SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-K

                                   (Mark One)
                [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                    For the fiscal year ended March 31, 1999

                                       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 333-48221

                           Nebraska Book Company, Inc.
             (Exact name of registrant as specified in its charter)

               Kansas                                           47-0549819
(State or other jurisdiction of                             (I.R.S. Employer
incorporation or organization)                              Identification No.)

                             4700 South 19th Street
                             Lincoln, NE 68501-0529
                    (Address of Principal executive offices)

                                 (402) 421-7300
              (Registrant's telephone number, including area code)

         Securities registered pursuant to Section 12(b) of the Act: None
         Securities registered pursuant to Section 12(g) of the Act: None

    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. [x] Yes [ ] No

     Indicate by check mark if disclosure of delinquent  filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein,
and will not be contained,  to the best of registrant's knowledge, in definitive
proxy or information  statements  incorporated  by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [x]

    There are no shares of the registrant's  voting stock held by non-affiliates
of the Registrant.

    There were 100 shares of common stock outstanding as of June 18, 1999.


                    DOCUMENTS INCORPORATED BY REFERENCE: None


                            Total Number of Pages: 55

                             Exhibit Index: Page 55

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                                TABLE OF CONTENTS

PART I:

Item 1    Business......................................................... 3
Item 2    Properties.......................................................13
Item 3    Legal Proceedings................................................14
Item 4    Submission of Matters to a Vote of Security Holders..............14

PART II:

Item 5    Market for Registrant's Common Equity and Related
           Stockholder Matters.............................................15
Item 6    Selected Financial Data..........................................15
Item 7    Management's Discussion and Analysis of
           Financial Condition and Results of Operations...................16
Item 7A   Quantitative and Qualitative Disclosures about Market Risk.......22
Item 8    Financial Statements and Supplementary Data......................23
Item 9    Changes in and Disagreements with Accountants on
           Accounting and Financial Disc1osure.............................41

PART III:

Item 10   Directors and Executive Officers of the Registrant...............42
Item 11   Executive Compensation...........................................43
Item 12   Security Ownership of Certain Beneficial Owners and Management...46
Item 13   Certain Relationships and Related Transactions...................47

PART IV:

Item 14   Exhibits, Financial Statement Schedules,
           and Reports on Form 8-K.........................................48
Signatures.................................................................52
Supplemental Information to be Furnished...................................52
Financial Statement Schedule II - Valuation and Qualifying Accounts........53
Exhibit Index..............................................................55




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                                     PART I.

                                ITEM 1. BUSINESS.


Recapitalization and Public Registration

     Effective  September 1, 1995,  Nebraska Book Company,  Inc. (the "Company")
was  acquired  in a  leveraged  buyout  by  NBC  Acquisition  Corp.  ("NBC"),  a
corporation  owned by investment  partnerships  affiliated with Olympus Advisory
Partners,  Inc. and certain other investors (the "1995  Transaction").  The 1995
Transaction was accounted for as a purchase business combination.

    Pursuant  to a merger  agreement  dated  January 6, 1998 among NBC;  certain
shareholders  of NBC,  including  members of senior  management;  and NBC Merger
Corp.,  a  newly  created,  indirect  wholly-owned  subsidiary  of  HWH  Capital
Partners,  L.P.("HWH"), NBC Merger Corp. merged with and into NBC (the "Merger")
with NBC as the surviving corporation. As a result of the Merger, which occurred
on February 13, 1998, certain NBC stockholders received a total of approximately
$165.9 million.  In addition,  upon the consummation of the Merger,  the Company
repaid approximately $82.0 million of outstanding  indebtedness.  As a result of
the early  extinguishment of debt in fiscal 1998, the Company  recognized a $4.0
million extraordinary loss, net of taxes.

    Concurrently with the consummation of the Merger, the Company entered into a
senior  secured  credit  agreement  (the  "Credit  Agreement")  with  The  Chase
Manhattan Bank ("Chase"),  as administrative  agent, and other lenders providing
for the following facilities (the "Senior Credit Facility"): (i) a $50.0 million
revolving  credit  facility  maturing  on March 31,  2004  which was  undrawn at
closing (the "Revolving Credit  Facility");  (ii) a $27.5 million tranche A term
loan,  maturing on March 31, 2004 (the "Tranche A Term Loan"); and (iii) a $32.5
million  tranche B term loan,  maturing on March 31,  2006 (the  "Tranche B Term
Loan"  and,  together  with the  Tranche  A Term  Loan,  the "Term  Loans").  In
addition, the Company also raised approximately $103.6 million from the issuance
of senior  subordinated notes (the "Senior  Subordinated  Notes").  NBC raised a
total of $91.6  million,  which it  contributed  to the  Company as equity  (the
"Equity Contribution"),  through: (i) the sale of approximately $45.6 million of
NBC  Acquisition  Corp.  Class A Common Stock to HWH; (ii) the  reinvestment  of
approximately  $4.4 million in NBC Acquisition Corp. Class A Common Stock by the
Company's  senior  management;  and (iii) net  proceeds of  approximately  $41.6
million from the issuance of senior discount  debentures  (the "Senior  Discount
Debentures").

    The Merger, the repayment of substantially all of the Company's  outstanding
indebtedness, the Equity Contribution, the issuance by the Company of the Senior
Subordinated Notes, the issuance by NBC of the Senior Discount  Debentures,  the
Company's borrowings under the Senior Credit Facility and the application of all
proceeds thereof are collectively referred to as the "Recapitalization."

    During  fiscal 1999,  the Company and NBC filed  Registration  Statements on
Form S-4 with the Securities and Exchange Commission for purposes of registering
debt securities to be issued in exchange for the Company's  Senior  Subordinated
Notes  and  NBC's  Senior  Discount  Debentures.  The  Securities  and  Exchange
Commission declared such Registration Statements effective on July 14, 1998. All
notes were  tendered in the offer to exchange  which was completed on August 13,
1998.

General

    The Company is one of the largest  wholesale  distributors  of used  college
textbooks in North America,  offering  approximately  90,000 textbook titles and
selling more than 7.1 million  books  annually at  approximately  2,000  college
campuses. In addition,  the Company owns or manages 65 bookstores on or adjacent
to college  campuses  through which it sells a variety of new and used textbooks
and  general  merchandise.  The  Company is also a leading  provider of distance
education  materials  to  students  in  nontraditional  courses,  which  include
correspondence  and  corporate  education  courses.   Furthermore,  the  Company
provides the college  bookstore  industry  with a variety of services  including
in-store  promotions,   buying  programs,  marketing  services  and  proprietary
information  systems.  With  origins  dating to 1915,  the  Company  has built a

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consistent reputation for excellence in order fulfillment,  shipping performance
and customer  service.  For the fiscal year ended March 31, 1999,  the Company's
revenues were $217.5 million.

    The Company entered the wholesale used textbook  market  following World War
II, when the supply of new  textbooks  could not meet the demand  created by the
return of ex-GI  students.  In 1964, the Company became a national,  rather than
regional,  wholesaler  of used  textbooks  as a result  of its  purchase  of The
College Book Company of California.  During the 1970's the Company continued its
focus on the wholesale  business.  However,  realizing the synergies  that exist
between wholesale operations and college bookstore operations,  in the 1980's it
expanded its efforts in the college bookstore market with a new strategy.  Under
this new strategy the Company  operates  bookstores on or near larger  campuses,
typically where the institution-owned college bookstore is contract-managed by a
competitor or where the Company does not have a significant  wholesale presence.
Today,  the  Company  services  the  college  bookstore   industry  through  its
wholesale, college bookstore and services operations.

    Wholesale.  The Company is one of the largest wholesale distributors of used
college textbooks in North America.  Its wholesale  operations consist primarily
of selling used textbooks to college bookstores,  buying them back from students
or college bookstores at the end of each school semester and then reselling them
to college  bookstores.  The Company  purchases  used textbooks from and resells
them to college  bookstores at many of the nation's  largest  college  campuses,
including:  University  of Texas,  University  of Southern  California,  Indiana
University,  University  of Arizona,  Brigham  Young  University,  University of
Washington  and  University of Minnesota.  Historically,  because the demand for
used textbooks has consistently  outpaced supply, the Company's  wholesale sales
have been  determined  primarily by the amount of used  textbooks  that it could
purchase.   The  Company's   strong   relationships   with  the   management  of
approximately  2,000   independently-owned   college  bookstores  have  provided
important access to valuable market information  regarding the  campus-by-campus
supply  and  demand  of  textbooks,  as  well as an  ability  to  procure  large
quantities   of  a  wide  variety  of   textbooks.   The  Company   provides  an
internally-developed  Buyer's  Guide to its  customers,  which lists over 41,000
textbook  titles  with such  details as author,  new copy  retail  price and the
Company's repurchase price.

    College bookstores.  College bookstores are the primary outlets for sales of
new and used textbooks to students.  The Company operates 65 college  bookstores
on or  adjacent  to college  campuses  of which  eight are  operated on physical
premises which are owned by and leased from the educational  institution  (i.e.,
"contract-managed").  Its college bookstores are located at some of the nation's
largest  college  campuses  including:  University  of Nebraska,  University  of
Michigan,  University of Maryland, Arizona State University,  Pennsylvania State
University,   University  of  Kansas,  Cornell  University,  Baylor  University,
Oklahoma  State  University,  University  of Tennessee and Ohio  University.  In
addition to generating  profits,  the  Company's  college  bookstore  operations
provide an  exclusive  source of used  textbooks  for sale across the  Company's
wholesale  distribution  network.  The  Company  generally  focuses  its college
bookstore  operations at colleges where the Company  otherwise  would not have a
significant representation.

    Complementary   Services.   In  fiscal  1998,  the  Company   completed  two
acquisitions  representing  new  initiatives  for  it in the  college  bookstore
industry.  In January 1998, the Company acquired  Collegiate Stores  Corporation
("CSC"), a centralized buying service for over 450 college bookstores across the
United States.  Through the enhanced  purchasing  power of such a large group of
bookstores,  participating  bookstores  are  able to  purchase  certain  general
merchandise  at  lower  prices  than  those  that  would  be paid by the  stores
individually.  Bookstores  participating  in CSC's  programs  also  provide  the
Company with another  potential source of used textbooks.  The Company is in the
process  of  developing  incentives  underlying  the  purchase  and sale of used
textbooks for CSC program participants. With its acquisition of Specialty Books,
Inc. ("Specialty Books") in May 1997, the Company entered the distance education
market,   which  consists  of  providing  education  materials  to  students  in
nontraditional  college  and  other  courses  (such as  correspondence  courses,
continuing  and  corporate   education   courses  and  courses  offered  through
electronic  media  such as the  Internet).  Other  services  offered  to college
bookstores  include  the sale of computer  hardware  and  software,  such as the
Company's  turnkey  bookstore  management  software,   and  related  maintenance
contracts.  These services  generate revenue and assist the Company in enhancing
and developing customer relationships.

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Industry Segment Financial Information

    Revenue,  operating profit or loss and identifiable  assets  attributable to
each of the  Company's  industry  segments  are  disclosed  in the  notes to the
financial statements presented in Item 8 of the Company's Form 10-K.

Business Strategy

    The Company's  objective is to strengthen its position as a leading provider
of products and services to the college  bookstore  market,  thereby  increasing
revenue and cash flow. In order to accomplish its goal,  the Company  intends to
pursue the following strategies:

    Enhance  growth in  wholesale  operations.  The  Company  expects the stable
growth of its  wholesale  operations  to  continue,  primarily as a result of an
expected  increase in college  enrollments  and  increased  utilization  of used
textbooks,  as well as  through  the  expansion  of its  own  college  bookstore
network.

    Capitalize on college bookstore opportunities. The Company intends to expand
sales for its college bookstore  operations by acquiring and opening  bookstores
at selected  college  campuses and offering  additional  specialty  products and
services  at its  existing  bookstores.  The  Company  also  believes  there are
significant  opportunities  to improve  cash flow at its college  bookstores  by
reducing certain selling,  general and administrative  expenses and by realizing
economies of scale through increased  purchasing power for textbooks and general
merchandise as a result of its affiliation with CSC.

    Pursue additional growth opportunities.  The Company intends to aggressively
pursue selected growth opportunities in several related markets, including:

    o   Complementary  Services.  The Company believes that its affiliation with
        CSC will greatly enhance the Company's sales and marketing capabilities,
        bolstering growth and positioning the Company as a dominant full-service
        provider  within the  college  bookstore  industry,  by  increasing  its
        sources  of used  textbooks  and  providing  access  to CSC's  marketing
        programs  and  capabilities.  During its first  full year of  operations
        under the control of the Company,  CSC  contributed net revenues of $1.6
        million.

    o   Distance Education.  The distance education market is growing due to the
        increased popularity of correspondence courses, continuing and corporate
        education  courses and courses offered through  electronic media such as
        the Internet.  Through its acquisition of Specialty  Books,  the Company
        believes  that it is well  positioned  to take  advantage of this growth
        trend. During its first full year of operations under the control of the
        Company, Specialty Books contributed net revenues of $6.0 million.

Industry Overview

    Based on recent industry trade data, the college bookstore  industry remains
strong,  with  approximately  5,000 college  stores  generating  annual sales in
excess of $8.0 billion to college students and other consumers in North America.
Sales of textbooks and other education materials used for classroom  instruction
comprise  approximately  two-thirds  of this  amount.  The Company  expects this
market will continue to grow as a result of anticipated  increases in enrollment
at U.S.  colleges  attributable  to the  children  of the baby  boom  generation
entering the college population.

    Wholesale  textbook  market.  The Company  believes that used textbooks will
continue  to be  attractive  to  both  students  and  college  bookstores.  Used
textbooks  provide  students with a lower-cost  alternative to new textbooks and
bookstores typically achieve higher margins through the sale of used rather than
new textbooks.


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    The pricing pattern of textbook  publishing accounts for a large part of the
growth of the used book  market.  Because of  copyright  restrictions,  each new
textbook is produced  by only one  publisher,  which is free to set the new copy
retail price and discount terms to bookstores.  Publishers  generally  offer new
textbooks at prices which enable college bookstores to achieve a gross margin of
23.0% to 25.0% on new  textbooks.  Historically,  the high  retail  costs of new
textbooks  and the higher  margins  achieved by  bookstores  on the sale of used
textbooks  (approximately  33.0%) have  encouraged  the growth of the market for
used textbooks.

    The used textbook cycle begins with new textbook  publishers,  who purposely
plan obsolescence into the publication of new textbooks. Generally, new editions
of textbooks  are produced  every two to four years.  In the first year of a new
edition, there are few used copies of a new edition available. In the second and
third years,  used  textbooks  become  increasingly  available.  Simultaneously,
publishers  begin to plan an updated edition.  In years four and beyond,  at the
end of the average life cycle of a particular edition, as publishers cut back on
original  production,  used  textbooks  generally  represent a majority (in unit
terms) of the particular edition in use. While the length of the cycle varies by
title (and sometimes is indefinite,  as certain titles are never  updated),  the
basic supply/demand progression remains fairly consistent.

    The following example illustrates the life cycle of a used textbook as it is
purchased from the college  bookstore by the  wholesaler,  then sold back to the
college  bookstore  which  resells  it to the  student  who,  at the  end of the
semester,  sells it back to the  college  bookstore  (assuming a new copy retail
list  price of  $100.00):  The  wholesaler  begins  the cycle by buying the used
textbook from the college  bookstore for $32.00.  The  wholesaler  will sell the
used  textbook  to the  college  bookstore  for  $50.00 or 50.0% of the new copy
retail price.  The  bookstore in turn,  sells it to the student for 75.0% of the
new copy retail price, or $75.00 (earning a gross margin of 33.0%).  This margin
compares favorably to the gross margin provided by sales of new textbooks, which
historically  has been in the range of 23.0 to 25.0%.  After using the  textbook
for the semester,  the student sells the book back to the college  bookstore for
$28.00,  and the  bookstore  again  sells  the used book to the  wholesaler  for
$32.00,  for a net  commission  of $4.00.  The  wholesaler's  mark-up  of $18.00
(selling  price of $50.00 less  acquisition  cost of $32.00)  represents a gross
margin of 36.0%, not taking into account the periodic  increase in prices of new
textbooks.

    College bookstores begin to place orders with used textbook wholesalers once
professors  determine  which books will be required for their upcoming  courses,
usually by the end of May for the fall  semester and the end of November for the
spring  semester.  Bookstore  operators must first  determine  their  allocation
between new and used copies for a particular title but, in most cases, they will
order an  excessive  quantity of used books  because:  (i) used book demand from
students is  typically  strong and  consistent;  (ii) many  operators  only have
access to a limited  supply from  wholesalers  and believe  that not having used
book alternatives could create considerable  frustration among students and with
the college  administration;  (iii)  bookstore  operators earn higher margins on
used  books  than on new  books;  and (iv) both new and used books are sold with
return privileges, eliminating any overstock risk (excluding freight charges) to
the college bookstore.

    New  textbook  ordering  usually  begins  in June,  at which  time the store
operator  augments its expected used book supply by ordering new books.  By this
time,  publishers  typically  will  have just  implemented  their  annual  price
increases.  These regular price increases,  which  historically have run 4.0% to
5.0%,  allow the Company and its  competitors to buy used textbooks based on old
list prices (in May) and to almost  simultaneously sell them based on new higher
prices, thereby creating an immediate margin increase.

    While  price is an  important  factor  in the  store  operator's  purchasing
decision,  available  supply,  as well as service,  usually determine with which
used textbook wholesaler a college bookstore will develop a strong relationship.
Pure exclusive supply  arrangements in the Company's  market are rare.  However,
used  textbook  wholesalers  that are able to  significantly  service  a college
bookstore account typically receive preferential treatment from store operators,
both in selling and in buying used textbooks.  Since the Company is usually able
to sell the vast  majority of the used  textbooks  it is able to  purchase,  its
ability to obtain  sufficient  supply is the critical  factor for the  Company's
success.

    College  bookstore   market.   College  stores  generally  fall  into  three
categories: (i) institutional -  stores that are primarily owned and operated by


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institutions  of  higher  learning   (represent  60.0%  of  the  market);   (ii)
contract-managed  - stores owned by  institutions of higher learning and managed
by outside, private companies, typically found on-campus (represent 25.0% of the
market);  and (iii)  independent  stores - privately owned and operated  stores,
generally  located off campus (represent 15.0% of the market).  In general,  the
"captive"   portion   of   the   college   bookstore   market   includes   those
contract-managed  stores that sell their used textbooks to affiliated companies,
and institutional and independent  stores to the extent that such used textbooks
are  repurchased  from  students  and are retained by the  bookstore  for resale
without involving a wholesaler.

    The Company  believes that sales at its college  bookstores will continue to
grow as a result of increased  enrollment at colleges and due to the  increasing
number of products and services  offered in these  bookstores.  In addition,  it
believes that as a result of the  development and  implementation  of management
information systems to improve  productivity and customer service, as well as to
more easily and efficiently track and manage inventory, the profitability of its
college bookstores will increase.

Products and Services

     Wholesale.   The  Company's   wholesale   operations  are  engaged  in  the
procurement  and  redistribution  of  textbooks on college  campuses  across the
nation.

    The  Company  also  publishes  the  Buyer's  Guide,  which lists over 41,000
textbooks  according to author,  title,  new copy retail price and the Company's
repurchase  price.  The  Buyer's  Guide is an  important  part of the  Company's
inventory control and book procurement  system. The Company updates and reprints
the Buyer's  Guide ten times each year and makes it  available in both print and
various  electronic  formats,  including  on all of  the  Company's  proprietary
information systems. A staff of dedicated professionals gathers information from
all over the  country in order to make the  Buyer's  Guide into what the Company
believes to be the most  comprehensive and up-to-date pricing and buying aid for
college bookstores. The Company also maintains a database of over 170,000 titles
in order to better serve its customers.

    College  bookstores.  The  Company  operates  65  college  bookstores  on or
adjacent to college campuses of which eight are contract-managed by the Company.
These  bookstores  sell a wide variety of used and new textbooks,  general books
and assorted general  merchandise,  including apparel,  sundries and gift items.
Over the past three years,  revenues of the Company's bookstores from activities
other  than used and new  textbook  sales have been  between  28.5% and 36.7% of
total  revenues.  The Company has been,  and  intends to  continue,  selectively
expanding its product offerings at its bookstores in order to increase sales and
profitability.

    The college bookstore  operations also provide consulting  services to other
college bookstores.  Using their industry experience,  the Company's specialists
work with  college  bookstore  managers to provide them with systems and support
services. The Company offers assistance in areas such as store planning, systems
and merchandise layouts.

    Complementary  Services.  As a result of the Company's acquisition of CSC in
January  1998,  it is able to offer a variety of products  and services to CSC's
participating  college  bookstores.  CSC offers apparel and general  merchandise
through discount  programs,  develops and executes  marketing programs and hosts
trade shows at which vendor's showcase their products.  As a centralized  buying
service for over 450 participating  college  bookstores,  CSC has evolved into a
buying group with enough purchasing power to compete with larger, multi-location
store operators.

    Through a joint venture with  American  Collegiate  Marketing,  CSC offers a
plastic bag program to college  bookstores.  This  plastic bag program  provides
bookstores the opportunity to purchase customized bags at a substantial discount
while the Company  generates a profit due to receipt of revenue from advertising
inserts which are placed inside the bags. Other CSC marketing services include a
freight  savings  program,  a check  authorization  program,  and retail display
allowances for magazine displays.

    CSC also provides an opportunity  for  interaction and exchange among buyers
and between buyers and vendors to the college bookstore market through an annual
trade show, which is held in February/March. Vendors pay CSC for the opportunity
to attend these trade shows.

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<PAGE>

    Additionally,  a staff of  experienced  CSC  professionals  consult with the
management  of  bookstores  both by telephone  and in person.  Services  offered
include strategic  planning,  store review,  merchandise  planning and help with
most  other   operational   aspects  of  the  business.   While  consulting  has
historically  represented a relatively small component of CSC's business,  it is
nonetheless strategically important to the ongoing success of this aspect of the
Company's business.

    With its acquisition of Specialty Books in May 1997, the Company entered the
market for distance  education  products and  services.  Currently,  the Company
provides  students at over 50 colleges  with  textbooks and materials for use in
distance  education  courses,   and  is  a  leading  provider  of  textbooks  to
nontraditional  programs  and  students  such  as  correspondence  or  corporate
education  students.  The Company  believes the  fragmented  distance  education
market represents an opportunity for the Company to leverage its fulfillment and
distribution  expertise  in a rapidly  growing  sector.  Beyond  textbooks,  the
Company offers  services and specialty  course  materials to distance  education
students including  videotape  duplication and shipping,  shipping of specialty,
nontextbook  course  materials and a sales and ordering  function.  Students can
order  distance  education  materials  from the Company over the  Internet.  The
Company believes it can significantly  increase the service operations  revenues
from distance education products over the next several years.

    Other services offered to college bookstores include services related to the
Company's turnkey bookstore  management  software and the sale of other software
and hardware, and related maintenance contracts. These services generate revenue
and assist the Company in gaining access to new sources of used  textbooks.  The
Company has an installed  base of over 400 college  bookstore  locations for its
textbook management control systems,  and it has installed its proprietary total
store management system at over 200 college bookstore locations.  In total, over
600 college bookstore locations utilize the Company's software products.

Wholesale Procurement and Distribution

    Historically,  because  the  demand  for  used  textbooks  has  consistently
exceeded  supply,  the  Company's  sales have been  primarily  determined by the
amount of used  textbooks  that it can purchase.  The Company  believes that, on
average, it is able to fulfill approximately 20% of its demand. As a result, the
Company's success has depended primarily on its inventory  procurement,  and the
Company  continues  to focus its  efforts on  obtaining  inventory.  In order to
ensure its  ability to both obtain and  redistribute  inventory,  the  Company's
wholesale  strategy has emphasized  establishing and maintaining strong customer
and supplier relationships with college bookstores  (primarily,  independent and
institutional college bookstores) through its employee account  representatives.
These 45 account  representatives  (as of March 31,  1999) are  responsible  for
procuring  used textbooks  from  students,  marketing the Company's  services on
campus,  purchasing  overstock  textbooks from bookstores and securing leads for
sale of the Company's automation products. The Company has been able to maintain
a  competitive  edge by providing  superior  service,  made  possible  primarily
through  the   development   and  maintenance  of  ready  access  to  inventory,
information  and supply.  Other  components  of the  wholesale  strategy and its
implementation  include:  (i) selectively  paying a marginal premium relative to
competitors  to entice  students  to sell back more books to the  Company;  (ii)
gaining  access  to  competitive   campuses  (where  the  campus   bookstore  is
contract-managed by a competitor) by opening off-campus,  Company-owned  college
bookstores;  (iii) using technology to gain efficiencies and to improve customer
service;  (iv) maintaining a knowledgeable  and experienced  sales force that is
customer-service  oriented;  and (v) providing  working capital  flexibility for
bookstores making substantial purchases.

    The  two  major  used  textbook  purchasing  seasons  are at the end of each
academic  semester,  May/June and  December/January.  Although the Company makes
book purchases  during other  periods,  the inventory  purchased in May,  before
publishers  announce their price increases in June and July,  allows the Company
to purchase inventory based on the lower retail prices of the previous year. The
combination  of this  purchasing  cycle and the fact that the Company is able to
sell its inventory in relation to retail  prices for the following  year permits
the Company to realize additional gross margin. The Company advances cash to its
representatives  during these two periods,  and the  representatives in turn buy
books directly from students, generally through the on-campus bookstore.

                                       8
<PAGE>

    The prices  wholesalers pay for books are a function of a number of factors,
including  the date on which a new  edition is  scheduled  to be  released,  the
demand pattern for each book, the Company's  existing supply and the anticipated
overall supply.  Suggested purchase prices typically range from 5.0% to 33.0% of
the  publisher's  new copy retail  price.  The  average  price paid for books is
approximately 22.0% of new copy retail; bookstores and agents earn an additional
commission for allowing the Company to purchase books at their  facilities.  The
result is a total cost to the Company of between  8.0% and 40.0% of the new copy
retail price.

    After the Company  purchases the books, the Company arranges for shipment to
one of its two warehouses  via common  carrier.  At the  warehouse,  the Company
refurbishes  damaged  books and  categorizes  and  shelves  all other books in a
timely manner,  and enters them into the Company's on-line inventory system. The
Company,  which does  business in California  under the tradename  "College Book
Company of California," is the only major national used textbook wholesaler with
facilities in California. However, the Company's primary warehouse is located in
Nebraska.  These two locations  function as one facility  allowing  customers to
access inventory at both locations.

    In order to ensure  prompt,  efficient and accurate order  fulfillment,  the
Company has  developed a system of  classifying  both books and customers in its
database.  Based on an  in-depth  analysis  of orders  received,  inventory  and
publishing  trends for the  preceding  18 months,  the Company  rates books on a
scale of 1-9, with 9 being the highest rating. A high rating generally indicates
that a book is in high demand. Highly rated books move out of inventory quickly,
and they produce  relatively  low gross  margins  because the Company must pay a
relatively  higher  price to purchase  these books from  students.  In contrast,
lower-rated  books  produce  higher  margins  because the  Company  pays less to
acquire the inventory. If the Company has not received any orders for a book for
six months, it gives that title no value for inventory purposes, and if there is
no demand for the title in 18 months,  the Company may physically remove it from
inventory.

    In a similar  fashion,  the Company also rates  customers on a scale of 1-9,
based on a  combination  of how many used  books the  customer  supplies  to the
Company,  whether or not the customer  uses the  Company's  management  systems,
credit quality and the volume of used books ordered by the customer. The Company
does  not  permit a  customer  to order a book  with a  higher  rating  than the
customer's.  (For instance,  a customer with a rating of 7 is unable to purchase
books with a rating of 8 or 9, but is able to order any title with a 7 rating or
below.)  This  system  enables  the  Company  to manage  its  inventory  and its
relationships  effectively despite the constraints placed on it by the fact that
demand for used books is greater than supply.  The Company  rates  approximately
80.0% of its  inventory  3 or  lower,  which  allows  most of its  customers  to
purchase sufficient quantities of even the more popular titles.

    Customers place orders by phone, mail, fax or other electronic method.  Upon
receiving an order,  the Company removes the books from available  inventory and
holds them for future shipping.  Customers may return books within 60 days after
the start of classes if a written request is enclosed. Returns currently average
approximately   20.1%  of  sales  and  generally  are   attributable  to  course
cancellations  or  overstocking.  The majority of returns are textbooks that the
Company is able to resell for the next  semester.  Because  customers may change
their orders prior to the shipping date, the Company does not recognize  revenue
until an order has been shipped.

College Bookstore Operations

    An important aspect of the Company's business strategy is a program designed
to reach new  customers  through the opening of  bookstores  adjacent to college
campuses.  In addition to generating sales of new and used textbooks and general
merchandise,  these  outlets  enhance  the  Company's  wholesale  operations  by
increasing the inventory of used books purchased from the campus.

    A desirable campus for a Company-operated  college bookstore is one on which
the Company  does not  currently  buy or sell used  textbooks  either  because a
competitor  of the  Company  contract-manages  the  college's  bookstore  or the
college  bookstore  does not have a strong  relationship  with the Company.  The


                                       9
<PAGE>

Company  generally  will not open a location on a campus  where it already has a
strong  relationship with the college bookstore because some college  bookstores
may view having a competing location as a conflict of interest.

    The Company  tailors each  bookstore to fit the needs and  lifestyles of the
campus  on  which  it  is  located.  Individual  bookstore  managers  are  given
significant planning and managing responsibilities, including, hiring employees,
controlling cash and inventory,  and purchasing and merchandising  product.  The
Company has staff  specialists to assist individual  bookstore  managers in such
areas as store planning, merchandise layout and inventory control.

    As of March 31, 1999 the Company operated 65 college bookstores  nationwide,
having  expanded  from 28  bookstores  in 1993.  During  fiscal 1999 the Company
purchased/established   eight  new   bookstores   located  in  Miami,   Florida;
Carbondale,   Illinois;  Des  Moines,  Iowa;  Louisville,   Kentucky;  Richmond,
Kentucky;  Binghamton,  New  York;  and  Richmond,  Virginia,  adding  estimated
combined  annual  revenues in excess of $7.0  million.  Subsequent  to March 31,
1999, the Company acquired Triro Inc., a chain of 17 college  bookstores located
in Texas, New Mexico, and Arizona. The purchase price consisted of $13.2 million
paid to the former  shareholders  and $1.9  million for the average  annual debt
level.   The  actual   amount  of  debt  assumed  and  retired  at  closing  was
approximately $3.2 million, which exceeded the average outstanding debt level of
$1.9 million due to the seasonal  incurrence of debt to fund the buyback of used
textbooks at the end of the Spring semester. Offsetting the higher debt balances
at  Closing  was a  compensating  increase  in net  asset  balances  (consisting
primarily  of  inventory).  Also  subsequent  to March  31,  1999,  the  Company
purchased new bookstores located in Daytona Beach, Florida and Orlando,  Florida
at a cost of approximately $0.8 million and is in the process of starting up new
bookstores located in Arlington, Texas; Northridge, California and Johnson City,
Tennessee.

    The table below  highlights  certain  information  regarding  the  Company's
bookstores opened through March 31, 1999.

               Bookstores                                          Approximate
                 Open at   Bookstores    Bookstores    Bookstores     Total
                Beginning     Added        Closed      at End of     Square
                of Fiscal    During        During        Fiscal      Footage
   Fiscal Year    Year     Fiscal Year  Fiscal Year(1)    Year    (in thousands)
   ----------- ----------  -----------  --------------  --------  --------------
       1994         28          2             0            30          330
       1995         30          5             0            35          364
       1996         35          4             0            39          388
       1997         39         12             1            50          438
       1998         50          9             0            59          474
       1999         59          8             2            65          537

------------

(1) In  fiscal   1997,   the   management   contract   was  not   renewed  on  a
    contract-managed  bookstore.  In fiscal  1999,  the  property  leases at two
    bookstore locations expired and were not renewed by the Company.

    The Company  plans to increase the number of  bookstores  in operation by at
least three  bookstores  annually.  The bookstore  expansion  plan will focus on
campuses where the Company does not already have a strong  relationship with the
on-campus  bookstore.  In determining to open a bookstore,  the Company looks at
several  criteria:  (i) a large enough market to justify the  Company's  efforts
(typically  this  means a campus of at least  10,000  students);  (ii) a site in
close  proximity to campus with adequate  parking and  accessibility;  (iii) the
potential of the  bookstore to have a broad product mix (larger  bookstores  are
more  attractive  than  smaller  bookstores  because  a  full  line  of  general
merchandise can be offered in addition to textbooks);  (iv) the  availability of
top-quality  management;  and (v) certain  other  factors,  including  leasehold
improvement opportunities and personnel costs.

    The 59 Company  bookstores  that were opened prior to April 1, 1998 averaged
approximately  $2.0 million per store in annualized sales and produced sales per


                                       10
<PAGE>

gross  square  foot of  approximately  $239 for the fiscal  year ended March 31,
1999. The Company's  bookstores  have an average size of 8,300 gross square feet
but range in size from 900 to 50,000  square feet.  The Company  estimates  that
leasehold  improvements,   furniture  and  fixtures,  and  automation  with  the
Company's PRISM system, the Company's proprietary total-store management system,
for new bookstores is approximately $100,000 per bookstore,  after giving effect
to construction allowances.

Management Information Systems

    The Company has committed substantial resources to its MIS operations.  This
commitment  reflects  the  Company's  belief that it can  significantly  enhance
efficiency, profitability and competitiveness through investments in technology.
The Company's MIS operations process order entry,  control  inventory,  generate
purchase  orders and  customer  invoices,  generate  various  sales  reports and
process and retrieve textbook information.  All the Company's bookstores operate
with  state-of-the-art IBM RS/6000s. At the center of its MIS operations are the
Company's self-developed, proprietary software programs such as PRISM, its whole
store management system,  PC-Text, its textbook management and inventory control
system,  and PC-Trade,  which tracks sales data. This software is maintained and
continuously enhanced by the Company, which is staffed by an experienced team of
development  and  design  professionals.  The  Company  believes  that  its  MIS
capabilities will serve the Company's needs for the foreseeable future.

    None of the Company's  proprietary  software  programs are copyrighted,  nor
does the  Company  have  registered  trademarks  for the  names of its  software
programs,  or for the term  "Buyers'  Guide." In addition to using its  software
programs for its own management and inventory control,  the Company licenses the
use of its  software  programs to  bookstores.  Although  none of the  Company's
software programs are material to its business,  they enhance the efficiency and
cost-effectiveness of the Company's operations, and their use by bookstores that
are  customers or suppliers  of the Company  tends to solidify the  relationship
between the Company and such  customers  or  suppliers,  resulting  in increased
sales or supplies for the Company.

    MIS operations  consist of three  operating  units:  (i) the mainframe unit,
which develops and supports all systems utilized in the Company's warehouses and
corporate offices; (ii) a system sales unit, which markets the Company's college
store management systems to colleges; and (iii) the College Bookstore Management
Systems  ("CBMS"),  which  develops  and  supports  the systems that are sold to
bookstores.

    The Company conducts training courses for all systems users at the Company's
headquarters  in  Lincoln,  Nebraska.  Classes  are small and  provide  hands on
demonstrations  of the various systems.  Printed  reference manuals and training
materials  also  accompany  each system.  The  customer  support unit of CBMS is
staffed with approximately 25 experienced personnel who are available 24 hours a
day to answer questions on a toll-free number.

Customers

    The Company sells its products and services to  approximately  2,000 college
bookstores in the United States,  Canada and Puerto Rico for ultimate use by the
students of the respective colleges.  The Company has had relationships with its
25 largest wholesale customers (which accounted for approximately 7.1% of fiscal
1999  revenues) for an average of 20 years.  No one customer  accounted for more
than 1.0% of the Company's fiscal 1999 revenues.

    The Company's  wholesale  operations purchase from and resell used textbooks
to many of the nation's largest college campuses including: University of Texas,
University of Southern  California,  Indiana University,  University of Arizona,
Brigham Young University, University of Washington and University of Minnesota.

    The Company's college bookstores are located on many of the nation's largest
college  campuses  including:  University  of Nebraska,  University of Michigan,
University of Maryland, Arizona State University, Pennsylvania State University,
University of Kansas,  Cornell  University,  Baylor  University,  Oklahoma State
University, University of Tennessee and Ohio University.

                                       11
<PAGE>

Competition

    The Company's  wholesale  business  competes in the used textbook  wholesale
distribution  market,  which includes the sale of all used  textbooks  purchased
from students by an independent third party which are then redistributed through
college  bookstores.  This  market  represents  less than half of the total used
textbook  market.  Sales to  contract-managed  stores,  which do not enter  this
market because  contract-managed  stores obtain virtually all of their supply of
used  textbooks  from within  their  chain of stores  under  common  management,
represent  approximately  a quarter  of the total  used  textbook  market.  Used
textbooks retained by college bookstores, which do not enter this market because
the used textbooks are simply resold by the same bookstores that purchased them,
represent approximately a third of the total used textbook market.

    The Company's two major  competitors  in the college store industry and used
textbook  business are Follett  Campus  Resources  ("Follett")  and MBS Textbook
Exchange ("MBS"). The Company believes that its market share of the used college
textbook wholesale distribution market is comparable to that of Follett and MBS.
The remaining  competitors are smaller  regional  companies,  including  Wallace
College  Book  Company,  Budgetext,  Texas Book  Company and  Southeastern  Book
Company.  Most of the leading companies in the industry also have an established
retail  presence,  either  through direct store  ownership/operation  or through
contract-management.

    Many of Follett's college  bookstores are located on smaller  campuses.  The
size of the  campus  and  Follett's  presence  there  have  precluded  potential
competitors  such as the Company  from  entering  these  markets,  which in turn
affects  both the  Company's  ability  to buy books and its  ability  to add new
accounts. However, because it is required to supply used texts to all of its own
stores, Follett must balance the demands of its own bookstores with those of its
other independent customers.

    MBS is controlled  by the same  shareholder  that  controls  Barnes & Noble.
Consequently,  MBS supplies approximately 350 Barnes & Noble college stores. MBS
faces the same challenges that Follett faces in supplying existing institutional
accounts.  MBS has a strong  systems  division that  competes  actively with the
Company for new customers, and that also fulfills all of the needs of the Barnes
& Noble stores.

    The   Company's   college   bookstore   operations,   eight  of  which   are
contract-managed,  compete with other college campus  bookstores,  including the
on-campus  bookstore  in  those  locations  where  the  Company's  bookstore  is
off-campus. Its two primary competitors in college bookstores are Follett, which
contract-manages   approximately   580  stores,   and  Barnes  &  Noble,   which
contract-manages approximately 350 stores.

    There is only one  centralized  buying  service  that is similar to CSC, the
West Coast Buying Association  ("WCBA").  Participation by college bookstores in
CSC's or WCBA's centralized buying service is voluntary,  and college bookstores
may, and some do, belong to both buying associations.

     Presently,  the  Company  believes  that  its  largest  competitors  in the
distance education market are Follett and MBS.

    The Company also  increasingly  competes against the expansion of electronic
media as a source of textbook information, such as on-line resources and CD-ROM,
which may replace the need for students to purchase textbooks.

Governmental Regulation

    The Company is subject to various  federal,  state and local  environmental,
health and safety laws and regulations. Generally, these laws impose limitations
on the discharge of pollutants  and the presence of hazardous  substances in the
workplace  and establish  standards for vehicle and employee  safety and for the
handling  of solid  and  hazardous  wastes.  These  laws  include  the  Resource
Conservation  and  Recovery  Act,  the  Comprehensive   Environmental  Response,
Compensation  and  Liability  Act,  the Clear Air Act, the  Hazardous  Materials


                                       12
<PAGE>

Transportation   Act  and  the  Occupational   Safety  and  Health  Act.  Future
developments,  such as stricter environmental or employee health and safety laws
and regulations thereunder,  could affect the Company's operations.  The Company
does not currently  anticipate  that the cost of its compliance  with, or of any
foreseeable liabilities under, environmental and employee health and safety laws
and regulations will have a material adverse affect on its business or financial
condition.

Employees

    As of March 31, 1999 the Company  had a total of 2,121  employees,  of which
841 are full-time, 185 are part-time and 1,095 are temporary. The Company has no
unionized  employees  and believes that its  relationship  with its employees is
satisfactory.

    In view of the  seasonal  nature  of its  wholesale  business,  the  Company
utilizes seasonal labor to improve operating  efficiency.  The Company employs a
small  number of  "flex-pool"  workers  who are  cross-trained  in a variety  of
warehouse  functions.  Over the past eight years, the Company has employed up to
50 flex-pool workers in the Nebraska and California facilities, thereby enabling
the  Company to lower its  wholesale  operating  expenses.  Temporary  employees
augment the flex-pool to meet periodic labor demands.


                               ITEM 2. PROPERTIES.

    The  Company  owns its two  warehouses  (totaling  244,000  square  feet) in
Lincoln,  Nebraska (one of which is also the location of its headquarters),  and
leases its 60,000  square foot  warehouse  in Cypress,  California.  The Cypress
lease expires on August 31, 2002 and has one five-year option to renew.

    Listed  below,  set forth as of March 31, 1999,  are the  Company's  college
bookstores,  their  location,  college served and the school's  enrollment.  The
bookstores are leased by the Company unless otherwise noted:

<TABLE>
<CAPTION>

Institution                              Location       Enrollment(1)       Store Name
------------                             ---------      -------------  ----------------------
<S>                                        <C>            <C>             <C>
University of Alabama                    Tuscaloosa, AL     19,200     The College Store
Northern Arizona University              Flagstaff, AZ      20,400     The College Store
Northern Arizona University              Flagstaff, AZ      20,400     University Text and Tools
Coconino Community College               Flagstaff, AZ       5,500     Coconino Community College
                                                                          Bookstore(2)
Arizona State University                 Tempe, AZ          44,000     The College Store
University of Arizona                    Tucson, AZ         34,000     Arizona Book Store
University of Arkansas-Little Rock       Little Rock, AR    11,300     Campus Bookstore
Miami Dade Community College-Kendall     Miami, FL          18,400     Lemox College Book & Supply
Georgia State University                 Atlanta, GA        24,000     Georgia Book Store
Southern Illinois University             Carbondale, IL     23,000     Saluki Bookstore(2 locations)
Ball Sate University                     Muncie, IN         19,700     Collegiate Book Exchange
Valparaiso University                    Valparaiso, IN      3,500     University Book Center(2)
Drake University                         Des Moines, IA      5,600     University Book Store
                                                                          (2 locations) (2)
University of Kansas                     Lawrence, KS       29,100     University Book Shop
Johnson County Community College         Overland Park, KS  15,000     The College Store
University of Louisville                 Louisville, KY     21,100     College Book Warehouse
Eastern Kentucky University              Richmond, KY       17,500     University Book & Supply
University of Maryland                   College Park, MD   32,500     Maryland Book Exchange
Prince Georges Community College         Largo, MD          12,000     Prince Georges Community
                                                                          College Bookstore(2)
University of Michigan                   Ann Arbor, MI      36,200     Michigan Book & Supply
University of Michigan                   Ann Arbor, MI      36,200     Ulrich's Bookstore
Ferris State University                  Big Rapids, MI      9,500     The College Store
Michigan State University                East Lansing, MI   42,000     The College Store
Kettering Engineering &
   Management Institute                  Flint, MI           2,600     Kettering Campus Store(2)
Eastern Michigan University              Ypsilanti, MI      23,100     Campus Book & Supply
Mankato State University                 Mankato, MN        13,600     Maverick Bookstore
Chadron State College                    Chadron, NE         3,000     Eagle Book Shoppe
University of Nebraska - Kearney         Kearney, NE         8,000     The Antelope Bookstore(2)
University of Nebraska - Lincoln         Lincoln, NE        24,000     Nebraska Bookstore(2 locations)
Nebraska Wesleyan University             Lincoln, NE         1,400     Plainsman Bookstore(2)
Wayne State College                      Wayne, NE           4,000     Student Bookstore


                                       13
<PAGE>

University of Nevada Las Vegas           Las Vegas, NV      21,300     Rebelbooks
State University of New York - Buffalo   Amherst, NY        25,000     The College Store
State University of New  York -
   Binghamton                            Vestal, NY         11,800     Bookbridge
Cornell University                       Ithaca, NY         19,600     Triangle Book Shop
University of Akron                      Akron, OH          25,000     The College Store
Ohio University                          Athens, OH         19,200     Specialty Books
Wright State University                  Fairborn, OH       16,200     The College Store
Oklahoma State University                Stillwater, OK     19,200     Cowboy Book
Indiana University of Pennsylvania       Indiana, PA        14,000     The College Store
University of Pittsburgh                 Pittsburgh, PA     25,500     The College Store
Pennsylvania State University            State College, PA  40,500     University Book Centre
College of Charleston                    Charleston, SC     10,000     University Books of
                                                                         Charleston
Columbia College                         Columbia, SC        1,200     C-Squared Bookstore(2)
University of South Carolina             Columbia, SC       26,000     South Carolina Bookstore
                                                                         (2 locations)
University of Tennessee                  Knoxville, TN      26,000     Campus Bookstore
University of North Texas                Denton, TX         25,200     Voertman's
University of Texas - Pan American and                      12,700 &
   South Texas Community College         Edinburg, TX        7,200     South Texas Book & Supply
North  Harris County Community College   Houston, TX         9,200     College Bookstore
Texas Tech University                    Lubbock, TX        24,800     Spirit Shop
Texas Tech University                    Lubbock, TX        24,800     Double T Bookstores (3 locations)
San Antonio College, St. Philip's                           22,000;
   College, and Palo Alto                                    8,300; &
   College                               San Antonio, TX     7,100     L&M
University of Texas - San Antonio        San Antonio, TX    17,600     L&M - UTSA
Southwest Texas State                    San Marcos, TX     21,000     Colloquium Books (2 locations)
Baylor University                        Waco, TX           12,400     University Bookstore and
                                                                         Spirit Shop
Virginia  Polytechnic and
   State University                      Blacksburg, VA     24,800     Tech Bookstore
Old Dominion University                  Norfolk, VA        18,000     Dominion Bookstore
Virginia Commonwealth University         Richmond, VA       22,400     The College Store
</TABLE>

------------

(1)  Source:   National  Association  of  College  Stores.   Includes  part-time
     students.

(2)  Denotes    properties    leased    from   the    educational    institution
     ("contract-managed"   stores).  One  location  at  Drake  University  is  a
     contract-managed store.



                           ITEM 3. LEGAL PROCEEDINGS.

    From time to time,  the  Company is subject to legal  proceedings  and other
claims arising in the ordinary course of its business. The Company believes that
currently it is not a party to any  litigation the outcome of which would have a
material adverse affect on its financial condition or results of operations. The
Company  maintains  insurance  coverage  against  claims in an  amount  which it
believes to be adequate.


          ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

    No items were submitted to a vote of security  holders of the Company during
the fourth quarter of fiscal 1999.


                                       14
<PAGE>


                                     PART II

 ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

    There were no equity  securities of the  registrant  sold by the  registrant
during fiscal 1999.  Although amended  Registration  Statement No. 333-48221 was
filed and became  effective  in fiscal  1999,  disclosure  regarding  the use of
proceeds  pursuant to Rule 463 of the  Securities Act of 1933 is not required in
as such registration  statement  provided for the registering of debt securities
to be exchanged for other debt securities of the Company.

                        ITEM 6. SELECTED FINANCIAL DATA.

    The following table sets forth selected historical  financial and other data
of the Company as of and for the fiscal  years ended  March 31,  1999,  1998 and
1997, the seven and five month periods ended March 31, 1996 and August 31, 1995,
respectively,  and the fiscal year ended March 31, 1995. The selected historical
financial data was derived from the Company's audited financial statements.  The
following  table  should  be  read in  conjunction  with  Item 7,  "Management's
Discussion and Analysis of Financial  Condition and Results of  Operations"  and
the financial  statements of the Company and the related notes thereto  included
in Item 8 herein.

<TABLE>
<CAPTION>

                                                                  Seven      Five      Fiscal
                                                                  Months    Months      Year
                                                                  Ended     Ended      Ended
                                  Fiscal Years Ended March 31,   March 31, August 31, March 31,
                                    1999(1)   1998(1)   1997(1)   1996(1)    1995      1995
                                  ---------- --------- --------- --------- --------- ---------
Statement of Operations Data:                            (dollars in thousands)
<S>                                  <C>        <C>       <C>       <C>       <C>       <C>
Revenues                          $ 217,516  $ 198,773 $ 172,600 $ 79,423  $ 83,328  $ 149,227
Cost of sales                       137,709    125,632   110,466   51,866    52,753     96,317
                                  ---------- --------- --------- --------- --------- ---------
    Gross profit                     79,807     73,141    62,134   27,557    30,575     52,910
Operating expenses:
  Selling, general, and
    administrative                   51,547     47,081    39,491   22,517    14,729     35,325
  Depreciation                        2,393      2,531     2,706      904       872      1,889
  Amortization                        6,149      5,626     4,072    2,259         -          -
  Stock compensation costs                -      8,278       297       82         -          -
                                  ---------- --------- --------- --------- --------- ---------
    Income from operations           19,718      9,625    15,568    1,795    14,974     15,696
Other expenses (income):
  Interest expense                   17,508     11,284    10,760    6,035       952        766
  Interest income                      (351)      (328)     (561)    (433)      (51)      (224)
  Other income (2)                   (1,100)      (512)     (390)    (339)     (469)      (416)
                                  ---------- --------- --------- --------- --------- ---------
    Income (loss) before income
      taxes and extraordinary item    3,661       (819)    5,759   (3,468)   14,542     15,570
Income tax expense (benefit)          2,604        306     2,325     (967)    5,583      5,950
                                  ---------- --------- --------- --------- --------- ---------
    Income (loss) before
     extraordinary item               1,057     (1,125)    3,434   (2,501)    8,959      9,620
Extraordinary loss on
  extinguishment of debt,
  net of taxes                            -     (4,021)        -        -         -          -
                                  ---------- --------- --------- --------- --------- ---------
    Net income (loss)             $   1,057  $  (5,146)$   3,434 $ (2,501)$   8,959  $   9,620
                                  ========== ========= ========= ========= ========= =========

Other Data:
  EBITDA (3)                      $  29,360  $  26,572  $ 23,033  $ 5,379 $  16,315  $  18,001
  Net cash flows from operating
    activities                       10,296     (2,842)   10,774    3,423     1,643     10,009
  Net cash flows from financing
    activities                       (6,976)    10,220    (7,471) 116,063       437     (2,087)
  Net cash flows from investing
    activities                       (5,067)   (11,548)   (3,427)(109,385)      371     (8,255)
  Capital expenditures                2,842      3,690     2,243      838       801      8,260
  Business acquisition
    expenditures(4)                   2,086      7,714     1,252      551         -        100
  Number of bookstores open at
    end of the period                    65         59        50       39        36         35

Balance Sheet Data
(At End of Period):
  Cash and cash equivalents       $   4,060  $   5,807  $  9,977 $ 10,101  $  4,741  $   2,291
  Working capital                    55,470     54,053    55,936   52,469    43,879     32,781
  Total assets                      139,690    148,777   127,169  129,023    92,505     75,179
  Total debt, including current
   maturities                       169,257    175,985    79,524   86,712     9,376      8,940

</TABLE>

                                       15
<PAGE>

(1)  Effective  February 13,  1998,  NBC  consummated  a merger among NBC Merger
     Corp., NBC and certain  shareholders of NBC pursuant to which the Company's
     outstanding  debt  and  NBC's  stock  were   restructured.   Following  the
     Recapitalization,  the results of operations of the Company included higher
     interest costs due to the financing of the Recapitalization,  and in fiscal
     1998,  non-recurring charges associated with the extinguishment of debt and
     buyout of stock options. Effective September 1, 1995, NBC purchased all the
     outstanding  capital stock of Nebraska Book Company,  Inc. in a transaction
     accounted  for  as  a  purchase   business   combination.   Following  this
     transaction,  the results of  operations  of the Company  contained  higher
     interest  costs  due  to  the  financing  of  the  acquisition  and  higher
     amortization  expense for  goodwill  and other  intangibles  created by the
     acquisition.

(2)  Other  income   primarily   represents   recurring  income  from  ancillary
     activities of the Company.

(3)  EBITDA  is  defined  as  income   from   operations   plus  other   income,
     depreciation,  amortization  and non-cash  charges  relating to stock based
     compensation  expense in the amounts of $8,278 and $297 for the years ended
     March 31, 1998 and 1997,  respectively,  and $82 for the seven months ended
     March 31,  1996.  The  Company  believes  that EBITDA  provides  additional
     information for determining its ability to meet debt service  requirements.
     EBITDA does not represent and should not be considered as an alternative to
     net income or cash flow from operations as determined by generally accepted
     accounting  principles,  and EBITDA does not necessarily  indicate  whether
     cash flow will be sufficient  for cash  requirements.  EBITDA should not be
     considered  by  investors  as an  indicator  of cash flows  from  operating
     activities,  investing activities and financing activities as determined in
     accordance with generally accepted  accounting  principles.  Items excluded
     from  EBITDA,  such  as  depreciation  and  amortization,  are  significant
     components  in   understanding   and  assessing  the  Company's   financial
     performance.  EBITDA measures  presented may not be comparable to similarly
     titled measures presented by other issuers.

(4)  Business  acquisition   expenditures   represent   established   businesses
     purchased by the Company.



          ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                  AND RESULTS OF OPERATIONS.

Fiscal Year Ended March 31, 1999 Compared with Fiscal Year Ended March 31, 1998.

     Revenues.  Revenues  for the years  ended  March 31,  1999 and 1998 and the
corresponding increase (decrease) in revenues were as follows:

                                                            Increase (Decrease)
                                 1999           1998         Amount   Percentage
                             ------------- -------------- ------------- -------
Wholesale operations         $ 97,430,134   $ 90,595,190   $ 6,834,944    7.5%
College bookstore operations  120,745,188    110,584,757    10,160,431    9.2%
Complementary services         12,362,403      9,597,812     2,764,591   28.8%
Intercompany eliminations     (13,021,413)   (12,004,821)   (1,016,592)   8.5%
                             ------------- -------------- ------------- -------
                             $217,516,312  $ 198,772,938  $ 18,743,374    9.4%
                             ============= ============== ============= =======

    Wholesale  sales for  fiscal  1999  increased  to $97.4  million  from $90.6
million for fiscal 1998.  The increase in wholesale  sales was due  primarily to
publisher price increases  averaging 4% and product mix. College bookstore sales
for fiscal 1999 increased to $120.7 million from $110.6 million for fiscal 1998.
The  increase  in  college  bookstore  sales  was a result of same  store  sales
increases of 2.6% combined with the nine  bookstores  opened or acquired  during
fiscal 1998,  and the eight  bookstores  opened or acquired  during fiscal 1999.
Complementary  services  sales for fiscal 1999  increased to $12.4  million from
$9.6 million for fiscal 1998 due to the  acquisitions  of Specialty Books on May
1, 1997 and Collegiate Stores  Corporation on January 23, 1998. As the Company's
wholesale  and  college   bookstore   operations   have  grown,   the  Company's
intercompany transactions have also increased.

                                       16
<PAGE>

    Gross profit.  Gross profit for fiscal 1999 increased $6.7 million, or 9.1%,
to $79.8 million from $73.1 million for fiscal 1998. This increase was primarily
due to higher  revenues.  Gross margin percent remained  relatively  constant at
36.7% for fiscal 1999 as compared to 36.8% for fiscal 1998.

    Selling,   general  and  administrative   expenses.   Selling,  general  and
administrative  expenses for fiscal 1999  increased  $4.4  million,  or 9.5%, to
$51.5  million  from  $47.1  million  for  fiscal  1998.  Selling,  general  and
administrative expenses as a percentage of revenues remained stable at 23.7% for
fiscal 1999 and fiscal 1998.  The increase in expenses  resulted  primarily from
the higher expense base associated  with the Company's  expansion of its college
bookstore  operations in fiscal 1999 and the full year effect of the fiscal 1998
bookstore and complementary services expansions.

    Amortization  expense.  Amortization expense for the fiscal year ended March
31, 1999 increased $0.5 million,  or 9.3%, to $6.1 million from $5.6 million for
the fiscal year ended March 31, 1998.  This increase  resulted  primarily from a
full year of  amortization  on the  goodwill  associated  with the  fiscal  1998
acquisitions  and  amortization  on the goodwill  associated with the bookstores
acquired in fiscal 1999.

    Stock  compensation  costs.  There were no stock  compensation costs for the
fiscal  year  ended  March  31,  1999 as  compared  to  $8.3  million  in  stock
compensation  costs for the fiscal year ended March 31, 1998.  This  decrease is
primarily  the  result  of the  stock  options  bought  out in  fiscal  1998  in
connection with the Recapitalization.  There was no compensation cost associated
with the stock options granted in fiscal 1999 since the exercise price was equal
to the  estimated  fair value of NBC's Class A Common Stock on the date of grant
(measurement  date). The fair value of options granted was estimated at the date
of  grant  based  upon the  buy-out  price  as part of the  Recapitalization  on
February 13, 1998.

    Interest expense,  net. Interest expense, net for fiscal 1999 increased $6.2
million,  or 56.6%,  to $17.2  million  from $11.0  million for fiscal 1998 as a
result of the  impact of a full year of  interest  expense  associated  with the
additional  debt incurred  relating to the  Recapitalization,  which occurred on
February 13, 1998.

    Other  income.  Other  income for fiscal 1999  increased  $0.6  million,  or
114.9%,  to $1.1 million from $0.5 million for fiscal 1998 primarily as a result
of the full year effect of income from ancillary  activities at Specialty  Books
and CSC.

    Extraordinary  loss on  extinguishment  of debt.  During  fiscal  1998,  the
Company  recorded an  extraordinary  loss of $6.5 million and an associated  tax
benefit of $2.5 million as a result of early extinguishment of substantially all
of its previously outstanding debt as part of the Recapitalization.

    Income taxes. Income taxes for fiscal 1999 were recorded at an effective tax
rate of 71.1% as compared  with an effective  tax rate of 37.4% for fiscal 1998.
The high  effective  tax rate in fiscal  1999 was the  result of  non-deductible
amortization  on goodwill  associated with recent  acquisitions  and a change in
estimate of income tax liabilities. The fiscal 1998 tax benefit generated by the
loss from operations was reduced as a result of  non-deductible  amortization on
goodwill  associated with recent acquisitions and a change in estimate of income
tax liabilities.


                                       17
<PAGE>

Fiscal Year Ended March 31, 1998 Compared with Fiscal Year Ended March 31, 1997.

     Revenues.  Revenues  for the years  ended  March 31,  1998 and 1997 and the
corresponding increase (decrease) in revenues were as follows:

                                                           Increase (Decrease)
                                1998           1997         Amount    Percentage
                            ------------- -------------- ------------- ---------
Wholesale operations        $ 90,595,190   $ 84,487,476   $ 6,107,714    7.2%
College bookstore operations 110,584,757     92,507,974    18,076,783   19.5%
Complementary services         9,597,812      4,921,922     4,675,890   95.0%
Intercompany eliminations    (12,004,821)    (9,317,179)   (2,687,642)  28.8%
                            ------------- -------------- ------------- ------
                            $198,772,938  $ 172,600,193  $ 26,172,745   15.2%
                            ============= ============== ============= ======

    Wholesale  sales for  fiscal  1998  increased  to $90.6  million  from $84.5
million for fiscal 1997.  The increase in wholesale  sales was due  primarily to
publisher  price  increases  averaging 4% and unit volume sales growth of 3%. In
part,  this unit  growth  resulted  from an  increase  in the  number of college
bookstores  operated by the Company,  which  increased the Company's  ability to
procure book  inventory,  contributing  an additional  $1.5 million in purchases
from this source.  College  bookstore  sales for fiscal 1998 increased to $110.6
million from $92.5  million for fiscal 1997.  The increase in college  bookstore
sales was a result of same store sales increases of 12.6% combined with the nine
bookstores  opened or  acquired  during  fiscal 1998 and the full year effect of
stores  opened or  acquired in fiscal  1997.  Complementary  services  sales for
fiscal 1998  increased  to $9.6 million from $4.9 million for fiscal 1997 due to
the  acquisitions  of  Specialty  Books  on May 1,  1997 and  Collegiate  Stores
Corporation  on  January  23,  1998.  As the  Company's  wholesale  and  college
bookstore  operations have grown, the Company's  intercompany  transactions have
also increased.

    Gross  profit.  Gross profit for fiscal 1998  increased  $11.0  million,  or
17.7%,  to $73.1 million from $62.1  million for fiscal 1997.  This increase was
primarily  due to higher  revenues,  combined  with an increase in gross  margin
percent.  Gross margin for fiscal 1998  increased to 36.8% from 36.0% for fiscal
1997.  This  increase was  primarily  due to an increase of $2.4 million in used
textbook  sales through the  Company's  bookstores,  which  generates an average
gross  margin of 58% compared to an average  gross  margin of 37% for  wholesale
sales.

    Selling,   general  and  administrative   expenses.   Selling,  general  and
administrative  expenses for fiscal 1998  increased $7.6 million,  or 19.2%,  to
$47.1  million  from  $39.5  million  for  fiscal  1997.  Selling,  general  and
administrative  expenses  as a  percentage  of revenues  increased  to 23.7% for
fiscal 1998 from 22.9% for fiscal 1997. These increases  resulted primarily from
the higher expense base associated  with the Company's  expansion of its college
bookstore  operations in fiscal 1998 and the full year effect of the fiscal 1997
bookstore expansion.

    Amortization  expense.  Amortization expense for the fiscal year ended March
31, 1998 increased $1.5 million, or 38.2%, to $5.6 million from $4.1 million for
the fiscal year ended March 31, 1997.  This increase  resulted  primarily from a
full  year of  amortization  on the  goodwill  associated  with  the  bookstores
acquired in fiscal 1997 and  amortization  on the goodwill  associated  with the
fiscal 1998 acquisitions.

    Stock compensation costs. Stock compensation costs for the fiscal year ended
March 31, 1998  increased $8.0 million to $8.3 million from $0.3 million for the
fiscal  year ended  March 31,  1997.  This  increase  is the result of the stock
options bought out in connection with the Recapitalization.

    Interest expense,  net. Interest expense, net for fiscal 1998 increased $0.8
million,  or 7.4%,  to $11.0  million  from $10.2  million  for fiscal 1997 as a
result of the additional debt incurred relating to the  Recapitalization,  which
occurred on February 13, 1998.

                                       18
<PAGE>

    Extraordinary  loss on  extinguishment  of debt.  During  fiscal  1998,  the
Company  recorded an  extraordinary  loss of $6.5 million and an associated  tax
benefit of $2.5 million as a result of early extinguishment of substantially all
of its previously outstanding debt as part of the Recapitalization.

    Income taxes. Income taxes for fiscal 1998 were recorded at an effective tax
rate of 37.4% as compared  with an effective  tax rate of 40.4% for fiscal 1997.
The fiscal 1998 tax benefit generated by the loss from operations was reduced as
a result of  non-deductible  amortization  on  goodwill  associated  with recent
acquisitions and a change in estimate of income tax liabilities.

Liquidity and Capital Resources

    The Company's primary liquidity  requirements are for debt service under the
Senior Credit  Facility,  the Senior  Subordinated  Notes and other  outstanding
indebtedness, for working capital, and for capital expenditures. The Company has
historically  funded these requirements  primarily through internally  generated
cash flow and funds borrowed under the Company's  Revolving Credit Facility.  At
March 31, 1999,  the  Company's  total  indebtedness  was  approximately  $169.3
million, consisting of approximately $58.7 million in Term Loans, $110.0 million
of the Senior  Subordinated  Notes and $0.6  million of other  indebtedness.  To
provide  additional  financing to fund the  Recapitalization,  NBC issued Senior
Discount  Debentures which provided $41.6 million in net proceeds (face value of
$76.0  million  less  original  issue  discount of $31.0  million  and  deferred
financing costs of $3.4 million).

    Principal and interest  payments  under the Senior  Credit  Facility and the
Senior Subordinated Notes represent significant  liquidity  requirements for the
Company.  Under the terms of the Tranche A and B Loans, the Company is scheduled
to make principal  payments totaling  approximately $5.6 million in fiscal 2000,
$4.2 million in fiscal 2001, $6.0 million in fiscal 2002, $6.5 million in fiscal
2003,  $8.1  million in fiscal  2004,  $10.7  million  in fiscal  2005 and $17.6
million in fiscal 2006. Such scheduled  principal payments are subject to change
upon the annual payment and  application of excess cash flows (as defined in the
Credit Agreement  underlying the Senior Credit Facility) towards Tranche A and B
Loan principal  balances.  The aforementioned  scheduled principal payments have
been  adjusted to reflect an  anticipated  excess cash flow payment for the year
ended March 31, 1999 of approximately  $3.6 million,  which is due September 29,
1999  and is  included  in the  current  maturities  of  long-term  debt  in the
Company's  financial  statements.  Loans under the Senior  Credit  Facility bear
interest at floating  rates based upon the interest rate option  selected by the
Company.  The Senior Subordinated Notes require semi-annual interest payments at
a fixed rate of 8.75% and  mature on  February  15,  2008.  The Senior  Discount
Debentures require semi-annual interest payments commencing August 15, 2003 at a
fixed rate of 10.75% and mature on February 15, 2009.

    The Company's capital expenditures were $2.8 million, $3.7 million, and $2.2
million for the fiscal years ended March 31, 1999, 1998 and 1997,  respectively.
The  Company  estimates  that for fiscal  2000,  approximately  $2.5  million of
capital  expenditures  will be  required,  primarily  for  maintenance.  Capital
expenditures consist primarily of bookstore opening costs, bookstore renovations
and  miscellaneous  maintenance  requirements.  The  Company's  ability  to make
capital  expenditures is subject to certain restrictions under the Senior Credit
Facility.

    Business acquisition  expenditures were $2.1 million, $7.7 million, and $1.3
million for the fiscal years ended March 31, 1999, 1998, and 1997, respectively.
Of the $7.7  million in business  acquisition  expenditures  made for the fiscal
year  ended  March  31,  1998,   approximately  $6.2  million  pertains  to  the
acquisitions  of  CSC,   Specialty   Books,  and  four  South  Carolina  college
bookstores.   The  Company   estimates  that  for  fiscal  2000,  it  will  make
approximately $18.0 million of business acquisition expenditures,  including the
acquisition  expenditures  occurring  subsequent to March 31, 1999  discussed in
Item 8, "Financial  Statements and Supplementary  Data" (Note O to the financial
statements).

    Excluding  the sale of  additional  shares of NBC's Class A Common  Stock to
finance certain acquisition  expenditures occurring subsequent to March 31, 1999
(discussed  in Item 8,  "Financial  Statements  and  Supplementary  Data"),  the
Company's  principal  sources of cash to fund its future liquidity needs will be
net cash from operating  activities and  borrowings  under the Revolving  Credit


                                       19
<PAGE>

Facility.  Net cash flows  provided from (used in) operating  activities for the
year ended March 31, 1999 were $10.3 million,  an increase of $13.1 million from
$(2.8)  million for the year ended March 31, 1998.  This  increase was primarily
due to the  combination  of higher uses of cash in fiscal 1998 to fund increases
in working  capital,  stock  compensation  in excess of $8.0 million paid out in
fiscal  1998  in  conjunction  with  the  Recapitalization,  and a $3.0  million
increase in cash interest paid during fiscal 1999 as a result of the  additional
debt incurred in conjunction with the  Recapitalization in fiscal 1998. Usage of
the Revolving  Credit Facility to meet the Company's  liquidity needs fluctuates
throughout the year due to the Company's  distinct  buying and selling  periods,
increasing substantially at the end of each semester (May and December). For the
year ended  March 31,  1999,  weighted-average  borrowings  under the  Revolving
Credit Facility  approximated $12.0 million, with actual borrowings ranging from
a low of no borrowings to a high of $35.4 million.

    Access to the  Company's  principal  sources  of cash is  subject to various
restrictions.  The  availability  of additional  borrowings  under the Revolving
Credit Facility is subject to the calculation of a borrowing base,  which at any
time is equal to a percentage of eligible accounts receivable and inventory. The
Senior Credit Facility restricts the Company's ability to make loans or advances
and pay  dividends,  except  that,  among  other  things,  the  Company  may pay
dividends to NBC (i) after August 15, 2003 in an amount not to exceed the amount
of interest  required to be paid on the Senior  Discount  Debentures and (ii) to
pay corporate  overhead  expenses not to exceed  $250,000 per year and any taxes
due by  NBC.  The  indenture  governing  the  Senior  Discount  Debentures  (the
"Indenture")  restricts the ability of NBC and its Restricted  Subsidiaries  (as
defined in the Indenture) to pay dividends or make other Restricted Payments (as
defined in the Indenture) to their respective  stockholders,  subject to certain
exceptions,  unless certain  conditions  are met,  including that (i) no default
under the  Indenture  shall have occurred and be  continuing,  (ii) NBC shall be
permitted by the Indenture to incur additional indebtedness and (iii) the amount
of the dividend or payment may not exceed a certain amount based on, among other
things,  NBC's  consolidated  net income.  The  indenture  governing  the Senior
Subordinated  Notes contains similar  restrictions on the ability of the Company
and its  Restricted  Subsidiaries  to pay  dividends  or make  other  Restricted
Payments to their respective stockholders. Such restrictions are not expected to
affect the Company's ability to meet its cash obligations.

    As of March 31, 1999, the Company could borrow up to $32.4 million under the
Revolving Credit Facility. The Revolving Credit Facility was unused at March 31,
1999.  Additionally,  in conjunction with one of the bookstores  acquired during
fiscal 1999, the Company established an irrevocable standby letter of credit for
$90,000 which expires  October 29, 1999.  Amounts  available under the Revolving
Credit Facility may be used for working capital and general  corporate  purposes
(including  up to $10.0  million  for  letters  of  credit),  subject to certain
limitations contained in the Senior Credit Facility.

Seasonality

    The Company's  wholesale and bookstore  operations  experience  two distinct
selling  periods and the wholesale  operations  experience  two distinct  buying
periods.  The peak selling periods for the wholesale  operations  occur prior to
the beginning of each school semester in August and December. The buying periods
for the wholesale  operations  occur at the end of each school  semester in late
December  and May. In fiscal 1999,  approximately  45% of the  Company's  annual
revenues  occurred  in  the  second  fiscal  quarter   (July-September),   while
approximately 25% of the Company's annual revenues occurred in the fourth fiscal
quarter   (January-March).   The  primary  selling  periods  for  the  bookstore
operations  are in September and January.  Accordingly,  the  Company's  working
capital requirements fluctuate throughout the year, increasing  substantially at
the end of each  semester,  in May  and  December,  as a  result  of the  buying
periods. The Company funds its working capital requirements  primarily through a
revolving credit facility, which historically has been repaid with cash provided
from operations.

Impact of Inflation

    The Company's  results of operations  and financial  condition are presented
based upon  historical  costs.  While it is difficult to accurately  measure the
impact of inflation due to the imprecise nature of the estimates  required,  the


                                       20
<PAGE>

Company  believes  that the  effects of  inflation,  if any,  on its  results of
operations  and financial  condition have been minor.  However,  there can be no
assurance that during a period of significant  inflation,  the Company's results
of operations would not be adversely affected.

Impact of Year 2000

    Some of the Company's older computer  programs were written using two digits
rather than four to define the applicable year. As a result,  those programs may
recognize  a date  using  "00" as the year 1900  rather  than the year 2000 (the
"Year 2000 Issue"). This problem could cause a system failure or miscalculations
resulting  in  disruptions  of  operations,  including,  among other  things,  a
temporary inability to process transactions,  send invoices or engage in similar
routine business activities.

    The Company has completed an assessment of the impact of the Year 2000 Issue
on its  operations,  and has been  modifying  and will  continue  to modify  and
replace  portions of its  software so that its  internal  computer  systems will
function  properly  with respect to dates in the year 2000 and  thereafter.  The
Company  has been  addressing  the Year 2000 Issue  consistently  as part of its
regular  program of updating and rewriting its internal  corporate  applications
during  the last  eight  years.  As a result,  all of the  Company's  own retail
applications,   including  those  marketed  and  sold  to  independent   college
bookstores,  have been  modified  and tested  completely.  Since Year 2000 Issue
modifications were integrated with regular operations, no significant additional
costs were incurred in conjunction with such modifications.

    The only internal corporate  application that remains to be addressed is the
general  ledger  application,  which the Company is  currently in the process of
modifying internally. The Company expects the cost to modify its current general
ledger  software  will  not be  significant.  The  Company  plans  to have  such
modifications in place by September 1, 1999.

    The  Company is  currently  in the  process of  identifying  and  evaluating
potential  risks  associated  with  the  Year  2000  Issue  on   non-information
technology  systems (i.e.,  telecommunications,  heating and cooling,  security,
electrical, and freight).  Although potentially disruptive,  management does not
believe  that such Year 2000 Issue system  difficulties  will  adversely  affect
day-to-day operations at the Company's retail locations.  In a most likely worst
case scenario,  difficulties encountered with the telecommunications and freight
systems  could  potentially  hinder the  Company's  ability to receive  and ship
wholesale  orders.  Contingency plans are being developed to minimize the effect
of any such disruptions on day-to-day operations.

    The Company  has also  distributed  questionnaires  to its vendors to assess
exposure to vendors failing to be Year 2000  compliant.  Based upon responses to
such questionnaires,  discussions with certain vendors, and information provided
in trade publications, the Company believes that its vendors are taking steps to
address the Year 2000 Issue.  Nonetheless,  there can be no  guarantee  that the
systems of other companies on which the Company's systems rely will be corrected
in a timely manner.

"Safe Harbor"  Statement Under the Private  Securities  Litigation Reform Act of
1995

    This  Annual  Report on Form 10-K  contains  or  incorporates  by  reference
certain statements that are not historical facts,  including,  most importantly,
information  concerning  possible or assumed future results of operations of the
Company and statements preceded by, followed by or that include the words "may,"
"believes,"  "experts,"  "anticipates,"  or the  negation  thereof,  or  similar
expressions, which constitute "forward-looking statements" within the meaning of
the Private  Securities  Litigation  Reform Act of 1995 (the "Reform Act").  All
statements which address operating performance,  events or developments that are
expected or anticipated to occur in the future, including statements relating to
volume and revenue  growth,  earnings per share growth or statements  expressing
general optimism about future operating results, are forward-looking  statements
within the meaning of the Reform Act. Such  forward-looking  statements  involve
risks, uncertainties and other factors which may cause the actual performance or
achievements of the Company to be materially  different from any future results,
performance  or  achievements  expressed  or  implied  by  such  forward-looking
statements.  For those statements, the Company claims the protection of the safe
harbor for  forward-looking  statements  contained  in the Reform  Act.  Several
important factors could affect the future results of the Company and could cause
those results to differ  materially from those expressed in the  forward-looking
statements  contained  herein.  The factors that could cause  actual  results to
differ  materially  include,  but are not limited to, the  following:  increased
competition; ability to integrate recent acquisitions; loss or retirement of key
members of management; increases in the Company's cost of borrowing or inability
or unavailability of additional debt or equity capital;  inability to purchase a
sufficient  supply of used  textbooks;  changes in  pricing  of new and/or  used


                                       21
<PAGE>

textbooks; changes in general economic conditions and/or in the markets in which
the  Company  competes  or may,  from time to time,  compete;  and  other  risks
detailed  in the  Company's  Securities  and  Exchange  Commission  filings,  in
particular the Company's Registration Statement on Form S-4 (No. 333-48221), all
of which are difficult or impossible to predict accurately and many of which are
beyond  the  control  of  the  Company.  The  Company  will  not  undertake  and
specifically  declines  any  obligation  to  publicly  release the result of any
revisions which may be made to any forward-looking  statements to reflect events
or circumstances  after the date of such statements or to reflect the occurrence
of anticipated or unanticipated events.


      ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

    The Company's  primary  market risk exposure is, and is expected to continue
to be,  fluctuation in LIBOR interest  rates. Of the $169.3 million in long-term
debt  outstanding at March 31, 1999,  approximately  $58.7 million is subject to
fluctuations  in the LIBOR  rate.  As provided in the  Company's  Senior  Credit
Facility, exposure to interest rate fluctuations is managed by maintaining fixed
interest rate debt  (primarily  the Senior  Subordinated  Notes) and by entering
into interest rate swap agreements to effectively convert the Company's variable
rate debt into fixed rate debt.  During  fiscal 1999,  the Company  entered into
separate five-year  amortizing  interest rate swap agreements with two financial
institutions whereby the Company's variable rate Tranche A and B Term Loans have
been  effectively  converted into debt with a fixed LIBOR rate of 5.815% plus an
applicable  margin (as defined in the Senior  Credit  Facility  Agreement).  The
current  notional  amount under each agreement is  approximately  $29.3 million.
Such notional amounts are reduced periodically by amounts equal to the scheduled
principal  payments on the Tranche A and B Term Loans. The Company is exposed to
credit loss in the event of nonperformance by the counterparties to the interest
rate swap agreements. The Company anticipates the counterparties will be able to
fully satisfy their obligations under the agreements.

    The following table presents  quantitative  information  about the Company's
market risk sensitive instruments (the weighted average variable rates are based
on implied forward rates in the yield curve at March 31, 1999):
<TABLE>
<CAPTION>
                  Fixed Rate Debt       Variable Rate Debt    Variable to Fixed Interest Rate Swaps
                ---------------------  ---------------------  ------------------------------------
                              Weighted               Weighted                  Weighted
                              Average                Average                   Average
                 Principal    Interest  Principal    Interest    Notional    Pay/Receive
                Cash Flows     Rate    Cash Flows(1)  Rate       Amounts         Rates
                ------------  -------  ------------  -------  -------------  -----------
<S>                <C>         <C>     <C>            <C>     <C>              <C>
Fiscal Year
Ended March 31:
2000          $      16,913    8.76%  $  5,627,925    7.49%  $  57,286,458   5.81% / 5.10%
2001                 18,824    8.76%     4,232,843    7.90%     53,471,354   5.81% / 5.51%
2002                 20,949    8.76%     5,997,521    8.13%     48,170,833   5.81% / 5.72%
2003                 23,317    8.76%     6,486,384    8.27%     41,413,542   5.81% / 5.85%
2004                 25,950    8.76%     8,084,133    8.47%     12,275,000   5.81% / 5.95%
Thereafter      110,463,874    8.76%    28,258,694    8.76%              -            -
                ------------  -------  ------------  -------  -------------  -------------
 Total        $ 110,569,827    8.76%  $ 58,687,500    8.12%  $ 212,617,187   5.81% / 5.54%
                ============  =======  ============  =======  =============  =============

 Fair Value   $ 112,061,953      -    $ 58,687,500       -   $    (564,380)           -
               ============           ============           =============
</TABLE>

(1)     Principal  cash flows  represent  scheduled  principal  payments and are
        adjusted for  anticipated  excess cash flow  payments (as defined in the
        Credit  Agreement  underlying the Senior Credit  Facility) to be applied
        toward principal balances. For Fiscal 1999, the excess cash flow payment
        approximates $3.6 million and is due September 29, 1999.


                                       22
<PAGE>


              ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Index to Financial Statements of Nebraska Book Company, Inc. for the Years Ended
March 31, 1999, 1998, and 1997

Independent Auditors' Report...............................................24

Balance Sheets............................................................ 25

Statements of Operations...................................................26

Statements of Stockholders' Equity (Deficit)...............................27

Statements of Cash Flows...................................................28

Notes to Financial Statements..............................................29



                                       23
<PAGE>


INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholder of
Nebraska Book Company, Inc.
Lincoln, Nebraska

    We have audited the  accompanying  balance  sheets of Nebraska Book Company,
Inc. (a wholly-owned  subsidiary of NBC Acquisition  Corp.) as of March 31, 1999
and  1998,  and the  related  statements  of  operations,  stockholder's  equity
(deficit),  and cash flows for each of the three years in the period ended March
31, 1999.  These financial  statements are the  responsibility  of the Company's
management.  Our  responsibility  is to  express  an  opinion  on the  financial
statements based on our audits.

    We conducted  our audits in  accordance  with  generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

    In our opinion,  such financial  statements  present fairly, in all material
respects,  the financial position of Nebraska Book Company, Inc. as of March 31,
1999 and 1998,  and the results of its operations and its cash flows for each of
the three years in the period ended March 31, 1999 in conformity  with generally
accepted accounting principles.




DELOITTE & TOUCHE LLP

Omaha, Nebraska
May 22, 1999
(June 4, 1999 as to Note O)


                                       24
<PAGE>

NEBRASKA BOOK COMPANY, INC.

BALANCE SHEETS
------------------------------------------------------------------------------

                                                            March 31,
                                                       1999           1998
                                                  ------------- --------------
ASSETS

CURRENT ASSETS:
  Cash and cash equivalents                     $    4,059,660  $   5,806,890
  Receivables                                       20,838,546     21,383,146
  Inventories                                       49,878,561     48,810,714
  Recoverable income tax                                 4,902      4,374,048
  Deferred income tax benefit                        1,468,156      1,183,529
  Prepaid expenses and other assets                    376,748        189,950
                                                  ------------- --------------
     Total current assets                           76,626,573     81,748,277

PROPERTY AND EQUIPMENT                              31,212,534     28,716,839
  Less accumulated depreciation                     (8,024,049)    (5,984,932)
                                                  ------------- --------------
                                                    23,188,485     22,731,907

GOODWILL AND OTHER INTANGIBLES, net
 of amortization                                    35,562,090     41,498,725

OTHER ASSETS                                         4,313,208      2,798,270
                                                  ------------- --------------

                                                $  139,690,356  $ 148,777,179
                                                  ============= ==============

LIABILITIES AND STOCKHOLDER'S DEFICIT

CURRENT LIABILITIES:
  Accounts payable                              $    9,200,870  $  14,418,843
  Accrued employee compensation and benefits         3,825,893      3,797,242
  Accrued interest                                   1,426,509      1,788,547
  Accrued expenses                                     681,725        498,740
  Deferred revenue                                     376,556        463,917
  Current maturities of long-term debt               5,644,838      1,327,696
  Revolving credit facility                                  -      5,400,000
                                                  ------------- --------------
    Total current liabilities                       21,156,391     27,694,985

LONG-TERM DEBT, net of current maturities          163,612,489    169,257,327

OTHER LONG-TERM LIABILITIES                            191,074        150,604

DUE TO PARENT                                        2,277,266        248,091

COMMITMENTS (Note J)

STOCKHOLDER'S DEFICIT (Note A):
  Common stock, voting, authorized 50,000 shares
   of $1.00 par value; issued and outstanding
   100 shares                                              100            100
  Additional paid-in capital                        30,904,931     30,935,250
  Retained deficit                                 (78,451,895)   (79,509,178)
                                                 ------------- --------------
    Total stockholder's deficit                    (47,546,864)   (48,573,828)
                                                 ------------- --------------

                                                 $ 139,690,356  $ 148,777,179
                                                 ============= ==============


See notes to financial statements.

                                       25
<PAGE>

NEBRASKA BOOK COMPANY, INC.

STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------
                                                 Year Ended March 31,
                                           1999         1998          1997
                                       -----------   -----------   -----------
REVENUES, net of returns              $217,516,312  $198,772,938  $172,600,193

COSTS OF SALES                         137,709,320   125,632,403   110,465,930
                                       -----------   -----------   -----------
  Gross profit                          79,806,992    73,140,535    62,134,263

OPERATING EXPENSES:
  Selling, general and administrative   51,546,776    47,080,571    39,491,174
  Depreciation                           2,392,701     2,531,181     2,705,687
  Amortization                           6,148,971     5,626,334     4,072,450
  Stock compensation costs                       -     8,277,748       296,642
                                       -----------   -----------   -----------
                                        60,088,448    63,515,834    46,565,953
                                       -----------   -----------   -----------
INCOME FROM OPERATIONS                  19,718,544     9,624,701    15,568,310

OTHER EXPENSES (INCOME):
  Interest expense                      17,508,601    11,284,229    10,760,139
  Interest income                         (351,231)     (328,750)     (561,494)
  Other income                          (1,099,766)     (511,812)     (389,446)
                                       -----------   -----------   -----------
                                        16,057,604    10,443,667     9,809,199

INCOME (LOSS) BEFORE INCOME TAXES
 AND EXTRAORDINARY ITEM                  3,660,940      (818,966)    5,759,111

INCOME TAX EXPENSE                       2,603,657       306,279     2,324,619
                                       -----------   -----------   -----------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM  1,057,283    (1,125,245)    3,434,492

EXTRAORDINARY LOSS ON
EXTINGUISHMENT OF DEBT
 (net of income tax benefit
  of $2,460,238)                                 -    (4,020,893)            -
                                       -----------   -----------   -----------
NET INCOME (LOSS)                     $  1,057,283  $ (5,146,138) $  3,434,492
                                      ============  ============  ============

See notes to financial statements.

                                       26
<PAGE>
<TABLE>
<CAPTION>

NEBRASKA BOOK COMPANY, INC.

STATEMENTS OF STOCKHOLDER'S EQUITY (DEFICIT)
------------------------------------------------------------------------------


                                            Additional     Retained
                                 Common      Paid-in       Earnings
                                  Stock      Capital      (Deficit)        Total
                                --------   -----------  -------------   -----------

<S>            <C>                <C>      <C>          <C>             <C>
BALANCE, April 1, 1996            $ 100    $ 30,763,790 $ (2,501,203)   $28,262,687

  Net income                          -               -    3,434,492      3,434,492
                                --------    -----------  -----------    -----------

BALANCE, March 31, 1997             100      30,763,790      933,289     31,697,179

  Dividend to Parent
   in conjunction
   with Recapitalization              -               -  (75,296,329)   (75,296,329)

  Contributed capital                 -         171,460            -        171,460

  Net loss                            -               -   (5,146,138)    (5,146,138)
                                --------    -----------  -----------    -----------

BALANCE, March 31, 1998             100      30,935,250  (79,509,178)   (48,573,828)

  Contributed capital                 -         (30,319)           -        (30,319)

  Net income                          -               -    1,057,283      1,057,283
                                --------    -----------  -------------  -----------

BALANCE, March 31, 1999           $ 100    $ 30,904,931 $(78,451,895)  $(47,546,864)
                                ========    ===========  =============  ===========


</TABLE>

See notes to financial statements.

                                       27
<PAGE>
<TABLE>
<CAPTION>

NEBRASKA BOOK COMPANY, INC.
STATEMENTS OF CASH FLOWS
-------------------------------------------------------------------------------------
                                                        Year Ended March 31,
                                                   1999         1998         1997
                                                ----------    --------     -------
<S>                                             <C>          <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
 Net income (loss)                              $ 1,057,283  $(5,146,138)$ 3,434,492
 Adjustment  to  reconcile  net income
 (loss) to net cash  flows from  operating
 activities:
   Depreciation                                   2,392,701    2,531,181   2,705,687
   Amortization of intangibles                    7,491,851    9,297,653   4,747,486
   Original issue debt discount amortization              -    2,525,000     282,500
   Loss on disposal of assets                        89,800      264,285     113,925
   Deferred income taxes                           (883,200)    (902,458)   (278,326)
   Changes in operating assets and liabilities,
   net of effect of acquisitions:
     Receivables                                    368,840   (6,060,871)   (798,645)
     Inventories                                     18,827   (4,522,322)   (789,386)
     Recoverable income tax                       4,369,146   (3,799,673)   (574,375)
     Prepaid expenses and other assets             (123,460)     140,573    (123,502)
     Other assets                                (1,019,776)       5,852     153,838
     Accounts payable                            (5,297,973)     955,350   1,052,933
     Accrued employee compensation and benefits      28,651      837,167     326,063
     Accrued interest                              (362,038)     522,667     238,832
     Accrued expenses                               182,985      145,798     (19,620)
     Income taxes payable                                 -            -    (107,001)
     Deferred revenue                               (87,361)     463,917           -
     Other long-term liabilities                     40,470     (348,082)    408,853
     Due to parent                                2,029,175      248,091           -
                                                  ---------   ----------   -----------

       Net cash flows from operating activities  10,295,921   (2,842,010) 10,773,754

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property and equipment            (2,842,036)  (3,689,571) (2,242,816)
  Bookstore acquisitions, net of cash acquired   (2,085,881)  (1,231,825) (1,252,345)
  Acquisition of other businesses                         -   (6,481,832)          -
  Proceeds from sale of property and equipment       97,586       64,754      68,585
  Software development costs                       (236,328)    (209,535)          -
                                                  ---------   ----------   -----------
       Net cash flows from investing activities  (5,066,659) (11,548,009) (3,426,576)

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from issuance of long-term debt                -  170,000,000           -
  Deferred financing costs                         (218,477) (11,037,054)          -
  Principal payments on long-term debt           (1,327,696) (81,463,655) (7,471,157)
  Net increase (decrease) in revolving
    credit facility                              (5,400,000)   5,400,000           -
  Dividend paid to parent in conjunction
    with Recapitalization                                 -  (72,703,656)          -
  Capital contribution                              (30,319)      24,310           -
                                                  ---------   ----------   -----------
      Net cash flows from financing activities   (6,976,492)  10,219,945  (7,471,157)
                                                  ---------   ----------   -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS        (1,747,230)  (4,170,074)   (123,979)

CASH AND CASH EQUIVALENTS, Beginning of year      5,806,890    9,976,964  10,100,943
                                                  ---------   ----------   -----------
CASH AND CASH EQUIVALENTS, End of year          $ 4,059,660  $ 5,806,890 $ 9,976,964
                                                  =========   ==========   ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS
INFORMATION:
  Cash paid (refunded) during the period for:
    Interest                                    $16,527,759  $13,518,646 $ 9,555,267
    Income taxes                                 (2,911,464)   2,300,081   3,284,321

Noncash investing and financing activities:
  Dividend to Parent in conjunction
   with Recapitalization, unpaid and
   accrued in accounts payable                  $         -  $ 2,592,673  $        -

  Common stock of Parent contributed
  for acquisition of other businesses                     -      147,150           -


See notes to financial statements.
</TABLE>

                                       28
<PAGE>


NEBRASKA BOOK COMPANY, INC.

NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


A.  NATURE OF OPERATIONS

    Nebraska Book Company, Inc. (the "Company") is a wholly-owned  subsidiary of
NBC Acquisition Corp. NBC Acquisition  Corp.  ("NBC") was formed for the purpose
of acquiring  all of the  outstanding  capital  stock of the Company,  effective
September  1,  1995.  NBC did  not  have  substantive  operations  prior  to the
acquisition  of the  Company.  The  purchase  price of the  Company  was  $106.0
million,  which was funded primarily through the issuance of long-term debt. The
acquisition  was accounted for by the purchase method of accounting and resulted
in excess  of cost  over  fair  value of net  assets  acquired  ("goodwill")  of
approximately $28.1 million.

    The Company participates in the college bookstore industry by providing used
textbooks  to  college  bookstore  operators,   by  operating  its  own  college
bookstores and by providing  proprietary  college bookstore  information systems
and consulting services.

    Recapitalization:  On February 13, 1998, NBC consummated a Merger  Agreement
among NBC Merger Corp. (a newly created, indirect wholly-owned subsidiary of HWH
Capital Partners,  LP. ["HWH"]), NBC and certain shareholders of NBC pursuant to
which the  Company's  outstanding  debt and NBC's stock were  restructured  (the
"Recapitalization").  Significant  components of the Recapitalization,  together
with the applicable accounting effects, were as follows:

(i)        HWH contributed  $45.6 million in capital to NBC Merger Corp.,  which
           was then merged into NBC, with NBC being the surviving corporation.

(ii)       Existing management shareholders of NBC reinvested approximately $4.4
           million  in  NBC.  HWH  and  management  shareholders  were  reissued
           surviving corporation shares of NBC Class A Common Stock.

(iii)      The  Company  obtained  approximately  $170.0  million  in  new  debt
           financing and retired  substantially  all of its existing  debt.  The
           early extinguishment of debt resulted in an extraordinary loss on the
           transaction.

(iv)       NBC obtained  approximately  $45.0 million in debt financing  through
           the issuance of senior  discount  debentures  (the  "Senior  Discount
           Debentures").

(v)        The Company paid a dividend of approximately  $72.7 million to NBC to
           be  utilized  in the  repurchase  of NBC  Common  Stock  and  accrued
           approximately    $2.6   million   for   additional   costs   of   the
           Recapitalization.

(vi)       The Company agreed to purchase management's outstanding options under
           NBC's 1995 Stock  Incentive  Plan,  for a cash payment in lieu of the
           options.  This resulted in stock based  compensation of approximately
           $8.3  million for the year ended March 31,  1998.  In  addition,  NBC
           agreed to purchase all outstanding  warrants for approximately  $16.7
           million.

(vii)      NBC reacquired its  outstanding  shares of Class A and Class B Common
           Stock of certain  shareholders for approximately  $149.2 million. NBC
           accounted  for this  reacquisition  of  shares  as a  treasury  stock
           transaction,  and such  reacquired  shares were  retired.  As the new
           investor  did not acquire  substantially  all of the common  stock of
           NBC, a new basis of accounting was not established in connection with
           the Recapitalization.

                                       29
<PAGE>

    In connection with the  Recapitalization,  a transaction fee of $4.0 million
was paid to HWH. Additionally, HWH was reimbursed approximately $0.1 million for
expenses incurred by HWH in conjunction with the  Recapitalization.  NBC charged
approximately  $0.6  million  of such  costs to  additional  paid-in  capital as
non-deductible costs of the Recapitalization. Of the remaining $3.5 million, the
Company and NBC recorded $2.6 million and $0.9 million ,  respectively,  as debt
issue costs and are amortizing such costs over the life of the related debt.

B.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    The significant accounting policies of the Company are as follows:

    Revenue  Recognition:  The Company  recognizes revenue from product sales at
the time of shipment. The Company has established a program which, under certain
conditions,  enables its customers to return product. The effect of this program
is estimated  and the current  period  accounts are  adjusted  accordingly.  The
Company  recognizes  revenues from the  licensing of its software  products upon
delivery or  installation if the Company is  contractually  obligated to install
the software.

    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
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from the estimates.

    Cash and Cash Equivalents: Cash and cash equivalents consist of cash on hand
and in the  bank as well as  short-term  investments  with  maturities  of three
months or less when purchased.

     Inventories:  Inventories  are  stated  at the  lower  of cost  or  market.
Inventories for wholesale operations are determined on the weighted average cost
method. Other inventories are determined on the first-in, first-out cost method.

    Property  and  Equipment:   Property  and  equipment  are  stated  at  cost.
Depreciation  is  determined  using  a  combination  of  the  straight-line  and
accelerated methods. The majority of property and equipment have useful lives of
five to six years, with the exception of buildings which are depreciated over 30
years.

    Software  Development Costs:  Development costs included in the research and
development  of new software  products  and  enhancements  to existing  software
products associated with the Company's proprietary college bookstore information
systems are  expensed  as  incurred  until  technological  feasibility  has been
established.   After  technological   feasibility  is  established,   additional
development  costs are  capitalized  in accordance  with  Statement of Financial
Accounting  Standards  ("SFAS")  No. 86,  "Accounting  for the Costs of Computer
Software to be Sold, Leased or Otherwise Marketed" and amortized over the lesser
of five years or the economic  life of the related  product.  Recoverability  of
such capitalized costs is evaluated based upon estimates of future  undiscounted
net revenues.  Software costs capitalized approximated $236,000 and $210,000 for
the fiscal years ended March 31, 1999 and 1998,  respectively  and  pertained to
the Company's new Windows-based product, which was installed at one test site in
May, 1999 with two more test sites slated for the second quarter of fiscal 2000.
This product is anticipated to be available for general release to the public in
the third quarter of fiscal 2000.

     Goodwill and Intangible Assets: Intangible assets were acquired through the
acquisition of 100% of the stock of the Company effective September 1, 1995, and
the  acquisition  of  various   bookstore   operations  and  other   businesses.
Recoverability   of  goodwill  is  evaluated  based  upon  estimates  of  future
undiscounted  operating income.  Goodwill is amortized on a straight-line  basis
over a period ranging from 3-15 years. Covenants not to compete are amortized on
a straight-line basis over 3 years.

     Debt Issue Costs: The costs related to the issuance of debt are capitalized
and amortized to interest expense over the lives of the related debt.

                                       30
<PAGE>

    Derivative Financial Instruments: Interest rate swap agreements are utilized
by the Company to reduce the exposure to  fluctuations  in the interest rates on
its  variable  rate debt.  The  differential  to be  received or paid under such
agreements  is  recognized  in  income  over  the  life  of  the  agreements  as
adjustments to interest expense.

    Fair Value of  Financial  Instruments:  The  carrying  amounts of  financial
instruments  including  cash  and cash  equivalents,  accounts  receivable,  and
accounts payable  approximate fair value as of March 31, 1999 and 1998,  because
of the  relatively  short  maturity  of these  instruments.  The  fair  value of
long-term debt,  including the current maturities and revolving credit facility,
was  approximately  $170.7  million and $176.0  million as of March 31, 1999 and
1998, respectively, based upon prevailing interest rates for the same or similar
debt issues.  The fair value of the interest rate swap  agreements  (see note H)
approximated  $564,000  as of March 31,  1999  using  quotes  from  brokers  and
represents the Company's cost of settlement if the existing  agreements had been
settled on that date.

     Stock  Based  Compensation:   The  company  accounts  for  its  stock-based
compensation  under  provisions of Accounting  Principles  Board Opinion No. 25,
Accounting for Stock Issued to Employees ("APB 25").

    Income Taxes:  The Company files a  consolidated  federal  income tax return
with its parent and follows a policy of  recording an amount equal to the income
tax  expense  which the  Company  would  have  incurred  had it filed a separate
return. The Company is responsible for remitting tax payments and collecting tax
refunds for the  consolidated  group.  The amount due to parent  represents  the
cumulative  reduction in tax payments made by the Company as a result of the tax
benefit of operating  losses  generated  by the  Company's  parent.  The Company
provides for  deferred  income taxes based upon  temporary  differences  between
financial  statement  and income tax bases of assets  and  liabilities,  and tax
rates in effect for periods in which such temporary differences are estimated to
reverse.

    Accounting  Standards Not Adopted:  In June 1998,  the Financial  Accounting
Standards Board issued SFAS No. 133,  Accounting for Derivative  Instruments and
Hedging  Activities,  which establishes  accounting and reporting  standards for
derivative  instruments,  including certain derivative  instruments  embedded in
other contracts,  and for hedging  activities.  The Statement becomes effective,
and will be adopted by the Company,  in the first  quarter of fiscal  2002.  The
impact on the  Company's  financial  position and results of  operations  is not
expected to be material.

     Reclassifications:  Certain items on the prior years'  statements have been
reclassified to conform to the current year presentation.

C.  ACQUISITIONS

    In May 1997, the Company  acquired the operations of Specialty  Books,  Inc.
located in Athens,  Ohio.  Specialty  Books,  Inc. is a distributor  of distance
education  material  to  various  institutions  of higher  education  as well as
corporate education and correctional facility education programs.  Additionally,
Specialty  Books,  Inc.  operated a college  bookstore  serving Ohio University,
which also was part of the  acquisition.  In November 1997, the Company acquired
the operations of South Carolina Bookstore,  Inc. This acquisition included four
college bookstores,  three located in Columbia, SC and one in Charleston, SC, as
well as a small  regional  wholesale  textbook  operation  in  Columbia,  SC. In
January  1998,  the  operations of Collegiate  Stores  Corporation  ("CSC") were
acquired  by the  Company.  CSC is a  centralized  buying  service  for over 450
college  bookstores  across  the  United  States,   allowing  the  participating
bookstores  to purchase  certain books and general  merchandise  at lower prices
than those that would be paid by the stores  individually  through the  enhanced
purchasing power of a large group.

    These  operations  were acquired for a net of $6.2 million in cash and 3,924
shares of NBC's common stock at a price of $37.50/share as determined based upon
the  estimated  fair value of such shares at the time of  acquisition.  The fair
value used was based on a multiple  between 7.5 and 8.0 of NBC's  earnings  from
operations  (before  amortization  and  depreciation  expense),  less debt, plus
available cash, divided by the diluted number of shares available.  The multiple
utilized  was  based  on  comparable  market  valuations  at  the  time  of  the
acquisition.  The  acquisitions  were  made  utilizing  cash  on hand as well as


                                       31
<PAGE>

amounts  borrowed under the Company's  revolving  credit  facility.  Each of the
acquisitions  was  accounted  for as a purchase and the results of operations of
the  acquired  businesses  are included in the results of the Company from their
respective dates of acquisition. As a result of the acquisitions,  approximately
$6.6 million excess cost over fair value of net assets  acquired was recorded as
goodwill by the Company.

    The following table  summarizing  unaudited pro forma financial  information
assumes the acquisitions discussed above had occurred on April 1, 1997.

                                      Year Ended
   PRO FORMA INFORMATION            March 31, 1998
   ----------------------           ---------------
   Sales, net of returns             $215,322,319
   Net income (loss)                   (4,780,341)

    Additionally,  the Company from time to time acquires bookstore  operations,
which  generally  are  minimal  in their  impact to the  Company.  The  purchase
generally involves paying cash for the inventory and fixed assets, as well as an
amount  for  goodwill.   In  fiscal  1999,  the  Company  acquired  6  bookstore
operations.

    Goodwill recorded in the above  transactions is amortized on a straight-line
basis over a period of three years.

D.  RECEIVABLES

    Receivables are summarized as follows:

                                                      March 31,
                                               ------------------------
                                                 1999          1998
   Trade  receivables,  less  allowance for    ---------     ----------
     doubtful accounts of $165,899 and
     $164,829 at March 31, 1999 and 1998,
     respectively                            $11,112,281   $12,771,977
   Receivables from book publishers for
     returns                                   5,934,871     5,790,255
   Advances for book buy-backs                 1,721,953     1,446,732
   Notes receivable, current portion                   -        55,798
   Computer  finance  agreements, current
     portion                                      95,999        92,201
   Other                                       1,973,442     1,226,183
                                             -----------   -----------
                                             $20,838,546   $21,383,146
                                             ===========   ===========

   Trade receivables include the effect of estimated product returns. The amount
of product returns  estimated at March 31, 1999 and 1998 is  approximately  $3.3
million and $2.5 million, respectively.

E.  INVENTORIES

    Inventories are summarized as follows:

                                                      March 31,
                                              ------------------------
                                                  1999         1998
                                              -----------  -----------
   Wholesale                                  $25,944,411  $23,974,308
   College bookstores                          21,400,003   21,889,631
   Other                                        2,534,147    2,946,775
                                              -----------  -----------
                                              $49,878,561  $48,810,714
                                              ===========  ===========

    Wholesale  inventories include the effect of estimated product returns.  The
amount of product returns  estimated at March 31, 1999 and 1998 is approximately
$1.6 million.


                                       32
<PAGE>


F.  PROPERTY AND EQUIPMENT

    A summary of the cost of property and equipment follows:

                                               March 31,
                                      ---------------------------
                                          1999           1998
                                      -----------    ------------
    Land                             $ 2,385,293     $ 2,385,293
    Buildings and improvements        13,714,392      12,997,096
    Leasehold improvements             4,756,844       3,894,501
    Furniture and fixtures             3,710,158       2,984,270
    Information systems                5,841,875       5,080,869
    Automobiles and trucks               362,966         502,998
    Machinery                            344,531         323,248
    Projects in process                   96,475         548,564
                                      ----------      ----------
                                     $31,212,534     $28,716,839
                                      ==========      ==========

G.  GOODWILL AND OTHER INTANGIBLES

    Goodwill and intangible assets and related amortization are as follows:

                                               March 31,
                                       --------------------------
                                          1999            1998
                                       -----------     ----------
    Goodwill                          $37,624,132     $36,287,391
    Covenants not to compete                    -       6,300,000
    Debt issue costs                   11,255,530      11,037,054
                                       ----------      ----------
                                       48,879,662      53,624,445
    Less: accumulated amortization     13,317,572      12,125,720
                                       ----------      ----------
                                      $35,562,090     $41,498,725
                                       ==========      ==========
H.  LONG-TERM DEBT

    On February 13,  1998,  the Company  obtained  new  financing as part of the
Recapitalization  (See Note A). Substantially all of the Company's previous debt
facilities  were  paid off with the  proceeds  of the new  financing.  The early
retirement of the previous debt facilities resulted in an extraordinary loss for
the prepayment fees and unamortized  discount on the subordinated  notes as well
as the write-off of the debt issue costs on the retired debt.  The new financing
included  a  bank-administered   senior  credit  facility  (the  "Senior  Credit
Facility") provided through a syndicate of investors. The facility was comprised
of a $27.5 million term loan (the  "Tranche A Loan"),  a $32.5 million term loan
(the  "Tranche B Loan")  and a $50.0  million  revolving  credit  facility  (the
"Revolving Credit Facility").

    The Revolving Credit Facility expires on March 31, 2004.  Availability under
the Revolving  Credit  Facility is determined by the  calculation of a borrowing
base, which at any time is equal to a percentage of eligible accounts receivable
and inventory. The calculated borrowing base at March 31, 1999 was approximately
$32.4  million.  The  Revolving  Credit  Facility  was unused at March 31, 1999;
however,  in conjunction with one of the bookstores acquired during fiscal 1999,
the Company  established  an  irrevocable  standby  letter of credit for $90,000
which expires  October 29, 1999 and reduces the amount  available to be borrowed
under the  Revolving  Credit  Facility.  The interest  rate on the Senior Credit
Facility  is prime plus an  applicable  margin of up to 1.50% or, on  Eurodollar
borrowings, LIBOR plus an applicable margin of up to 2.50%. Additionally,  there
is a 0.5%  commitment  fee for the  average  daily  unused  amount.  The average
borrowings under the Company's  Revolving Credit  Facilities for the years ended
March 31, 1999 and 1998 were approximately  $12.0 million and $9.7 million at an
average rate of 9.6% and 10.0%, respectively.

    The Senior Credit Facility is  collateralized  by  substantially  all of the
assets of the Company and its parent, NBC. Additionally,  NBC has guaranteed the
prompt and complete payment and performance of the Company's  obligations  under
the Senior Credit  Facility.  The Senior Credit  Facility also  stipulates  that


                                       33
<PAGE>

excess cash flows as defined in the credit  agreement  dated  February  13, 1998
(the "Credit  Agreement") shall be applied  initially towards  prepayment of the
term  loans  and then  utilized  to  permanently  reduce  commitments  under the
Revolving  Credit  Facility.  For the year ended March 31, 1999, the excess cash
flow  payment of  approximately  $3.6 million is due  September  29, 1999 and is
included in the current maturities of long-term debt in the Company's  financial
statements.  Aggregate  maturities of long-term debt presented  below  represent
scheduled  principal  payments and are adjusted for such anticipated excess cash
flow payments to be applied toward principal balances.

    Additional funding of the  Recapitalization  included the proceeds of $110.0
million  face amount of 8.75%  senior  subordinated  notes due 2008 (the "Senior
Subordinated  Notes") and the issuance by NBC of senior discount debentures (the
"Senior  Discount  Debentures").  During fiscal 1999,  the Company and NBC filed
Registration  Statements on Form S-4 with the Securities and Exchange Commission
for purposes of  registering  debt  securities  to be issued in exchange for the
Company's Senior Subordinated Notes and NBC's Senior Discount  Debentures.  Such
Registration  Statements were declared  effective by the Securities and Exchange
Commission  on July 14, 1998.  All notes were tendered in the offer to exchange,
which was completed on August 13, 1998.

    Borrowings consist of the following:

                                                        March 31,
                                                  ----------------------
                                                 1999                1998
   Tranche A Loan, due March 31, 2004,        ----------         -----------
    quarterly     principal     payments
    beginning July 31, 1998, plus interest
    at a floating  rate  based on LIBOR
    plus 2.25% (7.25% at March 31, 1999)     $ 26,562,500       $ 27,500,000
   Tranche B Loan, due March 31, 2006,
    quarterly     principal     payments
    beginning July 31, 1998, plus interest
    at a floating  rate  based on LIBOR
    plus 2.50% (7.50% at March 31, 1999)       32,125,000         32,500,000
   Senior subordinated notes,  unsecured,
    due February  15,  2008,  semi-annual
    interest payments,  commencing August
    15, 1998, at a fixed rate of 8.75%        110,000,000        110,000,000
   Mortgage note payable   with   an
    insurance  company assumed with the
    acquisition of a bookstore facility,
    due December 1, 2013, monthly payments
    of $6,446 including interest at 10.75%        569,827            585,023
                                             ------------       ------------
                                              169,257,327        170,585,023
   Less current maturities                     (5,644,838)        (1,327,696)
                                             ------------       ------------
                                             $163,612,489       $169,257,327
                                             ============       ============

    The  Senior  Credit  Facility  requires  the  Company  to  maintain  certain
financial  ratios and  contains  a number of other  covenants  that among  other
things,  restrict  the  ability  to incur  additional  indebtedness,  dispose of
assets,  make capital  expenditures,  make loans or advances and pay  dividends,
except that, among other things,  the Company may pay dividends to NBC (i) after
August 15, 2003 in an amount not to exceed the amount of interest required to be
paid on NBC's Senior  Discount  Debentures  and (ii) to pay  corporate  overhead
expenses  not to exceed  $250,000  per year and any taxes due by NBC. The Credit
Agreement  underlying the Senior Credit  Facility was amended on May 21, 1999 to
permit the January 13, 1999 sale of 4,765  shares of NBC's Class A Common  Stock
to the Company's Chief Operating Officer and the acquisition of Triro, Inc.
discussed in Note O to the financial statements.

    The indenture  governing the Senior Subordinated Notes restricts the ability
of the Company and its Restricted  Subsidiaries (as defined in the indenture) to
pay dividends or make other Restricted Payments (as defined in the indenture) to


                                       34
<PAGE>

their respective  stockholders,  subject to certain  exceptions,  unless certain
conditions are met, including that (i) no default under the indenture shall have
occurred and be continuing, (ii) the Company shall be permitted by the indenture
to incur additional indebtedness and (iii) the amount of the dividend or payment
may not exceed a certain  amount based on,  among other  things,  the  Company's
consolidated net income.

    During fiscal 1999, the Company entered into separate  five-year  amortizing
interest  rate swap  agreements  with two  financial  institutions  whereby  the
Company's  variable  rate  Tranche  A and B Term  Loans  have  been  effectively
converted  into  debt with a fixed  LIBOR  rate of  5.815%  plus the  applicable
margin. The notional amount under each agreement was approximately $29.3 million
at March 31, 1999.  Such notional  amounts are reduced  periodically  by amounts
equal to the scheduled principal payments on the Tranche A and B Term Loans. The
Company  is  exposed  to  credit  loss in the  event  of  nonperformance  by the
counterparties to the interest rate swap agreements. The Company anticipates the
counterparties  will  be able to  fully  satisfy  their  obligations  under  the
agreements.  The Company  settled a previous  interest  rate swap  agreement  in
February,  1998 as  part of the  Recapitalization  at a cost to the  Company  of
approximately $450,000. Such cost is reflected in the statement of operations as
part of the extraordinary loss on extinguishment of debt.

    At March 31, 1999,  the aggregate  maturities of long-term debt for the next
five years were as follows:

   Fiscal Year
   -----------
   2000                               $5,644,838
   2001                                4,251,667
   2002                                6,018,470
   2003                                6,509,701
   2004                                8,110,083

I.  INCOME TAXES

    The provision (benefit) for income taxes consists of:

                                                  Year Ended March 31,
                                        -------------------------------------
                                          1999           1998          1997
   Current:                            ---------      ---------     ---------
     Federal                          $2,967,333     $1,057,439    $2,192,687
     State                               519,524        151,298       410,258
   Deferred                             (883,200)      (902,458)     (278,326)
                                       ---------      ---------     ---------
                                      $2,603,657     $  306,279    $2,324,619
                                      ==========     ==========    ==========

    In  fiscal  1998,  the  actual  income  tax  benefit   associated  with  the
extraordinary  item  differs  from the benefit  computed by applying the Federal
income  tax  rate as a  result  of the  effect  of  state  income  tax  benefits
associated with the extraordinary  loss. The income tax benefit allocated to the
extraordinary item consisted of the following:

   Current                            $2,460,238
   Deferred                                    -
                                      ----------
                                      $2,460,238
                                      ==========



                                       35
<PAGE>

    The  following  represents a  reconciliation  between the actual  income tax
expense  (benefit) and income taxes  computed by applying the Federal income tax
rate to income (loss) before income taxes and extraordinary item:

                                                  Year Ended March 31,
                                          -----------------------------------
                                          1999           1998          1997
                                         ------         ------        ------
   Statutory rate                          34.0%         (34.0)%        34.0%
   State income tax effect                  6.4           (4.0)          4.0
   Amortization in excess of
     purchase price over net assets
     acquired                              17.5           31.6           0.4
   Change in estimate of income tax
     liabilities                           10.0           30.7             -
   Other                                    3.2           13.1           2.0
                                         ------         ------        ------
                                           71.1%          37.4%         40.4%
                                         ======         ======        ======

    The components of the deferred tax assets consist of the following:

                                                March 31,
                                          ---------------------
                                           1999           1998
   Deferred    income    tax    assets  ----------      ---------
   (liabilities), current:
     Vacation accruals                  $  372,749     $  355,523
     Inventory                             456,360        480,432
     Allowance for doubtful accounts        62,975         65,932
     Product returns                       618,637        374,515
     Other                                 (42,565)       (92,873)
                                        ----------      ---------
                                         1,468,156      1,183,529
                                        ----------      ---------
   Deferred income tax assets,
   noncurrent:
     Deferred compensation agreements       72,532         60,241
     Book over tax goodwill
       amortization                        944,676        438,564
     Covenant not to compete             1,733,511      1,653,341
                                        ----------      ---------
                                         2,750,719      2,152,146
                                        ----------      ---------
                                        $4,218,875     $3,335,675
                                        ==========     ==========
    The  non-current  portion  of  deferred  tax assets is  classified  in other
assets.

J.  COMMITMENTS

    The Company leases bookstore  facilities and data processing equipment under
noncancelable  operating  leases  expiring at various dates through fiscal 2011.
Certain of the leases are based on a percentage  of sales,  ranging from 3.0% to
9.0%.  Aggregate  minimum lease  payments  under these  agreements for the years
ending March 31 are as follows:

   Year                                    Amount
   ----                                  ---------
   2000                                $ 4,233,000
   2001                                  3,738,000
   2002                                  3,310,000
   2003                                  2,600,000
   2004                                  1,970,000
   Thereafter                            4,899,000
                                       -----------
                                       $20,750,000
                                       ===========

    Total rent  expense for the years ended  March 31,  1999,  1998 and 1997 was
approximately  $6.2  million,  $6.0  million  and  $4.6  million,  respectively.
Percentage  rent expense for the years ended March 31,  1999,  1998 and 1997 was
approximately $1.6 million, $1.5 million and $0.6 million, respectively.



                                       36
<PAGE>


K.  RETIREMENT PLAN

    The Company  participates  in and  sponsors a 401(k)  compensation  deferral
plan. The plan covers  substantially all employees.  The plan provisions include
employee  contributions  based on a  percentage  of  compensation  along  with a
sponsor base contribution in addition to a limited matching feature. The sponsor
contributions   for  the  years  ended  March  31,  1999,  1998  and  1997  were
approximately $0.7 million, $0.7 million and $0.7 million, respectively.

L. DEFERRED COMPENSATION

    The Company has a  non-qualified  deferred  compensation  plan for  selected
employees.  This plan allows participants to voluntarily elect to defer portions
of their  current  compensation.  The  amounts  can be  distributed  upon death,
resignation or termination, voluntary or involuntary. Interest is accrued at the
prime rate adjusted  semi-annually  on January 1 and July 1 and is compounded as
of March 31. The  liability for the deferred  compensation  is included in other
long-term liabilities.

M.  STOCK-BASED COMPENSATION

    NBC had three stock-based  compensation plans established to provide for the
granting of options to purchase  NBC Class A Common  Stock,  two of which are in
effect at March  31,  1999.  Details  regarding  each of the three  plans are as
follows:

    1995 Stock  Incentive  Plan - This plan  provided for granting of options to
purchase  200,000  shares of NBC Class A Common Stock to  designated  employees,
officers and  directors.  The options were to be in the form of incentive  stock
options or  non-qualified  stock options.  The options granted were to vest with
respect to a certain percentage of the options through March 31, 2000,  provided
that NBC's cumulative earnings before interest,  income taxes,  depreciation and
amortization  met certain  targeted  amounts as defined in the plan. The options
generally were to expire ten years from the date of grant and were granted at an
exercise  price of $10 per share.  All of the options were bought out as part of
the  Recapitalization  on  February  13,  1998  (see  Note A) and the  plan  was
terminated.

    1998  Performance  Stock Option Plan - This plan,  which was adopted on June
30,  1998,  provides for the  granting of options to purchase  52,000  shares of
NBC's Class A Common Stock to selected  members of senior  management of NBC and
its  affiliates.  All options  granted are  intended  to be  nonqualified  stock
options,  although the plan also provides for incentive stock options.  NBC will
grant a portion of the  available  options in fiscal  years  1999-2002  upon the
attainment of  pre-established  financial  targets.  Twenty-five  percent of the
options granted become exercisable immediately upon granting, with the remaining
options  becoming  exercisable in 25% increments over the subsequent three years
on the  anniversary of the date of grant.  The options have an exercise price of
not less than fair  market  value on the date the options are granted and expire
ten  years  from the date of grant.  At March  31,  1999,  42,470  options  were
available for grant under the plan.

    1998 Stock Option Plan - This plan, which was also adopted on June 30, 1998,
provides for the granting of options to purchase  31,000 shares of NBC's Class A
Common  Stock to selected  employees,  officers,  and  directors  of NBC and its
affiliates.  All options granted are intended to be nonqualified  stock options,
although the plan also provides for incentive stock options. NBC will grant such
options at the  discretion  of a committee  designated by the Board of Directors
(the Committee).  Twenty-five  percent of the options granted become exercisable
immediately upon granting,  with the remaining  options becoming  exercisable in
25% increments over the subsequent three years on the anniversary of the date of
grant.  Incentive  stock  options  have an exercise  price of not less than fair
market value on the date the options are granted, while the Committee determines
the  exercise  price for  nonqualified  options,  which may be below fair market
value,  at the time of grant.  All  options  expire  ten years  from the date of
grant.  At March 31, 1999,  17,800  options were  available  for grant under the
plan.

    The  Company  accounts  for its  stock-based  compensation  plans  under the
provisions of APB 25, which utilizes the intrinsic value method. No compensation


                                       37
<PAGE>

cost was recognized for the options granted in fiscal 1999 as the exercise price
was equal to the estimated  fair value of NBC's Class A Common Stock on the date
of  grant   (measurement   date).   Compensation  cost  related  to  stock-based
compensation  was $8,277,748 and $296,642 for the years ended March 31, 1998 and
1997, respectively.

    A summary of the  Company's  stock-based  compensation  activity  related to
stock  options  for each of the three  plans for the three years ended March 31,
1999 is as follows:

                                              Year Ended March 31,
                                           1998                  1997
                                   --------------------- --------------------
                                               Weighted-            Weighted-
                                                Average              Average
                                               Exercise             Exercise
                                    Number       Price    Number      Price
                                   ----------- --------- --------- ---------
1995 Stock Incentive Plan:
   Outstanding - beginning of year    170,000   $ 10.00   170,000   $ 10.00
   Granted                             30,000     10.00         -         -
   Expired/terminated                (200,000)    10.00         -         -
   Exercised                                -         -         -         -
                                   ----------- --------- --------- ---------
   Outstanding - end of year                -   $     -   170,000   $ 10.00
                                   =========== ========= ========= =========

      There were 17,000 options exercisable at March 31, 1997.

                                       Year Ended March 31,
                                               1999
                                     -----------------------
                                                  Weighted-
                                                   Average
                                                  Exercise
                                       Number       Price
                                     ------------ ----------
1998 Performance Stock Option Plan:
   Outstanding - beginning of year             -    $     -
   Granted                                 9,530      52.47
   Expired/terminated                          -          -
   Exercised                                   -          -
                                     ------------ ----------
   Outstanding - end of year               9,530    $ 52.47
                                     ============ ==========

     There  were  2,382   options   exercisable   at  March  31,   1999  with  a
     weighted-average   exercise  price  of  $52.47  per  option.   All  options
     outstanding  at March 31, 1999 have an exercise  price of $52.47 per option
     and a weighted-average remaining contractual life of 9.8 years.

                                      Year Ended March 31,
                                              1999
                                     -----------------------
                                                  Weighted-
                                                   Average
                                                  Exercise
                                       Number       Price
                                     ------------ ----------
1998 Stock Option Plan:
   Outstanding - beginning of year             -    $     -
   Granted                                13,200      52.47
   Expired/terminated                          -          -
   Exercised                                   -          -
                                     ------------ ----------
   Outstanding - end of year              13,200    $ 52.47
                                     ============ ==========

     There  were  3,300   options   exercisable   at  March  31,   1999  with  a
     weighted-average   exercise  price  of  $52.47  per  option.   All  options
     outstanding  at March 31, 1999 have an exercise  price of $52.47 per option
     and a weighted-average remaining contractual life of 9.7 years.

                                       38
<PAGE>


    If the Company  accounted for its  stock-based  compensation  using the fair
value  method   prescribed  by  SFAS  No.  123,   Accounting   for   Stock-Based
Compensation,  the weighted-average fair value of options granted under the 1998
Performance  Stock  Option  Plan and 1998 Stock  Option  Plan for the year ended
March 31,  1999 would have been $8.85 and $8.64 per  option,  respectively.  The
fair  value of  options  granted  was  estimated  at the  date of grant  using a
Black-Scholes   option   pricing  model  with  the  following   weighted-average
assumptions:
                                Year Ended
                              March 31, 1999
                              -------------

  Risk-free interest rate           4.50%
  Dividend yield                        -
  Expected volatility               1.00%
  Expected life (years)                 4

    The  weighted-average  fair  value of options  granted  under the 1995 Stock
Incentive Plan for the year ended March 31, 1998 was $42.47 per option. The fair
value  was   determined   based   upon  the   buy-out   price  as  part  of  the
Recapitalization on February 13, 1998.

    The pro forma  impact on net income  (loss) of  accounting  for  stock-based
compensation using the fair value method required by SFAS 123 is as follows:

                                        Year Ended March 31,
                               1999           1998            1997
                           -------------- --------------  --------------
Net income (loss):
   As reported               $ 1,057,283   $ (5,146,138)    $ 3,434,492
   Pro forma                     995,295     (1,286,752)      3,502,981


N.  SEGMENT INFORMATION

    The following segment  reporting  information is provided in accordance with
SFAS  No.  131,   Disclosures  about  Segments  of  an  Enterprise  and  Related
Information.

    The  Company's  operating  segments  are  determined  based  on the way that
management  organizes the segments for making operating  decisions and assessing
performance.   Management  has  organized  the  Company's  segments  based  upon
differences in products and services provided.  The Company has three reportable
segments:  wholesale operations,  college bookstore operations and complementary
services.  The wholesale  operations  segment consists primarily of selling used
textbooks  to college  bookstores,  buying  them back from  students  or college
bookstores at the end of each school semester and then reselling them to college
bookstores.  The college bookstore  operations segment encompasses the operating
activities  of the  Company's  65 college  bookstores  located on or adjacent to
college  campuses.  The  complimentary  services segment  includes  book-related
services such as a centralized buying service, distance education materials, and
computer hardware and software.

    The  accounting  policies of the  Company's  segments  are the same as those
described  in the  summary of  significant  accounting  policies  in Note B. The
Company  accounts for  intersegment  sales as if the sales were to third parties
(at current  market  prices).  With the exception of cash and cash  equivalents,
certain  receivables and other assets,  and  inventories,  assets,  net interest
expense,  taxes, and extraordinary  item are not allocated between the Company's
segments; instead, such balances are accounted for in a corporate administrative
division. The following table provides selected information about profit or loss
and assets on a segment basis for the three years ended March 31, 1999.

                                       39
<PAGE>

<TABLE>
                                                  College
                                     Wholesale   Bookstore   Complementary
                                    Operations   Operations    Services       Total
                                  ------------ ------------- ------------ -------------
<S>                                <C>          <C>           <C>          <C>
Year ended March 31, 1999:
  External customer revenues       $ 85,324,194 $ 120,745,188 $ 11,446,930 $ 217,516,312
  Intersegment revenues              12,105,940             -      915,473    13,021,413
  Depreciation and amortization
    expense                             319,702     3,171,027    1,894,323     5,385,052
  Income (loss) before interest,
    taxes and extraordinary item     22,662,669     7,399,011   (2,559,067)   27,502,613
  Total assets                       28,898,295    23,600,603    4,228,300    56,727,198

Year ended March 31, 1998:
  External customer revenues       $ 79,865,566 $ 110,584,757 $  8,322,615 $ 198,772,938
  Intersegment revenues              10,729,624             -    1,275,197    12,004,821
  Depreciation and
    amortization expense                404,384     2,618,451      822,056     3,844,891
  Income (loss) before interest,
     taxes and extraordinary item    20,873,859     6,835,911   (1,468,199)   26,241,571
  Total assets                       27,441,423    23,941,963    5,779,487    57,162,873

Year ended March 31, 1997:
  External customer revenues       $ 76,129,403 $  92,507,974 $  3,962,816 $ 172,600,193
  Intersegment revenues               8,358,073             -      959,106     9,317,179
  Depreciation and amortization
    expense                             586,429     1,544,848      216,905     2,348,182
  Income (loss) before interest,
    taxes and extraordinary item     18,842,924     5,590,228     (685,088)   23,748,064
  Total assets                       24,316,380    24,623,739    1,066,111    50,006,230


</TABLE>

    The following  table  reconciles  segment  information  presented above with
information  as presented in the Company's  financial  statements  for the three
years ended March 31, 1999.
                                            Year Ended March 31,
                                       1999          1998          1997
                                    ------------ ------------- -------------
Revenues:
  Total for reportable segments    $230,537,725 $210,777,759  $181,917,372
  Elimination of intersegment
    revenues                        (13,021,413) (12,004,821)   (9,317,179)
                                   ------------ ------------- -------------
      Financial statement total    $217,516,312 $198,772,938  $172,600,193
                                   ============ ============= =============

Depreciation and Amortization
Expense:
  Total for reportable segments    $  5,385,052 $  3,844,891  $  2,348,182
  Corporate administration            3,156,620    4,312,624     4,429,955
                                   ------------ ------------ -------------
    Financial statement total      $  8,541,672 $  8,157,515  $  6,778,137
                                   ============ ============ =============

Income Before Interest, Taxes and
Extraordinary Item:
  Total for reportable segments    $ 27,502,613 $ 26,241,571  $ 23,748,064
  Unallocated corporate
    administrative costs             (6,684,303) (16,105,058)   (7,790,308)
                                    ------------ ------------- -------------
    Financial statement total      $ 20,818,310 $ 10,136,513  $ 15,957,756
                                    ============ ============= =============

Total Assets:
  Total for reportable segments    $ 56,727,198 $ 57,162,873  $ 50,006,230
  Assets not allocated to segments:
    Receivables                      17,572,090   17,414,958    12,141,061
    Recoverable income tax                4,902    4,374,048       574,375
    Deferred income tax benefit       1,468,156    1,183,529     1,156,540
    Property and equipment, net      23,188,485   22,731,907    21,902,556
    Goodwill and other
      intangibles, net               35,562,090   41,498,725    31,898,517
    Other assets                      3,653,180    2,798,270     1,719,118
    Other                             1,514,255    1,612,869     7,770,863
                                     ---------- ------------ -------------
      Financial statement total    $139,690,356 $148,777,179  $127,169,260
                                    =========== ============ =============

    The Company's  revenues are attributed to countries based on the location of
the customer. Substantially all revenues generated are attributable to customers
located within the United States.

                                       40
<PAGE>

O.      SUBSEQUENT EVENT

    Effective June 4, 1999, the Company  acquired all of the outstanding  common
stock of Triro, Inc., an independent  college bookstore operation with 17 retail
bookstores  located in Texas,  New  Mexico,  and  Arizona.  The  purchase  price
consisted of $13.2 million paid to the former  shareholders and $1.9 million for
the average annual debt level.  The actual amount of debt assumed and retired at
closing was approximately $3.2 million,  which exceeded the average  outstanding
debt level of $1.9  million due to the seasonal  incurrence  of debt to fund the
buyback of used  textbooks  at the end of the Spring  semester.  Offsetting  the
higher  debt  balances  at  Closing  was a  compensating  increase  in net asset
balances (consisting primarily of inventory).  The Company will account for this
acquisition  under the purchase  method of  accounting.  Upon  completion of the
closing  balance sheet,  any excess cost over fair value of net assets  acquired
will be recorded as goodwill and amortized over a period of three years.

The  acquisition  of Triro,  Inc.  was  funded in part  through a $10.3  million
capital  contribution  from NBC to the Company.  NBC raised the $10.3 million in
capital  through  the sale of  197,001  shares  of its  Class A Common  Stock to
certain  shareholders,  including  HWH and  members  of senior  management.  The
remaining funding was provided through available cash funds and borrowings under
the  Company's   revolving  credit  facility.   Also  in  conjunction  with  the
acquisition  of Triro,  Inc., the Company  established  an  irrevocable  standby
letter of credit for $52,000 which expires June 2, 2000.


           ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
                   AND FINANCIAL DISCLOSURE.

    There were no changes in or disagreements with accountants on accounting and
financial disclosure for the fiscal year ended March 31, 1999.



                                       41
<PAGE>

                                    PART III

          ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

    The executive  officers and members of the Board of Directors of the Company
and their ages are as follows:

         Name           Age              Position
      ----------     -------  -------------------------------------------
   Robert B. Haas        52  Chairman and Director
   Douglas D. Wheat      48  Director
   Mark W. Oppegard      49  Chief Executive Officer, President and Director
   Bruce E. Nevius       47  Chief Financial  Officer,  Treasurer, and Assistant
                             Secretary
   Barry S. Major        42  Chief Operating Officer
   William H. Allen      56  Vice President of Warehouse Operations
   Thomas A. Hoff        51  Vice President of Retail Division
   Larry R. Rempe        51  Vice President of Information Systems
   Kenneth F. Jirovsky   55  Vice President of Sales and Marketing
   Ardean A. Arndt       57  Vice President of Administration and Secretary
   John D. Baumeister    52  Assistant Treasurer

   The business  experience,  principal occupation and employment as well as the
periods  of service  of each of the  directors  and  executive  officers  of the
Company during the last five years are set forth below.

    Robert B. Haas  became  Chairman  and a  Director  of the  Company  upon the
consummation  of the  Recapitalization.  Mr. Haas has been actively  involved in
private investments since 1978. He has served as Chairman of the Board and Chief
Executive  Officer of Haas Wheat  since 1995;  he has also been  Chairman of the
Board and Chief Executive Officer of Haas Wheat Advisory  Partners  Incorporated
since 1992 and Chairman of the Board of Haas & Partners  Incorporated since 1989
(each  of  which  is  a  private   investment  firm  specializing  in  leveraged
acquisitions).  Mr.  Haas serves as a director of  Specialty  Foods  Acquisition
Corporation,   Specialty  Foods   Corporation  (a  producer  of  specialty  food
products), Sybron International Corporation,  Smarte Carte Corporation and Walls
Holding Company, Inc. and is the Chairman of the Board of Playtex Products, Inc.
(a consumer products company).

     Douglas D. Wheat became a Director of the Company upon the  consummation of
the Recapitalization.  Mr. Wheat has been President of Haas Wheat since 1995 and
President  of Haas Wheat  Advisory  Partners  Incorporated  since  1992;  he was
Co-Chairman  of Grauer & Wheat,  Inc. (a private  investment  firm) from 1989 to
1992 and Senior  Vice  President  of  Donaldson,  Lufkin &  Jenrette  Securities
Corporation from 1985 to 1989. Mr. Wheat serves as a director of Specialty Foods
Acquisition Corporation,  Specialty Foods Corporation, Smarte Carte Corporation,
Walls Holding Company, Inc. and Playtex Products, Inc.

    Mark W. Oppegard has served in the college  bookstore  industry for 29 years
(all of which  have  been  with the  Company  and its  parent,  NBC  (since  its
inception  in 1995)) and became  Chief  Executive  Officer  of the  Company  and
President,   Secretary  and  a  Director  of  NBC  upon   consummation   of  the
Recapitalization on February 13, 1998. Additionally,  Mr. Oppegard has served as
President of the Company since 1992 and as a Director of the Company since 1995.
Prior to the Recapitalization, Mr. Oppegard served as Vice President, Secretary,
Assistant  Treasurer and a Director of NBC between 1995 and 1998. Prior to 1992,
Mr.  Oppegard  served in a series of positions at the  Company,  including  Vice
President  of the college  bookstore  operations.  He is currently a director of
NACSCORP, INC., a distribution company serving the college bookstore industry.

    Bruce E. Nevius has served in the college  bookstore  industry  for 23 years
(all of which  have  been  with the  Company  and its  parent,  NBC  (since  its
inception  in  1995))  and  became  Vice  President  and  Treasurer  of NBC upon
consummation of the Recapitalization on February 13, 1998. Mr. Nevius has served
as Chief Financial Officer of the Company since 1995 and Treasurer and Assistant
Secretary of the Company  since 1984.  From 1976 to 1984,  Mr.  Nevius served as
Controller of the Company.  Prior  thereto,  he served in various  positions for
Lincoln Industries,  Inc. ("Lincoln"),  a holding company that owned the Company


                                       42
<PAGE>

until 1995.

    Barry S. Major was named Chief Operating  Officer of the Company in January,
1999.  Prior to joining  the  Company,  Mr.  Major  served in various  executive
management  positions  at SITEL  Corporation,  a company  listed on the New York
Stock Exchange that provides outsourced  telephone and Internet-based  sales and
customer  service.  Joining  SITEL  Corporation  in 1995 as the  Executive  Vice
President of Finance,  Mr. Major was named Chief  Financial  Officer in 1996 and
assumed the role of President of the North America Region in 1997.  Between 1985
and 1995,  Mr. Major  served in a series of  positions,  including  President in
1995, Executive Vice President,  and Senior Vice President/Credit  Manager, with
American  National  Corporation,  a multi-bank  holding company  operating three
banks throughout Omaha and Southeast Nebraska.

    William H. Allen has served in the college  bookstore  industry for 34 years
(of which 25 have been with the Company and its parent, NBC (since its inception
in 1995)) and has been Vice  President of Warehouse  Operations  for the Company
since 1994.  Between 1974 and 1994,  Mr. Allen served in a series of  positions,
including  assistant manager of the wholesale  operations.  Prior to joining the
Company in 1974,  Mr.  Allen was  employed  by the  Missouri  Store  Company,  a
predecessor of MBS.

    Thomas A. Hoff has served in the  college  bookstore  industry  for 12 years
(all of which  have  been  with the  Company  and its  parent,  NBC  (since  its
inception  in 1995))  and has been Vice  President  of Retail  Division  for the
Company  since 1992.  Mr. Hoff served as an assistant  to the Vice  President of
College Bookstore Operations between 1987 and 1992.

    Larry R. Rempe has served in the  college  bookstore  industry  for 13 years
(all of which  have  been  with the  Company  and its  parent,  NBC  (since  its
inception in 1995)) and has been Vice President of  Information  Systems for the
Company since 1986. Prior to that time Mr. Rempe served in various positions for
Lincoln.

    Kenneth F.  Jirovsky  has served in the college  bookstore  industry  for 38
years (all of which have been with the Company  and its  parent,  NBC (since its
inception in 1995)) and has been Vice  President of Sales and  Marketing for the
Company since 1986.  Prior to 1986 Mr. Jirovsky served in a series of positions,
including assistant manager of the wholesale operations.

    Ardean A. Arndt has served in the college  bookstore  industry  for 14 years
(all of which  have  been  with the  Company  and its  parent,  NBC  (since  its
inception  in 1995))  and has served as Vice  President  of  Administration  and
Secretary for the Company since 1985.  Between 1981 and 1985, Mr. Arndt was Vice
President of Administration for Lincoln.

    John D. Baumeister has served in the college bookstore industry for 33 years
(all of which  have  been  with the  Company  and its  parent,  NBC  (since  its
inception in 1995)) and has served as Assistant  Treasurer for the Company since
1988. Prior to 1988 Mr.  Baumeister  served in a series of positions,  including
sixteen years as an account representative.


                        ITEM 11. EXECUTIVE COMPENSATION.

    The  following  tables  and  paragraphs   provide   information   concerning
compensation  paid by the  Company  for the last two  fiscal  years to its Chief
Executive  Officer  and to the four  other  most  highly  compensated  executive
officers   earning  in  excess  of  $100,000  in  annual   salary  and  bonuses;
compensation paid to Directors; and employment contracts in place with executive
officers.

    The table  presented  below  summarizes  annual and long-term  compensation,
including  stock  compensation  awarded  under the NBC  Acquisition  Corp.  1998
Performance Stock Option Plan, to such persons for the last two fiscal years:

                                       43
<PAGE>

<TABLE>
<CAPTION>

                              Summary Compensation Table

                                                          Long-Term
                                                         Compensation
                                     Annual Compensation   Awards
                                     ------------------- ------------
                                                           Number
                                                         of Securities
                              Fiscal                     Underlying      All Other
Name and Principal Position   Year    Salary     Bonus   Options (1)   Compensation (2)
----------------------------  -----  ---------  -------- ------------  --------------
<S>                           <C>     <C>         <C>          <C>         <C>
Mark W. Oppegard - President,
Chief Executive Officer and
Director                      1999   $197,808   $     -            -     $ 2,985
                              1998    176,539         -            -       3,017

Barry S. Major - Chief
Operating  Officer            1999     40,769    60,000        9,530           -
                              1998          -         -            -           -

Larry R. Rempe - Vice
President of Information
Systems                       1999    106,846         -            -       3,092
                              1998    102,846         -            -       3,017

Kenneth F. Jirovsky - Vice
President of Sales and
Marketing                     1999    100,923         -            -       3,376
                              1998     98,923         -            -       3,017

William H. Allen - Vice
President of Warehouse
Operations                    1999    100,923         -            -       3,376
                              1998     85,923         -            -       3,521

</TABLE>

(1)     The stock  options  were  granted at an exercise  price of  $52.47/share
        ("Founder's   Price").   Such   exercise   price  is  considered  to  be
        representative  of the fair market value of the NBC Class A Common Stock
        underlying  the stock  options at January 4, 1999 (date of grant)  based
        upon the buy-out price as part of the  Recapitalization  on February 13,
        1998.
(2)     Consists of Company  matching  contributions  to the NBC Retirement Plan
        and life  insurance  premiums  paid by the  Company  on the  executive's
        behalf.

    Presented below is information in tabular format regarding individual grants
of stock  options to certain  executive  officers of the  Company  under the NBC
Acquisition  Corp. 1998  Performance  Stock Option Plan for the year ended March
31, 1999:

              Options Granted During the Year Ended March 31, 1999

                 Individual Grants                            Grant Date Value
----------------------------------------------------------  --------------------
                            Number     % of Total
                              of        Options
                           Securities  Granted to                         Grant
                           Underlying  Employees   Exercise               Date
                            Options     in Fiscal   Price   Expiration   Present
            Name            Granted       1999    Per Share    Date     Value(1)
-------------------------- ---------   ---------  ---------  --------- ---------

Barry S. Major - Chief
Operating Officer            9,530        41.9%    $52.47    01/04/09    $84,376

(1)     Grant date present value was  determined  using a  Black-Scholes  option
        pricing model,  assuming a 4.63% risk-free  interest rate, 1.0% expected
        volatility, and an expected life of approximately 4 years.


                                       44
<PAGE>

    The following table provides  information  concerning each exercise of stock
options by certain  executive  officers of the Company under the NBC Acquisition
Corp. 1998 Performance Stock Option Plan during the year ended March 31, 1999 as
well as the value of unexercised options as of March 31, 1999:

        Aggregated Option Exercises During the Year Ended March 31, 1999
                      and Option Value as of March 31, 1999

                                                      Number
                                                   of Securities    Value of
                                                     Underlying    Unexercised
                                                    Unexercised    in-the-Money
                                                     Options at     Options at
                                                   March 31, 1999 March 31, 1999
                                                    -------------  -------------
                                 Shares
                                Acquired    Value    Exercisable/  Exercisable/
            Name               on Exercise Realized  Unexercisable Unexercisable
------------------------------ ----------- --------  ------------- -------------

Barry S. Major - Chief
Operating Officer                    -       $ -      2,382/7,148      $-/$-


Compensation of Directors

   Directors  of the  Company  receive  no  compensation  for  services  but are
reimbursed for out-of-pocket expenses.

Employment Agreements

   Upon  consummation  of  the   Recapitalization,   the  Company  entered  into
employment  agreements  expiring  March 31, 2001 with Mark W.  Oppegard  and six
other senior executive officers of the Company.  Subsequent thereto, on December
22, 1998, the Company entered into a similar employment agreement expiring March
31, 2001 with its newly-appointed Chief Operating Officer,  Barry S. Major. Such
agreements (the "Employment  Agreements") with the eight  aforementioned  senior
executive  officers (each, an "Executive")  provide for an annual base salary as
determined by the Board of Directors,  for incentive compensation based upon the
attainment of financial  objectives to be  established by the Board of Directors
(or a committee  thereof)  after  considering  the  recommendation  of the chief
executive  officer,  and for customary fringe benefits.  The amounts of salaries
are as follows: Mr. Oppegard, $225,000 per annum; Mr. Major, $200,000 per annum;
Mr. Rempe, $109,000 per annum; Mr. Jirovsky,  $102,000 per annum; and Mr. Allen,
$102,000 per annum.  The Employment  Agreements  provide that their term will be
automatically extended from year to year after March 31, 2001, unless terminated
upon specified notice by either party.

   The Employment  Agreements also provide that each Executive will be granted a
number of options  to acquire  shares of NBC  Acquisition  Corp.  Class A Common
Stock  determined  by the Board of  Directors.  Each such option has an exercise
price  not to be less  than the fair  market  value  per share as of the date of
grant and is exercisable as to 25% of the shares covered  thereby on the date of
grant and as to an additional 25% of the shares  covered  thereby on each of the
first  three  anniversaries  of the date of grant,  subject  to the  Executive's
continued employment by the Company on such dates.

   The  Employment  Agreements  also  provide  for  specified  payments  to  the
Executive  in the event of  termination  of  employment  by the Company  without
"cause" (as defined in the respective  agreements)  and in the event of death or
disability of the Executive  during the term.  The  Employment  Agreements  also
contain  customary  confidentiality  obligations and three year  non-competition
agreements for each Executive.

                                       45
<PAGE>

   Finally, the Employment Agreements provide that, prior to the consummation by
NBC of an initial public offering of NBC  Acquisition  Corp.  Common Stock,  the
Executives will not sell, transfer, pledge or otherwise dispose of any shares of
NBC Acquisition  Corp.  Common Stock,  except for certain transfers to immediate
family members, in the event of disability and for estate planning purposes. The
Employment  Agreements also provide that, in the event of the sale of a majority
of the outstanding NBC Acquisition  Corp. Common Stock, the Executives will have
the option,  and (at the option of HWH) will be  required,  to sell their shares
ratably  with,  and on the same  terms and  conditions  as,  the  other  selling
shareholders.


       ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

    As a result of the  Recapitalization,  all  shares  of  common  stock of the
Company are owned by NBC. The  information in the following table sets forth the
ownership  of NBC  Acquisition  Corp.  Class A Common  Stock by each  person who
beneficially owns more than 5.0% of the outstanding shares of the Class A Common
Stock,  and each  named  director,  executive  officer,  and all  directors  and
executive officers of the Company treated as a group who beneficially own shares
of the  Class A Common  Stock  as of June  18,  1999.  To the  knowledge  of the
Company,  each of such holders of shares has sole voting and investment power as
to the shares  owned  unless  otherwise  noted.  The address for each  executive
officer and director is 4700 South 19th Street,  Lincoln,  Nebraska 68501 unless
otherwise noted.

                                                         Amount and
                                                          Nature of
                                                         Beneficial   Percent of
         Title of Class/Name of Beneficial Owner         Ownership(1)    Class
-------------------------------------------------------  ------------  ---------

Class A Common Stock:
 Owning Greater Than 5% of Shares:
  HWH (2)                                                  1,060,330      91.8%
                                                         ============  =========

Ownership of Management:
  Robert B. Haas (2)                                       1,060,330      91.8%
  Mark W. Oppegard                                            22,966       2.0%
  Larry R. Rempe                                              15,748       1.4%
  Bruce E. Nevius                                             11,436       1.0%
  Thomas A Hoff                                               11,364       1.0%
  Kenneth F. Jirovsky                                         10,030       0.9%
  Ardean A. Arndt                                              8,624       0.7%
  William H. Allen                                             7,624       0.7%
  Barry S. Major                                               6,671       0.6%
  Douglas D. Wheat (2)                                             -          -
                                                         ------------  ---------
   Total for Directors and Executive Officers as a Group   1,154,793     100.0%
                                                         ============  =========

(1)     Beneficial  ownership is determined in accordance  with the rules of the
        SEC and includes voting and investment  power with respect to the shares
        of NBC Acquisition Corp. Class A Common Stock.

(2)     The sole general partner of HWH is a limited  partnership,  and the sole
        general partner of the limited  partnership is a corporation  controlled
        by Mr.  Haas.  Mr. Wheat is a  stockholder,  director and officer of the
        corporation.  The  address of HWH and of  Messrs.  Haas and Wheat is 300
        Crescent Court, Suite 1700, Dallas, Texas 75201.


                                       46
<PAGE>


             ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

    Effective June 4, 1999, the Company  acquired all of the outstanding  common
stock of Triro, Inc. The acquisition of Triro, Inc. was funded in part through a
$10.3 million capital contribution from NBC to the Company. NBC raised the $10.3
million in  capital  through  the sale of  197,001  shares of its Class A Common
Stock at a price of $52.47 per share  (based upon the  buy-out  price as part of
the  Recapitalization on February 13, 1998) to certain  shareholders,  including
190,595 shares to HWH; 2,000 shares to the Company's Chief Executive Officer and
1,906 shares to the Company's Chief Operating Officer.

    As of March 31, 1999, NBC reported notes  receivable from  stockholders  and
associated interest receivable of approximately $361,000. Approximately $133,000
of such notes  originated  during the leveraged buyout of the Company by Olympus
Advisory  Partners,  Inc. in 1995. In conjunction with the buyout, the Company's
executive officers were given the opportunity to acquire shares of NBC's Class A
Common Stock with a portion of the purchase  price of such shares being provided
to the  officers in the form of  interest  bearing  notes.  Such notes are dated
August 31, 1995, become due August 31, 2002, and bear interest at the applicable
Federal rate for mid-term loans. The largest aggregate amount outstanding at any
time during the year ended  March 31,  1999 under a note due from the  Company's
Chief Executive  Officer was approximately  $85,000,  bore interest at a rate of
6.04%, and was repaid in full in December, 1998.

    The remaining  balance of such notes originated  pursuant to the terms of an
employment agreement dated December 22, 1998 with the Company's  newly-appointed
Chief  Operating  Officer,  Barry S. Major.  In January,  1999, NBC issued 4,765
shares of its Class A Common  Stock to Mr. Major at a price of $52.47 per share,
receiving  $25,000 in cash and a $225,000  note  maturing  January  19, 2009 and
bearing  interest at 5.25% per year. The largest  aggregate  amount  outstanding
under  this  note  at any  time  during  the  year  ended  March  31,  1999  was
approximately $228,000.

    During  fiscal  1998  and in  conjunction  with  the  Recapitalization,  NBC
simultaneously  granted the remaining  30,000 options  authorized  under the NBC
1995 Stock Incentive Plan to the Company's  senior  executive  officers and then
bought  out  and  cancelled  all  200,000  unexercised  options  at  a  cost  of
approximately  $8.5  million,  of which $0.2 million was paid out  subsequent to
March 31, 1998.  Such  officers  reinvested an aggregate of  approximately  $4.4
million of the proceeds from the buyout to purchase  approximately 8.7% of NBC's
Class A Common Stock.


                                       47
<PAGE>

                                     PART IV

     ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

(a)     Financial Statements and Financial Statement Schedules.

        (1)  Financial Statements of Nebraska Book Company, Inc.

             Index to Financial Statements.
             Independent Auditors' Report.
             Balance Sheets as of March 31, 1999 and 1998.
             Statements of Operations  for the Years Ended March 31, 1999,  1998
               and 1997.
             Statements  of  Stockholders' Equity  (Deficit) for the Years Ended
               March 31, 1999, 1998 and 1997.
             Statements of Cash Flows for  the Years Ended  March 31, 1999, 1998
               and 1997.
             Notes to Financial Statements.

        (2)  Financial Statement Schedules.

             Independent  Auditors'  Report on Schedule.
             Schedule II - Valuation and Qualifying Accounts.

        (3)  Management Contract and Compensatory Plan Arrangement Exhibits.

             Exhibits 10.4 through 10.11 are incorporated herein by reference.

(b)     Reports on Form 8-K.

        No reports on Form 8-K were filed  during the  quarter  ended  March 31,
        1999.

(c)     Exhibits.

        3.1     Certificate  of  Incorporation,  as amended,  of  Nebraska  Book
                Company,  Inc.,  filed as Exhibit 3.1 to Nebraska  Book Company,
                Inc.  Registration  Statement on Form S-4, as amended  (File No.
                333-48221), is incorporated herein by reference.

        3.2     By-laws of Nebraska Book Company,  Inc., filed as Exhibit 3.2 to
                Nebraska Book Company, Inc. Registration  Statement on Form S-4,
                as  amended  (File No.  333-48221),  is  incorporated  herein by
                reference.

        4.1     Indenture dated as of February 13, 1998 by and between  Nebraska
                Book Company,  Inc. and United States Trust Company of New York,
                as Trustee,  filed as Exhibit 4.1 to Nebraska Book Company, Inc.
                Registration  Statement  on  Form  S-4,  as  amended  (File  No.
                333-48221), is incorporated herein by reference.

        4.2     Exchange and Registration  Rights Agreement dated as of February
                13, 1998 by and between  Nebraska Book  Company,  Inc. and Chase
                Securities  Inc., filed as Exhibit 4.2 to Nebraska Book Company,
                Inc.  Registration  Statement on Form S-4, as amended  (File No.
                333-48221), is incorporated herein by reference.

        4.3     Form of Initial Note of Nebraska Book Company, Inc. (included in
                Exhibit 4.1 as Exhibit A), filed as Exhibit 4.3 to Nebraska Book
                Company,  Inc.  Registration  Statement  on Form S-4, as amended
                (File No. 333-48221), is incorporated herein by reference.

                                       48
<PAGE>

        4.4     Form of Exchange Note of Nebraska Book Company,  Inc.  (included
                in Exhibit 4.1 as Exhibit  B),  filed as Exhibit 4.4 to Nebraska
                Book  Company,  Inc.  Registration  Statement  on Form  S-4,  as
                amended  (File  No.  333-48221),   is  incorporated   herein  by
                reference.

        10.1    Credit  Agreement dated as of February 13, 1998 by and among NBC
                Acquisition  Corp.,  Nebraska  Book  Company,  Inc.,  the  Chase
                Manhattan Bank and certain other financial  institutions,  filed
                as Exhibit  10.1 to Nebraska  Book  Company,  Inc.  Registration
                Statement  on Form S-4,  as  amended  (File No.  333-48221),  is
                incorporated herein by reference.

        10.2    Guarantee  and  Collateral  Agreement,  dated as of February 13,
                1998 made by NBC  Acquisition  Corp.  and Nebraska Book Company,
                Inc. in favor of the Chase  Manhattan  Bank,  as  administrative
                agent,  filed as Exhibit  10.2 to Nebraska  Book  Company,  Inc.
                Registration  Statement  on  Form  S-4,  as  amended  (File  No.
                333-48221), is incorporated herein by reference.

        10.3    Purchase Agreement dated February 10, 1998 between Nebraska Book
                Company,  Inc. and Chase  Securities Inc., filed as Exhibit 10.3
                to Nebraska Book Company,  Inc.  Registration  Statement on Form
                S-4, as amended (File No. 333-48221),  is incorporated herein by
                reference.

        10.4    Form of  Memorandum of  Understanding,  dated as of February 13,
                1998 between NBC Acquisition Corp. and each of Mark W. Oppegard,
                Bruce E. Nevius, Larry R. Rempe, Kenneth F. Jirovsky, William H.
                Allen, Thomas A. Hoff and Ardean A. Arndt, filed as Exhibit 10.4
                to Nebraska Book Company,  Inc.  Registration  Statement on Form
                S-4, as amended (File No. 333-48221),  is incorporated herein by
                reference.

        10.5    Memorandum  of  Understanding,  dated as of  December  22,  1998
                between  Nebraska Book Company,  Inc. and Barry S. Major,  Chief
                Operating  Officer,  filed  as  Exhibit  10.1 to  Nebraska  Book
                Company, Inc. Form 10-Q for the quarter ended December 31, 1998,
                is incorporated herein by reference.

        10.6    NBC  Acquisition  Corp. 1995 Stock Incentive Plan adopted August
                31, 1995,  filed as Exhibit 10.5 to Nebraska Book Company,  Inc.
                Registration  Statement  on  Form  S-4,  as  amended  (File  No.
                333-48221), is incorporated herein by reference.

        10.7    NBC Acquisition Corp. 1998 Performance Stock Option Plan adopted
                June 30, 1998,  filed as Exhibit 10.1 to Nebraska  Book Company,
                Inc.  Form  10-Q  for  the  quarter  ended  June  30,  1998,  is
                incorporated herein by reference.

        10.8    NBC  Acquisition  Corp.  1998 Stock Option Plan adopted June 30,
                1998, filed as Exhibit 10.2 to Nebraska Book Company,  Inc. Form
                10-Q for the quarter ended June 30, 1998, is incorporated herein
                by reference.

        10.9    NBC Acquisition  Corp. Senior Management Bonus Plan adopted June
                30, 1998,  filed as Exhibit 10.3 to Nebraska Book Company,  Inc.
                Form 10-Q for the quarter ended June 30, 1998,  is  incorporated
                herein by reference.

        10.10   Form of Deferred Compensation  Agreement by and between Nebraska
                Book  Company,  Inc.  and  each of Mark W.  Oppegard,  Bruce  E.
                Nevius, Larry R. Rempe and Thomas A. Hoff, filed as Exhibit 10.6
                to Nebraska Book Company,  Inc.  Registration  Statement on Form
                S-4, as amended (File No. 333-48221),  is incorporated herein by
                reference.

                                       49
<PAGE>

        10.11   NBC Acquisition Corp. 401(k) Savings Plan, filed as Exhibit 10.7
                to Nebraska Book Company,  Inc.  Registration  Statement on Form
                S-4, as amended (File No. 333-48221),  is incorporated herein by
                reference.

        10.12   Agreement  for  Purchase  and Sale of Stock made January 9, 1998
                between and among  Nebraska  Book  Company,  Inc.  and Martin D.
                Levine,  the Lauren E. Levine  Grantor Trust and the Jonathan L.
                Levine  Grantor  Trust  (the  "Collegiate   Stores   Corporation
                Agreement"),  filed as Exhibit  10.8.1 to Nebraska Book Company,
                Inc.  Registration  Statement on Form S-4, as amended  (File No.
                333-48221), is incorporated herein by reference.

        10.13   First Amendment dated January 23, 1998 to the Collegiate  Stores
                Corporation Agreement,  filed as Exhibit 10.8.2 to Nebraska Book
                Company,  Inc.  Registration  Statement  on Form S-4, as amended
                (File No. 333-48221), is incorporated herein by reference.

        10.14   Commercial  Lease Agreement made and entered into March 8, 1989,
                by and  between  Robert J.  Chaney,  Mary  Charlotte  Chaney and
                Robert J. Chaney,  as Trustee  under the Last Will and Testament
                of James A Chaney,  and Nebraska  Book Company,  Inc.,  filed as
                Exhibit  10.9  to  Nebraska  Book  Company,   Inc.  Registration
                Statement  on Form S-4,  as  amended  (File No.  333-48221),  is
                incorporated herein by reference.

        10.15   Lease  Agreement  entered into as of  September 1, 1986,  by and
                between Odell Associates  Limited  Partnership and Nebraska Book
                Company,  Inc., filed as Exhibit 10.10 to Nebraska Book Company,
                Inc.  Registration  Statement on Form S-4, as amended  (File No.
                333-48221), is incorporated herein by reference.

        10.16   Lease  Agreement  entered into as of  September 1, 1986,  by and
                between John B. DeVine,  successor trustee of the Fred C. Ulrich
                Trust,  as amended,  and Nebraska Book Company,  Inc.,  filed as
                Exhibit  10.11  to  Nebraska  Book  Company,  Inc.  Registration
                Statement  on Form S-4,  as  amended  (File No.  333-48221),  is
                incorporated herein by reference.

        10.17   Lease  Agreement  entered  into as of  September  1, 1986 by and
                between Odell Associates  Limited  Partnership and Nebraska Book
                Company,  Inc., filed as Exhibit 10.12 to Nebraska Book Company,
                Inc.  Registration  Statement on Form S-4, as amended  (File No.
                333-48221), is incorporated herein by reference.

        10.18   Lease  Agreement  made and entered  into October 12, 1988 by and
                between  Hogarth  Management  and Nebraska Book  Company,  Inc.,
                filed  as  Exhibit  10.13  to  Nebraska   Book   Company,   Inc.
                Registration  Statement  on  Form  S-4,  as  amended  (File  No.
                333-48221), is incorporated herein by reference.

        10.19   Industrial  Real Estate Lease dated June 22, 1987 by and between
                Cyprus Land Company and Nebraska  Book Company,  Inc.,  filed as
                Exhibit  10.14  to  Nebraska  Book  Company,  Inc.  Registration
                Statement  on Form S-4,  as  amended  (File No.  333-48221),  is
                incorporated herein by reference.

        12.     Statements regarding  computation of ratios, filed as Exhibit 12
                to Nebraska Book Company,  Inc.  Registration  Statement on Form
                S-4, as amended (File No. 333-48221),  is incorporated herein by
                reference.

        24.     Powers of Attorney (included on signature page).

        27.     Financial Data Schedule for the Year Ended March 31, 1999 [EDGAR
                filing only].


                                       50
<PAGE>

    All other schedules for which provision is made in the applicable accounting
regulations of the  Securities  and Exchange  Commission are either not required
under the related  instructions,  are not  applicable  (and  therefore have been
omitted),  or the required disclosures are contained in the financial statements
included herein.


                                       51
<PAGE>

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

                                NEBRASKA BOOK COMPANY, INC.


                                 /s/ Mark W. Oppegard
                                 ----------------------------------
                                 Mark W. Oppegard
                                 President, Chief Executive Officer and Director
                                 June 18, 1999

    Pursuant to the  requirements  of the Securities  Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
registrant and in the capacities and on the dates indicated.


                                 /s/ Mark W. Oppegard
                                 ----------------------------------
                                 Mark W. Oppegard
                                 President, Chief Executive Officer and Director
                                 June 18, 1999


                                      *
                                 ----------------------------------
                                 Bruce E. Nevius
                                 Treasurer, Chief Financial Officer and
                                 Assistant Secretary
                                 June 18, 1999


                                       *
                                 ----------------------------------
                                 Robert B. Haas
                                 Chairman and Director
                                 June 18, 1999


                                       *
                                 ----------------------------------
                                 Douglas D. Wheat
                                 Director
                                 June 18, 1999


                             *By: /s/  Mark W. Oppegard
                                 ----------------------------------
                                 Mark W. Oppegard
                                 Attorney-In-Fact



    Supplemental  Information  to Be Furnished  With Reports  Filed  Pursuant to
Section 15(d) of the Act by  Registrants  Which Have Not  Registered  Securities
Pursuant to Section 12 of the Act:

     No annual report or proxy material for the fiscal year ended March 31, 1999
has been, nor will be, sent to security holders.



                                       52
<PAGE>


                          FINANCIAL STATEMENT SCHEDULES



INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
Nebraska Book Company, Inc.
Lincoln, Nebraska

    We have audited the financial  statements of Nebraska Book Company,  Inc. (a
wholly-owned  subsidiary of NBC Acquisition Corp.) as of March 31, 1999 and 1998
and for each of the three  years in the period  ended March 31,  1999,  and have
issued our report  thereon  dated May 22, 1999 (June 4, 1999 as to Note O); such
report is included  elsewhere  in this Form 10-K.  Our audits also  included the
financial  statement schedule listed in Item 14(a)(2).  This financial statement
schedule is the responsibility of the Company's  management.  Our responsibility
is to express an opinion  based on our audits.  In our opinion,  such  financial
statement  schedule,   when  considered  in  relation  to  the  basic  financial
statements  taken as a whole,  presents  fairly  in all  material  respects  the
information set forth therein.




DELOITTE & TOUCHE LLP

Omaha, Nebraska
May 22, 1999


                                       53
<PAGE>
<TABLE>
<CAPTION>

NEBRASKA BOOK COMPANY, INC.

SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
-----------------------------------------------------------------------------------------------

                                                Charged to   Charged to
                                  Beginning of   Costs and     Other       Net       End of Year
                                  Year Balance   Expenses     Accounts   Charge-Offs   Balance
                                  ------------   ----------  ---------- -----------  ----------
<S>                                <C>            <C>           <C>      <C>         <C>
YEAR ENDED MARCH 31, 1999
  Allowance for doubtful accounts  $ 164,829     $ 134,661    $     -  $ (133,591)  $ 165,899


YEAR ENDED MARCH 31, 1998
  Allowance for doubtful accounts    239,296       180,491          -    (254,958)    164,829


YEAR ENDED MARCH 31, 1997
  Allowance for doubtful accounts    255,027       159,602          -    (175,333)    239,296


</TABLE>


                                       54
<PAGE>

                                  EXHIBIT INDEX


24.  Powers of Attorney (included on signature page).

27.  Financial  Data  Schedule  for the Year Ended March 31, 1999 [EDGAR  filing
     only].



                                       55
<PAGE>