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SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549





Form 10-Q




| | (Mark One)
| | ----------
| | x         
|
| |           
|
| |           



| | 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(State or Other Jurisdiction ofIncorporation or Organization)  |  | 13-4048787(I.R.S. EmployerIdentification No.)
|---------------------------------------------------------------------- |  | ---------------------------------------------
|                                                                      
|76 Ninth Avenue, New York, NY
(Address of Principal Executive Offices) |  | 10011(Zip Code)                              
|                                                                      
|(212) 414-6000Registrant'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
xNo
o

Number of shares of $.001 par value Class A Common Stock, Class B Common Stock and Class C Common Stock
outstanding as of November 8, 2002 was 47,951,566, 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 Securities Holders                                
|                               | Item 5: Other Information                                                                    
|                               | Item 6: Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                    
|CERTIFICATION                 
|CERTIFICATION                 



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barnesandnoble.com inc.
September 30, 2002
Index to Form 10-Q



|                                         |                                                                                       | Page No.
|---------------------------------------- | ------------------------------------------------------------------------------------- | --------
|                                         |                                                                                       |         
|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 Securities Holders                                |         
|Item 5:                                  | Other Information                                                                     |         
|Item 6:                                  | Exhibits and Reports on Form 8-K                                                      |         
|Signatures                               |                                                                                       |         
|Certification
of Chief Executive Officer |                                                                                       | 20      
|Certification
of Chief Financial Officer |                                                                                       | 21      

2



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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,    
|                                                                                       | 2002               |         | 2001             
|                                                                                       |                    |         |                  
|Net sales                                                                              | $                  | 102,575 |                  
|Cost of sales                                                                          |                    | 77,997  |                  
|                                                                                       |                    |         |                  
|Gross profit                                                                           |                    | 24,578  |                  
|                                                                                       |                    |         |                  
|Operating expenses:                                                                    |                    |         |                  
|Fulfillment and customer service                                                       |                    | 8,240   |                  
|Marketing, sales and editorial                                                         |                    | 8,682   |                  
|Technology and web site development                                                    |                    | 8,190   |                  
|General and administrative                                                             |                    | 6,998   |                  
|Depreciation and amortization                                                          |                    | 8,428   |                  
|Equity in net loss of equity investments including related amortization of intangibles |                    | 1,805   |                  
|                                                                                       |                    |         |                  
|Total operating expenses                                                               |                    | 42,343  |                  
|Loss from operations                                                                   |                    | (17,765 | )                
|Interest income, net                                                                   |                    | 303     |                  
|                                                                                       |                    |         |                  
|Loss before minority interest                                                          |                    | (17,462 | )                
|Minority interest                                                                      |                    | 12,647  |                  
|                                                                                       |                    |         |                  
|Net loss                                                                               | $                  | (4,815  | )                
|                                                                                       |                    |         |                  
|Basic net loss per common share                                                        |                    |         |                  
|                                                                                       | $                  | (0.11   | )                
|Basic weighted average common shares outstanding (1)                                   |                    | 43,788  |                  






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)(unaudited)



|                                                                                                                  | September 30,2002 | December 31,2001
|----------------------------------------------------------------------------------------------------------------- | ----------------- | ----------------
|                                                                                                                  |                   |                 
|                                                                                                                  |                   | (unaudited)     
|ASSETS                                                                                                            |                   |                 
|Current assets:                                                                                                   |                   |                 
|Cash and cash equivalents                                                                                         |                   | $               
|Marketable securities                                                                                             |                   |                 
|Receivables, net                                                                                                  |                   |                 
|Merchandise inventories                                                                                           |                   |                 
|Prepaid expenses and other current assets                                                                         |                   |                 
|                                                                                                                  |                   |                 
|Total current assets                                                                                              |                   |                 
|                                                                                                                  |                   |                 
|Fixed assets, net                                                                                                 |                   |                 
|Other non-current assets                                                                                          |                   |                 
|                                                                                                                  |                   |                 
|Total assets                                                                                                      |                   | $               
|                                                                                                                  |                   |                 
|LIABILITIES AND STOCKHOLDERS' EQUITY                                                                              |                   |                 
|Current liabilities:                                                                                              |                   |                 
|Accounts payable                                                                                                  |                   | $               
|Accrued liabilities                                                                                               |                   |                 
|Payable to affiliate                                                                                              |                   |                 
|                                                                                                                  |                   |                 
|Total current liabilities                                                                                         |                   |                 
|                                                                                                                  |                   |                 
|Minority interest                                                                                                 |                   |                 
|                                                                                                                 
|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;
 43,788,478 shares issued and outstanding |                   |                 
|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                                                                                                   |                   |                 
|Accumulated deficit                                                                                               |                   |                 
|                                                                                                                  |                   |                 
|Total stockholders' equity                                                                                        |                   |                 
|                                                                                                                  |                   |                 
|Commitments and contingencies                                                                                     |                   |                 
|Total liabilities and stockholders' equity                                                                        |                   | $               
|                                                                                                                  |                   |                 

See accompanying notes
 to consolidated financial statements.

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barnesandnoble.com inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS
For the nine months ended September 30, 2002 and September 30, 2001
(in thousands of dollars, except per share data)(unaudited)



|                                                                                | Nine Months Ended
|------------------------------------------------------------------------------- | -----------------
|                                                                                |                  
|                                                                                | September 30,    
|                                                                                |                  
|                                                                                |                  
|Cash flows from operating activities:                                           |                  
|Net loss                                                                        | $                
|Adjustments to reconcile net loss to net cash
 flows from operating activities: |                  
|Depreciation and amortization                                                   |                  
|Decrease in receivables, net                                                    |                  
|Increase in merchandise inventories                                             |                  
|Decrease (increase) in prepaid expenses and other current assets                |                  
|Increase (decrease) in accounts payable                                         |                  
|Increase (decrease) in payable to affiliate                                     |                  
|Decrease in accrued liabilities                                                 |                  
|Minority interest in loss                                                       |                  
|                                                                                |                  
|Net cash flows used in operating activities                                     |                  
|                                                                                |                  
|Cash flows from investing activities:                                           |                  
|Purchases of fixed assets                                                       |                  
|Sales of marketable securities                                                  |                  
|Decrease in other non-current assets                                            |                  
|                                                                                |                  
|Net cash flows from investing activities                                        |                  
|                                                                                |                  
|Cash flows from financing activities:                                           |                  
|Proceeds from exercise of stock options                                         |                  
|                                                                                |                  
|Net cash flows from financing activities                                        |                  
|                                                                                |                  
|Net change in cash and cash equivalents                                         |                  
|Cash and cash equivalents at beginning of period                                |                  
|                                                                                |                  
|Cash and cash equivalents at end of period                                      | $                
|                                                                                |                  

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, 2002 and September 30, 2001
(in thousands of dollars, except per share data)
(unaudited)



The unaudited consolidated
 financial statements include the accounts of barnesandnoble.com inc. (the Company) and
barnesandnoble.com llc (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, 2002 and the results of its operations 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, 2001. The Company followed the
 same accounting policies in preparation of this report as in such Annual Report. Operating results
 for the nine months ended September 30, 2002 are not necessarily indicative of the results that may
 be expected for the year ending December 31, 2002.


1.    ORGANIZATION



The Company is a holding company whose sole
 asset is a 27.6% equity
 interest in B&N.com, an internet-based
retailer of books, music, DVD/video and online courses, and whose sole business is to manage the operations of B&N.com.
As the 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 for financial statement purposes. Barnes & Noble, Inc. (Barnes & Noble)
 and Bertelsmann
A.G. (Bertelsmann), each beneficially own a 36.2% equity
 interest (equivalent to an aggregate of 115 million Membership
Units) in B&N.com. Each Membership Unit held by these companies 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.


2.    RECLASSIFICATIONS



Certain prior-period amounts
 have been reclassified for comparative purposes to conform to the 2002 presentation.


3.    ACCRUED SPECIAL CHARGES



In connection with the
 November 16, 2000 acquisition of Fatbrain.com, Inc. (Fatbrain), B&N.com assessed and formulated
 plans to restructure certain operations of Fatbrain. These plans involved the closure of the
 Fatbrain fulfillment facility in Kentucky as well as a consolidation of administrative operations
 reducing the workforce at Fatbrain's office in Santa Clara, California. The objectives of the plans
 were to consolidate operations and leverage overhead expenses. The costs associated with the
 consolidation effort were recorded as liabilities in the purchase business combination and consist
 of severance and other employee costs of $1,059, all of which had been paid by the end of the first
 quarter of 2002, and facility closure costs of $1,876, all of which had been paid through the end
 of the third quarter of 2002.




An impairment of fixed
 assets and other special charges of $88,213 ($0.56 per share assuming conversion of membership
 units) and $75,051 ($0.51 per share assuming conversion of membership units) were recorded as a
 component of operating expenses during the fourth quarters of 2001 and 2000, respectively. 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, 2002, the accrued liability associated with the special charges was $5,758 and
 consisted of the following:




|                                 | Balance31-Dec-01 |        | 2002Payments |   | Balance30-Sept-02 |  | Due within12 Months |       | Due after12 Months
|-------------------------------- | ---------------- | ------ | ------------ | - | ----------------- |  | ------------------- | ----- | ------------------
|                                 |                  |        |              |   |                   |  |                     |       |                   
|Facility/Lease Termination Costs | $                | 6,997  |              | $ | 1,976             |  | $                   | 5,021 |                   
|Employee Termination Benefits    |                  | 4,436  |              |   | 4,197             |  |                     | 239   |                   
|Other Impairment Charges         |                  | 2,014  |              |   | 1,516             |  |                     | 498   |                   
|                                 |                  |        |              |   |                   |  |                     |       |                   
|                                 | $                | 13,447 |              | $ | 7,689             |  | $                   | 5,758 |                   
|                                 |                  |        |              |   |                   |  |                     |       |                   

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barnesandnoble.com inc.

NOTES TO CONSOLIDATED
 FINANCIAL STATEMENTS  (Continued) For the nine months ended September 30,
 2002 and September 30, 2001 (in thousands of dollars, except per share data)
 (unaudited)

4.        
   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.

In January
 2000, B&N.com acquired a 32% common stock interest in enews, inc. (enews),
 a retailer of magazine subscriptions on the Internet, and warrants to acquire additional
 common stock, for $26,428 in cash and 714 shares of the Companys stock valued
 at $12,857, to expand its presence in the on-line magazine subscription market.
 Through September 30, 2002, B&N.coms investment in enews was approximately
 47%.

In July 2002,
 the Board of Directors of enews approved a Plan of Complete Liquidation (the Liquidation
 Plan), which was then approved by stockholders of enews owning at least a
 majority of the outstanding shares of capital stock of enews. As of September 30,
 2002, the Liquidation Plan had been substantially completed and it is expected to be
 concluded by December 31, 2002. During the quarter ended September 30, 2002, the
 Company wrote off its net investment in enews of $1,196.

5.        
   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 $74,911 and $91,480 from
 Barnes & Noble representing 38% and 46% of the Companys purchases for
 the nine months ended September 30, 2002 and 2001, respectively. The charges for
 incremental overhead for the nine months ended September 30, 2002 and 2001 were
 $1,750 and $1,809, respectively. At September 30, 2002, $39,532 remained payable
 to Barnes & Noble in connection with such purchases.

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 administration (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 provide such services, plus any incremental
 internal costs. B&N.com was charged $1,256 and $1,045 for such services during
 the nine months ended September 30, 2002 and 2001, respectively.

B&N.com
 purchased merchandise 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 for the nine
 months ended September 30, 2002 totaled $1,740.

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barnesandnoble.com inc.

NOTES TO
CONSOLIDATED
 FINANCIAL STATEMENTS  (Continued)For the nine months ended September 30, 2002 and September
 30, 2001(in thousands of dollars, except per share data)(unaudited)

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 $373 and $365 for such subleased space during the nine months ended September
 30, 2002 and 2001, 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 $19,659 and $17,364
 in connection with this agreement for merchandise purchased during the nine months
 ended September 30, 2002 and 2001, respectively. In addition, B&N.com was charged
 by AEC $188 and $153 for database services during the nine months ended September
 30, 2002 and 2001, respectively. At September 30, 2002, $2,175 remained payable
 to AEC.

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, 2002 and 2001, the
 Company recorded royalty expense of $3,119 and $3,902, 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 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 are subject to certain
 renewal and termination provisions.

Barnes &
 Noble commenced a marketing program in November 2000, whereby a customer purchases
 a Readers AdvantageTM Card for a non-refundable annual membership
 fee of $25.00. With this card, customers can receive discounts of 10% on all Barnes
 & Noble store purchases and 5% on all of their purchases through the B&N.com
 Web site. B&N.com and Barnes & Noble have agreed to share the revenue,
 net of expenses, generated 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, 2002 and 2001 were $837 and $388, respectively.

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. The fees received are recorded as a reduction of B&N.coms
 total fulfillment expense. For the nine months ended September 30, 2002 and 2001,
 B&N.com recorded $330 and $889, 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 $902 for the nine months ended September
 30, 2002.

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barnesandnoble.com inc.

NOTES TO CONSOLIDATED
 FINANCIAL STATEMENTS  (Continued)For the nine months ended September 30,
 2002 and September 30, 2001(in thousands of dollars, except per share data)
(unaudited)

Barnes &
 Noble subleased warehouse space from the Company in Reno, Nevada. B&N.com charged
 Barnes & Noble $500 and $1,391 for such subleased space for the nine months
 ended September 30, 2002 and 2001, respectively. Additionally, B&N.com sold
 $6,186 of warehouse equipment from its Reno warehouse to Barnes & Noble in
 2001. 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, following Board approval on
 January 29, 2002, 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 at cost for approximately $9,877.
 The Board of Barnes & Noble also approved Barnes & Nobles assumption
 of the lease obligation and the hiring of all of the employees at the Reno facility.
 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. B&N.com paid $628 in relation to these expenses for the
 nine months ended September 30, 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, 2002 and 2001 were $15,486
 and $12,243, 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 used books directly to MBS. B&N.com is paid a commission
 based on the price paid by MBS to the consumer. Total commissions received for the
 nine months ended September 30, 2002 and 2001 were $45 and $14, respectively.

Under a Strategic
 Relationship Agreement, dated as of May 1, 2001 (the Strategic Relationship Agreement),
 between B&N.com and GameStop, Inc. (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 $63 and $13 were recorded for
 the nine months ended September 30, 2002 and 2001, respectively, under this agreement.

B&N.com
 has an approximate 47% equity stake in enews, a company engaged in selling magazine
 subscriptions on the Internet, and accounts 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 the
 Liquidation Plan. As of September 30, 2002, the implementation of the Liquidation
 Plan had been substantially completed and it is expected to be concluded by December
 31, 2002. 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 $909 and $227 for the periods
 ended September 30, 2002 and 2001, respectively, and was reimbursed $269 for expenses
 incurred on behalf of enews for the period ended September 30, 2002.

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

6.       
    RECENT ACCOUNTING PRONOUNCEMENTS

In June 2001,
 the Financial Accounting Standards Board finalized FASB Statements No. 141, Business Combinations (SFAS 141), and No. 142, Goodwill and Other Intangible
 Assets (SFAS 142). SFAS 141 requires the use of the purchase method of accounting
 and prohibits the use of the pooling-of-interests method of accounting for business
 combinations initiated after June 30, 2001. SFAS 141 also requires that the Company
 recognize acquired intangible assets apart from goodwill if the acquired intangible
 assets meet certain criteria. SFAS 141 applies to all business combinations initiated
 after June 30, 2001 and for purchase business combinations completed on or after
 July 1, 2001. It also requires that, upon adoption of SFAS 142, the Company reclassify
 the carrying amounts of intangible assets and goodwill based on the criteria in
 SFAS 141.

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barnesandnoble.com inc.

NOTES TO CONSOLIDATED
 FINANCIAL STATEMENTS  (Continued)For the nine months ended September 30,
 2002 and September 30, 2001(in thousands of dollars, except per share data)
(unaudited)

SFAS 142 requires,
 among other things, that companies no longer amortize goodwill, but instead test
 goodwill for impairment at least annually. In addition, SFAS 142 requires that the
 Company identify reporting units for the purposes of assessing potential future
 impairments of goodwill, reassess the useful lives of other existing recognized
 intangible assets, and cease amortization of intangible assets with an indefinite
 useful life. An intangible asset with an indefinite useful life should be tested
 for impairment in accordance with the guidance in SFAS 142. SFAS 142 is required
 to be applied in fiscal years beginning after December 15, 2001 to all goodwill
 and other intangible assets recognized at that date, regardless of when those assets
 were initially recognized. SFAS 142 requires the Company to complete a transitional
 goodwill impairment test six months from the date of adoption. The Company reassessed
 the useful lives of other intangible assets within the first interim quarter after
 adoption of SFAS 142.

The Companys
 previous business combinations were accounted for using the purchase method.
 As of September 30, 2002, the net carrying amount of goodwill was $13,777. As required
 by SFAS 142, the Company completed their initial impairment test on the goodwill
 in the second quarter ended June 30, 2002 and deemed that no impairment charge was
 necessary. No subsequent indicators of impairment have been noted by the Company.

The effect
 of adoption of SFAS No. 142 on the reported net loss for the prior period is as
 follows:



|For the nine months
 ended September 30,             | 2002 |         | 2001
|---------------------------------------------------- | ---- | ------- | ----
|                                                     |      |         |     
|Loss before minority interest                        | $    | (58,616 | )   
|Add back: Amortization of goodwill                   |      |        |     
|                                                     |      |         |     
|Loss before minority interest, as adjusted           | $    | (58,616 | )   
|                                                     |      |         |     
|Loss before minority interest per share:             |      |         |     
|Loss before minority interest                        | $    | (0.37   | )   
|Amortization of goodwill                             |      |        |     
|                                                     |      |         |     
|Loss before minority interest per share, as adjusted | $    | (0.37   | )   
|                                                     |      |         |     

In August
 2001, the FASB also issued SFAS No. 144, Accounting for the Impairment or Disposal
 of Long-Lived Assets, that is applicable to financial statements issued for fiscal
 years beginning after December 15, 2001. The FASBs new rules on asset impairment
 supersede SFAS No. 121, Accounting for the Impairment of
Long-Lived Assets, and portions of Accounting Principles Bulletin Opinion 30,
 Reporting the Results of Operations. This new standard provides a single accounting
 model for long-lived assets to be disposed of and significantly changes the criteria
 that would have to be met to classify an asset as held-for-sale. Classification
 as held-for-sale is an important distinction since such assets are not depreciated
 and are stated at the lower of fair value and carrying amount. The adoption of this
 Statement has not had material impact on the Companys financial position and
 operating results.

Statement
 of Financial Accounting Standards No. 145, Rescission of SFAS Statements No.
 4, 44 and 64, Amendment of SFAS Statement No. 13, and Technical Corrections
 (SFAS 145), updates, clarifies and simplifies existing accounting pronouncements.
 SFAS 145 rescinds SFAS No. 4, Reporting Gains and Losses from Extinguishment
 of Debt. SFAS 145 amends SFAS No. 13, Accounting for Leases,
 to eliminate an inconsistency between the required accounting for sale-leaseback
 transactions and the required accounting for certain lease modifications that have
 economic effects that are similar to sale-leaseback transactions. The provisions
 of SFAS 145 related to SFAS No. 4 and SFAS No. 13 are effective for fiscal years
 beginning and transactions occurring after May 15, 2002, respectively. It is anticipated
 that the financial impact of SFAS 145 will not have a material effect on the Company.

Statement
 of Financial Accounting Standards No. 146, Accounting for the Costs Associated
 with Exit or Disposal Activities (SFAS 146), requires the Company
 to recognize costs associated with exit or disposal activities when they are incurred
 rather than at the date of a commitment to an exit or disposal plan. SFAS 146 replaces
 Emerging Issues Task Force Issue No. 94-3, Liability Recognition for Certain
 Employee Termination Benefits and Other Costs to Exit and Activity (including Certain
 Costs Incurred in a Restructuring). The provisions of SFAS 146 are to be
 applied prospectively to exit or disposal activities initiated after December 31,
 2002.

10



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##### Table of Contents






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 27.6% 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 since that time has become the
 eighth largest e-commerce Web site, based on the Jupiter Media Metrix September
 2002 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 12.7 million customers in 228 countries. B&N.coms
 online bookstore includes the largest in-stock selection of in-print book
 titles with access to 1 million titles for immediate delivery, supplemented by more
 than 20 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 sales, are not necessarily meaningful and should not
 be relied upon as an indication of future performance.

Results of Operations

Net sales



|          | Three Months Ended September 30, |         | Nine Months Ended September 30,
|--------- | -------------------------------- | ------- | -------------------------------
|          |                                  |         |                                
|          | (in thousands of dollars)        |         | (in thousands of dollars)      
|          | 2002                             |         | 2001                           
|          |                                  |         |                                
|Net sales | $                                | 102,575 |                                

Net sales
 are comprised of sales of books, music, video, online courses, eBooks and related
 products, net of returns and promotional discounts, as well as outbound shipping
 and handling charges billed to customers. The increase in net sales for the three
 months ended September 30, 2002 and for the nine months ended September 30, 2002
 was attributable to an increase in net sales to the Companys consumer customers
 which increased 13.1 percent for the three months ended September 30, 2002 and increased
 10.9 percent for the nine months ended September 30, 2002. Net sales to the Companys
 corporate customers decreased 42.6 percent for the three months ended September
 30, 2002 and decreased 46.2 percent for the nine months ended September 30, 2002.

Gross profit



|             | Three Months Ended September 30, |        | Nine Months Ended September 30,
|------------ | -------------------------------- | ------ | -------------------------------
|             |                                  |        |                                
|             | (in thousands of dollars)        |        | (in thousands of dollars)      
|             | 2002                             |        | 2001                           
|             |                                  |        |                                
|Gross profit | $                                | 24,578 |                                
|Gross margin | $                                | 24.0%  |                                

Gross profit
 is net sales less the cost of sales, which consists of the cost of merchandise sold
 to customers and the costs of online courses as well as inbound and outbound shipping
 costs. Gross profit and gross margin increased for the three months ended September
 30, 2002 due to an increase in the Companys internal fulfillment rate as well
 as a more efficient utilization of shipping providers. The Company anticipates
 that gross profit and gross margin in the fourth quarter of 2002 will be higher
 as compared to the prior year period.

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##### Table of Contents



Fulfillment and customer service



|                                 | Three Months Ended September 30, |       | Nine Months Ended September 30,
|-------------------------------- | -------------------------------- | ----- | -------------------------------
|                                 |                                  |       |                                
|                                 | (in thousands of dollars)        |       | (in thousands of dollars)      
|                                 | 2002                             |       | 2001                           
|                                 |                                  |       |                                
|Fulfillment and customer service | $                                | 8,240 |                                
|Percentage of net sales          |                                  | 8.0   | %                              





Fulfillment and customer
 service expenses consist primarily of the cost of operating and staffing distribution and customer
 service centers. Fulfillment and customer service expenses decreased on an absolute basis and as a
 percentage of net sales primarily as a result of achieving more efficiency in fulfillment and
 customer service operations. B&N.com anticipates that its fulfillment and customer service costs
 will be lower in absolute dollars and as a percentage of net sales for the fourth quarter of 2002
 as compared to the prior year period.


Marketing, sales and editorial



|                               | Three Months Ended September 30, |       | Nine Months Ended September 30,
|------------------------------ | -------------------------------- | ----- | -------------------------------
|                               |                                  |       |                                
|                               | (in thousands of dollars)        |       | (in thousands of dollars)      
|                               | 2002                             |       | 2001                           
|                               |                                  |       |                                
|Marketing, sales and editorial | $                                | 8,682 |                                
|Percentage of net sales        |                                  | 8.5   | %                              



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 and sales expenses
decreased primarily due to a significant reduction in B&N.com's advertising and promotional expenditures. Such expenses
decreased in absolute dollars and as a percentage of net sales due to the Company's focus on more targeted and measurable
marketing programs as well as the re-negotiation of many of the Companys online marketing deals to obtain more
advantageous terms. The Company expects marketing and promotional expenditures to increase during the fourth quarter of
2002 compared to the third quarter of 2002. However, the Company expects fourth quarter marketing and promotional
expenditures to decrease both in dollars and as a percentage of sales in comparison to the same period last year.


Technology and web site development



|                                    | Three Months Ended September 30, |       | Nine Months Ended September 30,
|----------------------------------- | -------------------------------- | ----- | -------------------------------
|                                    |                                  |       |                                
|                                    | (in thousands of dollars)        |       | (in thousands of dollars)      
|                                    | 2002                             |       | 2001                           
|                                    |                                  |       |                                
|Technology and web site development | $                                | 8,190 |                                
|Percentage of net sales             |                                  | 8.0   | %                              





Technology and web site
 development expenses consist principally 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. The decrease in technology and web site development for each
 comparative period was primarily attributable to increased infrastructure efficiency, and price
 reductions in many expense categories. Technology and web site development expenses are expected
 to decrease in dollars and as a percentage of sales for the fourth quarter of 2002 compared to the
 fourth quarter of 2001.


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General and administrative



|                           | Three Months Ended September 30, |       | Nine Months Ended September 30,
|-------------------------- | -------------------------------- | ----- | -------------------------------
|                           |                                  |       |                                
|                           | (in thousands of dollars)        |       | (in thousands of dollars)      
|                           | 2002                             |       | 2001                           
|                           |                                  |       |                                
|General and administrative | $                                | 6,998 |                                
|Percentage of net sales    |                                  | 6.8   | %                              



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. The decrease in general and administrative
 expenses was a result of the Company's efforts to consolidate operations and its continued effort
 to improve efficiency. General and administrative expenses are expected to decrease in dollars and
 as a percentage of sales for the fourth quarter of 2002 compared to the fourth quarter of
 2001.


Depreciation and amortization



|                              | Three Months Ended September 30, |       | Nine Months Ended September 30,
|----------------------------- | -------------------------------- | ----- | -------------------------------
|                              |                                  |       |                                
|                              | (in thousands of dollars)        |       | (in thousands of dollars)      
|                              | 2002                             |       | 2001                           
|                              |                                  |       |                                
|Depreciation and amortization | $                                | 8,428 |                                
|Percentage of net sales       |                                  | 8.2   | %                              



The decrease in depreciation and amortization
 expenses is the result of lower capital expenditures in fiscal 2002 and
2001 as compared with fiscal 2000. The carrying balance of goodwill is assessed for recoverability on a periodic basis. In
2002 the Company no longer amortizes goodwill due to the adoption of SFAS 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)      
|                                                                                        | 2002                             |       | 2001                           
|                                                                                        |                                  |       |                                
|Equity in net loss of equity investments including related
 amortization of intangibles | $                                | 1,805 |                                
|Percentage of net sales                                                                 |                                  | 1.8   | %                              

Equity in net loss of equity investments consists
 of losses from the Company's equity investments in enews for the third
 quarter ended September 30, 2002. Equity in net loss of equity investments
 decreased in the nine months ended September 30, 2002 in comparison
 with the prior year period as enews realized lower losses year over year. In
 addition, the 2001 period included other equity investments, which the Company no longer holds,
 as well as goodwill related to those investments. As of December 31, 2001, 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, 2002, the implementation of the Liquidation Plan had been substantially
 completed and it is expected to be concluded by December 31, 2002.

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##### Table of Contents



Interest income, net



|                        | Three Months Ended September 30, |     | Nine Months Ended September 30,
|----------------------- | -------------------------------- | --- | -------------------------------
|                        |                                  |     |                                
|                        | (in thousands of dollars)        |     | (in thousands of dollars)      
|                        | 2002                             |     | 2001                           
|                        |                                  |     |                                
|Interest income, net    | $                                | 303 |                                
|Percentage of net sales |                                  | 0.3 | %                              



Interest income decreased 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.


Liquidity and Capital Resources



As
of September 30, 2002,
the Company's cash, cash equivalents and short-term marketable securities were $74.0 million,
compared to $115.3 million on December 31, 2001. The Company continues to have a debt-free balance
sheet.




Net cash flows used in
operating activities were $40.4 million for the nine months ended September 30, 2002 and $87.2
million for the nine months ended September 30, 2001. Cash used for the nine months ended September
30, 2002 was attributable to a net loss of $16.2 million, a corresponding decrease in minority
interest of $42.5 million, a decrease in accrued liabilities of $16.8 million, a decrease in
payable to affiliate of $4.0 million, a $1.1 million increase in merchandise inventories 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. Cash used for the nine months ended September 30,
2001 was primarily attributable to a net loss of $32.1 million, a corresponding decrease in
minority interest of $84.4 million, a decrease in accrued liabilities of $23.0 million, an increase
in merchandise inventories of $15.2 million and a decrease in accounts payable of $13.1 million.
This was offset by a $10.7 million decrease in receivables, an increase in payable to affiliate
of $22.8 million, depreciation and amortization of $45.5 million and a decrease of $1.6 million in
prepaid expenses and other current assets.




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 investing
 activities of $15.9 million for the nine
months ended September 30, 2001 was attributable to a decrease of $1.3 million in other
 non-current assets and sales of
marketable securities of $20.6 million, offset by purchases of fixed assets totaling $6.0 million.




At September 30, 2002, the Company's principal sources
 of liquidity consisted of $74.0 million in cash and cash
equivalents. As of September 30, 2002, 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, 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


14



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##### Table of Contents



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 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 new warehouses or the failure to successfully integrate those
 warehouses 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
 invested in enews and MightyWords, Inc. (MightyWords), primarily for strategic
 purposes. Such investments are accounted for under the equity method if they give
 the Company the ability to exercise significant influence, but not control, over
 an 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 December 2001, B&N.com considered the MightyWords investment impaired
 as the MightyWords Board of Directors had voted to dissolve the company and distribute
 the remaining cash back to investors after obligations of the company were met.
 B&N.com recorded an impairment charge of $9.2 million related to equity method
 and other investments in December 2001. No impairment is considered to exist at
 September 30, 2002 beyond that which was recorded at December 31, 2001. In July
 2002, the Board of Directors and stockholders of enews approved the Liquidation
 Plan. As of September 30, 2002, the implementation of the Liquidation Plan had
 been substantially completed and it is expected to be concluded by December 31, 2002.

B&N.com
 invests its excess cash in money market funds consisting of highly liquid debt instruments
 of the U.S. Government and its agencies, and of high quality corporate issuers.
 B&N.com is exposed to interest rate risk on the money market instruments that
 it holds. As of September 30, 2002, the Companys investments in cash and cash
 equivalents totaled approximately $74.0 million.






|Item
 4: | Controls and Procedures
|-------- | -----------------------

(a) Evaluation
 of Disclosure Controls and Procedures. The Companys Chief Executive Officer
 and its Chief Financial Officer, after evaluating the effectiveness of the Companys disclosure
 controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c)
 of the Securities Exchange Act of 1934) as of a date within 90 days of the filing
 date of this quarterly report on Form 10-Q (the Evaluation Date), have
 concluded that as of the Evaluation Date, the Companys disclosure controls
 and procedures were adequate and effective to ensure that material information relating
 to the Company

15



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##### Table of Contents



and its consolidated subsidiaries would be made known to them by
 others within those entities, particularly during the period in which this quarterly
 report on Form 10-Q was being prepared. Notwithstanding the
foregoing, there can be no assurance that the Companys
disclosure controls and procedures will detect or uncover all
failures of persons within the Company and its consolidated
subsidiaries to disclose material information otherwise required to
be set forth in the Companys periodic reports.

(b) Changes
 in Internal Controls. There were no significant changes in the Companys internal
 controls or in other factors that could significantly affect the Companys
 internal controls subsequent to the Evaluation Date, nor any significant deficiencies
 or material weaknesses in such internal controls requiring corrective actions.

16



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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.






|Item
 2: | Changes in Securities and Use of Proceeds
|-------- | -----------------------------------------

The effective
 date of the Companys registration statement, filed on Form S-1 under the Securities
 Act of 1933 (File No. 333-64211) relating to the initial public offering of its
 Class A Common Stock, was May 25, 1999. Pursuant to the initial public offering,
 a total of 28,750,000 shares of the Companys Class A Common Stock were sold
 to an underwriting syndicate. The managing underwriters of the initial public offering
 were Goldman, Sachs & Co., Merrill Lynch & Co., Salomon Smith Barney and
 Wit Capital Corporation. The initial public offering was completed on May 28, 1999,
 at an initial public offering price of $18.00 per share. The initial public offering
 resulted in gross proceeds to the Company of $517.5 million, $31.1 million of which
 were applied to the underwriting discount and approximately $2.0 million of which
 were applied to initial public offering expenses. As a result, net proceeds of the
 initial public offering to the Company were approximately $484.4 million. Such net
 proceeds were used by the Company to acquire 28,750,000 Membership Units of B&N.com.
 The remaining funds have been used to purchase fixed assets and support the operations
 of B&N.com. Except as indicated in the Companys prospectus and other
 reports filed with the Securities and Exchange Commission, none of the net proceeds
 of the initial public offering were paid by the Company or B&N.com, directly
 or indirectly, to any director, officer or general partner of the Company or B&N.com
 or any of their associates, or to any persons owning ten percent or more of any
 class of the Companys equity securities, or any affiliates of the Company
 or B&N.com.






|Item
 3: | Defaults upon Senior Securities
|-------- | -------------------------------

None






|Item
 4: | Submission of Matters to a Vote of Securities Holders
|-------- | -----------------------------------------------------

The Companys
 annual meeting of stockholders was held on August 8, 2002.

The following
 nominees were elected as Directors, each to serve until the 2005 Annual Meeting
 of Stockholders and until their respective successors are duly elected, by the vote
 set forth below:



| |  | Director Class |  |  | Nominee             |  |  | For           |  |  | Withheld 
| |  | -------------- |  |  | ------------------- |  |  | ------------- |  |  | ---------
| |  |                |  |  |                     |  |  |               |  |  |          
| |  | Class A        |  |  | Jan Michiel Hessels |  |  | 1,188,538,391 |  |  | 1,938,875
| |  | Class B        |  |  | Leonard Riggio      |  |  | 575,000,010   |  |  |         
| |  | Class C        |  |  | Peter Olson         |  |  | 575,000,010   |  |  |         

The appointment
 of BDO Seidman, LLP as independent certified public accountants for the Companys
 fiscal year ending December 31, 2002 was ratified by the vote set forth below.



| |  | For           |  | Against |  |  | Abstain |  | 
| |  | ------------- |  | ------- |  |  | ------- |  | 
| |  |               |  |         |  |  |         |  | 
| |  | 1,190,078,626 |  | 304,916 |  |  | 93,724  |  | 






|Item
 5: | Other Information
|-------- | -----------------

On August
 6, 2002, the Company received notice from the Nasdaq Stock Market, Inc. (Nasdaq) that, for
 the previous 30 consecutive trading days, the price of the Companys common
 stock had closed below the minimum $1.00 per share requirement for
 continued inclusion under Marketplace Rule 4450(a)(5) (the Rule).
 Since then, the closing bid price of the Companys common stock has been at
 $1.00 per share or greater for at least 10 consecutive trading days. Accordingly,
 the Company has regained compliance with the Rule and the Company has received a
 notification from Nasdaq to that effect.

17



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##### Table of Contents



Ewald Walgenbach
 was appointed as a new Class C Director of the Company in September 2002 in place
 of Klaus Eierhoff. Mr. Walgenbach has been the Chief Executive Officer of DirectGroup
 Bertelsmann since August 2002 and has been a member of the Executive Board of Bertelsmann
 since February 2002. From February 2002 to July 2002, Mr. Walgenbach was the Chief
 Operating Officer of DirectGroup Bertelsmann. From March 2000 to January 2002, Mr.
 Walgenbach was the Chief Operating Officer and Deputy Chief Executive Officer of
 RTL Group (formerly CLT-UFA) in Luxemburg. From January 1997 to February 2000, Mr.
 Walgenbach was the Executive Director, TV, Production and Rights Trading, and the
 Deputy Chief Executive Officer, of CLT-UFA in Luxemburg. Mr. Walgenbach is a member
 of the Special Committee, the Executive Committee and the Nominating Committee of
 the Companys Board of Directors.






|Item
 6: | Exhibits and Reports on Form 8-K
|-------- | --------------------------------

(a) Exhibits

Exhibit No.



| | 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 Form10-K for the year ended December 31, 2000, filed April
 2, 2001)                      
|
| | 99.1      
   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                                                        
|
| | 99.2      
   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) No report
 on Form 8-K was filed by the Company during the fiscal quarter for which this report
 is filed.

18



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##### Table of Contents






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, 2002 |                                                                     
|                        | By:    
    /s/ KEVIN M.
 FRAIN                                     
|                        |                                                                     
|                        | Kevin M. Frain                                                      
|                        | Chief
 Financial Officer(Principal Accounting and Financial Officer)

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##### Table of Contents



CERTIFICATION

I, Marie J. Toulantis, Chief Executive Officer,
 certify that:



|1. | I have reviewed
 this quarterly report on Form 10-Q of barnesandnoble.com inc.;                                                                                                                                                                                                                                                   
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. | Based on my
 knowledge, this quarterly report does not contain any untrue statement of a material
 fact or omit to state a material fact necessary to make the statements made, in
 light of the circumstances under which such statements were made, not misleading
 with respect to the period covered by this quarterly report;
|  
|3. | Based on my
 knowledge, the financial statements, and other financial information included in
 this quarterly report, fairly present in all material respects the financial condition,
 results of operations and cash flows of the registrant as of, and for, the periods
 presented in this quarterly report;                   
|  
|4. | The registrants other
 certifying officers and I are responsible for establishing
 and maintaining disclosure controls and procedures (as defined in Exchange Act Rules
 13a-14 and 15d-14) for the registrant and we have:                                                                                                      



| | a. | designed such
 disclosure controls and procedures to ensure that material information relating
 to the registrant, including its consolidated subsidiaries, is made known to us
 by others within those entities, particularly during the period in which this quarterly
 report is being prepared;
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. | evaluated
 the effectiveness of the registrants disclosure controls and procedures as
 of a date within 90 days prior to the filing date of this quarterly report (the
 Evaluation Date); and                                                                                                   
|
| | c. | presented
 in this quarterly report our conclusions about the effectiveness of the disclosure
 controls and procedures based on our evaluation as of the Evaluation Date;                                                                                                                          



|5. | The registrants other
 certifying officers and I have disclosed, based on our most recent
 evaluation, to the registrants auditors and the audit committee of registrants board
 of directors (or persons performing the equivalent function):
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a. | all significant
 deficiencies in the design or operation of internal controls which could adversely
 affect the registrants ability to record, process, summarize and report financial
 data and have identified for the registrants auditors any material weaknesses
 in internal controls; and
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. | any fraud,
 whether or not material, that involves management or other employees who have a
 significant role in the registrants internal controls;                                                                                                                                              



|6. | The registrants other certifying
 officers and I have indicated in this quarterly report whether
 or not there were significant changes in internal controls or in other factors that
 could significantly affect internal controls subsequent to the date of our most
 recent evaluation, including any corrective actions with regard to significant deficiencies
 and material weaknesses.
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Date: November 14, 2002



By:     
  /s/ MARIE J.
 TOULANTIS







Marie J. ToulantisChief Executive Officerbarnesandnoble.com inc.


20



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##### Table of Contents



CERTIFICATION

I, Kevin M. Frain, Chief Financial Officer,
 certify that:



|1. | I have reviewed
 this quarterly report on Form 10-Q of barnesandnoble.com inc.;                                                                                                                                                                                                                                                   
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  
|2. | Based on my
 knowledge, this quarterly report does not contain any untrue statement of a material
 fact or omit to state a material fact necessary to make the statements made, in
 light of the circumstances under which such statements were made, not misleading
 with respect to the period covered by this quarterly report;
|  
|3. | Based on my
 knowledge, the financial statements, and other financial information included in
 this quarterly report, fairly present in all material respects the financial condition,
 results of operations and cash flows of the registrant as of, and for, the periods
 presented in this quarterly report;                   
|  
|4. | The registrants other certifying
 officers and I are responsible for establishing and maintaining
 disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and
 15d-14) for the registrant and we have:                                                                                                      



| | a. | designed such
 disclosure controls and procedures to ensure that material information relating
 to the registrant, including its consolidated subsidiaries, is made known to us
 by others within those entities, particularly during the period in which this quarterly
 report is being prepared;
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. | evaluated
 the effectiveness of the registrants disclosure controls and procedures as
 of a date within 90 days prior to the filing date of this quarterly report (the
 Evaluation Date); and                                                                                                   
|
| | c. | presented
 in this quarterly report our conclusions about the effectiveness of the disclosure
 controls and procedures based on our evaluation as of the Evaluation Date;                                                                                                                          



|5. | The registrants other certifying
 officers and I have disclosed, based on our most recent
 evaluation, to the registrants auditors and the audit committee of registrants board
 of directors (or persons performing the equivalent function):
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | a. | all significant
 deficiencies in the design or operation of internal controls which could adversely
 affect the registrants ability to record, process, summarize and report financial
 data and have identified for the registrants auditors any material weaknesses
 in internal controls; and
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| | b. | any fraud,
 whether or not material, that involves management or other employees who have a
 significant role in the registrants internal controls; and                                                                                                                                          



|6. | The registrant's other certifying
 officers and I have indicated in this quarterly report whether or not there were
significant changes in internal controls or in other factors that could significantly affect
 internal controls subsequent
to the date of our most recent evaluation, including any corrective actions
 with regard to significant deficiencies and
material weaknesses.
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Date: November 14, 2002



By:    
  /s/ KEVIN M. FRAIN







Kevin M. FrainChief Financial
 Officerbarnesandnoble.com inc.


21