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                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
 
                               ----------------
 
 
                                   FORM 10-K
 
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
   OF 1934
 
                  For the fiscal year ended December 31, 1998
 
                                       OR
 
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES ACT OF
   1934
 
                        Commission file number 000-24711
 
                             EBS Litigation, L.L.C.
             (Exact name of registrant as specified in its charter)
 
            
             Delaware                                   13-3989964
   (State or other jurisdiction of       (I.R.S. Employer Identification Number)
            incorporation)                    
 
                      c/o Friedman, Wang & Bleiberg, P.C.
                                 90 Park Avenue
                            New York, New York 10016
                              Attn: Peter N. Wang
                    (Address of principal executive offices)
 
       Registrant's telephone number, including area code (212) 682-7474
 
          Securities registered pursuant to Section 12(b) of the Act:
 
                                      None
 
          Securities registered pursuant to Section 12(g) of the Act:
 
                            Class A Membership Units
                                (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 for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]
 
   Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
 
   There is no aggregate market value of the registrant's Class A Membership
Units held by nonaffiliates of the registrant as of December 31, 1998. Book
value of the registrant's Class A Membership Units as of December 31, 1998 was
approximately $2.88 million.
 
   There were 10,000,000 Class A Membership Units outstanding as of February
28, 1999.
 
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<PAGE>
 
                                     PART I
 
ITEM 1--BUSINESS
 
   Unless otherwise noted, all references to "the Company" shall mean EBS
Litigation, L.L.C., a Delaware limited liability company.
 
Background
 
   On September 9, 1997, the United States Bankruptcy Court for the District of
Delaware (the "Bankruptcy Court") entered an order in accordance with section
1129 of the Bankruptcy Code, 11 U.S.C. (S)(S) 101-1330, et seq., (the
"Bankruptcy Code") confirming the Amended Joint Plan of Reorganization Under
Chapter 11 of the Bankruptcy Code (the "Plan") filed by Edison Brothers Stores,
Inc. ("Edison") and its affiliated debtors in possession (collectively with
Edison, the "Debtors"). The Plan became effective on September 26, 1997 (the
"Effective Date").
 
   The Company was established pursuant to the Plan and the EBS Litigation,
L.L.C. Members Agreement (the "Members Agreement"). Pursuant to the Plan, each
holder of an Allowed General Unsecured Claim (as defined in the Plan) against
Edison was entitled to receive a distribution on account of such claim which
included, among other consideration, the holder's pro rata share of the
Company's Class A Membership Units in the Company. The initial distribution
date under the Plan occurred on or about December 12, 1997 (the "Initial
Distribution Date"). Accordingly, in late December of 1997, holders of Allowed
General Unsecured Claims began receiving membership certificates evidencing
their ownership of Class A Membership Units in the Company. As of December 31,
1998, there were 10,000,000 Class A Membership Units and no Class B Membership
Units of the Company issued and outstanding.
 
   The Plan further provided for the Debtors' transfer to the Company of their
right, title and interest in and to all of the Debtors' potential fraudulent
transfer causes of action under the Bankruptcy Code or applicable state law,
arising in connection with (a) the June 29, 1995 distribution by Edison of
approximately 4,404,560 shares of common stock (the "D&B Common Stock") in Dave
& Buster's Inc., a Missouri corporation ("Dave & Busters"), to holders of
Edison common stock (the "D&B Spinoff Stockholders") in the form of a dividend;
and (b) all related transactions (the "D&B Spinoff"). The causes of action
relating to the D&B Spinoff are referred to herein as the "Unresolved Avoidance
Claims." Following transfer of the Unresolved Avoidance Claims to the Company,
the Plan provided for the appointment of the Company as the representative of
the Debtors' estates for the purpose of retaining and enforcing the Unresolved
Avoidance Claims in accordance with section 1123(b)(3)(B) of the Bankruptcy
Code and the Members Agreement.
 
   The Plan further obligated the Debtors to transfer the "L.L.C. Funding
Amount," in an amount designated by the Official Committee of Unsecured
Creditors appointed in the Debtors' chapter 11 cases (the "Creditors'
Committee"), to the Company on the Effective Date. The Creditors' Committee
designated $2 million as the L.L.C. Funding Amount payable to the Company; such
L.L.C. Funding Amount was paid to the Company on October 16, 1997.
 
Formation of the Company and Summary of Certain Provisions of the Members
Agreement
 
 Formation
 
   In accordance with the Plan, the Certificate of Formation of the Company was
filed on September 24, 1997, with the office of the Delaware Secretary of State
for the purpose of forming the Company as a limited liability company under the
provisions and subject to the requirements of the State of Delaware, and in
particular the Delaware Limited Liability Company Act, Del. Code Ann. tit.6,
ch. 18 (the "Delaware Act"). The Certificate of Formation became effective on
September 25, 1997 (the "Inception Date").
 
                                       2
<PAGE>
 
 Purposes
 
   The Company was organized solely for the purposes of (a) prosecuting,
settling and/or liquidating the Unresolved Avoidance Claims; (b) receiving and
administering all assets of the Company (i.e., the cash proceeds of the
Unresolved Avoidance Claims or "Avoidance Claim Proceeds" as well as other
property or proceeds received by the Company); and (c) distributing the net
Avoidance Claim Proceeds to holders of Membership Units in the Company pursuant
to the terms of the Members Agreement. The Company has no objective to engage
in the conduct of any trade or business. In essence, the Company constitutes a
vehicle for (a) converting the Unresolved Avoidance Claims to cash, whether by
means of the D&B Spinoff Settlement (as defined in the Plan) or other
settlement, or enforcement of a judgment ultimately obtained; and then (b)
distributing all net cash to holders of Membership Units in the Company.
 
 Administration and the Manager
 
   The Company has no employees. The affairs of the Company are managed by the
Manager. The Manager of the Company, as duly designated by the Creditors'
Committee, is Peter N. Wang (in such capacity, the "Manager"). The principal
office of the Company is maintained at the office of the Manager, which is the
law office of Friedman, Wang & Bleiberg, P.C. ("FWB"), 90 Park Avenue, New
York, New York 10016. The telephone number is (212) 682-7474.
 
   In furtherance of the Company's purposes and subject to the retained
jurisdiction of the Bankruptcy Court as provided for in the Plan, the Manager
is obligated to make continuing efforts to (1) prosecute, settle and/or
liquidate the Unresolved Avoidance Claims, based upon the assessment of the
Manager, with the advice of counsel and consultants retained by the Manager, of
(A) the likelihood that the Company will prevail on the merits, (B) the
possible recovery on such litigation, (C) the estimated cost (and attendant
delay) of such litigation, (D) the offer of settlement, (E) the resources of
the Company that are available for prosecuting the Unresolved Avoidance Claims,
and (F) any other matters that the Manager deems to be relevant to such
assessment, and (2) make distributions of Avoidance Claim Proceeds; in each
case in an expeditious but orderly manner intended reasonably to maximize the
value of such distributions to the Members, but subject to the judgment and
discretion of the Manager and the provisions of the Members Agreement. The
Manager is not liable or accountable, in damages or otherwise, to the Company
or to any Member for any action or inaction, except in the case of his willful
breach of a material provision of the Members Agreement or gross negligence in
connection with the performance of his duties under the Members Agreement.
 
   The Manager is empowered to retain such independent experts and advisors
(including, but not limited to, law firms, tax advisors, consultants or other
professionals) as the Manager may select to aid in the performance of his
duties and responsibilities and to perform such other functions as may be
appropriate in furtherance of the intent and purpose of the Members Agreement.
 
   The Members Agreement also requires the Manager to designate one of the
Members as the "Tax Matters Partner" (as defined in the Section 6231 of the
Internal Revenue Code). The Tax Matters Partner is required to represent the
Company (at the Company's expense) in connection with all examinations of the
Company's affairs by tax authorities and to expend Company funds for
professional services associated therewith. The Tax Matters Partner also
arranges for the preparation and timely filing of all returns required to be
filed by the Company and the distribution of Form K-1 or other similar forms to
all Members. In accordance with the Members Agreement, the Manager has
designated Citibank, N.A., through its authorized representative Randolph I.
Thornton, Jr., to serve as the Tax Matters Partner of the Company.
 
   The Manager has selected the law firm of Jones, Day, Reavis & Pogue ("Jones
Day") to serve as counsel to the Company. Jones Day's principal duties as
counsel for the Company involve the prosecution of the D&B Spinoff Litigation
(as defined below) and related negotiations. Prior to the Effective Date, Jones
Day served as counsel to the Creditors' Committee. The Manager has selected
PricewaterhouseCoopers LLP to provide the Company with financial reporting and
consulting services as well as tax-related services. Norwest Bank
 
                                       3
<PAGE>
 
Minnesota, N.A., which serves as the Company's Transfer Agent and as the
Company's Disbursing Agent under the Plan, maintains the Company's funds and
ownership registers, coordinates distributions to Members of the Company, and
performs related administrative duties. Rubin, Brown, Gornstein & Company, LLP
serves as the Company's independent auditors.
 
   Subject to the retained jurisdiction of the Bankruptcy Court as provided for
in the Plan, but without prior or further authorization, the Manager may
control and exercise authority over the Company's assets, over the acquisition,
management and disposition thereof and over the management and conduct of the
Company to the extent necessary to enable the Manager to fulfill the intent and
purposes of the Members Agreement. No person dealing with the Company is
obligated to inquire into the authority of the Manager in connection with the
acquisition, management or disposition of the Company's assets. In connection
with the administration of the Company's assets and the management of the
Company's affairs, the Manager has the power to take any and all actions as, in
the Manager's sole discretion, are necessary or advisable to effectuate the
purposes of the Company. The Manager may not, however, at any time, on behalf
of the Company or the Members, enter into or engage in any trade or business,
and no part of the Company's assets will be used or disposed of by the Manager
in furtherance of any such trade or business. All decisions and actions taken
by the Manager under the authority of the Members Agreement are binding upon
all of the Members and the Company. Without the consent of all of the Members,
the Manager may not (1) take any action in contravention of the Members
Agreement; (2) take any action which would make it impossible to carry on the
activities of the Company; or (3) possess property of the Company or assign the
Company's rights in specific property for other than Company purposes.
 
 Term of the Company; Dissolution
 
   Unless dissolved earlier, because of an adjudication of bankruptcy of the
Company or because of the unanimous written consent of all Members, the
Company's existence will terminate (unless dissolved earlier) on September 26,
2000 (the third anniversary of the Effective Date), unless extended by the
Manager (with the approval of the Bankruptcy Court) for one or more successive
periods of two years each if the Company's assets have not been fully
liquidated and distributed or all Disputed General Unsecured Claims (as defined
in the Plan) have not been resolved. In the event of the Company's dissolution,
following the payment of, or provision for, all debts and liabilities of the
Company and all expenses of liquidation, and subject to the right of the
Liquidating Agent (as defined in the Members Agreement) to set up reasonable
cash reserves for any contingent or unforeseen liabilities or obligations of
the Company, all assets of the Company (or the proceeds thereof) will be
distributed to holders of Class A Membership Units in accordance with their
respective Capital Account (as defined in the Members Agreement) balances. No
Member will have any recourse against Edison or any other Member for any
distributions with respect to such Member's Capital Account balances.
 
The Company's Operations Since Inception
 
 Commencement of Litigation
 
   On September 29, 1997, the Company, as the assignee of the Unresolved
Avoidance Claims, filed a complaint (the "Complaint") with the Bankruptcy
Court, commencing the prosecution of all Unresolved Avoidance Claims against
the D&B Spinoff Stockholders, Dave & Busters, and their current management. The
lawsuit is pending before the Bankruptcy Court as Adversary Proceeding No. A-
97-171 (the "D&B Spinoff Litigation"). The Complaint filed by the Company
alleged, among other things, that Edison had not received reasonably equivalent
value for the D&B Common Stock and certain realty holdings valued at
approximately $7.3 million in connection with the D&B Spinoff, and thus sought
to recover the D&B Common Stock, or the value thereof, from the D&B Spinoff
Stockholders.
 
   The Company also filed a Motion to Certify Defendant Class, requesting that
the Bankruptcy Court permit the Company to prosecute the D&B Spinoff Litigation
as a defendant class action. A defendant class action is a procedural device
whereby the plaintiff, in this case the Company, can identify a limited number
of qualified
 
                                       4
<PAGE>
 
defendants to represent the interests of a larger number of similarly situated
defendants and upon prevailing, can take judgment against all defendants.
Certification of a defendant class and designation of class representatives
permits the plaintiff to obtain uniform relief from all defendants by removing
the inefficiencies and risks of inconsistent or varying adjudications with
respect to individual members of the class. The Company initially identified 11
parties to serve as class representatives.
 
   In addition to seeking recovery of the D&B Spinoff Stock or its value from
the D&B Spinoff Stockholders, the Complaint sought to recover approximately
$7.3 million transferred to insiders of Dave & Busters by subsidiaries of
Edison. Specifically, the Complaint alleged that Edison paid a $3.75 million
dividend to one subsidiary, and satisfied an antecedent debt of $3.55 million
to another subsidiary, for the sole purpose of providing cash to pay advances
to certain individual defendants. The Complaint sought recovery of these cash
transfers from defendants Dave & Busters, D&B Realty Holding, Inc., and the
named individuals (collectively, the "Spinoff-Related Defendants"). On October
30, 1997, the Spinoff-Related Defendants filed a joint answer, generally
denying the relevant allegations of the Complaint, setting forth certain
affirmative defenses and demanding a trial by jury. The Spinoff-Related
Defendants also filed a Motion for a Determination that the proceeding is a
Core Proceeding (which is a proceeding over which a bankruptcy court may
preside in accordance with 28 U.S.C.(S) 157(d)), which was granted without
objection, as well as a Motion for Withdrawal of Reference, seeking withdrawal
of the D&B Spinoff Litigation to the United States District Court for the
District of Delaware (the "District Court"). On August 10, 1998, the Company
entered into a Settlement Agreement with the Spinoff-Related Defendants and
certain other interested parties, wherein the Company released these parties
from all Spinoff-Related claims in return for a payment of $2.1 million. The
action against the Spinoff-Related Defendants was dismissed August 20, 1998,
and the money was paid into the Disbursing Agent's account on August 26, 1998.
 
 The D&B Spinoff Settlement
 
   Notwithstanding commencement of the D&B Spinoff Litigation, each D&B Spinoff
Stockholder had the right to obtain a release of all Unresolved Avoidance
Claims against it by participating in the D&B Spinoff Settlement provided for
in the Plan. In order to participate in the D&B Spinoff Settlement, a D&B
Spinoff Stockholder was obligated to exercise one of three settlement options
outlined in the Plan. The three settlement options permitted D&B Spinoff
Stockholders to participate by means of (a) exercising a specified number of
rights granted to Edison stockholders under the Plan; (b) paying cash to the
Company in an amount equal to the D&B Spinoff Release Minimum Purchase Price
described below; or (c) a combination of rights exercised and cash paid, all as
determined in accordance with formulas set forth in the Plan. Most of the D&B
Spinoff Stockholders who elected to participate in the D&B Spinoff Settlement
elected the settlement option (the "Direct Purchase Option") involving the
payment of the "D&B Spinoff Release Minimum Purchase Price," which was equal to
the product of (a) $5.6593, and (b) the number of shares of D&B Common Stock
that such D&B Spinoff Stockholder received in connection with the D&B Spinoff.
 
   The Plan provided for the expiration of the D&B Spinoff Settlement Period on
the 30th day after the Effective Date. The Company elected to extend such
period for the Direct Purchase Option until March 30, 1998. It was determined
that such an extension was in the best interests of the Company, as it
permitted the recovery of approximately $4.5 million in D&B Spinoff Settlement
Proceeds from defendants who were not able to accept the D&B Spinoff Settlement
Offer by the initial deadline, for reasons including, without limitation, (a)
the time lag attendant to the transmission of settlement-related documents from
record holders to their beneficial holders, and (b) the desire of certain D&B
Spinoff Stockholders to consult with counsel or other advisors prior to
participating in the D&B Spinoff Settlement.
 
   As of December 31, 1998, the D&B Spinoff Settlement Proceeds that had been
received by the Company aggregated approximately $15.0 million. This sum
represents the aggregate settlement amount paid by D&B Spinoff Stockholders of
approximately 2.4 million shares of D&B Common Stock. Holders of approximately
2 million remaining shares did not participate in the D&B Spinoff Settlement.
For procedural reasons, the
 
                                       5
<PAGE>
 
Company is only seeking recovery against D&B Spinoff Stockholders who received
more than 55 shares of D&B Common Stock in the D&B Spinoff.
 
Status of D&B Spinoff Litigation as of December 31, 1998
 
   On November 21, 1997, the Company temporarily withdrew its Motion to
Certify Defendant Class, in light of the fact that each of the proposed class
representatives had elected to participate in the D&B Spinoff Settlement.
Following efforts to identify adequate class representatives to replace the
initial proposed class representatives, on March 6, 1998, the Company filed
(a) its Motion to File Amended Class Complaint, requesting leave to file an
amended complaint (the "Amended Complaint") substantively similar to the
Complaint but identifying new proposed class representatives; and (b) a
Renewed Motion to Certify Defendant Class. On March 30, 1998, the Bankruptcy
Court granted each of these motions. The Bankruptcy Court's Order Certifying
Defendant Class Action (the "Class Certification Order") certified the
following defendant class (the "Defendant Class") as a mandatory defendant
class pursuant to Rule 23(b)(1) of the Federal Rules of Civil Procedure:
 
     All persons or entities who were the beneficial or legal recipients of
  at least 55 shares of the June 1995 transfer of 4,404,560 shares of Dave
  and Busters stock from Edison except those persons or entities who have
  obtained a release of Unresolved Avoidance Claims, as defined in the Plan,
  that was confirmed on September 9, 1997.
 
   The Class Certification Order designated the following entities
(collectively, the "Class Representatives") to represent the Defendant Class:
Barclays Global Investors, N.A.; Greentree Partners; Greenway Partners;
Wilshire Associates, Inc; and WKW Asset Management.
 
   On May 22, 1998, Class Representative Wilshire Associates, Inc. filed a
motion under Federal Rule of Civil Procedure 12(b)(6), seeking the Bankruptcy
Court's determination that Wilshire Associates, Inc. is not a proper party to
the D&B Spinoff Litigation. Wilshire Associates, Inc. asserts that it merely
serves as the nominee record holder of D&B Spinoff Stock, for the benefit of a
number of persons who have not thus far been identified. The Company has filed
a response to such motion, indicating that it will consent to dismissal of
Wilshire Associates, Inc. from the D&B Spinoff Litigation if Wilshire
Associates, Inc. adequately identifies, voluntarily or in accordance with an
order of the Bankruptcy Court, the persons for whose benefit it holds D&B
Spinoff Stock.
 
   The Class Representatives selected Edward McNally and the Wilmington,
Delaware law firm of Morris, James, Hitchens & Williams ("Class Counsel") to
represent the Defendant Class. On June 8, 1998, Class Counsel filed a motion
seeking payment of all fees and costs relating to the D&B Spinoff litigation.
The Bankruptcy Court has not yet ruled on the motion, which the Company
opposes. Following official appointment of Class Counsel by the Bankruptcy
Court, the Class Counsel, on July 1, 1998, filed a motion requesting
decertification of the Defendant Class and a motion to withdraw reference from
the bankruptcy court. The Company filed its responses opposing the motions on
July 14, 1998 and July 28, 1998, respectively. On July 17, 1998, the Defendant
Class filed a motion to dismiss the action. The Company's response opposing
this motion was filed on August 10, 1998.
 
   The Class' Motion to withdraw reference was assigned in the district court
in late September. The Motion is fully briefed, and the Company requested oral
argument. The district court has not yet ruled or asked for oral argument on
the Motion. The remaining Motions stay with the Bankruptcy Court unless and
until the district court decides to withdraw the reference. The Bankruptcy
Court may rule on the pending motions any time before reference is withdrawn,
but need not do so. Each of the remaining Motions is fully briefed and
awaiting the bankruptcy court's ruling or request for oral argument.
 
   The Company intends to prosecute the D&B Spinoff Litigation vigorously, and
to pursue the maximum available recoveries. While there can be no assurances
as to the Company's ultimate total recovery given the uncertainties associated
with litigation, at this juncture it is estimated that such recoveries will
exceed the costs of further prosecuting the D&B Spinoff Litigation.
 
                                       6
<PAGE>
 
ITEM 2--PROPERTIES
 
   The Company does not own or lease any property.
 
ITEM 3--LEGAL PROCEEDINGS
 
   Other than the D&B Spinoff Litigation described throughout this Annual
Report on Form 10-K, the Company is not involved in any legal proceedings.
 
ITEM 4--SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
 
   No matters were submitted to holders of Membership Units for vote during the
fourth quarter of the fiscal year ended December 31, 1998.
 
 
                                       7
<PAGE>
 
                                    PART II
 
ITEM 5--MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
 
   There is no established public trading market for the Company's Class A
Membership Units. As of December 31, 1998, there were 2,094 holders of record
of the Class A Membership Units. See "Item 12. Security Ownership of Certain
Beneficial Owners and Management" for more information.
 
ITEM 6--SELECTED FINANCIAL DATA
 
   The following summary operating and balance sheet data sets forth selected
financial information of the Company as of and for the period ended December
31, 1997, since the Inception Date and as of and for the year ended December
31, 1998. The selected financial data as of and for the period ended December
31, 1997 and as of and for the year ended December 31, 1998 has been derived
from the Company's financial statements, which were audited by Rubin, Brown,
Gornstein & Company, LLP. The following information should be read in
conjunction with the Company's financial statements and "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
presented below.
 
<TABLE>
<CAPTION>
                                                          Period
                                                           Ended
                                                         December    Year Ended
                                                            31,     December 31,
                                                         1997(/1/)      1998
                                                        ----------- ------------
<S>                                                     <C>         <C>
Operating Statement Data:
Defendant payment revenue.............................. $ 9,991,975  $4,981,595
Interest income........................................     106,048     388,168
Expenses...............................................     175,587     671,438
Net income.............................................   9,922,436   4,698,325
Distribution per Class A Membership Unit(/2/)..........         -0-        1.45
Balance Sheet Data (at period end):
Total assets........................................... $12,069,695  $3,049,682
Accrued expenses.......................................     147,259     161,560
Working capital........................................  11,922,436   2,888,122
Long-term debt.........................................         -0-         -0-
Members' equity........................................  11,922,436   2,888,122
</TABLE>
--------
(/1/The)Company's inception was September 25, 1997.
(/2/This)represents an average distribution made per Class A Membership Unit
    during the year. Actual distributions to Class A Membership Unit holders
    may differ. The following includes a detailed discussion of the
    distributions made during the year. During April 1998, the Company
    distributed approximately $7.0 million to 9,342,874 Class A Membership
    Units holders that were outstanding at the date of distribution. During
    June 1998, the Company distributed approximately $0.1 million to holders of
    the 127,507 Class A Membership Units that were distributed in June 1998.
    During October 1998, the Company distributed approximately $6.6 million to
    the holders of Class A Membership Units of record as of October 1, 1998.
 
                                       8
<PAGE>
 
ITEM 7--MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
 
   The following is a discussion and analysis of the financial condition and
the results of operations of the Company as of and for the period ended
December 31, 1997 and as of and for the year ended December 31, 1998, and of
certain factors that may affect the Company's prospective financial condition
and results of operations. This discussion and analysis should be read in
conjunction with the Company's Financial Statements and Notes thereto included
elsewhere herein. This discussion contains certain forward-looking statements
which involve risks and uncertainties. The Company's actual results could
differ materially from the results expressed in, or implied by, such
statements.
 
Results of Operations
 
   The Company, which was formed pursuant to the Plan and the Members
Agreement, is a limited purpose entity which may not engage in any trade or
business. The Company was organized solely for the purposes of (a) prosecuting,
settling and/or liquidating the Unresolved Avoidance Claims, (b) receiving and
administering the Avoidance Claim Proceeds, and (c) distributing the net
Avoidance Claim Proceeds to holders of the Company's Class A Membership Units
pursuant to the terms of the Members Agreement. The Company commenced its
activities on September 25, 1997. Accordingly, there is no comparative
financial information presented herein.
 
   On October 16, 1997, the Company received the L.L.C. Funding Amount of $2
million. The Company recognizes income from amounts received from the
prosecution, settlement and liquidation of the Unresolved Avoidance Claims. To
date, the Company has only received settlement amounts. During the period ended
December 31, 1997, the Company received approximately $10.0 million in D&B
Spinoff Settlement Proceeds. The D&B Spinoff Settlement Period was to initially
expire on October 27, 1997, at which time the Company had received
approximately $7.8 million in D&B Spinoff Settlement Proceeds. However, many
defendants were not able to accept the D&B Spinoff Settlement by the initial
deadline for reasons including, without limitation, (a) the time lag attendant
to the transmission of settlement-related documents from record holders to
their beneficial holders, and (b) the desire of certain D&B Spinoff
Stockholders to consult with counsel or other advisors prior to participating
in the D&B Spinoff Settlement. The Manager therefore decided that an extension
of the D&B Spinoff Settlement Period was in the best interests of the Company.
The extension permitted the recovery of additional D&B Settlement Proceeds of
approximately $2.2 million between October 27, 1997 and December 31, 1997 and
approximately $5.0 million in the twelve month period ended December 31, 1998.
The Company expects to recognize defendant payment revenue in future periods as
the Unresolved Avoidance Claims are prosecuted, settled further, or both.
However, there can be no assurance that the Company will recognize any further
defendant payment revenue.
 
   The Company also recognizes income from interest earned on Avoidance Claim
Proceeds. The Company invests Avoidance Claim Proceeds in a money market fund
investing solely in direct obligations of the United States Government. The
Members Agreement permits all funds received by the Company to be temporarily
invested in United States treasury bills and notes with maturities of 12 months
or less, institutional money market funds, and demand or time deposits with
U.S. federal or state commercial banks having primary capital of not less than
$500 million. During the period ended December 31, 1997 and the twelve month
period ended December 31, 1998, the Company recognized approximately $106,000
and $388,000 of interest income, respectively. The amount of interest income
recognized by the Company in future periods will be dependent on, among other
things, (1) fluctuations in interest rates, (2) the amounts and timing of any
Avoidance Claims Proceeds received in the future, (3) the amounts and timing of
any distributions to holders of Class A Membership Units, and (4) the amount
and timing of the Company's expenses.
 
   The Company's expenses consist primarily of fees payable to the Transfer
Agent, the Manager, and the Company's lawyers and accountants and insurance
expenses. The Company had expenses of approximately $176,000 for the period
ended December 31, 1997 and approximately $671,000 for the twelve month period
 
                                       9
<PAGE>
 
ended December 31, 1998. These expenses are expected to fluctuate in future
periods primarily based on the activity in any period in the D&B Spinoff
Litigation.
 
   The Company and EBS Pension, L.L.C. (another limited liability company
formed pursuant to the Plan) have agreed to indemnify the Debtors and their
present or former officers, directors and employees from and against any
losses, claims, damages or liabilities by reason of any actions arising from or
relating to the Company and any actions taken or proceeding commenced by the
Company (other than with respect to any Unresolved Avoidance Claims that the
Company may have against such persons other than in their capacities as
officers, directors or employees of the Debtors). Indemnification must first be
sought from any applicable officers' and directors' insurance policy, and then
from the $1.5 million reserve established by EBS Pension L.L.C. Although to
date there has not been any indemnification claim, there can be no assurance
such a claim will not be made in the future. All liabilities of the Company,
including the foregoing indemnification obligations, will be satisfied from the
Company's assets.
 
   At December 31, 1997 and 1998, the Company had cash and cash equivalents of
approximately $12.0 million and $3.0 million, respectively. During 1998, the
Company distributed an aggregate amount of $13.7 million to holders of Class A
Membership Units. The Company reserved approximately $0.8 million for holders
of Class A Membership Units that were distributed in December 1998. The amount
and timing of any future distributions of Avoidance Claim Proceeds will be
determined by the Manager in accordance with the terms of the Members
Agreement. There can be no assurance as to the amount (if any) of any further
distributions that will be made.
 
   The Company is classified as a partnership for federal income tax purposes
and, therefore, does not pay taxes. Instead, the Members pay taxes on their
proportionate share of the Company's income.
 
Year 2000 Issues
 
   In the light of the limited nature of the Company's activities, it does not
believe its operations or financial condition are affected by Year 2000 issues,
except insofar as it would be affected by a general interruption of telephone
and utility services or if its Transfer Agent were unable to process
distributions or transfers of Membership Units. The Company is seeking written
assurances from its Transfer Agent as to Year 2000 compliance. If the Company
does not receive adequate assurances or if, notwithstanding those assurances,
the Transfer Agent were noncompliant, it would replace the Transfer Agent with
one that has systems that are Year 2000 compliant.
 
                                       10
<PAGE>
 
ITEM 8--FINANCIAL STATEMENTS
 
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
 
                          INDEPENDENT AUDITORS' REPORT
 
                       Rubin, Brown, Gornstein & Co., LLP
                            230 South Benison Avenue
                              St. Louis, MO 63105
Members
EBS Litigation, L.L.C.
 
   We have audited the accompanying balance sheets of EBS Litigation, L.L.C., a
limited liability company, as of December 31, 1997 and December 31, 1998 and
the related statements of operations, changes in members' equity and cash flows
for the period beginning September 25, 1997 and ended December 31,1997 and for
the year ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
 
   We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
 
   In our opinion, the financial statements referred to above represent fairly,
in all material respects, the financial position of EBS Litigation, L.L.C. as
of December 31, 1997 and December 31, 1998, and the results of its operations
and its cash flows for the period beginning September 25, 1997 and ended
December 31, 1997 and for the year ended December 31, 1998, in conformity with
generally accepted accounting principles.
 
                                        /s/ Rubin, Brown, Gornstein & Co., LLP
                                        _______________________________________
                                           Rubin, Brown, Gornstein & Co., LLP
 
March 2, 1999
 
                                       11
<PAGE>
 
                             EBS LITIGATION, L.L.C.
 
                                 Balance Sheet
                           December 31, 1998 and 1997
 
<TABLE>
<CAPTION>
                                                              December 31
                                                            1998       1997
                                                         ---------- -----------
<S>                                                      <C>        <C>
Assets
Cash and cash equivalents
  Available for general operations.....................  $2,190,255 $12,021,196
  Available for future holders of Class A Membership
   Units distributed in
   November and December of 1998.......................     781,785         --
Prepaid insurance......................................      66,082         --
Interest receivable ...................................      11,560      48,499
                                                         ---------- -----------
    Total assets.......................................  $3,049,682 $12,069,695
                                                         ========== ===========
Liabilities
  Accrued expenses.....................................  $  161,560 $   147,259
                                                         ---------- -----------
    Total liabilities..................................     161,560     147,259
                                                         ---------- -----------
Members' equity:
Membership Units (Class A--10,000,000 authorized,
 10,000,000 and 9,064,140 issued and outstanding at De-
 cember 31, 1998 and 1997, respectively; Class B--0 and
 935,860 authorized, issued and outstanding at December
 31, 1998 and 1997, respectively)
Paid-in capital........................................         --    2,000,000
Retained earnings......................................   2,888,122   9,922,436
                                                         ---------- -----------
    Total members' equity..............................   2,888,122  11,922,436
                                                         ---------- -----------
    Total liabilities and members' equity..............  $3,049,682 $12,069,695
                                                         ========== ===========
</TABLE>
 
 
 
   The accompanying notes are an integral part of these financial statements.
 
                                       12
<PAGE>
 
                             EBS LITIGATION, L.L.C.
 
                            Statement of Operations
                For the Periods Ended December 31, 1998 and 1997
 
<TABLE>
<CAPTION>
                                                                   Period
                                                             September 25, 1997
                                                                  (date of
                                                                 inception)
                                                 Year ended       through
                                                December 31,    December 31,
                                                    1998            1997
                                                ------------ ------------------
<S>                                             <C>          <C>
Income:
  Defendant payment revenue....................  $4,981,595     $ 9,991,975
  Interest.....................................     388,168         106,048
                                                 ----------     -----------
    Total income...............................   5,369,763      10,098,023
                                                 ----------     -----------
Expenses:
  Legal and accounting fees....................     327,364          41,540
  Insurance....................................      97,343          26,575
  Manager fees.................................      94,945          28,116
  Transfer agent and settlement administration
   fees........................................      76,588          67,224
  Other........................................      75,198          12,132
                                                 ----------     -----------
    Total expenses.............................     671,438         175,587
                                                 ----------     -----------
Net income.....................................  $4,698,325     $ 9,922,436
                                                 ==========     ===========
</TABLE>
 
 
 
 
   The accompanying notes are an integral part of these financial statements.
 
                                       13
<PAGE>
 
                             EBS LITIGATION, L.L.C.
 
                    Statement of Changes in Members' Equity
                For the Periods Ended December 31, 1998 and 1997
 
<TABLE>
<CAPTION>
                          Class A     Class B
                         Membership  Membership    Paid in      Retained
                           Units       Units       Capital      Earnings       Total
                         ----------  ----------  -----------  ------------  ------------
<S>                      <C>         <C>         <C>          <C>           <C>
Balance, September 25,
 1997...................        --          --   $       --   $        --   $        --
Original capital
 contribution...........        --   10,000,000    2,000,000           --      2,000,000
Units transferred.......  9,064,140  (9,064,140)         --            --            --
Period income...........        --          --           --      9,922,436     9,922,436
                         ----------  ----------  -----------  ------------  ------------
Balance, December 31,
 1997...................  9,064,140     935,860    2,000,000     9,922,436    11,922,436
Capital distribution....        --          --    (2,000,000)  (11,732,812)  (13,732,812)
Units transferred.......    936,138    (936,138)         --            --            --
Units and proceeds
 returned from June
 distribution...........       (278)        278          --            173           173
Current year income.....        --          --           --      4,698,325     4,698,325
                         ----------  ----------  -----------  ------------  ------------
Balance, December 31,
 1998................... 10,000,000         --   $       --   $  2,888,122  $  2,888,122
                         ==========  ==========  ===========  ============  ============
</TABLE>
 
 
   The accompanying notes are an integral part of these financial statements.
 
                                       14
<PAGE>
 
                             EBS LITIGATION, L.L.C.
 
                            Statement of Cash Flows
                For the Periods Ended December 31, 1998 and 1997
 
<TABLE>
<CAPTION>
                                                                  Period
                                                            September 25, 1997
                                                            (date of inception)
                                               Year ended         through
                                              December 31,     December 31,
                                                  1998             1997
                                              ------------  -------------------
<S>                                           <C>           <C>
Cash flows from operating activities:
  Net income................................. $  4,698,325      $ 9,922,436
  Reconciliation of net income to cash flows
   provided by operating activities:
  Increase in prepaid insurance..............      (66,082)
  Decrease (increase) in interest
   receivable................................       36,939          (48,499)
  Increase in accrued expenses...............       14,301          147,259
                                              ------------      -----------
    Cash flows provided by operating
     activities..............................    4,683,483       10,021,196
                                              ------------      -----------
Cash flows from financing activities:
  Capital contribution.......................          --         2,000,000
  Capital distribution, net..................  (13,732,639)             --
                                              ------------      -----------
    Cash flows (used for)/provided by
     financing activities....................  (13,732,639)       2,000,000
                                              ------------      -----------
Net (decrease) increase in cash and cash
 equivalents.................................   (9,049,156)      12,021,196
Cash and cash equivalents at beginning of
 period......................................   12,021,196              --
                                              ------------      -----------
Cash and cash equivalents at end of period... $  2,972,040      $12,021,196
                                              ============      ===========
</TABLE>
 
 
   The accompanying notes are an integral part of these financial statements.
 
                                       15
<PAGE>
 
                             EBS LITIGATION, L.L.C.
 
                         Notes to Financial Statements
                           December 31, 1998 and 1997
 
1. Description of business
 
EBS Litigation, L.L.C. (the "Company") is governed by a Members Agreement,
dated as of September 25, 1997 (the "Members Agreement"). Pursuant to the
Members Agreement, the Company's purposes are to (a) prosecute, settle and/or
liquidate the Unresolved Avoidance Claims relating to the distribution by
Edison Brothers Stores, Inc. ("Edison") of approximately 4.4 million shares of
common stock of Dave & Busters, Inc. to holders of Edison common stock in the
form of a dividend and all related transactions (the "Unresolved Avoidance
Claims"), (b) receive, and administer the cash proceeds of the Unresolved
Avoidance Claims, and (c) distribute the net proceeds to the appropriate
holders of Membership Units (the "Members") in accordance with the Members
Agreement.
 
2. Summary of significant accounting policies
 
This summary of significant accounting policies is presented to assist in
evaluating the Company's financial statements included in this report. These
principles conform to generally accepted accounting principles. The preparation
of financial statements in conformity with generally accepted accounting
principles requires that management make estimates and assumptions that impact
the reported amounts of 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.
 
Basis of presentation
 
These financial statements include the accounts of the Company for the periods
from September 25, 1997 (date of inception) through December 31, 1997 and
January 1, 1998 through December 31, 1998.
 
Cash and cash equivalents
 
Cash and cash equivalents consists of funds held in an account in the Company's
name at a highly-rated financial institution, which funds are invested in an
institutional money market fund investing solely in direct obligations of the
United States Government.
 
Accrued expenses
 
Accrued expenses includes amounts payable to service providers and other
vendors. Amounts are payable within one year.
 
Defendant payment revenue
 
Defendant payment revenue is determined on an accrual basis and represents
settlements with individual defendants of Avoidance Claims during the period.
 
Interest
 
Interest income is determined on the accrual basis. Interest receivable is due
to be received within one year.
 
Expenses
 
All expenses of the Company are recorded on the accrual basis of accounting.
 
Income taxes
 
The Company is not subject to income taxes. Instead, the Members report their
distributive share of the Company's profits and losses on their respective
income tax returns.
 
                                       16
<PAGE>
 
                             EBS LITIGATION, L.L.C.
 
                         NOTES TO FINANCIAL STATEMENTS
                For the Periods Ended December 31, 1998 and 1997
 
3. Members' equity
 
On September 25, 1997, Edison transferred the rights, title and interests in
the Unresolved Avoidance Claims. In addition, as of September 25, 1997, Edison
was obligated to provide cash funding to the Company of $2.0 million, which was
subsequently paid on October 16, 1997. Such transfer and funding were in
exchange for 10,000,000 Class B Membership Units of the Company, which
represented all of the outstanding Membership Units of the Company. On December
12, 1997, in accordance with the Company's Members Agreement and the Plan of
Reorganization, Edison exchanged 9,064,140 Class B Membership Units for
9,064,140 Class A Membership Units of the Company and simultaneously
distributed such Class A Membership Units to holders of Allowed General
Unsecured Claims.
 
During 1998, Edison exchanged 936,138 Class B Membership Units for 936,138
Class A Membership Units of the Company and simultaneously distributed such
Class A units to holders of Allowed General Unsecured Claims.
 
During 1998, the Company distributed approximately $13.7 million to holders of
Class A Membership Units. In addition, $0.8 million is reserved for holders of
the Class A Membership Units that were distributed in November and December
1998.
 
Also during 1998, certain Class A Membership Unit holders returned 278 Class A
Membership Units to Edison as such Membership Units had been distributed in
error. The distribution proceeds relating to these returned Membership Units
are included in retained earnings and were made available for future
distributions to holders of Class A Membership Units. At December 31, 1998,
Edison has no Class B Membership Units.
 
4. Subsequent events
 
Cash on deposit as of February 19, 1999
 
As of February 19, 1999, the aggregate sum of approximately $2.1 million was on
deposit for the account of the Company. Such sum represents the sum of
aggregate D&B Spinoff Settlement Proceeds, the L.L.C. Funding Amount (the
original contribution) and accrued interest through January 31, 1999, less
disbursements through February 19, 1999. These proceeds will be used for
general operations. Any amounts not used will be made available for future
distributions to Class A Membership Unit holders.
 
Distribution to Members
 
On February 1, 1999, the Company distributed approximately $0.8 million of
reserved amounts to the holders of the Class A Membership Units that were
distributed in November and December 1998. This represents the entire amount of
funds reserved for future holders of Class A Membership Units.
 
 
                                       17
<PAGE>
 
ITEM 9--CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
       FINANCIAL DISCLOSURE
 
   None.
 
                                    PART III
 
ITEM 10--DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
 
   The Company has no directors and the Manager, Peter N. Wang, acts as the
Company's sole executive officer. Mr. Wang is 50 years old and has been a
shareholder and officer of FWB for the past 20 years. The Manager may resign at
any time or be removed by the holders (the "Requisite Holders") of 65% or more
of the outstanding Class A Membership Units (excluding such holders against
whom the Company holds Unresolved Avoidance Claims), with or without cause, at
any time, such resignation or removal to be effective upon the appointment of a
successor Manager. In the event of the death, resignation, incompetency or
removal of the Manager, the Requisite Holders may appoint a successor Manager
that is not affiliated with Edison. If such appointment does not occur within
90 days, the Manager or the Manager's representative may petition the
Bankruptcy Court for the appointment of a successor Trustee.
 
ITEM 11--EXECUTIVE COMPENSATION
 
   The Members Agreement provides that FWB will receive compensation for the
Manager's services to the Company at the standard hourly rates charged for the
Manager's services and the services of other persons at FWB who may assist him
with his duties. The Company is also obligated to reimburse FWB for reasonable
expenses incurred by the Manager and others at FWB in connection with the
performance of the Manager's duties to the Company.
 
   With respect to services rendered from the Inception Date to December 31,
1997, FWB was paid $6,903 on account of the Manager's services, $20,995 on
account of the services of another attorney at FWB who assisted him, and $218
in expense reimbursement.
 
   With respect to services rendered during the year ended December 31, 1998,
FWB was paid $9,240 on account of the Manager's services to the Company and
$85,102 on account of the services of another attorney at FWB who assisted him.
The Company also paid $81 for the services of a paralegal at FWB and $521 in
expense reimbursement.
 
ITEM 12--SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
   The following table sets forth certain information regarding the beneficial
ownership of the Company's Class A Membership Units of persons owning of record
or known to the Company to be the beneficial owner of more than five percent of
the outstanding Class A Membership Units as of December 31, 1998. The Manager
does not own any Class A Membership Units.
 
<TABLE>
<CAPTION>
   Name and Address of         Number of Class A  Nature of Beneficial
   Beneficial Owner            Membership Units        Ownership        Percent
   -------------------         ----------------- ---------------------- -------
   <S>                         <C>               <C>                    <C>
   Swiss Bank Corporation....      1,593,601     Sole Voting/Investment  15.9%
   Principal Mutual Life.....        802,425     Sole Voting/Investment   8.0%
   Citibank, N.A.............        836,070     Sole Voting/Investment   8.4%
   Loeb Partners Corporation
    .........................        778,382     Sole Voting/Investment   7.8%
   Contrarian Capital
    Advisors, L.L.C. ........        678,102     Sole Voting/Investment   6.8%
   Morgens Waterfall Overseas
    Partners ................        653,314     Sole Voting/Investment   6.5%
</TABLE>
 
 
                                       18
<PAGE>
 
ITEM 13--CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
 
   None.
 
                                    PART IV
 
ITEM 14--EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
 
(a)1.The following financial statements and the report thereon of Rubin,
      Brown, Gornstein & Co., LLP are included in Item 8 of this Annual Report
      on Form 10-K:
 
     Report of Independent Public Accountants
 
     Balance Sheets as of December 31, 1997 and December 31, 1998
 
     Statements of Operations for the Period Ended December 31, 1997 and the
     Year Ended December 31, 1998
 
     Statements of Changes in Members' Equity for the Period Ended December
     31, 1997 and the Year Ended December 31, 1998
 
     Statements of Cash Flows for the Period Ended December 31, 1997 and the
     Year Ended December 31, 1998
 
     Notes to Financial Statements
 
2.Financial Statement Schedules:
 
     All schedules are omitted since the required information is not present
     in amounts sufficient to require submission of the schedules or because
     the information required is included in the financial statements and
     notes thereto.
 
(b) The Company did not file any reports on Form 8-K during the last quarter
    of the period covered by this Annual Report on Form 10-K.
 
(c)Exhibits
 
<TABLE>
<CAPTION>
 Exhibit
 Number                           Description
 -------                          -----------
 <C>     <S>
         Amended Joint Plan of Reorganization of Edison Brothers
  2.1*   Stores, Inc.
  3.1*   EBS Litigation, L.L.C. Certificate of Formation
  3.2*   EBS Litigation, L.L.C. Membership Agreement
  23.1   Consent of Independent Public Accountants
  27.1   Financial Data Schedule
</TABLE>
--------
*  Incorporated herein by reference to the Company's Form 10 originally filed
   with theSecurities and Exchange Commission on July 29, 1998 (SEC File No.
   000-24713).
 
                                      19
<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.
 
Dated March 31, 1999                      EBS Litigation, L.L.C.
                                          (Registrant)
 
                                          By: /s/ Peter N. Wang
                                            _________________________________
                                                       Peter N. Wang
                                                          Manager
 
                                       20
<PAGE>
 
                                 Exhibit Index
 
<TABLE>
<CAPTION>
 Exhibit
 Number  Item                                        Location
 ------- ----                                        --------
 <C>     <S>                                         <C>
         Amended Joint Plan of Reorganization of
   2.1   Edison Brothers Stores, Inc.                Incorporated by reference
         EBS Litigation, L.L.C. Certificate of
   3.1   Formation                                   Incorporated by reference
         EBS Litigation, L.L.C. Membership
   3.2   Agreement                                   Incorporated by reference
  23.1   Consent of Independent Public Accountants   Filed herewith
  27.1   Financial Data Schedule                     Filed herewith
</TABLE>