UNITED STATES 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, 2003

                                       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 333-48225

                              NBC ACQUISITION CORP.
             (Exact name of registrant as specified in its charter)

              DELAWARE                                      47-0793347
(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. YES [X] No [ ]

    Indicate by check mark if disclosure of delinquent  filers  pursuant to Item
405 of Regulation S-K (ss.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]

    Indicate by check mark whether the  registrant is an  accelerated  filer (as
defined in Rule 12b-2 of the Act). Yes [ ] NO [X]

    MARKET VALUE OF THE REGISTRANT'S  VOTING STOCK HELD BY NON-AFFILIATES OF THE
REGISTRANT - NOT APPLICABLE AS REGISTRANT'S STOCK IS NOT PUBLICLY TRADED.

    THERE WERE  1,264,546  SHARES OF CLASS A COMMON STOCK  OUTSTANDING AS OF MAY
30, 2003.

                    DOCUMENTS INCORPORATED BY REFERENCE: NONE

                            Total Number of Pages: 84

                             Exhibit Index: PAGE 84

                                       1
<PAGE>
                                TABLE OF CONTENTS


PART I:

Item 1       Business..........................................................3
Item 2       Properties.......................................................13
Item 3       Legal Proceedings................................................15
Item 4       Submission of Matters to a Vote of Security Holders..............15

PART II:

Item 5       Market for Registrant's Common Equity and Related Stockholder
               Matters........................................................16
Item 6       Selected Financial Data..........................................16
Item 7       Management's Discussion and Analysis of Financial Condition and
               Results of Operations..........................................18
Item 7A      Quantitative and Qualitative Disclosures about Market Risk.......28
Item 8       Financial Statements and Supplementary Data......................30
Item 9       Changes in and Disagreements with Accountants on Accounting and
               Financial Disclosure...........................................56

PART III:

Item 10     Directors and Executive Officers of the Registrant................57
Item 11     Executive Compensation............................................59
Item 12     Security Ownership of Certain Beneficial Owners and Management
              and Related Stockholder Matters.................................64
Item 13     Certain Relationships and Related Transactions....................65
Item 14     Controls and Procedures...........................................67

PART IV:

Item 15     Exhibits, Financial Statement Schedules, and Reports on Form 8-K..68
Signatures....................................................................74
Certifications................................................................75
Supplemental Information to be Furnished......................................77
Financial Statement Schedule I - Condensed Financial Information
  (Parent Company Only).......................................................78
Financial Statement Schedule II - Valuation and Qualifying Accounts...........83
Exhibit Index.................................................................84


                                       2
<PAGE>

                                     PART I.

                                ITEM 1. BUSINESS.


RECAPITALIZATION AND PUBLIC REGISTRATION

    Effective  September  1, 1995,  Nebraska  Book  Company,  Inc.  ("NBC")  was
acquired in a leveraged  buyout by NBC  Acquisition  Corp.  (the  "Company"),  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 the  Company;
certain shareholders of the Company, including members of senior management; and
a newly created  corporation  controlled and owned by affiliates of Haas Wheat &
Partners,  L.P. ("HWP"),  the newly created corporation merged with and into NBC
Acquisition Corp. (the "Merger") with the Company as the surviving corporation.

    Concurrently with the consummation of the Merger,  NBC 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,  NBC also raised  approximately  $103.6  million  from the issuance of
senior  subordinated  notes (the  "Senior  Subordinated  Notes") and the Company
raised a total of $91.6 million  through:  (i) the sale of  approximately  $45.6
million of NBC  Acquisition  Corp.  Class A Common Stock to HWP affiliates  (the
"Stock  Sale");  (ii) the  reinvestment  of  approximately  $4.4  million in NBC
Acquisition  Corp. Class A Common Stock by the Company's senior  management (the
"Reinvestment");  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  NBC's  outstanding
indebtedness,  the Stock  Sale,  the  Reinvestment,  the  issuance by NBC of the
Senior  Subordinated  Notes,  the issuance by the Company of the Senior Discount
Debentures,   NBC'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  Discount
Debentures  and NBC's Senior  Subordinated  Notes.  The  Securities and Exchange
Commission declared such Registration Statements effective on July 14, 1998. All
notes were  tendered in the offer to exchange  that was  completed on August 13,
1998.

    On August 2, 2002, HWH Capital Partners,  L.P. and HWH Cornhusker  Partners,
L.P.,  affiliates of HWP, along with certain other  stockholders  of the Company
(collectively with HWP, the "Sellers"), sold approximately 33% of the issued and
outstanding  shares of the  Company  to certain  funds  affiliated  with  Weston
Presidio (Weston  Presidio Capital III, L.P.,  Weston Presidio Capital IV, L.P.,
WPC Entrepreneur  Fund, L.P., and WPC Entrepreneur  Fund II, L.P.,  collectively
the "Weston Presidio Funds"). HWP retained a controlling interest in the Company
after the sale. This sale is referred to as the "Weston  Presidio  Transaction".
Under the terms of a buy-sell  agreement  entered into in  connection  with this
sale, Weston Presidio may require that the Sellers  repurchase Weston Presidio's
shares of the Company at a price as defined in the buy-sell agreement,  unless a
majority of the Sellers elects,  in the alternative,  to sell to Weston Presidio
their  remaining  shares of the  Company at a price as  defined in the  buy-sell
agreement.

    The  Company  does  not  conduct  significant   activities  apart  from  its
investment in NBC.  Operational matters discussed in this report,  including the
acquisition  of  college  bookstores  and  other  related  businesses,  refer to
operations of NBC. This report refers to "the Company" and "NBC" interchangeably
when discussing such operational matters.

                                       3
<PAGE>

GENERAL

    The Company is one of the largest  wholesale  distributors  of used  college
textbooks in North  America,  offering over 95,000  textbook  titles and selling
more than 7.7 million  books  annually,  primarily  to  campuses  located in the
United  States.  In addition,  as of March 31, 2003, the Company owns or manages
109  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 consistent reputation for excellence in order fulfillment,  shipping
performance and customer service.

    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 under a revised  strategy.
Under this 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 Textbook,
Bookstore and Complementary Services Divisions.

    TEXTBOOK DIVISION.  The Company is one of the largest wholesale distributors
of used college  textbooks in North  America.  Its  Textbook  Division  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 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,  San Diego State University,  University of Washington,  and
University of Minnesota. Historically, because the demand for used textbooks has
consistently  outpaced  supply,  Textbook  Division  sales have been  determined
primarily by the amount of used textbooks that it could purchase.  The Company's
strong  relationships  with  the  management  of  non  contract-managed  college
bookstores   nationwide  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  Textbook
Division customers, which lists over 45,000 textbook titles with such details as
author, new copy retail price, and the Company's repurchase price.

    BOOKSTORE DIVISION.  College bookstores are the primary outlets for sales of
new and used textbooks to students.  As of March 31, 2003, the Company  operated
109  college  bookstores  on or adjacent  to college  campuses,  of which 14 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, Michigan State University,
University  of  California  -  Berkeley,  Texas A&M  University,  University  of
Florida,  and University of Tennessee.  In addition to generating  profits,  the
Company's  Bookstore Division provides an exclusive source of used textbooks for
sale across the Company's wholesale distribution network.

    COMPLEMENTARY  SERVICES  DIVISION.  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).

                                       4
<PAGE>

    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.  The Company has an installed base
of over 250 college  bookstore  locations  for its textbook  management  control
systems,  and it has installed its proprietary  total store management system at
almost 600 college bookstore  locations.  In total,  including the Company's own
bookstores,  almost  850  college  bookstore  locations  utilize  the  Company's
software  products.  During fiscal 2001, the Company  licensed  certain software
related to  E-commerce  to an entity that is  partially  owned by the  Company's
majority  owner.  These  services  generate  revenue  and assist the  Company in
enhancing and developing customer relationships.

    In January 1998,  the Company  acquired  Connect 2 One (formerly  Collegiate
Stores  Corporation),   a  centralized  buying  service  for  over  570  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  Connect  2  One's  ("C2O")
programs  also  provide  the  Company  with  another  potential  source  of used
textbooks.

    The Company also  provides a consulting  and store design  program to assist
college  bookstores in store  presentation  and layout.  During fiscal 2002, the
Company  introduced  a  marketing  services  program to leverage  the  Company's
distribution channels. Marketing services offered by the Company enable national
vendors to reach college students through in-store kiosks,  prepackaged freshman
mailers, coupon books, e-mail promotions and in-store displays.

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
consolidated  financial  statements  presented in Item 8 of the  Company's  Form
10-K.  The Company  makes its periodic and current  reports  available,  free of
charge,  through  www.nebook.com  as soon as reasonably  practicable  after such
material is electronically filed with the Securities and Exchange Commission.

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 THE  TEXTBOOK  DIVISION.  The Company  expects the stable
growth  of its  Textbook  Division  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  Bookstore  Division.
Additionally,  the Company recently introduced an enhanced commission  structure
that rewards customers who make a long-term  commitment to supplying the Company
with a large portion of their textbooks.  Finally,  the Company is strengthening
its marketing  campaign to increase student  awareness of the benefits of buying
and selling used textbooks.

    CAPITALIZE  ON  COLLEGE  BOOKSTORE  OPPORTUNITIES.  The  Company  intends to
increase  revenues  for its  Bookstore  Division  by  acquiring  or  opening  or
contract-managing   additional  bookstores  at  selected  college  campuses  and
offering additional  specialty products and services at its existing bookstores.
The Company also  intends to increase  same-store  sales  growth  through a more
coordinated  effort to implement  best  practices  across the  Company's  entire
bookstore  network.  Finally,  the Company  believes there are  opportunities to
improve cash flow at its college bookstores by reducing certain selling, general
and administrative expenses.

                                       5
<PAGE>

    CONTINUED  GROWTH IN DISTANCE  EDUCATION  PROGRAM.  The  distance  education
market  continues  to grow due to the  increased  popularity  of  correspondence
courses,  continuing and corporate education courses and courses offered through
electronic  media such as the Internet.  Through  Specialty  Books,  the Company
believes that it is well positioned to take advantage of this growth trend.

    INCREASED  MARKET  PENETRATION  THROUGH  TECHNOLOGY.  The Company intends to
continue  generating  incremental  revenue  through  the  sale  of  its  turnkey
bookstore  management  software.  The installation of such software,  along with
E-commerce technology offered through its affiliate (which is partially owned by
the  Company's  majority  owner),  TheCampusHub.com,  Inc.,  also  increases the
channels through which the Company can access the college and university market.

    EXPANSION  OF  MARKETING   SERVICES  PROGRAM.   It  is  very  difficult  for
traditional  vendors to access  the highly  fragmented  college  and  university
market in an efficient manner. The Company's marketing services program provides
vendors with efficient  access to the college and university  market through its
distribution   channels.   The  Company   intends  to  expand  this  program  by
establishing arrangements with major national vendors.


INDUSTRY OVERVIEW

    Based on recent industry trade data, the college bookstore  industry remains
strong,  with over 5,000 college stores generating annual sales of approximately
$11.1 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 that 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.

    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 that 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.

    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 ample supply 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.

                                       6
<PAGE>

    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 3.0% 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.
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. Pure exclusive supply arrangements
in the Company's market are rare.  However,  in the past four to five years, the
Company has been marketing its exclusive  supply  program to the industry.  This
program has grown to approximately  260  participating  bookstores at the end of
fiscal 2003.  The Company also  introduced  the NBC Advantage  program in fiscal
2001.  This  program  rewards  customers  who  make a  long-term  commitment  to
supplying the Company with a large portion of their books.  At the end of fiscal
2003,   approximately  470  bookstores  were   participating  in  this  program,
approximately  250 of which are also  participating  in the  exclusive  program.
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 a
critical factor in the Company's success.

    COLLEGE  BOOKSTORE   MARKET.   College  stores  generally  fall  into  three
categories: (i) INSTITUTIONAL -- stores that are primarily owned and operated by
institutions  of higher  learning  (represents  approximately  57.0% of the U.S.
market);  (ii)  CONTRACT-MANAGED  --  stores  owned by  institutions  of  higher
learning and managed by outside,  private  companies,  typically found on-campus
(represents  approximately  26.0% of the U.S.  market);  and  (iii)  INDEPENDENT
STORES -- privately  owned and  operated  stores,  generally  located off campus
(represents  approximately 17.0% of the U.S. 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,   including
E-commerce capabilities provided through its affiliate, TheCampusHub.com, Inc.

PRODUCTS AND SERVICES

    TEXTBOOK  DIVISION.  The  Company's  Textbook  Division  is  engaged  in the
procurement and redistribution of textbooks on college campuses primarily across
the United States.

    The  Company  also  publishes  the  BUYER'S  GUIDE,  which lists over 45,000
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 nine 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 almost  165,000
titles in order to better serve its customers.

    BOOKSTORE  DIVISION.  As of March 31, 2003, the Company operated 109 college
bookstores  on or adjacent to college  campuses.  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 21% and 24% 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 Company has
also installed  software  providing  E-commerce  capabilities  in all of its own
bookstores,  thereby allowing its bookstores to further expand product offerings
and compete with online-only textbook sellers.

                                       7
<PAGE>

    COMPLEMENTARY  SERVICES  DIVISION.  Through Specialty Books, the Company has
access to the market for distance  education  products and services.  Currently,
the Company  provides  students at  approximately 70 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,  non-textbook course materials;  and a sales and ordering
function.  Students can order distance education materials from the Company over
the Internet.  Over the past three years,  revenues of Specialty Books have been
between  72% and 84% of total  Complementary  Services  Division  revenues.  The
Company  believes it can  continue to increase the service  operations  revenues
from distance education products over the next several years, although presently
the Company's primary objective is increased profitability through improved cost
containment.

    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 250 college  bookstore  locations for its
textbook management control systems,  and it has installed its proprietary total
store management  system at almost 600 college  bookstore  locations.  In total,
including the Company's own bookstores,  almost 850 college bookstore  locations
utilize the Company's software products.

    Through C2O, the Company is able to offer a variety of products and services
to  participating  college  bookstores.   C2O  negotiates  apparel  and  general
merchandise  discounts  and  develops and  executes  marketing  programs for its
membership.  As a centralized buying service for over 570 participating  college
bookstores including the Company's own bookstores, C2O has evolved into a buying
group with  substantial  purchasing  power. C2O offers a shopping bag program to
college   bookstores.   This  shopping  bag  program  provides   bookstores  the
opportunity  to purchase  customized  bags at a  substantial  discount  from the
vendor, while the Company earns a monthly  administrative fee from the vendor in
return for accepting billing and collection  responsibilities  for shopping bags
sold by the  vendor.  Other C2O  marketing  services  include a freight  savings
program,  a check  authorization  program,  and retail  display  allowances  for
magazine  displays.  Additionally,  a staff  of  experienced  C2O  professionals
consult with the management of bookstores.  Services  offered include  strategic
planning,  store review,  merchandise  planning and help with other  operational
aspects  of the  business.  While  consulting  has  historically  represented  a
relatively  small component of C2O's business,  it is nonetheless  strategically
important to the ongoing success of this aspect of the Company's business.

    The Company also  provides a consulting  and store design  program to assist
college   bookstores   in   store   presentation   and   layout.   Through   its
newly-introduced marketing services program, the Company is able to leverage its
distribution channels. Marketing services offered by the Company enable national
vendors to reach college students through in-store kiosks,  prepackaged freshman
mailers, coupon books, e-mail promotions and in-store displays.

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% to 25% 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 Textbook Division 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 36 account  representatives (as of


                                       8
<PAGE>

March 31, 2003) 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  systems  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
Textbook  Division  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;  (v) providing
working capital  flexibility for bookstores making  substantial  purchases;  and
(vi) establishing  long-term supply arrangements by rewarding customers who make
a long-term  commitment  to supplying  the Company with a large portion of their
books.

    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 profit. 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.

    After the Company  purchases the books, the Company arranges for shipment to
one of its two warehouses  (Nebraska and California) 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.  These  two  locations  function  as  one  facility  allowing
customers to access inventory at both locations.

    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   20.5%  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.

BOOKSTORE DIVISION

    An important aspect of the Company's business strategy is a program designed
to reach new customers through the opening or acquisition of bookstores adjacent
to college campuses or the  contract-management of stores on campus. In addition
to generating  sales of new and used  textbooks and general  merchandise,  these
outlets enhance the Company's  Textbook  Division 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
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  of its own  bookstores  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.

                                       9
<PAGE>

    As of March 31, 2003 the Company operated 109 college bookstores nationwide,
having  expanded from 59  bookstores  in 1998.  During fiscal 2003 NBC purchased
four  bookstores  located in Greeley,  Colorado;  Bowling Green,  Kentucky;  and
Nacogdoches,  Texas and  closed  stores in  Berkeley,  California;  Big  Rapids,
Michigan; and Richmond, Virginia when their leases expired.

    The table below  highlights  certain  information  regarding  the  Company's
bookstores opened through March 31, 2003.

                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)
   -----------  ---------  -----------  -------------- ---------- --------------

       1999         59          8            2              65         537
       2000         65         35            2              98         733
       2001         98          4            0             102         740
       2002        102         10            4             108         797
       2003        108          4            3             109         798

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

(1) In fiscal 1999, the property leases at two bookstore  locations  expired and
    were not renewed by the Company.  In fiscal 2000,  the property lease at one
    bookstore location expired and was not renewed by the Company and one Triro,
    Inc. bookstore location which did not meet the Company's  expansion criteria
    described  below was closed.  In fiscal  2002,  the  property  leases at two
    bookstore  locations  expired  and were not  renewed by the  Company and two
    bookstore locations in Austin,  Texas were sold to a large Textbook Division
    customer.  In fiscal 2003, the property leases at three bookstore  locations
    expired and were not renewed by the Company.

    The  Company  plans to  continue  increasing  the  number of  bookstores  in
operation. 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 8,000  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 Company also plans to be more active in reviewing  opportunities  to
contract-manage additional stores.

    The Company's bookstores have an average size of 7,300 gross square feet but
range in size  from 500 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  cost  approximately  $100,000 per  bookstore,  after giving
effect to construction allowances.

MANAGEMENT INFORMATION SYSTEMS

    The Company  believes  that it can  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 IBM RS/6000's.  At the
center  of its MIS  operations  are the  Company's  self-developed,  proprietary
software programs such as PRISM, its whole store management system, and PC-Text,
its  textbook   management  and  inventory  control  system.  This  software  is
maintained  and  continuously  enhanced by the  Company,  which is staffed by an
experienced team of development and design professionals.

                                       10
<PAGE>

    In addition,  the Company and its consultants  had been developing  software
for E-commerce capabilities. These software products allow college bookstores to
launch their own E-commerce  site and effectively  compete  against  online-only
textbook sellers by offering textbooks and both traditional and  non-traditional
store merchandise  online. As previously  discussed,  the ongoing development of
this  software  was  assumed  in fiscal  2001 by an  affiliated  entity  that is
partially owned by the Company's majority owner.

    None  of  the  Company's  proprietary  software  programs  are  copyrighted,
although the Company  does have  registered  trademarks  for certain  names.  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 40 experienced personnel.  Personnel are available 24
hours a day to answer questions on a toll-free number.

CUSTOMERS

    The Company sells its products and services to college bookstores throughout
the United  States,  Canada and Puerto Rico for  ultimate use by the students of
the respective  colleges.  The Company's 25 largest Textbook Division  customers
accounted for approximately 5.8% of fiscal 2003 consolidated revenues. No single
Textbook Division customer  accounted for more than 1.0% of the Company's fiscal
2003 consolidated revenues.

    The Company's Textbook Division purchases from and resells used textbooks to
many of the nation's  largest college campuses  including:  University of Texas,
University  of  Southern  California,   Indiana  University,   San  Diego  State
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,  Michigan  State  University,  University of California -
Berkeley,  Texas A&M  University,  University  of  Florida,  and  University  of
Tennessee.

    The Company's  distance  education program is, among other things, a primary
supplier of textbooks and educational  material to students  enrolled in on-line
courses offered through one institution.  That institution  accounts for greater
than 50.0% of total revenues in the distance education program.

    No single  customer  accounted for more than 10.0% of the  Company's  fiscal
2003 consolidated revenues.

COMPETITION

    The Company's  Textbook  Division  competes in the used  textbook  wholesale
distribution  market.  This  market  includes  the  sale of all  used  textbooks
purchased  from  students  by  an   independent   third  party  which  are  then
redistributed  through college  bookstores;  sales to  contract-managed  stores,
which obtain  virtually all of their supply of used  textbooks from within their
chain of stores under common management;  and used textbooks retained by college
bookstores.

                                       11
<PAGE>

    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"), which contract-manage approximately 680 stores and 430 stores,
respectively.  The Company  believes  that its market  share of the used college
textbook wholesale distribution market is comparable to that of Follett and MBS,
individually.   The  remaining   competitors  are  smaller  regional  companies,
including 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 430 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 also  fulfills  all of the needs of the Barnes &
Noble stores.

    The  Company's   Bookstore  Division  competes  with  other  college  campus
bookstores,  including  the  on-campus  bookstore in those  locations  where the
Company's bookstore is off-campus.

    Both the Company's Textbook and Bookstore Divisions compete with a number of
entities  that have  entered the college  marketplace,  or enhanced  their sales
channel to that marketplace, through E-commerce. These competitors typically use
the  Internet to  establish  websites  designed to sell  textbooks  and/or other
merchandise directly to students,  by-passing the traditional college bookstore.
By contrast,  the  Company's  software  products,  WebPRISM and  CampusHub,  are
designed to sell  textbooks and other  merchandise  through a college  bookstore
website,  not around it. The Company  also  competes  against the  expansion  of
electronic media as a source of textbook information, such as on-line resources,
E-Books,  print-on-demand  textbooks and CD-ROM, which may replace or modify the
need  for  students  to  purchase  textbooks  through  the  traditional  college
bookstore. The Company does not believe that such competition has had a material
adverse impact on the Company's results of operations.

    Presently,  the Company believes that its largest competitor in the distance
education market is MBS.

    There is only one  centralized  buying  service  that is similar to C2O, the
Independent  College Bookstore  Association  ("ICBA").  Participation by college
bookstores  in C2O's or ICBA's  centralized  buying  service is  voluntary,  and
college bookstores may, and some do, belong to both buying associations.

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 Clean Air Act, the  Hazardous  Materials
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.

                                       12
<PAGE>

EMPLOYEES

    As of  March  31,  2003  the  Company  had a total  of  approximately  2,900
employees,  of which approximately 1,000 were full-time,  approximately 700 were
part-time and approximately  1,200 were 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  Textbook  Division,  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.  Recently,  the  Company has  employed up to 50  flex-pool
workers in the Nebraska and California facilities,  thereby enabling the Company
to lower Textbook Division operating  expenses.  Temporary employees augment the
flex-pool to meet periodic labor demands.


                               ITEM 2. PROPERTIES.

    The Company  owns its two Textbook  Division  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 Textbook Division warehouse in
Cypress, California. The Cypress lease expires on August 31, 2007. The Company's
distance  education program resides in a leased facility with 49,500 square feet
in Athens,  Ohio. The lease expires on May 31, 2007 and has one five-year option
to renew.

    Listed  below,  set forth as of March 31, 2003,  are the  Company's  college
bookstores, their location, college served and the school's enrollment.
<TABLE>
<CAPTION>

    Institution                                       Location                Enrollment(1)    Store Name
    -----------                                       --------                -------------    ----------
<S>                                                   <C>                       <C>             <C>
    University of Alabama                             Tuscaloosa, AL                 19,800  The College Store
    University of Arkansas--Little Rock               Little Rock, AR                12,300  Campus Bookstore
    Northern Arizona University                       Flagstaff, AZ                  16,800  The College Store
    Northern Arizona University                       Flagstaff, AZ                  16,800  University Text and Tools
    Arizona State University                          Tempe, AZ                      49,000  The College Store
    Arizona State University                          Tempe, AZ                      49,000  Rother's Bookstore
    University of Arizona                             Tucson, AZ                     34,300  Arizona Book Store
    University of Arizona                             Tucson, AZ                     34,300  Rother's University Bookstore
    University of California - Berkeley               Berkeley, CA                   30,500  Ned's Bookstore
    University of California - Berkeley               Berkeley, CA                   30,500  Ned's Bookstore  II
    University of California - Berkeley               Berkeley, CA                   30,500  Ned's Bookstore - Boalt Hall
    California State University - Northridge          Northridge, CA                 32,500  The College Store
    University of Northern Colorado                   Greeley, CO                    13,000  The Book Stop
    Daytona Beach Community College                   Daytona Beach, FL              20,000  College Book Rack
    University of Florida, also serving:              Gainesville, FL                48,200  Florida Book Store
       Santa Fe Community College                                                    13,900
    University of Florida, also serving:              Gainesville, FL                48,200  Florida Book Store, Volume II
       Santa Fe Community College                                                    13,900
    Miami Dade Community College-Kendall              Miami, FL                      18,400  Lemox College Book & Supply
    University of Central Florida, also serving:      Orlando, FL                    35,400  College Book & Supply
       Seminole Community College                                                     9,600
       Valencia Community College                                                    15,000
    University of Central Florida                     Orlando, FL                    35,400  Knight's Corner
    Georgia State University                          Atlanta, GA                    33,000  Georgia Book Store
    Drake University                                  Des Moines, IA                  4,300  D-Shoppe (2)
    Drake University, also serving:                   Des Moines, IA                  4,300  University Book Store (3)
       Mercy College of Health Sciences                                                 400
    Southern Illinois University                      Carbondale, IL                 18,200  Saluki Bookstore
    Ball Sate University                              Muncie, IN                     20,300  Collegiate Book Exchange
    Valparaiso University                             Valparaiso, IN                  3,500  University Book Center (2)
    University of Kansas                              Lawrence, KS                   25,500  University Book Shop
    Johnson County Community College                  Overland Park, KS              16,100  The College Store
    Western Kentucky University                       Bowling Green, KY              17,000  Lemox-Bowling Green
    Western Kentucky University                       Bowling Green, KY              17,000  Lemox II
    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               46,500  Maryland Book Exchange
    Prince George's Community College                 Largo, MD                      13,000  Prince George's Community
                                                                                                College Bookstore (2)

                                       13
<PAGE>

    Institution                                       Location                Enrollment(1)    Store Name
    -----------                                       --------                -------------    ----------
    Concordia University - Ann Arbor                  Ann Arbor, MI                     600  Concordia College Bookstore (2)
    University of Michigan                            Ann Arbor, MI                  42,500  Michigan Book & Supply
    University of Michigan                            Ann Arbor, MI                  42,500  Ulrich's Bookstore
    Oakland University                                Auburn Hills, MI               20,000  Textbook Outlet
    Wayne County Community College                    Belleville, MI                 24,000  Ned's Bookstore (2)
    Wayne County Community College                    Detroit, MI                    24,000  Ned's WCCC Downtown (2)
    Wayne County Community College                    Detroit, MI                    24,000  Ned's WCCC Eastern (2)
    Wayne County Community College                    Detroit, MI                    24,000  Ned's WCCC Northwest (2)
    Wayne County Community College                    Taylor, MI                     24,000  Ned's WCCC Downriver (2)
    Michigan State University                         East Lansing, MI               43,300  The College Store
    Michigan State University                         East Lansing, MI               43,300  Ned's Bookstore
    Kettering University                              Flint, MI                       3,300  The Campus Store (2)
    Eastern Michigan University, also serving:        Ypsilanti, MI                  23,000  Campus Book & Supply
       Washtenaw Community College                                                   11,200
       Washtenaw Technical Middle College                                               500
    Eastern Michigan University                       Ypsilanti, MI                  23,000  Ned's Bookstore
    Eastern Michigan University                       Ypsilanti, MI                  23,000  Ned's College of Business
                                                                                                Bookstore
    Minnesota State University Mankato                Mankato, MN                    12,900  Maverick Bookstore (3)
    North Carolina State University                   Raleigh, NC                    29,000  Packbackers Student Bookstore
    Chadron State College                             Chadron, NE                     2,400  Chadron Book Shop
    Chadron State College                             Chadron, NE                     2,400  Eagle Pride Bookstore (2)
    University of Nebraska-- Kearney                  Kearney, NE                     7,100  The Antelope Bookstore (2)
    University of Nebraska-- Lincoln                  Lincoln, NE                    22,800  Big Red Shop
    University of Nebraska-- Lincoln                  Lincoln, NE                    22,800  Nebraska Bookstore (3)
    Nebraska Wesleyan University                      Lincoln, NE                     1,700  Prairie Wolves Bookstore (2)
    Wayne State College                               Wayne, NE                       3,900  Student Bookstore
    University of Nevada Las Vegas                    Las Vegas, NV                  20,700  Rebelbooks
    State  University  of New York--  Buffalo,  also  Amherst, NY                    24,000  The College Store
    serving:
       Erie Community College - North Campus                                          5,600
    State University of New York - Binghamton         Vestal, NY                     12,800  The Bookbridge
    University of Akron                               Akron, OH                      21,700  The College Store
    Ohio University                                   Athens, OH                     19,500  Specialty Books
    Ohio State University                             Columbus, OH                   47,900  College Town
    Wright State University, also serving:            Fairborn, OH                   17,000  The College Store
       Sinclair Community College                                                    11,900
    University of Oklahoma                            Norman, OK                     20,000  Boomer Book Store
    University of Oklahoma                            Norman, OK                     20,000  Sooner Textbooks
    Oklahoma State University                         Stillwater, OK                 20,500  Cowboy Book
    Indiana University of Pennsylvania                Indiana, PA                    14,000  The College Store
    University of Pittsburgh                          Pittsburgh, PA                 29,000  The College Store
    Pennsylvania State University                     State College, PA              42,000  University Book Centre
    College of Charleston                             Charleston, SC                  9,900  University Book of Charleston
    Columbia College                                  Columbia, SC                    1,500  C-Square Bookstore (2)
    University of South Carolina                      Columbia, SC                   23,700  Carolina Spirit Shop
    University of South Carolina                      Columbia, SC                   23,700  South Carolina Book Store
    East Tennessee State University                   Johnson City, TN               12,100  The College Store
    University of Tennessee                           Knoxville, TN                  26,000  Rocky Top Books
    University of Tennessee                           Knoxville, TN                  26,000  Rocky Top East (3)
    University of Texas - Arlington                   Arlington, TX                  22,000  The College Store
    Austin Community College                          Austin, TX                     25,000  Bevo's ACC
    Austin Community College                          Austin, TX                     25,000  Bevo's Northridge
    Blinn College                                     Bryan, TX                       7,600  Rother's Bookstore
    Texas A&M University                              College Station, TX            42,900  Rother's  Bookstore  -  College
                                                                                             Station
    Texas A&M University                              College Station, TX            42,900  Rother's   Bookstore  -  George
                                                                                             Bush
    Texas A&M University                              College Station, TX            42,900  Rother's Bookstore - Woodstone
    Southern Methodist University                     Dallas, TX                      9,800  Varsity Book Store
    University of North Texas, also serving:          Denton, TX                     30,100  Voertman's (3)
       North Central Texas College                                                    6,000
       Texas Woman's University                                                       7,900
    University of Texas-- Pan American                Edinburg, TX                   18,000  South Texas Book & Supply
    North Harris College                              Houston, TX                     9,500  College Bookstore (3)
    North Harris College                              Humble, TX                      9,500  College Bookstore
    University of Houston, also serving:              Houston, TX                    33,000  Rother's Bookstore
       Texas Southern University School of Law                                          200
    Texas Tech University                             Lubbock, TX                    29,000  Double T Bookstore
    Texas Tech University                             Lubbock, TX                    29,000  Double T Bookstore II
    Texas Tech University                             Lubbock, TX                    29,000  Double T Bookstore III
    Texas Tech University                             Lubbock, TX                    29,000  Spirit Shop
    South Texas Community College                     McAllen, TX                    14,000  South Texas Book & Supply
    Stephen F. Austin State University                Nacogdoches, TX                10,500  Varsity Book Store

                                       14
<PAGE>

    Institution                                       Location                Enrollment(1)    Store Name
    -----------                                       --------                -------------    ----------
    San Antonio College, also serving:                San Antonio, TX                22,700  L&M Bookstore
       Northwest Vista College                                                        7,900
       Palo Alto College                                                              7,300
       St. Philip's College                                                          11,100
       UTSA - Downtown                                                                5,000
    University of Texas-- San Antonio                 San Antonio, TX                20,500  L&M  UTSA Bookstore
    Southwest Texas State University                  San Marcos, TX                 25,000  Colloquium Bookstore
    Southwest Texas State University                  San Marcos, TX                 25,000  Colloquium Too
    Southwest Texas State University                  San Marcos, TX                 25,000  Rother's Bookstore
    Tarleton State University                         Stephenville, TX                7,700  Rother's Bookstore
    Baylor University                                 Waco, TX                       13,200  Rother's Bookstore
    Baylor University                                 Waco, TX                       13,200  University Bookstore and
                                                                                                Spirit Shop
    Midwestern State University                       Wichita Falls, TX               5,800  Rother's Bookstore
    Virginia Polytechnic Institute and State          Blacksburg, VA                 26,000  Tech Bookstore
       University
    Old Dominion University                           Norfolk, VA                    19,000  Dominion Bookstore
    Radford University                                Radford, VA                     8,500  Radford Book Exchange
    Western Washington University, also serving:      Bellingham, WA                 12,000  The College Store
       Whatcom Community College                                                      4,000
</TABLE>

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

(2) Denotes    properties    leased    from    the    educational    institution
    ("contract-managed" stores).

(3) Property is owned by the Company.


                           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 2003.


                                       15
<PAGE>

                                    PART II


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

    As of May 30, 2003,  based upon the number of holders on record,  there were
51 holders of the Company's  Class A Common Stock and 71 holders of  outstanding
stock options to purchase  81,825 shares of the Company's  Class A Common Stock.
As  discussed  in Item 7,  "Management's  Discussion  and  Analysis of Financial
Condition  and Results of  Operations"  and Item 8,  "Financial  Statements  and
Supplementary Data", the payment of dividends is subject to various restrictions
under the Company's debt instruments.  As a result,  the Company has declared no
dividends on its Class A Common Stock during  fiscal 2003 and 2002.  There is no
established public trading market for the Company's Class A Common Stock.

    During February,  2003 and in conjunction with his retirement,  NBC's former
Vice  President of  Administration  and Secretary  exercised  vested  options to
purchase  750  shares  of the  Company's  Class A Common  Stock  under  the 1998
Performance  Stock Option Plan at an exercise  price of $52.47 per share and 125
shares of the Company's  Class A Common Stock under the 1998  Performance  Stock
Option Plan at an exercise price of $106 per share,  forfeiting unvested options
to  purchase  450 shares of the  Company's  Class A Common  Stock under the 1998
Performance  Stock Option Plan at an exercise  price of $52.47 per share and 375
shares of the Company's  Class A Common Stock under the 1998  Performance  Stock
Option Plan at an exercise price of $106 per share. This transaction,  which did
not  involve  any  public  offering,  was  exempt  from  registration  under the
Securities  Act of 1933  pursuant to Section  4(2).  Proceeds from this issuance
were utilized for general operating activities.


                        ITEM 6. SELECTED FINANCIAL DATA.

    The following table sets forth selected  historical  consolidated  financial
and other data of the  Company as of and for the fiscal  years  ended  March 31,
2003,  2002,  2001,  2000,  and  1999,  respectively.  The  selected  historical
consolidated  financial data was derived from the audited consolidated financial
statements of the Company.

                                       16
<PAGE>

    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  consolidated  financial  statements  of the Company  and the related  notes
thereto included in Item 8 herein.
<TABLE>
<CAPTION>

                                                             Fiscal Years Ended March 31,
                                            ----------------------------------------------------------------
                                                2003         2002         2001         2000         1999
                                            ------------- ------------ ------------ -----------  -----------
<S>                                             <C>          <C>          <C>         <C>          <C>
STATEMENT OF OPERATIONS DATA:                                          (dollars in thousands)
  Revenues                                      $370,510     $338,917     $301,669    $267,069     $218,638
  Costs of sales                                 224,488      206,976      187,099     164,984      137,989
                                            ------------- ------------ ------------ -----------  -----------
      Gross profit                               146,022      131,941      114,570     102,085       80,649
  Operating expenses:
    Selling, general, and administrative          90,391       84,871       74,100      65,820       51,289
    Depreciation                                   2,988        3,087        2,956       3,096        2,393
    Amortization (3)                                 644          505       10,446       9,320        6,149
                                            ------------- ------------ ------------ -----------  -----------
      Income from operations                      51,999       43,478       27,068      23,849       20,818
  Other expenses (income):
    Interest expense                              22,192       24,408       24,008      23,398       22,854
    Interest income                                 (360)        (400)        (615)       (356)        (351)
    Loss on derivative instruments                   156          361            -           -            -
                                            ------------- ------------ ------------ -----------  -----------
      Income (loss) before income taxes           30,011       19,109        3,675         807       (1,685)
  Income tax expense                              12,232        7,954        3,407       2,516          574
                                            ------------- ------------ ------------ -----------  -----------
      Net income (loss)                         $ 17,779     $ 11,155     $    268    $ (1,709)    $ (2,259)
                                            ============= ============ ============ ===========  ===========
  Earnings (loss) per share:
    Basic                                       $  14.07     $   8.83     $   0.21    $  (1.48)    $  (2.37)
    Diluted                                        13.88         8.83         0.21       (1.48)       (2.37)

OTHER DATA:
  EBITDA (1)                                    $ 55,631     $ 47,070     $ 40,470    $ 36,265     $ 29,360
  Net cash flows from operating activities        37,332       31,038        8,839      18,945       10,296
  Net cash flows from investing activities        (5,327)      (7,616)      (4,994)    (30,244)      (5,067)
  Net cash flows from financing activities        (4,018)     (16,412)      (3,887)     11,690       (6,976)
  Capital expenditures                             3,708        2,277        1,759       3,542        2,842
  Business acquisition expenditures (2)            1,389        6,110        2,975      26,072        2,086

  Number of bookstores open at end of the period     109          108          102          98           65

BALANCE SHEET DATA (AT END OF PERIOD):
  Cash and cash equivalents                     $ 39,405     $ 11,419     $  4,410    $  4,451     $  4,060
  Working capital                                 81,966       75,865       72,394      62,244       55,442
  Total assets                                   210,379      185,033      167,701     168,991      142,879
  Total debt, including current maturities       219,367      216,915      224,219     222,552      219,904

</TABLE>


(1)     EBITDA is defined as earnings before interest, taxes, depreciation,  and
        amortization.  As the Company is  highly-leveraged  and as the Company's
        equity is not publicly-traded, management believes that EBITDA is useful
        in measuring  its  liquidity  and provides  additional  information  for
        determining  its ability to meet debt service  requirements.  The Senior
        Subordinated  Notes,  Senior  Discount  Debentures,  and  Senior  Credit
        Facility  also  utilize  EBITDA,  as  defined in those  agreements,  for
        certain financial covenants. EBITDA does not represent and should not be
        considered as an alternative to net cash flows from operating activities
        as determined by accounting  principles generally accepted in the United
        States of America, and EBITDA does not necessarily indicate whether cash
        flows will be  sufficient  for cash  requirements.  Items  excluded from
        EBITDA,  such as interest,  taxes,  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 registrants.


                                       17
<PAGE>

        The following  presentation  reconciles  EBITDA with net cash flows from
        operating activities as presented in the Consolidated Statements of Cash
        Flows included in Item 8, FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA:
<TABLE>
<CAPTION>


                                                                 Fiscal Year Ended March 31,
                                                  2003        2002        2001        2000         1999
                                              ------------ ----------- ----------- -----------  -----------
                                                                   (dollars in thousands)
<S>                                              <C>         <C>         <C>         <C>          <C>
EBITDA                                           $ 55,631    $ 47,070    $ 40,470    $ 36,265     $ 29,360

Adjustments to reconcile EBITDA to net cash
flows from operating activities:

  Interest income                                     360         400         615         356          351
  Provision for losses on accounts receivable         452       1,630         434         141          135
  Cash paid for interest                          (13,549)    (15,225)    (16,001)    (16,175)     (16,528)
  Cash refunded (paid) for income taxes           (14,533)     (4,063)     (6,018)     (2,424)       2,911
  (Gain) Loss on disposal of assets                    36        (483)         60          18           90
  Other                                                 -           -           -           7            -
  Changes in operating assets and liabilities,
  net of effect of acquisitions/disposals(4)        8,935       1,709     (10,721)        757       (6,023)
                                              ------------ ----------- ----------- -----------  -----------
Net Cash Flows from Operating Activities         $ 37,332    $ 31,038    $  8,839    $ 18,945     $ 10,296
                                              ============ =========== =========== ===========  ===========
</TABLE>

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

(3)     The Company adopted SFAS No. 142, GOODWILL AND OTHER INTANGIBLE  ASSETS,
        on April 1, 2001.  Under SFAS No. 142,  goodwill and  intangible  assets
        with  indefinite  useful lives are not  amortized  but rather tested for
        impairment on a periodic basis.

(4)     Changes  in  operating  assets  and   liabilities,   net  of  effect  of
        acquisitions/disposals   includes   the  changes  in  the   balances  of
        receivables,  inventories,  prepaid  expenses  and other  assets,  other
        assets,  accounts payable,  accrued employee  compensation and benefits,
        accrued  incentives,  accrued  expenses,  deferred  revenue,  and  other
        long-term liabilities.



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

FISCAL YEAR ENDED MARCH 31, 2003 COMPARED WITH FISCAL YEAR ENDED MARCH 31, 2002.

    REVENUES.  Revenues  for the years  ended  March  31,  2003 and 2002 and the
corresponding change in revenues were as follows:
<TABLE>
<CAPTION>

                                                                             Change
                                      2003             2002            Amount     Percentage
                                 ---------------  ---------------  -------------- ----------
<S>                               <C>              <C>              <C>               <C>
Textbook Division                 $ 132,806,703    $ 122,893,781    $  9,912,922      8.1 %
Bookstore Division                  216,943,133      201,399,648      15,543,485      7.7 %
Complementary Services Division      44,004,856       38,093,091       5,911,765     15.5 %
Intercompany eliminations           (23,244,843)     (23,470,111)        225,268     (1.0)%
                                 ---------------  ---------------  -------------- ----------
                                  $ 370,509,849    $ 338,916,409    $ 31,593,440      9.3 %
                                 ===============  ===============  ============== ==========
</TABLE>


                                       18
<PAGE>

    The increase in Textbook Division revenues for the year ended March 31, 2003
was due in part to publisher  price  increases,  complemented  by an increase in
unit  sales.  The  increase  in  Bookstore   Division   revenues  was  primarily
attributable to an increase in same store sales of 4.9%, or $9.4 million, and to
the  acquisition  of new  college  bookstores  (defined by the Company as stores
acquired  since April 1, 2001).  These new  bookstores  provided a $6.2  million
increase  in  revenues.   Complementary  Services  Division  revenues  increased
primarily due to growth in the Company's distance  education program,  offset in
part by outsourcing the plastic bag program late in fiscal 2002 and a decline in
systems division  revenues  resulting from revisions made to certain  agreements
with  TheCampusHub.com,  Inc. and a drop in system installations.  The increased
revenues in distance  education  resulted  primarily  from  additional  services
provided to the program's  largest account and, in part, to services provided to
new accounts. The Company's intercompany transactions decreased primarily due to
changes made to some of the Complementary Services Division programs.

    GROSS  PROFIT.  Gross profit for fiscal 2003  increased  $14.1  million,  or
10.7%,  to $146.0 million from $131.9 million for fiscal 2002. This increase was
primarily due to higher revenues and an increase in gross margin percent.  Gross
margin  percent was 39.4% for fiscal 2003 as compared to 38.9% for fiscal  2002.
Gross  margin  percent in the  Textbook  Division  experienced  a small  decline
primarily  as a result of the  impact of the  incentive  programs,  while  gross
margin  percentages in the Bookstore  Division improved primarily due to certain
margin improvement efforts.  Complementary Services Division experienced a small
decline due to the lower-margin distance education program continuing to grow as
a percentage of total Complementary Services Division revenues.

    SELLING,   GENERAL  AND  ADMINISTRATIVE   EXPENSES.   Selling,  general  and
administrative  expenses for fiscal 2003  increased  $5.5  million,  or 6.5%, to
$90.4  million  from  $84.9  million  for  fiscal  2002.  Selling,  general  and
administrative  expenses as a  percentage  of  revenues  were 24.4% and 25.0% in
fiscal 2003 and fiscal 2002, respectively. The increase in expenses is primarily
the result of the Company's  growth,  as previously  discussed.  The decrease in
expenses as a percentage of revenues is primarily attributable to revenue growth
outpacing growth in certain expenses, particularly salaries and wages.

    EARNINGS BEFORE INTEREST,  TAXES,  DEPRECIATION,  AND AMORTIZATION (EBITDA).
EBITDA for fiscal 2003 and 2002 and the  corresponding  change in EBITDA were as
follows:
<TABLE>
<CAPTION>

                                                                        Change
                                       2003          2002          Amount    Percentage
                                 -------------- -------------- ------------- ----------
<S>                               <C>            <C>            <C>              <C>
Textbook Division                 $ 33,915,223   $ 31,290,952   $ 2,624,271      8.4 %
Bookstore Division                  26,992,497     22,399,279     4,593,218     20.5 %
Complementary Services Division      2,041,093        696,335     1,344,758    193.1 %
Corporate administration            (7,318,023)    (7,316,701)       (1,322)    (0.0)%
                                 -------------- -------------- ------------- ----------
                                  $ 55,630,790   $ 47,069,865   $ 8,560,925     18.2 %
                                 ============== ============== ============= ==========
</TABLE>

    The  increase  in  EBITDA  in the  Textbook  Division  was  attributable  to
increased  revenues  and a  decline  in  certain  expenses  as a  percentage  of
revenues,  offset in part by the aforementioned decline in gross margin percent.
The increase in EBITDA in the Bookstore  Division was primarily due to increased
revenues, improved margins, and a decline in certain expenses as a percentage of
revenues.  The  increase in EBITDA in the  Complementary  Services  Division was
primarily  due to  increased  revenues  and a decline in certain  expenses  as a
percentage of revenues,  offset in part by a slightly lower gross margin percent
attributable to revenue mix. Corporate administrative costs have remained stable
between fiscal years.

    INTEREST EXPENSE,  NET. Interest expense, net for fiscal 2003 decreased $2.2
million, or 9.1%, to $21.8 million from $24.0 million for fiscal 2002, primarily
due to reduced interest charges on the Senior Credit Facility resulting from the
$10.0 million optional  prepayment of Tranche A and Tranche B Loans on March 29,
2002 and reduced  usage under the Revolving  Credit  Facility.  Additionally,  a
portion of interest  expense  associated  with the interest rate swap agreements
previously  classified  as  interest  expense  is now  included  in the  loss on
derivative  financial  instruments,   as  discussed  in  the  footnotes  to  the
consolidated  financial  statements  presented in Item 8. These  decreases  were
partially  offset by increasing  original issue debt discount  amortization  and
accrued  interest on the  Company's  Senior  Discount  Debentures,  which became
fully-accreted on February 15, 2003.

                                       19
<PAGE>

    LOSS ON DERIVATIVE FINANCIAL  INSTRUMENTS.  This loss is attributable to the
$10.0 million optional  prepayment of Tranche A and Tranche B Loans on March 29,
2002.  As a result  of the  optional  prepayment,  notional  amounts  under  the
interest  rate swap  agreements no longer  correlate  with  remaining  principal
balances due under the Tranche A and Tranche B Loans.  This loss  represents the
change in the fair value of the  portion of the  interest  rate swap  agreements
that no longer qualify as hedging  instruments,  along with interest  associated
with that portion of the interest rate swap agreements.

    INCOME TAXES.  Income tax expense for fiscal 2003 increased $4.2 million, or
53.8%,  to $12.2  million  from $8.0  million  for fiscal  2002.  The  Company's
effective  tax rate  for  fiscal  years  2003 and  2002  was  40.8%  and  41.6%,
respectively.  The  Company's  effective tax rate differs from the statutory tax
rate primarily as a result of state income taxes.

FISCAL YEAR ENDED MARCH 31, 2002 COMPARED WITH FISCAL YEAR ENDED MARCH 31, 2001.

    REVENUES.  Revenues  for the years  ended  March  31,  2002 and 2001 and the
corresponding change in revenues were as follows:
<TABLE>
<CAPTION>
                                                                          Change
                                       2002           2001           Amount     Percentage
                                 --------------- --------------- -------------- ----------
<S>                               <C>             <C>             <C>                <C>
Textbook Division                 $ 122,893,781   $ 113,006,804   $  9,886,977       8.7%
Bookstore Division                  201,399,648     182,856,000     18,543,648      10.1%
Complementary Services Division      38,093,091      26,647,451     11,445,640      43.0%
Intercompany eliminations           (23,470,111)    (20,841,402)    (2,628,709)     12.6%
                                 --------------- --------------- -------------- ----------
                                  $ 338,916,409   $ 301,668,853   $ 37,247,556      12.3%
                                 =============== =============== ============== ==========
</TABLE>

    The increase in Textbook Division revenues for the year ended March 31, 2002
was due in part to publisher  price  increases,  complemented  by an increase in
unit sales.  The Company believes that this increase in unit sales is partly the
result of recent  enhancements  made to the Company's  incentive  programs.  The
increase  in  Bookstore  Division  revenues  was  primarily  attributable  to an
increase in same store sales of 4.7%  (excluding two stores that were sold since
April 1,  2000),  or $8.2  million,  and to the  acquisition  of 14 new  college
bookstores  (defined  by the  Company as stores  acquired  since April 1, 2000).
These  new   bookstores   provided  a  $12.7   million   increase  in  revenues.
Complementary  Services Division revenues  increased  primarily due to growth in
the  Company's  distance  education  and system sales  programs.  The  increased
revenues in distance  education  resulted  primarily  from  additional  services
provided to the program's  largest account and, in part, to services provided to
new accounts.  As the Company's Textbook and Bookstore Divisions have grown, the
Company's intercompany transactions have also increased.

    GROSS  PROFIT.  Gross profit for fiscal 2002  increased  $17.3  million,  or
15.2%,  to $131.9 million from $114.6 million for fiscal 2001. This increase was
primarily due to higher revenues and an increase in gross margin percent.  Gross
margin  percent was 38.9% for fiscal 2002 as compared to 38.0% for fiscal  2001,
driven  primarily  by strong  used  textbook  margins in both the  Textbook  and
Bookstore Divisions.

    SELLING,   GENERAL  AND  ADMINISTRATIVE   EXPENSES.   Selling,  general  and
administrative  expenses for fiscal 2002 increased  $10.8 million,  or 14.5%, to
$84.9  million  from  $74.1  million  for  fiscal  2001.  Selling,  general  and
administrative  expenses as a  percentage  of  revenues  were 25.0% and 24.6% in
fiscal 2002 and fiscal 2001, respectively. The increase in expenses is primarily
the result of the  Company's  revenue  and  operational  growth,  as  previously
discussed. Expenses as a percentage of revenues increased to 25.0% primarily due
to $1.0 million in increased bad debt expense  recognized  in the  Complementary
Services  Division.   Revenues  attributable  to  the  management  services  and
technology sale and license  agreements with  TheCampusHub.com,  Inc.,  which is
partially owned by the Company's  majority owner, were recognized in fiscal 2002
under the anticipation that, if necessary,  TheCampusHub.com,  Inc. would make a
capital call to its  shareholders  to provide the funding  necessary to meet its
obligations under the aforementioned agreements.  TheCampusHub.com, Inc. reached
break-even on a cash flow basis, excluding amounts under the management services
and technology sale and license agreements,  during its most recent fiscal year.


                                       20
<PAGE>

While it remains a viable business and is funding its own operations,  it is not
currently  generating  sufficient excess cash flow to fund its obligations under
the  aforementioned  agreements  and the remaining  capital  available  from its
shareholders is being reserved to fund strategic development  opportunities and,
if required,  ongoing operations.  Accordingly,  NBC has increased the allowance
for  doubtful  accounts  for  such  potential  uncollectible  amounts  due  from
TheCampusHub.com, Inc.

    AMORTIZATION  EXPENSE.  Amortization  expense for fiscal 2002 decreased $9.9
million,  to $0.5 million from $10.4 million for fiscal 2001.  This decrease was
due to the  Company's  adoption of SFAS No. 142,  GOODWILL AND OTHER  INTANGIBLE
ASSETS,  on April 1, 2001.  Under SFAS No. 142,  goodwill and intangible  assets
with indefinite  useful lives are not amortized but rather tested for impairment
on a periodic basis.

    EARNINGS BEFORE INTEREST,  TAXES,  DEPRECIATION,  AND AMORTIZATION (EBITDA).
EBITDA for fiscal 2002 and 2001 and the  corresponding  change in EBITDA were as
follows:
<TABLE>
<CAPTION>
                                                                      Change
                                       2002         2001         Amount     Percentage
                                 -------------- ------------- ------------- ----------
<S>                               <C>           <C>            <C>             <C>
Textbook Division                 $ 31,290,952  $ 27,534,524   $ 3,756,428     13.6 %
Bookstore Division                  22,399,279    18,636,044     3,763,235     20.2 %
Complementary Services Division        696,335        73,248       623,087    850.7 %
Corporate administration            (7,316,701)   (5,774,175)   (1,542,526)   (26.7)%
                                 -------------- ------------- ------------- ----------
                                  $ 47,069,865  $ 40,469,641   $ 6,600,224     16.3 %
                                 ============== ============= ============= ==========
</TABLE>

    The  increase  in  EBITDA  in the  Textbook  Division  was  attributable  to
increased  revenues and strong used textbook margins.  The increase in EBITDA in
the Bookstore  Division was primarily due to increased  revenues and strong used
textbook  margins.  The  improvement  in  EBITDA in the  Complementary  Services
Division was primarily due to increased revenues. Corporate administrative costs
have increased between fiscal years,  primarily due to increased personnel costs
attributable to the Company's continued growth and rising insurance costs.

    INTEREST EXPENSE,  NET. Interest expense, net for fiscal 2002 increased $0.6
million, or 2.6%, to $24.0 million from $23.4 million for fiscal 2001, primarily
as a result of  increasing  original  issue debt  discount  amortization  on the
Company's Senior Discount Debentures,  which will continue to increase until the
Senior Discount  Debentures are fully-accreted to face value of $76.0 million in
fiscal 2003.

    LOSS ON DERIVATIVE FINANCIAL INSTRUMENTS.  The $0.4 million loss incurred on
derivative  financial  instruments  in fiscal  2002 is  attributable  to a $10.0
million optional  prepayment of Tranche A and Tranche B Loans on March 29, 2002.
As a result of the optional prepayment, notional amounts under the interest rate
swap agreements no longer correlate with remaining  principal balances due under
the Tranche A and Tranche B Loans.  This loss represents the fair value on March
29,  2002 of the portion of the  interest  rate swap  agreements  that no longer
qualify as hedging instruments.

    INCOME TAXES.  Income tax expense for fiscal 2002  increased $4.6 million to
$8.0 million from $3.4 million for fiscal 2001. The Company's effective tax rate
for fiscal years 2002 and 2001 was 41.6% and 92.7%, respectively.  The change in
the effective tax rate is attributable to the impact of non-deductible  goodwill
amortization  in fiscal 2001.  The Company's  effective tax rate for fiscal 2002
differs from the statutory tax rate primarily as a result of state income taxes.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

    Management's  Discussion and Analysis of Financial  Condition and Results of
Operations discusses the Company's consolidated financial statements, which have
been prepared in accordance with accounting principles generally accepted in the
United  States of  America.  The  preparation  of these  consolidated  financial
statements  requires the Company to make estimates and  assumptions  that affect
the reported  amounts of assets and liabilities and the disclosure of contingent


                                       21
<PAGE>

assets and liabilities at the date of the consolidated  financial statements and
the reported amounts of revenues and expenses during the reporting period. On an
on-going  basis,  the Company  evaluates its estimates and judgments,  including
those  related  to  product  returns,   bad  debts,   inventory   valuation  and
obsolescence,   intangible   assets,   rebate   programs,   income  taxes,   and
contingencies  and litigation.  The Company bases its estimates and judgments on
historical  experience  and on various  other  factors  that are  believed to be
reasonable  under the  circumstances,  the  results  of which form the basis for
making  judgments about the carrying  values of assets and liabilities  that are
not readily  apparent from other  sources.  Actual results may differ from these
estimates under different  assumptions or conditions.  The Company  believes the
following  critical  accounting   policies,   among  others,   affect  its  more
significant  judgments and estimates used in the preparation of its consolidated
financial statements:

    PRODUCT RETURNS. The Company recognizes revenue from Textbook Division sales
at the time of shipment.  The Company has  established  a program  which,  under
certain  conditions,  enables its  customers  to return  textbooks.  The Company
records  reductions  to revenue and costs of sales for the  estimated  impact of
textbooks with return  privileges  which have yet to be returned to the Textbook
Division. Additional reductions to revenue and costs of sales may be required if
the  actual  rate of  product  returns  exceeds  the  estimated  rate of product
returns.  The estimated rate of product returns is determined  utilizing  actual
historical product return experience.

    BAD DEBTS.  The Company  maintains  allowances  for  doubtful  accounts  for
estimated  losses resulting from the inability of its customers to make required
payments.  If  the  financial  condition  of the  Company's  customers  were  to
deteriorate,  resulting  in an  impairment  of their  ability to make  payments,
additional allowances may be required.

    INVENTORY  VALUATION.  The Company's  Bookstore Division values new textbook
and  non-textbook  inventories  at the lower of cost or market  using the retail
inventory method  (first-in,  first-out cost basis).  Under the retail inventory
method, the valuation of inventories at cost and the resulting gross margins are
calculated by applying a calculated  cost-to-retail ratio to the retail value of
inventories.  The retail  inventory  method is an averaging method that has been
widely  used in the retail  industry  due to its  practicality.  Inherent in the
retail inventory method calculation are certain significant management judgments
and estimates which impact the ending inventory valuation at cost as well as the
resulting gross margins. Changes in the fact patterns underlying such management
judgments and estimates could ultimately result in adjusted inventory costs.

    INVENTORY  OBSOLESCENCE.  The Company  accounts for  inventory  obsolescence
based upon  assumptions  about future  demand and market  conditions.  If actual
future demand or market  conditions are less  favorable than those  projected by
the Company, inventory write-downs may be required.

    GOODWILL  AND  INTANGIBLE  ASSETS.  The Company is required to make  certain
assumptions  and estimates  when  assigning an initial value to covenants not to
compete  arising from  bookstore  acquisitions.  The Company is also required to
make certain  assumptions  and estimates  regarding the fair value of intangible
assets  (namely  goodwill,  covenants not to compete,  and software  development
costs) when assessing such assets for  impairment.  Changes in the fact patterns
underlying  such  assumptions  and  estimates  could  ultimately  result  in the
recognition of impairment losses on intangible assets.

LIQUIDITY AND CAPITAL RESOURCES

    The Company's primary liquidity  requirements are for debt service under the
Senior Credit  Facility,  the Senior  Subordinated  Notes,  the Senior  Discount
Debentures, and other outstanding indebtedness, for working capital, for capital
expenditures and for certain  acquisitions.  The Company has historically funded
these requirements  primarily through  internally  generated cash flow and funds
borrowed under NBC's Revolving Credit Facility. At March 31, 2003, the Company's
total indebtedness was approximately $219.4 million, consisting of approximately
$30.5 million in Term Loans,  $110.0 million of the Senior  Subordinated  Notes,
$76.0  million  of the  Senior  Discount  Debentures  and $2.9  million of other
indebtedness, including capital lease obligations.

                                       22
<PAGE>

    Principal and interest payments under the Senior Credit Facility, the Senior
Subordinated  Notes, and the Senior Discount  Debentures  represent  significant
liquidity  requirements  for the  Company.  Under the terms of the Tranche A and
Tranche B Loans, after taking into account optional  prepayments and excess cash
flow  payments and  obligations,  NBC is scheduled  to make  principal  payments
totaling  approximately  $19.2  million in fiscal  2004,  $3.8 million in fiscal
2005,  and $7.5 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),  if
any,  towards  Tranche A and  Tranche B Loan  principal  balances.  There was an
excess cash flow payment  obligation  at March 31, 2003 of  approximately  $14.7
million  that is due and  payable in  September,  2003.  Loans  under the Senior
Credit Facility bear interest at floating rates based upon the borrowing  option
selected  by NBC.  NBC has  separate  five-year  amortizing  interest  rate swap
agreements with two financial institutions whereby NBC's variable rate Tranche A
and  Tranche B Loans have been  converted  into debt with a fixed rate of 5.815%
plus an  applicable  margin (as  defined in the  Credit  Agreement).  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 cash 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 $3.7 million, $2.3 million, and $1.8
million for the fiscal years ended March 31, 2003, 2002, and 2001, respectively.
Capital expenditures consist primarily of leasehold improvements and furnishings
for new bookstores,  bookstore renovations,  computer upgrades and miscellaneous
warehouse  improvements.  The Company's ability to make capital  expenditures is
subject to certain restrictions under the Senior Credit Facility.

    Business acquisition  expenditures were $1.4 million, $6.1 million, and $3.0
million for the fiscal years ended March 31, 2003, 2002, and 2001, respectively.
For the fiscal year ended March 31, 2003, four bookstore locations were acquired
serving Stephen F. Austin State University,  the University of Northern Colorado
and Western Kentucky  University.  For the fiscal year ended March 31, 2002, ten
bookstore  locations  were  acquired  serving the  University  of  California  -
Berkeley,  Western Washington University,  Chadron State College, North Carolina
State University, the University of Oklahoma, Radford University, the University
of Central  Florida,  and the  University of Florida.  For the fiscal year ended
March  31,  2001,  four  bookstore  locations  were  acquired  serving  Southern
Methodist University,  Oakland University,  the University of Tennessee, and the
University of Oklahoma.  The Company's ability to make acquisition  expenditures
is subject to certain restrictions under the Senior Credit Facility.

    During fiscal 2003,  bookstores  serving Virginia  Commonwealth  University,
Ferris State University, and the University of California - Berkeley were closed
upon the  expiration  of the property  leases.  During  fiscal 2002,  NBC closed
bookstores  serving Austin Community College and Coconino Community College upon
expiration of the property  leases and sold certain assets of two of its college
bookstore  locations  serving  the  University  of Texas in  Austin,  Texas  for
approximately $1.1 million, recognizing a gain on disposal of approximately $0.5
million.  This  gain  is  presented  as  an  offset  to  selling,  general,  and
administrative  expenses in the Company's consolidated statements of operations.
Annual  combined  revenues for these two  locations for the year ended March 31,
2001 were approximately $2.4 million.  The sale was made to one of the Company's
largest Textbook Division customers.

    During  fiscal 2003,  NBC's  former Vice  President  of  Administration  and
Secretary exercised vested options to purchase 750 shares of the Company's Class
A Common Stock under the 1998 Performance Stock Option Plan at an exercise price
of $52.47 per share ("Founder's  Price") and 125 shares of the Company's Class A
Common Stock under the 1998  Performance  Stock Option Plan at an exercise price
of $106 per share. This transaction,  which did not involve any public offering,
was exempt  from  registration  under the  Securities  Act of 1933  pursuant  to
Section 4(2).  Proceeds  from this issuance were utilized for general  operating
activities.  During fiscal 2002,  the Company issued 2,621 shares of its Class A
Common Stock to NBC's Senior Vice  President  of the  Bookstore  Division at the
Founder's  Price of $52.47  per share,  in  exchange  for  $13,752 in cash and a
promissory note in the principal amount of $123,765 maturing  January,  2009 and
bearing interest at 5.25% per year. This transaction,  which did not involve any
public offering,  was exempt from registration  under the Securities Act of 1933
pursuant to Section 4(2).  Proceeds from this issuance were utilized for general


                                       23
<PAGE>

operating  activities.  During fiscal 2001,  the Company issued 12,237 shares of
its Class A Common Stock to certain NBC employees. This issuance was exempt from
registration  under the Securities Act of 1933, as amended,  pursuant to Section
3(b) thereof and Rule 505 of  Regulation D promulgated  thereunder.  Such shares
were issued at $52.47 per share.  Proceeds  from this  issuance,  which  totaled
$642,039, were utilized for general operating activities.

      The  Company's  principal  sources  of cash to fund its  future  operating
liquidity needs will be cash from operating  activities and borrowings under the
Revolving  Credit  Facility.  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
college  semester  (May  and  December).  For the year  ended  March  31,  2003,
weighted-average  borrowings  under the Revolving  Credit Facility  approximated
$9.8 million,  with actual  borrowings  ranging from a low of no borrowings to a
high of $35.8  million.  Net cash flows from  operating  activities for the year
ended March 31, 2003 were $37.3 million,  an increase of $6.3 million from $31.0
million  for the  year  ended  March  31,  2002.  This  increase  was  primarily
attributable to improved operations.

    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,  up
to a  maximum  of $50.0  million.  The  Senior  Credit  Facility  restricts  the
Company's  ability to make loans or advances  and pay  dividends,  except  that,
among other things,  NBC may pay dividends to the Company (i) on or 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 owed by the Company. The indenture
governing the Senior Discount Debentures (the "Indenture") 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
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. The indenture  governing the Senior  Subordinated Notes
contains  similar  restrictions  on  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. Such restrictions are not expected to affect the Company's ability
to meet its cash obligations for the foreseeable future.

    As of March  31,  2003,  NBC  could  borrow  up to $41.0  million  under the
Revolving Credit Facility. The Revolving Credit Facility was unused at March 31,
2003.  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 under the Senior Credit
Facility.

    The Company  believes that funds generated from  operations,  existing cash,
and borrowings under the Revolving Credit Facility will be sufficient to finance
its current operations,  any required excess cash flow payments, planned capital
expenditures   and  internal   growth  for  the   foreseeable   future.   Future
acquisitions, if any, may require additional debt or equity financing.

                                       24
<PAGE>

    The following  tables  present  aggregated  information as of March 31, 2003
regarding the Company's contractual obligations and commercial commitments:

<TABLE>
<CAPTION>

                                                             Payments Due by Period
                                      --------------------------------------------------------------
    Contractual                          Less Than         1-3             4-5            After 5
    Obligations            Total          1 Year          Years           Years            Years
--------------------- --------------- -------------- --------------  ---------------  --------------
<S>                    <C>             <C>            <C>             <C>              <C>
Long-term debt         $ 216,936,990   $ 19,181,277   $ 11,352,859    $ 110,075,590    $ 76,327,264
Capital lease
obligations                2,430,286        124,703        387,096          577,415       1,341,072
Operating leases          36,518,000      7,951,000     12,817,000        8,562,000       7,188,000
                      --------------- -------------- --------------  ---------------  --------------
  Total                $ 255,885,276   $ 27,256,980   $ 24,556,955    $ 119,215,005    $ 84,856,336
                      =============== ============== ==============  ===============  ==============


                                                 Amount of Commitment Expiration Per Period
                           Total       --------------------------------------------------------------
 Other Commercial         Amounts        Less Than        1-3              4-5            Over 5
  Commitments            Committed         1 Year         Years            Years          Years
--------------------- --------------- -------------- --------------  ---------------  --------------

Unused line of credit  $  50,000,000   $ 50,000,000   $          -    $           -    $          -
                      =============== ============== ==============  ===============  ==============
</TABLE>

TRANSACTIONS WITH RELATED AND CERTAIN OTHER PARTIES

    In fiscal 2001,  NBC entered into several  agreements  with a newly  created
entity,  TheCampusHub.com,  Inc.,  which is  partially  owned  by the  Company's
majority owner. TheCampusHub.com, Inc. was created to provide college bookstores
with a way to sell in-store  inventory and virtual brand name  merchandise  over
the Internet utilizing  technology  originally developed by NBC. Such agreements
included an equity option  agreement,  a management  services  agreement,  and a
technology sale and license agreement.  The equity option agreement provides NBC
the  opportunity  to acquire 25% of the initial  common  shares  outstanding  of
TheCampusHub.com,  Inc.  The  option  is being  accounted  for as a cost  method
investment  in  accordance  with APB  Opinion  No.  18,  THE  EQUITY  METHOD  OF
ACCOUNTING FOR INVESTMENTS IN COMMON STOCK. The management  services  agreement,
which was extended for one year and expires on May 10, 2004,  reimburses NBC for
certain direct costs incurred on behalf of  TheCampusHub.com,  Inc. Prior to its
amendment as described  below, the management  services  agreement also required
TheCampusHub.com,  Inc.  to pay NBC $0.5  million  per year for  certain  shared
management and administrative  support.  Complementary Services Division revenue
resulting  from the  management  services  agreement,  including as amended,  is
recognized  as the  services  are  performed.  The  technology  sale and license
agreement  provides for NBC to license its E-commerce  software  capabilities to
TheCampusHub.com, Inc. Prior to its amendment as described below, the technology
sale and  license  agreement  required  TheCampusHub.com,  Inc.  to pay NBC $0.5
million per year over a period of three years.  The technology  sale and license
agreement also provides  TheCampusHub.com,  Inc. with an option to purchase such
software  capabilities  from NBC during that three year period and was  extended
for one year,  expiring on May 10,  2004.  The license fees were  recognized  as
Complementary Services Division revenue over the term of the agreement.  For the
years  ended  March 31,  2003,  2002,  and 2001,  revenues  attributable  to the
management  services and  technology  sale and license  agreements  totaled $0.3
million, $1.0 million, and $0.9 million,  respectively,  and reimbursable direct
costs incurred on behalf of  TheCampusHub.com,  Inc. totaled $0.6 million,  $0.8
million, and $0.9 million, respectively.

    Revenues  attributable  to the management  services and technology  sale and
license  agreements were recognized in fiscal 2002 under the anticipation  that,
if  necessary,  TheCampusHub.com,   Inc.  would  make  a  capital  call  to  its
shareholders to provide the funding  necessary to meet its obligations under the
aforementioned agreements.  TheCampusHub.com,  Inc. reached break-even on a cash
flow basis,  excluding amounts under the management services and technology sale
and license  agreements,  during fiscal 2002. While it remains a viable business


                                       25
<PAGE>

and is funding its own operations,  it was not generating sufficient excess cash
flow to  fund  its  obligations  under  the  aforementioned  agreements  and the
remaining capital available from its shareholders was reserved to fund strategic
development opportunities and, if required,  ongoing operations. As a result, on
March 31, 2002 NBC  established a reserve of  approximately  $1.0 million on net
amounts due from TheCampusHub.com,  Inc. and ultimately wrote-off  approximately
$1.0  million of net  amounts  due during  fiscal  2003.  Net  amounts  due from
TheCampusHub.com,  Inc. at March 31, 2003 and 2002 totaled $0.1 million and $0.2
million,  respectively.  Effective  April 1, 2002, the  management  services and
technology  sale and license  agreements  were amended,  eliminating  the annual
licensing fee and reducing the annual management services fee for certain shared
management and administrative  support to $0.3 million. NBC continues to benefit
from its relationship with  TheCampusHub.com,  Inc., as the technology developed
further enhances the  product/service  offering of NBC to its Textbook  Division
customers.

    On August 2, 2002, HWH Capital Partners,  L.P. and HWH Cornhusker  Partners,
L.P.,  affiliates of HWP, along with certain other  stockholders  of the Company
(collectively with HWP, the "Sellers"), sold approximately 33% of the issued and
outstanding  shares of the  Company  to certain  funds  affiliated  with  Weston
Presidio (Weston  Presidio Capital III, L.P.,  Weston Presidio Capital IV, L.P.,
WPC Entrepreneur  Fund, L.P., and WPC Entrepreneur  Fund II, L.P.,  collectively
the "Weston Presidio Funds"). HWP retained a controlling interest in the Company
after the sale. This sale is referred to as the "Weston  Presidio  Transaction".
Under the terms of a buy-sell  agreement  entered into in  connection  with this
sale, Weston Presidio may require that the Sellers  repurchase Weston Presidio's
shares of the Company at a price as defined in the buy-sell agreement,  unless a
majority of the Sellers elects,  in the alternative,  to sell to Weston Presidio
their  remaining  shares of the  Company at a price as  defined in the  buy-sell
agreement.

    As of March 31, 2003 and 2002,  notes receivable from  stockholders  totaled
$0.3  million  and  $0.7  million,  respectively,  and the  associated  interest
receivable totaled approximately $4,000 and $136,000,  respectively. Such notes,
which were amended and restated in July, 2002, mature between January,  2009 and
January, 2010 and bear interest at 5.25%.

SEASONALITY

    The  Company's  Textbook and  Bookstore  Divisions  experience  two distinct
selling  periods and the  Textbook  Division  experiences  two  distinct  buying
periods.  The peak selling periods for the Textbook  Division occur prior to the
beginning of each college  semester in August and December.  The buying  periods
for the  Textbook  Division  occur at the end of each  college  semester in late
December and May. The primary selling periods for the Bookstore  Division are in
September and January. In fiscal 2003, approximately 43% of the Company's annual
revenues  were  earned in the  second  fiscal  quarter  (July-September),  while
approximately  29% of the  Company's  annual  revenues were earned in the fourth
fiscal  quarter  (January-March).  Accordingly,  the Company's  working  capital
requirements fluctuate throughout the year, increasing  substantially at the end
of each  college  semester,  in May and  December,  as a  result  of the  buying
periods.  The Company funds its working capital  requirements  primarily through
the 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
Company  believes  that the  effects of  inflation,  if any,  on its  results of
operations and financial condition have not been material. However, there can be
no  assurance  that  during a period of  significant  inflation,  the  Company's
results of operations will not be adversely affected.

ACCOUNTING STANDARDS NOT YET ADOPTED

    In January,  2003 the  Financial  Accounting  Standards  Board (FASB) issued
Interpretation No. 46, CONSOLIDATION OF VARIABLE INTEREST ENTITIES (FIN 46). FIN
46 requires a variable  interest  entity to be consolidated by a company if that
company is subject to a majority of the risk of loss from the variable  interest
entity's  activities or entitled to receive a majority of the entity's  residual


                                       26
<PAGE>

returns  or both.  FIN 46 also  requires  disclosures  about  variable  interest
entities  that a company is not  required to  consolidate  but in which it has a
significant variable interest. The consolidation  requirements apply to existing
entities in the first  fiscal year or interim  period  beginning  after June 15,
2003. The adoption of the  consolidation  requirements  attributable to existing
entities in fiscal  2004 is not  expected  to have a  significant  impact on the
Company's  consolidated  financial  statements.  In  June,  2001  the  Financial
Accounting  Standards Board issued SFAS No. 143, ACCOUNTING FOR ASSET RETIREMENT
OBLIGATIONS.  This standard  addresses  financial  accounting  and reporting for
obligations  related to the  retirement  of tangible  long-lived  assets and the
related  asset  retirement  costs.  SFAS No. 143 is  effective  for fiscal years
beginning  after June 15, 2002. The Company does not expect its adoption of this
standard  in  fiscal  2004  to have a  significant  impact  on its  consolidated
financial  statements.  In May, 2003 the Financial  Accounting  Standards  Board
issued  SFAS  No.  150,  ACCOUNTING  FOR  CERTAIN  FINANCIAL   INSTRUMENTS  WITH
CHARACTERISTICS  OF BOTH  LIABILITIES  AND EQUITY.  This  standard  improves the
accounting for certain financial  instruments that issuers previously  accounted
for as equity,  requiring  such  instruments  to be classified as liabilities in
certain  situations.  SFAS No. 150 is effective  for all  financial  instruments
entered into or modified  after May 31, 2003 and for interim  periods  beginning
after June 15, 2003.  The Company does not expect its adoption of this  standard
in  fiscal  2004 to have a  significant  impact  on its  consolidated  financial
statements.

"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,"  "expects,"  "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  or   pessimism   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  to  raise  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  textbooks;  changes in
general economic  conditions and/or in the markets in which the Company competes
or may,  from time to time,  compete;  the impact of the Internet and E-books on
the Company's  operations;  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. 333-48225),  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.

                                       27
<PAGE>

      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 Eurodollar  interest rates. Of the $219.4 million in total
indebtedness  outstanding  at March 31,  2003,  approximately  $30.5  million is
subject to  fluctuations  in the  Eurodollar  rate.  As provided in NBC's Senior
Credit  Facility,   exposure  to  interest  rate   fluctuations  is  managed  by
maintaining  fixed interest rate debt (primarily the Senior  Subordinated  Notes
and  Senior  Discount  Debentures)  and by  entering  into  interest  rate  swap
agreements  that qualify as cash flow  hedging  instruments  to convert  certain
variable rate debt into fixed rate debt. NBC has separate  five-year  amortizing
interest  rate swap  agreements  with two financial  institutions  whereby NBC's
variable rate Tranche A and Tranche B Loans have been converted into debt with a
fixed  rate of 5.815%  plus an  applicable  margin  (as  defined  in the  Credit
Agreement).  Such  agreements  terminate on July 31, 2003.  The notional  amount
under each agreement as of March 31, 2003 was approximately $19.0 million.  Such
notional   amounts   are   reduced   periodically   by  amounts   equal  to  the
originally-scheduled principal payments on the Tranche A and Tranche B Loans.

    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, 2003):
<TABLE>
<CAPTION>

                                                                              Variable to Fixed Interest
                         Fixed Rate Debt           Variable Rate Debt                 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:
  2004              $     150,654      9.60%     $ 19,155,326      3.57%      $ 12,275,000   5.81% / 1.22%
  2005                    196,314      9.59%        3,763,945      4.83%               -                -
  2006                    251,807      9.59%        7,527,889      6.08%               -                -
  2007                    306,016      9.59%              -         -                  -                -
  2008                110,346,989      9.59%              -         -                  -                -
  Thereafter           77,668,336     10.77%              -         -                  -                -
                   ---------------  ---------  ---------------  ---------  ----------------  --------------
    Total           $ 188,920,116      9.68%     $ 30,447,160      4.24%      $ 12,275,000   5.81% / 1.22%
                   ===============  =========  ===============  =========  ================  ==============

    Fair Value      $ 185,116,064        -       $ 30,447,160       -         $   (845,669)             -
                   ===============             ===============             ================
</TABLE>

(1)     Principal  cash flows  represent  scheduled  principal  payments and are
        adjusted  for  anticipated   excess  cash  flow  payments  and  optional
        prepayments  (as defined in the Credit  Agreement  underlying the Senior
        Credit  Facility) to be applied toward  principal  balances.  The excess
        cash flow  payment  obligation  for  fiscal  2003 is  reflected  in such
        principal cash flows.

                                       28
<PAGE>

    Certain  quantitative  market risk  disclosures have changed since March 31,
2002 as a result of market fluctuations,  movement in interest rates,  principal
payments,  and new capital  lease  obligations.  The  following  table  presents
summarized market risk information for the years ended March 31, 2003 and 2002:

                                               March 31,      March 31,
                                                 2003           2002
                                            -------------- --------------
Fair Values:
  Fixed rate debt                           $ 185,116,064  $ 165,683,478
  Variable rate debt                           30,447,160     34,900,000
  Interest rate swaps                            (845,669)    (1,618,397)

Overall Weighted-Average Interest Rates:
  Fixed rate debt                                    9.68%          9.66%
  Variable rate debt                                 4.24%          7.01%
  Interest rate swaps receive rate                   1.22%          3.19%



                                       29
<PAGE>
              ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS OF NBC ACQUISITION CORP. FOR THE
YEARS ENDED MARCH 31, 2003, 2002, AND 2001

Independent Auditors' Report..................................................31

Consolidated Balance Sheets...................................................32

Consolidated Statements of Operations.........................................33

Consolidated Statements of Stockholders' Deficit..............................34

Consolidated Statements of Cash Flows.........................................35

Notes to Consolidated Financial Statements....................................36


                                       30
<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
NBC Acquisition Corp.
Lincoln, Nebraska

    We  have  audited  the  accompanying  consolidated  balance  sheets  of  NBC
Acquisition  Corp. and subsidiary as of March 31, 2003 and 2002, and the related
consolidated statements of operations, stockholders' deficit, and cash flows for
each of the three years in the period  ended  March 31,  2003.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

    We conducted our audits in  accordance  with  auditing  standards  generally
accepted in the United States of America.  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 consolidated  financial  statements present fairly, in
all material  respects,  the financial  position of NBC  Acquisition  Corp.  and
subsidiary  as of March 31, 2003 and 2002,  and the results of their  operations
and their cash flows for each of the three  years in the period  ended March 31,
2003 in conformity with accounting  principles  generally accepted in the United
States of America.


/s/  Deloitte & Touche LLP

DELOITTE & TOUCHE LLP

Lincoln, Nebraska
May  27, 2003


                                       31
<PAGE>

NBC ACQUISITION CORP.

CONSOLIDATED BALANCE SHEETS
-------------------------------------------------------------------------------

                                                              March 31,
                                                          2003         2002
                                                      ------------ ------------
ASSETS

CURRENT ASSETS:
  Cash and cash equivalents                          $ 39,405,382 $ 11,419,277
  Receivables                                          29,085,329   29,384,249
  Inventories                                          68,315,352   69,908,414
  Deferred income taxes                                 3,861,932    3,557,325
  Prepaid expenses and other assets                       834,284      498,440
                                                     ------------ ------------
    Total current assets                              141,502,279  114,767,705

PROPERTY AND EQUIPMENT, net of
  depreciation & amortization                          27,666,370   26,478,915

GOODWILL                                               30,472,823   29,791,335

IDENTIFIABLE INTANGIBLES, net of amortization             239,014      414,564

DEBT ISSUE COSTS, net of amortization                   6,055,751    7,642,465

OTHER ASSETS                                            4,442,780    5,937,710
                                                     ------------ ------------

                                                     $210,379,017 $185,032,694
                                                     ============ ============

LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES:
  Accounts payable                                   $ 19,857,301 $ 15,084,077
  Accrued employee compensation and benefits           10,642,713    8,910,902
  Accrued interest                                      2,505,772    1,547,199
  Accrued incentives                                    5,518,883    3,595,628
  Accrued expenses                                      1,077,844    1,060,969
  Income taxes payable                                     89,932    3,684,439
  Deferred revenue                                        538,230      432,790
  Current maturities of long-term debt                 19,181,277    4,476,156
  Current maturities of capital lease obligations         124,703      111,015
                                                     ------------ ------------
    Total current liabilities                          59,536,655   38,903,175

LONG-TERM DEBT, net of current maturities             197,755,713  210,275,783

CAPITAL LEASE OBLIGATIONS, net of current maturities    2,305,583    2,052,286

OTHER LONG-TERM LIABILITIES                               300,823    1,892,250

COMMITMENTS (Note H)

STOCKHOLDERS' DEFICIT:
  Class A common stock, voting, authorized 5,000,000
  shares of $.01 par value; issued and outstanding
  1,264,246 and 1,263,371 shares at March 31, 2003
  and 2002, respectively                                   12,642       12,634
  Additional paid-in capital                           65,381,476   65,304,884
  Notes receivable from stockholders                     (336,681)    (865,940)
  Accumulated deficit                                (114,158,563)(131,937,811)
  Accumulated other comprehensive loss                   (418,631)    (604,567)
                                                     ------------ ------------
    Total stockholders' deficit                       (49,519,757) (68,090,800)
                                                     ------------ ------------

                                                     $210,379,017 $185,032,694
                                                     ============ ============

See notes to consolidated financial statements.

                                       32
<PAGE>


NBC ACQUISITION CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------

                                                 Year Ended   March 31,
                                            2003          2002          2001
                                        ------------  ------------  ------------

REVENUES, net of returns                $370,509,849  $338,916,409 $301,668,853

COSTS OF SALES                           224,488,201   206,975,716  187,098,970
                                        ------------  ------------ ------------
Gross profit                             146,021,648   131,940,693  114,569,883

OPERATING EXPENSES:
  Selling, general and administrative     90,390,858    84,870,828   74,100,242
  Depreciation                             2,987,947     3,087,234    2,956,135
  Amortization                               644,053       504,468   10,445,766
                                        ------------  ------------ ------------
                                          94,022,858    88,462,530   87,502,143
                                        ------------  ------------ ------------

INCOME FROM OPERATIONS                    51,998,790    43,478,163   27,067,740

OTHER EXPENSES (INCOME):
  Interest expense                        22,192,314    24,408,403   24,008,120
  Interest income                           (360,448)     (399,573)    (615,430)
  Loss on derivative financial
  instruments                                155,831       360,445            -
                                        ------------  ------------ ------------
                                          21,987,697    24,369,275   23,392,690
                                        ------------  ------------ ------------

INCOME BEFORE INCOME TAXES                30,011,093    19,108,888    3,675,050

INCOME TAX EXPENSE                        12,231,845     7,953,584    3,406,972
                                        ------------  ------------ -------------

NET INCOME                              $ 17,779,248  $ 11,155,304 $    268,078
                                        ============  ============ =============

EARNINGS PER SHARE:
  Basic                                 $      14.07  $       8.83 $       0.21
                                        ============  ============ -============

  Diluted                               $      13.88  $       8.83 $       0.21
                                        ============  ============ -============

See notes to consolidated financial statements.

                                       33
<PAGE>
<TABLE>
<CAPTION>

NBC ACQUISITION CORP.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
------------------------------------------------------------------------------------------------------------------------------------

                                                                Notes                      Accumulated
                                              Additional     Receivable                       Other
                                 Common        Paid-in          From        Accumulated   Comprehensive                Comprehensive
                                 Stock         Capital      Stockholders      Deficit         Loss           Total        Income
                              -----------  -------------- --------------- --------------- -------------  ------------- -------------

<S>                             <C>         <C>               <C>          <C>              <C>           <C>            <C>
BALANCE, April 1, 2000          $ 12,485    $ 64,525,477      $(660,910)   $(143,361,193)   $        -    $(79,484,141)

  Issuance of Class A
  common stock                       122         641,917              -                -             -         642,039  $         -

  Interest accrued on
  stockholder notes                    -               -        (36,261)               -             -         (36,261)           -

  Net income                           -               -              -          268,078             -         268,078      268,078
                              -----------  -------------- -------------- ---------------- -------------  -------------- ------------
BALANCE, March 31, 2001           12,607      65,167,394       (697,171)    (143,093,115)            -     (78,610,285) $   268,078
                                                                                                                        ============
  Issuance of Class A
  common stock                        27         137,490       (123,765)               -             -          13,752  $         -

  Interest accrued on
  stockholder notes                    -               -        (45,004)               -             -         (45,004)           -

  Net income                           -               -              -       11,155,304             -      11,155,304   11,155,304

  Other comprehensive loss,
  net of taxes:

    Cumulative effect of
    adoption of SFAS No.
    133, net of taxes of
    $401,760                           -               -              -                -      (602,640)       (602,640)    (602,640)

    Unrealized losses on
    interest rate swap
    agreements, net of
    taxes of $1,285                    -               -              -                -        (1,927)         (1,927)      (1,927)
                              -----------  -------------- -------------- ---------------- -------------  -------------- ------------
BALANCE, March 31, 2002           12,634      65,304,884       (865,940)    (131,937,811)     (604,567)    (68,090,800) $10,550,737
                                                                                                                        ============
  Issuance of Class A
  common stock upon
  exercise of stock options            8          52,592              -                -             -          52,600  $         -

  Deferred tax benefit
  associated with exercise
  of stock options                     -          24,000              -                -             -          24,000            -

  Payment on stockholder notes         -               -        552,089                -             -         552,089            -

  Interest accrued on
  stockholder notes                    -               -        (22,830)               -             -         (22,830)           -

  Net income                           -               -              -       17,779,248             -      17,779,248   17,779,248

  Other comprehensive income,
  net of taxes:

    Unrealized gains on interest
    rate swap agreements, net
    of taxes of $146,900               -               -              -                -       185,936         185,936      185,936
                              -----------  -------------- -------------- ---------------- -------------  -------------- ------------
BALANCE, March 31, 2003         $ 12,642    $ 65,381,476      $(336,681)  $ (114,158,563)   $ (418,631)   $(49,519,757) $17,965,184
                              ===========  ============== ============== ================ =============  ============== ============

See notes to consolidated financial statements.
</TABLE>

                                       34
<PAGE>
<TABLE>
<CAPTION>

NBC ACQUISITION CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS
------------------------------------------------------------------------------------------------------------------

                                                                             Year Ended March 31,
CASH FLOWS FROM OPERATING ACTIVITIES:                            2003               2002               2001
                                                            ----------------  -----------------  -----------------
<S>                                                            <C>                <C>                <C>
Net income                                                     $ 17,779,248       $ 11,155,304       $    268,078
Adjustments to reconcile net income to net cash
flows from operating activities:
  Provision for losses on accounts receivable                       451,578          1,629,704            434,070
  Depreciation                                                    2,987,947          3,087,234          2,956,135
  Amortization                                                    2,263,213          2,463,756         12,139,902
  Original issue debt discount amortization                       6,661,206          6,893,299          6,195,595
  Noncash interest (income) expense from derivative
  financial instruments                                            (249,310)           250,340                  -
  (Gain) Loss on derivative financial instruments                  (190,583)           360,445                  -
  (Gain) Loss on disposal of assets                                  35,428           (482,810)            59,627
  Reduction of income taxes paid due to employee
  exercise of stock options                                          24,000                  -                  -
  Deferred income taxes                                           1,269,000           (500,000)        (1,351,000)
  Changes in operating assets and liabilities,
  net of effect of acquisitions/disposals:
    Receivables                                                    (175,488)           309,193         (7,618,872)
    Inventories                                                   2,061,981         (6,554,490)           354,360
    Recoverable income taxes                                              -            706,408           (706,408)
    Prepaid expenses and other assets                              (335,844)           (94,740)            23,602
    Other assets                                                   (346,736)          (683,573)           (85,526)
    Accounts payable                                              3,927,555          3,436,113         (4,497,902)
    Accrued employee compensation and benefits                    1,731,811          2,398,129            211,662
    Accrued interest                                                958,573             80,556            117,419
    Accrued incentives                                            1,923,255          2,613,734            856,541
    Accrued expenses                                                 16,875             96,188            271,867
    Income taxes payable                                         (3,594,507)         3,684,439           (553,893)
    Deferred revenue                                                105,440            153,808           (273,269)
    Other long-term liabilities                                      26,971             34,883             36,739
                                                            ----------------  -----------------  -----------------
      Net cash flows from operating activities                   37,331,613         31,037,920          8,838,727

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property and equipment                            (3,707,733)        (2,276,892)        (1,759,010)
  Bookstore acquisitions, net of cash acquired                   (1,389,338)        (6,109,599)        (2,975,332)
  Proceeds from sale of bookstores                                        -          1,139,400                  -
  Proceeds from sale of property and equipment and other             19,643             49,487            144,834
  Software development costs                                       (249,644)          (418,463)          (403,996)
                                                            ----------------  -----------------  -----------------
      Net cash flows from investing activities                   (5,327,072)        (7,616,067)        (4,993,504)

CASH FLOWS FROM FINANCING ACTIVITIES:
  Payment of financing costs                                        (32,446)                 -                  -
  Principal payments on long-term debt                           (4,476,155)       (16,308,445)        (4,456,324)
  Principal payments on capital lease obligations                  (114,524)          (117,388)           (72,320)
  Proceeds from issuance of common stock                             52,600             13,752            642,039
  Proceeds from payment on notes receivable from stockholders       552,089                  -                  -

                                                            ----------------  -----------------  -----------------
      Net cash flows from financing activities                   (4,018,436)       (16,412,081)        (3,886,605)
                                                            ----------------  -----------------  -----------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS             27,986,105          7,009,772            (41,382)

CASH AND CASH EQUIVALENTS, Beginning of year                     11,419,277          4,409,505          4,450,887
                                                            ----------------  -----------------  -----------------
CASH AND CASH EQUIVALENTS, End of year                         $ 39,405,382       $ 11,419,277       $  4,409,505
                                                            ================  =================  =================

SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION:
  Cash paid during the year for:
    Interest                                                   $ 13,549,099       $ 15,224,920       $ 16,000,970
    Income taxes                                                 14,533,352          4,062,737          6,018,273

  Noncash investing and financing activities:
    Notes receivable from shareholders recorded
    upon issuance of common stock                              $          -       $    123,765       $          -

    Property acquired through capital lease                         381,509          2,228,972                  -

    Accumulated other comprehensive income (loss):

      Cumulative effect of adoption of SFAS No. 133,
      net of income taxes                                                 -           (602,640)                 -
      Unrealized gains (losses) on interest rate
      swap agreements, net of income taxes                          185,936             (1,927)                 -
      Deferred taxes resulting from accumulated
      other comprehensive income (loss)                             146,900           (403,045)                 -

See notes to consolidated financial statements.
</TABLE>


                                       35
<PAGE>

NBC ACQUISITION CORP.

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

A.  NATURE OF OPERATIONS

    NBC  Acquisition  Corp.  (the  "Company")  was  formed  for the  purpose  of
acquiring all of the  outstanding  capital stock of Nebraska Book Company,  Inc.
("NBC"),  effective  September  1, 1995.  The Company  did not have  substantive
operations prior to the acquisition of NBC. The purchase price of NBC 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 $26.9 million.

    The  Company  does  not  conduct  significant   activities  apart  from  its
investment in NBC.  Operational matters discussed in this report,  including the
acquisition  of  college  bookstores  and  other  related  businesses,  refer to
operations   of  NBC.   References   to  "the   Company"   and  "NBC"  are  used
interchangeably  when discussing such operational  matters.  NBC participates in
the college bookstore  industry primarily by providing used textbooks to college
bookstore  operators,  by  operating  its own college  bookstores,  by providing
distance education products and services,  and by providing  proprietary college
bookstore information systems and consulting services.

    On February 13, 1998,  the Company  consummated a Merger  Agreement  among a
newly  created  corporation  controlled  and owned by affiliates of Haas Wheat &
Partners,  L.P.  ("HWP"),  the Company and certain  shareholders  of the Company
pursuant to which the  Company's  outstanding  debt and stock were  restructured
(the "Recapitalization").  As the new investor did not acquire substantially all
of the  common  stock  of  the  Company,  a new  basis  of  accounting  was  not
established  in connection  with the  Recapitalization,  resulting in a negative
charge to retained earnings of approximately $134.8 million. The Company and NBC
obtained  approximately $215.0 million in new debt financing in conjunction with
the  Recapitalization  and capitalized debt issue costs of  approximately  $14.9
million associated with such new debt financing.

    On August 2, 2002, HWH Capital Partners,  L.P. and HWH Cornhusker  Partners,
L.P.,  affiliates of HWP, along with certain other  stockholders  of the Company
(collectively with HWP, the "Sellers"), sold approximately 33% of the issued and
outstanding  shares of the  Company  to certain  funds  affiliated  with  Weston
Presidio (Weston  Presidio Capital III, L.P.,  Weston Presidio Capital IV, L.P.,
WPC Entrepreneur  Fund, L.P., and WPC Entrepreneur  Fund II, L.P.,  collectively
the "Weston Presidio Funds"). HWP retained a controlling interest in the Company
after the sale. This sale is referred to as the "Weston  Presidio  Transaction".
Under the terms of a buy-sell  agreement  entered into in  connection  with this
sale, Weston Presidio may require that the Sellers  repurchase Weston Presidio's
shares of the Company at a price as defined in the buy-sell agreement,  unless a
majority of the Sellers elects,  in the alternative,  to sell to Weston Presidio
their  remaining  shares of the  Company at a price as  defined in the  buy-sell
agreement.

B.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    The significant accounting policies of the Company and its subsidiary are as
follows:

    PRINCIPLES OF CONSOLIDATION:  The consolidated  financial statements include
the accounts of the Company and NBC. All significant  intercompany  accounts and
transactions are eliminated in consolidation.

    Effective  July 1, 2002,  NBC's  distance  learning  division was separately
incorporated under the laws of the State of Delaware as Specialty Books, Inc., a
wholly-owned subsidiary of NBC.

                                       36
<PAGE>

    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  utilizing  actual  historical  return  experience  and amounts 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.

    SHIPPING  AND  HANDLING  FEES AND COSTS:  Amounts  billed to a customer  for
shipping  and  handling  have been  classified  as revenues in the  consolidated
statements of operations and approximated $5.4 million,  $4.4 million,  and $2.9
million  for the years  ended  March 31,  2003,  2002,  and 2001,  respectively.
Shipping  and  handling  costs  are  included  in  operating   expenses  in  the
consolidated  statements  of operations  and  approximated  $9.0  million,  $8.0
million,  and $6.8 million for the years ended March 31, 2003,  2002,  and 2001,
respectively.

    ADVERTISING:  Advertising  costs are expensed as incurred  and  approximated
$3.2 million, $2.7 million, and $2.2 million for the years ended March 31, 2003,
2002, and 2001, respectively.

    USE OF ESTIMATES: The preparation of financial statements in conformity with
accounting  principles  generally  accepted  in the  United  States  of  America
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 the Textbook  Division are  determined on the  weighted-average
cost  method.   The  Company's   Bookstore  Division  values  new  textbook  and
non-textbook inventories using the retail inventory method (first-in,  first-out
cost basis).  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 seven years,  with the exception of buildings which are depreciated over
39 years.

    SOFTWARE  DEVELOPMENT COSTS: The Company's primary activities  regarding the
internal   development  of  software  revolve  around  its  proprietary  college
bookstore  information  system  (PRISM),  which  is  utilized  by the  Company's
Bookstore  Division  and also  marketed  to the  general  public.  As the  PRISM
software  developed  internally  is intended  for both  internal use and sale to
external  customers,  the  Company  adheres  to the  guidance  in  Statement  of
Financial  Accounting  Standards  ("SFAS") No. 86,  ACCOUNTING  FOR THE COSTS OF
COMPUTER  SOFTWARE  TO BE SOLD,  LEASED,  OR  OTHERWISE  MARKETED as required by
Statement  of  Position  98-1,  ACCOUNTING  FOR THE COSTS OF  COMPUTER  SOFTWARE
DEVELOPED OR OBTAINED FOR INTERNAL USE.

    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  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  cash flows.  Capitalized  software costs
approximated  $1.1  million  and $1.2  million  at  March  31,  2003  and  2002,
respectively.  Certain  functionalities  have been completed and released to the
general  public.  Amortization  of the  capitalized  costs  associated with such
functionalities  totaled $0.4 million,  $0.3  million,  and $0.1 million for the
fiscal years ended March 31, 2003, 2002, and 2001, respectively.

                                       37
<PAGE>

    GOODWILL  AND  OTHER  IDENTIFIABLE  INTANGIBLE  ASSETS:  Goodwill  and other
identifiable  intangible assets were acquired through the acquisition of 100% of
the stock of NBC effective  September 1, 1995,  and the  acquisition  of various
bookstore  operations and other businesses.  Goodwill and intangible assets with
indefinite  useful lives are not amortized  but rather tested at least  annually
for impairment.  The test for impairment of goodwill is a two-step  process that
identifies  potential impairment and then measures the amount of such impairment
to be recorded in the consolidated financial statements. The test for impairment
of intangible assets with indefinite useful lives consists of comparing the fair
value of the intangible asset with its carrying  amount,  recognizing any excess
carrying value as an impairment loss. Intangible assets with finite useful lives
continue to be  amortized  on a  straight-line  basis over  useful  lives of 2-3
years. There were no impairment losses recognized during fiscal 2003.

    DEBT ISSUE COSTS:  The costs related to the issuance of debt are capitalized
and amortized to interest expense on a straight-line basis over the lives of the
related debt.  Accumulated  amortization  of such costs as of March 31, 2003 and
2002 was approximately $8.8 million and $7.2 million, respectively.

    In April, 2002 the Financial Accounting Standards Board issued SFAS No. 145,
RESCISSION OF FASB STATEMENTS NO. 4, 44, AND 64, AMENDMENT OF FASB STATEMENT NO.
13 AND TECHNICAL CORRECTIONS.  In part, this standard rescinds SFAS No. 4, which
required all gains and losses from  extinguishment of debt to be aggregated and,
if material,  classified as an  extraordinary  item,  net of income  taxes.  The
provisions of SFAS No. 145 related to the rescission of SFAS No. 4 are effective
for fiscal years  beginning after May 15, 2002. The Company  early-adopted  this
standard in fiscal 2002,  recording the write-off of approximately  $0.3 million
in unamortized debt issue costs related to the $10.0 million optional prepayment
of Tranche A and Tranche B Loans as additional amortization expense.

    DERIVATIVE FINANCIAL INSTRUMENTS: Interest rate swap agreements are utilized
by the Company to reduce exposure to fluctuations in the interest rates on NBC's
variable rate debt.  Such  agreements are recorded in the  consolidated  balance
sheet at fair value. Changes in the fair value of the agreements are recorded in
earnings or other comprehensive  income (loss),  based on whether the agreements
are designated as part of the hedge  transaction  and whether the agreements are
effective  in  offsetting  the  change  in the  value of the  interest  payments
attributable to NBC`s variable rate debt.

    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, 2003 and 2002,  because
of the  relatively  short  maturity  of these  instruments.  The  fair  value of
long-term  debt,  including the current  maturities,  was  approximately  $215.6
million  and $200.6  million  as of March 31,  2003 and 2002,  respectively,  as
determined  primarily by quoted  market  values.  The fair value of the interest
rate swap agreements (see note I) approximated $(0.8) million and $(1.6) million
as of March 31, 2003 and 2002 using  quotes  from  brokers  and  represents  the
Company's loss on settlement if the existing agreements had been settled on that
date.

                                       38
<PAGE>

    STOCK  BASED   COMPENSATION:   The  Company  accounts  for  its  stock-based
compensation under provisions of Accounting Principles Board ("APB") Opinion No.
25,  ACCOUNTING  FOR  STOCK  ISSUED TO  EMPLOYEES  and  related  interpretations
utilizing the intrinsic value method.  Certain information regarding stock-based
compensation is presented in the following tabular format:

                                              Fiscal Year Ended March 31,
                                            2003          2002         2001
                                       ------------- ------------- ------------
Net income, as reported                 $17,779,248   $11,155,304    $ 268,078

Add:  Stock-based employee
compensation expense included
in reported net income,
net of related tax effects                        -             -            -

Deduct:  Total stock-based employee
compensation expense determined
under fair value based method for all
awards, net of related tax effects          (92,382)      (51,344)     (72,835)
                                       ------------- ------------- ------------
Pro forma net income                    $17,686,866   $11,103,960    $ 195,243
                                       ============= ============= ============

Earnings per share:
  Basic - as reported                   $     14.07   $      8.83    $    0.21
  Basic - pro forma                           14.00          8.79         0.15
  Diluted - as reported                       13.88          8.83         0.21
  Diluted - pro forma                         13.70          8.79         0.15


    INCOME  TAXES:  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.

    EARNINGS  PER  SHARE:  Basic  earnings  per  share  data  are  based  on the
weighted-average  number of common shares outstanding during the period. Diluted
earnings  per  share  data are  based on the  weighted-average  number of common
shares  outstanding and the dilutive effect of potential common shares including
stock options and warrants.

    COMPREHENSIVE INCOME (LOSS): Comprehensive income (loss) includes net income
(loss) and other  comprehensive  income (losses).  For the years ended March 31,
2003,  2002, and 2001,  other  comprehensive  income  (losses)  consisted of the
cumulative  effect of adoption of SFAS No. 133 and unrealized  gains (losses) on
interest rate swap agreements, net of taxes.

    ACCOUNTING  STANDARDS  NOT YET  ADOPTED:  In  January,  2003  the  Financial
Accounting Standards Board (FASB) issued Interpretation No. 46, CONSOLIDATION OF
VARIABLE  INTEREST ENTITIES (FIN 46). FIN 46 requires a variable interest entity
to be  consolidated by a company if that company is subject to a majority of the
risk of loss from the  variable  interest  entity's  activities  or  entitled to
receive  a  majority  of the  entity's  residual  returns  or both.  FIN 46 also
requires  disclosures  about  variable  interest  entities that a company is not
required to consolidate but in which it has a significant variable interest. The
consolidation  requirements  apply to existing entities in the first fiscal year
or  interim  period   beginning  after  June  15,  2003.  The  adoption  of  the
consolidation  requirements  attributable to existing entities in fiscal 2004 is
not  expected  to  have  a  significant  impact  on the  Company's  consolidated
financial  statements.  In June, 2001 the Financial  Accounting  Standards Board
issued SFAS No. 143, ACCOUNTING FOR ASSET RETIREMENT OBLIGATIONS.  This standard
addresses  financial  accounting  and reporting for  obligations  related to the
retirement of tangible long-lived assets and the related asset retirement costs.
SFAS No. 143 is effective for fiscal years  beginning  after June 15, 2002.  The

                                       39
<PAGE>

Company does not expect its  adoption of this  standard in fiscal 2004 to have a
significant impact on the consolidated  financial  statements.  In May, 2003 the
Financial Accounting Standards Board issued SFAS No. 150, ACCOUNTING FOR CERTAIN
FINANCIAL  INSTRUMENTS WITH CHARACTERISTICS OF BOTH LIABILITIES AND EQUITY. This
standard improves the accounting for certain financial  instruments that issuers
previously accounted for as equity,  requiring such instruments to be classified
as  liabilities  in  certain  situations.  SFAS  No.  150 is  effective  for all
financial  instruments  entered  into or  modified  after  May 31,  2003 and for
interim  periods  beginning after June 15, 2003. The Company does not expect its
adoption of this  standard in fiscal  2004 to have a  significant  impact on its
consolidated financial statements.

C.  RECEIVABLES

    Receivables are summarized as follows:
                                                      March 31,
                                                 2003           2002
                                             ------------   -----------
   Trade receivables, less allowance for
   doubtful accounts of $442,942 and
   $429,803 at March 31, 2003 and 2002,
   respectively                              $13,792,759     $15,096,134

   Receivables from book publishers for
   returns                                    10,351,717       9,333,134

   Advances for book buy-backs                 2,294,455       2,162,439

   Computer finance agreements, current
   portion                                       445,393         352,286

   Related party receivables, less
   allowance for doubtful accounts
   of $1.0  million  at March 31, 2002           348,386         337,561

   Other                                       1,852,619       2,102,695
                                             -----------     -----------
                                             $29,085,329     $29,384,249
                                             ===========     ===========


   Trade receivables include the effect of estimated product returns. The amount
of estimated product returns at March 31, 2003 and 2002 was  approximately  $6.0
million.

D.  INVENTORIES

    Inventories are summarized as follows:

                                                       March 31,
                                                 2003            2002
                                              -----------      -----------
   Textbook Division                          $28,908,121     $30,256,654
   Bookstore Division                          31,986,260      32,447,083
   Complementary Services Division              7,420,971       7,204,677
                                              -----------     -----------
                                              $68,315,352     $69,908,414
                                              ===========     ===========

    Textbook  Division  inventories  include  the  effect of  estimated  product
returns.  The amount of estimated product returns at March 31, 2003 and 2002 was
approximately $2.7 million.

    General and administrative costs associated with the storage and handling of
inventory  totaled  approximately  $7.4  million and $6.5  million for the years
ended March 31, 2003 and 2002, respectively, of which approximately $2.1 million
and $1.9  million was  capitalized  into  inventory  at March 31, 2003 and 2002,
respectively.

                                       40
<PAGE>

E.  PROPERTY AND EQUIPMENT

    A summary of the cost of property and equipment follows:

                                                         March 31,
                                              -------------------------------
                                                   2003             2002
                                              --------------  ---------------
     Land                                      $  2,408,999     $  2,408,999
     Buildings and improvements                  17,394,396       17,002,181
     Leasehold improvements                       7,134,396        6,526,231
     Furniture and fixtures                       7,060,829        5,361,476
     Information systems                         11,514,821       10,786,038
     Automobiles and trucks                         337,957          321,476
     Machinery                                      564,468          450,510
     Projects in process                            483,246          204,521
                                              --------------  ---------------
                                                 46,899,112       43,061,432
     Less:  Accumulated depreciation &
     amortization                               (19,232,742)     (16,582,517)
                                              --------------  ---------------
                                               $ 27,666,370     $ 26,478,915
                                              ==============  ===============

F.  GOODWILL AND OTHER IDENTIFIABLE INTANGIBLES

    On July 20, 2001, the Financial  Accounting  Standards Board issued SFAS No.
142, GOODWILL AND OTHER INTANGIBLE ASSETS. This statement addresses how goodwill
and other intangible assets should be accounted for in the financial  statements
upon acquisition and subsequent thereto.

    During the fiscal year ended  March 31,  2003,  NBC  acquired  four  college
bookstore locations in three separate  transactions,  none of which was material
to the  Company's  consolidated  financial  statements.  In  June of  2002,  NBC
acquired certain assets of a privately owned bookstore serving the University of
Northern  Colorado.  In November of 2002,  NBC  acquired  certain  assets of two
privately owned bookstore  locations  serving Western  Kentucky  University.  In
March of 2003,  NBC  acquired  certain  assets of a  privately  owned  bookstore
serving  Stephen F. Austin  University.  The total purchase  price,  net of cash
acquired,  of  such  acquisitions  was  approximately  $1.4  million,  of  which
approximately  $0.1  million  was  assigned  to  covenants  not to compete  with
amortization  periods of three years and approximately $0.7 million was assigned
to tax-deductible goodwill.

    The changes in the carrying amount of goodwill for the years ended March 31,
2003 and 2002 are as follows:


                                                        Year Ended March 31,
                                                         2003          2002
                                                    ------------- -------------
     Balance, beginning of year                      $29,791,335   $26,659,797

     Goodwill acquired during the year                   681,488     3,327,249

     Goodwill included in gain on disposal
     of assets                                                 -      (195,711)
                                                    ------------- -------------
     Balance, end of year                            $30,472,823   $29,791,335
                                                    ============= =============


                                       41
<PAGE>

    The following table presents  certain  financial  information  assuming that
amortization  expense  associated  with  goodwill  was  excluded for all periods
presented:
<TABLE>
<CAPTION>

                                                           Year Ended March 31,
                                                    2003           2002           2001
                                               -------------- -------------- --------------
<S>                                             <C>            <C>               <C>
Net Income:
  Net income, as reported                       $ 17,779,248   $ 11,155,304    $   268,078
  Add:  Goodwill amortization                              -              -     10,169,697
  Deduct: Tax benefit of goodwill amortization             -              -     (2,364,766)
                                               -------------- -------------- --------------
  Net income, as adjusted                       $ 17,779,248   $ 11,155,304    $ 8,073,009
                                               ============== ============== ==============

Basic Earnings Per Share:
  Basic earnings per share, as reported         $      14.07   $       8.83    $      0.21
  Add:  Goodwill amortization                              -              -           8.07
  Deduct: Tax benefit of goodwill amortization             -              -          (1.88)
                                               -------------- -------------- --------------
  Basic earnings per share, as adjusted         $      14.07   $       8.83    $      6.40
                                               ============== ============== ==============

Diluted Earnings Per Share:
  Diluted earnings per share, as reported       $      13.88   $       8.83    $      0.21
  Add:  Goodwill amortization                              -              -           8.05
  Deduct: Tax benefit of goodwill amortization             -              -          (1.87)
                                               -------------- -------------- --------------
  Diluted earnings per share, as adjusted       $      13.88   $       8.83    $      6.39
                                               ============== ============== ==============
</TABLE>

    The  following  table  presents the total  carrying  amount of goodwill,  by
reportable  segment,  as of March  31,  2003 and  2002,  respectively.  Goodwill
assigned to corporate  administration  represents the carrying value of goodwill
arising from the  Company's  acquisition  of NBC on September 1, 1995. As is the
case with a portion of the  Company's  assets,  such  goodwill is not  allocated
between the Company's  segments when management  makes  operating  decisions and
assesses  performance.  Such  goodwill is allocated to the  Company's  reporting
units for purposes of testing  goodwill for impairment and  calculating any gain
or loss on the disposal of all or a portion of a reporting unit.

                                                      March 31,
                                                 2003            2002
                                            -------------- ---------------

  Bookstore Division                         $ 13,702,249    $ 13,020,761
  Complementary Services Division                       -               -
                                            -------------- ---------------
    Total for reportable segments              13,702,249      13,020,761
  Corporate administration                     16,770,574      16,770,574
                                            -------------- ---------------
     Total goodwill                          $ 30,472,823    $ 29,791,335
                                            ============== ===============

    Identifiable intangible assets, net of amortization expense of approximately
$0.3 million and $0.2 million as of March 31, 2003 and 2002, respectively,  were
not material.

G.  LONG-TERM DEBT

    On February 13,  1998,  the Company  obtained  new  financing as part of the
Recapitalization  (See Note A). The new financing  included a  bank-administered
senior credit facility (the "Senior Credit Facility")  provided to NBC through a
syndicate of  investors.  The facility is 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").

                                       42
<PAGE>

    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,  up to a maximum of $50.0 million.  The calculated borrowing base
at March 31, 2003 was approximately $41.0 million. The Revolving Credit Facility
was unused at March 31, 2003.

    The interest rate on the Senior Credit  Facility is prime plus an applicable
margin of up to 1.50% or, on Eurodollar borrowings,  the Eurodollar rate plus an
applicable margin of up to 2.50%.  Additionally,  there is a 0.3% commitment fee
for the average  daily  unused  amount of the  Revolving  Credit  Facility.  The
average borrowings under the Revolving Credit Facility for the years ended March
31,  2003 and 2002 were  approximately  $9.8  million  and $14.0  million  at an
average rate of 5.5% and 7.8%, respectively.

    The Senior Credit Facility is  collateralized  by  substantially  all of the
Company's  assets.  The Senior Credit  Facility also stipulates that excess cash
flows as defined in the credit  agreement  dated  February 13, 1998 (the "Credit
Agreement"),  as amended,  shall be applied initially towards  prepayment of the
term  loans  and then  utilized  to  permanently  reduce  commitments  under the
Revolving Credit Facility.  An optional  prepayment of $10.0 million was made on
March 29,  2002 and  applied  towards  the  Tranche A Loan and Tranche B Loan in
accordance with the Credit Agreement.  There is also an excess cash flow payment
obligation at March 31, 2003 of approximately  $14.7 million that is included in
the current  portion of long-term  debt and is due and payable on September  29,
2003.

    Additional  funding of the  Recapitalization  included  the  proceeds of the
issuance by NBC of $110.0 million face amount of 8.75% senior subordinated notes
due 2008 (the  "Senior  Subordinated  Notes") and the issuance by the Company of
$76.0 million face amount of 10.75%  senior  discount  debentures  due 2009 (the
"Senior Discount  Debentures").  The Senior Discount Debentures were issued at a
discount of  approximately  $31.0  million and  accreted in value at the rate of
10.75%  compounded  semi-annually  through  February 15, 2003, with  semi-annual
interest payments commencing August 15, 2003.

                                       43
<PAGE>

    Borrowings consist of the following:

                                                            March 31,
                                                       2003            2002
                                                   -----------     -----------
     Tranche A Loan, due March 31, 2004,
     quarterly principal payments, plus
     interest at a floating rate based
     on Eurodollar rate plus applicable
     margin % (2.76% and 4.24% at
     March 31, 2003 and 2002, respectively)       $  6,642,873   $ 11,095,713

     Tranche B Loan, due March 31, 2006,
     quarterly principal payments, plus
     interest at a floating rate based
     on Eurodollar rate plus applicable
     margin % (3.76% and 4.49% at
     March 31, 2003 and 2002, respectively)         23,804,287     23,804,287

     Senior subordinated notes, unsecured,
     due February 15, 2008, semi-annual
     interest payments at a fixed rate of
     8.75%                                         110,000,000    110,000,000

     Senior discount debentures, unsecured,
     maturing February 15, 2009, semi-annual
     interest payments at a rate of 10.75%,
     commencing August 15, 2003, net of a
     discount of $6,661,206 at March 31, 2002       76,000,000     69,338,794

     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%                                489,830        513,145
                                                  -------------  -------------
                                                   216,936,990    214,751,939
     Less current maturities                       (19,181,277)    (4,476,156)
                                                  -------------  -------------
                                                  $197,755,713   $210,275,783
                                                  =============  =============

    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,  NBC may pay dividends to the Company (i) on or
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 owed by the Company.

    The indenture governing the Senior Discount Debentures 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
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. The indenture  governing the Senior  Subordinated Notes
contains  similar  restrictions  on  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.

                                       44
<PAGE>

    At March 31, 2003,  the aggregate  maturities of long-term debt for the next
five years were as follows:

        Fiscal Year
        -----------
        2004                             $ 19,181,277
        2005                                3,792,826
        2006                                7,560,033
        2007                                   35,774
        2008                              110,039,816

H.  LEASES AND OTHER COMMITMENTS

    In  conjunction  with  two  bookstores  acquired  in June  of  2001  and one
bookstore  acquired in March of 2003, NBC entered into bookstore facility leases
that  qualified as capital  leases.  Such leases expire at various dates through
fiscal  2013 and  contain  options  to renew  for  periods  of up to ten  years.
Capitalized leased property included in property and equipment was approximately
$2.2 million at March 31, 2003, net of accumulated depreciation.

    The Company leases bookstore  facilities and data processing equipment under
noncancelable  operating  leases  expiring at various dates through fiscal 2015,
many of which contain  options to renew for periods of up to ten years.  Certain
of the leases are based on a percentage of sales, ranging from 3.0% to 10.0%.

    Future minimum  capital lease payments and aggregate  minimum lease payments
under  noncancelable  operating  leases  for the  years  ending  March 31 are as
follows:

                                          Capital     Operating
   Year                                   Leases        Leases
   ----                                -----------   ---------
   2004                                $   398,225   $ 7,951,000
   2005                                    424,791     6,788,000
   2006                                    454,947     6,029,000
   2007                                    477,392     4,954,000
   2008                                    480,895     3,608,000
   Thereafter                            1,629,495     7,188,000
                                       -----------   -----------
   Total minimum lease payments          3,865,745   $36,518,000
                                                     ===========
   Amount representing interest
     at 11.5%                           (1,435,459)
                                       ------------
   Present value of minimum lease
     payments                            2,430,286
   Obligations due within one year        (124,703)
                                       ------------
   Long-term obligations               $ 2,305,583
                                       ============

    Total rent  expense for the years ended March 31, 2003,  2002,  and 2001 was
approximately  $11.5  million,  $10.6 million,  and $9.6 million,  respectively.
Percentage  rent expense for the years ended March 31, 2003,  2002, and 2001 was
approximately $3.0 million, $2.5 million, and $2.0 million, respectively.

I.  DERIVATIVE FINANCIAL INSTRUMENTS

    The Financial Accounting Standards Board has issued SFAS No. 133, ACCOUNTING
FOR DERIVATIVE  INSTRUMENTS AND HEDGING ACTIVITIES,  as amended by SFAS No. 137,
ACCOUNTING FOR DERIVATIVE  INSTRUMENTS AND HEDGING  ACTIVITIES - DEFERRAL OF THE
EFFECTIVE DATE OF FASB  STATEMENT NO. 133, SFAS No. 138,  ACCOUNTING FOR CERTAIN
DERIVATIVE  INSTRUMENTS  AND  CERTAIN  HEDGING  ACTIVITIES,  and SFAS  No.  149,
AMENDMENT OF STATEMENT 133 ON  DERIVATIVE  INSTRUMENTS  AND HEDGING  ACTIVITIES.
This  standard  requires  that all  derivative  instruments  be  recorded in the
balance  sheet at fair  value.  Changes  in the fair  value of  derivatives  are
recorded in earnings or other comprehensive  income (loss), based on whether the
instrument is designated as part of a hedge  transaction and, if so, the type of
hedge  transaction.   The  Company  utilizes  derivative  financial  instruments
primarily  to manage the risk that  changes in  interest  rates will  affect the
amount of its future interest  payments on the Tranche A and Tranche B Loans and
adopted SFAS No. 133 effective April 1, 2001.

                                       45
<PAGE>

    The Company's  primary  market risk exposure is, and is expected to continue
to be, fluctuation in Eurodollar  interest rates. Of the $219.4 million in total
indebtedness  outstanding  at March  31,  2003,  $30.5  million  is  subject  to
fluctuations in the Eurodollar interest rate. As provided in NBC's Senior Credit
Facility, exposure to interest rate fluctuations is managed by maintaining fixed
interest rate debt (primarily the Senior  Subordinated Notes and Senior Discount
Debentures)  and by entering into interest rate swap  agreements that qualify as
cash flow hedging  instruments to convert certain  variable rate debt into fixed
rate debt. NBC has separate five-year  amortizing  interest rate swap agreements
with two  financial  institutions  whereby  NBC's  variable  rate  Tranche A and
Tranche B Loans have been  converted  into debt with a fixed rate of 5.815% plus
an  applicable  margin (as  defined in the Credit  Agreement).  Such  agreements
terminate on July 31, 2003.  Notional  amounts under the  agreements are reduced
periodically by amounts equal to the originally-scheduled  principal payments on
the Tranche A and Tranche B Loans. NBC is exposed to credit loss in the event of
nonperformance by the  counterparties to the interest rate swap agreements.  NBC
anticipates the  counterparties  will be able to fully satisfy their obligations
under the agreements.  General  information  regarding the Company's exposure to
fluctuations in Eurodollar interest rates is presented in the following table:

                                                            March 31,
                                                      2003             2002
                                                  -------------   -------------
  Total indebtedness outstanding                  $ 219,367,276   $216,915,240

  Indebtedness subject to Eurodollar fluctuations    30,447,160     34,900,000

  Notional amounts under swap agreements             38,100,000     44,900,000

    The interest rate swap agreements  qualify as cash flow hedge instruments if
the following criteria are met:

(1)         Formal  documentation  of the  hedging  relationship  and NBC's risk
            management objective and strategy for undertaking the hedge occur at
            the inception of the agreements.

(2)         The  interest  rate  swap  agreements  are  expected  to  be  highly
            effective  in  offsetting  the  change in the value of the  interest
            payments attributable to NBC's Tranche A and Tranche B Loans.

    NBC  estimates  the  effectiveness  of the  interest  rate  swap  agreements
utilizing the hypothetical  derivative method. Under this method, the fair value
of the actual  interest  rate swap  agreements  is compared to the fair value of
hypothetical  swap agreements that have the same critical terms as the Tranche A
and Tranche B Loans,  including  notional  amounts and repricing  dates.  To the
extent  that  the  agreements  are not  considered  to be  highly  effective  in
offsetting the change in the value of the interest  payments  being hedged,  the
fair  value  relating  to the  ineffective  portion of such  agreements  and any
subsequent changes in such fair value are immediately  recognized in earnings as
"gain or loss on  derivative  financial  instruments".  To the  extent  that the
agreements  are  considered  highly  effective but not  completely  effective in
offsetting the change in the value of the interest  payments  being hedged,  any
changes in fair value relating to the ineffective portion of such agreements are
immediately recognized in earnings as interest expense.

    Under hedge  accounting,  the interest rate swap agreements are reflected at
fair value in the Company's  consolidated  balance sheets (as "accounts payable"
in fiscal 2003 and "other long-term liabilities" in fiscal 2002) and the related
gains or losses on these  agreements  are  generally  recorded in  stockholders'
deficit,  net of applicable  income taxes (as "accumulated  other  comprehensive
loss"). The gains or losses recorded in accumulated other comprehensive loss are
reclassified  into  earnings as an  adjustment  to interest  expense in the same
periods in which the related  interest  payments  being hedged are recognized in


                                       46
<PAGE>

earnings.  The net  effect  of this  accounting  on the  Company's  consolidated
results of operations  is that  interest  expense on the Tranche A and Tranche B
Loans is generally being recorded based on fixed interest rates.  The fair value
of the interest rate swap agreements  reflected as a liability at March 31, 2003
and 2002 totaled $0.8 million and $1.6 million, respectively.

    The  initial  adoption  of SFAS No. 133 on April 1, 2001  resulted in a $1.0
million  increase  in other  long-term  liabilities,  $0.4  million  increase in
noncurrent  deferred income tax assets, and $0.6 million increase in accumulated
other  comprehensive  loss to recognize the fair value of the interest rate swap
agreements,  net of  income  taxes,  as the  cumulative  effect  of a change  in
accounting principle.

    As a result of a $10.0 million optional  prepayment of Tranche A and Tranche
B Loans on March  29,  2002,  notional  amounts  under  the  interest  rate swap
agreements no longer correlate with remaining  principal  balances due under the
Tranche A and Tranche B Loans. The difference between the notional amounts under
the interest rate swap agreements and the remaining principal balances due under
the Tranche A and Tranche B Loans  represents the portion of the agreements that
no longer qualify for hedge accounting. The fair value of the interest rate swap
agreements on March 29, 2002 was allocated between the portion of the agreements
that no longer  qualify for hedge  accounting  and the portion of the agreements
that were redesignated as hedging instruments on the remaining amounts due under
the Tranche A and Tranche B Loans.  The fair value  allocated  to the portion of
the interest rate swap  agreements  that no longer qualify for hedge  accounting
was immediately  recognized in the Company's  consolidated results of operations
as a loss on derivative  financial  instruments and totaled  approximately  $0.4
million.  Changes in the fair value of this  portion of the  interest  rate swap
agreements,  along with the  proportionate  share of actual net cash settlements
attributable  to this portion of the  agreements,  are also recognized as a gain
(loss) on derivative  financial  instruments in the  consolidated  statements of
operations and totaled $(0.2) million for the year ended March 31, 2003.

Information  regarding  the fair value of the portion of the interest  rate swap
agreements designated as hedging instruments is presented in the following table
for the years ended March 31, 2003 and 2002:

                                                  Year Ended March 31,
                                                    2003        2002
                                                ------------ -----------
   Year-to-date increase (decrease)
   in fair value of swap agreements
   designated as hedges                         $ 582,146  $ (253,552)

   Year-to-date interest (income)
   expense recorded due to hedge
   ineffectiveness                               (249,310)    250,340



    Changes in the fair value of the interest rate swap agreements are reflected
in the consolidated statements of cash flows as either "noncash interest expense
from derivative  financial  instruments",  "gain or loss on derivative financial
instruments", or as noncash investing and financing activities.

J.  NOTES RECEIVABLE FROM STOCKHOLDERS

    Notes receivable from stockholders reflected as a component of stockholders'
deficit  pertain to notes  obtained  from  certain  NBC  executive  officers  in
conjunction with certain  issuances of the Company's Class A Common Stock.  Such
notes mature on various dates from January,  2009 to January,  2010, are payable
at maturity, and bear interest at 5.25%.

                                       47
<PAGE>


K.  INCOME TAXES

    The provision (benefit) for income taxes consists of:

                                                Year Ended March 31,
                                          2003          2002         2001
                                        --------      ---------   ----------
   Current:
     Federal                         $ 8,801,085     $6,791,179  $ 3,811,112
     State                             2,161,760      1,662,405      946,860
   Deferred                            1,269,000       (500,000)  (1,351,000)
                                     $12,231,845     $7,953,584  $ 3,406,972

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

                                                Year Ended March 31,
                                            2003          2002        2001
                                         ----------    ---------   ---------
   Statutory rate                          35.0%         35.0%         34.0%
   State income tax effect                  5.1           5.5          13.2
   Amortization of goodwill                   -             -          39.3
   Change in estimate of income tax
     liabilities                            0.3           0.5           3.0
   Other                                    0.4           0.6           3.2
                                         ------        ------        ------
                                           40.8%         41.6%         92.7%
                                         ======        ======        ======

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

                                                March 31,
                                           2003           2002
                                        ----------     ---------
   Deferred income tax assets
   (liabilities), current:
     Vacation accruals                  $  495,160     $  532,816
     Inventory                             110,913         69,490
     Allowance for doubtful accounts       168,141        542,753
     Product returns                     1,238,155      1,237,730
     Incentive programs                  1,991,821      1,312,059
     Other                                (142,258)      (137,523)
                                        -----------    -----------
                                         3,861,932      3,557,325
                                        -----------    -----------
   Deferred income tax assets
   (liabilities), noncurrent:
     Deferred compensation agreements      114,192        103,955
     Goodwill amortization                 692,739      1,843,312
     Covenant not to compete             1,309,811      1,384,571
     Fixed assets                         (423,383)             -
     Unrealized losses on derivatives      321,016        403,045
                                        ----------     ----------
                                         2,014,375      3,734,883
                                        ----------     ----------
                                        $5,876,307     $7,292,208
                                        ==========     ==========

    The non-current  portion of deferred tax assets  (liabilities) is classified
in other assets (liabilities).

L.  RETIREMENT PLAN

    The Company's subsidiary  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, 2003,  2002, and 2001 were
approximately $1.0 million, $0.9 million, and $0.8 million, respectively.

                                       48
<PAGE>

M. 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 either death
or voluntary/involuntary  resignation or termination. 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  and  approximated  $0.3 million as of March 31, 2003 and
2002.

N.  STOCK-BASED COMPENSATION

    The Company has two stock-based  compensation  plans  established to provide
for the granting of options to purchase Class A Common Stock.  Details regarding
each of the plans in effect are as follows:

    1998 PERFORMANCE  STOCK OPTION PLAN - This plan provides for the granting of
options to  purchase  53,771  shares of the  Company's  Class A Common  Stock to
selected  members of senior  management of the Company and its  affiliates.  All
options granted were nonqualified stock options, although the plan also provides
for  incentive  stock  options.  The Company  granted a portion of the available
options  in  fiscal  years  2001-2003  upon the  attainment  of  pre-established
financial targets. Generally,  twenty-five percent of the options granted became
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,  2003,  there were no options  available  for grant
under the plan.

    1998 STOCK  OPTION PLAN - This plan  provides for the granting of options to
purchase  29,229  shares  of the  Company's  Class A Common  Stock  to  selected
employees,  officers,  and  directors  of the  Company and its  affiliates.  All
options granted were nonqualified stock options, although the plan also provides
for incentive stock options.  The Company granted such options at the discretion
of a committee designated by the Board of Directors (the Committee).  Generally,
twenty-five  percent of the options granted became 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, 2003,
there were no options available for grant under the plan.

    No compensation  cost was recognized for the options granted to employees in
fiscal 2003,  2002,  and 2001 as the exercise price was greater than or equal to
the  estimated  fair value  (including  a  discount  for the  holder's  minority
interest  position and illiquidity of the Class A Common Stock) of the Company's
Class A Common Stock on the date of grant.  In fiscal 2002,  the estimated  fair
value was  based  upon an  independent  valuation  of the  Class A Common  Stock
performed during fiscal 2002.

                                       49
<PAGE>

    A summary of the  Company's  stock-based  compensation  activity  related to
stock  options for each of the plans for the three years ended March 31, 2003 is
as follows:
<TABLE>
<CAPTION>
                                                       Year Ended March 31,
                                          2003                2002               2001
                                    ------------------ ------------------ ------------------
                                             Weighted-           Weighted-          Weighted-
                                             Average             Average            Average
                                             Exercise            Exercise           Exercise
                                    Number    Price     Number    Price    Number    Price
                                    -------- --------- --------- -------- --------- --------
<S>                                  <C>      <C>        <C>      <C>        <C>     <C>
1998 Performance Stock
Option Plan:
   Outstanding - beginning of year   40,771   $ 52.47    22,530   $52.47     9,530   $52.47
   Granted                           13,825    107.39    18,241    52.47    13,000    52.47
   Expired/terminated                  (825)   (76.80)        -        -         -        -
   Exercised                           (875)   (60.12)        -        -         -        -
                                    -------- --------- --------- -------- --------- --------
   Outstanding - end of year         52,896   $ 66.32    40,771   $52.47    22,530   $52.47
                                    ======== ========= ========= ======== ========= ========

1998 Stock Option Plan:
   Outstanding - beginning of year   27,094   $ 52.47    28,094   $52.47    24,694   $52.47
   Granted                            2,135    106.00         -        -     3,400    52.47
   Expired/terminated                     -         -    (1,000)  (52.47)        -        -
   Exercised                              -         -         -        -         -        -
                                    -------- --------- --------- -------- --------- --------
   Outstanding - end of year         29,229   $ 56.38    27,094   $52.47    28,094   $52.47
                                    ======== ========= ========= ======== ========= ========


                                     1998 Performance    1998 Stock Option
                                     Stock Option Plan         Plan
                                    ------------------  ------------------
                                              Weighted-           Weighted-
                                             Average             Average
                                             Remaining           Remaining
                                             Contractual        Contractual Exercise
                                    Number   Life (Yrs)  Number  Life (Yrs)  Price
                                    -------- --------- --------- ---------  ---------
Outstanding - March 31, 2003:
  Exercise price of $52.47           39,571       7.4    27,094      6.2    $ 52.47
  Exercise price of $106             12,500       9.3     2,135      9.3     106.00
  Exercise price of $129.30             825       9.8         -        -     129.30
                                    -------- --------- --------- --------
  Weighted-average                   52,896       7.9    29,229      6.4
                                    ======== ========= ========= ========

Exercisable - March 31, 2003:
  Exercise price of $52.47           27,652       7.1    26,294      6.2    $ 52.47
  Exercise price of $106              3,127       9.3       534      9.3     106.00
  Exercise price of $129.30             206       9.8         -        -     129.30
                                    -------- --------- --------- --------
  Weighted-average                   30,985       7.3    26,828      6.2
                                    ======== ========= ========= ========

Outstanding as of March 31:
  2002                               40,771       8.4    27,094      7.2    $ 52.47
  2001                               22,530       8.7    28,094      8.2      52.47

Exercisable as of March 31:
  2002                               20,592       7.8    22,596      7.1    $ 52.47
  2001                               10,398       8.2    16,472      8.0      52.47
</TABLE>


                                       50
<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  grant-date  fair value of options  granted
under the 1998  Performance  Stock Option Plan in fiscals 2003,  2002,  and 2001
would  have  been  $14.35,  $2.83,  and  $7.37  per  option,  respectively.  The
weighted-average  grant-date  fair value of options granted under the 1998 Stock
Option  Plan in  fiscals  2003 and 2001  would  have been  $14.51  and $7.68 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      Year Ended       Year Ended
                           March 31, 2003  March 31, 2002   March 31, 2001
                           --------------  --------------   --------------

    Risk-free interest rate       3.68%          3.71%            6.26%
    Dividend yield                   -              -                -
    Expected volatility           1.00%          1.00%            1.00%
    Expected life (years)           4.0            1.5              3.0


O.  SEGMENT 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:  Textbook  Division,  Bookstore  Division and  Complementary  Services
Division.  The  Textbook  Division  segment  consists  primarily of selling used
textbooks  to college  bookstores,  buying  them back from  students  or college
bookstores  at the end of each  college  semester  and  then  reselling  them to
college  bookstores.  The Bookstore  Division segment  encompasses the operating
activities of the Company's 109 college  bookstores as of March 31, 2003 located
on or adjacent to college campuses.  The Complementary Services Division segment
includes  book-related  services such as distance education materials,  computer
hardware and software, and a centralized buying service.

    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 primarily  accounts for intersegment sales as if the sales were to third
parties (at current market prices).  Assets  (excluding  inventories and certain
cash and cash equivalents, receivables, property and equipment, intangibles, and
other  assets),  net interest  expense and taxes are not  allocated  between the
Company's  segments;  instead,  such  balances are  accounted for in a corporate
administrative division.


                                       51
<PAGE>

    The following table provides  selected  information about profit or loss and
assets on a segment basis for the three years ended March 31, 2003.
<TABLE>
<CAPTION>

                                                                Complementary
                                      Textbook      Bookstore      Services
                                      Division       Division      Division       Total
                                    ------------  -------------- ------------ -------------
<S>                                <C>            <C>           <C>          <C>
Year ended March 31, 2003:
  External customer revenues       $ 111,365,802  $ 216,026,871 $ 43,117,176 $ 370,509,849
  Intersegment revenues               21,440,901        916,262      887,680    23,244,843
  Depreciation and amortization
   expense                               671,628      2,141,544      646,287     3,459,459
  Earnings Before Interest, Taxes,
   Depreciation, and Amortization
   (EBITDA)                           33,915,223     26,992,497    2,041,093    62,948,813
  Total assets                        49,444,007     67,572,172   13,852,133   130,868,312

Year ended March 31, 2002:
  External customer revenues       $ 101,596,353  $ 200,850,901 $ 36,469,155 $ 338,916,409
  Intersegment revenues               21,297,428        548,747    1,623,936    23,470,111
  Depreciation and amortization
   expense                               462,448      2,241,941      633,863     3,338,252
  Earnings Before Interest, Taxes,
  Depreciation, and Amortization
   (EBITDA)                           31,290,952     22,399,279      696,335    54,386,566
  Total assets                        51,431,071     67,387,725   13,720,897   132,539,693

Year ended March 31, 2001:
  External customer revenues       $  93,922,712  $ 182,479,980 $ 25,266,161 $ 301,668,853
  Intersegment revenues               19,084,092        376,020    1,381,290    20,841,402
  Depreciation and amortization
   expense                               509,541      9,577,941    1,489,371    11,576,853
  Earnings Before Interest, Taxes,
  Depreciation and Amortization
   (EBITDA)                           27,534,524     18,636,044       73,248    46,243,816
  Total assets                        46,879,332     60,818,814    9,680,805   117,378,951
</TABLE>


                                       52
<PAGE>

    The following  table  reconciles  segment  information  presented above with
consolidated  information as presented in the consolidated  financial statements
for the three years ended March 31, 2003.

                                               Year Ended March 31,
                                        2003            2002         2001
                                    ------------- -------------- ------------
Revenues:
  Total for reportable segments     $ 393,754,692 $ 362,386,520 $ 322,510,255
  Elimination of intersegment
   revenues                           (23,244,843)  (23,470,111)  (20,841,402)
                                    ------------- ------------- -------------
    Consolidated total              $ 370,509,849 $ 338,916,409 $ 301,668,853
                                    ============= ============= =============

Depreciation and
Amortization Expense:
  Total for reportable segments     $   3,459,459  $  3,338,252  $ 11,576,853
  Corporate administration                172,541       253,450     1,825,048
                                    ------------- ------------- -------------
    Consolidated total              $   3,632,000  $  3,591,702  $ 13,401,901
                                    ============= ============= =============

Income Before Income Taxes:
  Total EBITDA for
   reportable segments               $ 62,948,813  $ 54,386,566  $ 46,243,816
  Corporate administrative costs       (7,318,023)   (7,316,701)   (5,774,175)
                                    ------------- ------------- -------------
                                       55,630,790    47,069,865    40,469,641
  Depreciation and amortization        (3,632,000)   (3,591,702)  (13,401,901)
                                    ------------- ------------- -------------
    Consolidated income from
     operations                        51,998,790    43,478,163    27,067,740
  Interest and other expense, net     (21,987,697)  (24,369,275)  (23,392,690)
                                    ------------- ------------- -------------
    Consolidated income before
      income taxes                   $ 30,011,093  $ 19,108,888  $  3,675,050
                                    ============= ============= =============

Total Assets:
  Total for reportable segments      $130,868,312  $132,539,693  $117,378,951
  Assets not allocated to segments:
    Cash and cash equivalents          34,276,049     6,798,602         1,170
    Receivables                        13,967,352    12,130,650    15,389,112
    Recoverable income taxes                    -             -       706,408
    Deferred income taxes               3,861,932     3,557,325     1,862,166
    Property and equipment, net           534,598       507,927       473,845
    Goodwill                           16,770,574    16,770,574    16,770,574
    Debt issue costs, net               6,055,751     7,642,465     9,601,753
    Other assets                        3,241,143     4,591,241     5,115,312
    Other                                 803,306       494,217       401,233
                                    ------------- ------------- -------------
     Consolidated total              $210,379,017  $185,032,694  $167,700,524
                                    ============= ============= =============

        EBITDA is defined as earnings before interest, taxes, depreciation,  and
    amortization. As the Company is highly-leveraged and as the Company's equity
    is not  publicly-traded,  management  believes  that  EBITDA  is  useful  in
    measuring its liquidity and provides additional  information for determining
    its  ability to meet debt  service  requirements.  The  Senior  Subordinated
    Notes, Senior Discount  Debentures,  and Senior Credit Facility also utilize
    EBITDA,  as defined in those agreements,  for certain  financial  covenants.
    EBITDA does not represent and should not be considered as an  alternative to
    net cash  flows  from  operating  activities  as  determined  by  accounting
    principles  generally  accepted in the United States of America,  and EBITDA
    does not necessarily indicate whether cash flows will be sufficient for cash
    requirements.   Items  excluded  from  EBITDA,  such  as  interest,   taxes,
    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
    registrants.



                                       53
<PAGE>

       The following  presentation  reconciles  EBITDA with net cash flows from
    operating  activities  as presented in the  Consolidated  Statements of Cash
    Flows:
<TABLE>
<CAPTION>

                                                    Year Ended March 31,
                                             2003          2002          2001
                                         ------------- ------------- -------------
<S>                                       <C>           <C>           <C>
EBITDA                                    $55,630,790   $47,069,865   $40,469,641

Adjustments to reconcile EBITDA
to net cash flows from operating
activities:

  Interest income                             360,448       399,573       615,430
  Provision for losses on
    accounts receivable                       451,578     1,629,704       434,070
  Cash paid for interest                  (13,549,099)  (15,224,920)  (16,000,970)
  Cash paid for income taxes              (14,533,352)   (4,062,737)   (6,018,273)
  (Gain) Loss on disposal of assets            35,428      (482,810)       59,627
  Changes in operating assets and
   liabilities, net of effect of
   acquisitions/disposals (1)               8,935,820     1,709,245   (10,720,798)
                                         ------------- ------------- -------------
Net Cash Flows from Operating Activities  $37,331,613   $31,037,920   $ 8,838,727
                                         ============= ============= =============
</TABLE>

        (1)  Changes  in  operating  assets and  liabilities,  net  of effect of
        acquisitions/disposals   includes   the  changes  in  the   balances  of
        receivables,  inventories,  prepaid  expenses  and other  assets,  other
        assets,  accounts payable,  accrued employee  compensation and benefits,
        accrued  incentives,  accrued  expenses,  deferred  revenue,  and  other
        long-term liabilities.

    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.

P.  EARNINGS PER SHARE

    Basic  earnings per share data are based on the  weighted-average  number of
common shares outstanding during the period. Diluted earnings per share data are
based on the  weighted-average  number  of  common  shares  outstanding  and the
dilutive effect of potential common shares including stock options,  if any. For
the  purpose of  calculating  basic and  diluted  earnings  per share,  weighted
average common shares outstanding were as follows:
<TABLE>
<CAPTION>

                                                             Year Ended March 31,
                                                         2003        2002        2001
                                                    ------------- ----------- -----------
<S>                                                    <C>         <C>         <C>
Basic Earnings Per Share:
  Weighted-average common shares outstanding           1,263,457   1,263,256   1,260,314

Diluted Earnings Per Share:
  Weighted-average common shares outstanding           1,281,262   1,263,256   1,263,546
  Incremental shares attributable to stock options        17,805           -       3,232
  Stock options outstanding                               82,125      67,865      50,624
</TABLE>

    Stock  options  outstanding  at March  31,  2002 had no  impact  on  diluted
earnings  per share as the  exercise  price of such options was greater than the
average  estimated  fair value  (including a discount for the holder's  minority
interest  position and  illiquidity  of the Class A Common Stock) of the Class A
Common Stock  underlying  the options as of March 31, 2002.  The estimated  fair
value as of March 31, 2002 was based upon an independent  valuation of the Class
A Common Stock performed during fiscal 2002.


                                       54
<PAGE>

Q.  RELATED PARTY TRANSACTIONS

       In fiscal  2001,  NBC  entered  into  several  agreements  related to its
WebPRISM and CampusHub  E-commerce  software  capabilities  with a newly created
entity,  TheCampusHub.com,  Inc.,  which is  partially  owned  by the  Company's
majority  owner.  Such  agreements  included  an  equity  option  agreement,   a
management services agreement, and a technology sale and license agreement.

    The equity option  agreement  provides NBC the opportunity to acquire 25% of
the initial common shares  outstanding of  TheCampusHub.com,  Inc. The option is
being  accounted for as a cost method  investment in accordance with APB Opinion
No. 18, THE EQUITY METHOD OF ACCOUNTING  FOR  INVESTMENTS  IN COMMON STOCK.  The
management  services  agreement,  which was extended for one year and expires on
May 10, 2004,  reimburses  NBC for certain  direct  costs  incurred on behalf of
TheCampusHub.com, Inc. Prior to its amendment as described below, the management
service agreement also required  TheCampusHub.com,  Inc. to pay NBC $0.5 million
per year for certain shared management and administrative support. Complementary
Services  Division  revenue  resulting from the management  services  agreement,
including  as  amended,  is  recognized  as  the  services  are  performed.  The
technology sale and license agreement provides for NBC to license its E-commerce
software  capabilities  to  TheCampusHub.com,  Inc.  Prior to its  amendment  as
described   below,   the  technology   sale  and  license   agreement   required
TheCampusHub.com,  Inc to pay NBC $0.5  million  per year over a period of three
years. The technology sale and license agreement also provides TheCampusHub.com,
Inc. with an option to purchase such software  capabilities from NBC during that
three year period and was extended for one year,  expiring on May 10, 2004.  The
license fees were recognized as Complementary Services Division revenue over the
term of the  agreement.  For the years ended  March 31,  2003,  2002,  and 2001,
revenues attributable to the management services and technology sale and license
agreements totaled $0.3 million,  $1.0 million, and $0.9 million,  respectively,
and  reimbursable  direct  costs  incurred on behalf of  TheCampusHub.com,  Inc.
totaled $0.6 million, $0.8 million, and $0.9 million, respectively.

    Revenues  attributable  to the management  services and technology  sale and
license  agreements were recognized in fiscal 2002 under the anticipation  that,
if  necessary,  TheCampusHub.com,   Inc.  would  make  a  capital  call  to  its
shareholders to provide the funding  necessary to meet its obligations under the
aforementioned agreements.  TheCampusHub.com,  Inc. reached break-even on a cash
flow basis,  excluding amounts under the management services and technology sale
and license  agreements,  during fiscal 2002. While it remains a viable business
and is funding its own operations,  it was not generating sufficient excess cash
flow to  fund  its  obligations  under  the  aforementioned  agreements  and the
remaining capital available from its shareholders was reserved to fund strategic
development opportunities and, if required,  ongoing operations. As a result, on
March 31, 2002 NBC  established a reserve of  approximately  $1.0 million on net
amounts due from TheCampusHub.com,  Inc. and ultimately wrote-off  approximately
$1.0  million of net  amounts  due during  fiscal  2003.  Net  amounts  due from
TheCampusHub.com,  Inc. at March 31, 2003 and 2002 totaled $0.1 million and $0.2
million,  respectively.  Effective  April 1, 2002, the  management  services and
technology  sale and license  agreements  were amended,  eliminating  the annual
licensing fee and reducing the annual management services fee for certain shared
management and administrative  support to $0.3 million. NBC continues to benefit
from its relationship with  TheCampusHub.com,  Inc., as the technology developed
further enhances the  product/service  offering of NBC to its Textbook  Division
customers.

    During  fiscal 2003,  NBC's  former Vice  President  of  Administration  and
Secretary exercised vested options to purchase 750 shares of the Company's Class
A Common Stock under the 1998 Performance Stock Option Plan at an exercise price
of $52.47 per share ("Founder's  Price") and 125 shares of the Company's Class A
Common Stock under the 1998  Performance  Stock Option Plan at an exercise price
of $106 per share. This transaction,  which did not involve any public offering,
was exempt  from  registration  under the  Securities  Act of 1933  pursuant  to
Section 4(2). During fiscal 2002, the Company issued 2,621 shares of its Class A
Common Stock to NBC's Senior Vice  President  of the  Bookstore  Division at the
Founder's  Price of $52.47  per share,  in  exchange  for  $13,752 in cash and a
promissory note in the principal amount of $123,765 maturing  January,  2009 and
bearing interest at 5.25% per year. This transaction,  which did not involve any
public offering,  was exempt from registration  under the Securities Act of 1933
pursuant to Section 4(2).  During fiscal 2001,  the Company issued 12,237 shares


                                       55
<PAGE>

of its Class A Common Stock to certain NBC  employees.  This issuance was exempt
from  registration  under the  Securities  Act of 1933, as amended,  pursuant to
Section 3(b) thereof and Rule 505 of Regulation D promulgated  thereunder.  Such
shares  were issued at the  Founder's  Price of $52.47 per share,  resulting  in
total  proceeds of $642,039.  Proceeds  from these  issuances  were utilized for
general operating activities.


       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, 2003.



                                       56
<PAGE>

                                    PART III

          ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

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

         NAME           AGE           POSITION
         ----           ---           --------
   Robert B. Haas       55   Chairman and Director
   Douglas D. Wheat     52   Director
   Wyche H. Walton      37   Director
   Todd D. Robichaux    38   Director
   Michael F. Cronin    49   Director
   Mark L. Bono         43   Director
   Mark W. Oppegard     53   President/Chief Executive Officer, Secretary and
                             Director
   Alan G. Siemek       42   Vice President and Treasurer

   Barry S. Major       46   Chief Operating Officer, NBC
   William H. Allen     60   Senior Vice President of Textbook Division, NBC
   Robert A. Rupe       55   Senior Vice President of Bookstore Division, NBC
   Michael J. Kelly     45   Senior Vice President of Distance
                             Learning/Marketing Services and Other Complementary
                             Services, NBC
   Thomas A. Hoff       55   Vice President of Retail Development, NBC
   Larry R. Rempe       55   Vice President of Information Systems, NBC
   Kenneth F. Jirovsky  59   Vice President of Development, NBC
   Cynthia L. Morris    46   Vice President of Administration and Secretary, NBC

   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 and NBC upon
the consummation of the Recapitalization. Mr. Haas has also served as a Director
of  TheCampusHub.com,  Inc.  since  its  inception  in 2000.  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 & Partners,  L.P. since
1992 (a private  investment firm  specializing in leveraged  acquisitions).  Mr.
Haas is the Chairman of the Board of Playtex Products, Inc. (a consumer products
company) and AMN Healthcare  Services,  Inc. (a provider of staffing services to
the healthcare field).

    DOUGLAS  D.  WHEAT  became  a  Director  of the  Company  and NBC  upon  the
consummation of the Recapitalization. Mr. Wheat has also served as a Director of
TheCampusHub.com, Inc. since its inception in 2000. Mr. Wheat has been President
of Haas Wheat & Partners, L.P. 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 AMN Healthcare Services, Inc. and Playtex Products, Inc.

    WYCHE  H.  WALTON  became  a  Director  of the  Company  and  NBC  upon  the
consummation of the Weston  Presidio  Transaction in fiscal 2003. Mr. Walton has
been Senior Vice President of Haas Wheat & Partners,  L.P. (a private investment
firm specializing in leveraged transactions) since 1995. Previously,  Mr. Walton
was a Vice President of McGarr Capital  Management (a private  investment  firm)
from 1994 to 1995.  Mr.  Walton also  currently  serves as a director of Playtex
Products, Inc.

    TODD D.  ROBICHAUX  became  a  Director  of the  Company  and NBC  upon  the
consummation  of the Weston Presidio  Transaction in fiscal 2003. Mr.  Robichaux
has been Senior Vice  President of Haas Wheat & Partners,  L.P.  since 1998; and
with Wells Fargo Bank from 1988 to 1998 where he most recently  served as a vice
president of structured finance.

                                       57
<PAGE>

    MICHAEL  F.  CRONIN  became  a  Director  of the  Company  and NBC  upon the
consummation  of the Weston  Presidio  Transaction  in fiscal 2003.  Mr.  Cronin
co-founded  Weston  Presidio,  a private  equity firm, in 1991 and is a managing
member of the general  partners of the Weston Funds. Mr. Cronin also serves as a
Director of Tekni-Plex,  Inc. and Tweeter Home Entertainment,  Inc. as well as a
number of the Weston Funds' portfolio companies.

    MARK L. BONO became a Director of the Company and NBC upon the  consummation
of the Weston  Presidio  Transaction  in fiscal  2003.  Mr. Bono  joined  Weston
Presidio  in 1999 and is a member of the general  partners of the Weston  Funds.
Prior to 1999,  Mr.  Bono  served in various  positions  at Tucker  Anthony,  an
investment banking firm,  including Managing Director and Co-Head of Mergers and
Acquisitions. Mr. Bono also serves as a Director of Trimark Sportswear Group and
Herald Media.

    MARK W. OPPEGARD has served in the college  bookstore  industry for 33 years
(all of which have been with NBC) and became President/Chief  Executive Officer,
Secretary and a Director of the Company and Chief Executive  Officer of NBC upon
consummation of the  Recapitalization  on February 13, 1998.  Additionally,  Mr.
Oppegard  has served as  President  of NBC since  1992 and as a Director  of NBC
since  1995.  Prior  to  the  Recapitalization,  Mr.  Oppegard  served  as  Vice
President,  Secretary, Assistant Treasurer and a Director of the Company between
1995 and 1998.  Prior to 1992, Mr.  Oppegard  served in a series of positions at
NBC, including Vice President of the Bookstore  Division.  Mr. Oppegard has also
served as Chairman and a Director of  TheCampusHub.com,  Inc.  since May,  2000,
having  previously  served as the  President  and  Chief  Executive  Officer  of
TheCampusHub.com, Inc. since its inception in February, 2000.

    ALAN G. SIEMEK was named Senior Vice President of Finance and Administration
of NBC in  April,  2001.  Mr.  Siemek  has also  served  as Vice  President  and
Treasurer of the Company and Chief  Financial  Officer,  Treasurer and Assistant
Secretary of NBC since July, 1999. Additionally,  Mr. Siemek has served as Chief
Financial Officer, Treasurer, and Secretary of TheCampusHub.com,  Inc. since its
inception in 2000. Prior to joining the Company,  Mr. Siemek served as Corporate
Controller at SITEL Corporation  (SITEL), a company listed on the New York Stock
Exchange  that  provides  outsourced  telephone  and  Internet-based  sales  and
customer service,  starting in 1997. Between 1994 and 1997, Mr. Siemek served in
the positions of Director and Manager of SEC Reporting and Risk  Management  for
MFS Communications,  a billion dollar  telecommunications firm. Prior to joining
MFS  Communications,  Mr.  Siemek spent eleven years in public  accounting  with
Coopers & Lybrand LLP in their Omaha and New York offices.

    BARRY S. MAJOR was named Chief  Operating  Officer of NBC in January,  1999.
Additionally,   Mr.   Major  has   served   as  Chief   Executive   Officer   of
TheCampusHub.com,  Inc.  since May,  2000,  having also served as  President  of
TheCampusHub.com,  Inc. from May, 2000 to November,  2000 and as Chief Operating
Officer of TheCampusHub.com,  Inc. from its inception in February,  2000 to May,
2000.  Prior to joining NBC, Mr.  Major served in various  executive  management
positions at SITEL.  Joining  SITEL 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 38 years
(of which 29 have been with NBC).  NBC named Mr. Allen the Senior Vice President
of the Textbook Division in April, 2001. Between 1994 and 2001, Mr. Allen served
as Vice President of Warehouse  Operations  for NBC.  Between 1974 and 1994, Mr.
Allen  served in a series  of  positions,  including  assistant  manager  of the
Textbook  Division.  Prior to joining NBC in 1974, Mr. Allen was employed by the
Missouri Store Company, a predecessor of MBS.

    ROBERT A. RUPE was named Senior Vice President of the Bookstore  Division of
NBC in April,  2001.  Prior to joining NBC and a one-year period in which he was
self-employed  as a  management  training  consultant,  Mr.  Rupe served as Vice
President of  Operations of Busybody,  Inc., a specialty  retailer with over 100
retail locations, from 1995 to 2000. Mr. Rupe has 33 years of retail experience,
including a variety of senior  management  positions at May  Department  Stores,
Marshall Field and Company, Phillips Van-Huesen and International Paper.

                                       58
<PAGE>

    MICHAEL   J.   KELLY  was  named   Senior   Vice   President   of   Distance
Learning/Marketing  Services and Other Complementary  Services of NBC in August,
2001,  having  previously  served as Vice  President of  E-commerce of NBC since
November,  1999.  Additionally,  Mr.  Kelly has  served as  President  and Chief
Operating Officer of TheCampusHub.com,  Inc. since November, 2000 and May, 2000,
respectively,  having  previously  served as Vice  President  of  E-commerce  of
TheCampusHub.com,  Inc. from its inception in February, 2000 to May, 2000. Prior
to joining NBC, Mr. Kelly served in various  executive  management  positions at
SITEL. Joining SITEL in 1995 as a Business Unit Vice President of Administration
and Finance,  Mr. Kelly was named a Business Unit President in 1997, assumed the
role of Chief Information  Officer for the North America Region in March,  1998,
and was named Chief Technology  Officer for Global  Operations in August,  1998.
Between 1981 and 1995,  Mr. Kelly served as Director of  Information  Technology
for Father Flanagan's Boys Home, a non-profit  organization offering services to
troubled children.

    THOMAS A. HOFF has served in the  college  bookstore  industry  for 16 years
(all of which  have  been  with  NBC) and was  named  Vice  President  of Retail
Development  for NBC in April,  2001.  Between 1992 and 2001, Mr. Hoff served as
Vice  President  of the  Bookstore  Division  for NBC.  Mr.  Hoff  served  as an
assistant to the Vice President of the Bookstore Division between 1987 and 1992.

    LARRY R. REMPE has served in the  college  bookstore  industry  for 17 years
(all of which  have been with NBC) and has been Vice  President  of  Information
Systems for NBC since 1986.  Between 1974 and 1986,  Mr. Rempe served in various
positions for Lincoln Industries, Inc. ("Lincoln"), a holding company that owned
NBC until 1995.

    KENNETH F.  JIROVSKY  has served in the college  bookstore  industry  for 42
years  (all of which  have  been  with  NBC) and was  named  Vice  President  of
Development for NBC in April,  2001.  Between 1986 and 2001, Mr. Jirovsky served
as Vice  President of Sales and  Marketing for NBC.  Prior to 1986 Mr.  Jirovsky
served in a series of  positions,  including  assistant  manager of the Textbook
Division.

    CYNTHIA L. MORRIS was named Vice President of  Administration  and Secretary
of NBC in January,  2003 after having served as the  Executive  Director and the
Director of Finance of  TheCampusHub.com,  Inc.  since November 2002 and January
2001, respectively.  Prior to joining TheCampusHub.com,  Inc., Ms. Morris served
as the  Director of Finance and  Accounting  of the Dental  Division of InfoCure
Inc., a national provider of practice  management  software  applications,  from
November  1999 to October  2000,  and as the  Corporate  Treasurer and Corporate
Controller of Cohesive Technology  Solutions,  Inc., a national computer service
integration and consulting  corporation,  from April 1997 to October 1999. Prior
to 1997, Ms. Morris was self-employed as a financial  consultant,  served as the
Controller  and  Treasurer of  HealthCare  Communications,  Inc., a developer of
office  management  software,  and also spent twelve years in public  accounting
with KPMG Peat Marwick LLP in their Lincoln, Nebraska office.


                        ITEM 11. EXECUTIVE COMPENSATION.

    The  following  tables  and  paragraphs   provide   information   concerning
compensation  paid by the  Company  for  the  last  three  fiscal  years  to its
President/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.

                                       59
<PAGE>

    The table  presented  below  summarizes  annual and long-term  compensation,
including stock compensation, to such persons for the last three fiscal years:
<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 - Chief
Executive Officer,
President, and
Director, NBC                 2003    $276,923     280,000        2,675          $ 2,573
                              2002     253,731     236,000        2,900            2,962
                              2001     246,731     138,000        3,050            4,928

Barry S. Major - Chief
Operatiing Officer, NBC       2003     247,077     250,000        2,500            2,477
                              2002     235,539     215,000        2,600            2,430
                              2001     219,231     118,000        2,650            2,120

Alan G. Siemek - Chief
Financial Officer, Senior
Vice President of Finance
and Administration, Treasuer,
and Assistant Secretary, NBC  2003     181,885     160,000        1,375            2 417
                              2002     173,923     120,000        2,100            2,430
                              2001     161,923      97,000        1,875            2,120

Michael J. Kelly - Senior
Vice President of Distance
Learning/Marketing Services
and Other
Complementary Services, NBC   2003     169,731     130,000        1,375            2,477
                              2002           -     120,000        1,150                -
                              2001       5,769           -          525                -

Robert A. Rupe - Senior
Vice President of
Bookstore Division, NBC       2003     142,750     146,500        1,250            2,813
                              2002     128,704     135,000        5,241            2,312
                              2001           -           -            -                -
</TABLE>

(1)     The fiscal  2003 stock  options  were  granted at an  exercise  price of
        $106/share,  while fiscal 2002 and 2001 stock options were granted at an
        exercise price of  $52.47/share.  The estimated fair market value of the
        Company's  Class A Common  Stock  underlying  the stock  options,  which
        includes a discount  for the  holder's  minority  interest  position and
        illiquidity  of the Class A Common Stock,  was less than or equal to the
        exercise price on the date of grant. The estimated fair market value for
        stock options  granted in fiscal 2003 was based upon the Weston Presidio
        Transaction  and the  estimated  fair  market  value for  stock  options
        granted in fiscal 2002 was based upon an  independent  valuation  of the
        Class A Common Stock performed during fiscal 2002.

(2)     Consists of Company  matching  contributions  to the NBC Retirement Plan
        and life  insurance  premiums  paid by the  Company  on the  executive's
        behalf.  For Mr.  Oppegard,  balances also include the dollar value,  if
        any,  of  above-market  amounts  earned on deferred  compensation.  Such
        amounts totaled $376 and $2,652 for fiscal 2002 and 2001, respectively.

                                       60
<PAGE>

    Presented below is information in tabular format regarding individual grants
of stock options to certain executive officers of the Company for the year ended
March 31, 2003:
<TABLE>
<CAPTION>

                   Options Granted During the Year Ended March 31, 2003

                                  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        2003      Per Share     Date (1)    Value (2)
------------------------------------  ------------  -----------  -----------  -----------  -----------
<S>                                        <C>         <C>        <C>           <C>       <C>

Mark W. Oppegard - Chief Executive
Officer, President, and Director, NBC      2,675       16.8%       $106.00     06/20/12      $38,814

Barry S. Major - Chief Operating
Officer, NBC                               2,500       15.7%        106.00     06/20/12       36,275

Alan G. Siemek - Chief Financial
Officer, Senior Vice President of
Finance and Adminstration,
Treasurer, and Assistant
Secretary, NBC                             1,375        8.6%        106.00     06/20/12       19,951

Michael J. Kelly - Senior Vice
President of  Distance Learning/
Marketing Services and
Other  Complementary Services, NBC         1,375        8.6%        106.00     06/20/12       19,951

Robert A. Rupe - Senior Vice
President of Boookstore Division, NBC      1,250        7.8%        106.00     06/20/12       18,138

</TABLE>

(1)     Twenty-five percent of the options granted were exercisable  immediately
        upon  granting on June 20, 2002,  with the  remaining  options  becoming
        exercisable in 25% increments over the subsequent three years.

(2)     Grant date present value was  determined  using a  Black-Scholes  option
        pricing model,  assuming a 3.75% risk-free  interest rate, 1.0% expected
        volatility, and an expected life of approximately 4.0 years.

                                       61
<PAGE>

   The following table provides  information  concerning each exercise of stock
options by certain executive officers of the Company during the year ended March
31, 2003 as well as the value of unexercised options as of March 31, 2003:
<TABLE>
<CAPTION>

                Aggregated Option Exercises During the Year Ended March 31, 2003
                            and Option Value as of March 31, 2003

                                                                    Number
                                                                 of Securities          Value of
                                                                  Underlying          Unexercised
                                                                  Unexercised         in-the-Money
                                                                  Options at           Options at
                                                                March 31, 2003     March 31, 2003 (1)
                                                                ----------------  ---------------------
                                         Shares
                                        Acquired      Value      Exercisable/          Exercisable/
               Name                   on Exercise   Realized     Unexercisable        Unexercisable
------------------------------------  ------------  ----------  ----------------  ---------------------
<S>                                       <C>       <C>           <C>               <C>
Mark W. Oppegard - Chief Executive
Officer, President, and Director, NBC         -      $    -        4,407/4,218      $  328,321/$241,143

Barry S. Major - Chief Operating
Officer, NBC                                  -      $    -       13,443/3,837       1,077,322/ 216,675

Alan G. Siemek - Chief Financial
Officer, Senior Vice President of
Finance and Adminstration,
Treasurer, and Assistant
Secretary, NBC                                -      $    -        9,153/2,550         737,915/ 155,524

Michael J. Kelly - Senior Vice
President of  Distance Learning/
Marketing Services and
Other  Complementary Services, NBC            -      $    -        6,554/1,737         523,140/  88,344

Robert A. Rupe - Senior Vice
President of Boookstore Division, NBC         -      $    -        2,934/3,557         225,683/ 243,761
</TABLE>

(1)     Represents  the excess of the March 31, 2003 estimated fair market value
        of the  Company's  Class A Common Stock  underlying  the stock  options,
        which includes a discount for the holder's  minority  interest  position
        and illiquidity of the Class A Common Stock,  over the  weighted-average
        exercise  price,  which ranged from  $54.48/share  to  $60.60/share  for
        exercisable  options and $66.57/share to $84.24/share for  unexercisable
        options.  The  estimated  fair  market  value was based  upon the Weston
        Presidio Transaction in fiscal 2003.

COMPENSATION OF DIRECTORS AND ADDITIONAL INFORMATION

   Directors  of the  Company  receive  no  compensation  for  services  but are
reimbursed for out-of-pocket  expenses.  Certain of the Company's Directors also
serve as Directors of TheCampusHub.com,  Inc., an entity that is partially owned
by the Company's majority owner.

EMPLOYMENT AGREEMENTS

   The Company has employment  agreements  with Mark W. Oppegard and eight other
executive officers of the Company. Such agreements (the "Employment Agreements")
with the aforementioned executive officers (each, an "Executive") provide for an
annual base salary as determined by the Board of Directors after considering the
recommendation of the chief executive officer, for incentive  compensation based
upon the  attainment of financial  objectives to be  established by the Board of


                                       62
<PAGE>

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,  $285,000 per annum; Mr. Major,  $254,000
per annum; Mr. Siemek,  $186,500 per annum;  Mr. Kelly,  $181,000 per annum; and
Mr. Rupe, $146,500 per annum. The Employment  Agreements provide that their term
will be  automatically  extended  from  year to  year,  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.

   Finally, the Employment Agreements provide that, prior to the consummation by
the Company 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 HWP) will be required, to
sell their shares  ratably with,  and on the same terms and  conditions  as, the
other selling shareholders.

                                       63
<PAGE>

          ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                   MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

    SECURITY  OWNERSHIP  OF  CERTAIN  BENEFICIAL  OWNERS  AND  MANAGEMENT  - The
information  in the following  table sets forth NBC  Acquisition  Corp.  Class A
Common Stock  beneficially  owned by each person who owns more than 5.0% of such
shares;  each  director;  each  executive  officer  named  in Item  11;  and all
directors and executive  officers of the Company treated as a group.  The shares
listed and percentages  calculated  thereon are based upon NBC Acquisition Corp.
Class A Common Stock  outstanding as of May 30, 2003 and NBC  Acquisition  Corp.
Class A Common Stock underlying  nonqualified stock options that are exercisable
within  sixty days,  pursuant to Rule 13d-3 of the  Securities  Exchange  Act of
1934. 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.

<TABLE>
<CAPTION>

                                                                 Amount and
                                                                 Nature of
                                                                 Beneficial     Percent of
        Title of Class/Name of Beneficial Owner                  Ownership (1)   Class (5)
------------------------------------------------------------   --------------- ------------
<S>                                                                  <C>         <C>
Class A Common Stock:
  Owning Greater Than 5% of Shares:
   HWH Capital Partners, L.P. (2)                                     534,117        42.2%
   HWH Cornhusker Partners, L.P. (3)                                  230,927        18.3%
   Weston Presidio Capital IV, L.P. (4)                               286,156        22.6%
   Weston Presidio Capital III, L.P. (4)                              120,291         9.5%
   WPC Entrepreneur Fund, L.P. (4)                                      5,935         0.5%
   WPC Entrepreneur Fund II, L.P. (4)                                   4,530         0.4%

  Ownership of Directors:
   Robert B. Haas (2) (3)                                             765,044        60.5%
   Douglas D. Wheat (2) (3)                                                 -            -
   Wyche H. Walton (2) (3)                                                  -            -
   Todd D. Robichaux (2)                                                    -            -
   Michael F. Cronin (4)                                              416,912        33.0%
   Mark L. Bono (4)                                                         -            -

  Ownership of Executive Officers Named in Item 11:
   Mark W. Oppegard                                                    20,254         1.6%
   Barry S. Major                                                      17,159         1.3%
   Alan G. Siemek                                                      10,893         0.9%
   Michael J. Kelly                                                     7,278         0.6%
   Robert A. Rupe                                                       4,052         0.3%

  Ownership of Directors and All Executive Officers as a Group      1,286,563        98.2%
</TABLE>

(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.  Such shares  include
        shares underlying  nonqualified  stock options  exercisable within sixty
        days,  as  follows:  Mr.  Oppegard - 5,076  shares;  Mr.  Major - 14,068
        shares;  Mr. Siemek - 9,497 shares; Mr. Kelly - 6,898 shares; Mr. Rupe -
        3,246 shares; and 45,704 shares for all directors and executive officers
        as a group.

(2)     The sole  general  partner of HWH  Capital  Partners,  L.P. 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  and
        officer of the corporation. Messrs. Walton and Robichaux are officers of
        the  corporation.  The  address of HWH  Capital  Partners,  L.P.  and of
        Messrs.  Haas, Wheat, Walton, and Robichaux is 300 Crescent Court, Suite
        1700, Dallas, Texas 75201.

                                       64
<PAGE>

(3)     The sole general partner of HWH Cornhusker  Partners,  L.P. 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  and
        officer of the corporation. Mr. Walton is an officer of the corporation.
        The address of HWH Cornhusker Partners, L.P. and of Messrs. Haas, Wheat,
        and Walton is 300 Crescent Court, Suite 1700, Dallas, Texas 75201.

(4)     The sole general  partner of Weston  Presidio  Capital IV, L.P.,  Weston
        Presidio  Capital  III,  L.P.,  WPC  Entrepreneur  Fund,  L.P.,  and WPC
        Entrepreneur  Fund II, L.P. (the "Weston  Presidio  Funds") is a limited
        partnership whose sole general partner is a limited liability company of
        which Mr. Cronin is a managing member and Mr. Bono is a member.  Messrs.
        Cronin and Bono disclaim beneficial  ownership of the shares held by the
        Weston  Presidio  Funds,  except  to  the  extent  of  their  respective
        pecuniary  interests therein.  The address of the Weston Presidio Funds,
        and Messrs. Cronin and Bono is 200 Clarendon Street, 50th Floor, Boston,
        Massachusetts 02116.

(5)     The  percentages  are  calculated  based  upon  1,264,546  shares of NBC
        Acquisition  Corp.  Class A Common Stock  outstanding as of May 30, 2003
        and shares  underlying  nonqualified  stock options  exercisable  within
        sixty days as detailed in footnote (1).

    SECURITIES  AUTHORIZED  FOR ISSUANCE UNDER EQUITY  COMPENSATION  PLANS - The
Company has two stock-based  compensation  plans  established to provide for the
granting of options to purchase Class A Common Stock.  Details regarding each of
the plans in effect are presented in the footnotes to the consolidated financial
statements  found  in Item  8,  Financial  Statements  and  Supplementary  Data.
Specific  information as of March 31, 2003  regarding  each of the plans,  which
were not subject to the approval by security  holders,  is also presented in the
following table.
                                      Number of       Weighted-      Number of
                                    Securities to      Average      Securities
                                    be Issued Upon     Exercise      Remaining
                                     Exercise of       Price of    Available for
                                     Outstanding     Outstanding      Future
                   Plan                Options         Options       Issuance
---------------------------------- ----------------- ------------ --------------

1998 Performance Stock Option Plan           52,896      $ 66.32              -

1998 Stock Option Plan                       29,229        56.38              -

                                   ----------------- ------------ --------------
  Total                                      82,125      $ 62.78              -
                                   ================= ============ ==============


            ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

    CERTAIN  BUSINESS  RELATIONSHIPS  - In fiscal 2001, NBC entered into several
agreements   related  to  its  WebPRISM  and   CampusHub   E-commerce   software
capabilities  with a newly  created  entity,  TheCampusHub.com,  Inc.,  which is
partially  owned by the Company's  majority owner.  Such agreements  included an
equity option agreement, a management services agreement,  and a technology sale
and license agreement.  The equity option agreement provides NBC the opportunity
to acquire 25% of the initial  common shares  outstanding  of  TheCampusHub.com,
Inc.  The  management  services  agreement,  which was extended for one year and
expires on May 10, 2004,  reimburses  NBC for certain  direct costs  incurred on
behalf of TheCampusHub.com,  Inc. Prior to its amendment as described below, the
management  service  agreement also required  TheCampusHub.com,  Inc. to pay NBC
$0.5 million per year for certain shared management and administrative  support.
The  technology  sale and  license  agreement  provides  for NBC to license  its
E-commerce  software  capabilities  to  TheCampusHub.com,   Inc.  Prior  to  its


                                       65
<PAGE>

amendment as described below, the technology sale and license agreement required
TheCampusHub.com,  Inc. to pay NBC $0.5  million per year over a period of three
years. The technology sale and license agreement also provides TheCampusHub.com,
Inc. with an option to purchase such software  capabilities from NBC during that
three year period and was extended for one year, expiring on May 10, 2004.

    For the year ended March 31, 2003,  revenues  attributable to the management
services and technology sale and license  agreements  totaled $0.3 million,  and
reimbursable direct costs incurred on behalf of  TheCampusHub.com,  Inc. totaled
$0.6 million. Additionally, Messrs. Haas, Wheat, and Oppegard serve as Directors
of  TheCampusHub.com,  Inc.  and  Messrs.  Major,  Siemek,  and  Kelly  serve as
executive  officers  of  TheCampusHub.com,  Inc. As of March 31,  2003,  Messrs.
Oppegard,  Major, Siemek, and Kelly have been granted 13,900, 13,900, 9,690, and
16,800 options,  respectively,  from TheCampusHub.com,  Inc. as compensation for
services provided to TheCampusHub.com,  Inc. since its inception. In total, such
options represent  approximately  3.9% of  TheCampusHub.com,  Inc.'s outstanding
shares and options at March 31, 2003.

    Revenues  attributable  to the management  services and technology  sale and
license  agreements were recognized in fiscal 2002 under the anticipation  that,
if  necessary,  TheCampusHub.com,   Inc.  would  make  a  capital  call  to  its
shareholders to provide the funding  necessary to meet its obligations under the
aforementioned agreements.  TheCampusHub.com,  Inc. reached break-even on a cash
flow basis,  excluding amounts under the management services and technology sale
and license  agreements,  during fiscal 2002. While it remains a viable business
and is funding its own operations,  it was not generating sufficient excess cash
flow to  fund  its  obligations  under  the  aforementioned  agreements  and the
remaining capital available from its shareholders was reserved to fund strategic
development opportunities and, if required,  ongoing operations. As a result, on
March 31, 2002 NBC  established a reserve of  approximately  $1.0 million on net
amounts due from TheCampusHub.com,  Inc. and ultimately wrote-off  approximately
$1.0  million of net  amounts  due during  fiscal  2003.  Net  amounts  due from
TheCampusHub.com,  Inc. at March 31, 2003 totaled $0.1 million.  Effective April
1, 2002, the management services and technology sale and license agreements were
amended, eliminating the annual licensing fee and reducing the annual management
services fee for certain shared  management and  administrative  support to $0.3
million.  NBC continues to benefit from its relationship with  TheCampusHub.com,
Inc., as the technology developed further enhances the product/service  offering
of NBC to its Textbook Division customers.

    INDEBTEDNESS  OF MANAGEMENT - As of March 31, 2003,  notes  receivable  from
stockholders and the associated interest  receivable totaled  approximately $0.3
million and $4,000, respectively. Approximately $35,000 of such notes originated
during the leveraged buyout of NBC 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 the  Company'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,  which were amended and restated
in July, 2002, mature in January, 2009 and bear interest at 5.25%.

    The  remaining  balance of such notes  originated  pursuant  to the terms of
employment agreements with NBC's Chief Operating Officer,  Barry S. Major; Chief
Financial   Officer,   Alan  G.  Siemek;   Senior  Vice  President  of  Distance
Learning/Marketing  Services and Other Complementary Services, Michael J. Kelly;
and Senior Vice President of the Bookstore Division, Robert A. Rupe. In January,
1999,  the Company  issued 4,765 shares of its Class A Common Stock to Mr. Major
at a price of $52.47 per share, in exchange for $25,000 in cash and a promissory
note in the principal amount of $225,000 bearing interest at 5.25% per year. The
largest aggregate amount outstanding under this note at any time during the year
ended  March 31,  2003 was  approximately  $270,000  and  totaled  approximately
$165,000 at March 31, 2003. In July,  1999,  the Company  issued 3,177 shares of
its  Class A Common  Stock to Mr.  Siemek  at a price of $52.47  per  share,  in
exchange for $16,688 in cash and a promissory  note in the  principal  amount of
$150,000  bearing  interest  at 5.25% per year.  The  largest  aggregate  amount


                                       66
<PAGE>

outstanding under this note at any time during the year ended March 31, 2003 was
approximately  $174,000 and totaled  approximately $74,000 at March 31, 2003. In
January,  2000,  the Company  issued 2,621 shares of its Class A Common Stock to
Mr. Kelly at a price of $52.47 per share,  in exchange for $13,752 in cash and a
promissory note in the principal  amount of $123,765  bearing  interest at 5.25%
per year. The largest  aggregate amount  outstanding under this note at any time
during the year ended  March 31,  2003 was  approximately  $142,000  and totaled
approximately  $20,000 at March 31, 2003.  In April,  2001,  the Company  issued
2,621  shares of its Class A Common  Stock to Mr.  Rupe at a price of $52.47 per
share,  in exchange for $13,752 in cash and a promissory  note in the  principal
amount of $123,765  bearing  interest at 5.25% per year.  The largest  aggregate
amount  outstanding  under this note at any time during the year ended March 31,
2003 was approximately  $132,000 and totaled  approximately $43,000 at March 31,
2003.  These notes were  amended and restated in July,  2002 and mature  between
January, 2009 and January, 2010.


                        ITEM 14. CONTROLS AND PROCEDURES.

    (A) EVALUATION OF DISCLOSURE  CONTROLS AND  PROCEDURES.  The Company's Chief
Executive  Officer and Treasurer (its principal  executive officer and principal
financial officer, respectively) have concluded, based on their evaluation as of
a date  within 90 days prior to the date of filing of this annual  report,  that
the Company's  disclosure  controls and  procedures are effective to ensure that
information  required to be disclosed by it in reports  filed or submitted by it
under the Securities Exchange Act of 1934, as amended,  is recorded,  processed,
summarized and reported within the time periods specified in the SEC's rules and
forms, and includes controls and procedures  designed to ensure that information
required to be disclosed by it in such reports is accumulated  and  communicated
to  the  Company's  management,   including  its  Chief  Executive  Officer  and
Treasurer,   as  appropriate  to  allow  timely  decisions   regarding  required
disclosure.

    (B) CHANGES IN INTERNAL CONTROLS.  There have been no significant changes in
the Company's  internal  controls or in other  factors that could  significantly
affect these controls  subsequent to the date of the Company's  Chief  Executive
Officer and Treasurer's evaluation.


                                       67
<PAGE>

                                     PART IV

   ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

    (A)  FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES.

        (1) Consolidated Financial Statements of NBC Acquisition Corp.

             Index to Consolidated Financial Statements.
             Independent Auditors' Report.
             Consolidated Balance Sheets as of March 31, 2003 and 2002.
             Consolidated Statements of Operations for the Years Ended
               March 31, 2003,  2002,  and 2001.
             Consolidated  Statements of  Stockholders' Deficit for the Years
               Ended March 31, 2003, 2002, and 2001.
             Consolidated Statements of Cash Flows for the Years Ended
               March 31, 2003, 2002, and 2001.
             Notes to Consolidated Financial Statements.

        (2) Financial Statement Schedules.

             Independent Auditors' Report on Schedules.
             Schedule I - Condensed Financial Information of
               NBC Acquisition Corp. (Parent Company Only).
             Schedule II - Valuation and Qualifying Accounts.

        (3) Management Contract and Compensatory Plan Arrangement Exhibits.

             Exhibits 10.9 through 10.28 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, 2003.

    (C) EXHIBITS.

        2.1     Agreement  for Purchase  and Sale of Stock,  dated as of May 26,
                1999  between and among  Nebraska  Book  Company,  Inc.,  Dennis
                Rother,   and  Larry  Rother,   filed  as  Exhibit  2.1  to  NBC
                Acquisition  Corp. Form 8-K, as amended,  dated June 4, 1999, is
                incorporated herein by reference.

        2.2     Agreement of Sale,  dated as of  September  30, 1999 between and
                among  Nebraska  Book  Company,   Inc.,  Michigan  College  Book
                Company,  Inc.,  Ned's  Berkeley Book Company,  Inc., Ned Shure,
                Fred  Shure,  and Jack  Barenfanger  filed as Exhibit 2.1 to NBC
                Acquisition Corp. Form 8-K, as amended, dated November 12, 1999,
                is incorporated herein by reference.

        2.3     Agreement of Sale, as amended,  dated as of May 11, 2001 between
                Nebraska Book Company, Inc. and University Co-operative Society,
                filed as Exhibit 2.1 to NBC Acquisition Corp. Form 8-K dated May
                11, 2001, is incorporated herein by reference.

        3.1     Certificate of  Incorporation,  as amended,  of NBC  Acquisition
                Corp.,   filed  as  Exhibit   3.1  to  NBC   Acquisition   Corp.
                Registration  Statement  on  Form  S-4,  as  amended  (File  No.
                333-48225), is incorporated herein by reference.

                                       68
<PAGE>

        3.2     By-laws of NBC  Acquisition  Corp.,  filed as Exhibit 3.2 to NBC
                Acquisition Corp. Registration Statement on Form S-4, as amended
                (File No. 333-48225), is incorporated herein by reference.

        3.3     Amendment,  dated  as of  August  2,  2002,  to  By-laws  of NBC
                Acquisition Corp., filed as Exhibit 3.2 to NBC Acquisition Corp.
                Form  10-Q  for  the  quarter   ended   December  31,  2002,  is
                incorporated herein by reference.

        4.1     Indenture  dated as of  February  13,  1998 by and  between  NBC
                Acquisition  Corp.  and United States Trust Company of New York,
                as  Trustee,  filed  as  Exhibit  4.1 to NBC  Acquisition  Corp.
                Registration  Statement  on  Form  S-4,  as  amended  (File  No.
                333-48225), is incorporated herein by reference.

        4.2     Exchange and Registration  Rights Agreement dated as of February
                13,  1998  by  and  between  NBC  Acquisition  Corp.  and  Chase
                Securities Inc.,  filed as Exhibit 4.2 to NBC Acquisition  Corp.
                Registration  Statement  on  Form  S-4,  as  amended  (File  No.
                333-48225), is incorporated herein by reference.

        4.3     Form of Initial Debenture of NBC Acquisition Corp.  (included in
                Exhibit  4.1  as  Exhibit  A),  filed  as  Exhibit  4.3  to  NBC
                Acquisition Corp. Registration Statement on Form S-4, as amended
                (File No. 333-48225), is incorporated herein by reference.

        4.4     Form of Exchange Debenture of NBC Acquisition Corp. (included in
                Exhibit  4.1  as  Exhibit  B),  filed  as  Exhibit  4.4  to  NBC
                Acquisition Corp. Registration Statement on Form S-4, as amended
                (File No. 333-48225), is incorporated herein by reference.

        4.5     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  4.5 to NBC  Acquisition  Corp.
                Registration  Statement  on  Form  S-4,  as  amended  (File  No.
                333-48225), is incorporated herein by reference.

        4.6     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 4.6 to NBC Acquisition  Corp.
                Registration  Statement  on  Form  S-4,  as  amended  (File  No.
                333-48225), is incorporated herein by reference.

        4.7     Form of Initial Note of Nebraska Book Company, Inc. (included in
                4.5 as Exhibit A), filed as Exhibit 4.7 to NBC Acquisition Corp.
                Registration  Statement  on  Form  S-4,  as  amended  (File  No.
                333-48225), is incorporated herein by reference.

        4.8     Form of Exchange Note of Nebraska Book Company,  Inc.  (included
                in 4.5 as Exhibit B),  filed as Exhibit  4.8 to NBC  Acquisition
                Corp.  Registration  Statement on Form S-4, as amended (File No.
                333-48225), is incorporated herein by reference.

        4.9     Stockholders Agreement,  dated as of July 11, 2002, by and among
                NBC  Acquisition   Corp.,  HWH  Capital   Partners,   L.P.,  HWH
                Cornhusker  Partners,  L.P.,  Weston Presidio Capital III, L.P.,
                Weston Presidio Capital IV, L.P., WPC  Entrepreneur  Fund, L.P.,
                WPC Entrepreneur Fund II, L.P., and the other stockholders party
                thereto, filed as Exhibit 4.1 to NBC Acquisition Corp. Form 10-Q
                for the quarter ended June 30, 2002, is  incorporated  herein by
                reference.

        4.10    Registration Rights Agreement, dated as of July 11, 2002, by and
                among HWH Capital Partners, L.P., HWH Cornhusker Partners, L.P.,
                Weston Presidio  Capital III, L.P.,  Weston Presidio Capital IV,
                L.P., WPC Entrepreneur  Fund,  L.P., WPC  Entrepreneur  Fund II,
                L.P.,  and NBC  Acquisition  Corp.,  filed as Exhibit 4.2 to NBC
                Acquisition Corp. Form 10-Q for the quarter ended June 30, 2002,
                is incorporated herein by reference.

                                       69
<PAGE>

        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 NBC Acquisition Corp.  Registration Statement
                on Form S-4, as amended (File No.  333-48225),  is  incorporated
                herein by reference.

        10.2    First  Amendment,  dated  as of May  21,  1999,  to  the  Credit
                Agreement,  dated as of February 13, 1998 among NBC  Acquisition
                Corp.,  Nebraska Book Company,  Inc., the Chase  Manhattan Bank,
                and certain other financial institutions,  filed as Exhibit 10.1
                to NBC  Acquisition  Corp.  Form 10-Q for the quarter ended June
                30, 1999, is incorporated herein by reference.

        10.3    Second Amendment and Waiver,  dated as of April 27, 2000, to the
                Credit  Agreement,  dated as of  February  13,  1998,  among NBC
                Acquisition  Corp.,  Nebraska  Book  Company,  Inc.,  the  Chase
                Manhattan Bank, and certain other financial institutions,  filed
                as  Exhibit  10.1 to NBC  Acquisition  Corp.  Form  10-Q for the
                quarter  ended  June  30,  2000,  is   incorporated   herein  by
                reference.

        10.4    Third  Amendment,  dated as of December 20, 2001,  to the Credit
                Agreement,  dated as of February 13, 1998, among NBC Acquisition
                Corp., Nebraska Book Company,  Inc., J.P. Morgan Chase Bank, and
                certain other financial  institutions,  filed as Exhibit 10.1 to
                NBC  Acquisition  Corp. Form 10-Q for the quarter ended December
                31, 2001, is incorporated herein by reference.

        10.5    Fourth  Amendment  and Waiver,  dated as of June 4, 2002, to and
                under the Credit Agreement, dated as of February 13, 1998, among
                NBC Acquisition  Corp.,  Nebraska Book Company,  Inc.,  JPMorgan
                Chase Bank, and certain other financial  institutions,  filed as
                Exhibit 10.1 to NBC Acquisition  Corp. Form 10-Q for the quarter
                ended June 30, 2002, is incorporated herein by reference.

        10.6    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  NBC   Acquisition   Corp.
                Registration  Statement  on  Form  S-4,  as  amended  (File  No.
                333-48225), is incorporated herein by reference.

        10.7    Purchase   Agreement   dated   February  10,  1998  between  NBC
                Acquisition  Corp. and Chase  Securities  Inc., filed as Exhibit
                10.3 to NBC  Acquisition  Corp.  Registration  Statement on Form
                S-4, as amended (File No. 333-48225),  is incorporated herein by
                reference.

        10.8    Purchase Agreement dated February 10, 1998 between Nebraska Book
                Company,  Inc. and Chase  Securities Inc., filed as Exhibit 10.4
                to NBC Acquisition Corp.  Registration Statement on Form S-4, as
                amended  (File  No.  333-48225),   is  incorporated   herein  by
                reference.

        10.9    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 10.5
                to NBC Acquisition Corp.  Registration Statement on Form S-4, as
                amended  (File  No.  333-48225),   is  incorporated   herein  by
                reference.

                                       70
<PAGE>

        10.10   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 NBC  Acquisition
                Corp.  Form 10-Q for the quarter  ended  December 31,  1998,  is
                incorporated herein by reference.

        10.11   Addendum  to  the  Memorandum  of  Understanding,  dated  as  of
                December 22, 1998 between Nebraska Book Company,  Inc. and Barry
                S. Major,  dated March 29, 2002,  filed as Exhibit  10.10 to NBC
                Acquisition  Corp.  Form 10-K for the year ended March 31, 2002,
                is incorporated herein by reference.

        10.12   Amended and Restated Secured  Promissory Note dated July 9, 2002
                between  NBC  Acquisition  Corp.  and Barry S.  Major,  filed as
                Exhibit 10.4 to NBC Acquisition  Corp. Form 10-Q for the quarter
                ended June 30, 2002, is incorporated herein by reference.

        10.13   Memorandum  of  Understanding,  dated as of July 1, 1999 between
                Nebraska Book  Company,  Inc. and Alan Siemek,  Chief  Financial
                Officer,  filed as Exhibit 10.1 to NBC  Acquisition  Corp.  Form
                10-Q for the quarter ended  September 30, 1999, is  incorporated
                herein by reference.

        10.14   Addendum to the Memorandum of Understanding, dated as of July 1,
                1999 between Nebraska Book Company,  Inc. and Alan Siemek, dated
                March 29, 2002, filed as Exhibit 10.12 to NBC Acquisition  Corp.
                Form 10-K for the year ended  March 31,  2002,  is  incorporated
                herein by reference.

        10.15   Amended and Restated Secured  Promissory Note dated July 9, 2002
                between NBC Acquisition Corp. and Alan Siemek,  filed as Exhibit
                10.5 to NBC  Acquisition  Corp.  Form 10-Q for the quarter ended
                June 30, 2002, is incorporated herein by reference.

        10.16   Memorandum  of  Understanding,  dated  as of  November  1,  1999
                between Nebraska Book Company,  Inc. and Michael J. Kelly,  Vice
                President   of   E-commerce,   filed  as  Exhibit  10.1  to  NBC
                Acquisition  Corp.  Form 10-Q for the quarter ended December 31,
                1999, is incorporated herein by reference.

        10.17   Amended and Restated Secured  Promissory Note dated July 9, 2002
                between NBC  Acquisition  Corp.  and Michael J. Kelly,  filed as
                Exhibit 10.6 to NBC Acquisition  Corp. Form 10-Q for the quarter
                ended June 30, 2002, is incorporated herein by reference.

        10.18   Memorandum of Understanding,  dated as of April 17, 2001 between
                Nebraska  Book  Company,  Inc.  and  Robert  Rupe,  Senior  Vice
                President of the  Bookstore  Division,  filed as Exhibit 10.1 to
                NBC  Acquisition  Corp. Form 10-Q for the quarter ended June 30,
                2001, is incorporated herein by reference.

        10.19   Amended and Restated Secured  Promissory Note dated July 9, 2002
                between NBC Acquisition  Corp. and Robert Rupe, filed as Exhibit
                10.7 to NBC  Acquisition  Corp.  Form 10-Q for the quarter ended
                June 30, 2002, is incorporated herein by reference.

        10.20   NBC  Acquisition  Corp. 1995 Stock Incentive Plan adopted August
                31,  1995,  filed  as  Exhibit  10.6  to NBC  Acquisition  Corp.
                Registration  Statement  on  Form  S-4,  as  amended  (File  No.
                333-48225), is incorporated herein by reference.

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

                                       71
<PAGE>

        10.22   First  Amendment,  dated  as  of  June  12,  2002,  to  the  NBC
                Acquisition  Corp.  1998  Performance  Stock Option Plan adopted
                June 30, 1998,  filed as Exhibit 10.2 to NBC  Acquisition  Corp.
                Form 10-Q for the quarter ended June 30, 2002,  is  incorporated
                herein by reference.

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

        10.24   First  Amendment,  dated  as  of  June  12,  2002,  to  the  NBC
                Acquisition  Corp. 1998 Stock Option Plan adopted June 30, 1998,
                filed as Exhibit 10.3 to NBC Acquisition Corp. Form 10-Q for the
                quarter  ended  June  30,  2002,  is   incorporated   herein  by
                reference.

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

        10.26   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 10.7
                to NBC Acquisition Corp.  Registration Statement on Form S-4, as
                amended  (File  No.  333-48225),   is  incorporated   herein  by
                reference.

        10.27   Amendment  of Form of  Deferred  Compensation  Agreement,  dated
                December 30, 2002, by and between  Nebraska  Book Company,  Inc.
                and each of Mark W. Oppegard, Larry R. Rempe and Thomas A. Hoff,
                filed as Exhibit 10.1 to NBC Acquisition Corp. Form 10-Q for the
                quarter  ended  December 31,  2002,  is  incorporated  herein by
                reference.

        10.28   NBC Acquisition Corp. 401(k) Savings Plan, filed as Exhibit 10.8
                to NBC Acquisition Corp.  Registration Statement on Form S-4, as
                amended  (File  No.  333-48225),   is  incorporated   herein  by
                reference.

        10.29   Merger Agreement dated January 6, 1998 by and between NBC Merger
                Corp.,  NBC  Acquisition  Corp. and certain  stockholders of NBC
                Acquisition  Corp.  named therein,  filed as Exhibit 10.9 to NBC
                Acquisition Corp. Registration Statement on Form S-4, as amended
                (File No. 333-48225), is incorporated herein by reference.

        10.30   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 10.10.1 to NBC Acquisition  Corp.
                Registration  Statement  on  Form  S-4,  as  amended  (File  No.
                333-48225), is incorporated herein by reference.

        10.31   First Amendment dated January 23, 1998 to the Collegiate  Stores
                Corporation   Agreement,   filed  as  Exhibit   10.10.2  to  NBC
                Acquisition Corp. Registration Statement on Form S-4, as amended
                (File No. 333-48225), is incorporated herein by reference.

        10.32   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 10.11 to NBC Acquisition Corp. Registration Statement on
                Form S-4,  as  amended  (File No.  333-48225),  is  incorporated
                herein by reference.

        10.33   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 NBC Acquisition  Corp.
                Registration  Statement  on  Form  S-4,  as  amended  (File  No.
                333-48225), is incorporated herein by reference.

                                       72
<PAGE>

        10.34   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 10.13 to NBC Acquisition Corp. Registration Statement on
                Form S-4,  as  amended  (File No.  333-48225),  is  incorporated
                herein by reference.

        10.35   Lease  Agreement  entered  into as of  September  1, 1986 by and
                between Odell Associates  Limited  Partnership and Nebraska Book
                Company,  Inc., filed as Exhibit 10.14 to NBC Acquisition  Corp.
                Registration  Statement  on  Form  S-4,  as  amended  (File  No.
                333-48225), is incorporated herein by reference.

        10.36   Lease  Agreement  made and entered  into October 12, 1988 by and
                between  Hogarth  Management  and Nebraska Book  Company,  Inc.,
                filed as Exhibit  10.15 to NBC  Acquisition  Corp.  Registration
                Statement  on Form S-4,  as  amended  (File No.  333-48225),  is
                incorporated herein by reference.

        10.37   Industrial  Real Estate Lease dated June 22, 1987 by and between
                Cyprus Land Company and Nebraska  Book Company,  Inc.,  filed as
                Exhibit 10.16 to NBC Acquisition Corp. Registration Statement on
                Form S-4,  as  amended  (File No.  333-48225),  is  incorporated
                herein by reference.

        12.     Statements regarding  computation of ratios, filed as Exhibit 12
                to NBC Acquisition Corp.  Registration Statement on Form S-4, as
                amended  (File  No.  333-48225),   is  incorporated   herein  by
                reference.

        21.     Subsidiaries,  filed  as  Exhibit  21 to NBC  Acquisition  Corp.
                Registration  Statement  on  Form  S-4,  as  amended  (File  No.
                333-48225), is incorporated herein by reference.

        99.1    Certification of  President/Chief  Executive Officer pursuant to
                18 U.S.C.  Section 1350,  as adopted  pursuant to Section 906 of
                the Sarbanes-Oxley Act of 2002.

        99.2    Certification  of Principal  Financial  and  Accounting  Officer
                pursuant  to 18 U.S.C.  Section  1350,  as adopted  pursuant  to
                Section 906 of the Sarbanes-Oxley Act of 2002.


    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  consolidated
financial statements included herein.

    The Company is not required to file reports with the Securities and Exchange
Commission  pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of
1934,  as amended,  but is filing this Annual Report on Form 10-K on a voluntary
basis.

                                       73
<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.

                                            NBC ACQUISITION CORP.


                                            /s/ Mark W. Oppegard
                                            ------------------------------------
                                            Mark W. Oppegard
                                            President/Chief Executive Officer,
                                            Secretary, and Director
                                            May 30, 2003

    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                       /s/  Wyche H. Walton
------------------------------------        ------------------------------------
Mark W. Oppegard                            Wyche H. Walton
President/Chief Executive Officer,          Director
Secretary,                                  May 30, 2003
and Director
May 30, 2003


/s/  Alan G. Siemek                         /s/  Todd D. Robichaux
------------------------------------        ------------------------------------
Alan G. Siemek                              Todd D. Robichaux
Vice President and Treasurer                Director
(Principal Financial and                    May 30, 2003
Accounting Officer)
May 30, 2003


/s/  Robert B. Haas                         /s/  Michael F. Cronin
------------------------------------        ------------------------------------
Robert B. Haas                              Michael F. Cronin
Chairman and Director                       Director
May 30, 2003                                May 30, 2003


/s/  Douglas D. Wheat                       /s/  Mark L. Bono
------------------------------------        ------------------------------------
Douglas D. Wheat                            Mark L. Bono
Director                                    Director
May 30, 2003                                May 30, 2003



                                       74
<PAGE>

                                 CERTIFICATIONS


I, Mark W. Oppegard, certify that:

1.  I have reviewed this annual report on Form 10-K of NBC Acquisition Corp.;

2.  Based on my  knowledge,  this  annual  report  does not  contain  any untrue
    statement of a material fact or omit to state a material  fact  necessary to
    make the  statements  made, in light of the  circumstances  under which such
    statements  were made, not misleading  with respect to the period covered by
    this annual report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
    information  included in this annual report,  fairly present in all material
    respects the financial  condition,  results of operations  and cash flows of
    the registrant as of, and for, the periods presented in this annual report;

4.  The  registrant's  other  certifying  officers  and  I are  responsible  for
    establishing and maintaining  disclosure controls and procedures (as defined
    in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

    a)  designed such disclosure controls and procedures to ensure that material
        information  relating  to the  registrant,  including  its  consolidated
        subsidiaries,  is made  known to us by  others  within  those  entities,
        particularly  during  the period in which  this  annual  report is being
        prepared;

    b)  evaluated the effectiveness of the registrant's  disclosure controls and
        procedures  as of a date within 90 days prior to the filing date of this
        annual report (the "Evaluation Date"); and

    c)  presented in this annual report our conclusions  about the effectiveness
        of the disclosure  controls and procedures based on our evaluation as of
        the Evaluation Date;

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

    a)  all  significant  deficiencies  in the design or  operation  of internal
        controls  which  could  adversely  affect  the  registrant's  ability to
        record, process, summarize and report financial data and have identified
        for the  registrant's  auditors  any  material  weaknesses  in  internal
        controls; and

    b)  any fraud,  whether or not material,  that involves  management or other
        employees  who  have a  significant  role in the  registrant's  internal
        controls; and

6.  The  registrant's  other  certifying  officers and I have  indicated in this
    annual report whether there were significant changes in internal controls or
    in  other  factors  that  could   significantly   affect  internal  controls
    subsequent  to the  date  of  our  most  recent  evaluation,  including  any
    corrective  actions  with regard to  significant  deficiencies  and material
    weaknesses.



May 30, 2003
                                             /s/ Mark W. Oppegard
                                             -----------------------------------
                                             Mark W. Oppegard
                                             President/Chief Executive Officer,
                                             Secretary and Director



                                       75
<PAGE>

I, Alan G. Siemek, certify that:

1.  I have reviewed this annual report on Form 10-K of NBC Acquisition Corp.;

2.  Based on my  knowledge,  this  annual  report  does not  contain  any untrue
    statement of a material fact or omit to state a material  fact  necessary to
    make the  statements  made, in light of the  circumstances  under which such
    statements  were made, not misleading  with respect to the period covered by
    this annual report;

3.  Based  on my  knowledge,  the  financial  statements,  and  other  financial
    information  included in this annual report,  fairly present in all material
    respects the financial  condition,  results of operations  and cash flows of
    the registrant as of, and for, the periods presented in this annual report;

4.  The  registrant's  other  certifying  officers  and  I are  responsible  for
    establishing and maintaining  disclosure controls and procedures (as defined
    in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

    a)  designed such disclosure controls and procedures to ensure that material
        information  relating  to the  registrant,  including  its  consolidated
        subsidiaries,  is made  known to us by  others  within  those  entities,
        particularly  during  the period in which  this  annual  report is being
        prepared;

    b)  evaluated the effectiveness of the registrant's  disclosure controls and
        procedures  as of a date within 90 days prior to the filing date of this
        annual report (the "Evaluation Date"); and

    c)  presented in this annual report our conclusions  about the effectiveness
        of the disclosure  controls and procedures based on our evaluation as of
        the Evaluation Date;

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

    a)  all  significant  deficiencies  in the design or  operation  of internal
        controls  which  could  adversely  affect  the  registrant's  ability to
        record, process, summarize and report financial data and have identified
        for the  registrant's  auditors  any  material  weaknesses  in  internal
        controls; and

    b)  any fraud,  whether or not material,  that involves  management or other
        employees  who  have a  significant  role in the  registrant's  internal
        controls; and

6.  The  registrant's  other  certifying  officers and I have  indicated in this
    annual report whether there were significant changes in internal controls or
    in  other  factors  that  could   significantly   affect  internal  controls
    subsequent  to the  date  of  our  most  recent  evaluation,  including  any
    corrective  actions  with regard to  significant  deficiencies  and material
    weaknesses.



May 30, 2003
                                               /s/ Alan G. Siemek
                                               --------------------------------
                                               Alan G. Siemek
                                               Vice President and Treasurer
                                               (Principal Financial and
                                               Accounting Officer)


                                       76
<PAGE>

    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, 2003
has been, or will be, sent to security holders.



                                       77
<PAGE>

                          FINANCIAL STATEMENT SCHEDULES



INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
NBC Acquisition Corp.
Lincoln, Nebraska

    We have audited the  consolidated  financial  statements of NBC  Acquisition
Corp.  and  subsidiary  as of March 31,  2003 and 2002 and for each of the three
years in the period  ended March 31,  2003,  and have issued our report  thereon
dated May 27, 2003;  such report is included  elsewhere  in this Form 10-K.  Our
audits also included the financial  statement schedules listed in Item 14(a)(2).
These  financial  statement  schedules are the  responsibility  of the Company's
management.  Our responsibility is to express an opinion based on our audits. In
our opinion, such financial statement schedules,  when considered in relation to
the basic consolidated  financial statements taken as a whole, present fairly in
all material respects the information set forth therein.


/s/  Deloitte & Touche LLP

DELOITTE & TOUCHE LLP

Lincoln, Nebraska
May 27, 2003


                                       78
<PAGE>
NBC ACQUISITION CORP. (PARENT COMPANY ONLY)

SCHEDULE I - CONDENSED FINANCIAL INFORMATION
BALANCE SHEETS
-------------------------------------------------------------------------------

                                                           March 31,
                                                      2003           2002
                                                  -------------  --------------
ASSETS

OTHER ASSETS:
  Due from subsidiary (Note A)                    $ 12,371,846    $  9,594,899
  Investment in subsidiary (Note A)                 13,188,101               -
  Debt issue costs, net of amortization              1,913,335       2,239,123
                                                 --------------  --------------
                                                  $ 27,473,282    $ 11,834,022
                                                 ==============  ==============

LIABILITIES AND STOCKHOLDERS' DEFICIT

ACCRUED INTEREST                                  $    993,039    $          -

INVESTMENT IN SUBSIDIARY (Note A)                            -      10,586,028

SENIOR DISCOUNT DEBENTURES                          76,000,000      69,338,794

COMMITMENTS AND CONTINGENCIES (Note B)

STOCKHOLDERS' DEFICIT:
  Class A common stock, voting, authorized
  5,000,000 shares of $.01 par value;
  issued and outstanding 1,264,246 and
  1,263,371 shares at March 31, 2003 and
  2002, respectively                                    12,642          12,634

  Additional paid-in-capital                        65,381,476      65,304,884
  Notes receivable from stockholders                  (336,681)       (865,940)
  Accumulated deficit                             (114,158,563)   (131,937,811)
  Accumulated other comprehensive loss
  of subsidiary                                       (418,631)       (604,567)
                                                 --------------  --------------
    Total stockholders' deficit                    (49,519,757)    (68,090,800)
                                                 --------------  --------------
                                                  $ 27,473,282    $ 11,834,022
                                                 ==============  ==============


See notes to condensed financial statements.

                                       79
<PAGE>

 NBC ACQUISITION CORP. (PARENT COMPANY ONLY)

SCHEDULE I - CONDENSED FINANCIAL INFORMATION
STATEMENTS OF OPERATIONS
-----------------------------------------------------------------------------

                                                  Year Ended March 31,
                                           2003          2002        2001
                                       ------------ ------------ ------------

INTEREST EXPENSE                        $(7,980,033) $(7,219,087) $(6,521,383)

INCOME TAX BENEFIT                        2,752,947    2,538,084    2,450,624

EQUITY IN EARNINGS OF SUBSIDIARY         23,006,334   15,836,307    4,338,837
                                       ------------- ------------ ------------
NET INCOME                              $17,779,248  $11,155,304  $   268,078
                                       ============= ============ ============

EARNINGS PER SHARE:

  Basic                                 $     14.07  $      8.83  $      0.21
                                       ============= ============ ============
  Diluted                               $     13.88  $      8.83  $      0.21
                                       ============= ============ ============



See notes to condensed financial statements.


                                       80
<PAGE>
<TABLE>
<CAPTION>
NBC ACQUISITION CORP. (PARENT COMPANY ONLY)

SCHEDULE I - CONDENSED FINANCIAL INFORMATION
STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------------

                                                           Year Ended March 31,
                                                      2003        2002        2001
                                                  ----------- -----------  -----------
<S>                                                <C>         <C>          <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net cash flows from operating activities         $       -   $       -    $       -
                                                  ----------- -----------  -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from issuance of common stock             604,689      13,752      642,039
  Advances to subsidiary                            (604,689)    (13,752)    (642,039)
                                                  ----------- -----------  -----------
    Net cash flows from financing activities               -           -            -
                                                  ----------- -----------  -----------

NET INCREASE IN CASH AND CASH EQUIVALENTS                  -           -            -

CASH AND CASH EQUIVALENTS, Beginning of year               -           -            -
                                                  ----------- -----------  -----------

CASH AND CASH EQUIVALENTS, End of year             $       -   $       -    $       -
                                                  =========== ===========  ===========


SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:

  Notes receivable from stockholders recorded
  upon issuance of common stock                    $       -   $ 123,765    $       -

  Accumulated other comprehensive income (loss)
  associated with derivative financial instruments
  of subsidiary                                      185,936    (604,567)           -

See notes to condensed financial statements.
</TABLE>

                                       81
<PAGE>

NBC ACQUISITION CORP. (PARENT COMPANY ONLY)

SCHEDULE I - CONDENSED FINANCIAL INFORMATION
NOTES TO CONDENSED FINANCIAL STATEMENTS


A.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    DUE  FROM  SUBSIDIARY  - NBC  Acquisition  Corp.  (the  "Company")  files  a
consolidated  federal  income  tax  return  with  its  wholly-owned  subsidiary,
Nebraska Book  Company,  Inc.  ("NBC") and follows a policy of recording  income
taxes  equal to that which  would have been  incurred  had the  Company  filed a
separate  return.  NBC is responsible  for remitting tax payments and collecting
tax  refunds  for  the  consolidated  group.  The  amount  due  from  subsidiary
represents the cumulative tax savings  resulting from operating losses generated
by the Company from which NBC derives the benefit  through  reduced tax payments
on the consolidated return.

    INVESTMENT  IN SUBSIDIARY - The Company  accounts for its  investment in NBC
under the equity  method of  accounting.  Advances  to or from NBC are  included
within the investment in subsidiary.

B.  COMMITMENTS AND CONTINGENCIES

    The Company,  along with NBC's  wholly-owned  subsidiary  (Specialty  Books,
Inc.), has jointly and severally,  unconditionally  and irrevocably,  guaranteed
the prompt and  complete  payment and  performance  by NBC of NBC's  obligations
underlying the Senior Credit Facility.  Such guarantee remains in full force and
effect until all obligations underlying the Senior Credit Facility, which became
effective February 13, 1998 as part of the aforementioned  Recapitalization  and
matures at various  dates  through  March 31,  2006,  have been  satisfied.  The
maximum  potential  future amounts payable under the guarantee at March 31, 2003
totaled $30.5 million in principal  payments,  plus interest which is based,  in
part, on variable  rates and, in part, is fixed at 5.815% through July 31, 2003.
As this guarantee  represents a parent's guarantee of its subsidiary's debt to a
third party, such guarantee is not carried as a liability in the "Parent Company
Only" financial statements.


                                       82
<PAGE>
<TABLE>
<CAPTION>

NBC ACQUISITION CORP.

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, 2003
  Allowance for doubtful accounts    $ 1,429,803    $  451,578    $     -   $ (1,438,439)   $  442,942


YEAR ENDED MARCH 31, 2002
  Allowance for doubtful accounts        407,033     1,629,704          -       (606,934)    1,429,803


YEAR ENDED MARCH 31, 2001
  Allowance for doubtful accounts        175,899       434,070          -       (202,936)      407,033

</TABLE>

                                       83
<PAGE>

                                  EXHIBIT INDEX


        99.1    Certification of  President/Chief  Executive Officer pursuant to
                18 U.S.C.  Section 1350,  as adopted  pursuant to Section 906 of
                the Sarbanes-Oxley Act of 2002.

        99.2    Certification  of Principal  Financial  and  Accounting  Officer
                pursuant  to 18 U.S.C.  Section  1350,  as adopted  pursuant  to
                Section 906 of the Sarbanes-Oxley Act of 2002.


                                       84