UNITED STATES

SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549




---

FORM 10-Q

(MARK ONE)

|    |                                                                                         
|--- | ----------------------------------------------------------------------------------------
|[X] | QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
	SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2000

OR



|     |                                                                                          
|---- | -----------------------------------------------------------------------------------------
|[  ] | TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
	SECURITIES EXCHANGE ACT OF 1934

For the transition period from
                    to

                    .



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Commission file number 0-28977



---

VARSITY GROUP INC.

(Exact name of registrant as specified in its
charter)


|                                                                                            |  |                                                   
|------------------------------------------------------------------------------------------- |  | --------------------------------------------------
|                                                                                           
|                                                                                           
|                                                                                           
|                                                                                           
|Delaware
	 (State of incorporation)                                                         |  | 54-1876848
	 (IRS Employer
	Identification Number)
|                                                                                           
|2020 K Street, N.W.,
	6th Floor
	Washington, D.C.
	(Address of principal executive offices) |  | 20006
	(Zip Code)                                 

Registrants telephone number, including area code:
(202) 667-3400

(Former Name, Former Address and Former Fiscal
Year, if

Changed, Since Last Report.)


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 
[  ]

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS

DURING THE PRECEDING FIVE YEARS:


Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12,
13 or 15 (d) of the Securities Exchange Act of 1934
subsequent to the distribution of securities under a plan
confirmed by a court.  Yes  [ 
]  No  [  ]

As of November 7, 2000, the registrant had 15,795,485
shares of common stock outstanding.









---



VARSITY GROUP INC. AND SUBSIDIARIES

QUARTERLY REPORT ON FORM 10-Q

For the quarter ended September 30, 2000


INDEX

|         |  |                                                                                                                         |  |        |    | 
|-------- |  | ----------------------------------------------------------------------------------------------------------------------- |  | ------ | -- | 
|         |  |                                                                                                                         |  | Page  
|         |  |                                                                                                                         |  | Number
|         |  |                                                                                                                         |  |       
|         |  | PART I.  FINANCIAL INFORMATION                                                                                          |  |        |    | 
|Item  1. |  | Financial Statements                                                                                                    |  |        |    | 
|        
|        
|        
|        
|         |  | Condensed consolidated statements of operations for the three
	and nine month periods ended September 30, 1999 and 2000 |  |        | 3  | 
|        
|        
|        
|        
|         |  | Condensed consolidated balance sheets as of December 31,
	1999 and September 30, 2000                                   |  |        | 4  | 
|        
|        
|        
|        
|         |  | Condensed consolidated statements of cash flows for the nine
	months ended September 30, 1999 and 2000                  |  |        | 5  | 
|        
|        
|        
|        
|         |  | Notes to condensed consolidated financial statements                                                                    |  |        | 6  | 
|        
|        
|        
|        
|Item  2. |  | Managements Discussion and Analysis of Financial Condition
	and Results of Operations                                  |  |        | 8  | 
|        
|        
|        
|        
|Item  3. |  | Quantitative and Qualitative Disclosures About Market Risk                                                              |  |        | 17 | 
|         |  | PART II.  OTHER INFORMATION                                                                                             |  |        |    | 
|        
|        
|        
|        
|Item  1. |  | Legal Proceedings                                                                                                       |  |        | 18 | 
|        
|        
|        
|        
|Item  2. |  | Changes in Securities                                                                                                   |  |        | 18 | 
|        
|        
|        
|        
|Item  3. |  | Defaults Upon Senior Securities                                                                                         |  |        | 18 | 
|        
|        
|        
|        
|Item  4. |  | Submission of Matters to a Vote of Security Holders                                                                     |  |        | 18 | 
|        
|        
|        
|        
|Item  5. |  | Other Information                                                                                                       |  |        | 18 | 
|        
|        
|        
|        
|Item  6. |  | Exhibits and Reports on Form 8K                                                                                         |  |        | 18 | 

2



---



PART I.

FINANCIAL INFORMATION


Item 1:  Financial Statements

VARSITY GROUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)


(unaudited)


|                                             |                                   |                                                                                                                                             |                          |                    |       |   |         |                   |           |        |  |      |       |   |        |       |            |        |  |  |        |   |         |       |           |        |  |  |        |   |         |        |            |        | 
|-------------------------------------------- | --------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------ | ------------------ | ----- | - | ------- | ----------------- | --------- | ------ |  | ---- | ----- | - | ------ | ----- | ---------- | ------ |  |  | ------ | - | ------- | ----- | --------- | ------ |  |  | ------ | - | ------- | ------ | ---------- | ------ | 
|                                             |                                   |                                                                                                                                             |                          |                    |       |   |         |                  
|                                             |                                   |                                                                                                                                             |                          | Three Months Ended |       |   |         | Nine Months Ended
|                                             |                                   |                                                                                                                                             |                          | September 30,      |       |   |         | September 30,    
|                                             |                                   |                                                                                                                                             |                          |                    |       |   |         |                  
|                                             |                                   |                                                                                                                                             |                          | 1999               |       |   |         | 2000              |           |        |  | 1999 |       |   |        | 2000 
|                                             |                                   |                                                                                                                                             |                          |                    |       |   |         |                   |           |        |  |      |       |   |        |      
|Net sales:                                   |                                   |                                                                                                                                             |                          |                    |       |   |         |                   |           |        |  |      |       |   |        |       |            |        |  |  |        |   |         |       |           |        |  |  |        |   |         |       
|                                            
|                                            
|                                            
|                                            
|                                             | Books                             |                                                                                                                                             |                          |                    |       |   | $       | 6,662             |           |        |  |      |       |   | $      | 9,999 |            |        |  |  |        |   | $       | 8,230 |           |        |  |  |        |   | $       | 23,085 |           
|                                            
|                                            
|                                            
|                                            
|                                             | Shipping                          |                                                                                                                                             |                          |                    |       |   |         | 413               |           |        |  |      |       |   |        | 622   |            |        |  |  |        |   |         | 541   |           |        |  |  |        |   |         | 1,665  |           
|                                            
|                                            
|                                            
|                                            
|                                             | Marketing services                |                                                                                                                                             |                          |                    |       |   |         | 95                |           |        |  |      |       |   |        | 1,046 |            |        |  |  |        |   |         | 95    |           |        |  |  |        |   |         | 1,387  |           
|                                             |                                   |                                                                                                                                             |                          |                    |       |   |         |                   |           |        |  |      |       |   |        |       |            |        |  |  |        |   |         |       |           |        |  |  |        |   |         |       
|                                             |                                   |                                                                                                                                             | Total net sales          |                    |       |   |         |                   |           | 7,170  |  |      |       |   |        |       |            | 11,667 |  |  |        |   |         |       |           | 8,866  |  |  |        |   |         |        |            | 26,137 | 
|                                             |                                   |                                                                                                                                             |                          |                    |       |   |         |                   |           |        |  |      |       |   |        |       |            |        |  |  |        |   |         |       |           |        |  |  |        |   |         |       
|Operating expenses:                          |                                   |                                                                                                                                             |                          |                    |       |   |         |                   |           |        |  |      |       |   |        |       |            |        |  |  |        |   |         |       |           |        |  |  |        |   |         |       
|                                            
|                                            
|                                            
|                                            
|                                             | Cost of books-related party       |                                                                                                                                             |                          |                    |       |   |         | 6,227             |           |        |  |      |       |   |        | 8,230 |            |        |  |  |        |   |         | 7,710 |           |        |  |  |        |   |         | 20,432 |           
|                                            
|                                            
|                                            
|                                            
|                                             | Cost of shipping-related party    |                                                                                                                                             |                          |                    |       |   |         | 578               |           |        |  |      |       |   |        | 722   |            |        |  |  |        |   |         | 723   |           |        |  |  |        |   |         | 2,131  |           
|                                            
|                                            
|                                            
|                                            
|                                             | Equity transactions-related party |                                                                                                                                             |                          |                    |       |   |         |                  |           |        |  |      |       |   |        |      |            |        |  |  |        |   |         | 169   |           |        |  |  |        |   |         |       |           
|                                            
|                                            
|                                            
|                                            
|                                             | Cost of marketing services        |                                                                                                                                             |                          |                    |       |   |         |                  |           |        |  |      |       |   |        | 203   |            |        |  |  |        |   |         |      |           |        |  |  |        |   |         | 203    |           
|                                            
|                                            
|                                            
|                                            
|                                             | Marketing and sales:              |                                                                                                                                             |                          |                    |       |   |         |                   |           |        |  |      |       |   |        |       |            |        |  |  |        |   |         |       |           |        |  |  |        |   |         |        |           
|                                            
|                                            
|                                            
|                                            
|                                             |                                   | Non-cash charges                                                                                                                            |                          |                    | 378   |   |         |                   |           |        |  |      | 1,026 |   |        |       |            |        |  |  | 538    |   |         |       |           |        |  |  | 2,046  |   |         |        |            |       
|                                            
|                                            
|                                            
|                                            
|                                             |                                   | Other marketing and sales (including $683 and $1,541 with
	related party for three and nine months ended September 30,
	2000, respectively) |                          |                    | 9,623 |   |         |                   | 10,001    |        |  |      | 6,176 |   |        |       | 7,202      |        |  |  | 12,852 |   |         |       | 13,390    |        |  |  | 22,832 |   |         |        | 24,878     |       
|                                             |                                   |                                                                                                                                             |                          |                    |       |   |         |                   |           |        |  |      |       |   |        |       |            |        |  |  |        |   |         |       |           |        |  |  |        |   |         |       
|                                             | Product development:              |                                                                                                                                             |                          |                    |       |   |         |                   |           |        |  |      |       |   |        |       |            |        |  |  |        |   |         |       |           |        |  |  |        |   |         |        |           
|                                            
|                                            
|                                            
|                                            
|                                             |                                   | Non-cash charges                                                                                                                            |                          |                    | 22    |   |         |                   |           |        |  |      | (117  | ) |        |       |            |        |  |  | 72     |   |         |       |           |        |  |  | (141   | ) |         |        |            |       
|                                            
|                                            
|                                            
|                                            
|                                             |                                   | Other product development                                                                                                                   |                          |                    | 1,707 |   |         |                   | 1,729     |        |  |      | 542   |   |        |       | 425        |        |  |  | 2,461  |   |         |       | 2,533     |        |  |  | 3,899  |   |         |        | 3,758      |       
|                                             |                                   |                                                                                                                                             |                          |                    |       |   |         |                   |           |        |  |      |       |   |        |       |            |        |  |  |        |   |         |       |           |        |  |  |        |   |         |       
|                                             | General and administrative:       |                                                                                                                                             |                          |                    |       |   |         |                   |           |        |  |      |       |   |        |       |            |        |  |  |        |   |         |       |           |        |  |  |        |   |         |        |           
|                                            
|                                            
|                                            
|                                            
|                                             |                                   | Non-cash charges                                                                                                                            |                          |                    | 516   |   |         |                   |           |        |  |      | 49    |   |        |       |            |        |  |  | 876    |   |         |       |           |        |  |  | 2,233  |   |         |        |            |       
|                                            
|                                            
|                                            
|                                            
|                                             |                                   | Other general and administrative                                                                                                            |                          |                    | 1,954 |   |         |                   | 2,470     |        |  |      | 2,041 |   |        |       | 2,090      |        |  |  | 2,778  |   |         |       | 3,654     |        |  |  | 6,189  |   |         |        | 8,422      |       
|                                             |                                   |                                                                                                                                             |                          |                    |       |   |         |                   |           |        |  |      |       |   |        |       |            |        |  |  |        |   |         |       |           |        |  |  |        |   |         |       
|                                             |                                   |                                                                                                                                             | Total operating expenses |                    |       |   |         |                   |           | 21,005 |  |      |       |   |        |       |            | 18,872 |  |  |        |   |         |       |           | 28,179 |  |  |        |   |         |        |            | 59,824 | 
|                                             |                                   |                                                                                                                                             |                          |                    |       |   |         |                   |           |        |  |      |       |   |        |       |            |        |  |  |        |   |         |       |           |        |  |  |        |   |         |       
|Loss from operations                         |                                   |                                                                                                                                             |                          |                    |       |   | (13,835 | )                 |           |        |  |      |       |   | (7,205 | )     |            |        |  |  |        |   | (19,313 | )     |           |        |  |  |        |   | (33,687 | )     
|                                            
|                                            
|                                            
|                                            
|Other income (expense), net:                 |                                   |                                                                                                                                             |                          |                    |       |   |         |                   |           |        |  |      |       |   |        |       |            |        |  |  |        |   |         |       |           |        |  |  |        |   |         |       
|                                            
|                                            
|                                            
|                                            
|                                             |                                   | Interest income                                                                                                                             |                          |                    |       |   |         |                   | 123       |        |  |      |       |   |        |       | 315        |        |  |  |        |   |         |       | 223       |        |  |  |        |   |         |        | 1,032      |       
|                                            
|                                            
|                                            
|                                            
|                                             |                                   | Interest expense                                                                                                                            |                          |                    |       |   |         |                   | (24       | )      |  |      |       |   |        |       | (68        | )      |  |  |        |   |         |       | (67       | )      |  |  |        |   |         |        | (206       | )     
|                                            
|                                            
|                                            
|                                            
|                                             |                                   | Other expense                                                                                                                               |                          |                    |       |   |         |                   |          |        |  |      |       |   |        |       |           |        |  |  |        |   |         |       |          |        |  |  |        |   |         |        | (58        | )     
|                                             |                                   |                                                                                                                                             |                          |                    |       |   |         |                   |           |        |  |      |       |   |        |       |            |        |  |  |        |   |         |       |           |        |  |  |        |   |         |       
|                                             |                                   | Other income (expense), net                                                                                                                 |                          |                    |       |   |         |                   | 99        |        |  |      |       |   |        |       | 247        |        |  |  |        |   |         |       | 156       |        |  |  |        |   |         |        | 768        |       
|                                            
|                                            
|                                            
|                                            
|Net loss                                     |                                   |                                                                                                                                             |                          |                    |       |   | (13,736 | )                 |           |        |  |      |       |   | (6,958 | )     |            |        |  |  |        |   | (19,157 | )     |           |        |  |  |        |   | (32,919 | )     
|                                            
|                                            
|                                            
|                                            
|Preferred stock dividends                    |                                   |                                                                                                                                             |                          |                    |       |   | 411     |                   |           |        |  |      |       |   |       |       |            |        |  |  |        |   | 682     |       |           |        |  |  |        |   |        |       
|                                             |                                   |                                                                                                                                             |                          |                    |       |   |         |                   |           |        |  |      |       |   |        |       |            |        |  |  |        |   |         |       |           |        |  |  |        |   |         |       
|Net losses applicable to common stockholders |                                   |                                                                                                                                             |                          |                    |       | $ | (14,147 | )                 |           |        |  |      |       | $ | (6,958 | )     |            |        |  |  |        | $ | (19,839 | )     |           |        |  |  |        | $ | (32,919 | )     
|                                             |                                   |                                                                                                                                             |                          |                    |       |   |         |                   |           |        |  |      |       |   |        |       |            |        |  |  |        |   |         |       |           |        |  |  |        |   |         |       
|Net loss per share (basic and diluted):      |                                   |                                                                                                                                             |                          |                    |       |   |         |                   |           |        |  |      |       |   |        |       |            |        |  |  |        |   |         |       |           |        |  |  |        |   |         |       
|                                            
|                                            
|                                            
|                                            
|                                             |                                   | Net loss                                                                                                                                    |                          |                    |       |   |         | $                 | (6.08     | )      |  |      |       |   |        | $     | (0.44      | )      |  |  |        |   |         | $     | (9.08     | )      |  |  |        |   |         | $      | (2.43      | )     
|                                            
|                                            
|                                            
|                                            
|                                             |                                   | Preferred stock dividends                                                                                                                   |                          |                    |       |   |         |                   | (0.18     | )      |  |      |       |   |        |       |           |        |  |  |        |   |         |       | (0.32     | )      |  |  |        |   |         |        |           |       
|                                             |                                   |                                                                                                                                             |                          |                    |       |   |         |                   |           |        |  |      |       |   |        |       |            |        |  |  |        |   |         |       |           |        |  |  |        |   |         |       
|                                             |                                   | Net loss applicable to common stockholders                                                                                                  |                          |                    |       |   |         | $                 | (6.26     | )      |  |      |       |   |        | $     | (0.44      | )      |  |  |        |   |         | $     | (9.40     | )      |  |  |        |   |         | $      | (2.43      | )     
|                                             |                                   |                                                                                                                                             |                          |                    |       |   |         |                   |           |        |  |      |       |   |        |       |            |        |  |  |        |   |         |       |           |        |  |  |        |   |         |       
|Weighted average shares:                     |                                   |                                                                                                                                             |                          |                    |       |   |         |                   |           |        |  |      |       |   |        |       |            |        |  |  |        |   |         |       |           |        |  |  |        |   |         |       
|                                            
|                                            
|                                            
|                                            
|                                             |                                   | Basic and diluted                                                                                                                           |                          |                    |       |   |         |                   | 2,260,959 |        |  |      |       |   |        |       | 15,759,308 |        |  |  |        |   |         |       | 2,111,621 |        |  |  |        |   |         |        | 13,524,403 |       

See accompanying notes to condensed consolidated financial
statements.

3



---



VARSITY GROUP INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)


|                                     |                                                                                                                                                                                                                                                                                   |                                            |       |               |        |  |       |         |        | 
|------------------------------------ | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ----- | ------------- | ------ |  | ----- | ------- | ------ | 
|                                     |                                                                                                                                                                                                                                                                                   | December 31,                               |       | September 30,
|                                     |                                                                                                                                                                                                                                                                                   | 1999                                       |       | 2000         
|                                     |                                                                                                                                                                                                                                                                                   |                                            |       |              
|                                     |                                                                                                                                                                                                                                                                                   |                                            |       | (unaudited)  
|ASSETS                               |                                                                                                                                                                                                                                                                                   |                                            |       |               |        |  |       |        
|                                    
|                                    
|                                    
|                                    
|Current assets:                      |                                                                                                                                                                                                                                                                                   |                                            |       |               |        |  |       |        
|                                    
|                                    
|                                    
|                                    
|                                     | Cash and cash equivalents                                                                                                                                                                                                                                                         |                                            | $     | 7,813         |        |  | $     | 16,659  |       
|                                    
|                                    
|                                    
|                                    
|                                     | Short-term investments                                                                                                                                                                                                                                                            |                                            |       | 480           |        |  |       | 480     |       
|                                    
|                                    
|                                    
|                                    
|                                     | Accounts receivable, net of allowance of doubtful accounts of
	$100 at December 31, 1999 and September 30, 2000
	(including $94 and $554 with related party at December  31,
	1999 and September 30, 2000, respectively)                                                          |                                            |       | 626           |        |  |       | 1,890   |       
|                                    
|                                    
|                                    
|                                    
|                                     | Prepaid marketing                                                                                                                                                                                                                                                                 |                                            |       | 4,625         |        |  |       | 201     |       
|                                    
|                                    
|                                    
|                                    
|                                     | Prepaid expenses  related party                                                                                                                                                                                                                                                  |                                            |       |              |        |  |       | 1,111   |       
|                                    
|                                    
|                                    
|                                    
|                                     | Deferred charge                                                                                                                                                                                                                                                                   |                                            |       | 1,024         |        |  |       |        |       
|                                    
|                                    
|                                    
|                                    
|                                     | Other                                                                                                                                                                                                                                                                             |                                            |       | 517           |        |  |       | 1,089   |       
|                                     |                                                                                                                                                                                                                                                                                   |                                            |       |               |        |  |       |        
|                                     |                                                                                                                                                                                                                                                                                   | Total current assets                       |       |               | 15,085 |  |       |         | 21,430 | 
|                                    
|                                    
|                                    
|                                    
|Fixed assets, net                    |                                                                                                                                                                                                                                                                                   |                                            | 2,040 |               |        |  | 2,193 |        
|                                    
|                                    
|                                    
|                                    
|Other assets                         |                                                                                                                                                                                                                                                                                   |                                            | 937   |               |        |  | 93    |        
|                                     |                                                                                                                                                                                                                                                                                   |                                            |       |               |        |  |       |        
|                                     |                                                                                                                                                                                                                                                                                   | Total assets                               |       | $             | 18,062 |  |       | $       | 23,716 | 
|                                     |                                                                                                                                                                                                                                                                                   |                                            |       |               |        |  |       |        
|                                    
|LIABILITIES AND STOCKHOLDERS EQUITY |                                                                                                                                                                                                                                                                                   |                                            |       |               |        |  |       |        
|                                    
|                                    
|                                    
|                                    
|Current liabilities:                 |                                                                                                                                                                                                                                                                                   |                                            |       |               |        |  |       |        
|                                    
|                                    
|                                    
|                                    
|                                     | Accounts payable                                                                                                                                                                                                                                                                  |                                            | $     | 1,482         |        |  | $     | 952     |       
|                                    
|                                    
|                                    
|                                    
|                                     | Accrued marketing expenses                                                                                                                                                                                                                                                        |                                            |       | 1,511         |        |  |       | 364     |       
|                                    
|                                    
|                                    
|                                    
|                                     | Deferred revenue                                                                                                                                                                                                                                                                  |                                            |       | 20            |        |  |       | 317     |       
|                                    
|                                    
|                                    
|                                    
|                                     | Other accrued expenses and other current liabilities                                                                                                                                                                                                                              |                                            |       | 1,590         |        |  |       | 1,459   |       
|                                    
|                                    
|                                    
|                                    
|                                     | Taxes payable                                                                                                                                                                                                                                                                     |                                            |       | 607           |        |  |       | 1,256   |       
|                                    
|                                    
|                                    
|                                    
|                                     | Accrued employee compensation and benefits                                                                                                                                                                                                                                        |                                            |       | 712           |        |  |       | 522     |       
|                                     |                                                                                                                                                                                                                                                                                   |                                            |       |               |        |  |       |        
|                                     |                                                                                                                                                                                                                                                                                   | Total current liabilities                  |       |               | 5,922  |  |       |         | 4,870  | 
|                                    
|                                    
|                                    
|                                    
|Long-term liabilities                |                                                                                                                                                                                                                                                                                   |                                            | 93    |               |        |  | 138   |        
|                                     |                                                                                                                                                                                                                                                                                   |                                            |       |               |        |  |       |        
|                                     |                                                                                                                                                                                                                                                                                   | Total liabilities                          |       |               | 6,015  |  |       |         | 5,008  | 
|                                     |                                                                                                                                                                                                                                                                                   |                                            |       |               |        |  |       |        
|Stockholders equity:                |                                                                                                                                                                                                                                                                                   |                                            |       |               |        |  |       |        
|                                    
|                                    
|                                    
|                                    
|                                     | Series A convertible preferred stock: $.0001 par value,
	2,071,420 shares authorized, issued and outstanding at
	December 31, 1999 (liquidation preference of $1,450 at
	December 31, 1999); 0 shares authorized, issued and
	outstanding at September 30, 2000                   |                                            |       |              |        |  |       |        |       
|                                    
|                                    
|                                    
|                                    
|                                     | Series B convertible preferred stock: $.0001 par value,
	6,933,806 shares authorized, issued and outstanding at
	December 31, 1999 (liquidation preference of $10,658 at
	December 31, 1999); 0 shares authorized, issued and
	outstanding at September 30, 2000                  |                                            |       | 1             |        |  |       |        |       
|                                    
|                                    
|                                    
|                                    
|                                     | Series C convertible preferred stock: $.0001 par value,
	9,755,633 shares authorized, 8,928,571 shares issued and
	outstanding at December 31, 1999 (liquidation preference of
	$30,815 at December 31, 1999); 0 shares authorized,
	issued and outstanding at September 30, 2000 |                                            |       | 1             |        |  |       |        |       
|                                    
|                                    
|                                    
|                                    
|                                     | Preferred stock: $.0001 par value, 20,000,000 shares authorized;
	0 shares issued and outstanding at September  30, 2000                                                                                                                                                          |                                            |       |              |        |  |       |        |       
|                                    
|                                    
|                                    
|                                    
|                                     | Common stock: $.0001 par value, 27,932,927 and 60,000,000 shares
	authorized, 2,643,277 and 15,781,999 shares issued and
	outstanding at December 31, 1999 and September 30,
	2000, respectively                                                                                  |                                            |       |              |        |  |       | 2       |       
|                                    
|                                    
|                                    
|                                    
|                                     | Additional paid-in capital                                                                                                                                                                                                                                                        |                                            |       | 53,707        |        |  |       | 90,233  |       
|                                    
|                                    
|                                    
|                                    
|                                     | Warrant subscription receivable and other                                                                                                                                                                                                                                         |                                            |       |              |        |  |       | (1,900  | )     
|                                    
|                                    
|                                    
|                                    
|                                     | Notes Receivable from stockholders                                                                                                                                                                                                                                                |                                            |       | (124          | )      |  |       | (124    | )     
|                                    
|                                    
|                                    
|                                    
|                                     | Deferred compensation                                                                                                                                                                                                                                                             |                                            |       | (7,341        | )      |  |       | (2,387  | )     
|                                    
|                                    
|                                    
|                                    
|                                     | Accumulated deficit                                                                                                                                                                                                                                                               |                                            |       | (34,197       | )      |  |       | (67,116 | )     
|                                     |                                                                                                                                                                                                                                                                                   |                                            |       |               |        |  |       |        
|                                     |                                                                                                                                                                                                                                                                                   | Total stockholders equity                 |       |               | 12,047 |  |       |         | 18,708 | 
|                                     |                                                                                                                                                                                                                                                                                   |                                            |       |               |        |  |       |        
|                                     |                                                                                                                                                                                                                                                                                   | Total liabilities and stockholders equity |       | $             | 18,062 |  |       | $       | 23,716 | 
|                                     |                                                                                                                                                                                                                                                                                   |                                            |       |               |        |  |       |        

See accompanying notes to condensed consolidated financial
statements.

4



---



VARSITY GROUP INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)


(unaudited)


|                                                                             |                                                                                         |                                                      |         |         |       |   |         |         |        |  
|---------------------------------------------------------------------------- | --------------------------------------------------------------------------------------- | ---------------------------------------------------- | ------- | ------- | ----- | - | ------- | ------- | ------ | -
|                                                                             |                                                                                         |                                                     
|                                                                             |                                                                                         | Nine Months Ended                                   
|                                                                             |                                                                                         | September 30,                                       
|                                                                             |                                                                                         |                                                     
|                                                                             |                                                                                         | 1999                                                 |         | 2000   
|                                                                             |                                                                                         |                                                      |         |        
|Operating activities:                                                        |                                                                                         |                                                      |         |         |       |   |         |        
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             | Net loss                                                                                |                                                      | $       | (19,157 | )     |   | $       | (32,919 | )     
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Adjustments to reconcile net loss to net cash used in operating
	activities: |                                                                                         |                                                      |         |         |       |   |         |        
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             | Depreciation and amortization                                                           |                                                      |         | 145     |       |   |         | 939     |       
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             | Loss on sale of fixed assets                                                            |                                                      |         |        |       |   |         | 58      |       
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             | Non-cash charges                                                                        |                                                      |         | 1,486   |       |   |         | 4,138   |       
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             | Amortization of discount on convertible notes payable                                   |                                                      |         | 12      |       |   |         |        |       
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             | Equity transactions with related party and interest expense
	related to warrants issued |                                                      |         | 201     |       |   |         | 189     |       
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             | Changes in operating assets and liabilities:                                            |                                                      |         |         |       |   |         |         |       
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             |                                                                                         | Accounts receivable, net                             |         |         | (881  | ) |         |         | (1,264 | )
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             |                                                                                         | Prepaid marketing                                    |         |         | (79   | ) |         |         | 4,424  |  
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             |                                                                                         | Prepaid expenses-related party                       |         |         |      |   |         |         | (1,111 | )
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             |                                                                                         | Deferred charge                                      |         |         |      |   |         |         | 1,024  |  
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             |                                                                                         | Other current assets                                 |         |         | (457  | ) |         |         | (921   | )
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             |                                                                                         | Accounts payable                                     |         |         | 1,245 |   |         |         | (530   | )
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             |                                                                                         | Accrued marketing expenses                           |         |         | 5,317 |   |         |         | (1,147 | )
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             |                                                                                         | Deferred revenue                                     |         |         | 63    |   |         |         | 297    |  
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             |                                                                                         | Other accrued expenses and other current liabilities |         |         | 1,193 |   |         |         | (131   | )
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             |                                                                                         | Taxes payable                                        |         |         | 496   |   |         |         | 649    |  
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             |                                                                                         | Accrued employee compensation and benefits           |         |         | 391   |   |         |         | (190   | )
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|                                                                             |                                                                                         | Other non-current liabilities                        |         |         | (132  | ) |         |         | 45     |  
|                                                                             |                                                                                         |                                                      |         |         |       |   |         |        
|Net cash used in operating activities                                        |                                                                                         |                                                      | (10,157 | )       |       |   | (26,450 | )      
|                                                                             |                                                                                         |                                                      |         |         |       |   |         |        
|Investing activities:                                                        |                                                                                         |                                                      |         |         |       |   |         |        
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Additions to fixed assets                                                    |                                                                                         |                                                      | (1,167  | )       |       |   | (1,249  | )      
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Proceeds from sale of fixed assets                                           |                                                                                         |                                                      |        |         |       |   | 100     |        
|                                                                             |                                                                                         |                                                      |         |         |       |   |         |        
|Net cash used in investing activities                                        |                                                                                         |                                                      | (1,167  | )       |       |   | (1,149  | )      
|                                                                             |                                                                                         |                                                      |         |         |       |   |         |        
|Financing activities:                                                        |                                                                                         |                                                      |         |         |       |   |         |        
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Proceeds from issuance of preferred stock                                    |                                                                                         |                                                      | 38,453  |         |       |   |        |        
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Proceeds from issuance of common stock                                       |                                                                                         |                                                      | 20      |         |       |   | 35,945  |        
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Proceeds from notes payable                                                  |                                                                                         |                                                      |        |         |       |   | 2,500   |        
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Repayment of notes payable                                                   |                                                                                         |                                                      |        |         |       |   | (2,500  | )      
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Proceeds from warrant subscription receivable                                |                                                                                         |                                                      |        |         |       |   | 500     |        
|                                                                             |                                                                                         |                                                      |         |         |       |   |         |        
|Net cash provided by financing activities                                    |                                                                                         |                                                      | 38,473  |         |       |   | 36,445  |        
|                                                                             |                                                                                         |                                                      |         |         |       |   |         |        
|Net increase in cash and cash equivalents                                    |                                                                                         |                                                      | 27,149  |         |       |   | 8,846   |        
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Cash and cash equivalents at beginning of period                             |                                                                                         |                                                      | 1,481   |         |       |   | 7,813   |        
|                                                                             |                                                                                         |                                                      |         |         |       |   |         |        
|Cash and cash equivalents at end of period                                   |                                                                                         | $                                                    | 28,630  |         |       | $ | 16,659  |        
|                                                                             |                                                                                         |                                                      |         |         |       |   |         |        
|Supplemental disclosure of cash flow information:                            |                                                                                         |                                                      |         |         |       |   |         |        
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Cash paid for income taxes and interest                                      |                                                                                         | $                                                    |        |         |       | $ | 17      |        
|                                                                             |                                                                                         |                                                      |         |         |       |   |         |        
|Supplemental schedule of non-cash investing and financing
	activities:       |                                                                                         |                                                      |         |         |       |   |         |        
|                                                                            
|                                                                            
|                                                                            
|                                                                            
|Conversion of convertible notes payable to Series B
	preferred stock         |                                                                                         | $                                                    | 1,160   |         |       | $ |        |        
|                                                                             |                                                                                         |                                                      |         |         |       |   |         |        
|Issuance of common stock for note receivable                                 |                                                                                         | $                                                    | 124     |         |       | $ |        |        
|                                                                             |                                                                                         |                                                      |         |         |       |   |         |        
|Warrant subscription receivable and other                                    |                                                                                         | $                                                    |        |         |       | $ | 3,837   |        
|                                                                             |                                                                                         |                                                      |         |         |       |   |         |        

See accompanying notes to consolidated financial statements.

5



---



VARSITY GROUP INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Note 1: Description of Operations

Varsity Group Inc. (formerly VarsityBooks.com Inc., the
Company), a college marketing services provider and
a leading online retailer of new college textbooks, was
incorporated on December 16, 1997 and launched its Website
in August 1998, at which time the Company began generating
revenues. In August 1999, the Company established two
wholly-owned subsidiaries, CollegeImpact.com, Inc. and
VarsityBooks.com, LLC (formerly CollegeOps.com LLC), to assist
in the overall management of its marketing and retailing
activities, respectively.

In February 2000, we issued 4,000,000 shares of Common
Stock at an initial public offering price of $10.00 per share.
In March 2000, we sold an additional 35,000 shares pursuant
to the exercise of the underwriters over-allotment option
at $10.00 per share. Total net proceeds were approximately
$35.9 million. On February 22, 2000, approximately
$2.5 million of this amount was used to pay all amounts due
under the credit facility with Imperial Bank
(Imperial) (see discussion below). As of
September 30, 2000, approximately $16.7 million had
been used for working capital purposes. The balance of
approximately $16.7 million was invested in cash and cash
equivalents at September 30, 2000.

Note 2: Basis of Presentation

The condensed consolidated financial statements of Varsity Group
Inc. and subsidiaries included herein have been prepared by the
Company without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission and reflect all
adjustments which are, in the opinion of management, necessary
for a fair presentation of the results for the interim period in
conformity with generally accepted accounting principles.

Certain information and footnote disclosure normally included in
the financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted.
The interim financial statements should be read in conjunction
with the consolidated financial statements and notes thereto
included in the Companys Annual Report on Form 10-K
for the fiscal year ended December 31, 1999. Operating
results for the interim periods are not necessarily indicative
of results for an entire year.

Certain reclassifications of prior year amounts have been made
to conform with the current year presentation.

Note 3: Revolving Credit Facility

On January 19, 2000, the Company executed an agreement with
Imperial to provide the Company with a revolving credit facility
in the aggregate amount of $7.5 million with sub-limits of
$3.0 million for purchases of property, equipment and
software and $750,000 for letters of credit. The maturity date
for advances of working capital is December 31, 2000 and
for property, equipment and software advances, the maturity date
is October 18, 2002. Interest on outstanding balances
accrued at Imperials prime rate (9.5% at
September 30, 2000) plus 1% until the closing of the
Companys initial public offering, and afterwards at
Imperials prime rate. All amounts outstanding, which could
be up to $7.5 million, are collateralized by a pledge of
all of the Companys assets. Under the terms of the credit
facility, as amended, the Company must maintain a tangible net
worth of $15.0 million and a ratio of its current assets to
its current liabilities of 1.5 to 1. The Company also issued
warrants to Imperial to purchase 37,500 shares of its common
stock at an exercise price of $10 per share. The Company
borrowed $2.5 million under the revolving credit facility
during February 2000 and repaid such borrowings on
February 22, 2000 with a portion of the net proceeds of its
initial public offering. No amounts were outstanding under the
agreement at September 30, 2000 with the exception of a
letter of credit in the amount of $0.3 million.

6



---



VARSITY GROUP INC. AND SUBSIDIARIES


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)

Note 4: Marketing Services and Product Promotion
Agreements

On February 3, 2000, the Company entered into a marketing
services agreement and a product promotion agreement with Sallie
Mae, Inc. Pursuant to the marketing services agreement, Sallie
Mae will pay the Company $2.0 million over a two year
period. In exchange, the Company will develop and execute a
marketing plan for Sallie Mae to reach the college market.

Pursuant to the product promotion agreement, the Company will
pay Sallie Mae referral fees based on a percentage of any
revenue generated by Sallie Mae customers during the term of the
arrangement. Sallie Mae will promote the Companys products
to Sallie Mae customers. Sallie Mae will also actively promote
eduPartners, the Companys partnership program, to the
schools to which it sells and promotes Sallie Mae products. In
addition, the Company will be the exclusive textbook retailer on
the Sallie Mae Web site. In exchange, the Company granted Sallie
Mae a warrant to purchase up to 616,863 shares of common stock,
which represented 3.5% of its aggregate common stock outstanding
and reserved for issuance immediately prior to the completion of
the Companys initial public offering, at a price equal to
the initial public offering of price of $10 per share. Of these
shares, 352,493 vested on February 3, 2000 and the
remaining 264,370 shares will vest over the two year term of the
agreement depending on the number of customer transactions and
eduPartner school referrals Sallie Mae delivers during
that period. Prior to the quarter ending September 30,
2000, the Company assumed that Sallie Mae would be able to meet
the criteria needed to allow it to exercise the
performance-based warrants. As a result, the Company recorded an
expense for the performance-based warrants from the date of
issuance to June 30, 2000. For the quarter ending
September 30, 2000, the Company believes that Sallie Mae
will not be able to meet the criteria needed to allow it to
exercise the performance-based warrants and therefore has not
recorded warrant expense for the quarter ending
September 30, 2000.

In the accompanying condensed consolidated financial statements
for the quarter ended September 30, 2000, the Company has
combined the two agreements for accounting purposes and recorded
a receivable of $2.0 million and a deferred charge of
$0.6 million. The total of the receivable and deferred
charge of $2.6 million equaled the fair value of the vested
portion of the warrant on the date of the grant. The fair value
of the warrant was estimated using the Black-Scholes option
pricing model with the following assumptions: dividend yield of
0.0%; volatility of 74%; risk free interest rate of 6.0%; and
expected term of 7 years. The receivable will be relieved
as payments are made under the marketing services agreement and
the deferred charge will be amortized on a straight-line basis
over the two-year life of the agreement. Expense of
approximately $200,000 was recorded as of September 30,
2000. The receivable and deferred charge are recorded as warrant
subscription receivable and other, an offset to
stockholders equity, in the accompanying condensed
consolidated balance sheet as of September 30, 2000.

7



---





|        |                                                                                       
|------- | --------------------------------------------------------------------------------------
|Item 2: | Managements Discussion and Analysis of Financial
	Condition and Results of Operations

Forward Looking Statements

This document contains forward-looking statements. These
statements relate to future events or our future financial
performance. In some cases, you can identify forward-looking
statements by terminology such as may,
will, should, except,
plan, anticipate, expect,
believe, estimate, predict,
potential or continue, the negative of
such terms or other comparable terminology. These statements are
only predictions. Actual events or results may differ materially.

Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee
future results, levels of activity, performance or achievements.
Moreover, neither we nor any other person assumes responsibility
for the accuracy and completeness of the forward-looking
statements. We are under no duty to update any of the
forward-looking statements after the date of this report to
conform such statements to actual results or to changes in our
expectations.

Readers are also urged to carefully review and consider the
various disclosures made by us which attempt to advise
interested parties of the factors which affect our business,
including without limitation the disclosures made under the
caption Managements Discussion and Analysis of
Financial Condition and Results of Operations included
herein and under the captions Managements Discussion
and Analysis of Financial Condition and Results of
Operations and Risk Factors included in the
Companys Annual Report on Form 10-K for the year ended
December 31, 1999 and other reports and filings made with
the Securities and Exchange Commission.

Overview

We are a leading college marketing services provider and online
retailer of new college textbooks. We were incorporated in
December 1997 and began offering books for sale on our Web
site on August 10, 1998. For the period from inception
through August 9, 1998, our primary activities consisted of:



| |   |                                                                                              
| | - | ---------------------------------------------------------------------------------------------
| |  | Developing our business model;                                                               
|
| |  | Establishing, negotiating and consummating a relationship with
	our supplier, Baker & Taylor;
|
| |  | Initial planning and development of our Web site;                                            
|
| |  | Developing our information systems infrastructure;                                           
|
| |  | Developing our information systems infrastructure;                                           
|
| |  | Developing our marketing plans; and                                                          
|
| |  | Establishing finance and administrative functions.                                           

Since the launch of our Web site, we have continued these
activities and have also focused on increasing sales, expanding
our product and service offerings, improving the efficiency of
our order and fulfillment process, recruiting and training
employees, recruiting and training our student representatives,
enhancing finance and administrative functions, and increasing
customer services operations and the depth of our management
team to help implement our growth strategy.

To date, our revenues have consisted primarily of sales of new
textbooks. Net sales consist of sales of books and charges to
customers for outbound shipping and are net of allowances for
returns, promotional discounts and coupons. Revenues from sales
of textbooks are recognized at the time products are shipped to
customers. We have also generated revenues through the sales of
general interest books, banner advertisements and marketing
service agreements, as well as co-marketing programs, pursuant
to which we have arrangements to sell textbooks through other
Web sites. Revenues from the sales of Internet advertisements
are recognized net of commissions paid. Revenues from our
marketing services are recognized ratably over the period in
which the services are delivered, provided that no significant
performance obligations remain and the collection of the related
receivable is probable.

8



---



During the fourth quarter of fiscal 1999, we began generating
revenues from marketing programs. In May 2000, we announced
our intent to accelerate the migration of our business more
towards this marketing services business. We have pursued that
strategy, and have since signed marketing services agreements
with a number of public and private companies, including
AT&T Wireless Services, Inc., Palm, Incorporated, Papa
Johns International, Inc., Ben & Jerrys
Homemade, Inc.

In addition, we have successfully lowered the overall operating
expenses and increased the margins of our retail book business
through various means, including the imposition of increased
retail pricing. Although our margins are improving, our ability
to become profitable given our planned expenses and liquidity
depends on our ability to generate and sustain higher net
revenues. If we do achieve profitability, we cannot be certain
that we can sustain or increase profitability on a quarterly or
annual basis in the future. We do not expect to achieve positive
cash flow from operations until the third quarter of 2001. We
base our current and future expense levels on our operating
plans and estimates of future revenues. In view of the rapidly
evolving nature of our business and our limited operating
history, we have little experience forecasting our revenues.
Therefore, we believe that period-to-period comparisons of our
financial results might not necessarily be meaningful and you
should not rely upon them as an indication of our future
performance. If we cannot achieve and sustain operating
profitability or positive cash flows from operations, we may be
unable to meet our working capital requirements or to obtain
additional financing, which would adversely affect our business
and may cause us to discontinue operations.

We have incurred substantial losses and negative cash flows from
operations in every fiscal period since our inception. For the
year ended December 31, 1999, we incurred a loss from
operations of $31.9 million and negative cash flows from
operations of $29.4 million. For the nine month period
ended September 30, 2000, we incurred a loss from
operations of $33.7 million and negative cash flows from
operations of $26.5 million. As of December 31, 1999
and September 30, 2000, we have accumulated deficits of
$34.2 million and $67.1 million respectively. We
expect operating losses and negative cash flows to continue into
the second half of 2001, and expect to achieve positive cash
flow in the third quarter of 2001.

Results of Operations

The following table and discussion provides information which
management believes is relevant to an assessment and
understanding of the Companys consolidated results of
operations and financial condition. The discussion should be
read in conjunction with the condensed consolidated financial
statements and accompanying notes thereto included elsewhere
herein.

9



---



|                     |                                     |                               |        |                   |       |      |       |      |       |  |        |       |       |  |        |      |       | 
|-------------------- | ----------------------------------- | ----------------------------- | ------ | ----------------- | ----- | ---- | ----- | ---- | ----- |  | ------ | ----- | ----- |  | ------ | ---- | ----- | 
|                     |                                     |                              
|                     |                                     | Percentage of Total Net Sales
|                     |                                     |                              
|                     |                                     |                               |        |                  
|                     |                                     | Three Months Ended            |        | Nine Months Ended
|                     |                                     | September 30,                 |        | September 30,    
|                     |                                     |                               |        |                  
|                     |                                     | 1999                          |        | 2000              |       | 1999 |       | 2000
|                     |                                     |                               |        |                   |       |      |       |     
|Net sales:           |                                     |                               |        |                   |       |      |       |      |       |  |        |       |       |  |        |     
|                    
|                    
|                    
|                    
|                     | Books                               |                               |        | 92.9              | %     |      |       | 85.7 | %     |  |        | 92.8  | %     |  |        | 88.3 | %    
|                    
|                    
|                    
|                    
|                     | Shipping                            |                               |        | 5.8               |       |      |       | 5.3  |       |  |        | 6.1   |       |  |        | 6.4  |      
|                    
|                    
|                    
|                    
|                     | Marketing services                  |                               |        | 1.3               |       |      |       | 9.0  |       |  |        | 1.1   |       |  |        | 5.3  |      
|                     |                                     |                               |        |                   |       |      |       |      |       |  |        |       |       |  |        |     
|                     |                                     | Total net sales               |        |                   | 100.0 |      |       |      | 100.0 |  |        |       | 100.0 |  |        |      | 100.0 | 
|                     |                                     |                               |        |                   |       |      |       |      |       |  |        |       |       |  |        |     
|Operating expenses:  |                                     |                               |        |                   |       |      |       |      |       |  |        |       |       |  |        |     
|                    
|                    
|                    
|                    
|                     | Cost of books  related party       |                               |        | 86.8              |       |      |       | 70.5 |       |  |        | 87.0  |       |  |        | 78.2 |      
|                    
|                    
|                    
|                    
|                     | Cost of shipping  related party    |                               |        | 8.1               |       |      |       | 6.2  |       |  |        | 8.2   |       |  |        | 8.2  |      
|                    
|                    
|                    
|                    
|                     | Equity transactions  related party |                               |        |                  |       |      |       |     |       |  |        | 1.9   |       |  |        |     |      
|                    
|                    
|                    
|                    
|                     | Cost of marketing services          |                               |        |                  |       |      |       | 1.7  |       |  |        |      |       |  |        | 0.8  |      
|                    
|                    
|                    
|                    
|                     | Marketing and sales:                |                               |        | 139.5             |       |      |       | 61.7 |       |  |        | 151.0 |       |  |        | 95.2 |      
|                    
|                    
|                    
|                    
|                     | Product development:                |                               |        | 24.1              |       |      |       | 3.6  |       |  |        | 28.6  |       |  |        | 14.4 |      
|                    
|                    
|                    
|                    
|                     | General and administrative:         |                               |        | 34.4              |       |      |       | 17.9 |       |  |        | 41.2  |       |  |        | 32.2 |      
|                     |                                     |                               |        |                   |       |      |       |      |       |  |        |       |       |  |        |     
|                     |                                     | Total operating expenses      |        |                   | 292.9 |      |       |      | 161.6 |  |        |       | 317.9 |  |        |      | 229.0 | 
|                     |                                     |                               |        |                   |       |      |       |      |       |  |        |       |       |  |        |     
|Loss from operations |                                     |                               | (192.9 | )                 |       |      | (61.6 | )    |       |  | (217.9 | )     |       |  | (129.0 | )   
|                    
|                    
|                    
|                    
|Other income, net    |                                     |                               | 1.4    |                   |       |      | 2.1   |      |       |  | 1.8    |       |       |  | 2.9    |     
|                     |                                     |                               |        |                   |       |      |       |      |       |  |        |       |       |  |        |     
|Net loss             |                                     |                               | (191.5 | )%                |       |      | (59.5 | )%   |       |  | (216.1 | )%    |       |  | (126.1 | )%  
|                     |                                     |                               |        |                   |       |      |       |      |       |  |        |       |       |  |        |     

Three Months Ended September 30, 2000

compared to


Three Months Ended September 30, 1999


Net Sales

Net sales increased to $11.7 million for the three months
ended September 30, 2000 from $7.2 million for the
three months ended September 30, 1999, as a result of the
significant growth in orders primarily from eduPartners,
our program in which we contract on an exclusive basis with
educational institutions, including private secondary schools,
to become the textbook supplier to their student populations. In
addition, marketing services sales totaled $1.0 million for
the three months ended September 30, 2000, a significant
increase from the less than $0.1 million recognized in the
same period in 1999. This reflects the continuing migration of
our business towards this business.

Operating Expenses

Cost of Books  Related Party (Baker &
Taylor). Cost of books  related party consists of
the cost of books sold to customers. Cost of books 
related party increased to $8.2 million for the three
months ended September 30, 2000 from $6.2 million for
the three months ended September 30, 1999. This increase
was primarily attributable to our increased sales volume between
years.

Cost of Shipping  Related Party (Baker &
Taylor). Cost of shipping  related party consists
of outbound shipping. Cost of shipping increased to
$0.7 million for the three months ended September 30,
2000 from $0.6 million for the three months ended
September 30, 1999. This increase was primarily
attributable to

10



---





Cost of Marketing Services. Cost of marketing services
includes personnel costs associated with the implementation of
our on campus marketing programs and other directly identifiable
costs associated with our online advertising and on campus
promotions. Cost of marketing services totaled $0.2 million
for the three months ended September 30, 2000. There was no
cost of marketing services for the three months ended
September 30, 1999.

Marketing and Sales. Marketing and sales expense consists
primarily of advertising and promotional expenditures and
payroll and related expenses such as the amortization of
deferred compensation for personnel engaged in marketing and the
expenses associated with the continued development of our
nationwide network of student representatives. Marketing and
sales expense decreased to $7.2 million for the three
months ended September 30, 2000 from $10.0 million for
the three months ended September 30, 1999. This decrease
was primarily attributable to decreased marketing with respect
to the national retail book business and decreased personnel and
related expenses. Included in marketing and sales is
$1.0 million and $0.4 million of non-cash charges for
the three months ended September 30, 2000 and 1999,
respectively. Non-cash charges consist of the amortization of
deferred compensation and charges related to warrants issued
under the Sallie Mae and AOL/ ICQ, Inc. agreements. Non-cash
charges increased primarily as a result of the termination of
our interactive marketing agreement with AOL/ ICQ on
September 21, 2000.

Product Development. Product development expense consists
of payroll and related expenses such as the amortization of
deferred compensation for development and systems personnel and
consultants. Product development expense decreased to
$0.4 million for the three months ended September 30,
2000 from $1.7 million for the three months ended
September 30, 1999. This decrease was primarily
attributable to decreased web development, consulting and
personnel costs between years.

General and Administrative. General and administrative
expense consists of payroll and related expenses for executive
and administrative personnel such as the amortization of
deferred compensation, facilities expenses, professional
services expenses, travel and other general corporate expenses.
General and administrative expense decreased to
$2.1 million for the three months ended September 30,
2000 from $2.5 million for the three months ended
September 30, 1999. This decrease was primarily
attributable to decreased personnel and professional services
expenses between years. Included in general and administrative
expenses is less than $0.1 million and $0.5 million of
non-cash charges for the three months ended September 30,
2000 and 1999, respectively. Non-cash charges decreased
primarily as a result of a reduction in the number of employees.

Other income (expense), net.

Other income (expense), net consists primarily of interest
income on our cash and cash equivalents and investments, and
interest expense attributable to our credit facility with
Imperial Bank at September 30, 2000. Other income was
$0.2 million for the three months ended September 30,
2000 compared to less than $0.1 million for the three
months ended September 30, 1999. This increase is primarily
attributable to interest income on higher average cash, cash
equivalent and short-term investment balances during the three
months ended September 30, 2000, offset by interest expense
of $0.1 million related to a warrant issued to Imperial
Bank in connection with the Companys credit facility (see
discussion below).

Income Taxes.

As of September 30, 2000, we had net operating loss
carryforwards for federal income tax purposes of
$57.0 million, which expire beginning in 2018. We have
provided a full valuation allowance on the resulting deferred
tax asset because of uncertainty regarding its realizability.

11



---



Nine Months Ended September 30, 2000

compared to


Nine Months Ended September 30, 1999


Net Sales. Net sales increased to $26.1 million for
the nine months ended September 30, 2000 from
$8.9 million for the nine months ended September 30,
1999, as a result of the significant growth in orders as well as
the commencement and growth of our eduPartners program.
Marketing services sales increased to $1.4 million for the
nine months ended September 30, 2000 from $0.1 million in
marketing services sales during the nine months ended
September 30, 1999, reflecting the continuing migration of
our revenues towards the marketing services business.

Operating Expenses

Cost of Books  Related Party (Baker &
Taylor). Cost of books  related party consists of
the cost of books sold to customers. Cost of books-related party
increased to $20.4 million for the nine months ended
September 30, 2000 from $7.7 million for the nine
months ended September 30, 1999. This increase was
primarily attributable to our increased sales volume between
years.

Cost of Shipping  Related Party (Baker &
Taylor). Cost of shipping  related party consists
of outbound shipping. Cost of shipping increased to
$2.1 million for the nine months ended September 30,
2000 from $0.7 million for the nine months ended
September 30, 1999. This increase was primarily
attributable to our increased sales volume between years. Also
for the nine months ended September 30, 2000, cost of
shipping  related party exceeded shipping revenue by
$0.5 million, or 28.0%. For the nine months ended
September 30, 1999, cost of shipping  related
party exceeded shipping revenue by approximately
$0.2 million, or 34%. This decrease was primarily
attributable to the increase in the shipping rates charged to
our customers that was implemented in July 2000.

Equity Transactions  Related Party (Baker &
Taylor). Equity transactions-related party consists of the
fair value of warrants issued to Baker & Taylor. During
1999, we issued warrants to purchase up to 5,950 and 62,500
shares of our common stock at an exercise price of $2.33 and
$0.22 per share, respectively, to Baker & Taylor. We
estimated the fair value of the warrants on the date of grant
using an established option pricing model. In connection with
the Baker & Taylor equity transactions, we recorded an
aggregate expense of $169,000 for the nine months ended
September 30, 1999.

Cost of Marketing Services. Cost of marketing services
includes personnel costs associated with the implementation of
our on campus marketing programs and other directly identifiable
costs associated with our online advertising and on campus
promotions. Cost of marketing services totaled $0.2 million
for the nine months ended September 30, 2000. There was no
cost of marketing services for the nine months ended
September 30, 1999.

Marketing and Sales. Marketing and sales expense consists
primarily of advertising and promotional expenditures and
payroll and related expenses such as the amortization of
deferred compensation for personnel engaged in marketing and the
expenses associated with the continued development of our
nationwide network of student representatives. Marketing and
sales expense increased to $24.9 million for the nine
months ended September 30, 2000 from $13.4 million for
the nine months ended September 30, 1999. This increase was
primarily attributable to expansion of our online and offline
advertising, continued growth of eduPartners, expenses
associated with the Companys agreement with AOL/ICQ and
scholarship programs, and marketing fees assessed by
Baker & Taylor. Included in marketing and sales is
$2.0 million and $0.5 million of non-cash charges for
the nine months ended September 30, 2000 and 1999,
respectively. Non-cash charges consist of the amortization of
deferred compensation and charges related to warrants issued
under the Sallie Mae and AOL/ICQ, Inc. agreements. Non-cash
charges increased primarily as a result of additional option
grants and the impact of warrants issued in connection with the
AOL/ICQ, Inc. and Sallie Mae agreements.

Product Development. Product development expense consists
of payroll and related expenses such as the amortization of
deferred compensation for development and systems personnel and
consultants. Product development expense increased to
$3.8 million for the nine months ended September 30,
2000 from

12



---





General and Administrative. General and administrative
expense consists of payroll and related expenses for executive
and administrative personnel such as the amortization of
deferred compensation, facilities expenses, professional
services expenses, travel and other general corporate expenses.
General and administrative expense increased to
$8.4 million for the nine months ended September 30,
2000 from $3.7 million for the nine months ended
September 30, 1999. This increase was primarily
attributable to the hiring of additional personnel and increased
professional services expenses between years. Included in
general and administrative expenses is $2.2 million and
$0.9 million of non-cash charges for the nine months ended
September 30, 2000 and 1999, respectively. Non-cash charges
increased primarily as a result of additional options grants and
the accelerated vesting of shares owned by our former Executive
Vice President of Development in March 2000.

Other Income (expense), net

Other income (expense), net consists primarily of interest
income on our cash and cash equivalents and investments, and
interest expense attributable to our convertible notes payable
at September 30, 1999 and credit facility with Imperial
Bank at September 30, 2000. Other income was
$0.8 million for the nine months ended September 30,
2000 compared to $0.2 million for the nine months ended
September 30, 1999. This increase is primarily attributable
to interest income on higher average cash, cash equivalent and
short-term investment balances during the nine months ended
September 30, 2000, offset by interest expense of
$0.2 million related to a warrant issued to Imperial Bank
in connection with the Companys credit facility (see
discussion below) and a less than $0.1 million loss from
the disposition of excess computer equipment.

Income Taxes

As of September 30, 2000, we had net operating loss
carryforwards for federal income tax purposes of
$57.0 million, which expire beginning in 2018. We have
provided a full valuation allowance on the resulting deferred
tax asset because of uncertainty regarding its realizability.

Liquidity and Capital Resources

From inception until our initial public offering, we financed
our operations primarily through private sales of our
convertible preferred stock. On August 6, 1998 and
December 3, 1998, we issued an aggregate of 2,071,420
shares of Series A preferred stock at a purchase price of
$.70 per share, resulting in gross proceeds of approximately
$1.5 million. On February 25, 1999, we issued
6,933,806 shares of Series B preferred stock at a purchase
price of $1.44 per share, resulting in gross proceeds of
approximately $10.0 million. On August 27, 1999 and
September 21, 1999, we issued an aggregate of 8,928,571
shares of Series C preferred stock at a purchase price of
$3.36 per share, resulting in gross proceeds of approximately
$30.0 million. Upon the closing of our initial public
offering, shares of our Series A, B and C preferred stock
were converted into 8,966,879 shares of our common stock.

In April 1999, we entered into an agreement with Campus
Pipeline, Inc. under which a warrant to purchase 25,000 shares
of our common stock with an exercise price of $6.00 per share
was issued and will be exercisable upon the achievement of
contractual revenues of $30.0 million on or before
December 31, 2000, with an additional warrant for 50,000
shares with an exercise price of $6.00 per share which will be
exercisable if contractual revenues equal or exceed
$80.0 million on or before July 31, 2001. Since the
exercisability of these warrants is based on the achievement of
uncertain future revenue targets, we have not recorded any
expense for these warrants.

In December 1999, we granted AOL a warrant to purchase
493,246 shares of our common stock, which does not include the
additional warrant to purchase 1,125 shares which we granted to
AOL when we entered into definitive agreements with Imperial
Bank and the additional warrant to purchase 34,367 shares which
we granted to AOL when we entered into the product promotion
agreement with Sallie Mae, with an exercise price of $10 per
share. Of the aggregate of 528,738 shares subject to purchase
under these warrants, 176,245 shares were

13



---





In February 2000, we granted Sallie Mae, Inc. warrants to
purchase up to 616,863 shares of our common stock, with an
exercise price of $10 per share. Of these shares, warrants to
purchase 352,493 are immediately exercisable and the warrants to
purchase the remaining 264,370 shares may vest over the two year
period following the grant date based on Sallie Maes
performance under our product promotion agreement.

In February 2000, we issued 4,000,000 shares of Common
Stock at an initial public offering price of $10.00 per share.
In March 2000, we sold an additional 35,000 shares pursuant
to the exercise of the underwriters over-allotment option
at $10.00 per share. Total net proceeds (after deducting
discounts, commissions and other expenses of the offering) were
approximately $35.9 million. On February 22, 2000,
approximately $2.5 million of this amount was used to pay
all amounts outstanding under the credit facility with Imperial
Bank (see discussion below). As of September 30, 2000,
approximately $16.7 million had been used for working
capital purposes. The balance of approximately
$16.7 million was invested in cash and cash equivalents at
September 30, 2000.

As of September 30, 2000, prepaid marketing expenses were
$0.2 million compared to $4.6 million at
December 31, 1999. The decrease is a result of costs
incurred in conjunction with our January/ February selling
period.

As of December 31, 1999, we deferred expenses of
approximately $1.0 million related to our initial public
offering. These costs were offset against
additional-paid-in-capital upon the completion of our offering
in February 2000. Such costs are reflected as a deferred charge
in the accompanying December 31, 1999 consolidated balance
sheet.

Net cash used in operating activities was $26.5 million for
the nine months ended September 30, 2000, compared to
$10.2 million for the nine months ended September 30,
1999, consisting primarily of net losses adjusted for changes in
accounts receivable, accounts payable and accrued expenses.

Net cash used in investing activities was $1.1 million for
the nine months ended September 30, 2000, and
$1.2 million for the nine months ended September 30, 1999,
consisting primarily of purchases of computer equipment and
fixtures and furniture totaling $0.6 million and
$1.2 million at September 30, 2000 and 1999,
respectively. Also, for the nine months ended September 30,
2000, the Company capitalized $0.6 million of development
costs primarily related to its Web site. Such costs will be
amortized over an 18-month period.

Net cash provided by financing activities was $36.4 million
for the nine months ended September 30, 2000 and
$38.5 million for the nine months ended September 30,
1999 consisting primarily of the net proceeds from the
Companys initial public offering and the issuance of
preferred stock, respectively.

On January 19, 2000 we entered into a revolving credit
agreement with Imperial Bank in an aggregate amount of
$7.5 million with sub-limits of $3.0 million for
purchases of property, equipment and software and $750,000 for
letters of credit. The maturity date for working capital
advances is December 31, 2000 and the maturity date for
property, equipment and software advances is October 18,
2002. Interest on outstanding balances accrued at Imperial
Banks prime rate (9.5% at September 30, 2000) plus
1.0% until the closing of our initial public offering, and
afterwards at Imperial Banks prime rate. All amounts
outstanding, which could be up to $7.5 million, are
collateralized by a pledge of all of our assets. Under the terms
of the credit facility, as amended, we must maintain a tangible
net worth of $15 million and a ratio of our current assets
to our current liabilities of 1.5 to 1. We also issued a warrant
to Imperial Bank to purchase 37,500 shares of our common stock
at an exercise price of $10 per share. We borrowed
$2.5 million under the revolving credit facility during
February 2000 and repaid such borrowings on
February 22, 2000 with a portion of the proceeds of our
initial public offering. No amounts were outstanding under the
agreement at September 30, 2000 with the exception of a
letter of credit in the amount of $0.3 million.

We expect that operating losses and negative cash flows will
continue until at least the second half of 2001. As part of the
increased emphasis on our higher margin marketing services
business, we anticipate that costs and expenses related to brand
development, marketing and other promotional activities
associated with

14



---





We currently expect that cash, cash equivalent and short term
investment balances will be sufficient to meet our anticipated
needs for working capital and capital expenditures into the
third quarter of 2001. We may need to raise additional funds
prior to the expiration of such period if, for example, we
pursue new business, technology or intellectual property
acquisitions or experience net losses that exceed our current
expectations. Any required additional financing may be
unavailable on terms favorable to us, or at all.

Factors That May Affect Future Operating Results

This quarterly report on Form 10-Q contains forward looking
statements which involve risks and uncertainties. Our actual
results could differ materially from those anticipated by such
forward looking statements as a result of such factors,
including those set forth below.



| |                                                                                                                                                         
| | --------------------------------------------------------------------------------------------------------------------------------------------------------
| | We may need additional capital to fund our operations and
	finance our growth, and we may not be able to obtain it on terms
	acceptable to us or at all.

We require substantial working capital to fund our business in
the near and longer term. If we do not achieve cash flow
profitability in the third quarter of 2001, we may have to raise
additional funds to finance our operations beyond the third
quarter of 2001. We may elect to seek these additional funds at
any time, but there can be no assurance that any future fund
raising efforts will be successful. If we raise additional funds
by selling our common stock or securities convertible into
common stock, the relative ownership of our existing investors
could be significantly diluted or the new investors could obtain
terms more favorable than those of our existing investors.
Furthermore, the actual amount and timing of our longer-term
future capital requirements may differ materially from our
current estimates because our revenues and costs depend upon
certain factors that we cannot control. We may experience
significant changes and fluctuations in our revenues, operating
costs and development expenses due to changes in technology and
regulations, increased competition and factors such as
seasonality and performance by third parties in connection with
our operations. These variations may significantly affect our
future need for capital. If we cannot obtain appropriate levels
of financing when needed and on terms acceptable to us or at
all, we may be forced to curtail our operations.



| |                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------
| | Our limited experience makes it difficult to assess
	whether we can successfully implement our new business
	model.

Since the companys inception, our business has focused
primarily on the online sale of new textbooks. Only since
May 2000 have we begun to focus on a new business model
that aggressively grows our eduPartners program, in which
we contract with educational institutions to become their
exclusive textbook supplier, and which also accelerates the
migration of our business towards our marketing services
business. We must deploy and execute upon our marketing services
business model successfully and generate adequate revenue and
gross margin in order for us to achieve positive cash flow.
Because we have limited experience in operating our marketing
services business, we cannot give any assurances that we will be
able to successfully build this business and our historical
financial information is of limited value to you in projecting
our future results.

16



---





| |                                                                                                                                                                                                     
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Loss of any of our key management personnel or the
	inability of our key management personnel to work together
	effectively or successfully manage our growth could negatively
	affect our business.

Our future success depends to a significant extent on the
continued service and coordination of our management team,
particularly Eric J. Kuhn, our co-founder, Chief Executive
Officer, President and Chairman of the Board. We have entered
into an agreement with Mr. Kuhn which provides, among other
things, that he be compensated in the event he is terminated
without cause. We have not entered into similar agreements with
any other personnel. Nonetheless, the loss or departure of any
of our executive officers or key employees could harm our
ability to implement our business plan. We do not maintain key
person insurance on any member of our management team. In
addition, a number of members of our management team have joined
us within the last year. These individuals have not previously
worked together and are becoming integrated into our management
team. They may not be able to work together effectively or
successfully manage our growth, resulting in adverse
consequences to our business.

Our business and growth will suffer if we are
unable to successfully hire and retain key personnel.

Our future success depends on our ability to attract, train,
motivate and retain highly skilled employees and student
representatives. We may be unable to retain our key employees
and student representatives or attract, assimilate or retain
other highly qualified employees or student representatives in
the future. The failure to attract and retain the necessary
managerial, marketing, merchandising, operational, customer
service, technical, financial or administrative personnel could
harm our business. In addition, as we grow and add additional
product and service offerings, we anticipate a need to further
develop and expand our Web site. Competition for highly skilled
and qualified Web site and software developers is intense. We
cannot be certain we will be able to attract and retain a
sufficient number of qualified software developers or outside
consultants for our Web site and transaction-processing systems.

We expect to continue to incur significant
losses and experience negative cash flow.

We expect significant operating losses and net negative cash
flows from operations to continue until the third quarter of
2001, and possibly longer. Because we have planned expenses and
relatively low gross margins in our retail textbook business,
our ability to become profitable depends on our ability to
generate and sustain higher net revenues and gross margins
through our marketing services business and eduPartners
program. If we do achieve profitability, we cannot be certain
that we can sustain or increase profitability on a quarterly or
annual basis in the future. We base our current and future
expense levels on our operating plans and estimates of future
revenues. If we cannot achieve and sustain operating
profitability or positive cash flow from operations, we may be
unable to meet our working capital requirements, which would
adversely affect our business and may cause us to discontinue
operations.

Item 3.  Quantitative and Qualitative
Disclosures About Market Risk

The Company is subject to interest rate risk on its cash and
cash equivalents, short-term investments and credit facility. If
market rates were to increase immediately and uniformly by 10%
from the level at September 30, 2000, the change to the
Companys interest sensitive assets and liabilities would
have an immaterial effect on the Companys financial
position, results of operations and cash flows over the next
fiscal year.

17



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PART II.

OTHER INFORMATION


Item 1:  Legal Proceedings

Not Applicable

Item 2:  Changes in Securities

Not Applicable

Item 3:  Defaults Upon Senior
Securities

Not Applicable

Item 4:  Submission of Matters to a Vote of
Security Holders

Not Applicable.

Item 5:  Other Information

Our common stock currently trades on the Nasdaq National Market.
Under the rules of the Nasdaq National Market, in order for our
common stock to be designated as a National Market security, we
must be in compliance with certain standards which include,
among other things, (i) a minimum closing bid price for the
common stock of at least $1.00 per share, and (ii) a market
value for our publicly held shares (i.e., which does not include
shares held by executive officers, directors or 10%
shareholders) of at least $5,000,000. On October 27, 2000,
Nasdaq notified us that our common stock had failed to maintain
a minimum bid price of $1.00 for the previous 30 consecutive
trading days. Under the Nasdaq rules, we have until
January 25, 2001 to comply with the above mentioned listing
requirements. One way that we can regain such compliance is if
the bid price of our common stock is at least $1.00 for a
minimum of 10 consecutive trading days prior to such date. If we
are not able to demonstrate compliance with this requirement on
or before January 25, 2001, our common stock will be
delisted at the open of business on January 29, 2001,
unless we request a hearing on our delisting before Nasdaq. We
are considering possible responses to our failure to comply with
the Nasdaq minimum closing bid price requirements, which include
various actions designed to raise the bid price for our common
stock, but which could include a decision to take no such
action. We cannot assure you that we will regain compliance with
this listing requirement or that we will not fail to satisfy
this or other requirements in the future. For example, based on
the recent minimum bid price of our common stock, we may in the
future fail to comply with the $5,000,000 market value
requirement referred to above. In such case, our common stock
would no longer be listed on the Nasdaq National Market. In such
event, stockholders may be forced to trade our stock in the over
the counter market on an electronic bulletin board established
for securities that do not meet the listing requirements, or
what is commonly referred to as the pink sheets. The
result of such delisting would be a reduction in the liquidity
of any investment in our common stock. Delisting would also
reduce the ability of holders of our common stock to purchase or
sell shares as quickly and as inexpensively as they have done
historically. This lack of liquidity may also make it more
difficult for us to raise capital in the future.

Item 6:  Exhibits and Reports on
Form 8-K

(a)  Exhibits

|            |    |             |  |                                         
|----------- | -- | ----------- |  | ----------------------------------------
|Exhibit No. |    | Description
|            |    |            
|            | 11 |             |  | Computation of Earnings Per Common Share
|            | 27 |             |  | Financial Data Schedule                 



| |     |                            
| | --- | ---------------------------
| | (b) | Reports on Form 8-K 
	 None

18



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SIGNATURES

Pursuant to the requirements 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.



| |                   
| | ------------------
| | VARSITY GROUP INC.



| |     |                 
| | --- | ----------------
| | By: | /s/ ERIC J. KUHN

| |                          
| | -------------------------
| |                          
| | Eric J. Kuhn             
| | Chairman, Chief Executive
| | Officer and President    

Date:  November   , 2000

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