<PAGE>
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-Q

(Mark One)

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

         For the quarterly period ended September 30, 2001

                                       OR

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

         For the transition period from _______________ to ______________

                         Commission File Number: 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

Number of shares of $.001 par value Class A Common Stock, Class B Common Stock
and Class C Common Stock outstanding as of October 31, 2001 was 47,945,566, one
and one, respectively.
<PAGE>
                             barnesandnoble.com inc.

                               September 30, 2001

                               Index to Form 10-Q

<TABLE>
<CAPTION>
                                                                                                 Page No.
                                                                                                 --------
<S>          <C>                                                                                 <C>
PART I -     FINANCIAL INFORMATION

Item 1:      Financial Statements.........................................................           3

Item 2:      Management's Discussion and Analysis of Financial Condition and Results of
                 Operations...............................................................          13

Item 3:      Quantitative and Qualitative Disclosure About Market Risk....................          19

PART II -    OTHER INFORMATION............................................................          20

Item 1:      Legal Proceedings............................................................          20

Item 2:      Changes in Securities and Use of Proceeds ...................................          20

Item 3:      Defaults upon Senior Securities..............................................          20

Item 4:      Submission of Matters to a Vote of Security Holders..........................          20

Item 5:      Other Information............................................................          21

Item 6:      Exhibits and Reports on Form 8-K.............................................          21

             Signatures...................................................................          22
</TABLE>

                                       2
<PAGE>
                         PART I - FINANCIAL INFORMATION

Item 1:   Financial Statements

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



<TABLE>
<CAPTION>
                                                    Three months ended              Nine months ended
                                                    ------------------              -----------------
                                               September 30,   September 30,   September 30,     September 30,
                                                   2001           2000 (1)          2001            2000 (1)
                                                   ----           --------          ----            --------
<S>                                            <C>             <C>             <C>               <C>
Net sales                                       $  96,838        $  74,073        $ 289,562        $ 215,476

Cost of sales                                      75,657           59,221          222,766          179,273
                                                ---------        ---------        ---------        ---------

    Gross profit                                   21,181           14,852           66,796           36,203
                                                ---------        ---------        ---------        ---------
Operating expenses:
Fulfillment and customer service                    9,520           13,108           31,820           33,822
Marketing, sales and editorial                     15,197           17,940           47,560           56,733
Technology and web site
    development                                    10,069           10,723           34,859           26,665
General and administrative                          7,822            5,598           23,626           17,999
Depreciation and amortization                      10,778            9,236           31,134           23,980
Stock based compensation                               --               --               --           11,740
Equity in net loss of equity investments
    including related amortization of
     intangibles                                    7,384           11,090           20,593           21,872
                                                ---------        ---------        ---------        ---------
    Total operating expenses                       60,770           67,695          189,592          192,811
                                                ---------        ---------        ---------        ---------
Loss from operations                              (39,589)         (52,843)        (122,796)        (156,608)


Interest income, net                                1,301            4,814            6,265           19,010
                                                ---------        ---------        ---------        ---------
    Loss before minority interest                 (38,288)         (48,029)        (116,531)        (137,598)


Minority interest                                  27,730           37,769           84,396          108,624
                                                ---------        ---------        ---------        ---------
   Net loss                                     $ (10,558)       $ (10,260)       $ (32,135)       $ (28,974)
                                                =========        =========        =========        =========

Basic and diluted loss before minority
    interest per share                             ($0.24)          ($0.33)          ($0.73)          ($0.94)
Basic and diluted weighted average shares
    outstanding if converted                      158,787          146,118          158,787          145,644

Basic and diluted net loss per common
    share                                          ($0.24)          ($0.33)          ($0.73)          ($0.94)
Basic and diluted weighted average common
    shares outstanding                             43,787           31,118           43,787           30,644
</TABLE>


      (1) Excludes the results of Fatbrain.com, acquired November 16, 2000.



See accompanying notes to consolidated financial statements.


                                       3
<PAGE>
                             barnesandnoble.com inc.
                           CONSOLIDATED BALANCE SHEETS
                (in thousands of dollars, except per share data)


<TABLE>
<CAPTION>
                                                                               September 30,     December 31,
                                                                                  2001              2000
                                                                                  ----              ----
                                                                               (unaudited)
<S>                                                                            <C>               <C>
ASSETS

Current assets:
    Cash and cash equivalents                                                   $ 108,319        $ 179,609
    Marketable securities                                                          17,133           32,695
    Receivables, net                                                               15,395           26,129
    Merchandise inventories                                                        63,463           48,220
    Prepaid expenses and other current assets                                       4,345            5,983
                                                                                ---------        ---------
      Total current assets                                                        208,655          292,636
                                                                                ---------        ---------

Fixed assets, net                                                                 126,242          150,500
Long-term marketable securities                                                        --            5,000
Other non-current assets                                                           64,227           80,799
                                                                                ---------        ---------

       Total assets                                                             $ 399,124        $ 528,935
                                                                                =========        =========

LIABILITIES AND EQUITY

Current liabilities:
     Accounts payable                                                           $   5,966        $  19,066
     Accrued liabilities                                                           66,834           89,820
     Due to affiliate                                                              49,906           27,101
                                                                                ---------        ---------
        Total current liabilities                                                 122,706          135,987
                                                                                ---------        ---------

Minority interest                                                                 200,098          284,494

Stockholders' equity:
         Preferred Stock: $0.001 par value; 50,000,000 shares authorized;
                 none issued and outstanding                                           --               --
         Common Stock Class A; $0.001 par value; 750,000,000 shares
              authorized; 43,787,478 shares issued and outstanding                     44               44
         Common Stock Class B; $0.001 par value; 1,000 shares authorized;
                 1 share issued and outstanding                                        --               --
         Common Stock Class C; $0.001 par value; 1,000 shares authorized;
                 1 share issued and outstanding                                        --               --
         Paid-in capital                                                          187,612          187,612
         Accumulated deficit                                                     (111,336)         (79,202)
                                                                                ---------        ---------
                 Total stockholders' equity                                        76,320          108,454
                                                                                ---------        ---------
     Commitments and contingencies
                 Total liabilities and stockholders' equity                     $ 399,124        $ 528,935
                                                                                =========        =========
</TABLE>






See accompanying notes to consolidated financial statements.


                                        4
<PAGE>
                             barnesandnoble.com inc.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                            (in thousands of dollars)
                                   (unaudited)

<TABLE>
<CAPTION>
                                                                                  Nine months ended
                                                                                  -----------------
                                                                           September 30,      September 30,
                                                                                2001             2000(1)
                                                                                ----             -------
<S>                                                                        <C>                <C>
Cash flows from operating activities:
    Net loss                                                                $ (32,135)         $ (28,974)
    Adjustments to reconcile net loss to net cash flows from
       operating activities:
          Depreciation and amortization                                        45,505             23,980
          Non-cash acquisition, disposition and investment
               related costs                                                       --             12,857
          Decrease (increase) in receivables, net                              10,734             (2,218)
          Increase in merchandise inventories                                 (15,243)           (35,621)
          Decrease (increase) in prepaid expenses and other current
              assets                                                            1,638             (7,535)
          Decrease in accounts payable                                        (13,100)           (17,562)
          Increase in due to affiliate                                         22,805              3,798
          (Decrease) increase in accrued liabilities                          (22,986)             8,615
          Minority interest in loss                                           (84,396)          (108,624)
                                                                            ---------          ---------
             Net cash flows used in operating activities                      (87,178)          (151,284)
                                                                            ---------          ---------

Cash flows from investing activities:
          Fixed assets additions, net                                          (6,002)           (73,141)
          Sales of marketable securities                                       20,562             40,271
          Decrease (increase) in other non-current assets                       1,328            (44,888)
                                                                            ---------          ---------
             Net cash flows provided by (used in) investing
               activities                                                      15,888            (77,758)
                                                                            ---------          ---------
Cash flows from financing activities:
          Proceeds from exercise of stock options                                  --              5,691
                                                                            ---------          ---------
             Net cash flows from financing activities                              --              5,691
                                                                            ---------          ---------

Net change in cash and cash equivalents                                       (71,290)          (223,351)
Cash and cash equivalents at beginning of period                              179,609            247,403
                                                                            ---------          ---------

Cash and cash equivalents at end of period                                  $ 108,319          $  24,052
                                                                            =========          =========
</TABLE>



(1) Excludes the results of Fatbrain.com, acquired November 16, 2000.




See accompanying notes to consolidated financial statements.


                                       5
<PAGE>
                             barnesandnoble.com inc.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
       For the nine months ended September 30, 2001 and September 30, 2000
                (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 and its
wholly owned subsidiaries (collectively "B&N.com"). As used in this report,
"Fatbrain" refers to B&N.com's wholly owned subsidiary Fatbrain.com, LLC.

         The Company's investment in Fatbrain has been presented in the
accompanying consolidated financial statements as a consolidated wholly owned
subsidiary beginning after the merger with Fatbrain.com, Inc., effective
November 16, 2000. All significant intercompany accounts and transactions have
been eliminated in consolidation.

         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, 2001 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, 2000. 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, 2001 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2001.

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 knowledge, information,
education and entertainment related products, 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 2001 presentation.

3.       USE OF ESTIMATES

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


                                       6
<PAGE>
                             barnesandnoble.com inc.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
       For the nine months ended September 30, 2001 and September 30, 2000
                (in thousands of dollars, except per share data)
                                   (unaudited)

4.       NET SALES

         Sales of B&N.com's products are recognized, net of estimated returns
and promotional discounts, at the time the products are shipped to customers.
Net sales include revenue generated from outbound shipping and handling charges.
Allowances for doubtful accounts are nominal.

5.       MARKETABLE SECURITIES

         B&N.com invests certain of its excess cash in debt instruments of the
U.S. Government and its agencies, and of high quality corporate issuers. All
highly liquid instruments with a remaining maturity of three months or less are
considered cash equivalents; those with remaining maturities greater than three
months are considered marketable securities. B&N.com classified investments in
accordance with Statement of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities".

         At September 30, 2001, short-term investments in marketable securities
consisted primarily of U.S. Treasury Securities, U.S. government agency
securities and investments in high quality corporate issuers and were classified
as held-to-maturity. Unrealized holding gains and losses at September 30, 2001
were not significant.

6.       STOCKHOLDERS' EQUITY

         There are three classes of common stock authorized: Class A Common
Stock ("Class A Common"), Class B Common Stock ("Class B Common") and Class C
Common Stock ("Class C Common"). The holders of Class A Common generally have
rights identical to holders of Class B Common and Class C Common (collectively
"High Vote Stock"), except that each holder of Class A Common is entitled to one
vote per share and each holder of High Vote Stock is entitled to the number of
votes per share equal to: (i) ten, multiplied by the sum of (a) the aggregate
number of High Vote Stock owned by such holder and (b) the aggregate number of
Membership Units owned by such holder; divided by (ii) the number of shares of
High Vote Stock owned by such holder. Pursuant to the Company's Amended and
Restated Certificate of Incorporation (the "Amended Charter"), the holders of
the Class B Common Stock and the holders of the Class C Common Stock have the
right to each elect three of the Company's directors. Otherwise, holders of
Class A Common and High Vote Stock (collectively "Common Stock") generally will
vote together as a single class on all matters (including the election of the
directors who are not elected directly by the holders of the High Vote Stock)
presented to the stockholders for their vote or approval, except as otherwise
required by applicable Delaware law.

         The Board of Directors is authorized to issue up to an aggregate of 50
million shares of Preferred Stock. The rights and characteristics of the
Preferred Stock are at the discretion of the Board of Directors. As of September
30, 2001 there is no Preferred Stock issued or outstanding.


                                       7
<PAGE>
                             barnesandnoble.com inc.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
       For the nine months ended September 30, 2001 and September 30, 2000
                (in thousands of dollars, except per share data)
                                   (unaudited)

7.       ACCRUED SPECIAL CHARGES

         In connection with the November 16, 2000 acquisition of Fatbrain.com,
Inc., 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, of which $963 has been paid through the end of the third quarter of
2001, and closure of the facility costs of $1,876, of which $1,072 has been paid
through the end of the third quarter 2001. These unpaid balances are included in
accrued liabilities.

         In the fourth quarter of 2000, B&N.com initiated a company-wide
assessment of its cost structure, investments, and long-term marketing
relationships directed toward leveraging marketing, sales and fulfillment
expenses and focusing its attention on the core aspects of its business. In
connection with that assessment, an impairment of fixed assets and other special
charges of $75,051 ($0.51 per share) was recorded as a component of operating
expenses during the fourth quarter of 2000. These charges were primarily related
to the impairment of fixed and other assets, including equity investments as
well as the consolidation of fulfillment operations. As of December 31, 2000,
$4,800 of these charges related to an accrual for facility closure costs of
which $3,697 has been paid as of September 30, 2001. The unpaid balance is
included in accrued liabilities.

8.       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"), the largest 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
growing on-line magazine subscription market. During the second and third
quarters of 2001, the Company increased its investment in enews to approximately
45%.

         In June 2000, B&N.com invested $20,000 in cash for a 25% equity
interest in MightyWords, Inc. ("MightyWords"), a leading provider of digital
content. As a result of the purchase of Fatbrain, the Company owns approximately
53% of the shares in MightyWords. However, control of MightyWords has been
deemed temporary by management of B&N.com as MightyWords plans to seek
additional financing in the near future that will effectively decrease B&N.com's
ownership below 50 percent. Pro forma results of operations of MightyWords for
the first quarter 2000 have not been included, as they would not have had a
material effect on the overall results of operations of the Company.



                                       8
<PAGE>
                             barnesandnoble.com inc.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
       For the nine months ended September 30, 2001 and September 30, 2000
                (in thousands of dollars, except per share data)
                                   (unaudited)

9.       PRO FORMA CONSOLIDATED RESULTS

         Pro forma results of operations for the period ended September 30, 2000
include the consolidation of the Company, B&N.com and Fatbrain as if the Company
had completed the merger with Fatbrain.com, Inc. as of January 1, 2000. These
pro forma results are presented for comparative purposes only and are not
indicative of what may have occurred if the merger was completed before January
1, 2000. The pro forma results do not include any adjustments to reflect the
synergies of the business.

<TABLE>
<CAPTION>
                                                              Three months ended                   Nine months ended
                                                                (unaudited)                          (unaudited)
                                                                -----------                          -----------
                                                                         Pro forma                              Pro forma
                                                     September 30,      September 30,      September 30,      September 30,
                                                         2001              2000                2001               2000
                                                      ---------          ---------          ---------          ---------
<S>                                                  <C>                <C>                <C>                <C>
Net sales                                             $  96,838          $  90,924          $ 289,562          $ 260,881

Cost of sales                                            75,657             72,011            222,766            214,285
                                                      ---------          ---------          ---------          ---------
    Gross profit                                         21,181             18,913             66,796             46,596
                                                      ---------          ---------          ---------          ---------

Operating expenses:
     Fulfillment and customer service                     9,520             14,836             31,820             39,615
     Marketing, sales and editorial                      15,197             21,753             47,560             70,129
     Technology and web site
     development                                         10,069             14,463             34,859             37,294
     General and administrative                           7,822              6,431             23,626             22,883
     Depreciation and amortization                       10,778             10,149             31,134             25,013
     Stock based compensation                                --                 --                 --             11,740
     Equity in net loss of equity investments
        including related amortization of
        intangibles                                       7,384             12,234             20,593             29,649
                                                      ---------          ---------          ---------          ---------
         Total operating expenses                        60,770             79,866            189,592            236,323
                                                      ---------          ---------          ---------          ---------
Loss from operations                                    (39,589)           (60,953)          (122,796)          (189,727)

Interest income, net                                      1,301              4,488              6,265             18,528
                                                      ---------          ---------          ---------          ---------
    Loss before minority interest                       (38,288)           (56,465)          (116,531)          (171,199)

Minority interest                                        27,730             40,904             84,396            124,637
                                                      ---------          ---------          ---------          ---------
    Net loss                                          $ (10,558)         $ (15,561)         $ (32,135)         $ (46,562)
                                                      =========          =========          =========          =========

Basic and diluted loss before minority
     interest per share                                  ($0.24)            ($0.36)           ($ 0.73)            ($1.08)
Basic and diluted weighted average shares
    outstanding if converted                            158,787            158,615            158,787            158,126

Basic and diluted net loss per common
     share                                               ($0.24)            ($0.36)            ($0.73)            ($1.08)
Basic and diluted weighted average common
    shares outstanding                                   43,787             43,615             43,787             43,126
</TABLE>



                                       9
<PAGE>
                             barnesandnoble.com inc.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
       For the nine months ended September 30, 2001 and September 30, 2000
                (in thousands of dollars, except per share data)
                                   (unaudited)

10.      RELATED PARTY TRANSACTIONS

         Through its distribution facilities, Barnes & Noble accounted for
approximately 50% of the Company's purchases during the nine months ended
September 30, 2001 and September 30, 2000. Under a Supply Agreement, dated as of
October 31, 1998, as amended, between the Company and Barnes & Noble, Barnes &
Noble charges the Company the costs associated with such purchases plus
incremental overhead incurred by Barnes & Noble in connection with providing
such inventory. For the nine months ended September 30, 2001, $91,480 was
purchased from Barnes & Noble under this agreement.

         Under a Services Agreement, dated as of October 31, 1998, as amended,
between the Company and Barnes & Noble ("Services Agreement"), the Company
receives various services from Barnes & Noble and its subsidiaries, including,
among other things, services for payroll processing, benefits administration,
insurance (property and casualty, medical, dental and life), tax and traffic. In
accordance with the terms of the Services Agreement, the Company has paid, and
expects to continue to pay, fees to Barnes & Noble and its subsidiaries in an
amount equal to the direct costs plus incremental expenses associated with
providing such services. The Company paid $1,045 and $1,323 for such services
during the nine months ended September 30, 2001 and September 30, 2000,
respectively.

         The Company subleases from Barnes & Noble approximately one-third of a
300,000 square foot warehouse facility located in New Jersey. The Company paid
Barnes & Noble $365 for such subleased space during the nine months ended
September 30, 2001 and 2000.

         Since 1999, the Company has used the music distributor AEC One Stop
Group, Inc. ("AEC'), as its sole supplier, to fulfill its orders for music and
to provide a music database. Subsequent to an agreement between AEC and the
Company, 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, was a
significant minority investor. The Company paid AEC $17,364 and $15,520 in
connection with this agreement for merchandise and database usage during the
nine months ended September 30, 2001 and September 30, 2000, respectively. At
September 30, 2001, $3,423 remained payable to AEC in connection with this
agreement.

         The Company licenses the "Barnes & Noble" name under a royalty-free
license agreement, dated as of October 31, 1998, as amended, between the Company
and Barnes & Noble College Bookstores, Inc. (the "License Agreement"), of which
Leonard Riggio, Chairman of the Board of the Company and B&N.com, 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. The
License Agreement is subject to certain limitation provisions.

         Under a royalty-free Database and Software License Agreement, dated as
of October 31, 1998, as amended, between the Company and Barnes and Noble (the
"Database and Software License Agreement"), the Company licenses from Barnes &
Noble, the right to use Barnes & Noble's title database, inventory sourcing and
special order software. The Database and Software License Agreement is renewable
and is subject to certain termination provisions.



                                       10
<PAGE>
                             barnesandnoble.com inc.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
       For the nine months ended September 30, 2001 and September 30, 2000
                (in thousands of dollars, except per share data)
                                   (unaudited)

         Under a Trademark License Agreement, dated as of October 31, 1998, as
amended, between the Company and Bertelsmann Online ("BOL"), the subsidiary
through which Bertelsmann conducts its Internet business, the Company was
granted a non-exclusive royalty-free license to use BOL's name and trademark in
its operations and to sublicense the BOL name in accordance with the terms of
the license as the Class C Directors, in their sole discretion, see fit. The
license remains effective until the Company either defaults or becomes subject
to certain bankruptcy events.

         Under Technology Sharing License Agreements, dated as of October 31,
1998, as amended, between the Company and BOL, the Company was granted a
royalty-free license to view, access and use BOL's computer technology and
systems, and the Company granted BOL a royalty-free license to view, access and
use the Company's computer technology and systems. These agreements remain
effective until (i) the date both parties mutually agree to terminate, or (ii)
from and after the date either Barnes & Noble or Bertelsmann cease having an
equity interest of 10% or more in the Company. Following termination, each party
may continue to use in perpetuity any technology it obtained from the other
prior to such termination.

         The Company and Barnes & Noble commenced a marketing program in mid
November 2000, whereby a customer purchases a "Readers Advantage Card" for an
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 Company
purchases. The Company 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 taken with each company. Through September 30, 2001, the Company's
net revenue generated from this program was $388.

         Textbooks.com, Inc. ("Textbooks.com"), a corporation owned by Leonard
Riggio, Chairman of the Board of the Company and B&N.com, has a subsite on the
bn.com Web site. The Company fulfills the orders for Textbooks.com and records
the revenue on the textbooks sold. In January 2001, the Company and
Textbooks.com formalized an agreement to pay Textbooks.com a royalty on gross
revenues (net of product returns and applicable sales tax, if any) realized by
the Company (excluding shipping and handling) from the sale of books designated
as textbooks from January 1, 2000. Under this agreement, the Company is
permitted to sell textbooks using the "Barnes & Noble" name. The term of the
agreement is for five years and shall renew annually for additional one-year
periods unless terminated 12 months prior to the end of any given term. The
Company incurred a royalty expense of $3,902 for the nine months ended September
30, 2001.

         Under a Strategic Relationship Agreement, dated as of May 1, 2001 (the
"Strategic Relationship Agreement"), between the Company and GameStop, Inc.
("GameStop"), a wholly owned subsidiary of Barnes & Noble, GameStop sells video
game hardware, software and accessories and PC entertainment software through
the bn.com Web site. GameStop pays the Company a referral fee equal to
approximately 7.5% of its net sales revenue resulting from purchases made
through the bn.com Web site. The Strategic Relationship Agreement may be
terminated by either party on 60 days' notice after May 1, 2002. Commissions of
$13 have been recorded in the nine months ended September 30, 2001 under this
agreement.

         The Company has an approximate 45% equity stake in enews Corporation
("enews") and accounts for this investment under the equity method. The Company
fulfills a majority of orders for magazine subscriptions through enews and
records a commission on these sales. Beginning in October 2000, enews subleased
space from the Company at its New York office for an annual rent of $95. The
Company recorded commissions of



                                       11
<PAGE>
                             barnesandnoble.com inc.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
       For the nine months ended September 30, 2001 and September 30, 2000
                (in thousands of dollars, except per share data)
                                   (unaudited)

approximately $227 and $290 for the nine months ended September 30, 2001 and
2000, respectively, and related services of $99 for the first nine months ended
September 30, 2001.

         Michael N. Rosen, a director of the Company, is also the Chairman of
Robinson Silverman Pearce Aronsohn & Berman LLP, which is outside counsel to the
Company.

         The Company believes that the transactions discussed above, as well as
the terms of any future transactions and agreements (including renewals of any
existing agreements) between the Company and its affiliates, are and will be at
least as favorable to the Company as could be obtained from unaffiliated
parties. The Board of Directors and its Audit Committee must approve in advance
any proposed transaction or agreement and will utilize such 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.

11.      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, upon adoption of SFAS 142, that the Company reclassify the carrying
amounts of intangible assets and goodwill based on the criteria in SFAS 141.

         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 is
also required to reassess 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, 2001, the net carrying amount of
goodwill is $54,692. Amortization expense during the nine-month period ended
September 30, 2001 was $15,097. Currently, the Company is assessing but has not
yet determined how the adoption of SFAS 141 and SFAS 142 will impact its
financial position and results of operations.



                                       12
<PAGE>
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 sixth largest e-commerce Web site, based on the Media Metrix
September 2001 report.

         B&N.com has pursued a strategy of focusing on the sale of a broad range
of knowledge, information, education and entertainment related products. Since
opening its online store in March 1997, B&N.com has sold products to more than
10.3 million customers in 228 countries. B&N.com's Web site, www.bn.com, is
anchored by its online bookstore, and also offers music, video, magazines and
related products. B&N.com's online bookstore includes the largest in-stock
selection of in-print book titles, supplemented by more than 20 million listings
from its nationwide network of out-of-print, rare and used book dealers,
combined with the most comprehensive online selection of college textbooks.
B&N.com offers its customers fast delivery, easy and secure ordering, rich
editorial content and a community experience.

         B&N.com's affiliate network has more than 270,000 members and the
Company maintains strategic alliances with major Web portals and content sites,
such as Yahoo!, AOL, and MSN. B&N.com is also a leader in business-to-business
e-commerce through its wholly owned subsidiary, Fatbrain, which specializes in
professional and technical titles for the corporate marketplace.

         The results of operations discussed hereafter include the consolidated
results of the Company and B&N.com. In view of the rapidly 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. Pro forma results of operations for the period ended September 30,
2000 include the consolidation of the Company, B&N.com and Fatbrain as if the
Company had completed the merger with Fatbrain.com, Inc. as of January 1, 2000.
These pro forma results are presented for comparative purposes only and are not
indicative of what may have occurred if the merger was completed on January 1,
2000. The pro forma results do not include any adjustments to reflect the
synergies of the business.

Results of Operations

Net sales

<TABLE>
<CAPTION>
                     Three Months Ended September 30,                   Nine Months Ended September 30,
                     --------------------------------                   -------------------------------
                               Pro forma                                        Pro forma
                               ---------                                        ---------
                  2001            2000        % Change              2001           2000           % Change
                  ----            ----        --------              ----           ----           --------
                     (in thousands)                                    (in thousands)
<S>             <C>            <C>            <C>                 <C>            <C>              <C>
Net sales       $96,838        $90,924           7%               $289,562       $260,881            11%
</TABLE>

         Net sales are composed of sales of books, music, video and eBooks and
related products, net of returns and promotional discounts, as well as outbound
shipping and handling charges. Growth in net sales reflects an increase in units
sold due to the growth of B&N.com's customer base and repeat purchases from
B&N.com's existing customers. B&N.com added more than 765,000 customers during
the third quarter 2001, raising the


                                       13
<PAGE>
cumulative customer count to more than 10.3 million as of September 30, 2001.
For the third quarter 2001, the company's consumer book sales showed strong
gains which were partially offset by the weaker-than-anticipated corporate book
sales due to a curtailment of expenditures by major customers.

Gross profit

<TABLE>
<CAPTION>
                             Three Months Ended September 30,                       Nine Months Ended September 30,
                             --------------------------------                       -------------------------------
                                        Pro forma                                              Pro forma
                                        ---------                                              ---------
                          2001            2000          % Change               2001              2000            % Change
                          ----            ----          --------               ----              ----            --------
                             (in thousands)                                        (in thousands)
<S>                     <C>              <C>            <C>                   <C>              <C>               <C>
Gross profit            $21,181          $18,913           12%                $66,796          $46,596              43%

Gross margin              21.9%            20.8%                                23.1%            17.9%
</TABLE>


         Gross profit is net sales less the cost of sales, which consists of the
cost of merchandise sold to customers as well as inbound and outbound shipping
costs. Gross profit increased as a result of the increased utilization of the
new distribution centers and a substantial reduction in promotional discounts.

Fulfillment and customer service

<TABLE>
<CAPTION>
                              Three Months Ended September 30,                        Nine Months Ended September 30,
                              --------------------------------                        -------------------------------
                                        Pro forma                                                Pro forma
                                        ---------                                                ---------
                           2001             2000            % Change             2001               2000         % Change
                           ----             ----            --------             ----               ----         --------
                               (in thousands)                                         (in thousands)
<S>                       <C>             <C>               <C>                 <C>                <C>           <C>
Fulfillment and
 customer service         $9,520          $14,836              (36%)            $31,820            $39,615          (20%)

Percentage of
   net sales                9.8%            16.3%                                 11.0%              15.2%
</TABLE>


         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 as a result of B&N.com leveraging its
new state-of-the-art distribution facilities in Memphis and Reno and
incorporating the operations of Fatbrain, which was acquired by B&N.com in
November 2000. B&N.com anticipates its variable costs of fulfillment and
customer service will increase based on anticipated sales growth; however, as a
percentage of sales it is expected that fulfillment and customer service
expenses will continue to improve compared with last year.




                                       14
<PAGE>
Marketing, sales and editorial

<TABLE>
<CAPTION>
                                  Three Months Ended September 30,                   Nine Months Ended September 30,
                                  --------------------------------                   -------------------------------
                                            Pro forma                                         Pro forma
                                            ---------                                         ---------
                             2001             2000          % Change             2001            2000              % Change
                             ----             ----          --------             ----            ----              --------
                                 (in thousands)                                      (in thousands)
<S>                         <C>              <C>            <C>                <C>                <C>              <C>
Marketing, sales
   and editorial            $15,197          $21,753          (30%)            $47,560            $70,129             (32%)

Percentage of
   net sales                  15.7%            23.9%                             16.4%              26.9%
</TABLE>


         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 increase in net
sales and the Company's focus on more targeted, measurable marketing programs.
The Company expects to continue such focus in order to continue to drive down
these expenses as a percentage of sales.

Technology and web site development

<TABLE>
<CAPTION>
                                Three Months Ended September 30,                     Nine Months Ended September 30,
                                --------------------------------                     -------------------------------
                                         Pro forma                                            Pro forma
                                         ---------                                            ---------
                             2001          2000            % Change              2001            2000            % Change
                             ----          ----            --------              ----            ----            --------
                               (in thousands)                                      (in thousands)
<S>                        <C>            <C>               <C>                 <C>             <C>               <C>
Technology
   and web site
   development             $10,069        $14,463           (30%)               $34,859         $37,294            (7%)

Percentage of
   net sales                 10.4%          15.9%                                 12.0%           14.3%
</TABLE>

         Technology and web site development expenses consist principally of
payroll and related expenses for Web page production and computer network
operations personnel, and expenses related to systems infrastructure and
telecommunications. The decrease for the nine months ended September 30, 2001 in
technology and web site development expenses was primarily attributable to
increased infrastructure efficiency and reduced labor expenses during the third
quarter. Technology and web site development expenses are expected to continue
to decrease as a percentage of sales for the remainder of 2001.


                                       15
<PAGE>
General and administrative

<TABLE>
<CAPTION>
                                 Three Months Ended September 30,                      Nine Months Ended September 30,
                                 --------------------------------                      -------------------------------
                                           Pro forma                                             Pro forma
                                           ---------                                             ---------
                              2001            2000            % Change            2001              2000            % Change
                              ----            ----            --------            ----              ----            --------
                                 (in thousands)                                        (in thousands)
<S>                           <C>             <C>             <C>                 <C>              <C>              <C>
General and
   administrative             $7,822          $6,431             22%              $23,626          $22,883              3%

Percentage of
   net sales                    8.1%            7.1%                                 8.2%             8.8%
</TABLE>


         General and administrative expenses 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 increase in general and administrative
expenses was primarily due to an increase in credit card processing costs as a
result of the significant sales increase.

Depreciation and amortization

<TABLE>
<CAPTION>
                                  Three Months Ended September 30,                    Nine Months Ended September 30,
                                  --------------------------------                    -------------------------------
                                            Pro forma                                            Pro forma
                                            ---------                                            ---------
                               2001            2000           % Change             2001             2000            % Change
                               ----            ----           --------             ----             ----            --------
                                  (in thousands)                                      (in thousands)
<S>                            <C>           <C>              <C>                  <C>            <C>               <C>
Depreciation and
    amortization               $10,778       $10,149             6%                $31,134        $25,013               24%

Percentage of
   net sales                     11.1%         11.2%                                 10.8%            9.6%
</TABLE>


         The increase in depreciation and amortization expenses is the result of
the increase in capital expenditures in 2000 related to the building of two new
warehouses and the implementation of the technology infrastructure to support
them.

Stock based compensation

<TABLE>
<CAPTION>
                                 Three Months Ended September 30,                 Nine Months Ended September 30,
                                 --------------------------------                 -------------------------------
                                          Pro forma                                         Pro forma
                                          ---------                                         ---------
                                2001        2000         % Change              2001           2000            % Change
                                ----        ----         --------              ----           ----            --------
                                 (in thousands)                                   (in thousands)
<S>                           <C>           <C>          <C>                  <C>           <C>               <C>
Stock based
   compensation               $   -         $ -             -                 $    -        $11,740               -

Percentage of
   net sales                      -           -                                    -            4.5%
</TABLE>

         There was no stock-based compensation recorded in the first nine months
of 2001. On March 1, 2000 the Company repriced approximately 5 million of 16
million then outstanding options, which were originally granted at an average
per share exercise price of $16.15, to a new per share exercise price of $8.00,
the closing per share market price of the Company's stock as of March 1, 2000.
The Company is accounting for its repriced options as



                                       16
<PAGE>
if they were variable options and as a result has not recorded any expense due
to the decrease in the Company's stock price below the new exercise price.


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

<TABLE>
<CAPTION>
                                        Three Months Ended September 30,                      Nine Months Ended September 30,
                                        --------------------------------                      -------------------------------
                                                   Pro forma                                            Pro forma
                                                   ---------                                            ---------
                                      2001           2000        % Change                 2001             2000           % Change
                                      ----           ----        --------                 ----             ----           --------
                                         (in thousands)                                       (in thousands)
<S>                                   <C>          <C>           <C>                      <C>            <C>              <C>
Equity in net
    loss of equity
    investments including
    related to amortization
       of intangibles
                                      $7,384       $12,234       (40%)                    $20,593        $29,649          (31%)
Percentage of
   net sales                            7.6%          13.5%                                  7.1%           11.4%
</TABLE>


         Equity in net loss of equity investments including related amortization
of intangibles consists of losses from the Company's equity investments in enews
and MightyWords, Inc. Equity in net loss of equity investments decreased due to
impairment charges in December 2000, reducing the value of the Company's equity
investments. B&N.com concluded that its carrying amount of certain equity
investments, primarily enews and MightyWords, exceeded their fair value and that
the decline was other than temporary. The impairment loss was precipitated by
the significant decline in the value of Internet sector entities. No additional
impairment has been recorded beyond that which was recorded in December 2000.

Interest Income, Net

<TABLE>
<CAPTION>
                                   Three Months Ended September 30,                      Nine Months Ended September 30,
                                   --------------------------------                      -------------------------------
                                             Pro forma                                           Pro forma
                                             ---------                                           ---------
                                 2001          2000          % Change                2001           2000           % Change
                                 ----          ----          --------                ----           ----           --------
                                   (in thousands)                                      (in thousands)
=<S>                            <C>          <C>             <C>                    <C>           <C>              <C>
Interest income, net            $1,301       $4,488           (71%)                 $6,265        $18,528            (66%)

Percentage of
  net  sales                      1.3%          4.9%                                  2.2%            7.1%
</TABLE>


         Interest income decreased compared with last year as cash balances
decreased due to their use as a source of funding the Company's operations. In
addition, interest rates on investments have significantly decreased during the
first nine months of 2001. All available cash is invested in various marketable
securities consisting primarily of 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.

                                       17
<PAGE>
Liquidity and Capital Resources

         As of September 30, 2001, the Company's cash, cash equivalents and
short-term marketable securities were $125.5 million, compared to $212.3 million
on December 31, 2000. The Company continues to have a debt-free balance sheet.

         Net cash flows used in operating activities were $87.2 million for the
nine months ended September 30, 2001 and $151.3 million for the nine months
ended September 30, 2000. 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 partially
offset by a $10.7 million decrease in receivables, an increase in payables to
affiliates of $22.8 million and a decrease of $1.6 million in prepaid expenses
and other current assets. Cash used for the nine months ended September 30, 2000
was primarily attributable to a net loss of $29.0 million, a corresponding
decrease in minority interest of $108.6 million, a decrease in accounts payable
of $17.6 million, an increase in merchandise inventories of $35.6 million and an
increase in prepaid expenses and other current assets of $7.5 million. This was
partially offset by an increase in payables to affiliates of $3.8 million and an
increase in accrued liabilities of $8.6 million.

         Net cash flows from investing activities of $15.9 million for the nine
months ended September 30, 2001 were primarily attributable to purchases of
fixed assets totaling $6.0 million, offset by a decrease of $1.3 million in
other non-current assets and sales of marketable securities of $20.6 million.
Net cash flows used in investing activities of $77.8 million for the nine months
ended September 30, 2000 were attributable to a $44.9 million increase in other
non-current assets and purchases of fixed assets totaling $73.1 million, offset
by sales of marketable securities totaling $40.3 million.

         Net cash flows from financing activities were $5.7 million for the nine
months ended September 30, 2000, attributable to proceeds from the exercise of
stock options.

         At September 30, 2001, the Company's principal sources of liquidity
consisted of $108.3 million in cash and cash equivalents and $17.1 million in
short-term marketable securities. As of September 30, 2001, the Company's
remaining principal commitments consisted of obligations outstanding under
operating leases.

         The Company believes that current cash and investments 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 short-term investments in addition
to cash generated from operations is 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



                                       18
<PAGE>
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 Disclosure about Market Risk

         The Company invested in enews and 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 2000 B&N.com
recorded an impairment charge of $23.1 million related to equity method and
other investments. At September 30, 2001 the Company's equity-method investments
amounted to $9.7 million. No impairment is considered to exist at September 30,
2001 beyond that which was recorded at December 31, 2000. These investments are
in companies involved in the Internet and e-commerce industries and their fair
values are subject to significant fluctuations due to volatile market
conditions.

         B&N.com invests certain of its excess cash in debt instruments of the
U.S. Government and its agencies, and of high quality corporate issuers. All
highly liquid instruments with a remaining maturity of three months or less are
considered cash equivalents; those with remaining maturities greater than three
months and less than one year are classified as marketable securities. Long-term
marketable securities mature within two years. B&N.com is exposed to interest
rate risk on the debt instruments that it holds. The values of the Company's
marketable securities are subject to market price volatility. As of September
30, 2001, the Company's investments in cash, cash equivalents and marketable
securities totaled approximately $125 million.



                                       19
<PAGE>
                           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. Since May 28, 1999, B&N.com has invested approximately $17.1 million of
such net proceeds in short-term marketable securities. 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 9,
2001.

         The following nominees were elected as Directors, each to serve until
the 2004 Annual Meeting of Stockholders and until their respective successors
are duly elected, by the vote set forth below:

<TABLE>
<CAPTION>
      Director Class            Nominee                       For               Withheld
      --------------            -------                       ---               --------
<S>                         <C>                         <C>                     <C>
         Class A            Patricia Higgins            1,186,827,726            501,144
         Class B            Stephen Riggio                575,000,010                  -
         Class C            Klaus Eierhoff                575,000,010                  -
</TABLE>


                                       20
<PAGE>
         The appointment of BDO Seidman, LLP as independent certified public
accountants for the Company's fiscal year ending December 31, 2001 was ratified
by the vote set forth below.

              For                     Against                  Abstain
    -----------------------      ------------------        --------------
        1,186,907,227                 357,210                  64,433


Item 5: Other Information

                  None

Item 6: Exhibits and Reports on Form 8-K

                  (a)      No report on 8-K was filed by the Company during the
                           fiscal quarter for which this report is filed.




                                       21
<PAGE>
                                   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 13, 2001                       By: /s/  Kevin M. Frain
                                                  ------------------------------
                                                        Kevin M. Frain
                                                        Vice President, Finance

                                       22