broad array of products. The
cost of these catalogs is funded by our software, hardware and accessories
vendors. The catalogs are available in our stores and are mailed to several
hundred thousand households from our proprietary customer lists. The catalogs
are also inserted in leading industry magazines.

    EBGAMES.COM. Online marketing is focused on partnerships with other
entities, such as 800.com, PacSun.com, and Sprite.com, that combine low cost
with the ability to go beyond the limitations of conventional ad placements. On
an ongoing basis, we rigorously assess opportunities in media placements;
positioning endemic advertising in Game-focused magazines, as well as online
with Snowball (IGN.com), MSN's Internet Game Zone, and AOL.

    PRE-OWNED GAMES. Video game software has a useful life of thousands of
plays. As a result of the proliferation of new titles and the tendency of
electronic game players to seek new game challenges after mastering a particular
title, a growing market for pre-owned video game titles has evolved. We offer
our customers a store credit for their pre-owned video game titles, which can be
applied towards the purchase of new or pre-owned products. We then resell the
pre-owned video game titles at discount prices, but with gross profit margins
higher than those for new video game titles. We believe our wide assortment of
pre-owned video game titles distinguishes us from our competitors.

    OTHER MARKETING PROGRAMS. We provide our customers with a liberal return
policy. Our customers can return opened software products for a full credit
within ten days after purchase. We maintain an "everyday low pricing" policy.

TRAINING AND DEVELOPMENT

    We place an emphasis on training and developing our sales associates and
store managers. We believe that our training and developmental programs make our
sales associates and store managers more knowledgeable and enthusiastic about
our product offerings, providing us with an important competitive advantage over
mass merchants, toy retail chains and electronics and computer superstores. We
provide training and development at the store level, through regularly scheduled
seminars conducted by our District Managers, and through EB University. EB
University is a vendor-sponsored, multiday seminar encompassing sales training,
extensive product demonstrations and a variety of team building exercises. In
October 2000, we hosted our EB University seminar in Orlando, Florida, where
substantially all of our store and field managers were present. This event was
attended by 126 vendors, displaying and demonstrating their latest product
offerings.

MANAGEMENT INFORMATION SYSTEMS.

    Our primary management information system is a customized version of the
AS400-based JDA Merchandise Management System. We have made proprietary
enhancements to this program, which enable us to analyze total, comparative and
new store sales and inventory data at the company, region, district, and store
levels.

    Additional revisions to the program have enhanced analysis of top selling
items, new-release sales and gross margin item rankings. We operate our own
proprietary store POS and back office systems and believe this provides a
strategic advantage by allowing us to make fast enhancements to meet business
opportunities. We have integrated the ShopperTrak customer counting technology
into our POS and our AS400 system. This combination of technology provides
centralized access to store traffic and sales conversion information by store
and hour at our store locations.

    In fiscal 2001, we enhanced our capabilities for replenishment and inventory
needs forecasting, with the implementation of SCORE and for warehouse inventory
management through Logistics Pro. These new systems allow us to keep our stores
in stock at optimum levels, and move inventory as efficiently as possible.


                                       12
<PAGE>

    We spent $3.5 million for information system improvements in fiscal 2001. We
have budgeted $1.5 million for fiscal 2002 for additional improvements.

VENDORS

    With the exception of certain personal productivity software titles and
accessories, we purchase substantially all of our products directly from
manufacturers and software publishers. Our top 25 vendors accounted for
approximately 79% of our purchases in fiscal 2001. Our largest vendors in fiscal
2001 were Sony, Electronics Arts, Nintendo and Sega, which accounted for 12.5%,
9.9%, 9.3% and 7.1%, respectively, of our net purchases. No other vendor
accounted for more than 5.0% of our software or accessory purchases during
fiscal 2001. We believe that maintaining and strengthening our long-term
relationships with our vendors is essential to our operations and continued
expansion. We have no contracts with trade vendors and conduct business on an
order-by-order basis, a practice that is typical throughout the industry. We
believe that we have very good relations with the vendor community.

COMPETITION

    The electronic game industry is intensely competitive and subject to rapid
changes in consumer preferences and frequent new product introductions. We
believe that key competitive factors are:

    - ability to procure high-demand product,
    - knowledgeable service,
    - price,
    - reputation, and
    - shopping environment.

    We compete with other video game and PC software stores located in malls, as
well as with mass merchants, toy retail chains, mail-order businesses, catalogs,
direct sales by software publishers, online retailers, and office supply,
computer product and consumer electronics superstores. In addition, video games
are available for rental from many video stores. Further, other methods of
retail distribution may emerge in the future which would result in increased
competition. Some of our competitors have longer operating histories and
significantly greater financial, managerial, creative, sales and marketing and
other resources than us. We also compete with other forms of entertainment
activities, including movies, television, theater, sporting events and family
entertainment centers. Our ability to retain our existing customers and attract
new customers depends on numerous factors, some of which are beyond our control.
These factors include the continued introduction of new and enhanced video game
and PC hardware and software, and the availability and timeliness of new product
releases at our stores.

TRADEMARKS/REGISTRATIONS

    We possess registered trademarks for Electronics Boutique(TM), EBX(TM) and
Stop 'N Save Software(TM). We also possess trademarks for BC Sports
Collectibles(TM) and EBWORLD.COM(TM) as well as other registered trademarks and
service marks, both in the United States and in certain foreign jurisdictions.
We have trademarks pending for EB Kids, EB GameWorld and EBGAMES.COM.

    We believe our trademarks are valuable and intend to maintain our trademarks
and their related registrations. We do not know of any pending claims of
infringement or other challenges to our right to use our marks in the United
States or elsewhere. We have no patents, licenses, franchises or other
concessions which are considered material to our operations.

ASSOCIATES

    As of February 3, 2001, we had approximately 5,000 non-seasonal associates,
of which approximately 2,700 were employed on a part-time basis. In addition,
during the calendar 2000 peak holiday shopping season, we hired approximately
960 temporary associates. We believe that our relationship with our associates
is good. None of our associates is represented by a labor union or is a member
of a collective bargaining unit.


                                       13
<PAGE>

ITEM 1A.   EXECUTIVE OFFICERS OF ELECTRONICS BOUTIQUE

    The following table sets forth certain information regarding the executive
officers of Electronics Boutique:

<TABLE>
<CAPTION>

      Name               Age        Position
      ----               ---        --------
<S>                      <C>        <C>
Joseph J. Firestone      69         President, Chief Executive Officer and Director

Jeffrey W. Griffiths     50         Senior Vice President of Merchandising and Distribution

John R. Panichello       39         Senior Vice President and Chief Financial
                                       Officer; President, BC Sports Collectibles

Seth P. Levy             43         Senior Vice President and Chief Information
                                       Officer; President, EBWorld.com

James A. Smith           45         Senior Vice President of Finance

Steve Morgan             49         Senior Vice President of  Stores
</TABLE>

    Joseph J. Firestone. Mr. Firestone has served as the President, Chief
Executive Officer and a Class III Director of Electronics Boutique since March
1998. Mr.Firestone served as the President of Electronics Boutique's
predecessor, EB, since February 1984, and the President and Chief Executive
Officer of EB since February 1995. Mr. Firestone served as a director of EB-UK
from May 1995 until November 1999. Mr. Firestone also serves on the Executive
Advisory Board of the Center for Retailing Education and Research of the
University of Florida and as a Director of the National Retail Federation.

    Jeffrey W. Griffiths. Mr. Griffiths has served as Electronics Boutique's
Senior Vice President of Merchandising and Distribution since March 1998. Mr.
Griffiths served as the Senior Vice President of Merchandising and Distribution
of EB since March 1996. From March 1987 to February 1996, Mr. Griffiths served
as EB's Vice President of Merchandising and, from April 1984 to February 1987,
he served as the Merchandise Manager of EB. Mr. Griffiths serves on the board of
the Interactive Entertainment Merchants Association.

    John R. Panichello. Mr. Panichello has served as the Senior Vice President
and Chief Financial Officer of Electronics Boutique since March 1998. Mr.
Panichello served as the Senior Vice President of Finance of EB and the
President of EB's BC Collectibles division since March 1997. From March 1996 to
February 1997, Mr. Panichello served as EB's Senior Vice President of Finance
and, from June 1994 to February 1996, he served as the Vice President and
Treasurer of EB. Mr. Panichello served as a director of EB-UK from May 1995
until November 1999.

    Seth P. Levy. Mr. Levy has served as Senior Vice President and Chief
Information Officer of Electronics Boutique and the President of Electronics
Boutique's EBWorld.com subsidiary since March 1999. From February 1997 to March
1999, Mr. Levy served as Electronics Boutique's Vice President and Chief
Information Officer. From 1991 until February 1997, Mr. Levy served as the
Director of System Development for the May Merchandising and May Department
International divisions of May Department Stores.

    James A. Smith, Mr. Smith has served as Senior Vice President of Finance of
Electronics Boutique since August 2000. Mr. Smith has served as Electronics
Boutique's Vice President Finance from May 1998 to August 2000, as Vice
President and Controller from March 1996 to May 1998, and as Controller from
November 1993 to March 1996.

    Steve Morgan, Mr. Morgan joined Electronics Boutique in January 2001 as
Senior Vice President of Stores. From May 1998 to January 2001, Mr. Morgan
served as President and CEO of Millenium Futures, Inc.. a commodity trading
company. From July 1996 to May 1998, he served as Senior Vice President,
Director of Stores at Filene's Department Stores. From May 1988 to July 1996, he
served as Regional Vice President at Filene's Department Stores.


                                       14
<PAGE>

ITEM 2.  PROPERTIES

STORE LEASES. All of Electronics Boutique's stores are leased. The table below
sets forth, as of February 3, 2001, the number of our store leases that will
expire each year (assuming the lease is not terminated by either party prior to
the expiration of the term).

<TABLE>
<CAPTION>

                                                NUMBER OF LEASES
FISCAL YEAR IN
WHICH LEASES EXPIRE                       DOMESTIC             INTERNATIONAL
-------------------                       --------             -------------
<S>                                         <C>                     <C>
2002................................        81                      10
2003................................        50                      13
2004................................        45                      15
2005................................        27                      30
2006................................        36                      15
2007................................        41                      11
2008................................        67                       1
2009................................        85                      12
2010................................        87                      14
2011                                        81                      15
2012 and thereafter                          1                       -
                                         -----                    ----
                                           601                     136
</TABLE>

    HEADQUARTERS. Electronics Boutique's headquarters and primary distribution
center are located in a single 140,000 square foot building on several acres in
West Chester, Pennsylvania.

    DISTRIBUTION CENTERS. In addition to our West Chester, Pennsylvania
distribution center, we own an 80,000 square foot distribution facility adjacent
to this property which was opened in November 1999. In May 2000, we leased a
200,000 square foot building in Louisville, Kentucky, which supports our flow
through operations on new releases and top-selling products. The lease expires
in May 2005. We also lease a 52,000 spare foot building in Louisville, Kentucky,
which has a lease expiring in March 2004.

    INTERNATIONAL. In Brampton, Ontario, Canada, we own a 120,000 square foot
distribution and office facility, which opened in August 2000. In Pinkenba,
Queensland, Australia, we own a 70,000 square foot distribution and office
facility, which opened in September 2000.

ITEM 3.   LEGAL PROCEEDINGS

Electronics Boutique is involved from time to time in legal proceedings arising
in the ordinary course of its business. In the opinion of management, no pending
proceedings will have a material adverse effect on Electronics Boutique's
results of operations or financial condition.

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

None.


                                       15
<PAGE>

                                     PART II

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

    The common stock of Electronics Boutique was first traded publicly on July
28, 1998. The stock is quoted on the NASDAQ National Market under the symbol
ELBO. The table below represents the high and low bid prices of Electronics
Boutique's common stock as reported by NASDAQ.

<TABLE>
<CAPTION>

                                 Fiscal 2000          Fiscal 2001
                                 -----------          -----------
                               Low       High        Low       High
                               ---       ----        ---       ----
<S>                       <C>        <C>        <C>        <C>
First fiscal quarter      $   12.13  $   19.88  $   14.06  $   19.75
Second fiscal quarter         13.50      18.38      13.13      19.88
Third fiscal quarter          16.63      26.31      18.25      24.38
Fourth fiscal quarter         14.00      25.38      14.88      20.63
</TABLE>

    Such quotations reflect inter-dealer prices, without retail mark-ups,
mark-downs or commissions and may not necessarily reflect actual transactions.

    As of April 19, 2001, the Company had approximately 36 shareholders of
record (including Cede & Co., the nominee for Depository Trust Company, a
registered clearing agency) of the 22,368,040 outstanding shares of the
Company's Common Stock. On April 19, 2001, the last reported sale price for the
Company's common stock as quoted by NASDAQ was $23.30 per share.

    Electronics Boutique has not paid any dividends on its common stock to date
and does not anticipate paying any dividends on the common stock in the
foreseeable future.


                                       16
<PAGE>

ITEM 6.   SELECTED FINANCIAL DATA

    The following table sets forth for the periods indicated selected financial
data for Electronics Boutique for periods subsequent to its initial public
offering on July 28, 1998. Prior periods reflect financial data of Electronics
Boutique's predecessors, The Electronics Boutique, Inc. ("EB") and subsidiaries
and EB Services Company LLP. The selected income statement and balance sheet
items, which follow, have been derived from Electronics Boutique's consolidated
financial statements. This information should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Consolidated Financial Statements and Notes thereto included
elsewhere in this Form 10-K. The pro forma data, in the opinion of management,
include all adjustments necessary to present fairly the information set forth
therein including the matters referred to in footnotes 3 and 4 on page 18.

<TABLE>
<CAPTION>

                                                           (in thousands, except per share data and operating data)
                                                                                YEAR ENDED
                                                  -------------------------------------------------------------------------
                                                  FEBRUARY 1,    JANUARY 31,     JANUARY 30,     JANUARY 29,     FEBRUARY 3,
                                                    1997            1998            1999            2000            2001
                                                  ---------       ---------       ---------       ---------       ---------
<S>                                               <C>             <C>             <C>             <C>             <C>
STATEMENT OF INCOME DATA:
Net sales                                         $ 337,059       $ 449,180       $ 571,042       $ 725,522       $ 766,335
Management fees                                       2,526           4,792           3,405           4,873           4,425
                                                  ---------       ---------       ---------       ---------       ---------
Total revenues                                      339,585         453,972         574,447         730,395         770,760
Cost of goods sold                                  252,813         338,498         432,272         548,172         590,423
                                                  ---------       ---------       ---------       ---------       ---------
Gross profit                                         86,772         115,474         142,175         182,223         180,337
Operating expenses                                   69,828          87,003          99,972         133,534         144,466
Depreciation and amortization                         6,615           7,997           9,775          12,278          15,855
                                                  ---------       ---------       ---------       ---------       ---------
Income from operations                               10,329          20,474          32,428          36,411          20,016
Equity in earnings (loss) of affiliates                (573)          2,903            (161)             --              --
Other Income                                             --              --              --              --           1,550
Interest (income) expense, net                        1,298           1,380             289          (1,427)         (3,096)
Preacquisition loss of subsidiaries (1)                  --             913              --              --              --
                                                  ---------       ---------       ---------       ---------       ---------
Income before income tax expense                      8,458          22,910          31,978          37,838          24,662
Income tax expense(2)                                   550             846          11,693          15,008           9,791
                                                  ---------       ---------       ---------       ---------       ---------
Net income                                        $   7,908       $  22,064       $  20,285       $  22,830       $  14,871
                                                  =========       =========       =========       =========       =========


Net income per share - basic                                                                      $    1.11       $    0.67
                                                                                                  =========       =========
Weighted average shares outstanding- basic                                                           20,559          22,254
                                                                                                  =========       =========
Net income per share - diluted                                                                    $    1.10       $    0.66
                                                                                                  =========       =========
Weighted average shares outstanding - diluted                                                        20,762          22,466
                                                                                                  =========       =========

PRO FORMA INCOME DATA:
Income before income taxes                        $   8,458       $  22,910       $  31,978
Pro forma income taxes(3)                             3,514           9,415          11,866
                                                  ---------       ---------       ---------
Pro forma net income(3)                           $   4,944       $  13,495       $  20,112
                                                  =========       =========       =========
Pro forma net income per share - basic            $    0.31       $    0.85       $    1.12
                                                  =========       =========       =========
Pro forma weighted average shares
outstanding - basic(4)                               15,794          15,794          18,030
                                                  =========       =========       =========
Pro forma net income per share - diluted          $    0.31       $    0.85       $    1.11
                                                  =========       =========       =========
Pro forma weighted average shares
outstanding - diluted (4)                            15,794          15,794          18,084
                                                  =========       =========       =========

OPERATING DATA:(5)
Stores open at end of period                            360             452             528             619             737
Comparable store sales increase(6)                     20.8%           15.3%           14.1%           11.6%           (4.5%)
</TABLE>


                                       17
<PAGE>

<TABLE>
<CAPTION>

                                                                                AS OF
                                                  -------------------------------------------------------------------------
                                                  FEBRUARY 1,    JANUARY 31,     JANUARY 30,     JANUARY 29,     FEBRUARY 3,
                                                    1997            1998            1999            2000            2001
                                                  ---------       ---------       ---------       ---------       ---------
<S>                                               <C>             <C>             <C>             <C>             <C>
BALANCE SHEET DATA:
Working capital (deficit)                         $   9,893       $ (17,728)      $  (3,091)      $  42,567       $  30,133
Total assets                                        139,244         142,791         172,047         275,513         267,239
Total liabilities                                   118,887         114,392         123,205         159,026         136,019
Stockholders' equity                                 20,357          28,399          48,842         116,487         131,220
</TABLE>

----------
(1) The results of operations of two subsidiaries, Electronics Boutique
International, Inc. and Electronics Boutique Canada, Inc. have been consolidated
since the beginning of the year ended January 31, 1998. Preacquisition loss of
subsidiaries represents losses in Electronics Boutique International, Inc. and
Electronics Boutique Canada, Inc. prior to their acquisition by Electronics
Boutique.

(2) Prior to our initial public offering, our predecessors were taxed as an S
Corporation and a partnership. As a result, their taxable income was passed
through to their partners and shareholders for federal income tax purposes.
Accordingly, for periods prior to the initial public offering on July 28, 1998,
the financial statements do not include a provision for federal income taxes.
Additionally, a predecessor to us elected to be treated as an S Corporation for
some states, while remaining subject to corporate tax in other states and, as a
result, the financial statements prior to July 28, 1998, provide for certain
state income taxes. After the initial public offering, both federal and state
taxes as a C corporation have been reflected.

(3) The pro forma net income gives effect to the application of the pro forma
income tax expense that would have been reported had The Electronics Boutique,
Inc. and EB Services, LLP been subject to federal and all state income taxes for
fiscal years 1997, 1998 and 1999.

(4) Pro forma weighted average shares outstanding gives effect to the number of
shares that would have been outstanding upon completion of the initial public
offering and related transactions for periods prior to the initial public
offering.

(5) Does not reflect stores operated by EB-UK and WaldenSoftware for which we
provide management services. See "Business - Management Services."

(6) Comparable store sales are based on stores in operation for over one
year. Comparable store sales results for fiscal 2001 represents the 52 week
period ending January 27, 2001.

                                       18
<PAGE>

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

OVERVIEW

    We believe that we are among the world's largest specialty retailers of
electronic games. Our primary products are video games and PC entertainment
software, supported by the sale of video game hardware, PC productivity software
and accessories. As of February 3, 2001, we operated a total of 737 stores in 46
states, Puerto Rico, Canada, New Zealand, Australia and South Korea, primarily
under the names Electronics Boutique, EB GameWorld and Stop 'N Save Software. In
addition, we operated a commercial web site under the URL address of
EBGAMES.COM. As of such date, we also provided management services for EB-UK,
which operated over 300 stores and department store-based concessions in the
United Kingdom, Sweden and Ireland. We are a holding company and do not have any
significant assets or liabilities, other than all of the outstanding capital
stock of our subsidiaries.

    The fiscal year of Electronics Boutique ends on the Saturday nearest January
31. Accordingly the financial statements for the years ended January 30, 1999
("fiscal 1999") and January 29, 2000 ("fiscal 2000") each include 52 weeks of
operations and the year ending February 3, 2001 ("fiscal 2001") includes 53
weeks of operations.

RESULTS OF OPERATIONS

    The following table sets forth certain income statement items as a
percentage of total revenues for the periods indicated:

<TABLE>
<CAPTION>

                                            YEAR ENDED
                                -----------------------------------
                                JANUARY 30, JANUARY 29, FEBRUARY 3,
                                    1999        2000        2001
                                  --------     -------    --------
<S>                                <C>         <C>          <C>
Net sales                            99.4%       99.3%        99.4%
Management fees                       0.6         0.7          0.6
                                 ---------   ---------   ----------
Total revenues                      100.0       100.0        100.0
Cost of goods sold                   75.3        75.0         76.6
                                 --------    --------    ---------
Gross profit                         24.7        25.0         23.4
Operating expenses                   17.4        18.3         18.7
Depreciation and amortization         1.7         1.7          2.1
                                 ---------   ---------   ----------
Income from operations                5.6         5.0          2.6
Other income                            -           -          0.2
Interest expense (income), net        0.1        (0.2)        (0.4)
                                 ---------   ----------  -----------
Income before income tax expense      5.5         5.2          3.2
Income tax expense                    2.0         2.1          1.3
                                 ---------   ---------   ----------
Net income                            3.5%        3.1%         1.9%
                                 =========   =========   ==========
</TABLE>


FISCAL 2001 COMPARED TO FISCAL 2000

    Net sales (including shipping and handling fees) increased by 5.6% from
$725.5 million in fiscal 2000 to $766.3 million in fiscal 2001. The increase in
net sales was primarily attributable to the additional sales volume from 118 net
new stores opened during fiscal 2001 and that fiscal 2001 included 53 weeks of
net sales compared to 52 weeks in fiscal 2000. Offsetting the increase was a
decrease in comparable stores sales of 4.5% for the 52 week period ending
January 27, 2001. Comparable store sales were negatively impacted primarily by
declines in sales of PlayStation one software, Pokemon related toys and trading
cards, and PC education and productivity software, which was partially offset by
increases in new generation video game hardware and software for the Sega
Dreamcast and PlayStation 2 and GameBoy software.

    Management fees decreased 9.2% from $4.9 million in fiscal 2000 to $4.4
million in fiscal 2001. The decrease was primarily attributable to no
performance bonus being earned in fiscal

                                       19
<PAGE>

2001 under a consulting agreement with Border's Group, Inc. whereas $791,000 was
recorded in fiscal 2000. In addition, lower fees were earned in fiscal 2001
under this agreement as fewer stores were managed in the last year of this
agreement. As of February 3, 2001 the contract expired as the remaining store
leases ended in January 2001. Offsetting these decreases were additional
management fees earned from Electronics Boutique plc. in fiscal 2001 of $516,000
due to increased sales.

    Cost of goods sold increased by 7.7% from $548.2 million in fiscal 2000 to
$590.4 million in fiscal 2001. As a percentage of net sales, cost of goods sold
increased from 75.6% in fiscal 2000 to 77.0% in fiscal 2001. The increase in
cost of goods sold, as a percentage of net sales was primarily attributable to
several factors such as an increase in low margin video hardware sales,
particularly Sega Dreamcast and Sony PlayStation 2, a decrease in sales of high
margin Pokemon related toys and trading cards, and a decrease in the gross
margin on video game software. In addition, freight expense as a percentage of
net sales increased due to the higher cost of shipping large quantities of video
game hardware than in the prior year and the expediting of strong selling goods
to stores to achieve maximum sell-through.

    Selling, general and administrative expense increased 8.2% from $133.5
million in fiscal 2000 to $144.5 million in fiscal 2001. As a percentage of
total revenues, selling, general and administrative expense increased from 18.3%
in fiscal 2000 to 18.7% in fiscal 2001. The $10.9 million increase was primarily
attributable to the increase in Electronics Boutique's domestic and
international stores base and the associated increases in store, distribution,
and headquarter expenses, which was partially offset by an increase in
promotional and marketing reimbursements. The increase in selling, general, and
administrative expense as a percentage of total revenues was primarily
attributable to the increase in operating expenses for the factors noted above
and the decline in comparable store sales, partially offset by an increase in
overall net sales due to the additional new stores.

Depreciation and amortization expense increased by 29.1% from $12.3 million in
fiscal 2000 to $15.9 million in fiscal 2001. The increase was primarily
attributable to capitalized expenditures for leasehold improvements and
furniture and fixtures for new store openings, remodeling of existing stores,
and leasehold improvements, furniture and fixtures, and computer software at
corporate headquarters. In addition, in fiscal 2001 Electronics Boutique
purchased its corporate headquarters and distribution facility in West Chester,
Pennsylvania, relocated to a larger distribution facility in Louisville,
Kentucky, and built new distribution and office facilities in Australia and
Canada.

    Operating income decreased by 45.0% from $36.4 million in fiscal 2000 to
$20.0 million in fiscal 2001. As a percentage of total revenues, operating
income decreased from 5.0% in fiscal 2000 to 2.6% in fiscal 2001, due to the
increases in cost of goods sold and selling, general and administrative expense
as a percentage of total revenues.

    Other income of $1.6 million was recorded in fiscal 2001. This income was
the result of a termination fee on the acquisition of Funco, Inc. of $3.5
million, net of associated expenses of $1.9 million.

    Interest income, net, increased by 117% from $1.4 million in fiscal 2000 to
$3.1 million in fiscal 2001. The increase was primarily due to income earned on
short-term investments of the proceeds from our secondary offering completed in
November 1999.

    As a result of all the above factors, Electronics Boutique's income before
income taxes decreased by 34.8% from $37.8 million in fiscal 2000 to $24.7
million in fiscal 2001.

    Income tax expense decreased by 34.8% from $15.0 million in fiscal 2000 to
$9.8 million in fiscal 2001. As a percentage of pre-tax income, income tax
expense remained at 39.7% in both fiscal 2001 and fiscal 2000.

FISCAL 2000 COMPARED TO FISCAL 1999

    Net sales increased by 27.1% from $571.0 million in fiscal 1999 to $725.5
million in fiscal 2000. The increase in net sales was primarily attributable to
an 11.6% increase in comparable store sales, which resulted in a $65.1 million
increase in net sales, and the additional sales volume attributable to 91 net
new stores opened during fiscal 2000. Comparable store sales were positively
impacted primarily by the release of the Sega Dreamcast console system in the
third fiscal quarter, which was supported by a strong supply of software titles
through the end of the fiscal year. In addition, throughout the year there was a
strong demand for Nintendo Game Boy software and hardware as well as toy
categories including software-related action figures and Pokemon trading cards.

                                       20
<PAGE>

    Management fees increased 43.1% from $3.4 million in fiscal 1999 to $4.9
million in fiscal 2000. The increase was primarily attributable to additional
management fees earned from Electronics Boutique plc. on the sales of a newly
acquired competitor which occurred in May 1999 and to a $543,000 performance fee
earned for fiscal 2000 and an additional $248,000 performance fee earned for
fiscal 1999 and recorded in fiscal 2000 under the consulting agreement with
Border's Group, Inc.

    Cost of goods sold increased by 26.8% from $432.3 million in fiscal 1999 to
$548.2 million in fiscal 2000. As a percentage of net sales, cost of goods sold
decreased from 75.7% in fiscal 1999 to 75.6% in fiscal 2000. The decrease in
cost of goods sold as a percentage of net sales was primarily attributable to
increases in sales of Nintendo Game Boy software and hardware, Pokemon trading
cards toys and software-related action figures that carry higher overall margins
than the console video game category.

    Selling, general and administrative expense increased by 33.6% from $100.0
million in fiscal 1999 to $133.5 million in fiscal 2000. As a percentage of
total revenues, selling, general and administrative expense increased from 17.4%
in fiscal 1999 to 18.3% in fiscal 2000. The $33.5 million increase was primarily
attributable to the increase in Electronics Boutique's domestic and
international store base and the associated increases in store, distribution,
and headquarter operating expenses, which was partially offset by an increase in
promotional and marketing reimbursements. In addition, $10.7 million was
incurred in connection with an advertising and promotional campaign that began
in the third quarter of fiscal 2000 primarily for Electronics Boutique's
e-commerce business. The increase in selling, general and administrative expense
as a percentage of total revenues was primarily attributable to the expenses
associated with the advertising and promotional campaign in addition to other
increases in operating expenses, partially offset by the increase in net sales.

    Depreciation and amortization expense increased by 25.6% from $9.8 million
in fiscal 1999 to $12.3 million in fiscal 2000. This increase was primarily
attributable to capitalized expenditures for leasehold improvements and
furniture and fixtures for new store openings, remodeling of existing stores,
for leasehold improvements and furniture and fixtures at corporate headquarters.

    Operating income increased by 12.3% from $32.4 million in fiscal 1999 to
$36.4 million in fiscal 2000. As a percentage of total revenues, operating
income decreased from 5.7% in fiscal 1999 to 5.0% in fiscal 2000, as the
decrease in cost of goods sold as a percentage of total revenues was more than
offset by the increase in selling, general and administrative expenses as a
percentage of total revenues.

    Interest expense, net, improved from an expense of $0.3 million in fiscal
1999 to income of $1.4 million in fiscal 2000. The change was primarily
attributable to interest income earned from investing excess cash in short term
investments from the secondary offering in November 1999 and to the repayment of
Electronics Boutique's debt with the proceeds of the initial public offering in
fiscal 1999.

    As a result of all the above factors, Electronics Boutique's income before
income taxes increased by 18.3% from $32.0 million in fiscal 1999 to $37.8
million in fiscal 2000.

    Income tax expense increased from $11.7 million in fiscal 1999 to $15.0
million in fiscal 2000. As a percentage of pre-tax income, income tax expense
increased from 36.6% in fiscal 1999 to 39.7% in fiscal 2000. The increase as a
percentage of pre-tax income was due to Electronics Boutique being taxed in
fiscal 2000 as a "C" corporation, whereas income in fiscal 1999 prior to the
initial public offering on July 28, 1998 was taxed as an S corporation.

                                       21
<PAGE>

SEASONALITY AND QUARTERLY RESULTS

    Electronics Boutique's business, like that of most retailers, is highly
seasonal. A significant portion of our net sales, management fees and profits
are generated during Electronics Boutique's fourth fiscal quarter, which
includes the holiday selling season. Results for any quarter are not necessarily
indicative of the results that may be achieved for a full fiscal year. Quarterly
results may fluctuate materially depending upon, among other factors, the timing
of new product introductions and new store openings, net sales contributed by
new stores, increases or decreases in comparable store sales, adverse weather
conditions, shifts in the timing of certain holidays or promotions and changes
in Electronics Boutique's merchandise mix.

    The following table sets forth certain unaudited quarterly income statement
information for fiscal 2000 and fiscal 2001. The unaudited quarterly information
includes all normal recurring adjustments that management considers necessary
for a fair presentation of the information shown.

<TABLE>
<CAPTION>

                  (in thousands, except for number of stores)
                                       Fiscal 2000                                     Fiscal 2001
                      -------------------------------------------     --------------------------------------------
                        1st        2nd           3rd        4th         1st         2nd           3rd        4th
                      QUARTER    QUARTER       QUARTER    QUARTER     QUARTER     QUARTER       QUARTER    QUARTER
                      -------    -------       -------    -------     -------     -------       -------    -------
<S>                  <C>         <C>         <C>         <C>         <C>         <C>          <C>         <C>
Total revenues       $ 123,845   $ 113,272   $ 177,751   $ 315,526   $ 151,479   $ 126,128    $ 159,166   $ 333,987
Gross profit            33,167      30,756      41,430      76,870      38,592      31,658       36,936      73,152
Operating income         4,435         941       6,291      24,744       2,938      (5,633)       1,950      20,761
Net Income               2,873         549       3,864      15,545       2,404      (2,006)       1,394      13,080

Earnings per share
     - Basic              0.14        0.03        0.19        0.72        0.11       (0.09)        0.06        0.59
     - Diluted            0.14        0.03        0.19        0.71        0.11       (0.09)        0.06        0.58

Stores open at
quarter end                550         564         595         619         628         645          694         737
</TABLE>

    A gain of $1.6 million resulting from the termination fee on the acquisition
of Funco, Inc. was recorded in other income in the second quarter of fiscal
2001.

LIQUIDITY AND CAPITAL RESOURCES

    Electronics Boutique has historically financed operations through a
combination of cash generated from operations and bank debt. On November 23,
1999, Electronics Boutique completed a secondary offering of 3,500,000 shares of
common stock. Of the 3,500,000 shares sold, 2,000,000 shares were for the
account of Electronics Boutique and 1,500,000 shares were for the account of EB
Nevada, Inc., a selling shareholder. The transaction resulted in net proceeds
(after offering expenses) to Electronics Boutique of approximately $40.0
million.

    Electronics Boutique generated $0.8 million in cash from operations in
fiscal 2001 and $37.5 million in fiscal 2000. The $0.8 million of cash generated
from operations in fiscal 2001 was primarily the result of $14.9 million of net
income, $16.2 million of non-cash charges to net income, a $3.6 million decrease
in accounts receivable, and an increase of $1.3 million in accrued expenses and
deferred rent, partially offset by a $19.5 million decrease in accounts payable,
a $10.8 million increase in merchandise inventories, a $4.5 million decrease in
taxes payable, and a $0.6 million increase in prepaid expenses. The $37.5
million of cash generated from operations in fiscal 2000 was primarily the
result of $22.8 million of net income, $12.6 million of non-cash charges to net
income, an $8.9 million increase in accounts payable net of an increase in
merchandise inventories, a $1.7 million increase in accrued expenses, and a $0.4
million decrease in deferred taxes, partially offset by a $5.3 million increase
in receivables, and a $3.5 million increase in prepaid expenses. Electronics
Boutique's working capital decreased from $42.6 million at January 29, 2000 to
$30.1 million at February 3, 2001.

                                       22
<PAGE>

    Electronics Boutique made capital expenditures of $44.8 million in the
fiscal 2001, primarily to open new stores, to remodel existing stores, to
purchase our corporate headquarters and distribution center in West Chester,
Pennsylvania, to build new distribution and office centers in Canada and
Australia, and to purchase and install new software to enhance inventory
management and allocation We made capital expenditures of $31.8 million in the
fiscal 2000, primarily to open new stores, to remodel existing stores, to build
a new distribution center in West Chester, Pennsylvania, for leasehold
improvements at Electronics Boutique's headquarters and primary distribution
center, and for equipment and leasehold improvements at a new customer service
facility in Las Vegas, Nevada to support our Internet and catalog sales
operations.

    On March 16, 1998, EB entered into a credit agreement with Fleet, pursuant
to which Fleet agreed to make available an asset based revolving credit and term
loan facility in an amount up to $50.0 million. The revolving credit facility
was assigned to Electronics Boutique by EB. The revolving credit facility was
renewed for a one-year term expiring on March 16, 2002. Interest accrues on
borrowings at a per annum rate equal to either LIBOR plus 250 basis points or
Fleet's base rate of interest, at Electronics Boutique's option. The revolving
credit facility is secured by certain assets, including accounts receivable,
inventory, fixtures and equipment. As of February 3, 2001, we had no outstanding
borrowings under the revolving credit facility.

    Electronics Boutique believes that cash generated from its operating
activities and available bank borrowings will be sufficient to fund its
operations and store expansion programs for the next fiscal year.

RECENT ACCOUNTING PRONOUNCEMENTS

    In June 1998, the FASB issued Statement of Financial Accounting Standards
No. 133, "Accounting for Derivative Instruments and Hedging Activities"
("SFAS 133") as amended by SFAS 137 and SFAS 138. This statement establishes
accounting and reporting standards for derivative instruments and for hedging
activities. It requires that an entity recognize all derivatives as either
assets or liabilities in the statement of financial position and measures
those instruments at fair value. As required under SFAS 137, Electronics
Boutique will adopt SFAS 133 as amended in fiscal year 2002. The adoption of
this standard will not materially impact Electronics Boutique's results of
operations, financial condition or long-term liquidity.

ITEM 7A.   QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

    Electronics Boutique invests cash balances in excess of operating
requirements in short-term investment grade securities, generally with
maturities of 90 days or less. In addition, Electronics Boutique's revolving
credit facility provides for borrowings which bear interest at variable rates
based on either the bank's base rate or LIBOR plus 250 basis points. Electronics
Boutique had no borrowings outstanding pursuant to the revolving credit facility
as of February 3, 2001. We believe that the effect, if any, of reasonably
possible near-term changes in interest rates on our financial position, results
of operations, and cash flows should not be material.

    Electronics Boutique has retail operations in various foreign countries
including Canada, Australia, New Zealand and Korea. Electronics Boutique is
subject to currency exchange rate and currency devaluation risks due to these
operations. Since approximately 86% of Electronics Boutique's net sales are
domestic, Electronics Boutique does not believe that currency exchange rate
fluctuations would have a material adverse effect on Electronics Boutique's
results of operations and financial condition. As of February 3, 2001,
Electronics Boutique has forward contracts to sell Canadian Dollars for United
States Dollars totaling $4,400,000, with a fair value of approximately $34,000,
expiring in December 2001. We intend to monitor our exposure to these risks and
reevaluate our hedging strategies as appropriate.

                                       23
<PAGE>

ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE


 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE


                              FINANCIAL STATEMENTS

                                                                        PAGE

Independent Auditors' Report                                              25
Consolidated Balance Sheets                                               26
Consolidated Statements of Income                                         27
Consolidated Statements of Stockholders' Equity                           28
Consolidated Statements of Cash Flows                                     29
Notes to Consolidated Financial Statements                                30



                          FINANCIAL STATEMENT SCHEDULE

Schedule II - Valuation and Qualifying Accounts                           40


                                       24
<PAGE>

                         INDEPENDENT AUDITORS' REPORT


The Board of Directors and Stockholders
Electronics Boutique Holdings Corp.:

We have audited the accompanying consolidated balance sheets of Electronics
Boutique Holdings Corp. and subsidiaries as of January 29, 2000 and February 3,
2001, and the related consolidated statements of income, stockholders' equity,
and cash flows for each of the years in the three-year period ended February 3,
2001. In connection with our audits of the consolidated financial statements, we
have also audited the financial statement schedule as listed in the accompanying
index. These consolidated financial statements and financial statement schedule
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Electronics Boutique
Holdings Corp. and subsidiaries as of January 29, 2000 and February 3, 2001 and
the results of their operations and their cash flows for each of the years in
the three-year period ended February 3, 2001, in conformity with accounting
principles generally accepted in the United States of America. Also in our
opinion, the related financial statement schedule when considered in relation to
the basic consolidated financial statements taken as a whole, present fairly in
all material respects, the information set forth therein.


/s/  KPMG LLP


Philadelphia, PA
March 15, 2001


                                       25
<PAGE>

              ELECTRONICS BOUTIQUE HOLDINGS CORP. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

                                                                                      JANUARY 29,         FEBRUARY 3,
Assets                                                                                   2000                 2001
                                                                                     ----------------    -------------

<S>                                                                                   <C>                <C>
Current assets:
       Cash and cash equivalents                                                      $    88,356,091    $ 45,111,445
       Accounts receivable:
            Trade and vendors                                                               9,187,991       7,905,650
            Other                                                                           2,630,622         257,176
       Merchandise inventories                                                             90,550,508     100,185,374
       Deferred tax asset (note 11)                                                         3,691,000       4,460,780
       Prepaid expenses                                                                     4,524,233       5,069,802
                                                                                         ------------    ------------
Total current assets                                                                      198,940,445     162,990,227
                                                                                         ------------    ------------

Property and equipment:
       Building & leasehold improvements                                                   59,816,209      76,709,776
       Fixtures and equipment                                                              45,391,518      59,916,886
       Land                                                                                   908,000       5,418,727
       Construction in progress                                                             2,446,460       4,752,103
                                                                                         ------------    ------------
                                                                                          108,562,187     146,797,492
       Less accumulated depreciation and amortization                                      45,566,262      55,629,616
                                                                                         ------------    ------------
Net property and equipment                                                                 62,995,925      91,167,876

Goodwill and other intangible assets, net of accumulated amortization
       of $877,968 and $1,242,890 as of January 29, 2000 and February 3, 2001               1,503,387       1,243,465
Deferred tax asset (note 11)                                                                8,505,732       8,676,258
Other assets                                                                                3,567,388       3,160,714
                                                                                         ------------    ------------
Total assets (note 4)                                                                    $275,512,877    $267,238,540
                                                                                         ============    ============

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
       Current portion of long-term debt (note 4 )                                       $      8,353    $       --
       Accounts payable                                                                   122,822,260     102,381,151
       Accrued expenses (note 3 )                                                          23,437,268      23,984,891
       Income taxes payable                                                                10,105,424       6,491,397
                                                                                         ------------    ------------
Total current liabilities                                                                 156,373,305     132,857,439
                                                                                         ------------    ------------

Long-term liabilities:
       Deferred rent                                                                        2,653,103       3,161,205
                                                                                         ------------    ------------
Total liabilities                                                                         159,026,408     136,018,644
                                                                                         ------------    ------------

Commitments (note 2 )

Stockholders' equity (notes 8 and 10)
       Preferred stock - authorized 25,000,000 shares; $.01 par value;
             no shares issued and outstanding at January 29, 2000 and February 3, 2001           --              --
       Common stock - authorized 100,000,000 shares; $.01 par value;
            22,221,114 and 22,304,722 shares issued and outstanding
            at January 29, 2000 and February 3, 2001, respectively                            222,211         223,047
       Additional paid-in capital                                                          75,888,405      77,060,816
       Accumulated other comprehensive expense                                               (240,726)     (1,551,809)
       Retained earnings                                                                   40,616,579      55,487,842
                                                                                         ------------    ------------

Total stockholders' equity                                                                116,486,469     131,219,896
                                                                                         ------------    ------------

Total liabilities and stockholders' equity                                               $275,512,877    $267,238,540
                                                                                         ============    ============
</TABLE>

See accompanying notes to consolidated financial statements.


                                       26
<PAGE>

              ELECTRONICS BOUTIQUE HOLDINGS CORP. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF INCOME

<TABLE>
<CAPTION>

                                                                                                  YEARS ENDED
                                                                                -----------------------------------------------
                                                                                JANUARY 30,      JANUARY 29,       FEBRUARY 3,
                                                                                    1999             2000            2001
                                                                                -----------      -------------    -------------

<S>                                                                             <C>              <C>              <C>
Net sales                                                                       $ 571,042,390    $ 725,521,536    $ 766,334,631
Management fees (notes 5 and 6)                                                     3,404,862        4,872,822        4,425,097
                                                                                -------------    -------------    -------------
Total revenues                                                                  $ 574,447,252    $ 730,394,358      770,759,728
                                                                                -------------    -------------    -------------

Costs and expenses:
      Costs of merchandise sold, including freight                                432,272,101      548,172,011      590,422,747
      Selling, general and administrative (notes 5 and 6 )                         99,972,451      133,533,992      144,466,060
      Depreciation and amortization (notes 5 and 7 )                                9,774,388       12,277,797       15,855,374
                                                                                -------------    -------------    -------------

Operating income                                                                   32,428,312       36,410,558       20,015,547
Equity in loss of affiliate (note 5)                                                 (160,575)            --               --
Other income                                                                             --               --          1,550,032
Interest expense (income), net of interest income of $829,631, $1,590,270 and
      $3,149,077 in fiscal years 1999, 2000 and 2001, respectively                    289,188       (1,427,603)      (3,096,550)
                                                                                -------------    -------------    -------------

Income before income taxes                                                         31,978,549       37,838,161       24,662,129
Income tax expense (note 11)                                                       11,693,270       15,007,773        9,790,866
                                                                                -------------    -------------    -------------

Net income                                                                      $  20,285,279    $  22,830,388    $  14,871,263
                                                                                =============    =============    =============

Net income per share - basic                                                                     $        1.11    $        0.67
                                                                                                 =============    =============

Weighted average shares outstanding - basic                                                         20,559,100       22,253,816
                                                                                                 =============    =============

Net income per share - diluted                                                                   $        1.10    $        0.66
                                                                                                 =============    =============

Weighted average shares outstanding - diluted                                                       20,762,249       22,466,030
                                                                                                 =============    =============

PRO FORMA DATA (UNAUDITED) (NOTE 7):

Income before income taxes                                                      $  31,978,549
Pro forma income taxes                                                             11,866,084
                                                                                -------------

Pro forma net income                                                            $  20,112,465
                                                                                =============

Pro forma net income per share - basic                                          $        1.12
                                                                                =============

Pro forma weighted average shares outstanding - basic                              18,029,777
                                                                                =============

Pro forma net income per share - diluted                                        $        1.11
                                                                                =============

Pro forma weighted average shares outstanding - diluted                            18,084,109
                                                                                =============
</TABLE>


See accompanying notes to consolidated financial statements.


                                       27
<PAGE>

              ELECTRONICS BOUTIQUE HOLDINGS CORP. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>

                                                                        CLASS A           CLASS B
                                              PREFERRED STOCK         COMMON STOCK     COMMON STOCK              COMMON STOCK
                                           ----------------------    --------------   ---------------      ------------------------
                                           SHARES          AMOUNT    SHARES  AMOUNT   SHARES   AMOUNT      SHARES            AMOUNT
                                           ------          ------    ------  ------   ------   ------      ------            ------
<S>                                        <C>             <C>       <C>     <C>    <C>       <C>         <C>              <C>
Balance, Jan. 31, 1998                        --              --      1,900    190    21,000    2,100           --             --

Effects of reorganization (note 1)            --              --     (1,900)  (190)  (21,000)  (2,100)    20,169,200        201,692
Comprehensive income:
  Net income                                  --              --       --     --        --       --             --             --
  Foreign currency translation                --              --       --     --        --       --             --             --

Total comprehensive income


 Distributions                                --              --       --     --        --       --             --             --
                                           --------     ----------    -----   ----   -------   ------   ------------   ------------
Balance Jan. 30, 1999                         --              --       --     --        --       --       20,169,200        201,692
                                           ========     ==========    =====   ====   =======   ======   ============   ============

Comprehensive income:
  Net income                                  --              --       --     --        --       --             --             --
  Foreign currency translation                --              --       --     --        --       --             --             --

Total comprehensive income

  Issuance of common stock (note 8)           --              --       --     --        --       --        2,000,000         20,000
  Exercise of stock options                   --              --       --     --        --       --           51,914            519
  Tax benefit from stock options
    exercised and other equity
    transactions                              --                              --        --       --             --             --
                                           --------     ----------    -----   ----   -------   ------   ------------   ------------
Balance Jan. 29, 2000                         --        $     --       --    $--     $  --       --       22,221,114   $    222,211
                                           ========     ==========    =====  =====   =======   ======   ============   ============

Comprehensive income:
  Net income                                  --              --       --     --        --       --             --             --
  Foreign currency translation                --              --       --     --        --       --             --             --

Total comprehensive income


  Issuance of common stock                    --              --       --     --        --       --           22,179            222
  Exercise of stock options                   --              --       --     --        --       --           61,429            614
                                           --------     ----------    -----  -----   -------   ------   ------------   ------------
Balance Feb. 3, 2001                          --        $     --      $--      --    $  --       --       22,304,722   $    223,047
                                           ========     ==========    =====  =====   =======   ======   ============   ============

<CAPTION>

                                            PARTNERS'               ACCUMULATED
                                          CAPITAL OF EB ADDITIONAL     OTHER                            TOTAL
                                            SERVICES     PAID-IN    COMPREHENSIVE     RETAINED       STOCKHOLDERS'
                                           COMPANY LLP   CAPITAL       INCOME         EARNINGS          EQUITY
                                           -----------   -------       ------         --------          ------
<S>                                        <C>        <C>           <C>             <C>             <C>
Balance, Jan. 31, 1998                       1,000      7,584,365     (1,023,493)     21,834,364      28,398,526

Effects of reorganization (note 1)          (1,000)    23,957,063           --        (3,813,796)     20,341,669
Comprehensive income:
  Net income                                  --             --             --        20,285,279      20,285,279
  Foreign currency translation                --             --          336,573            --           336,573
                                                                                                    ------------
Total comprehensive income                                                                            20,621,852
                                                                                                    ============

 Distributions                                --             --             --       (20,519,656)    (20,519,656)
                                            ------   ------------   ------------    ------------    ------------
Balance Jan. 30, 1999                         --       31,541,428       (686,920)     17,786,191      48,842,391
                                            ======   ============   ============    ============    ============

Comprehensive income:
  Net income                                  --             --             --        22,830,388      22,830,388
  Foreign currency translation                --             --          446,194            --           446,194
                                                                                                    ------------
Total comprehensive income                                                                            23,276,582
                                                                                                    ============
  Issuance of common stock (note 8)           --       40,027,700           --              --        40,047,700
  Exercise of stock options                   --          726,277           --              --           726,796
  Tax benefit from stock options
    exercised and other equity
    transactions                              --        3,593,000           --              --         3,593,000
                                            ------   ------------   ------------    ------------    ------------
Balance Jan. 29, 2000                       $ --     $ 75,888,405   $   (240,726)   $ 40,616,579    $116,486,469
                                            ======   ============   ============    ============    ============

Comprehensive income:
  Net income                                  --             --             --        14,871,263      14,871,263
  Foreign currency translation                --             --       (1,311,083)           --        (1,311,083)
                                                                                                    ------------
Total comprehensive income                                                                            13,560,180
                                                                                                    ============

  Issuance of common stock                    --          311,845           --              --           312,067
  Exercise of stock options                   --          860,566           --              --           861,180
                                            ------   ------------   ------------    ------------    ------------
Balance Feb. 3, 2001                        $ --     $ 77,060,816   $ (1,551,809)   $ 55,487,842    $131,219,896
                                            ======   ============   ============    ============    ============
</TABLE>


                                       28
<PAGE>


              ELECTRONICS BOUTIQUE HOLDINGS CORP. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                                                 YEARS ENDED
                                                                                ---------------------------------------------
                                                                                  JANUARY 30,    JANUARY 29,      FEBRUARY 3,
                                                                                     1999            2000             2001
                                                                                -------------    ------------    ------------
<S>                                                                              <C>             <C>             <C>
Cash flows from operating activities:
      Net income                                                                 $ 20,285,279    $ 22,830,388    $ 14,871,263
      Adjustments to reconcile net income to cash provided by
           operating activities:
                Depreciation of property and equipment                              9,375,766      11,882,789      15,490,452
                Amortization of other assets                                          398,622         395,008         364,922
                Loss on disposal of property and equipment                            292,623         352,231         392,364
                Equity in loss of affiliates                                          160,575            --              --
                Changes in assets and liabilities:
                     Decrease (increase) in:
                          Accounts receivable                                        (828,692)     (6,258,628)      3,578,766
                          Due from affiliates                                       1,906,739         987,909            --
                          Merchandise inventories                                 (12,309,661)    (24,526,184)    (10,779,526)
                          Prepaid expenses                                          1,882,619      (3,532,696)       (615,049)
                          Deferred taxes                                                 --           413,008        (994,525)
                          Other long-term assets                                   (1,247,378)       (340,971)        239,996
                     (Decrease) increase in:
                          Accounts payable                                          4,993,290      33,463,199     (19,534,654)
                          Accrued expenses                                          7,071,901       1,715,425         733,847
                          Due to affiliate                                         (9,453,597)           --              --
                          Income taxes payable                                      8,168,826         (49,424)     (3,470,608)
                          Deferred rent                                                79,647         150,662         516,264
                                                                                 ------------    ------------    ------------
Net cash provided by operating activities                                          30,776,559      37,482,716         793,512
                                                                                 ------------    ------------    ------------
Cash flows used in investing activities:
      Purchases of property and equipment                                         (19,573,171)    (31,756,803)    (44,816,664)
      Proceeds from disposition of assets                                             132,592           5,323          92,748
                                                                                 ------------    ------------    ------------
Net cash used in investing activities                                             (19,440,579)    (31,751,480)    (44,723,916)
                                                                                 ------------    ------------    ------------
Cash flows from financing activities:
      Distributions                                                               (19,950,573)           --              --
      Proceeds from exercise of stock options                                            --           726,796         861,180
      Repayments of long-term debt                                                (12,896,594)        (99,996)         (8,353)
      Proceeds from issuance of common stock                                       54,962,500      40,047,700         312,067
      Net cash retained by predecessors                                           (12,375,535)           --              --
                                                                                 ------------    ------------    ------------
Net cash provided by financing activities                                           9,739,798      40,674,500       1,164,894
                                                                                 ------------    ------------    ------------

Effects of exchange rates on cash                                                     290,791         (55,824)       (479,136)

Net increase (decrease) in cash and cash equivalents                               21,366,569      46,349,912     (43,244,646)
Cash and cash equivalents, beginning of period                                     20,639,610      42,006,179      88,356,091
                                                                                 ------------    ------------    ------------
Cash and cash equivalents, end of period                                         $ 42,006,179    $ 88,356,091    $ 45,111,445
                                                                                 ============    ============    ============

Supplemental disclosures of cash flow information: Cash paid during the period
      for:
           Interest                                                              $  1,207,210    $    187,223    $      5,136
           Income taxes                                                             2,853,773      13,577,519      13,824,421
</TABLE>

See accompanying notes to consolidated financial statements.


                                       29
<PAGE>


                     ELECTRONICS BOUTIQUE HOLDINGS CORP.
                               AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


(1)   ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    FORMATION OF THE COMPANY
    Immediately prior to its initial public offering, Electronics Boutique
Holdings Corp. (collectively with its subsidiaries, the "Company") was formed
and acquired substantially all of the operating assets and liabilities of its
predecessors, The Electronics Boutique, Inc. and its subsidiaries and EB
Services Company LLP (collectively, the "EB Group") for shares of the Company.
This acquisition has been treated as an acquisition between entities under
common control and, therefore, reflected at historical cost. The EB Group
retained certain assets including cash, accounts receivable, real estate, the
cash surrender value of certain split dollar life insurance policies and the
ownership of approximately 25% of Electronics Boutique Plc.

    DESCRIPTION OF BUSINESS
    The Company is among the world's largest specialty retailers of electronic
games. The Company operates in only one business segment, as substantially all
of its revenues, net income and assets are derived from its primary products of
video games and personal computer entertainment software, supported by the sale
of video game hardware, PC productivity software and accessories.

    The Company had 528, 619 and 737 operating retail stores throughout the
United States, Puerto Rico, Canada, Australia, New Zealand and South Korea at
January 30, 1999, January 29, 2000 and February 3, 2001, respectively. Total
revenues from the U.S. and foreign operations were 88% and 12%, respectively,
in fiscal 2000 and 86% and 14%, respectively, in fiscal 2001. Long-lived
assets located in the United States and foreign countries were 89% and 11%,
respectively, in fiscal 2000 and 83% and 17%, respectively in fiscal 2001. We
are subject to the risks inherent in conducting business across national
boundaries. The Company also operates a mail order business and sells product
via the Internet. Approximately 31%, 30% and 32% of fiscal 1999, fiscal 2000
and fiscal 2001 sales, respectively, were generated from merchandise
purchased from its three largest vendors. The Company in highly dependent on
the introducton by its vendors of new and enhanced video game and PC hardware
and software.

    FISCAL YEAR-END
    The fiscal year ends on the Saturday nearest January 31. Accordingly, the
financial statements for the years ended January 30, 1999 (fiscal "1999") and
January 29, 2000 (fiscal "2000") each include 52 weeks of operations. Financial
statements for the year ended February 3, 2001 (fiscal "2001") includes 53 weeks
of operations.

    PRINCIPLES OF CONSOLIDATION AND COMBINATION
    The consolidated financial statements include the financial position and
results of operations of the Company since its initial public offering on July
28, 1998. Prior to that date, the consolidated financial statements include the
results of operations of the EB Group. All intercompany transactions have been
eliminated in consolidation. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included.

    REVENUE RECOGNITION
    Retail sales are recognized as revenue at point of sale. Mail order and
internet sales are recognized as revenue upon shipment. Management fees are
recognized in the period that related services are provided. Sales are recorded
net of estimated amounts for sales returns and other allowances.

    In fiscal 2001, the Company adopted Emerging Issues Task Force 00-10:
Accounting for Shipping and Handling Costs. As a result, all shipping and
handling fee income from the mail-order and internet operations is now
recognized as net sales. Net sales and cost of goods sold were reclassified
for fiscal 1999 and 2000 to reflect this change. The Company records shipping
and handling costs in cost of goods sold.

       The effect in fiscal 1999 and 2000 was an increase in net sales and an
increase in cost of goods sold in the amount of $528,000 and $1,721,000,
respectively.


                                       30
<PAGE>

    CASH AND CASH EQUIVALENTS
    The Company considers all highly liquid investments with original maturities
of three months or less to be cash equivalents for cash flow purposes.

    MERCHANDISE INVENTORIES
    Merchandise is valued at the lower of cost or market. Cost is determined
principally by a weighted-average method.

    PROPERTY AND EQUIPMENT
    Property and equipment is recorded at cost and depreciated or amortized over
the estimated useful life of the asset using the straight-line method. The
estimated useful lives are as follows:

Leasehold improvements...............       Lesser of 10 years or the lease term
Furniture and Fixtures...............       5 years
Computer equipment...................       3 years
Building.............................       30 years

    The Company capitalizes significant costs to acquire management information
systems software and significant costs of system improvements. Computer software
costs are amortized over estimated useful lives of three to five years.

    Included in selling, general and administrative costs for fiscal years 1999,
2000 and 2001, are losses of $293,000, $352,000 and $392,000, respectively,
primarily related to the write-off of the net book value of property and
equipment associated with the closing of ten stores in fiscal 1999, eight stores
in fiscal 2000, nineteen stores in fiscal 2001 and the remodeling of several
stores each year.

     DEFERRED REVENUE
    Amounts received under the Company's pre-sell program are recorded as a
liability. Revenue is recognized when the customer receives the related product.
Certain affinity programs include promotional gifts to customers that are
supplied by vendors at no cost to the Company.

    GOODWILL AND OTHER INTANGIBLES
 Goodwill is being amortized on a straight-line basis over periods of up to ten
years. Goodwill is evaluated continually to determine whether later events or
circumstances warrant revised estimates of useful lives. The Company assesses
the recoverability of other intangibles by determining whether the remaining
balance can be recovered through projected undiscounted cash flows.

    OTHER ASSETS
    Other assets consist principally of life insurance programs for certain key
executives and security deposits.

       LEASING EXPENSES
    The Company recognizes lease expense on a straight-line basis over the term
of the lease when lease agreements provide for increasing fixed rentals. The
difference between lease expense recognized and actual payments made is included
in deferred rent and prepaid expenses on the balance sheet.

    PREOPENING COSTS AND ADVERTISING EXPENSE
    Preopening and start-up costs for new stores are charged to operations as
incurred. Costs of advertising and sales promotion programs are charged to
operations, offset by vendor reimbursements, as incurred.

     VENDOR PROGRAMS
    The Company receives manufacturer reimbursements for certain training,
promotional and marketing activities that offset the expenses of these
activities. The expenses and reimbursements are reflected in selling, general
and administrative expenses, as incurred or received.


                                       31
<PAGE>

     FOREIGN CURRENCY
    The accounts of the foreign subsidiaries are translated in accordance with
Statement of Financial Accounting Standard No. 52, Foreign Currency Translation,
which requires that assets and liabilities of international operations be
translated using the exchange rate in effect at the balance sheet date. The
results of operations are translated using an average exchange rate for the
year. The effects of rate fluctuations in translating assets and liabilities of
international operations into U.S. dollars are accumulated and reflected as a
foreign currency translation adjustment in the statements of stockholders'
equity. Transaction gains and losses are included in net income.

Market risks relating to the Company's operations result primarily from changes
in foreign exchange rates. The Company routinely enters into forward currency
exchange contracts in the regular course of business to manage its exposure
against foreign currency fluctuations on intercompany loans. These contracts are
generally for durations of less than twelve months.

The Company has forward contracts to sell Canadian Dollars for United States
Dollars in the notional amount of $4,400,000 with a carrying value of $0 and a
fair value of approximately $34,000 as of February 3, 2001.

    COMPREHENSIVE INCOME
    Effective February 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income." This statement
requires that all items recognized under accounting standards as components of
comprehensive income be reported in an annual financial statement that is
displayed with the same prominence as other financial statements. The Company
has included the required information in the Statement of Stockholders' Equity.
Accumulated Other Comprehensive Income includes foreign currency translation
adjustments.

     INCOME TAXES
    The Company is subject to federal and state income taxes as a C corporation
whereas the EB Group had been treated as an S corporation and a partnership for
federal and certain state income tax purposes resulting in taxable income being
passed through to the shareholders and partners. For purposes of comparison, a
pro forma tax charge has been reflected on the statements of income for fiscal
1999 to show the results of operations as if the EB Group had been subject to
taxes as a C corporation.

    Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases and operating loss and tax credit carryforwards. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.

    NET INCOME PER SHARE
    Basic income per share is calculated by dividing net income by the weighted
average number of shares of the Company's Common Stock outstanding during the
period. Diluted income per share is calculated by adjusting the weighted average
common shares outstanding for the dilutive effect of common stock equivalents
related to stock options.

    The following is a reconciliation of the basic weighted average number of
shares outstanding to the diluted weighted average number of shares outstanding:

<TABLE>
<CAPTION>

                                                        Fiscal       Fiscal
                                                         2000         2001
                                                     -----------  -----------
<S>                                                   <C>          <C>
Weighted average shares outstanding - basic           20,559,100   22,253,816
Dilutive effect of stock options                         203,149      212,214
                                                     -----------  -----------
Weighted average outstanding - diluted shares         20,762,249   22,466,030
                                                     ===========  ===========
</TABLE>

                                       32
<PAGE>

    USE OF ESTIMATES
    The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

    FAIR VALUE OF FINANCIAL INSTRUMENTS
    The Company's financial instruments are accounts receivable, accounts
payable, long-term debt, certain long-term investments, and foreign exchange
contracts. The carrying value of accounts receivable and accounts payable
approximates fair value due to the short maturity of these instruments. The
carrying value of life insurance policies included in other assets approximates
fair value based on estimates received from insurance companies. The fair value
of the foreign exchange contracts is included in the foreign currency note on
page 32.

(2) COMMITMENTS

     LEASE COMMITMENTS
    At February 3, 2001, the future annual minimum lease payments under
operating leases for the following five fiscal years and thereafter were as
follows:

<TABLE>
<CAPTION>

                                   Retail
                                    Store       Distribution  Total lease
                                  Locations     facilities    Commitments
                                  -----------   ----------    ------------

<S>                               <C>            <C>            <C>
Fiscal 2002 ....................  $ 36,712,845   $    922,036   $ 37,634,881
Fiscal 2003 ....................     35,407,681        902,836     36,310,517
Fiscal 2004 ....................     32,431,773        898,996     33,330,769
Fiscal 2005 ....................     30,019,865        757,780     30,777,645
Fiscal 2006 ....................     27,581,333        244,000     27,825,333
Thereafter  ....................     85,707,510           --       85,707,510
                                   ------------   ------------   ------------
                                   $247,861,007   $  3,725,648   $251,586,655
                                   ============   ============   ============
</TABLE>


    The total future minimum lease payments include lease commitments for new
retail locations not in operation at February 3, 2001, and exclude contingent
rentals based upon sales volume and owner expense reimbursements. The terms of
the operating leases for the retail locations provide that, in addition to the
minimum lease payments, the Company is required to pay additional rent to the
extent retail sales, as defined, exceed amounts set forth in the lease
agreements and to reimburse the landlord for the Company's proportionate share
of the landlord's costs and expenses incurred in the maintenance and operation
of the shopping mall. Contingent rentals were approximately $10,695,000,
$12,605,000 and $9,966,000 in fiscal 1999, fiscal 2000 and fiscal 2001,
respectively. Rent expense, including contingent rental amounts, was
approximately $43,008,000, $53,178,000 and $58,496,000 in fiscal 1999, fiscal
2000 and fiscal 2001, respectively.

    Certain of the Company's lease agreements provide for varying lease payments
over the life of the leases. For financial statement purposes, rental expense is
recognized on a straight-line basis over the original term of the agreements.
Actual lease payments are less than the rental expense reflected in the
statements of operations by approximately $84,000, $161,000 and 508,000 for
fiscal 1999, fiscal 2000 and fiscal 2001, respectively.


                                       33
<PAGE>

(3)   ACCRUED EXPENSES

   Accrued expenses consist of the following:

<TABLE>
<CAPTION>

                                             January 29,    February 3,
                                                2000           2001
                                             ------------   ------------

<S>                                        <C>             <C>
Employee compensation and related taxes    $   7,439,552   $  5,824,769
Gift certificates and customer deposits        3,269,046      5,153,460
Deferred revenue                               2,327,733      3,605,498
Accrued rent                                   4,970,409      3,375,045
Other accrued liabilities                      5,430,528      6,026,119
                                             ------------   ------------

Total                                      $  23,437,268   $ 23,984,891
                                             ============   ============
</TABLE>


(4) DEBT

    The Company had available a revolving credit facility allowing for maximum
borrowings of $50,000,000 at January 29, 2000 and February 3, 2001. The
revolving credit facility was renewed for a one-year term expiring on March 16,
2002. Interest accrues on borrowings at a per annum rate equal to either LIBOR
plus 250 basis points or the bank's base rate of interest, at the Company's
option. The revolving credit agreement contains restrictive covenants regarding
transactions with affiliates, the payment of dividends, and other financial and
non-financial matters and is secured by certain assets, including accounts
receivable, inventory, fixtures and equipment. There was no outstanding balance
at January 29, 2000 and February 3, 2001 on this facility.

    The current portion of long-term debt at January 29, 2000 included a
promissory note with a balance of $8,353 that was repaid on February 1, 2000.

(5) RELATED PARTY TRANSACTIONS

    TRANSACTIONS WITH AFFILIATES
    In fiscal 1996, the EB Group entered into a services agreement with
Electronics Boutique Plc to provide consulting, management, training, and
advertising assistance which expires on January 31, 2006. The majority
shareholder of the Company indirectly owns approximately 20% of Electronics
Boutique Plc. The agreement was assigned to the Company. The agreement
prohibits the Company from competing in the United Kingdom or Ireland during
the term of the agreement, and for one year after its termination. The
agreement provides for a fee to be paid to the EB Group based on a formula of
1% of adjusted sales and if budgeted profits are exceeded for the year, a
bonus equal to 25% of such excess. The management fee receivable at January
29, 2000 was $1,301,000 and at February 3, 2001 was $558,000; both were
included in accounts receivable - trade and vendors. Included in management
fees for fiscal 1999, fiscal 2000 and fiscal 2001 was $2,529,000, $3,850,000
and $4,366,000, respectively. Additionally, the agreement provides that the
Company is to be reimbursed by Electronics Boutique Plc for all reasonable
travel and subsistence expenses incurred by employees of the Company during
their performance of the agreement. Amounts outstanding for these expenses at
January 29, 2000 were $198,000 and were included in accounts receivable -
trade and vendors. At February 3, 2001 there was a balance due to Electronics
Boutique Plc of $43,000, which was included in accrued expenses.

Equity  in  loss  of  affiliates   includes   $160,575  for  fiscal  1999  for
Electronics Boutique Plc.

    In June 2000, the Company purchased its headquarters and its primary
distribution center, which are located in a single 140,000 square foot building
on several acres in West Chester, Pennsylvania, from its majority shareholder
for $6,700,000.

(6) CONSULTING AGREEMENT

    In July 1993, the EB Group entered into a consulting agreement with a
business that owns and operates retail stores. The Company provides consulting,
management, administrative, marketing, and advertising assistance to this retail
business. The Company received $476,000, $226,000 and $57,000 during fiscal
1999, fiscal 2000 and fiscal

                                       34
<PAGE>

2001, respectively, as reimbursement for incremental costs incurred based on a
formula as defined. Amounts owed to the Company for these items and trade credit
at January 29, 2000 and February 3, 2001 are included in accounts receivable.
Reimbursements offset selling, general and administrative expenses. Based on
certain performance criteria as defined, the Company can also earn a performance
fee. The Company earned $648,000 for fiscal 1999 ($248,000 of which was recorded
in fiscal 2000) and $543,000 for fiscal 2000. No performance fee was earned for
fiscal 2001. The consulting agreement expired on January 31, 2001.

 (7) PRO FORMA STATEMENT OF INCOME INFORMATION (UNAUDITED)

    For purposes of comparison, the following pro forma information for and
fiscal 1999 is presented to show pro forma income on an after-tax basis as if
the EB Group had been subject to taxes as a C corporation.

<TABLE>
<CAPTION>

                                                             Fiscal
                                                              1999
                                                             ------
<S>                                                          <C>
Federal statutory tax rate                                   35.00%
State income taxes, net of federal benefit                    3.18
Other                                                         3.34
Change in valuation allowance                                (4.41)
                                                          ---------
Pro forma income tax rate                                    37.11%
                                                          =========
</TABLE>

    Set forth below are pro forma results of operations for fiscal 1999. The
following table sets forth the calculation of basic and diluted net income per
share:

<TABLE>
<CAPTION>

                                           Fiscal
                                            1999
                                         -----------

<S>                                      <C>
Income before income taxes               $31,978,549
Pro forma income taxes                    11,866,084
                                         -----------

Pro forma net income                     $20,112,465
                                         ===========

Pro forma net income per share - basic   $      1.12
                                         ===========

Pro forma weighted average
shares outstanding - basic                18,029,777
                                         ===========

Pro forma net income per
share - diluted                          $      1.11
                                         ===========

Pro forma weighted average
shares outstanding - diluted              18,084,109
                                         ===========
</TABLE>


    The pro forma weighted average shares outstanding - basic reflects the
effect of shares issued by the Company for the acquisition of substantially all
the operating assets and liabilities of the EB Group for periods prior to the
initial public offering. The pro forma weighted average shares outstanding -
diluted additionally include the effect of dilutive stock options.

 (8) CAPITAL STOCK

    On November 23, 1999, the Company completed a secondary offering of
3,500,000 shares of common stock. Of the 3,500,000 shares sold, 2,000,000 shares
were for the account of the Company and 1,500,000 shares were for the account of
EB Nevada, Inc., the selling shareholder. The transaction resulted in net
proceeds (after offering expenses) to the Company of approximately $40.0
million.

9) EMPLOYEES' RETIREMENT PLAN

    The Company provides employees with retirement benefits under a 401(k)
salary reduction plan. Generally, employees are eligible to participate in the
plan after attaining age 21 and completing one year of service. Eligible
employees may contribute up to 17% of their compensation to the plan. Company
contributions are at the

                                       35
<PAGE>

Company's discretion and may not exceed 15% of an eligible employee's
compensation. Company contributions to the plan are fully vested for eligible
employees with five years or more of service. Contributions under this plan were
approximately $389,000, $433,000 and $456,000 in fiscal 1999, fiscal 2000 and
fiscal 2001, respectively.

(10) EQUITY PLANS

EQUITY PARTICIPATION PLAN
The Company adopted an equity participation plan pursuant to which 2,100,000 and
2,000,000 shares of common stock were reserved in 1998 and 2000, respectively,
for issuance upon the exercise of stock options granted to employees,
consultants and directors. The exercise price of options granted under this plan
may not be less than fair market value per share of common stock at the grant
date; options become exercisable one to three years after the grant date and
expire over a period of not more than ten years. Exercisability is accelerated
on a change in control of the Company, as defined in the plan.

EMPLOYEE STOCK PURCHASE PLAN
Under Electronics Boutique's Employee Stock Purchase Plan (the Purchase Plan),
associates meeting specific employment qualifications are eligible to
participate and can purchase shares quarterly through payroll deductions at the
lower of 85% of the fair market value of the stock at the commencement or end of
the offering period. The Purchase Plan permits eligible associates to purchase
common stock through payroll deductions for up to 10% of qualified compensation.
As of February 3, 2001, 1,000,000 shares remain available for issuance under the
Purchase Plan. The weighted-average fair value of the purchase rights granted in
fiscal 2001 was $15.28.

    Pro forma information regarding net income and income per share is required
by Statement of Financial Accounting Standard ("FAS") No.123, and has been
determined as if the Company had accounted for its employee stock options and
the purchase plan under the fair value method of that Statement. The fair value
was estimated at the date of grant using a Black-Scholes option pricing model
with the following weighted average assumptions:

<TABLE>
<CAPTION>

                                             Fiscal    Fiscal    Fiscal
                                              1999      2000      2001
                                            --------  --------  --------
<S>                                          <C>       <C>       <C>
Expected volatility                          50.00 %   62.39 %   62.41 %
Risk-free interest rate                       4.55 %    4.93 %    4.86 %
Expected life of options in years              3.5       3.0       3.0
Expected life of purchase rights in months      --        --       3.0
Dividend yield                                   0         0         0
</TABLE>

    The Black-Scholes option valuation model was developed for use in estimating
the fair value of traded options, which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.

    For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
information follows:

<TABLE>
<CAPTION>

                                      Fiscal        Fiscal        Fiscal
                                       1999          2000          2001
                                     ----------    ----------    ----------
<S>                                <C>           <C>           <C>
Net income:
    As reported (pro forma in      $ 20,112,465  $ 22,830,388  $ 14,871,263
fiscal 1999)
    Pro forma net income           $ 19,234,620  $ 20,942,647  $ 12,100,336
Pro forma income per common share:
    Basic                          $      1.07   $      1.02   $      0.54
    Diluted                        $      1.06   $      1.01   $      0.54
</TABLE>


                                       36
<PAGE>

A summary of the Company's stock option activity, and related information for
the fiscal year ended January 30, 1999, January 29, 2000 and February 3, 2001
follows:

<TABLE>
<CAPTION>

                                                  Exercise        Weighted
                                                   Price -        Average
                                                  Range per       Exercise
                                     Shares          Share          Price
                                 -------------    -----------    -----------
<S>                              <C>              <C>           <C>
Outstanding at January 31, 1998            --      $      --    $      --
Granted                               1,599,133         14.00        14.00
Forfeited                               (37,800)        14.00        14.00
                                 --------------   -----------   ----------

Outstanding at January 30, 1999       1,561,333         14.00        14.00
Granted                                 342,086   17.00-24.00        19.82
Exercised                               (51,914)        14.00        14.00
Forfeited                               (73,029)  14.00-19.88        14.00
                                 --------------   -----------   ----------

Outstanding at January 29, 2000       1,778,476
Granted                                 412,200   16.44-19.06        15.32
Exercised                               (61,429)  14.00-19.88        14.02
Forfeited                               (79,729)  14.00-19.88        15.33
                                 --------------   -----------   ----------
Outstanding at February 3, 2001       2,049,518

Exercisable at February 3, 2001         989,394
</TABLE>

The weighted average exercise price for all options outstanding as of February
3, 2001 was $15.09. The average remaining contractual life of those options was
8.0 years.

(11) INCOME TAXES

    As discussed in notes 1 and 8, the Company is subject to federal and state
income taxes as a C corporation whereas its predecessors had been treated as an
S corporation and a partnership for federal and certain state income tax
purposes resulting in taxable income being passed through to the shareholders
and partners.

    Income before income taxes was as follows:

<TABLE>
<CAPTION>

             Fiscal        Fiscal        Fiscal
              1999          2000          2001
           ----------    ----------    ---------
<S>        <C>           <C>           <C>
Domestic   $31,331,801   $32,585,914   $19,790,343
Foreign        646,748     5,252,247     4,871,787
           -----------   -----------   -----------
Total      $31,978,549   $37,838,161   $24,662,129
           ===========   ===========   ===========
</TABLE>

                                       37
<PAGE>

    The provision for income taxes for fiscal 1999, fiscal 2000 and fiscal 2001
consists of the following:

<TABLE>
<CAPTION>

                                              Fiscal 1999      Fiscal 2000    Fiscal 2001
                                             -------------   -------------   -------------
<S>                                          <C>             <C>              <C>
Federal statutory tax rate                          35.00 %         35.00 %          35.00 %
State income taxes, net of federal benefit           3.18            2.73             1.13
Foreign incremental taxes                                            1.06             1.59
S corporation earnings not subject to
   federal taxation                                 (0.22)           --               --

Other                                                3.02            0.63             1.26
Change in valuation allowance                                        0.24             0.72
                                                                                     (4.41)
                                             ------------    ------------     ------------

Income tax expense                                  36.57 %         39.66            39.70 %
                                             ============    ============     ============


Current:
    Domestic - Federal                       $  9,767,127    $ 12,022,610     $  7,357,411
    Domestic - State                            3,050,653       1,601,952        1,030,459
    Foreign                                        60,528       3,045,359        2,135,695

Deferred:
    Domestic - Federal                            159,331      (1,245,891)        (115,269)
    Domestic - State                              159,331        (317,963)        (602,700)
    Foreign                                      (624,700)        (98,294)         (14,730)
                                             ------------    ------------     ------------

Income tax expense                           $ 11,693,270    $ 15,007,773     $  9,790,866
                                             ============    ============     ============
</TABLE>

    Deferred income taxes reflect the net tax effect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The following is a
summary of the significant components of the Company's deferred tax assets and
liabilities as of January 29, 2000 (fiscal 2000) and February 3, 2001 (fiscal
2001).

<TABLE>
<CAPTION>

 Deferred tax assets:                         Fiscal       Fiscal
                                               2000         2001
                                             ----------   ----------
<S>                                        <C>          <C>
    Inventory capitalized costs            $ 1,575,272  $ 1,437,370
    Accrued expenses                         2,078,001    2,447,190
    State net operating loss                      --        576,220
    Fixed assets                             7,161,428    7,251,683
    Deferred rent                            1,146,428    1,260,713
    Amortization of goodwill                   235,603      163,862
    Foreign net operating loss                 306,000      420,000
                                           -----------  -----------

    Total gross deferred tax asset          12,502,732   13,557,038
    Valuation allowance                       (306,000)    (420,000)
                                           -----------  -----------

    Net deferred tax asset                 $12,196,732  $13,137,038
                                           ===========  ===========
</TABLE>


    The increase in the valuation allowance of $92,000 and $114,000 in fiscal
2000 and 2001, respectively, results from net operating losses from a foreign
subsidiary.


                                       38
<PAGE>

(12)  QUARTERLY RESULTS (UNAUDITED)

    Electronics Boutique's business, like that of most retailers, is highly
seasonal. A significant portion of our net sales, management fees and profits
are generated during Electronics Boutique's fourth fiscal quarter, which
includes the holiday selling season. Results for any quarter are not necessarily
indicative of the results that may be achieved for a full fiscal year. Quarterly
results may fluctuate materially depending upon, among other factors, the timing
of new product introductions and new store openings, net sales contributed by
new stores, increases or decreases in comparable store sales, adverse weather
conditions, shifts in the timing of certain holidays or promotions and changes
in Electronics Boutique's merchandise mix.

    The following table sets forth certain unaudited quarterly income statement
information for fiscal 2000 and fiscal 2001. The unaudited quarterly information
includes all normal recurring adjustments that management considers necessary
for a fair presentation of the information shown.

<TABLE>
<CAPTION>

                                                  (in thousands, except for number of stores)
                                            Fiscal 2000                                Fiscal 2001
                    --------------------------------------------     ---------------------------------------------
                       1st         2nd         3rd         4th         1st        2nd          3rd           4th
                     QUARTER     QUARTER     QUARTER     QUARTER     QUARTER    QUARTER      QUARTER       QUARTER
                     -------     -------     -------     -------     -------    -------      -------       -------
<S>                  <C>         <C>         <C>         <C>         <C>         <C>          <C>         <C>
Total revenues       $ 123,845   $ 113,272   $ 177,751   $ 315,526   $ 151,479   $ 126,128    $ 159,166   $ 333,987
Gross profit            33,167      30,756      41,430      76,870      38,592      31,658       36,936      73,152
Operating income         4,435         941       6,291      24,744       2,938      (5,633)       1,950      20,761
Net income               2,873         549       3,864      15,545       2,404      (2,006)       1,394      13,080

Earnings per share
     - Basic              0.14        0.03        0.19        0.72        0.11       (0.09)        0.06        0.59
     - Diluted            0.14        0.03        0.19        0.71        0.11       (0.09)        0.06        0.58

Stores open at
quarter end                550         564         595         619         628         645          694         737
</TABLE>

A gain of $1.6 million resulting from the termination fee on the acquisition of
Funco, Inc. was recorded in other income in the second quarter of fiscal 2001.



                                       39
<PAGE>

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>

                                                                                Charged to  Charged to
                                                                     Beginning  costs and    other     Deductions      Ending
  Period Ended                             Description                Balance    expenses   accounts      (1)         Balance
----------------                 --------------------------------   ----------   --------   --------   -----------    -------

<S>                              <C>                                <C>          <C>          <C>      <C>          <C>
DEFERRED TAX VALUATION ALLOWANCE
January 30, 1999                 Deferred tax valuation allowance   $1,622,000   $     --     $ --     $1,408,000   $  214,000
January 29, 2000                 Deferred tax valuation allowance      214,000       92,000     --           --        306,000
February 3, 2001                 Deferred tax valuation allowance      306,000      114,000     --           --        420,000

(1) Realization of deferred tax assets

INVENTORY VALUATION ALLOWANCE
January 30, 1999                 Inventory valuation allowance       2,738,000    2,744,000     --      2,646,000    2,836,000
January 29, 2000                 Inventory valuation allowance       2,836,000    2,947,000     --      2,955,000    2,828,000
February 3, 2001                 Inventory valuation allowance       2,828,000    2,782,000     --      3,663,000    1,947,000
</TABLE>


                                       40
<PAGE>

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

None



                                   PART III

ITEMS 10-13   DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY

    The information required by Part III (Items 10-13) is set forth in the
Company's definitive proxy statement, which will be filed pursuant to Regulation
14A within 120 days of February 3, 2001, and in Item 1A hereof. Such information
is incorporated herein by reference and made a part hereof.



                                   PART IV

ITEM 14.   EXHIBITS AND REPORTS ON FORM 8-K

 (a)  1. Exhibits

      1.1   Form of Underwriting Agreement (1)
      4.1   Specimen Stock Certificate (2)
      3.1   Certificate of Incorporation (2)
      3.2   Bylaws (2)
     10.1   Form of Indemnification Agreement for Directors and Officers (2)
     10.2   Form of 1998 Equity Participation Plan (2)
     10.3   Form of 2000 Equity Participation Plan (3)
     10.4   Form of Employee Stock Purchase Plan (3)
     10.5   Services Agreement, dated October 13, 1995, by and between The
            Electronics Boutique, Inc. and Electronics Boutique plc(f/k/a
            Rhino Group plc) (2)
     10.6   Loan and Security Agreement, dated March 16, 1998, by and between
            The Electronics Boutique, Inc. and Fleet Capital Corporation (2)
     10.7   Joinder Agreement by and between Electronics Boutique of America
            Inc. and Fleet Capital Corporation (2)
     10.8   Form of Employment Agreement by and between Electronics Boutique
            Holdings Corp. and Joseph J. Firestone (2)
     10.9   Form of Employment Agreement by and between Electronics Boutique
            Holdings Corp. and John R. Panichello (2)
     10.10  Form of Employment Agreement by and between Electronics Boutique
            Holdings Corp and Jeffrey W. Griffiths (2)
     10.11  Amendment No. 1 to Loan and Security Agreement by and among The
            Electronics Boutique, Inc., Electronics Boutique of America Inc.
            and Fleet Capital Corporation (2)
     10.12  Amendment No. 2 to Loan and Security Agreement by and among The
            Electronics Boutique, Inc., Electronics Boutique of America Inc.
            and Fleet Capital Corporation (2)
     10.13  Form of Employment Agreement by and between Electronics Boutique
            Holdings Corp. and Seth P. Levy (4)
     10.14  Form of Employment Agreement by and between Electronics Boutique
            Holdings Corp. and James A. Smith (5)
     10.15  Form of Employment Agreement by and between Electronics Boutique
            Holdings Corp. and Steve Morgan
     21.1   Subsidiaries of Electronics Boutique Holdings Corp.
     23.1   Consent of KPMG LLP

                                       41
<PAGE>

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

      (1)   Incorporated by reference from the applicable exhibits of
            Electronics Boutique's Registration Statement on Form S-3 (Reg. No.
            333-88561)
      (2)   Incorporated by reference from the applicable exhibits of
            Electronics Boutique's Registration Statement on Form S-1 (Reg. No.
            333-48523)
      (3)   Incorporated by reference from Electronics Boutique Proxy on
            Schedule 14A dated June 16, 2000.
      (4)   Incorporated by reference from the applicable exhibits of
            Electronics Boutique's Annual Report on Form 10-Q for the quarterly
            period ended July 31, 1999
      (5)   Incorporated by reference from the applicable exhibits of
            Electronics Boutique's Annual Report on Form 10-Q for the quarterly
            period ended October 28, 2000

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

(b)   Reports on Form 8-K

      None.



                                       42
<PAGE>

                                  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.

                              ELECTRONICS BOUTIQUE HOLDINGS CORP.


                              By: /s/ Joseph J. Firestone
                                 -----------------------------------------------
                                 Joseph J. Firestone
                                 President and Chief Executive Officer

Date: April 30, 2001

    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 30, 2001.

NAME                                TITLE
----                                -----

 /s/ James J. Kim            Chairman of the Board
-------------------------
      James J. Kim


 /s/ Joseph J. Firestone     President and Chief Executive Officer and Director
--------------------------            (Principal Executive Officer)
   Joseph J. Firestone


 /s/ John R. Panichello      Senior Vice President and Chief Financial Officer
---------------------------     (Principal Financial and Accounting Officer)
    John R. Panichello


 /s/ Dean S. Adler           Director
---------------------------
  Dean S. Adler


 /s/ Susan Y. Kim            Director
---------------------------
    Susan Y. Kim


 /s/ Louis J. Siana          Director
---------------------------
    Louis J. Siana


 /s/ Stanley Steinberg       Director
----------------------------
   Stanley Steinberg

                                       43