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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549




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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, 2003                                       

or

|  |  |                                                                                          
|- |  | -----------------------------------------------------------------------------------------
|o |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
|  |  |                                                                                          
|  |  | For the transition period from ____________ to ____________                              

Commission File Number: 0-26063

barnesandnoble.com inc.

(Exact Name of Registrant as Specified in Its Charter)


| |  |                                          |  |                    
| |  | ---------------------------------------- |  | -------------------
| |  | Delaware                                 |  | 13-4048787         
| |  | (State or Other Jurisdiction of          |  | (I.R.S. Employer   
| |  | Incorporation or Organization)           |  | Identification No.)
| |  |                                          |  |                    
| |  | 76 Ninth Avenue, New York, NY            |  | 10011              
| |  | (Address of Principal Executive Offices) |  | (Zip Code)         

(212) 414-6000(Registrants Telephone Number, Including Area Code)

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 o

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes o No x

Number of shares of $.001 par value Class A Common Stock, Class B Common
Stock and Class C Common Stock outstanding as of November 10, 2003 was
48,907,749, one and one, respectively.



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TABLE OF CONTENTS



|                                         |                                                                                               |  |  |  |  |  |  | 
|---------------------------------------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|PART I  FINANCIAL INFORMATION          
|                                         | Item 1: Financial Statements                                                                 
|                                         | Item 2: Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                         | Item 3: Quantitative and Qualitative Disclosures about Market Risk                           
|                                         | Item 4: Controls and Procedures                                                              
|PART II  OTHER INFORMATION             
|                                         | Item 1: Legal Proceedings                                                                    
|                                         | Item 2: Changes in Securities and Use of Proceeds                                            
|                                         | Item 3: Defaults upon Senior Securities                                                      
|                                         | Item 4: Submission of Matters to a Vote of Security Holders                                  
|                                         | Item 5: Other Information                                                                    
|                                         | Item 6: Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                              
|CERTIFICATION OF CHIEF EXECUTIVE OFFICER
|CERTIFICATION OF CHIEF FINANCIAL OFFICER
|CERTIFICATION OF CHIEF EXECUTIVE OFFICER
|CERTIFICATION OF CHIEF FINANCIAL OFFICER



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barnesandnoble.com inc.

September 30, 2003

Index to Form 10-Q

|           |  |                                                                                       |  |  |    |          |  | 
|---------- |  | ------------------------------------------------------------------------------------- |  |  | -- | -------- |  | 
|           |  |                                                                                       |  |  |    | Page No.
|           |  |                                                                                       |  |  |    |         
|PART I -   |  | FINANCIAL INFORMATION                                                                 |  |  |    |         
|Item 1:    |  | Financial Statements                                                                  |  |  | 3  |         
|Item 2:    |  | Managements Discussion and Analysis of Financial Condition and
Results of Operations |  |  | 12 |         
|Item 3:    |  | Quantitative and Qualitative Disclosures About Market Risk                            |  |  | 17 |         
|Item 4:    |  | Controls and Procedures                                                               |  |  | 17 |         
|PART II -  |  | OTHER INFORMATION                                                                     |  |  |    |         
|Item 1:    |  | Legal Proceedings                                                                     |  |  | 18 |         
|Item 2:    |  | Changes in Securities and Use of Proceeds                                             |  |  | 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 8-K                                                      |  |  | 19 |         
|Signatures |  |                                                                                       |  |  | 22 |         

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PART I  FINANCIAL INFORMATION




Item 1: Financial Statements

barnesandnoble.com inc.

CONSOLIDATED STATEMENTS OF OPERATIONS(in thousands of dollars, except per share data)
(unaudited)

|                                                     |                                                                                        |                               |                          |       |                    |        |                   |       |               |        |               |        |         |         |         |        |         |         | 
|---------------------------------------------------- | -------------------------------------------------------------------------------------- | ----------------------------- | ------------------------ | ----- | ------------------ | ------ | ----------------- | ----- | ------------- | ------ | ------------- | ------ | ------- | ------- | ------- | ------ | ------- | ------- | 
|                                                     |                                                                                        |                               |                          |       | Three
Months Ended |        | Nine
Months Ended
|                                                     |                                                                                        |                               |                          |       |                    |        |                  
|                                                     |                                                                                        |                               |                          |       | September 30,      |        | September 30,     |       | September 30, |        | September 30,
|                                                     |                                                                                        |                               |                          |       | 2003               |        | 2002              |       | 2003          |        | 2002         
|                                                     |                                                                                        |                               |                          |       |                    |        |                   |       |               |        |              
|Net sales                                            |                                                                                        | $                             | 98,993                   |       |                    | $      | 102,575           |       |               | $      | 291,433       |        |         | $       | 294,947 |       
|Cost of sales                                        |                                                                                        |                               | 74,688                   |       |                    |        | 77,997            |       |               |        | 219,915       |        |         |         | 227,034 |       
|                                                     |                                                                                        |                               |                          |       |                    |        |                   |       |               |        |               |        |         |         |         |       
|                                                     |                                                                                        | Gross profit                  |                          |       | 24,305             |        |                   |       | 24,578        |        |               |        | 71,518  |         |         |        | 67,913  |        
|                                                     |                                                                                        |                               |                          |       |                    |        |                   |       |               |        |               |        |         |         |         |       
|Operating expenses:                                  |                                                                                        |                               |                          |       |                    |        |                   |       |               |        |               |        |         |         |         |       
|                                                     | Fulfillment and customer service                                                       |                               |                          | 8,457 |                    |        |                   | 8,240 |               |        |               | 25,413 |         |         |         | 26,237 |        
|                                                     | Marketing, sales and editorial                                                         |                               |                          | 7,187 |                    |        |                   | 8,682 |               |        |               | 22,945 |         |         |         | 26,731 |        
|                                                     | Technology and web site
development                                                    |                               |                          | 8,056 |                    |        |                   | 8,190 |               |        |               | 23,168 |         |         |         | 27,022 |        
|                                                     | General and administrative                                                             |                               |                          | 6,572 |                    |        |                   | 6,998 |               |        |               | 19,338 |         |         |         | 19,802 |        
|                                                     | Depreciation and amortization                                                          |                               |                          | 6,210 |                    |        |                   | 8,428 |               |        |               | 20,322 |         |         |         | 24,953 |        
|                                                     | Equity in net loss of equity
investments including related
amortization of intangibles |                               |                          |      |                    |        |                   | 1,805 |               |        |               |       |         |         |         | 3,179  |        
|                                                     |                                                                                        |                               |                          |       |                    |        |                   |       |               |        |               |        |         |         |         |       
|                                                     |                                                                                        |                               | Total operating expenses |       |                    | 36,482 |                   |       |               | 42,343 |               |        |         | 111,186 |         |        |         | 127,924 | 
|Loss from operations                                 |                                                                                        |                               | (12,177                  | )     |                    |        | (17,765           | )     |               |        | (39,668       | )      |         |         | (60,011 | )     
|Interest income, net                                 |                                                                                        |                               | 22                       |       |                    |        | 303               |       |               |        | 186           |        |         |         | 1,395   |       
|                                                     |                                                                                        |                               |                          |       |                    |        |                   |       |               |        |               |        |         |         |         |       
|                                                     |                                                                                        | Loss before minority interest |                          |       | (12,155            | )      |                   |       | (17,462       | )      |               |        | (39,482 | )       |         |        | (58,616 | )      
|Minority interest                                    |                                                                                        |                               | 9,086                    |       |                    |        | 12,647            |       |               |        | 29,541        |        |         |         | 42,452  |       
|                                                     |                                                                                        |                               |                          |       |                    |        |                   |       |               |        |               |        |         |         |         |       
|                                                     |                                                                                        | Net loss                      |                          | $     | (3,069             | )      |                   | $     | (4,815        | )      |               | $      | (9,941  | )       |         | $      | (16,164 | )      
|                                                     |                                                                                        |                               |                          |       |                    |        |                   |       |               |        |               |        |         |         |         |       
|Basic net loss per common share                      |                                                                                        | ($                            | 0.08                     | )     |                    | ($     | 0.11              | )     |               | ($     | 0.25          | )      |         | ($      | 0.37    | )     
|Basic weighted average common
shares outstanding (1) |                                                                                        |                               | 40,247                   |       |                    |        | 43,788            |       |               |        | 40,090        |        |         |         | 43,788  |       



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|(1) |  | Excludes assumed conversion of Membership Units and the elimination of minority interest, as it is not dilutive.
|--- |  | ----------------------------------------------------------------------------------------------------------------

See accompanying notes to consolidated financial statements.

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barnesandnoble.com inc.

CONSOLIDATED BALANCE SHEETS
(in thousands of dollars, except per share data)

|                                     |                                                                                                                                 |                                            |                           |          |               |         |              |          |         |         | 
|------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------- | ------------------------------------------ | ------------------------- | -------- | ------------- | ------- | ------------ | -------- | ------- | ------- | 
|                                     |                                                                                                                                 |                                            |                           |          | September 30, |         | December 31,
|                                     |                                                                                                                                 |                                            |                           |          | 2003          |         | 2002        
|                                     |                                                                                                                                 |                                            |                           |          |               |         |             
|                                     |                                                                                                                                 |                                            |                           |          | (unaudited)   |         |              |          |        
|ASSETS                               |                                                                                                                                 |                                            |                           |          |               |         |              |         
|Current assets:                      |                                                                                                                                 |                                            |                           |          |               |         |              |         
|                                     | Cash and cash equivalents                                                                                                       |                                            | $                         | 37,959   |               |         | $            | 70,144   |        
|                                     | Receivables, net of allowance $1,889 and $4,048, respectively                                                                   |                                            |                           | 5,524    |               |         |              | 14,631   |        
|                                     | Merchandise inventories                                                                                                         |                                            |                           | 47,993   |               |         |              | 48,303   |        
|                                     | Prepaid expenses and other current assets                                                                                       |                                            |                           | 4,122    |               |         |              | 3,991    |        
|                                     |                                                                                                                                 |                                            |                           |          |               |         |              |         
|                                     |                                                                                                                                 |                                            | Total current assets      |          |               | 95,598  |              |          |         | 137,069 | 
|                                     |                                                                                                                                 |                                            |                           |          |               |         |              |         
|Fixed assets, net                    |                                                                                                                                 |                                            | 46,395                    |          |               |         | 58,871       |         
|Goodwill, net                        |                                                                                                                                 |                                            | 13,777                    |          |               |         | 13,777       |         
|Other non-current assets             |                                                                                                                                 |                                            | 20                        |          |               |         | 17           |         
|                                     |                                                                                                                                 |                                            |                           |          |               |         |              |         
|                                     |                                                                                                                                 | Total assets                               |                           | $        | 155,790       |         |              | $        | 209,734 |        
|                                     |                                                                                                                                 |                                            |                           |          |               |         |              |         
|LIABILITIES AND STOCKHOLDERS EQUITY |                                                                                                                                 |                                            |                           |          |               |         |              |         
|Current liabilities:                 |                                                                                                                                 |                                            |                           |          |               |         |              |         
|                                     | Accounts payable                                                                                                                |                                            | $                         | 12,536   |               |         | $            | 16,071   |        
|                                     | Accrued liabilities                                                                                                             |                                            |                           | 54,871   |               |         |              | 70,456   |        
|                                     | Payable to affiliate                                                                                                            |                                            |                           | 51,715   |               |         |              | 48,261   |        
|                                     |                                                                                                                                 |                                            |                           |          |               |         |              |         
|                                     |                                                                                                                                 |                                            | Total current liabilities |          |               | 119,122 |              |          |         | 134,788 | 
|                                     |                                                                                                                                 |                                            |                           |          |               |         |              |         
|Minority interest                    |                                                                                                                                 |                                            | 22,706                    |          |               |         | 52,305       |         
|Commitments and contingencies        |                                                                                                                                 |                                            |                           |          |               |         |              |         
|Stockholders equity:                |                                                                                                                                 |                                            |                           |          |               |         |              |         
|                                     | Preferred Stock: $0.001 par value; 50,000,000 shares authorized; none
issued and outstanding                                    |                                            |                           |         |               |         |              |         |        
|                                     | Common Stock Series A: $0.001 par value; 750,000,000 shares authorized;
44,594,993 and 43,802,228 shares issued and outstanding |                                            |                           | 44       |               |         |              | 44       |        
|                                     | Common Stock Series B: $0.001 par value; 1,000 shares authorized; 1 share
issued and outstanding                                |                                            |                           |         |               |         |              |         |        
|                                     | Common Stock Series C: $0.001 par value; 1,000 shares authorized; 1 share
issued and outstanding                                |                                            |                           |         |               |         |              |         |        
|                                     | Paid-in capital                                                                                                                 |                                            |                           | 190,555  |               |         |              | 189,294  |        
|                                     | Accumulated deficit                                                                                                             |                                            |                           | (176,637 | )             |         |              | (166,697 | )      
|                                     |                                                                                                                                 |                                            |                           |          |               |         |              |         
|                                     |                                                                                                                                 | Total stockholders equity                 |                           |          | 13,962        |         |              |          | 22,641  |        
|                                     |                                                                                                                                 |                                            |                           |          |               |         |              |         
|                                     |                                                                                                                                 | Total liabilities and stockholders equity |                           | $        | 155,790       |         |              | $        | 209,734 |        
|                                     |                                                                                                                                 |                                            |                           |          |               |         |              |         

See accompanying notes to consolidated financial statements.

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barnesandnoble.com inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands of dollars, except per share data)
(unaudited)

|                                                 |                                                                                |                                                       |         |                   |         |               |         |         |         |  
|------------------------------------------------ | ------------------------------------------------------------------------------ | ----------------------------------------------------- | ------- | ----------------- | ------- | ------------- | ------- | ------- | ------- | -
|                                                 |                                                                                |                                                       |         | Nine Months Ended
|                                                 |                                                                                |                                                       |         |                  
|                                                 |                                                                                |                                                       |         | September 30,     |         | September 30,
|                                                 |                                                                                |                                                       |         | 2003              |         | 2002         
|                                                 |                                                                                |                                                       |         |                   |         |              
|Cash flows from operating activities:            |                                                                                |                                                       |         |                   |         |               |         |        
|                                                 | Net loss                                                                       |                                                       | $       | (9,941            | )       |               | $       | (16,165 | )      
|                                                 | Adjustments to reconcile net loss to net cash flows from operating activities: |                                                       |         |                   |         |               |         |         |        
|                                                 |                                                                                | Depreciation and amortization                         |         |                   | 20,304  |               |         |         | 25,142  |  
|                                                 |                                                                                | Decrease in receivables, net                          |         |                   | 9,107   |               |         |         | 3,684   |  
|                                                 |                                                                                | Decrease (increase) in merchandise inventories        |         |                   | 310     |               |         |         | (1,058  | )
|                                                 |                                                                                | Increase in prepaid expenses and other current assets |         |                   | (131    | )             |         |         | (820    | )
|                                                 |                                                                                | Increase (decrease) in accounts payable               |         |                   | (3,535  | )             |         |         | 12,006  |  
|                                                 |                                                                                | Increase (decrease) in payable to affiliate           |         |                   | 3,454   |               |         |         | (3,999  | )
|                                                 |                                                                                | Decrease in accrued liabilities                       |         |                   | (15,585 | )             |         |         | (16,764 | )
|                                                 |                                                                                | Minority interest in loss                             |         |                   | (29,541 | )             |         |         | (42,452 | )
|                                                 |                                                                                |                                                       |         |                   |         |               |         |        
|                                                 | Net cash flows used in operating activities                                    |                                                       |         | (25,558           | )       |               |         | (40,426 | )      
|                                                 |                                                                                |                                                       |         |                   |         |               |         |        
|Cash flows from investing activities:            |                                                                                |                                                       |         |                   |         |               |         |        
|                                                 | Purchases of fixed assets                                                      |                                                       |         | (7,827            | )       |               |         | (5,254  | )      
|                                                 | Sales of marketable securities                                                 |                                                       |         |                  |         |               |         | 10,141  |        
|                                                 | Decrease (increase) in other non-current assets                                |                                                       |         | (3                | )       |               |         | 4,396   |        
|                                                 |                                                                                |                                                       |         |                   |         |               |         |        
|                                                 | Net cash flows from (used in) investing activities                             |                                                       |         | (7,830            | )       |               |         | 9,283   |        
|                                                 |                                                                                |                                                       |         |                   |         |               |         |        
|Cash flows from financing activities:            |                                                                                |                                                       |         |                   |         |               |         |        
|                                                 | Proceeds from exercise of stock options                                        |                                                       |         | 1,203             |         |               |         | 1       |        
|                                                 |                                                                                |                                                       |         |                   |         |               |         |        
|                                                 | Net cash flows from financing activities                                       |                                                       |         | 1,203             |         |               |         | 1       |        
|                                                 |                                                                                |                                                       |         |                   |         |               |         |        
|Net change in cash and cash equivalents          |                                                                                |                                                       | (32,185 | )                 |         |               | (31,142 | )      
|Cash and cash equivalents at beginning of period |                                                                                |                                                       | 70,144  |                   |         |               | 105,125 |        
|                                                 |                                                                                |                                                       |         |                   |         |               |         |        
|Cash and cash equivalents at end of period       |                                                                                | $                                                     | 37,959  |                   |         | $             | 73,983  |        
|                                                 |                                                                                |                                                       |         |                   |         |               |         |        

See accompanying notes to consolidated financial statements.

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barnesandnoble.com inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the nine months ended September 30, 2003 and September 30, 2002
(in thousands of dollars, except per share data)
(unaudited)

The unaudited consolidated financial statements include the accounts of
barnesandnoble.com inc. (the Company), barnesandnoble.com llc (B&N.com) and
BookQuest LLC (BookQuest), a wholly owned subsidiary of B&N.com.

In the opinion of the Companys management, the accompanying unaudited
consolidated financial statements contain all adjustments (consisting of only
normal recurring adjustments) necessary to present fairly its consolidated
financial position as of September 30, 2003 and the results of its operations
for the three months and nine months then ended and its cash flows for the nine
months then ended. These consolidated financial statements are condensed and
therefore do not include all of the information and footnotes required by
generally accepted accounting principles. The consolidated financial statements
should be read in conjunction with the Companys Annual Report on Form 10-K for
the year ended December 31, 2002. The Company followed the same accounting
policies in preparation of this report as in such Annual Report. Operating
results for the three months and nine months ended September 30, 2003 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2003.



|1. |  | ORGANIZATION
|-- |  | ------------

The Company is a holding company whose sole asset is a 29.8% equity
interest in B&N.com, an online retailer of books, music and DVD/video, and
whose sole business is currently acting as sole manager of B&N.com. As sole
manager of B&N.com, the Company controls all of the affairs of B&N.com and as a
result, B&N.com is consolidated with the Company. As of September 30, 2003,
Barnes & Noble, Inc. (Barnes & Noble) beneficially owns an equity interest of
74.7%, (or 115,000 Membership Units and 4,139 shares of Class A Common Stock)
in B&N.com. Barnes & Noble increased its interest to that level on September
15, 2003 by acquiring the entire 36.8% equity interest of Bertelsmann AG
(Bertelsmann) in B&N.com for $2.80 per share or Membership Unit ($164,000
total), payable in a combination of cash and notes. Each Membership Unit held
by Barnes & Noble is convertible into one share of the Companys Class A Common
Stock. As reflected in the consolidated statements of operations, the loss
before minority interest represents the total loss for the period and the net
loss represents the portion of the loss attributable to the Company subsequent
to the commencement of its activities.



|2. |  | RECLASSIFICATIONS
|-- |  | -----------------

Certain prior-period amounts have been reclassified for comparative
purposes to conform to the 2003 presentation.



|3. |  | STOCK OPTIONS
|-- |  | -------------

The Company has one stock-based employee compensation plan in effect. The
Company accounts for all transactions under which employees receive shares of
stock or other equity instruments in the Company based on the price of its
stock in accordance with the provisions of Accounting Principles Board Opinion
No. 25 Accounting for Stock Issued to Employees. Options which have been
repriced have been treated as variable options. No stock-based employee
compensation cost is reflected in net loss, as all options granted under the
plan had an exercise price equal to the market value of the underlying common
stock on the date of grant and the market price of the stock subsequent to the
repricing has not exceeded the exercise price.The following table illustrates
the effect on net loss and earnings per share if the Company had applied the
fair value recognition provisions of Statement of Financial Accounting
Standards No. 123 Stock-Based Compensation (SFAS No. 123).

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barnesandnoble.com inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the nine months ended September 30, 2003 and September 30, 2002
(in thousands of dollars, except per share data)
(unaudited)

|                                                                                                                                                                                                                                                                                                                             |                           |                       |        |                                  |        |                                 |        |      |        |      |         |   |        |   |         |   |         |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------------------- | --------------------- | ------ | -------------------------------- | ------ | ------------------------------- | ------ | ---- | ------ | ---- | ------- | - | ------ | - | ------- | - | ------- | -
|                                                                                                                                                                                                                                                                                                                             |                           |                       |        | Three Months Ended September 30, |        | Nine Months Ended September 30,
|                                                                                                                                                                                                                                                                                                                             |                           |                       |        |                                  |        |                                
|                                                                                                                                                                                                                                                                                                                             |                           |                       |        | 2003                             |        | 2002                            |        | 2003 |        | 2002
|                                                                                                                                                                                                                                                                                                                             |                           |                       |        |                                  |        |                                 |        |      |        |     
|Net loss:                                                                                                                                                                                                                                                                                                                    |                           |                       |        |                                  |        |                                 |        |      |        |      |         |   |        |   |         |  
|                                                                                                                                                                                                                                                                                                                             |                           | As reported           |        | $                                | (3,069 | )                               |        | $    | (4,815 | )    |         | $ | (9,941 | ) |         | $ | (16,165 | )
|Deduct: Total stock-based
employee
compensation expense
determined under fair
value based method for
all awards ($3,724 and
$2,129 for the three
months ended September
30, 2003 and 2002,
respectively and $5,060
and $9,145 for the nine
months ended September
30, 2003 and 2002,
respectively), net of
minority
interest |                           |                       | (937   | )                                |        |                                 | (587   | )    |        |      | (1,274  | ) |        |   | (2,524  | )
|                                                                                                                                                                                                                                                                                                                             |                           |                       |        |                                  |        |                                 |        |      |        |      |         |   |        |   |         |   |         |  
|Proforma net loss                                                                                                                                                                                                                                                                                                            |                           | $                     | (4,006 | )                                |        | $                               | (5,402 | )    |        | $    | (11,215 | ) |        | $ | (18,689 | )
|                                                                                                                                                                                                                                                                                                                             |                           |                       |        |                                  |        |                                 |        |      |        |      |         |   |        |   |         |  
|                                                                                                                                                                                                                                                                                                                             | Basic net loss per share: |                       |        |                                  |        |                                 |        |      |        |      |         |   |        |   |         |   |        
|                                                                                                                                                                                                                                                                                                                             |                           | As reported           |        | $                                | (0.08  | )                               |        | $    | (0.11  | )    |         | $ | (0.25  | ) |         | $ | (0.37   | )
|                                                                                                                                                                                                                                                                                                                             |                           | Proforma SFAS No. 123 |        | $                                | (0.10  | )                               |        | $    | (0.12  | )    |         | $ | (0.28  | ) |         | $ | (0.43   | )

The fair value for each option granted was estimated at the date of grant
using the Black-Scholes option-pricing model, one of the allowable valuation
methods under SFAS No. 123, with the following assumptions:

|                                 |  |                                  |       |                                 |  |      |        |      |  |  |       |   |  |  |        |  
|-------------------------------- |  | -------------------------------- | ----- | ------------------------------- |  | ---- | ------ | ---- |  |  | ----- | - |  |  | ------ | -
|                                 |  | Three Months Ended September 30, |       | Nine Months Ended September 30,
|                                 |  |                                  |       |                                
|                                 |  | 2003                             |       | 2002                            |  | 2003 |        | 2002
|                                 |  |                                  |       |                                 |  |      |        |     
|Average risk free interest rates |  |                                  | 4.00  | %                               |  |      | 4.00   | %    |  |  | 4.00  | % |  |  | 4.00   | %
|Average expected life (in years) |  |                                  | 3.73  |                                 |  |      | 5.00   |      |  |  | 3.17  |   |  |  | 5.00   |  
|Volatility                       |  |                                  | 98.43 | %                               |  |      | 140.07 | %    |  |  | 98.43 | % |  |  | 140.07 | %

The weighted-average fair value of the options granted during the three
months ended September 30, 2003 and 2002 was estimated to be $1.59 and $0.83,
respectively, and $0.66 and $1.09 for the nine months ended September 30, 2003
and 2002, respectively, for options granted at fair market value.



|4. |  | ACCRUED SPECIAL CHARGES
|-- |  | -----------------------

An impairment of fixed assets and other special charges of $88,213 ($0.56
per share assuming conversion of membership units) was recorded as a component
of operating expenses during the fourth quarter of 2001. These charges were
primarily related to the impairment of fixed and other assets, including equity
investments, as well as the consolidation of fulfillment operations and
administrative functions. At September 30, 2003, the accrued liability
associated with the special charges was $4,374 and consisted of the following:

|                                 |  |           |       |          |  |            |     |            |  |           |       |  |  |   |       |  |  |   |       | 
|-------------------------------- |  | --------- | ----- | -------- |  | ---------- | --- | ---------- |  | --------- | ----- |  |  | - | ----- |  |  | - | ----- | 
|                                 |  | Balance   |       | 2003     |  | Balance    |     | Due within |  | Due after
|                                 |  | 31-Dec-02 |       | Payments |  | 30-Sept-03 |     | 12 Months  |  | 12 Months
|                                 |  |           |       |          |  |            |     |            |  |          
|Facility/lease termination costs |  | $         | 4,569 |          |  | $          | 889 |            |  | $         | 3,680 |  |  | $ | 1,588 |  |  | $ | 2,092 | 
|Employee termination benefits    |  |           | 80    |          |  |            | 30  |            |  |           | 50    |  |  |   | 50    |  |  |   |      | 
|Other impairment charges         |  |           | 644   |          |  |            |    |            |  |           | 644   |  |  |   | 644   |  |  |   |      | 
|                                 |  |           |       |          |  |            |     |            |  |           |       |  |  |   |       |  |  |   |       | 
|                                 |  | $         | 5,293 |          |  | $          | 919 |            |  | $         | 4,374 |  |  | $ | 2,282 |  |  | $ | 2,092 | 
|                                 |  |           |       |          |  |            |     |            |  |           |       |  |  |   |       |  |  |   |       | 

7



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barnesandnoble.com inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the nine months ended September 30, 2003 and September 30, 2002
(in thousands of dollars, except per share data)
(unaudited)



|5. |  | INVESTMENTS IN EQUITY METHOD INVESTEES
|-- |  | --------------------------------------

The Company has made certain investments in business entities accounted
for under the equity method of accounting. The Company accounts for an
investment under the equity method if the investment gives the Company the
ability to exercise significant influence over the operating and financial
policies of such entity. An investment of 20% or more of the voting stock
typically denotes such influence, in the absence of other evidence to the
contrary.

The Company has periodically evaluated whether the declines in fair value
of its equity investments are other-than-temporary. This evaluation consisted
of reviewing qualitative and quantitative factors including operating results
and trends, as well as market prices of public companies operating in the same
sector. As of September 30, 2003, the investment in equity method investees
had no carrying value as the business entity invested in has ceased all
operations and is in the process of being dissolved.



|6. |  | RELATED PARTY TRANSACTIONS
|-- |  | --------------------------

B&N.com has entered into agreements with Barnes & Noble, Bertelsmann and
their affiliates. The Company believes that the transactions and agreements
discussed below (including renewals of any existing agreements) between B&N.com
and its affiliates are at least as favorable to B&N.com as could be obtained
from unaffiliated parties. The Board of Directors and its Audit Committee must
approve in advance any proposed transaction or agreement with affiliates and
will utilize procedures in evaluating the terms and provisions of such proposed
transaction or agreement as are appropriate in light of the fiduciary duties of
directors under Delaware law.

B&N.com entered into a Supply Agreement, dated October 31, 1998, as
amended, with Barnes & Noble (the Supply Agreement), whereby Barnes & Noble
has agreed to supply inventory to B&N.com through Barnes & Nobles distribution
facilities and purchasing departments. Pursuant to the Supply Agreement, Barnes
& Noble charges B&N.com its actual cost to acquire the inventory plus any
incremental overhead incurred by Barnes & Noble in connection with providing
such merchandise supply services. The Company purchased $77,671 and $74,911
from Barnes & Noble representing 36.0% and 38.0% of the Companys merchandise
purchases for the nine months ended September 30, 2003 and 2002, respectively.
The charges for incremental overhead for the nine months ended September 30,
2003 and 2002 were $2,535 and $1,750, respectively.

Under a Services Agreement, dated October 31, 1998, as amended, between
B&N.com and Barnes & Noble (the Services Agreement), B&N.com receives various
administrative services from Barnes & Noble, including, among other things,
services for payroll processing, benefits administration, insurance (property
and casualty, medical, dental and life) and tax administration. In accordance
with the terms of the Services Agreement, B&N.com reimburses Barnes & Noble in
an amount equal to the third-party expenses it incurs to fund and provide such
services, plus any incremental internal costs. B&N.com was charged $1,349 and
$1,256 for such services during the nine months ended September 30, 2003 and
2002, respectively.

B&N.com purchases merchandise directly from Calendar Club, L.L.C.
(Calendar Club), a company engaged in the wholesaling and retailing of
calendars, in which Barnes & Noble owns a 73.9% interest. B&N.coms purchases
from Calendar Club were $1,207 and $1,740 for the nine months ended September
30, 2003 and 2002, respectively.

B&N.com subleases from Barnes & Noble approximately one-third of a
300,000 square foot warehouse facility located in New Jersey. B&N.com was
charged by Barnes & Noble $419 and $373 for such subleased space during the
nine months ended September 30, 2003 and 2002, respectively. The amount paid to
Barnes & Noble by B&N.com approximates the cost per square foot paid by Barnes
& Noble as tenant pursuant to its lease of the space from an unaffiliated third
party.

Since 1999, B&N.com has used AEC One Stop Group, Inc. (AEC) as its main
music supplier, and as one of its suppliers of DVD/video. AEC is among the
largest wholesale distributors of music, videos and DVDs in the United States.
AEC also provides B&N.com with a music, DVD and video product database.
Subsequent to the initial supply arrangement between AEC and B&N.com, AECs parent corporation was acquired by an
investor group in which Leonard Riggio, Chairman of the Board of the Company
and B&N.com, became a minority investor. B&N.com was charged by AEC $28,099 and
$19,659, representing 13.0% and 10.0% of the Companys merchandise purchases,
during the nine months ended September 30, 2003 and 2002, respectively. In
addition, B&N.com was charged by AEC $252 and $188 for database services during
the nine months ended September 30, 2003 and 2002, respectively. At September
30, 2003 and 2002, $3,402 and $2,175, respectively, remained payable to AEC.

8



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barnesandnoble.com inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the nine months ended September 30, 2003 and September 30, 2002
(in thousands of dollars, except per share data)
(unaudited)

B&N.com licenses the Barnes & Noble name under a royalty-free license
agreement, dated October 31, 1998, as amended, between B&N.com and Barnes &
Noble College Bookstores, Inc. (the License Agreement), of which Leonard
Riggio is the principal stockholder. Pursuant to the License Agreement, the
Company has been granted an exclusive license to use the Barnes & Noble name
and trademark for the purpose of selling books over the Internet (excluding
sales of college textbooks). Under a separate agreement dated as of January
2001, between the Company and Textbooks.com, Inc. (Textbooks.com), a
corporation owned by Leonard Riggio, B&N.com was granted the right to sell
college textbooks over the Internet using the Barnes & Noble name. Pursuant
to this agreement, B&N.com pays Textbooks.com a royalty on revenues (net of
product returns, applicable sales tax and excluding shipping and handling)
realized by the Company from the sale of books designated as textbooks. The
term of the agreement is for five years and renews annually for additional
one-year periods unless terminated 12 months prior to the end of any given
term. For the nine months ended September 30, 2003 and 2002, the Company
recorded royalty expense of $3,320 and $3,119, respectively, under the terms of
this agreement.

B&N.com has various royalty-free non-exclusive licenses dated October 31,
1998, as amended, from Barnes & Noble and Bertelsmanns Books Online (BOL).
B&N.com licenses from Barnes & Noble the right to use Barnes & Nobles database
of book bibliographic data as well as certain software applications. B&N.com
licenses from BOL, the subsidiary through which Bertelsmann conducts its
Internet business, its name and trademark for use in B&N.coms operations.
Under Technology Sharing License Agreements, B&N.com was granted a royalty-free
license to view, access and use BOLs computer technology and systems, and
B&N.com granted BOL a license to view, access and use B&N.coms computer
technology and systems. All of the agreements described in this
paragraph were terminated as of September 16, 2003.

B&N.com and Barnes & Noble commenced a marketing program in November 2000,
whereby a customer purchases a subscription to the Barnes & Noble Membership
Program (formerly the Readers Advantage card) for an annual membership
fee of $25.00, which is non-refundable after the first 30 days of the
membership term. With this card, customers can receive discounts of 10 percent
on certain Barnes & Noble purchases and 5 percent on all B&N.com purchases.
B&N.com and Barnes & Noble have agreed to share the expenses, net of revenue
from the sale of the cards, related to this program in proportion to the
discounts customers receive on purchases with each company. B&N.coms share of
the card revenue generated from this program for the nine months ended
September 30, 2003 and 2002 were $1,850 and $837, respectively.

In the fourth quarter of 2002, B&N.com entered into an agreement with
Marketing Services (Minnesota) Corp. (MSC), a wholly owned subsidiary of
Barnes & Noble, for marketing services, which includes the issuance of gift
cards. Under this agreement B&N.com has received $10,991 for the nine months
ended September 30, 2003 from MSC, which represents reimbursement for purchases
made with gift cards purchased in a Barnes & Noble store and redeemed on the
B&N.com Web site.

B&N.com ships, through its fulfillment centers, customer orders on behalf
of Barnes & Noble to Barnes & Noble retail stores as well as to Barnes & Noble
customers homes. B&N.com charges Barnes & Noble the costs associated with such
shipments plus any incremental overhead incurred by B&N.com to process these
orders. For the nine months ended September 30, 2003 and 2002, B&N.com recorded
$1,458 and $330, respectively, as a reimbursement for shipping and handling
from Barnes & Noble. In addition, during the year 2001, B&N.com and Barnes &
Noble entered into an agreement whereby B&N.com receives a commission on all
items ordered by customers at Barnes & Noble stores and shipped directly to
customers homes by B&N.com. Commissions for these sales were recorded as
revenue and amounted to $878 and $902 for the nine months ended September 30,
2003 and 2002, respectively.

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barnesandnoble.com inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the nine months ended September 30, 2003 and September 30, 2002
(in thousands of dollars, except per share data)
(unaudited)

Barnes & Noble subleased warehouse space from the Company in Reno, Nevada.
The Company charged Barnes & Noble $0 and $500 for such subleased space for the
nine months ended September 30, 2003 and 2002, respectively. Additionally,
Barnes & Noble reimbursed B&N.com $6,186 during the three months ended March
31, 2002, for fixed assets purchased on behalf of Barnes & Noble for the Reno
warehouse. The equipment was sold to Barnes & Noble at its original cost. In
January 2002, B&N.com determined it could not effectively utilize the full
capacity of its Reno, Nevada distribution center. Accordingly B&N.com agreed to
transfer the Reno warehouse lease and sell B&N.coms inventory located in Reno
to Barnes & Noble. Barnes & Noble purchased the inventory from B&N.com during
the three months ended March 31, 2002, at cost for approximately $9,877. The
Reno lease assignment and the transfer of the operations of the Reno facility
to Barnes & Noble was completed in April 2002. In connection with the
transfer, B&N.com agreed to pay one-half of the rent charged for the facility
through December 31, 2002.

In 2000, B&N.com began purchasing new and used textbooks directly from MBS
Textbook Exchange, Inc. (MBS), a corporation majority-owned by Leonard Riggio
and one of the nations largest wholesalers of college textbooks. B&N.coms
total purchases for the nine months ended September 30, 2003 and 2002 were
$12,064 and $15,486, respectively. In addition, B&N.com maintains a link on its
Web site called Sell Your Textbooks which is hosted by MBS and through which
B&N.com customers are able to sell back used books purchased at B&N.com
directly to MBS. B&N.com is paid a commission based on the price paid by MBS to
the consumer. Total commissions received and recorded as revenue for the nine
months ended September 30, 2003 and 2002 were $64 and $45, respectively.

Under a Strategic Relationship Agreement, dated as of May 1, 2001 (the
Strategic Relationship Agreement), between B&N.com and GameStop Corp.
(GameStop), a majority-owned subsidiary of Barnes & Noble, B&N.coms Web site
refers customers to the GameStop Web site for purchases of video game hardware,
software and accessories and PC entertainment software. GameStop pays B&N.com a
referral fee based on its net sales revenue from certain eligible purchases
made by customers as a result of the redirection from the B&N.com Web site.
Either party may terminate the Strategic Relationship Agreement on 60 days
notice. Commissions of $7 and $63 were recorded as revenue for the nine months
ended September 30, 2003 and 2002, respectively, under this agreement.

B&N.com has an approximate 46.8% equity stake in enews, inc. (enews), a
company previously engaged in selling magazine subscriptions on the Internet,
and accounted for this investment under the equity method. Substantially all of
the balance of the shares are owned by Barnes & Noble. In July 2002, the Board
of Directors and stockholders of enews approved a Plan of Complete Liquidation
(the Liquidation Plan). As of September 30, 2003, the implementation of the
Liquidation Plan had been substantially completed and is expected to be
concluded by February 29, 2004. Prior to the implementation of the Liquidation
Plan, B&N.com fulfilled a majority of orders for magazine subscriptions through
enews and recorded a commission on these sales. B&N.com recorded commissions
of $0 and $909 for the nine months ended September 30, 2003 and 2002,
respectively, and was reimbursed $432 and $269, respectively, for expenses
incurred on behalf of enews for the nine months ended September 30, 2003 and
2002.

At September 30, 2003 and 2002, $51,715 and $39,532, respectively,
remained payable to Barnes & Noble in connection with the transactions
described above.

Michael N. Rosen, a director of the Company, is also a member of Bryan
Cave LLP, outside counsel to the Company and B&N.com.



|7. |  | RECENT ACCOUNTING PRONOUNCEMENTS
|-- |  | --------------------------------

In
November 2002, the Emerging Issues Task Force (EITF)
reached a consensus on Issue No. 02-16, Accounting
by a Customer (Including a Reseller) for Certain Consideration Received from a
Vendor, addressing the accounting of cash consideration
received by a customer from a vendor, including vendor rebates and refunds.
The consensus reached states that consideration received should be presumed to
be a reduction of the prices of the vendors products or services and should
therefore be shown as a reduction of cost of sales in the income statement of
the customer. The presumption could be overcome if the vendor receives an
identifiable benefit in exchange for the consideration or the consideration
represents a reimbursement of a specific incremental identifiable cost incurred by the customer in selling
the vendors product or service. If one of these conditions is met, the cash
consideration should be characterized as revenues or a reduction of such costs,
as applicable, in the income statement of the customer. The consensus reached
also concludes that rebates or refunds based on the customer achieving a
specified level of purchases should be recognized as a reduction of cost of
sales based on a systematic and rational allocation of the consideration to be
received relative to the transactions that mark the progress of the customer
toward earning the rebate or refund, provided the amounts are probable and
reasonably estimable. This standard is effective for arrangements entered into
after December 31, 2002. Implementation of this standard did not have a
material effect on the Company.

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barnesandnoble.com inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the nine months ended September 30, 2003 and September 30, 2002
(in thousands of dollars, except per share data)
(unaudited)

In
November 2002, the Financial Accounting Standards Board (FASB) issued Interpretation No. 45 Guarantors
Accounting and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others (Interpretation
No. 45). Interpretation No. 45
requires a guarantor to include disclosure of certain obligations, and if
applicable, at the inception of the guarantee, recognize a liability for the
fair value of other certain obligations undertaken in issuing a guarantee. The
recognition requirement is effective for guarantees issued or modified after
December 31, 2002. The Company has no obligations regarding Interpretation No. 45.

In December 2002, the FASB issued SFAS No. 148 Accounting for StockBased
Compensation  Transition and Disclosure (SFAS No. 148). SFAS No. 148 amends SFAS No. 123,
to provide alternative methods of transition for a voluntary change to the
fair-value based method of accounting for stock-based employee compensation. In
addition, SFAS No. 148 amends the disclosure requirements of SFAS No. 123 to
require prominent disclosures in both annual and interim financial statements
about the method of accounting for stock-based employee compensation and the
effect of the method used on reported results. The disclosure provisions of
this standard are effective for fiscal years ending after December 15, 2002.
The Company has elected to continue using the intrinsic value method and has
incorporated these expanded disclosures into the footnotes to the Companys
consolidated financial statements included herein.

In January 2003, the FASB issued Interpretation No. 46 Consolidation of
Variable Interest Entities (Interpretation No. 46). Interpretation No. 46 clarifies
the application of Accounting Research Bulletin No. 51 Consolidated Financial
Statements, and applies immediately to any variable interest entities created
after January 31, 2003 and to variable interest entities in which an interest
is obtained after that date. The Company holds no interest in variable
interest entities.



|8. |  | SUBSEQUENT EVENT
|-- |  | ----------------

On November 7, 2003, the Company announced that a special committee
of independent directors will evaluate the proposal by Barnes & Noble to
purchase in a merger transaction for $2.50 in cash each share of the Company's common stock that Barnes & Noble does not currently own.

11



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

Overview

The Company is a holding company whose sole asset is its 29.8% equity
interest in B&N.com and whose sole business is acting as sole manager of
B&N.com. B&N.com launched its initial online store in March 1997 and is
currently ranked the ninth most-trafficked online shopping site, based on the
ComScore Media Metrix June 2003 report.

B&N.com has pursued a strategy of focusing on the sale of books, music,
DVD/video and online courses. Since opening its online store (www.bn.com) in
March 1997, B&N.com has sold products to more than 15.8 million customers in
230 countries. B&N.coms online bookstore includes the largest in-stock
selection of in-print book titles, supplemented by more than 30 million
listings from its nationwide network of out-of-print, rare and used book
dealers. B&N.com offers its customers fast delivery, easy and secure ordering
and rich editorial content.

The results of operations discussed hereafter include the consolidated
results of the Company and B&N.com. In view of the changing nature of B&N.coms
business and its limited operating history, the Company believes that
period-to-period comparisons of the operating results of B&N.com, including
gross profit margin and operating expenses as a percentage of net sales, are
not necessarily meaningful and should not be relied upon as an indication of
future performance.

Critical Accounting Policies

Securities and Exchange Commission Financial Reporting Release No. 60
requests all companies to include a discussion of critical accounting policies
or methods used in the preparation of financial statements. The Company
believes that the following critical accounting policies affect the significant
judgments and estimates used in the preparation of the Companys financial
statements.

Revenue Recognition.The Companys product sales, including outbound
shipping and handling charges, are recognized, net of estimated returns and
discounts, at the time the products are shipped to customers. Commissions
received on sales of magazine subscriptions are recorded at the net amount
earned as the Company is acting as an agent in such transactions. The Company
continuously monitors and tracks product returns and records a provision for
the estimated amount of future returns, based on historical experience. While
returns have historically been within the Companys expectations and the
provisions established, the Company cannot guarantee that it will continue to
experience the same return rates that it has in the past. Any significant
increase in product return rates could have a material adverse impact on the
Companys operating results for the period or periods in which such returns
materialize.

As of April 2003, the Company now receives commissions on sales of used
and out of print books, through BookQuest, a service that allows independent
book dealers to sell their used books on the B&N.com Web site. In accordance
with EITF Issue No. 99-19, Reporting Revenue Gross as a Principal Versus Net
as an Agent, revenues are recorded at the net amount earned as the Company is
acting as an agent in such transactions.

Impairment of Goodwill and Other Long-Lived Assets.The Companys
long-lived assets include fixed assets and goodwill. At September 30, 2003,
the Company had $46.4 million of fixed assets, net of accumulated depreciation,
and $13.8 million of net goodwill, accounting for approximately 38.6% of the
Companys total assets. B&N.com reviews its long-lived assets for impairment
whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable in accordance with SFAS No. 144 Accounting
for the Impairment or Disposal of Long-Lived Assets. In valuation, assets held
and used are measured by a comparison of the carrying amount of an asset to
undiscounted pre-tax future net cash flows. Future events could cause B&N.com
to conclude that impairment indicators exist and that long-lived assets may be
impaired. Any resulting impairment loss could have a material adverse impact
on the Companys financial condition and results of operations. As required by
SFAS Statement No. 142, Goodwill and Other Intangible Assets (SFAS No.
142), which the Company implemented in 2002, the Company completed its annual
impairment test on the goodwill as of November 30, 2002 and deemed that no
impairment charge was necessary. The Company has noted no subsequent
indicators of impairment. Changes in market conditions, among other factors,
could have a material impact on these estimates.

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##### Table of Contents



Results of Operations

Net sales

|          |  |                                  |        |                                 |  |          |         |      |  |      |    |          |  |   |         |  |  |   |         |  |  |  |    |   
|--------- |  | -------------------------------- | ------ | ------------------------------- |  | -------- | ------- | ---- |  | ---- | -- | -------- |  | - | ------- |  |  | - | ------- |  |  |  | -- | --
|          |  | Three Months Ended September 30, |        | Nine Months Ended September 30,
|          |  |                                  |        |                                
|          |  | (in thousands of dollars)        |        | (in thousands of dollars)      
|          |  | 2003                             |        | 2002                            |  | % Change |         | 2003 |  | 2002 |    | % Change
|          |  |                                  |        |                                 |  |          |         |      |  |      |    |         
|Net sales |  | $                                | 98,993 |                                 |  | $        | 102,575 |      |  |      | (3 | %)       |  | $ | 291,433 |  |  | $ | 294,947 |  |  |  | (1 | %)

Net sales are comprised of sales of books, music, DVD/video and online
courses including outbound shipping and handling charges, net of returns and
discounts. In April 2003, the Company began recording in net sales the net
commission received on any used and out-of-print product sold by dealers
listing their books on the Web site and shipping directly to the Companys
customers as the Company is acting as an agent on these sales. Prior to April
2003, the Company recorded the gross amount of sales of used and out-of-print
product in its net sales as the Company had acted as the principal in the
transaction. Net sales for the three months ended September 30, 2003 decreased
3 percent to $99.0 million. Had the Company continued to record the gross
amount of the used and out-of-print book sales, its total sales for the third
quarter would have been $103.7 million as compared with $102.6 million for the
comparable prior year period. The Company expects full year 2003 net sales to
range between $415 million and $435 million.

Gross profit

|             |  |                                  |        |                                 |  |          |        |      |  |      |    |          |  |   |        |   |  |   |        |   |  |  |   |  
|------------ |  | -------------------------------- | ------ | ------------------------------- |  | -------- | ------ | ---- |  | ---- | -- | -------- |  | - | ------ | - |  | - | ------ | - |  |  | - | -
|             |  | Three Months Ended September 30, |        | Nine Months Ended September 30,
|             |  |                                  |        |                                
|             |  | (in thousands of dollars)        |        | (in thousands of dollars)      
|             |  | 2003                             |        | 2002                            |  | % Change |        | 2003 |  | 2002 |    | % Change
|             |  |                                  |        |                                 |  |          |        |      |  |      |    |         
|Gross profit |  | $                                | 24,305 |                                 |  | $        | 24,578 |      |  |      | (1 | %)       |  | $ | 71,518 |   |  | $ | 67,913 |   |  |  | 5 | %
|Gross margin |  |                                  | 24.6   | %                               |  |          | 24.0   | %    |  |      |    |          |  |   | 24.5   | % |  |   | 23.0   | % |  |  |   |  

Gross profit is net sales less the cost of sales, which consists of the
cost of merchandise sold to customers and the cost of online courses as well as
inbound and outbound shipping costs. Gross profit decreased 1 percent in the
third quarter ended September 30, 2003 as a result of the 3 percent decrease in
net sales for the quarter. The gross margin in the third quarter improved to
24.6 percent due to an increase in the Companys internal fulfillment rate
resulting in less reliance on more expensive wholesalers and to the change in
the model for selling and distributing used and out-of-print books, which
results in higher gross margins and lower reported sales. The Company expects
the gross margin for full year 2003 to exceed 2002 results. Quarterly gross
margin results will fluctuate due to the timing of promotional activities.

Fulfillment and customer service

|                                 |  |                                  |       |                                 |  |          |       |      |  |      |   |          |  |   |        |   |  |   |        |   |  |  |    |   
|-------------------------------- |  | -------------------------------- | ----- | ------------------------------- |  | -------- | ----- | ---- |  | ---- | - | -------- |  | - | ------ | - |  | - | ------ | - |  |  | -- | --
|                                 |  | Three Months Ended September 30, |       | Nine Months Ended September 30,
|                                 |  |                                  |       |                                
|                                 |  | (in thousands of dollars)        |       | (in thousands of dollars)      
|                                 |  | 2003                             |       | 2002                            |  | % Change |       | 2003 |  | 2002 |   | % Change
|                                 |  |                                  |       |                                 |  |          |       |      |  |      |   |         
|Fulfillment and
customer service |  | $                                | 8,457 |                                 |  | $        | 8,240 |      |  |      | 3 | %        |  | $ | 25,413 |   |  | $ | 26,237 |   |  |  | (3 | %)
|Percentage of net sales          |  |                                  | 8.5   | %                               |  |          | 8.0   | %    |  |      |   |          |  |   | 8.7    | % |  |   | 8.9    | % |  |  |    |   

Fulfillment and customer service expenses consist primarily of the cost of
operating and staffing distribution and customer service centers, including
costs attributable to picking, packing and preparing customer orders for
shipment and responding to inquiries from customers. Fulfillment and customer
service expenses increased slightly during the third quarter, as compared to last
year, however, remained lower for the nine-month period than prior year levels.
The Company expects fulfillment and customer service expenses to be lower in
absolute dollars and as a percentage of sales for full year 2003 as compared
with 2002 results.

13



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##### Table of Contents



Marketing, sales and editorial

|                               |  |                                  |       |                                 |  |          |       |      |  |      |     |          |  |   |        |   |  |   |        |   |  |  |     |   
|------------------------------ |  | -------------------------------- | ----- | ------------------------------- |  | -------- | ----- | ---- |  | ---- | --- | -------- |  | - | ------ | - |  | - | ------ | - |  |  | --- | --
|                               |  | Three Months Ended September 30, |       | Nine Months Ended September 30,
|                               |  |                                  |       |                                
|                               |  | (in thousands of dollars)        |       | (in thousands of dollars)      
|                               |  | 2003                             |       | 2002                            |  | % Change |       | 2003 |  | 2002 |     | % Change
|                               |  |                                  |       |                                 |  |          |       |      |  |      |     |         
|Marketing, sales
and editorial |  | $                                | 7,187 |                                 |  | $        | 8,682 |      |  |      | (17 | %)       |  | $ | 22,945 |   |  | $ | 26,731 |   |  |  | (14 | %)
|Percentage of net sales        |  |                                  | 7.3   | %                               |  |          | 8.5   | %    |  |      |     |          |  |   | 7.9    | % |  |   | 9.1    | % |  |  |     |   

Marketing, sales and editorial expenses consist primarily of advertising
and promotional expenditures, as well as payroll and related expenses for
personnel engaged in marketing and selling activities. Marketing, sales and
editorial expenses decreased primarily due to the Companys increased focus on
more targeted and measurable marketing programs as well as the renegotiation of
many of the Companys online marketing deals for 2003 at more advantageous
terms. The Company expects marketing, sales and editorial expenses to be lower
as a percentage of net sales for full year 2003.

Technology and web site development

|                                    |  |                                  |       |                                 |  |          |       |      |  |      |    |          |  |   |        |   |  |   |        |   |  |  |     |   
|----------------------------------- |  | -------------------------------- | ----- | ------------------------------- |  | -------- | ----- | ---- |  | ---- | -- | -------- |  | - | ------ | - |  | - | ------ | - |  |  | --- | --
|                                    |  | Three Months Ended September 30, |       | Nine Months Ended September 30,
|                                    |  |                                  |       |                                
|                                    |  | (in thousands of dollars)        |       | (in thousands of dollars)      
|                                    |  | 2003                             |       | 2002                            |  | % Change |       | 2003 |  | 2002 |    | % Change
|                                    |  |                                  |       |                                 |  |          |       |      |  |      |    |         
|Technology and web site
development |  | $                                | 8,056 |                                 |  | $        | 8,190 |      |  |      | (2 | %)       |  | $ | 23,168 |   |  | $ | 27,022 |   |  |  | (14 | %)
|Percentage of net sales             |  |                                  | 8.1   | %                               |  |          | 8.0   | %    |  |      |    |          |  |   | 7.9    | % |  |   | 9.2    | % |  |  |     |   

Technology and web site development expenses consist of payroll and
related expenses for Web page production and computer network operations
personnel and consultants, and costs of infrastructure related to systems and
telecommunications. Certain costs relating to the development of internal-use
software are capitalized and depreciated over three years. The decrease in
technology and web site development expenses on an absolute basis was primarily
attributable to increased infrastructure efficiency and negotiated price
reductions in many expense categories. Technology and web site development
expenses increased as a percentage of net sales from 8.0 percent to 8.1 percent
in the third quarter of 2003 due to the 3 percent decrease in net sales for the
quarter. The Company expects technology and web site development expenses to
be lower as a percentage of net sales for full year 2003.

General and administrative

|                           |  |                                  |       |                                 |  |          |       |      |  |      |    |          |  |   |        |   |  |   |        |   |  |  |    |   
|-------------------------- |  | -------------------------------- | ----- | ------------------------------- |  | -------- | ----- | ---- |  | ---- | -- | -------- |  | - | ------ | - |  | - | ------ | - |  |  | -- | --
|                           |  | Three Months Ended September 30, |       | Nine Months Ended September 30,
|                           |  |                                  |       |                                
|                           |  | (in thousands of dollars)        |       | (in thousands of dollars)      
|                           |  | 2003                             |       | 2002                            |  | % Change |       | 2003 |  | 2002 |    | % Change
|                           |  |                                  |       |                                 |  |          |       |      |  |      |    |         
|General and administrative |  | $                                | 6,572 |                                 |  | $        | 6,998 |      |  |      | (6 | %)       |  | $ | 19,338 |   |  | $ | 19,802 |   |  |  | (2 | %)
|Percentage of net sales    |  |                                  | 6.6   | %                               |  |          | 6.8   | %    |  |      |    |          |  |   | 6.6    | % |  |   | 6.7    | % |  |  |    |   

General and administrative expenses primarily consist of payroll and
related expenses for executive, finance and administrative personnel,
recruiting, professional fees and other general corporate expenses, including
costs to process credit card transactions. General and administrative expenses
decreased in absolute dollars and as a percentage of net sales in the third
quarter primarily due to lower costs associated with processing credit card
transactions.

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Depreciation and amortization

|                              |  |                                  |       |                                 |  |          |       |      |  |      |     |          |  |   |        |   |  |   |        |   |  |  |     |   
|----------------------------- |  | -------------------------------- | ----- | ------------------------------- |  | -------- | ----- | ---- |  | ---- | --- | -------- |  | - | ------ | - |  | - | ------ | - |  |  | --- | --
|                              |  | Three Months Ended September 30, |       | Nine Months Ended September 30,
|                              |  |                                  |       |                                
|                              |  | (in thousands of dollars)        |       | (in thousands of dollars)      
|                              |  | 2003                             |       | 2002                            |  | % Change |       | 2003 |  | 2002 |     | % Change
|                              |  |                                  |       |                                 |  |          |       |      |  |      |     |         
|Depreciation and
amortization |  | $                                | 6,210 |                                 |  | $        | 8,428 |      |  |      | (26 | %)       |  | $ | 20,322 |   |  | $ | 24,953 |   |  |  | (19 | %)
|Percentage of net sales       |  |                                  | 6.3   | %                               |  |          | 8.2   | %    |  |      |     |          |  |   | 7.0    | % |  |   | 8.5    | % |  |  |     |   

The decrease in depreciation and amortization expenses was the result of
lower capital expenditures in fiscal 2003, 2002 and 2001. The carrying balance
of goodwill is assessed for recoverability on a periodic basis. In
2002, the
Company no longer amortized goodwill due to the adoption of SFAS No. 142.

Equity in net loss of equity investments including related amortization of
intangibles

|                                                                                       |  |                                  |   |                                 |  |          |       |      |  |      |      |          |  |   |   |   |  |   |       |   |  |  |      |   
|-------------------------------------------------------------------------------------- |  | -------------------------------- | - | ------------------------------- |  | -------- | ----- | ---- |  | ---- | ---- | -------- |  | - | - | - |  | - | ----- | - |  |  | ---- | --
|                                                                                       |  | Three Months Ended September 30, |   | Nine Months Ended September 30,
|                                                                                       |  |                                  |   |                                
|                                                                                       |  | (in thousands of dollars)        |   | (in thousands of dollars)      
|                                                                                       |  | 2003                             |   | 2002                            |  | % Change |       | 2003 |  | 2002 |      | % Change
|                                                                                       |  |                                  |   |                                 |  |          |       |      |  |      |      |         
|Equity in net loss of equity
investments including related
amortization of intangibles |  | $                                | - |                                 |  | $        | 1,805 |      |  |      | (100 | %)       |  | $ | - |   |  | $ | 3,179 |   |  |  | (100 | %)
|Percentage of net sales                                                                |  |                                  | - | %                               |  |          | 1.8   | %    |  |      |      |          |  |   | - | % |  |   | 1.1   | % |  |  |      |   

Equity in net loss of equity investments (including related amortization
of intangibles) consisted of losses from the Companys equity investment in
enews for the third quarter ended September 30, 2002. As of December 31, 2002,
the Company had written off its entire investment in enews of $3.3 million. As
of March 31, 2002, there was no remaining goodwill related to equity
investments. In July 2002, the Board of Directors and stockholders of enews
approved the Liquidation Plan. As of September 30, 2003, the implementation of
the Liquidation Plan had been substantially completed and is expected to be
concluded by February 29, 2004.

Interest income, net

|                        |  |                                  |    |                                 |  |          |     |      |  |      |     |          |  |   |     |   |  |   |       |   |  |  |     |   
|----------------------- |  | -------------------------------- | -- | ------------------------------- |  | -------- | --- | ---- |  | ---- | --- | -------- |  | - | --- | - |  | - | ----- | - |  |  | --- | --
|                        |  | Three Months Ended September 30, |    | Nine Months Ended September 30,
|                        |  |                                  |    |                                
|                        |  | (in thousands of dollars)        |    | (in thousands of dollars)      
|                        |  | 2003                             |    | 2002                            |  | % Change |     | 2003 |  | 2002 |     | % Change
|                        |  |                                  |    |                                 |  |          |     |      |  |      |     |         
|Interest income, net    |  | $                                | 22 |                                 |  | $        | 303 |      |  |      | (93 | %)       |  | $ | 186 |   |  | $ | 1,395 |   |  |  | (87 | %)
|Percentage of net sales |  |                                  | -  | %                               |  |          | 0.3 | %    |  |      |     |          |  |   | 0.1 | % |  |   | 0.5   | % |  |  |     |   

Interest income was lower as compared with last year, as cash balances
decreased due to their use as a source of funding the Companys operations. All
available cash is invested in various marketable securities consisting
primarily of money market funds containing highly liquid U.S. Treasury
Securities, U.S. government agency securities and investments in high quality
corporate issuers.

Income Taxes

The Company has not generated any taxable income to date and therefore has
not paid any federal income taxes since inception. The Company has provided a
full valuation allowance on the deferred tax asset, consisting primarily of net
operating loss carryforwards, due to the uncertainty of its realizability.

15



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##### Table of Contents



Inflation

The Company currently believes that inflation has not had a material
impact on operations.

Liquidity and Capital Resources

As of September 30, 2003, the Companys cash and cash equivalents were
$38.0 million, compared to $70.1 million on December 31, 2002. The Company
continues to have a debt-free balance sheet.

Net cash flows used in operating activities were $25.6 million for the
nine months ended September 30, 2003 and $40.4 million for the nine months
ended September 30, 2002. Cash used for the nine months ended September 30,
2003 was attributable to a net loss of $9.9 million, minority interest in loss of $29.5
million, a decrease in accrued liabilities of $15.6 million, a decrease of $3.5
million in accounts payable and an increase in prepaid expenses and other
current assets of $0.1 million. This was offset by a decrease in receivables of
$9.1 million, depreciation and amortization of $20.3 million, a $0.3 million
decrease in merchandise inventories and an increase in payable to affiliate of
$3.5 million. Cash used for the nine months ended September 30, 2002 was
attributable to a net loss of $16.2 million, minority interest in loss of $42.5
million, a $1.1 million increase in merchandise inventories, a decrease in
accrued liabilities of $16.8 million, a decrease in payable to affiliate of
$4.0 million and an increase in prepaid expenses and other current assets of
$0.8 million. This was offset by a decrease in receivables of $3.7 million,
depreciation and amortization of $25.1 million and an increase of $12.0 million
in accounts payable.

Net cash flows used in investing activities of $7.8 million for the nine
months ended September 30, 2003 was attributable to purchases of fixed assets
totaling $7.8 million. Net cash flows from investing activities of $9.3
million for the nine months ended September 30, 2002 was attributable to a
decrease of $4.4 million in other non-current assets and sales of marketable
securities of $10.1 million, offset by purchases of fixed assets totaling $5.3
million.

Net cash flows from financing activities for the nine months ended
September 30, 2003 were $1.2 million due to proceeds from the exercise of stock
options.

At September 30, 2003, the Companys principal sources of liquidity
consisted of $38.0 million in cash and cash equivalents. As of September 30,
2003, the Companys remaining principal commitments consisted of obligations
outstanding under operating leases. The Company has pledged a portion of its
cash and cash equivalents as collateral for stand-by letters of credit that
guarantee certain of the Companys real property lease obligations. At
September 30, 2003 and 2002, the total amount of collateral pledged under these
agreements was $4.2 million. The Company has no unconsolidated majority-owned
subsidiaries and no interests in special purpose entities.

The Company believes that current cash and cash equivalents will be
sufficient to meet its anticipated cash needs for at least twelve months.
However, any projection of future cash needs and cash flows is subject to
substantial uncertainty. If current cash and cash equivalents in addition to
cash generated from operations are insufficient to satisfy the Companys
liquidity requirements, the Company may seek to sell additional equity or debt
securities or to obtain a credit facility. The sale of additional equity or
convertible debt securities could result in additional dilution to the
Companys stockholders. There can be no assurance that financing will be
available in amounts or on terms acceptable to the Company, if at all. In
addition, the Company will, from time to time, consider the acquisition of or
investment in complementary businesses, products and technologies, which might
increase the Companys liquidity requirements or cause the Company to issue
additional equity or debt securities.

Forward-Looking Statements

This report may contain certain forward-looking statements (as such term
is defined in the Private Securities Litigation Reform Act of 1995) and
information relating to the Company and B&N.com that are based on the beliefs
of the management of the Company as well as assumptions made by and information
currently available to the management of the Company. When used in this report,
the words anticipate, believe, estimate, expect, intend, plan and
similar expressions, as they relate to the Company, B&N.com or the management
of the Company, identify forward-looking statements. Such statements reflect
the current views of the Company with respect to future events, the outcome of
which is subject to certain risks, including among others general economic and
market conditions, changes in product demand, the growth rate of Internet usage
and e-commerce, possible disruptions in the Companys or B&N.coms computer or
telephone systems, possible increases in shipping rates or interruptions in shipping
service, effects of competition, possible work stoppages or

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increases in labor
costs or labor shortages, unanticipated adverse litigation results or effects,
the performance of B&N.coms current and future investments and new product
initiatives, unanticipated costs associated with B&N.coms warehouse or the
failure to successfully integrate that warehouse into B&N.coms distribution
network, the level and volatility of interest rates, the successful integration
of acquired businesses, changes in tax and other governmental rules and
regulations applicable to the Company or B&N.com and other factors that may be
outside of the Companys control. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual results or outcomes may vary materially from those described herein as
anticipated, believed, estimated, expected, intended or planned. Subsequent
written and oral forward-looking statements attributable to the Company,
B&N.com or persons acting on their behalf are expressly qualified in their
entirety by the cautionary statements in this paragraph and elsewhere described
in this report and other reports filed by the Company with the Securities and
Exchange Commission.




Item 3:Quantitative and Qualitative Disclosures about Market Risk

The Company previously invested in enews primarily for strategic purposes,
which had been accounted for under the equity method as it gave the Company the
ability to exercise significant influence, but not control, over the investee.
This is generally defined as an ownership interest in voting stock of the
investee between 20% and 50%, although other factors, such as representation on
the investees Board of Directors and the impact of commercial arrangements,
are considered in determining whether the equity method is appropriate. The
Company regularly reviews the carrying value of its investments and identifies
and records impairment losses when events and circumstances indicate that such
assets are permanently impaired. In July 2002, the Board of Directors and
stockholders of enews approved the Liquidation Plan. As of September 30, 2003,
the implementation of the Liquidation Plan had been substantially completed and
is expected to be concluded by February 29, 2004. As of December 31, 2002, the
Company had written off its entire investment in enews of $3.3 million and had
no remaining investments accounted for under the equity method.

B&N.com invests certain of its excess cash in money market funds
consisting of debt instruments of the U.S. Government and its agencies, and of
high quality corporate issuers. All highly liquid instruments with an original
maturity of three months or less are considered cash equivalents; those with
original maturities greater than three months and less than one year are
classified as marketable securities. Long-term marketable securities mature in
periods greater than one year. B&N.com is exposed to interest rate risk on the
debt instruments that it holds. The value of the Companys marketable
securities is subject to market price volatility. As of September 30, 2003, the
Companys cash and cash equivalents totaled approximately $38.0 million.




Item 4:Controls and Procedures

Disclosure Controls and Procedures.As of the end of the period covered
by this report, the Company conducted an evaluation, under the supervision and
with the participation of the principal executive officer and principal
financial officer, of the Companys disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of
1934 (the Exchange Act)). Based on this evaluation, the principal executive
officer and principal financial officer concluded that the Companys disclosure
controls and procedures are effective to ensure that information required to be
disclosed by the Company in reports that it files or submits under the Exchange
Act is recorded, processed, summarized and reported within the time periods
specified in Securities and Exchange Commission rules and forms.

Internal Control Over Financial Reporting.There was no change in the
Companys internal control over financial reporting (as such term is defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the Companys most
recently completed fiscal quarter that has materially affected, or is
reasonably likely to materially affect, the Companys internal control over
financial reporting.

17



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##### Table of Contents






PART II  OTHER INFORMATION




Item 1:Legal Proceedings

No material developments have occurred with respect to previously reported legal proceedings, except as follows:

In
August 1998, The Intimate Bookshop, Inc. and its owner, Wallace
Kuralt, filed a lawsuit in the United States District Court for the
Southern District of New York against a predecessor of the Company,
Barnes & Noble, Borders Group, Inc. and others, alleging
violation of the Robinson-Patman Act and other federal law, New York
statutes governing trade practices and common law. In
March 2000, a Second Amended Complaint was served on the Company
and other defendants alleging a single cause of action for violations
of the Robinson-Patman Act. The Second Amended Complaint claims that
The Intimate Bookshop, Inc. has suffered damages of $11,250,000 or
more and requests treble damages, costs, attorneys' fees and
interest, as well as declaratory and injunctive relief prohibiting
the defendants from violating the Robinson-Patman Act. The Company
served an Answer in April 2000 denying the material allegations
of the Second Amended Complaint and asserting various affirmative
defenses. On January 11, 2002, the Company and the other
defendants filed a motion for summary judgment. A hearing on that
motion was held on March 22, 2002. On September 30, 2003,
the motion for summary judgment was granted and all claims against
the Company were dismissed. On October 29, 2003, the plaintiff
filed a Notice of Appeal. The Company and B&N.com intend to
vigorously defend this action.

On November 19, 2002, Half Price
Books, Records, Magazine, Inc. filed a complaint against B&N.com
in the United States District Court for the Nothern District of
Texas. The complaint alleges trademark infringement and related
claims against B&N.com for its use of the term "Half Price
Books" on its Web site. B&N.com has responded to the complaint
denying plaintiff's claims. In a recent decision, the Court denied
plaintiff's motion for a preliminary injunction and to strike
B&N.com's expert testimony and affirmative defenses. B&N.com
intends to vigorously defend itself against this action.

On or
about November 7, 2003, November 11, 2003 and November 12, 2003, twelve
substantially similar putative class action lawsuits were filed
against the Company, its directors and Barnes & Noble in the
Court of Chancery of the State of Delaware in and for New Castle
County arising out of Barnes & Noble's proposal to acquire all of
the Company's outstanding shares at a price of $2.50 per share in
cash. These actions purport to be brought on behalf of all of the
Company's stockholders excluding the defendants and their affiliates.

The
complaints in these actions generally allege that (a) Barnes &
Noble and the directors of the Company breached their fiduciary
duties to the class, (b) the consideration offered by Barnes &
Noble is inadequate and constitutes unfair dealing and (c) that
Barnes & Noble, as controlling stockholder, breached its duty to
the class by acting to further its own interests at the expense of
the class. The complaints seek to enjoin the proposal or, in the
alternative, damages in an unspecified amount and recission in the
event a merger occurs pursuant to the proposal.

The
Company believes that these lawsuits are without merit and intends to
vigorously defend the actions.




Item 2:Changes in Securities and Use of Proceeds

Not applicable.




Item 3:Defaults upon Senior Securities

None.




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

None.




Item 5:Other Information

At the
September 15, 2003 closing of Barnes & Noble's acquisition
of Bertelsmann's entire equity interest in the Company and
B&N.com, the Class C directors of the Company (Ewald
Walgenbach, Peter Olson and Reinhard Liedl) resigned. As of the date
of this report, the vacancies created by those resignations have not
been filled by Barnes & Noble, the holder of the Company's
Class C Common Stock.

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##### Table of Contents






Item 6:Exhibits and Reports on Form 8-K

(a) Exhibits

|        |  |                                                                                                                                                                                                                                                        
|------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                        
|No.     |  | Description                                                                                                                                                                                                                                            
|        |  |                                                                                                                                                                                                                                                        
|3.1     |  | Amended and Restated Certificate of Incorporation of the Company.
(Incorporated herein by reference to Exhibit 3.1 in the Companys
Form 10-K for the year ended December 31, 2000, filed April 2,
2001)                                               
|        |  |                                                                                                                                                                                                                                                        
|3.2     |  | Amended and Restated By-laws of the Company. (Incorporated herein
by reference to Exhibit 3.2 in the Companys Form 10-K for the
year ended December 31, 2000, filed April 2, 2001)                                                                    
|        |  |                                                                                                                                                                                                                                                        
|10.1    |  | Second Amended and Restated Limited Liability Company Agreement of
barnesandnoble.com llc. (Incorporated herein by reference to
Exhibit 10.1 in the Companys Form 10-K for the year ended
December 31, 2000, filed April 2, 2001)                     
|        |  |                                                                                                                                                                                                                                                        
|10.2    |  | Amendment No. 1 to Second Amended and Restated Limited Liability
Company Agreement of barnesandnoble.com llc. (Incorporated herein
by reference to Exhibit 10.30 in the Companys Form 10-K for the
year ended December 31, 1999, filed March 30, 2000)
|        |  |                                                                                                                                                                                                                                                        
|10.3    |  | Stockholders Agreement between Barnes & Noble, Inc. and
Bertelsmann AG. (Incorporated herein by reference to Exhibit 10.3
in the Companys Form 10-K for the year ended December 31, 2000,
filed April 2, 2001)                                        
|        |  |                                                                                                                                                                                                                                                        
|10.4    |  | 1999 Incentive Plan of the Company. (Incorporated herein by
reference to Exhibit 10.1 in Amendment No. 3 of the Companys
Registration Statement No. 333-64211, filed May 24, 1999)                                                                    
|        |  |                                                                                                                                                                                                                                                        
|10.5    |  | Deferred Compensation Plan of the Company. (Incorporated herein by
reference to Exhibit 10.25 in Amendment No. 3 of the Companys
Registration Statement No. 333-64211, filed May 24, 1999)                                                            
|        |  |                                                                                                                                                                                                                                                        
|10.6    |  | Retirement Plan of the Company. (Incorporated herein by reference
to Exhibit 10.26 in Amendment No. 3 of the                                                                                                                                           

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##### Table of Contents



|        |  |                                                                                                                                                                                                                                                                                                                                              
|------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                                                              
|No.     |  | Description                                                                                                                                                                                                                                                                                                                                  
|        |  |                                                                                                                                                                                                                                                                                                                                              
|        |  | Companys Registration
Statement No. 333-64211, filed May 24, 1999)                                                                                                                                                                                                                                                                          
|        |  |                                                                                                                                                                                                                                                                                                                                              
|10.7    |  | Agreement of Lease, dated as of October 1, 1999, between 111
Chelsea LLC, as landlord, and barnesandnoble.com llc, as tenant.
(Incorporated herein by reference to Exhibit 10.33 in the
Companys Form 10-K for the year ended December 31, 1999, filed
March 30, 2000)                                                                      
|        |  |                                                                                                                                                                                                                                                                                                                                              
|10.8    |  | Indenture of Lease and Amendments thereto, dated as of June 7,
1994, between SDI Technologies, Inc., as Landlord, and B. Dalton
Bookseller, Inc., as Tenant. (Incorporated herein by reference to
Exhibit 10.22 in Amendment No. 1 of the Companys Registration
Statement No. 333-64211, filed March 18, 1999)                              
|        |  |                                                                                                                                                                                                                                                                                                                                              
|10.9    |  | Lease, dated as of June 30, 1997, between P.A. Building Company,
as Landlord, and Barnes & Noble, Inc., as Tenant. (Incorporated
herein by reference to Exhibit 10.23 in Amendment No. 1 of the
Companys Registration Statement No. 333-64211, filed March 18,
1999)                                                                        
|        |  |                                                                                                                                                                                                                                                                                                                                              
|10.10   |  | Amended and Restated Industrial Lease Agreement effective as of
July 27, 1999, between Industrial Developments International
(Tennessee), L.P., as landlord, and barnesandnoble.com llc, as
tenant. (Incorporated herein by reference to Exhibit 10.31 in the
Companys Form 10-K for the year ended December 31, 1999, filed
March 30, 2000)
|        |  |                                                                                                                                                                                                                                                                                                                                              
|10.11   |  | Supply Agreement, dated as of October 31, 1998, between
barnesandnoble.com llc and Barnes & Noble, Inc. (Incorporated
herein by reference to Exhibit 10.14 in Amendment No. 1 of the
Companys Registration Statement No. 333-64211, filed March 18,
1999)                                                                                   
|        |  |                                                                                                                                                                                                                                                                                                                                              
|10.12   |  | Amendment No. 1 to the Supply Agreement, between
barnesandnoble.com llc and Barnes & Noble Inc. (Incorporated
herein by reference to Exhibit 10.14 in the Companys Form 10-K for
the year ended December 31, 2000, filed April 2, 2001)                                                                                                     
|        |  |                                                                                                                                                                                                                                                                                                                                              
|10.13   |  | Amended and Restated Services Agreement, dated as of October 31,
1998, among the Company, barnesandnoble.com llc and Barnes &
Noble, Inc. (Incorporated herein by reference to Exhibit 10.10 in
Amendment No. 1 of the Companys Registration Statement No.
333-64211, filed March 18, 1999)                                                 
|        |  |                                                                                                                                                                                                                                                                                                                                              
|10.14   |  | Amendment No. 1 to the Amended and Restated Services Agreement,
among the Company, barnesandnoble.com llc and Barnes & Noble, Inc.
(Incorporated herein by reference to Exhibit 10.16 in the
Companys Form 10-K for the year ended December 31, 2000, filed
April 2, 2001)                                                                  
|        |  |                                                                                                                                                                                                                                                                                                                                              
|10.15   |  | Technology Sharing and Licensing Agreement, dated as of October
31, 1998, between barnesandnoble.com llc, as Licensor and
BOL.Global, Inc., as Licensee. (Incorporated herein by reference
to Exhibit 10.8 in Amendment No. 1 of the Companys Registration
Statement No. 333-64211, filed March 18, 1999)                                   
|        |  |                                                                                                                                                                                                                                                                                                                                              
|10.16   |  | Amendment No. 1 to the Technology Sharing and License Agreement,
between BOL.Global, Inc., as Licensee, and barnesandnoble.com llc,
as Licensor. (Incorporated herein by reference to Exhibit 10.18 in
the Companys Form 10-K for the year ended December 31, 2000,
filed April 2, 2001)                                                    
|        |  |                                                                                                                                                                                                                                                                                                                                              
|10.17   |  | Technology Sharing and Licensing Agreement, dated as of October
31, 1998, between barnesandnoble.com llc, as Licensee and
BOL.Global, Inc., as Licensor. (Incorporated herein by reference
to Exhibit 10.9 in Amendment No. 1 of the Companys Registration
Statement No. 333-64211, filed March 18, 1999)                                   
|        |  |                                                                                                                                                                                                                                                                                                                                              
|10.18   |  | Amendment No. 1 to the Technology Sharing and License Agreement,
between BOL.Global, Inc., as Licensor, and barnesandnoble.com llc,
as Licensee. (Incorporated herein by reference to Exhibit 10.20 in
the Companys Form 10-K for the year ended December 31, 2000,
filed April 2, 2001)                                                    
|        |  |                                                                                                                                                                                                                                                                                                                                              
|10.19   |  | Amended and Restated Database and Software License Agreement,
dated as of October 31, 1998, among the Company,
barnesandnoble.com llc and Barnes & Noble, Inc. (Incorporated
herein by reference to Exhibit 10.15 in Amendment No. 1 of the
Companys Registration Statement No. 333-64211, filed March 18,
1999)                            
|        |  |                                                                                                                                                                                                                                                                                                                                              
|10.20   |  | Amendment No. 1 to the Amended and Restated Database and Software
License Agreement, among the Company, barnesandnoble.com llc and
Barnes & Noble, Inc. (Incorporated herein by reference to Exhibit
10.22 in the Companys Form 10-K for the year ended December 31,
2000, filed April 2, 2001)                                             
|        |  |                                                                                                                                                                                                                                                                                                                                              
|10.21   |  | Trademark License Agreement, dated as of October 31, 1998, between
BOL.Global, Inc. and barnesandnoble.com llc. (Incorporated herein
by reference to Exhibit 10.13 in Amendment No. 1 of the Companys
Registration Statement No. 333-64211, filed March 18, 1999)                                                                           

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|        |  |                                                                                                                                                                                                                                                                                                               
|------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  |                                                                                                                                                                                                                                                                                                               
|No.     |  | Description                                                                                                                                                                                                                                                                                                   
|        |  |                                                                                                                                                                                                                                                                                                               
|10.22   |  | Amendment No. 1 to the Trademark License Agreement, between
BOL.Global, Inc. and barnesandnoble.com llc. (Incorporated herein
by reference to Exhibit 10.24 in the Companys Form 10-K for the
year ended December 31, 2000, filed April 2, 2001)                                                             
|        |  |                                                                                                                                                                                                                                                                                                               
|10.23   |  | Amended and Restated Trademark License Agreement, dated as of
October 31, 1998, between Barnes & Noble College Bookstores, Inc.
and barnesandnoble.com llc. (Incorporated herein by reference to
Exhibit 10.12 in Amendment No. 1 of the Companys Registration
Statement No. 333-64211, filed March 18, 1999)
|        |  |                                                                                                                                                                                                                                                                                                               
|10.24   |  | Amendment No. 1 to the Amended and Restated Trademark License
Agreement, between Barnes & Noble College Bookstores, Inc. and
barnesandnoble.com llc. (Incorporated herein by reference to
Exhibit 10.26 in the Companys Form10-K for the year ended
December 31, 2000, filed April 2, 2001)                  
|        |  |                                                                                                                                                                                                                                                                                                               
|10.25   |  | Web Site Agreement, dated as of January 31, 2001, by and between
Textbooks.com, Inc. and barnesandnoble.com llc. (Incorporated
herein by reference to Exhibit 10.27 in the Companys Form 10-K
for the year ended December 31, 2000, filed April 2, 2001)                                                     
|        |  |                                                                                                                                                                                                                                                                                                               
|10.26   |  | Employment Agreement, dated as of October 31, 2002, between the
Company and Marie J. Toulantis. (Incorporated herein by reference
to Exhibit 10.26 in the Companys Form 10-K for the year ended
December 31, 2002, filed March 27, 2003)                                                                     
|        |  |                                                                                                                                                                                                                                                                                                               
|31.1    |  | Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to section 302 of the
Sarbanes-Oxley Act of 2002.                                                                                                                                                            
|        |  |                                                                                                                                                                                                                                                                                                               
|31.2    |  | Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to section 302 of the
Sarbanes-Oxley Act of 2002.                                                                                                                                                            
|        |  |                                                                                                                                                                                                                                                                                                               
|32.1    |  | Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to section 906 of the
Sarbanes-Oxley Act of 2002.                                                                                                                                                            
|        |  |                                                                                                                                                                                                                                                                                                               
|32.2    |  | Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted pursuant to section 906 of the
Sarbanes-Oxley Act of 2002.                                                                                                                                                            

(b) Reports on Form 8-K

On
July 25,
2003, the Company furnished a Report on Form 8-K pursuant to
Items 5 and 9 of such form announcing second quarter 2003
financial results.

On
July 30,
2003, the Company filed a Report on Form 8-K pursuant to
Items 5 and 7 of such form announcing an agreement between
Barnes & Noble and Bertelsmann for Barnes & Noble to
acquire Bertelsmann's entire equity interest in the Company and B&N.com.

Subsequent to
the end of the quarter, on October 29, 2003, the Company
furnished a Report on Form 8-K pursuant to Items 7 and 12
of such form announcing third quarter 2003 financial results.

Subsequent to
the end of the quarter, on November 12, 2003, the Company filed
a Report on Form 8-K pursuant to Items 5 and 7 of such form
relating to Barnes & Noble's proposal to purchase in a merger
transaction for $2.50 in cash each share of the Company's common
stock that Barnes & Noble does not currently own.

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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.

|                        |  |                                      |  |                                                       
|----------------------- |  | ------------------------------------ |  | ------------------------------------------------------
|                        |  | barnesandnoble.com inc.
(Registrant)
|                        |  |                                      |  |                                                       
|Date: November 14, 2003 |  |                                      |  |                                                       
|                        |  | By:                                  |  | /s/ Kevin M. Frain                                    
|                        |  |                                      | 
|                        |  |                                      |  | Kevin M. Frain                                        
|                        |  |                                      |  | Chief Financial Officer and Vice President, Operations
|                        |  |                                      |  | (Principal Accounting and Financial Officer)          

22