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, 2000

                                       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. [X] YES [ ] 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]

    THERE ARE 11,436  SHARES OF THE  REGISTRANT'S  VOTING  STOCK  VALUED AT $0.6
MILLION HELD BY NON-AFFILIATES OF THE REGISTRANT.


    THERE WERE 1,260,750  SHARES OF CLASS A COMMON STOCK  OUTSTANDING AS OF JUNE
20, 2000.



                    DOCUMENTS INCORPORATED BY REFERENCE: NONE

                            Total Number of Pages: 66

                             Exhibit Index: PAGE 66


                                       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.......25
Item 8       Financial Statements and Supplementary Data......................26
Item 9       Changes in and Disagreements with Accountants on Accounting and
             Financial Disclosure.............................................46

PART III:

Item 10     Directors and Executive Officers of the Registrant................47
Item 11     Executive Compensation............................................49
Item 12     Security Ownership of Certain Beneficial Owners and Management....51
Item 13     Certain Relationships and Related Transactions....................52

PART IV:

Item 14     Exhibits, Financial Statement Schedules, and Reports on Form 8-K..54
Signatures....................................................................59
Supplemental Information to be Furnished......................................59
Financial Statement Schedule I - Condensed Financial Information
(Parent Company Only).........................................................60
Financial Statement Schedule II - Valuation and Qualifying Accounts...........65
Exhibit Index.................................................................66


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

    Concurrently with the consummation of the Merger,  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 HWH (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  which was completed on August 13,
1998.

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

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<PAGE>

GENERAL


    The Company is one of the largest  wholesale  distributors  of used  college
textbooks in North America,  offering over 100,000  textbook  titles and selling
more than 7.5 million  books  annually,  primarily  to  campuses  located in the
United States. In addition, as of June 20, 2000, the Company owns or manages 100
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 with a new strategy.  Under
this new strategy the Company  operates  bookstores on or near larger  campuses,
typically where the institution-owned college bookstore is contract-managed by a
competitor or where the Company does not have a significant  wholesale presence.
Today,  the  Company  services  the  college  bookstore   industry  through  its
wholesale, college bookstore and complementary services operations.

    WHOLESALE.  The Company is one of the largest wholesale distributors of used
college textbooks in North America.  Its wholesale  operations consist primarily
of selling used textbooks to college bookstores,  buying them back from students
or college bookstores at the end of each school semester and then reselling them
to college  bookstores.  The Company  purchases  used textbooks from and resells
them to college  bookstores at many of the nation's  largest  college  campuses,
including:  University  of Texas,  University  of Southern  California,  Indiana
University,  University  of Arizona,  Brigham  Young  University,  University of
Washington  and  University of Minnesota.  Historically,  because the demand for
used textbooks has consistently  outpaced supply, the Company's  wholesale sales
have been  determined  primarily by the amount of used  textbooks  that it could
purchase.   The  Company's   strong   relationships   with  the   management  of
independently-owned 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 wholesale  customers,  which lists over 41,000  textbook titles with such
details as author, new copy retail price and the Company's repurchase price.


    COLLEGE BOOKSTORES.  College bookstores are the primary outlets for sales of
new and used textbooks to students.  As of June 20, 2000,  the Company  operated
100  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
Tennessee  and  University  of Texas.  In addition to  generating  profits,  the
Company's  college  bookstore  operations  provide an  exclusive  source of used
textbooks for sale across the Company's wholesale distribution network.


    COMPLEMENTARY   SERVICES.   In  fiscal  1998,  the  Company   completed  two
acquisitions  representing  new  initiatives  for  it in the  college  bookstore
industry.  In  January  1998,  the  Company  acquired  Connect  2 One  (formerly
Collegiate  Stores  Corporation),  a  centralized  buying  service  for over 430
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.  With its acquisition of Specialty Books, Inc. ("Specialty Books") in


                                       4
<PAGE>

May 1997, the Company entered the distance  education market,  which consists of
providing  education  materials to students in nontraditional  college and other
courses (such as  correspondence  courses,  continuing  and corporate  education
courses and courses  offered  through  electronic  media such as the  Internet).
Other  services  offered  to college  bookstores  include  the sale of  computer
hardware  and  software,  such as the  Company's  turnkey  bookstore  management
software,  and related  maintenance  contracts.  During fiscal 2000, the Company
also  began  licensing  certain  software  to  college   bookstores  related  to
E-commerce  (see  further  discussion  below  under  Business  Strategy).  These
services  generate  revenue and assist the Company in enhancing  and  developing
customer relationships.

INDUSTRY SEGMENT FINANCIAL INFORMATION

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

BUSINESS STRATEGY

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

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

    CAPITALIZE  ON  COLLEGE  BOOKSTORE  OPPORTUNITIES.  The  Company  intends to
increase revenues for its college bookstore  operations by acquiring and opening
bookstores  at selected  college  campuses  and  offering  additional  specialty
products  and  services at its existing  bookstores.  The Company also  believes
there are  opportunities  to  improve  cash flow at its  college  bookstores  by
reducing certain selling,  general and administrative  expenses and by realizing
economies of scale through increased purchasing power for general merchandise as
a result of its ownership of C2O.

    CAPITALIZE ON E-COMMERCE  OPPORTUNITIES.  The Company expects to enhance its
own  bookstores'  E-commerce  capabilities  through  software  products that the
Company has been developing.  In addition, the Company also expects that it will
benefit from the marketing of these products to other bookstores through several
agreements  related to these  software  products  that it has entered  into with
another entity.


    During fiscal 2000, the Company began developing and marketing WebPRISM,  an
innovative  software  solution  that  allows  bookstores  to  launch  their  own
E-commerce site and effectively  compete against  online-only  textbook sellers.
This software  solution  enables  bookstores to offer  textbooks and traditional
store  merchandise on their websites.  Additionally,  the Company was developing
CampusHub,   E-commerce   technology  that  will  enable   bookstores  to  offer
non-traditional  goods and services from brand name consumer  companies on their
websites.

    Subsequent to March 31, 2000, NBC entered into several agreements related to
these software  products with a newly created  entity,  TheCampusHub.com,  Inc.,
which is partially  owned by the Company's  majority  owner.  In connection with
these agreements, NBC has licensed these products to TheCampusHub.com,  Inc. who
will assume the on-going marketing,  operating and further development costs for
these  products.  The  three-year  license  agreement  requires  the  payment of
$500,000   per  year  from   TheCampusHub.com,   Inc.  to  NBC  and  also  gives
TheCampusHub.com,  Inc. the option to purchase the software products from NBC at
any time during the term of the agreement. The annual license payment is payable
even if the purchase option is exercised  before the end of the three-year term.
NBC will also provide certain management services to TheCampusHub.com,  Inc. for
three years in return for approximately  $500,000 per year plus reimbursement of
certain  other direct  costs.  In  connection  with these  agreements,  NBC also
acquired the option to purchase 25% of the initial common shares  outstanding of
TheCampusHub.com, Inc.


                                       5
<PAGE>

    The Company  expects that it will benefit  from such  arrangements  as it is
able to obtain  advanced  E-commerce  technology for its own bookstores  without
encumbering  its core business with the capital  investments and operating costs
necessary to complete  the  development  and  marketing  of these  products.  In
addition,  the Company expects that the license and management fees will provide
an additional source of cash flow for the Company.  Lastly, the Company believes
that it will share, by virtue of its equity option in TheCampusHub.com, Inc., in
future economic value,  if any,  created by the on-going  efforts related to the
software products.

    PURSUE ADDITIONAL GROWTH OPPORTUNITIES.  The Company intends to aggressively
pursue selected growth opportunities in several related markets, including:

  o     BUYING  SERVICES.  The Company  believes  that its ownership of C2O will
        enhance the relationship with the Company's  customers by leveraging its
        capabilities  as  being  a  full-service  provider  within  the  college
        bookstore  industry.  This will give the Company  access to all of C2O's
        marketing services and vendor programs.

  o     DISTANCE EDUCATION.  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.

INDUSTRY OVERVIEW

    Based on recent industry trade data, the college bookstore  industry remains
strong,  with  approximately  5,000 college  stores  generating  annual sales of
approximately  $8.9  billion to college  students  and other  consumers in North
America.  Sales of textbooks and other  education  materials  used for classroom
instruction  comprise  approximately  two-thirds  of this  amount.  The  Company
expects this market will continue to grow as a result of  anticipated  increases
in enrollment  at U.S.  colleges  attributable  to the children of the baby boom
generation entering the college population.

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

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

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

    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


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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.

    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 two to three years, the
Company  introduced its exclusive  supply program to the industry.  This program
has grown from  approximately 75  participating  bookstores at the end of fiscal
1999 to approximately  200  participating  bookstores at the end of fiscal 2000.
Since  the  Company  is  usually  able to sell  the  vast  majority  of the used
textbooks it is able to purchase, its ability to obtain sufficient supply is the
critical factor for the Company's success.

    COLLEGE  BOOKSTORE   MARKET.   College  stores  generally  fall  into  three
categories: (i) INSTITUTIONAL -- stores that are primarily owned and operated by
institutions of higher learning (represents  approximately 60.0% of the market);
(ii)  CONTRACT-MANAGED  -- stores owned by  institutions  of higher learning and
managed by outside,  private  companies,  typically found on-campus  (represents
approximately  25.0% of the market);  and (iii) INDEPENDENT  STORES -- privately
owned  and   operated   stores,   generally   located  off  campus   (represents
approximately  15.0% of the market).  In general,  the "captive"  portion of the
college bookstore market includes those contract-managed  stores that sell their
used textbooks to affiliated companies, and institutional and independent stores
to the extent that such used  textbooks  are  repurchased  from students and are
retained by the bookstore for resale without involving a wholesaler.

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

PRODUCTS AND SERVICES

    WHOLESALE.   The  Company's   wholesale   operations  are  engaged  in   the
procurement and redistribution of textbooks on college campuses primarily across
the United States.

    The  Company  also  publishes  the  BUYER'S  GUIDE,  which lists over 41,000
textbooks  according to author,  title,  new copy retail price and the Company's
repurchase  price.  The  BUYER'S  GUIDE is an  important  part of the  Company's
inventory control and book procurement  system. The Company updates and reprints
the BUYER'S  GUIDE ten times each year and makes it  available in both print and
various  electronic  formats,  including  on all of  the  Company's  proprietary
information systems. A staff of dedicated professionals gathers information from
all over the  country in order to make the  BUYER'S  GUIDE into what the Company
believes to be the most  comprehensive and up-to-date pricing and buying aid for
college bookstores. The Company also maintains a database of over 169,000 titles
in order to better serve its customers.

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<PAGE>



    COLLEGE  BOOKSTORES.  As of June 20, 2000, the Company  operated 100 college
bookstores on or adjacent to college  campuses of which 14 are  contract-managed
by the Company.  These bookstores sell a wide variety of used and new textbooks,
general books and assorted general merchandise,  including apparel, sundries and
gift items. Over the past three years, revenues of the Company's bookstores from
activities  other than used and new textbook  sales have been between  25.8% and
31.5% 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 also intends to install WebPRISM
and CampusHub in all of its own bookstores,  thereby  allowing its bookstores to
further expand product offerings and compete with online-only textbook sellers.


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

    COMPLEMENTARY  SERVICES.  As a result of the Company's acquisition of C2O in
January  1998,  it is able to offer a variety of products  and services to C2O's
participating  college  bookstores.  C2O offers apparel and general  merchandise
through discount  programs,  develops and executes  marketing programs and hosts
trade shows at which vendor's showcase their products.  As a centralized  buying
service for over 430 participating  college  bookstores  including the Company's
own bookstores,  C2O has evolved into a buying group with substantial purchasing
power.

    C2O offers a plastic bag  program to college  bookstores.  This  plastic bag
program  provides  bookstores the  opportunity to purchase  customized bags at a
substantial  discount  while the  Company  generates  a profit due to receipt of
revenue from  advertising  inserts which are placed  inside the bags.  Other C2O
marketing  services  include a freight savings  program,  a check  authorization
program, and retail display allowances for magazine displays.

    C2O also provides an opportunity  for  interaction and exchange among buyers
and between buyers and vendors to the college bookstore market through an annual
trade show, which is held in February/March. Vendors pay C2O for the opportunity
to attend these trade shows.

    Additionally,  a staff of  experienced  C2O  professionals  consult with the
management  of  bookstores  both by telephone  and in person.  Services  offered
include strategic  planning,  store review,  merchandise  planning and help with
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.

    With its acquisition of Specialty Books in May 1997, the Company entered the
market for distance  education  products and  services.  Currently,  the Company
provides  students at over 60 colleges  with  textbooks and materials for use in
distance  education  courses,   and  is  a  leading  provider  of  textbooks  to
nontraditional  programs  and  students  such  as  correspondence  or  corporate
education  students.  The Company  believes the  fragmented  distance  education
market represents an opportunity for the Company to leverage its fulfillment and
distribution  expertise  in a rapidly  growing  sector.  Beyond  textbooks,  the
Company offers  services and specialty  course  materials to distance  education
students including  videotape  duplication and shipping,  shipping of specialty,
nontextbook  course  materials and a sales and ordering  function.  Students can
order  distance  education  materials  from the Company over the  Internet.  The
Company  believes  it  can  continue  to  significantly   increase  the  service
operations  revenues  from  distance  education  products  over the next several
years.

    Other services offered to college bookstores include services related to the
Company's turnkey bookstore  management  software and the sale of other software
and hardware, and related maintenance contracts. These services generate revenue
and assist the Company in gaining access to new sources of used  textbooks.  The
Company has an installed  base of over 300 college  bookstore  locations for its
textbook management control systems,  and it has installed its proprietary total
store  management  system at over 300  college  bookstore  locations.  In total,
including the Company's own  bookstores,  over 600 college  bookstore  locations
utilize the Company's software products.

                                       8
<PAGE>

WHOLESALE PROCUREMENT AND DISTRIBUTION

    Historically,  because  the  demand  for  used  textbooks  has  consistently
exceeded  supply,  the  Company's  sales have been  primarily  determined by the
amount of used  textbooks  that it can purchase.  The Company  believes that, on
average, it is able to fulfill approximately 20% of its demand. As a result, the
Company's success has depended primarily on its inventory  procurement,  and the
Company  continues  to focus its  efforts on  obtaining  inventory.  In order to
ensure its  ability to both obtain and  redistribute  inventory,  the  Company's
wholesale  strategy has emphasized  establishing and maintaining strong customer
and supplier relationships with college bookstores  (primarily,  independent and
institutional college bookstores) through its employee account  representatives.
These 40 account  representatives  (as of March 31,  2000) 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  wholesale  strategy  and its  implementation
include:  (i) selectively  paying a marginal  premium relative to competitors to
entice  students to sell back more books to the Company;  (ii) gaining access to
competitive  campuses  (where  the campus  bookstore  is  contract-managed  by a
competitor) by opening off-campus, Company-owned college bookstores; (iii) using
technology  to  gain  efficiencies  and  to  improve  customer   service;   (iv)
maintaining a knowledgeable and experienced sales force that is customer-service
oriented;  and (v) providing  working capital  flexibility for bookstores making
substantial purchases.

    The  two  major  used  textbook  purchasing  seasons  are at the end of each
academic  semester,  May/June and  December/January.  Although the Company makes
book purchases  during other  periods,  the inventory  purchased in May,  before
publishers  announce their price increases in June and July,  allows the Company
to purchase inventory based on the lower retail prices of the previous year. The
combination  of this  purchasing  cycle and the fact that the Company is able to
sell its inventory in relation to retail  prices for the following  year permits
the Company to realize additional gross 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   20.3%  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.

COLLEGE BOOKSTORE OPERATIONS

    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.  In addition to generating sales of new and used textbooks
and  general   merchandise,   these  outlets  enhance  the  Company's  wholesale
operations by increasing the inventory of used books purchased from the campus.

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

                                       9
<PAGE>

    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.


    As of June 20, 2000 the Company operated 100 college bookstores  nationwide,
having  expanded  from 35  bookstores  in 1995.  During  fiscal 2000 the Company
purchased/established 35 new bookstores located in Arizona, California, Florida,
Michigan,  New Mexico,  Ohio,  Tennessee,  and Texas,  adding estimated combined
annual  revenues  in excess  of $45.7  million.  The  fiscal  2000  acquisitions
included Triro, Inc., a chain of 17 college  bookstores located in Arizona,  New
Mexico,  and  Texas,  and Ned's  Bookstores,  a chain of 11  college  bookstores
located in California  and Michigan.  Subsequent to March 31, 2000,  the Company
purchased bookstores located in Norman, Oklahoma and Knoxville, Tennessee.


    The table below  highlights  certain  information  regarding  the  Company's
bookstores opened through March 31, 2000.

                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)
   ----------- ----------  ----------- ------------- ---------   ------------
       1996         35          4           0           39          388
       1997         39         12           1           50          438
       1998         50          9           0           59          474
       1999         59          8           2           65          537
       2000         65         35           2           98          733


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

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

    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 10,000  students);  (ii) a site in close  proximity to campus
with adequate parking and accessibility; (iii) the potential of the bookstore to
have a broad product mix (larger  bookstores  are more  attractive  than smaller
bookstores because a full line of general merchandise can be offered in addition
to textbooks);  (iv) the availability of top-quality management; and (v) certain
other  factors,  including  leasehold  improvement  opportunities  and personnel
costs.

    The Company's bookstores have an average size of 7,500 gross square feet but
range in size  from 900 to  50,000  square  feet.  The  Company  estimates  that
leasehold  improvements,   furniture  and  fixtures,  and  automation  with  the
Company's PRISM system, the Company's proprietary total-store management system,
for new  bookstores  cost  approximately  $100,000 per  bookstore,  after giving
effect to construction allowances.


                                       10
<PAGE>

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.

    In addition, the Company and its consultants have been developing E-commerce
capabilities  called WebPRISM and CampusHub.  These software products will 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 WebPRISM and CampusHub was assumed  subsequent to March
31, 2000 by an entity related to the Company through common ownership.


    None  of  the  Company's  proprietary  software  programs  are  copyrighted,
although the Company does have registered  trademarks for the names WebPRISM and
CampusHub. 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 wholesale customers accounted
for approximately  6.4% of fiscal 2000 revenues.  No one customer  accounted for
more than 1.0% of the Company's fiscal 2000 revenues.

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

    The Company's college bookstores are located on many of the nation's largest
college  campuses  including:  University  of Nebraska,  University of Michigan,
University of Maryland, Arizona State University, Pennsylvania State University,
University  of Kansas,  Michigan  State  University,  University of California -
Berkeley, Texas A&M University, University of Tennessee and University of Texas.


                                       11
<PAGE>

COMPETITION

    The Company's  wholesale  business  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.

    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 590 stores and 330 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  Wallace  College  Book  Company,  Budgetext,  Texas Book  Company and
Southeastern  Book Company.  Most of the leading  companies in the industry also
have   an   established   retail   presence,   either   through   direct   store
ownership/operation or through contract-management.

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

    MBS is controlled  by the same  shareholder  that  controls  Barnes & Noble.
Consequently,  MBS supplies approximately 330 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   college   bookstore   operations,    14   of   which   are
contract-managed,  compete with other college campus  bookstores,  including the
on-campus  bookstore  in  those  locations  where  the  Company's  bookstore  is
off-campus.


    Both the Company's wholesale business and bookstore  operations 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.


    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.

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

                                       12
<PAGE>

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.

EMPLOYEES

    As of  March  31,  2000  the  Company  had a total  of  approximately  2,700
employees,  of  which  950  are  full-time,  200 are  part-time  and  1,550  are
temporary.  The  Company  has no  unionized  employees  and  believes  that  its
relationship with its employees is satisfactory.

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


                               ITEM 2. PROPERTIES.

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

    Listed  below,  set forth as of March 31, 2000,  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       18,600        The College Store
   Northern Arizona University       Flagstaff, AZ        19,900        The College Store
   Northern Arizona University       Flagstaff, AZ        19,900        University Text and Tools
   Coconino Community College        Flagstaff, AZ         3,600        Coconino Community College
                                                                           Bookstore (2)
   Arizona State University          Tempe, AZ            43,700        The College Store
   Arizona State University          Tempe, AZ            43,700        Rother's Bookstore
   University of Arizona             Tucson, AZ           34,200        Arizona Book Store
   University of Arizona             Tucson, AZ           34,200        Rother's University Bookstore
   University of Arkansas--          Little Rock, AR      10,500        Campus Bookstore
     Little Rock
   University of California          Berkeley, CA         30,400        Ned's Berkeley Bookstore
                                                                           (2 locations)
   California State University -     Northridge, CA       27,200        The College Store
     Northridge
   Daytona Beach Community College   Daytona Beach, FL    9,500 & 4,700 College Book Rack
     and Embry-Riddle Aeronautical
     University
   Miami Dade Community              Miami, FL            18,000        Lemox College Book & Supply
     College-Kendall
   University of Central Florida     Orlando, FL          28,000        Knight's Corner
   Georgia State University          Atlanta, GA          23,500        Georgia Book Store
   Southern Illinois University      Carbondale, IL       22,300        Saluki Bookstore
                                                                           (2 locations)
   Ball Sate University              Muncie, IN           19,100        Collegiate Book Exchange
   Valparaiso University             Valparaiso, IN        3,600        University Book Center (2)
   Drake University                  Des Moines, IA        5,300        University Book Store
                                                                           (2 locations) (2)
   University of Kansas              Lawrence, KS         29,100        University Book Shop
   Johnson County Community College  Overland Park, KS    16,000        The College Store
   University of Louisville          Louisville, KY       21,100        College Book Warehouse

                                       13
<PAGE>

   Eastern Kentucky University       Richmond, KY         17,500        University Book & Supply
   University of Maryland            College Park, MD     32,700        Maryland Book Exchange
   Prince Georges Community College  Largo, MD            12,500        Prince Georges Community
                                                                           College Bookstore (2)
   University of Michigan            Ann Arbor, MI        37,200        Michigan Book & Supply
   University of Michigan            Ann Arbor, MI        37,200        Ulrich's Bookstore
   Wayne County Community College    Belleville, MI       11,000        Ned's Bookstore
                                                                           (5 locations) (2)
   Ferris State University           Big Rapids, MI        9,800        The College Store
   Michigan State University         East Lansing, MI     42,500        The College Store
   Michigan State University         East Lansing, MI     42,500        Ned's Bookstore
   Kettering Engineering &           Flint, MI             2,500        Kettering Campus Store (2)
     Management Institute
   Eastern Michigan University       Ypsilanti, MI        23,300        Campus Book & Supply
   Eastern  Michigan University and  Ypsilanti, &         23,300 & 600  Ned's Bookstore (3 locations) (2)
     Concordia College                 Ann Arbor, MI
   Mankato State University          Mankato, MN          11,700        Maverick Bookstore
   Chadron State College             Chadron, NE           2,800        Eagle Book Shoppe
   University of Nebraska-- Kearney  Kearney, NE           7,200        The Antelope  Bookstore (2)
   University of Nebraska-- Lincoln  Lincoln, NE          23,000        Nebraska  Bookstore (2 locations)
   Nebraska Wesleyan University      Lincoln, NE           1,700        Plainsman Bookstore (2)
   Wayne State College               Wayne, NE             4,000        Student Bookstore
   University of Nevada Las Vegas    Las Vegas, NV        21,300        Rebelbooks
   State University of New York--    Amherst, NY          22,000        The College Store
     Buffalo
   State University of New York -    Vestal, NY           11,800        Bookbridge
     Binghamton
   University of Akron               Akron, OH            23,500        The College Store
   Ohio University                   Athens, OH           19,200        Specialty Books
   Ohio State University             Columbus, OH         48,300        Collegetown
   Wright State University           Fairborn, OH         16,800        The College Store
   Oklahoma State University         Stillwater, OK       20,500        Cowboy Book
   Indiana University of             Indiana, PA          14,000        The College Store
     Pennsylvania
   University of Pittsburgh          Pittsburgh, PA       26,000        The College Store
   Pennsylvania State University     State College, PA    40,700        University Book Centre
   College of Charleston             Charleston, SC       12,000        University Books of Charleston
   Columbia College                  Columbia, SC          1,200        C-Squared Bookstore (2)
   University of South Carolina      Columbia, SC         25,500        South Carolina Bookstore
                                                                           (2 locations)
   East Tennessee State University   Johnson City, TN     11,500        The College Store
   University of Tennessee           Knoxville, TN        26,000        Campus Bookstore
   University of Texas - Arlington   Arlington, TX        18,700        The College Store
   Austin Community College          Austin, TX           27,000        Bevo's Northridge
   Austin Community College          Austin, TX           27,000        Bevo's ACC
   Austin Community College          Austin, TX           27,000        Rother's Bookstore
   University of Texas               Austin, TX           48,000        Bevo's West
   University of Texas               Austin, TX           48,000        Bevo's Bookstore (Dobie)
   Blinn College                     Bryan, TX             9,500        Rother's Bookstore
   Texas A&M University              College Station, TX  44,000        Rother's Bookstore
   Texas A&M University              College Station, TX  44,000        Rother's Bookstore (Woodstone)
   Texas A&M University              College Station, TX  44,000        Rother's Bookstore (Northgate)
   University of North Texas         Denton, TX           25,500        Voertman's
   University of Texas -- Pan        Edinburg &          13,000 & 7,100 South Texas Book & Supply
     American and South                McAllen, TX                         (2 locations)
     Texas Community College
   North  Harris County Community    Houston, TX           9,200        College Bookstore
     College
   University of Houston             Houston, TX          33,000        Rother's Bookstore
   Texas Tech University             Lubbock, TX          24,800        Spirit Shop
   Texas Tech University             Lubbock, TX          24,800        Double T Bookstores (3 locations)
   San Antonio College, St.          San Antonio, TX      22,000;       L&M
   Philip's College, and                                  21,200;
     Palo Alto College                                    & 6,400
   University of Texas-- San Antonio San Antonio, TX      18,400        L&M-- UTSA
   Southwest Texas State University  San Marcos, TX       21,100        Colloquium Books (2 locations)
   Southwest Texas State University  San Marcos, TX       21,100        Rother's Bookstore
   Tarleton State University         Stephenville, TX      6,400        Rother's
   Baylor University                 Waco, TX             13,000        University Bookstore
                                                                           and Spirit Shop
   Baylor University                 Waco, TX             13,000        Rother's Bookstore
   Midwestern State University       Wichita Falls, TX     5,700        Rother's Bookstore
   Virginia Polytechnic and State    Blacksburg, VA       25,000        Tech Bookstore
     University
   Old Dominion University           Norfolk, VA          18,900        Dominion Bookstore
   Virginia Commonwealth University  Richmond, VA         23,200        The College Store

</TABLE>
------------

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

(2) Denotes    properties    leased    from    the    educational    institution
    ("contract-managed"  stores).  One  location  at  Drake  University  and one
    location at Concordia College are contract-managed stores.

                                       14
<PAGE>

                           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 2000.


                                       15
<PAGE>

                                     PART II


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

    On January 20, 2000, the Company granted options to purchase 5,241 shares of
the  Company's  Class A Common  Stock at an exercise  price of $52.47 per share.
Such options,  available under the NBC Acquisition Corp. 1998 Stock Option Plan,
were  granted  to  NBC's  Vice  President  of  E-commerce.  The  options  become
exercisable in 25% increments on February 1, 2000 and November 1, 2000, 2001 and
2002.

    On January 20, 2000,  the Company  issued 2,621 shares of its Class A Common
Stock to NBC's Vice  President of E-commerce 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 maturing January, 2010 and bearing interest at 5.25% per year.


    The  aforementioned  transactions  were exempt from  registration  under the
Securities Act of 1933 pursuant to Section 4(2). No  underwriters  were involved
in these transactions.  As of June 20, 2000, based upon the number of holders on
record,  there  were 44  holders  of the  Company's  Class A  Common  Stock  and
outstanding  stock options to purchase  34,224  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 1999 and 2000.
There is no established  public trading market for the Company's  Class A Common
Stock.



                        ITEM 6. SELECTED FINANCIAL DATA.

    The following table sets forth selected  historical  consolidated  financial
and other data of the Company and its predecessor as of and for the fiscal years
ended March 31, 2000,  1999, 1998 and 1997, and the seven and five month periods
ended March 31, 1996 and August 31, 1995, respectively.  The selected historical
consolidated  financial data was derived from the audited consolidated financial
statements of the Company and its  predecessor.  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.

                                       16
<PAGE>
<TABLE>
<CAPTION>

                                                    Successor (1)                     Predecessor
                                  --------------------------------------------------- -----------
                                                                              Seven      Five
                                                                              Months    Months
                                         Fiscal Years Ended March 31,         Ended     Ended
                                  ----------------------------------------- March 31,  August 31,
                                    2000       1999      1998      1997       1996       1995
                                  ---------- --------- --------- ---------- --------- -----------
Statement of Operations Data:                         (dollars in thousands)
<S>                               <C>        <C>       <C>       <C>        <C>         <C>
Revenues                           $265,290  $217,516  $198,773   $172,600  $ 79,423     $83,328
Cost of sales                       164,921   137,709   125,632    110,466    51,866      52,753
                                   --------  --------  --------   --------  --------     -------
    Gross profit                    100,369    79,807    73,141     62,134    27,557      30,575
Operating expenses:
  Selling, general, and
  administrative                     65,582    51,547    47,081     39,491    22,517      14,729
  Depreciation                        3,096     2,393     2,531      2,706       904         872
  Amortization                        9,320     6,149     5,626      4,072     2,259           -
  Stock compensation costs                -         -     8,278        297        82           -
                                   --------  --------  --------   --------  --------     -------
    Income from operations           22,371    19,718     9,625     15,568     1,795      14,974
Other expenses (income):
  Interest expense                   23,398    22,854    11,938     10,760     6,035         952
  Interest income                      (356)     (351)     (328)      (561)     (433)        (51)
  Other income (2)                   (1,478)   (1,100)     (512)      (390)     (339)       (469)
                                   --------  --------  --------   --------  --------     -------
    Income (loss) before income taxes
    and extraordinary item              807    (1,685)   (1,473)     5,759    (3,468)     14,542
Income tax expense (benefit)          2,516       574        58      2,325      (967)      5,583
                                   --------  --------  --------   --------  --------     -------
    Income (loss) before
    extraordinary item               (1,709)   (2,259)   (1,531)     3,434    (2,501)      8,959
Extraordinary loss on
extinguishment of
debt, net of taxes                        -         -    (4,021)         -         -           -
                                   --------  --------  --------   --------  --------     -------
    Net income (loss)              $ (1,709) $ (2,259) $ (5,552)  $  3,434  $ (2,501)    $ 8,959
                                   ========  ========  ========   ========  ========     =======
Earnings (loss) per share (3):
  Basic:
    Income (loss) before
    extraordinary item             $  (1.48) $  (2.37) $  (0.59)  $   1.23  $  (0.89)
    Extraordinary loss on
    extinguishment of debt                -         -     (1.57)         -         -
                                   --------  --------  --------   --------  --------
    Net income (loss)              $  (1.48) $  (2.37) $  (2.16)  $   1.23  $  (0.89)
                                   ========  ========  ========   ========  ========
  Diluted:
    Income (loss) before
    extraordinary item             $  (1.48) $  (2.37) $  (0.59)  $   1.16  $ (0.89)
    Extraordinary loss on
    extinguishment of debt                -         -     (1.57)         -         -
                                   --------  --------  --------   --------  --------
    Net income (loss)              $  (1.48) $  (2.37) $  (2.16)  $   1.16  $  (0.89)
                                   ========  ========  ========   ========  ========

Other Data:
  EBITDA (4)                       $ 36,265  $ 29,360  $ 26,572   $ 23,033  $  5,379     $16,315
  Net cash flows from operating
    activities                       18,601    10,296    (2,842)    10,774     3,423       1,643
  Net cash flows from financing
    activities                       11,690    (6,976)   10,220     (7,471)  116,063         437
  Net cash flows from investing
   activities                       (29,900)   (5,067)  (11,548)    (3,427) (109,385)        371
  Capital expenditures                3,542     2,842     3,690      2,243       838         801
  Business acquisition
    expenditures (5)                 26,072     2,086     7,714      1,252       551           -
  Number of bookstores open at
    end of the period                    98        65        59         50        39          36

Balance Sheet Data
(At End of Period):
  Cash and cash equivalents        $  4,451  $  4,060  $  5,807   $  9,977  $ 10,101     $ 4,741
  Working capital                    62,298    55,470    54,053     55,936    52,469      43,879
  Total assets                      169,046   142,907   152,145    127,169   129,023      92,505
  Total debt, including current
    maturies                        222,551   219,904   221,597     79,524    86,712       9,376

</TABLE>

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


                                       17
<PAGE>

        interest  costs  due to the  financing  of the  acquisition  and  higher
        amortization  expense for goodwill and other intangibles  created by the
        acquisition.

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

    (3) Earnings  (loss) per share has not been  presented  for the five  months
        ended August 31, 1995 as such presentation would not be meaningful.

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

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



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

FISCAL YEAR ENDED MARCH 31, 2000 COMPARED WITH FISCAL YEAR ENDED MARCH 31, 1999.

    REVENUES.  Revenues  for the years  ended  March  31,  2000 and 1999 and the
corresponding increase (decrease) in revenues were as follows:

                                                            Increase (Decrease)
                                                          ---------------------
                                2000           1999          Amount  Percentage
                            -------------- -------------- ---------- ----------
 Wholesale operations       $ 106,458,024  $  97,430,134 $  9,027,890     9.3%
 College bookstore operations 157,928,601    120,745,188   37,183,413    30.8%
 Complementary services        19,949,186     12,362,403    7,586,783    61.4%
 Intercompany eliminations    (19,045,581)   (13,021,413)  (6,024,168)   46.3%
                            -------------  ------------- ------------   -----
                            $ 265,290,230  $ 217,516,312 $ 47,773,918    22.0%
                            =============  ============= ============   =====


    The increase in  wholesale  revenues  was due  primarily to publisher  price
increases,  coupled with an increase in units  shipped and a decrease in returns
as a percent of sales. This increase was partially offset by the  discontinuance
of the  Company's  new book program in the fourth  quarter of fiscal 1999.  That
program generated approximately $2.0 million of revenue in that fiscal year. The
increase in college bookstore  revenues was due primarily to the net addition of
39 new college  bookstores either through  acquisition or startup since April 1,
1998,  including  28 new  bookstores  added  through the Triro,  Inc.  and Ned's
Bookstores acquisitions,  which occurred effective June 4, 1999 and November 12,
1999, respectively. Of the $37.2 million increase in college bookstore revenues,
$34.9  million was  attributable  to new college  bookstores  with the remainder
accounted  for by a 2.9% increase in revenues from stores open for the full year
for both the 1999 and 2000 fiscal years ("same stores").  Complementary services
revenues  increased  primarily due to growth in the Company's distance education
and system sales  programs.  As the Company's  wholesale  and college  bookstore
operations  have  grown,  the  Company's  intercompany  transactions  have  also
increased.


                                       18
<PAGE>

    GROSS  PROFIT.  Gross profit for fiscal 2000  increased  $20.6  million,  or
25.8%,  to $100.4 million from $79.8 million for fiscal 1999.  This increase was
primarily due to higher  revenues,  combined with an increase in gross  margins.
Gross margin was 37.8% for fiscal 2000 as compared to 36.7% for fiscal 1999. The
increase in gross margin was primarily  attributable to increased margins in the
Company's wholesale and college bookstore  operations,  including an increase in
used  textbook  sales through the  Company's  bookstores,  which can generate an
average gross margin of approximately  55%-60% compared to average gross margins
of 35% - 40% for external wholesale sales.

    SELLING,   GENERAL  AND  ADMINISTRATIVE   EXPENSES.   Selling,  general  and
administrative  expenses for fiscal 2000 increased  $14.1 million,  or 27.2%, to
$65.6  million  from  $51.5  million  for  fiscal  1999.  Selling,  general  and
administrative  expenses as a  percentage  of revenues  were 24.7% and 23.7% for
fiscal 2000 and fiscal 1999,  respectively.  The  increase in expenses  resulted
primarily from the expected  higher expense base  associated  with the Company's
expansion of its operations  through  bookstore  acquisitions and startups.  The
Company  has also  incurred  higher  corporate-level  expense  in  fiscal  2000,
primarily  due to additional  personnel and other costs  designed to help manage
its continued growth.

    DEPRECIATION  EXPENSE.  Depreciation expense for the fiscal year ended March
31, 2000 increased $0.7 million, or 29.4%, to $3.1 million from $2.4 million for
the fiscal year ended March 31, 1999.  This increase was primarily the result of
additional  depreciation related to recent  acquisitions,  including Triro, Inc.
and Ned's Bookstores.

    AMORTIZATION  EXPENSE.  Amortization expense for the fiscal year ended March
31, 2000 increased $3.2 million, or 51.6%, to $9.3 million from $6.1 million for
the fiscal year ended March 31, 1999. This increase was the result of additional
amortization of goodwill related to recent  acquisitions,  including Triro, Inc.
and  Ned's  Bookstores,  and was  partially  offset by a  non-compete  agreement
becoming fully amortized in August, 1998.

    INTEREST EXPENSE,  NET. Interest expense, net for fiscal 2000 increased $0.5
million,  or 2.4%, to $23.0 million from $22.5 million for fiscal 1999 primarily
as a result of  increasing  original  issue debt  discount  amortization  on the
Company's Senior Discount Debentures.

    OTHER INCOME. Other income for fiscal 2000 increased $0.4 million, or 34.4%,
to $1.5 million from $1.1 million for fiscal 1999 primarily due to the growth of
certain payments received related to reimbursement  from customers for the costs
incurred  to  ship  distance   education   materials  to  the   customer.   Such
reimbursement is recorded as other income. Other significant components of other
income include the equity in earnings  associated  with C2O's shopping bag joint
venture and ancillary items.

    INCOME (LOSS) BEFORE  INTEREST AND TAXES.  Income (loss) before interest and
taxes for fiscal  2000 and 1999 and the  corresponding  increase  (decrease)  in
income (loss) before interest and taxes were as follows:

                                                            Increase (Decrease)
                                                          ----------------------
                                2000           1999          Amount   Percentage
                            -------------- -------------- ----------- ----------
Wholesale operations        $ 26,335,614   $ 22,662,669   $ 3,672,945      16.2%
College bookstore operations   8,520,861      7,399,011     1,121,850      15.2%
Complementary services        (2,884,333)    (2,559,067)     (325,266)   (12.7)%
Corporate administration      (8,123,130)    (6,684,303)   (1,438,827)   (21.5)%
                            ------------   ------------  ------------   --------
                            $ 23,849,012   $ 20,818,310   $ 3,030,702      14.6%
                            ============   ============  ============   ========

    The increase in wholesale income before interest and taxes was primarily due
to increased  revenues.  Income before interest and taxes for college  bookstore
operations increased,  despite incremental  amortization expense of $3.7 million
related  to  goodwill  resulting  from  acquisitions,  as a result of  increased
revenues and improved margins  pertaining  primarily to used textbook sales. The
loss before interest and taxes increased for the complementary  services segment
primarily due to a reduction in the profitability of the Company's  shopping bag


                                       19
<PAGE>

joint  venture.  As  described  earlier,  corporate  administrative  costs  have
increased  primarily as a result of costs  incurred to help manage the Company's
growth.

    INCOME TAXES.  Income tax expense for fiscal 2000 increased $1.9 million, or
337.9%,  to $2.5 million from $0.6  million for fiscal 1999.  This  increase was
primarily  the  result  of  an  increase  in  income  before  income  taxes  and
non-deductible   amortization  on  goodwill  associated  with  the  Triro,  Inc.
acquisition.  The Company's effective tax rate was significantly higher than the
statutory   tax  rate   primarily   as  a  result  of  state  income  taxes  and
non-deductible amortization on goodwill associated with recent acquisitions.

FISCAL YEAR ENDED MARCH 31, 1999 COMPARED WITH FISCAL YEAR ENDED MARCH 31, 1998.

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

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

    The  increase  in   wholesale  sales was  due  primarily to publisher  price
increases  averaging 4% and product mix. The increase in college bookstore sales
was a result  of same  store  sales  increases  of 2.6%  combined  with the nine
bookstores  opened or acquired  during  fiscal  1998,  and the eight  bookstores
opened or acquired during fiscal 1999.  Complementary  services sales for fiscal
1999 increased due to the acquisitions of Specialty Books on May 1, 1997 and C2O
on January 23, 1998. As the Company's wholesale and college bookstore operations
have grown, the Company's intercompany transactions have also increased.

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

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

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

    STOCK  COMPENSATION  COSTS.  There were no stock  compensation costs for the
fiscal  year  ended  March  31,  1999 as  compared  to  $8.3  million  in  stock
compensation  costs for the fiscal year ended March 31, 1998.  This  decrease is
primarily  the  result  of the  stock  options  bought  out in  fiscal  1998  in
connection  with the  Recapitalization,  which is discussed in detail in Item 1,
"Business" and Item 8, "Financial  Statements and Supplementary Data." There was
no compensation cost associated with the stock options granted in fiscal 1999 to
employees  since the exercise price was greater than the estimated fair value of
the  Company's  Class A Common  Stock on the date of  grant.  The fair  value of
options  granted to employees  was  estimated at the date of grant by management
and the Board of  Directors  after  considering,  among  other  things,  EBITDA,
outstanding debt, minority interest and illiquidity.

                                       20
<PAGE>

    INTEREST EXPENSE, NET. Interest expense, net for fiscal 1999 increased $10.9
million,  or 93.8%,  to $22.5  million  from $11.6  million for fiscal 1998 as a
result of the  impact of a full year of  interest  expense  associated  with the
additional  debt incurred  relating to the  Recapitalization,  which occurred on
February 13, 1998.

    OTHER  INCOME.  Other  income for fiscal 1999  increased  $0.6  million,  or
114.9%,  to $1.1 million from $0.5 million for fiscal 1998 primarily as a result
of the full year effect of income from ancillary  activities at Specialty  Books
and C2O.  Such  ancillary  activities  consist  primarily  of  certain  payments
received that relate to  reimbursement  from customers for the costs incurred to
ship  distance  education  materials  to the  customer  and  equity in  earnings
associated with C2O's shopping bag joint venture.

    EXTRAORDINARY  LOSS ON  EXTINGUISHMENT  OF DEBT.  During  fiscal  1998,  the
Company  recorded an  extraordinary  loss of $6.5 million,  which  included $2.9
million of  unamortized  debt issue costs,  $2.3 million of unaccreted  discount
paid at time of  Recapitalization,  $0.8 million  prepayment  penalty,  and $0.5
million buyout of interest rate swap agreement, and an associated tax benefit of
$2.5 million as a result of early  extinguishment  of  substantially  all of its
previously outstanding debt as part of the Recapitalization.

    INCOME (LOSS) BEFORE  INTEREST AND TAXES.  Income (loss) before interest and
taxes for fiscal  1999 and 1998 and the  corresponding  increase  (decrease)  in
income (loss) before interest and taxes were as follows:

                                                           Increase (Decrease)
                                                        ------------------------
                               1999           1998          Amount    Percentage
                           ------------- -------------- -------------- ---------
Wholesale operations        $ 22,662,669  $ 20,873,859   $  1,788,810     8.6 %
College bookstore operations   7,399,011     6,835,911        563,100     8.2 %
Complementary services        (2,559,067)   (1,468,199)    (1,090,868)  (74.3)%
Corporate administration      (6,684,303)  (16,105,058)     9,420,755    58.5 %
                           ------------- -------------  ------------- ---------
                            $ 20,818,310  $ 10,136,513   $ 10,681,797   105.4 %
                           ============= =============  ============= =========


    The  increase  in  wholesale  income  before  interest  and taxes was due to
increased  revenues  which were  partially  offset  primarily  by lower  margins
resulting  from the Company's new book program,  which was obtained  through the
C2O  acquisition and  discontinued in the fourth quarter of fiscal 1999.  Income
before  interest and taxes for college  bookstore  operations  increased  due to
increased  revenues which were offset by the higher expense base associated with
recent  acquisitions.  The loss  before  interest  and taxes  increased  for the
complementary  services  segment  as a  result  of  reflecting  a full  year  of
operating  activity  for C2O and  Specialty  Books,  including  $1.1  million in
incremental   amortization  on  goodwill   associated  with  such  acquisitions.
Corporate  administrative costs have decreased primarily as a result of the $8.3
million in stock  compensation costs incurred in fiscal 1998 in conjunction with
the  Recapitalization  and a non-compete  agreement  becoming fully amortized in
August, 1998.

    INCOME  TAXES.  The effective tax rate for fiscal 1999 was 34.1% as compared
with 4.0% for fiscal 1998.  In both fiscal years,  the tax benefit  generated by
the loss from operations was reduced as a result of non-deductible  amortization
on  goodwill  associated  with recent  acquisitions  and a change in estimate of
income tax liabilities.  The change in estimate pertains to differences  between
the prior year tax accrual and actual taxes owed per the tax returns filed.

LIQUIDITY AND CAPITAL RESOURCES

    The Company's primary liquidity  requirements are for debt service under the
Senior Credit  Facility,  the Senior  Subordinated  Notes and other  outstanding
indebtedness,  for working  capital,  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,  2000,  the  Company's  total  indebtedness  was
approximately $222.6 million,  consisting of approximately $55.6 million in Term
Loans,  $110.0 million of the Senior  Subordinated  Notes,  $56.2 million of the
Senior  Discount  Debentures and $0.8 million of other  indebtedness,  including
capital lease obligations.

                                       21
<PAGE>

    Principal and interest  payments  under the Senior  Credit  Facility and the
Senior Subordinated Notes represent significant  liquidity  requirements for the
Company.  Under the terms of the Tranche A and B Loans, NBC is scheduled to make
principal  payments  totaling  approximately  $4.4 million in fiscal 2001,  $6.3
million in fiscal  2002,  $6.8  million in fiscal  2003,  $8.5 million in fiscal
2004,  $11.2  million in fiscal 2005,  and $18.4  million in fiscal  2006.  Such
scheduled  principal  payments are subject to change upon the annual payment and
application of excess cash flows (as defined in the Credit Agreement  underlying
the Senior Credit  Facility)  towards  Tranche A and B Loan principal  balances.
There was no excess cash flow payment  obligation at March 31, 2000. Loans under
the Senior  Credit  Facility  bear  interest  at  floating  rates based upon the
interest  rate option  selected by NBC. The Senior  Subordinated  Notes  require
semi-annual  interest  payments  at a fixed rate of 8.75% and mature on February
15, 2008. The Senior Discount Debentures require  semi-annual  interest payments
commencing  August 15, 2003 at a fixed rate of 10.75% and mature on February 15,
2009.

    The Company's capital expenditures were $3.5 million, $2.8 million, and $3.7
million for the fiscal years ended March 31, 2000, 1999 and 1998,  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 $26.1 million, $2.1 million, and $7.7
million for the fiscal years ended March 31, 2000, 1999 and 1998,  respectively.
Of the $26.1 million in business  acquisition  expenditures  made for the fiscal
year  ended  March  31,  2000,  approximately  $25.2  million  pertains  to  the
acquisitions of Triro, Inc. and Ned's Bookstores. Approximately $14.9 million of
capital was raised in fiscal 2000 through the issuance of 284,923  shares of the
Company's Class A Common Stock to HWH and members of senior management to assist
in financing the  acquisitions of Triro,  Inc. and Ned's  Bookstores Of the $7.7
million in  business  acquisition  expenditures  made for the fiscal  year ended
March 31, 1998,  approximately $6.2 million pertains to the acquisitions of C2O,
Specialty   Books,   and  four  South  Carolina   college   bookstores.   Future
acquisitions, if any, may require additional equity financing.

    Subsequent to March 31, 2000, 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  providing
NBC the  opportunity to acquire 25% of the initial common shares  outstanding of
TheCampusHub.com,  Inc.; a management  services agreement effective for a period
of three years that  reimburses  NBC for certain direct costs incurred on behalf
of  TheCampusHub.com,  Inc. and for certain shared management and administrative
support;  and a technology  sale and license  agreement that provides for NBC to
license its E-commerce software  capabilities to  TheCampusHub.com,  Inc. over a
period of three  years and  provides  TheCampusHub.com,  Inc.  with an option to
purchase  such  software  capabilities  from NBC during that three year  period.
NBC's Senior  Credit  Facility  was amended in April,  2000 to provide for these
transactions.

    The  Company's  principal  sources  of  cash to fund  its  future  operating
liquidity needs will be net cash flows 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  semester  (May and  December).  For the year ended March 31,  2000,
weighted-average  borrowings  under the Revolving  Credit Facility  approximated
$14.2 million,  with actual borrowings  ranging from a low of no borrowings to a
high of $42.0 million. Net cash flows provided from operating activities for the
year ended March 31, 2000 were $18.9  million,  an increase of $8.6 million from
$10.3 million for the year ended March 31, 1999. This increase was primarily due
to the combination of increased revenues and improved profit margins.

    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


                                       22
<PAGE>

Company's  ability to make loans or advances  and pay  dividends,  except  that,
among other  things,  NBC may pay  dividends to the Company (i) after August 15,
2003 in an amount not to exceed the amount of  interest  required  to be paid on
the Senior Discount  Debentures and (ii) to pay corporate  overhead expenses not
to exceed  $250,000  per year and any taxes due by 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  to pay  dividends  or make  other  Restricted  Payments  to  their
respective  stockholders.  Such  restrictions  are not  expected  to affect  the
Company's ability to meet its cash obligations.

    As of March  31,  2000,  NBC  could  borrow  up to $38.5  million  under the
Revolving Credit Facility. The Revolving Credit Facility was unused at March 31,
2000.  Additionally,  in  conjunction  with the  Triro,  Inc.  acquisition,  NBC
established  an  irrevocable  standby letter of credit for $52,000 which expired
June 2, 2000.  Amounts available under the Revolving Credit Facility may be used
for working  capital  and  general  corporate  purposes  (including  up to $10.0
million for letters of credit),  subject to certain limitations contained in the
Senior Credit Facility.

    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, planned capital expenditures and internal growth for the
foreseeable future. Future acquisitions,  if any, may require additional debt or
equity financing.

SEASONALITY

    The Company's  wholesale and bookstore  operations  experience  two distinct
selling  periods and the wholesale  operations  experience  two distinct  buying
periods.  The peak selling periods for the wholesale  operations  occur prior to
the beginning of each school semester in August and December. The buying periods
for the wholesale  operations  occur at the end of each school  semester in late
December and May. The primary selling  periods for the bookstore  operations are
in September  and January.  In fiscal 2000,  approximately  42% of the Company's
annual revenues  occurred in the second fiscal quarter  (July-September),  while
approximately 30% of the Company's annual revenues occurred 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
semester,  in May and December,  as a result of the buying periods.  The Company
funds its working  capital  requirements  primarily  through a revolving  credit
facility, which historically has been repaid with cash provided from operations.

IMPACT OF INFLATION

    The Company's  results of operations  and financial  condition are presented
based upon  historical  costs.  While it is difficult to accurately  measure the
impact of inflation due to the imprecise nature of the estimates  required,  the
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 would not be adversely affected.


                                       23
<PAGE>

"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 about future operating results, are forward-looking  statements
within the meaning of the Reform Act. Such  forward-looking  statements  involve
risks, uncertainties and other factors which may cause the actual performance or
achievements of the Company to be materially  different from any future results,
performance  or  achievements  expressed  or  implied  by  such  forward-looking
statements.  For those statements, the Company claims the protection of the safe
harbor for  forward-looking  statements  contained  in the Reform  Act.  Several
important factors could affect the future results of the Company and could cause
those results to differ  materially from those expressed in the  forward-looking
statements  contained  herein.  The factors that could cause  actual  results to
differ  materially  include,  but are not limited to, the  following:  increased
competition; ability to integrate recent acquisitions; loss or retirement of key
members of management; increases in the Company's cost of borrowing or inability
or unavailability of additional debt or equity capital;  inability to purchase a
sufficient  supply of used  textbooks;  changes in  pricing  of new and/or  used
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.


                                       24
<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 $222.6  million in
long-term  debt and capital  lease  obligations  outstanding  at March 31, 2000,
approximately  $55.6 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 to effectively convert the Company's 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 B Term  Loans  have been  effectively  converted  into debt with a
fixed rate of 5.815% plus an applicable  margin (as defined in the Senior Credit
Facility  Agreement).  The notional  amount under each agreement as of March 31,
2000  was  approximately  $27.8  million.  Such  notional  amounts  are  reduced
periodically by amounts equal to the scheduled principal payments on the Tranche
A and B Term 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.

    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, 2000):
<TABLE>
<CAPTION>

                                                                   Variable to Fixed
                    Fixed Rate Debt       Variable Rate Debt       Interest Rate Swaps
                 ---------------------- ---------------------  --------------------------
                               Weighted              Weighted                  Weighted
                                Average               Average                  Average
                  Principal    Interest  Principal   Interest    Notional     Pay/Receive
                 Cash Flows      Rate   Cash Flows(1)  Rate       Amounts        Rates
                 ------------  --------  ------------ -------  -------------  -----------
Fiscal Year Ended
March 31:
<S>            <C>             <C>     <C>            <C>     <C>            <C>
  2001         $     78,005    9.43%   $ 4,437,500    9.07%   $ 53,471,354   5.81% / 6.68%
  2002               63,230    9.48%     6,287,500    9.52%     48,170,833   5.81% / 7.11%
  2003               45,892    9.53%     6,800,000    9.52%     41,413,542   5.81% / 7.10%
  2004               25,950    9.57%     8,475,000    9.55%     12,275,000   5.81% / 7.07%
  2005               28,881    9.57%    11,187,500    9.68%              -              -
  Thereafter    186,434,993    9.71%    18,437,500    9.75%              -              -
                -----------  -------  ------------  -------  -------------  -------------
 Total         $186,676,951    9.60%   $55,625,000    9.46%   $155,330,729   5.81% / 6.96%
                ===========  =======  ============  =======  =============  =============

Fair Value     $124,703,075       -    $55,625,000       -    $  1,735,657              -
               ============           ============           =============
</TABLE>

(1)     Principal  cash flows  represent  scheduled  principal  payments and are
        adjusted for  anticipated  excess cash flow  payments (as defined in the
        Credit  Agreement  underlying the Senior Credit  Facility) to be applied
        toward  principal  balances.  For Fiscal 2000,  there was no excess cash
        flow payment obligation.


                                       25
<PAGE>
             ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Index to Consolidated Financial Statements of NBC Acquisition Corp.
for the Years Ended March 31, 2000, 1999 and 1998

Independent Auditors' Report..................................................27

Consolidated Balance Sheets...................................................28

Consolidated Statements of Operations.........................................29

Consolidated Statements of Stockholders' Equity (Deficit).....................30

Consolidated Statements of Cash Flows.........................................31

Notes to Consolidated Financial Statements....................................32



                                       26
<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, 2000 and 1999, and the related
consolidated statements of operations,  stockholders' equity (deficit), and cash
flows for each of the three  years in the period  ended  March 31,  2000.  These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility is to express an opinion on the financial statements based on our
audits.

    We conducted our audits in  accordance  with  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, 2000 and 1999,  and the results of their  operations
and their cash flows for each of the three  years in the period  ended March 31,
2000 in conformity with accounting  principles  generally accepted in the United
States of America.




DELOITTE & TOUCHE LLP

Lincoln, Nebraska
May 16, 2000


                                       27
<PAGE>
NBC ACQUISITION CORP.

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

                                                        March 31,
                                                    2000          1999
                                                -------------  ------------
ASSETS

CURRENT ASSETS:
  Cash and cash equivalents                     $  4,450,887  $  4,059,660
  Receivables                                     24,248,183    20,838,546
  Inventories                                     61,809,630    49,878,561
  Recoverable income tax                                   -         4,902
  Deferred income taxes                            1,598,793     1,468,156
  Prepaid expenses and other assets                  427,302       376,748
                                                ------------   -----------
    Total current assets                          92,534,795    76,626,573

PROPERTY AND EQUIPMENT                            36,558,620    31,212,534
  Less accumulated depreciation                  (10,797,795)   (8,024,049)
                                                ------------   -----------
                                                  25,760,825    23,188,485

GOODWILL AND OTHER INTANGIBLES,
net of amortization                               46,073,844    38,778,577

OTHER ASSETS                                       4,676,047     4,313,208
                                                ------------   -----------

                                                $169,045,511  $142,906,843
                                                ============  ============

LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES:
  Accounts payable                              $ 16,145,566  $  9,200,870
  Accrued employee compensation and benefits       6,301,111     3,825,893
  Accrued interest                                 1,349,224     1,426,509
  Accrued expenses                                   819,010       681,725
  Income tax payable                                 553,893             -
  Deferred revenue                                   552,251       376,556
  Current maturities of long-term debt             4,456,324     5,644,838
  Current maturities of capital lease obligations     59,181             -
                                                ------------  ------------
    Total current liabilities                     30,236,560    21,156,391

LONG-TERM DEBT, net of current maturities        217,971,490   214,259,143

CAPITAL LEASE OBLIGATIONS, net of
current maturities                                    64,856             -

OTHER LONG-TERM LIABILITIES                          202,231       191,074

COMMITMENTS (Note K)

STOCKHOLDERS' DEFICIT:
  Class A common stock, voting,
  authorized 5,000,000 shares of $.01 par value;
  issued and outstanding 1,248,513 and 957,792
  shares at March 31, 2000 and 1999,
  respectively                                        12,485         9,578
Additional paid-in capital                        64,525,477    49,275,087
Notes receivable from stockholders                  (606,395)     (332,630)
Accumulated deficit                             (143,361,193) (141,651,800)
                                                ------------  ------------
Total stockholders' deficit                      (79,429,626)  (92,699,765)
                                                ------------  ------------
                                                $169,045,511  $142,906,843
                                                ============  ============

See notes to consolidated financial statements.


                                       28
<PAGE>

NBC ACQUISITION CORP.

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


                                                Year Ended March 31,
                                           2000           1999         1998
                                       -----------    -----------   -----------

REVENUES, net of returns              $265,290,230   $217,516,312  $198,772,938

COSTS OF SALES                         164,921,525    137,709,320   125,632,403
                                       -----------   ------------   -----------

  Gross profit                         100,368,705     79,806,992    73,140,535

OPERATING EXPENSES:
  Selling, general and administrative   65,581,709     51,546,776    47,080,571
  Depreciation                           3,096,013      2,392,701     2,531,181
  Amortization                           9,319,993      6,148,971     5,626,334
  Stock compensation costs                       -              -     8,277,748
                                       -----------   ------------   -----------

                                        77,997,715     60,088,448    63,515,834
                                       -----------   ------------   -----------

INCOME FROM OPERATIONS                  22,370,990     19,718,544     9,624,701

OTHER EXPENSES (INCOME):
  Interest expense                      23,398,521     22,854,164    11,937,787
  Interest income                         (355,935)      (351,231)     (328,750)
  Other income                          (1,478,022)    (1,099,766)     (511,812)
                                       -----------   ------------   -----------

                                        21,564,564     21,403,167    11,097,225
                                       -----------   ------------   -----------

INCOME (LOSS) BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM                     806,426     (1,684,623)   (1,472,524)

INCOME TAX EXPENSE                       2,515,819        574,482        58,188
                                       -----------   ------------   -----------

LOSS BEFORE EXTRAORDINARY ITEM          (1,709,393)    (2,259,105)   (1,530,712)

EXTRAORDINARY LOSS ON
EXTINGUISHMENT OF DEBT
(net of income tax benefit
of $2,460,238)                                   -              -    (4,020,893)
                                       -----------   ------------   -----------

NET LOSS                              $ (1,709,393)  $ (2,259,105) $ (5,551,605)
                                       ===========   ============   ===========

EARNINGS (LOSS) PER SHARE:
  Basic:
    Loss before extraordinary item    $      (1.48)  $      (2.37) $      (0.59)
    Extraordinary loss on
    extinguishment of debt                       -              -         (1.57)
                                       -----------   ------------   -----------
Net Loss                              $      (1.48)  $      (2.37) $      (2.16)
                                       ===========   ============   ===========

  Diluted:
    Loss before extraordinary item    $      (1.48)  $      (2.37) $      (0.59)
    Extraordinary loss on
    extinguishment of debt                       -              -         (1.57)
                                       -----------   ------------   -----------
Net loss                              $      (1.48)  $      (2.37) $      (2.16)
                                       ===========   ============   ===========


See notes to consolidated financial statements.


                                       29
<PAGE>

 NBC ACQUISITION CORP.
<TABLE>
<CAPTION>

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------------------------------------------------------------

                                                                Notes         Retained
                              Common   Common   Additional   Receivable       Earnings
                              Stock    Stock     Paid-in        From        (Accumulated
                                A        B       Capital     Stockholders      Deficit)       Total
                            --------  --------  -----------  ------------   -----------    -----------
<S>                            <C>      <C>       <C>          <C>              <C>         <C>
BALANCE,
April 1, 1997               $ 27,519  $   481   $30,972,000 $ (236,110)   $     933,289  $ 31,697,179

  Issuance of Class A
  Common Stock                    39        -       147,111          -                -       147,150

  Repurchases of common
  stock and warrants         (27,558)    (481)  (31,119,111)         -     (134,774,379) (165,921,529)

  Proceeds from
  stock issued
  in Recapitalization          9,530        -    49,993,150          -                -    50,002,680

  Costs of Recapitalization        -        -      (968,015)         -                -      (968,015)

  Payment on stockholder note      -        -             -     24,310                -        24,310

  Net loss                         -        -             -          -       (5,551,605)   (5,551,605)
                            --------  -------    ----------  ---------    -------------   -----------

BALANCE, March 31, 1998        9,530        -    49,025,135   (211,800)    (139,392,695)  (90,569,830)

  Issuance of Class A
  Common Stock                    48        -       249,952   (225,000)               -        25,000

  Payment on stockholder note      -        -             -    104,170                -       104,170

  Net loss                         -        -             -          -       (2,259,105)   (2,259,105)
                            --------  -------    ----------  ---------    -------------   -----------

BALANCE, March 31, 1999        9,578        -    49,275,087   (332,630)    (141,651,800)  (92,699,765)

  Issuance of Class A
  Common Stock                 2,907        -    15,250,390   (273,765)               -    14,979,532

  Net loss                         -        -             -          -       (1,709,393)   (1,709,393)
                            --------  -------    ----------  ---------    -------------   -----------

BALANCE, March 31, 2000     $ 12,485  $     -   $64,525,477 $ (606,395)   $(143,361,193) $(79,429,626)
                            ========  =======    ==========  =========    =============   ===========

</TABLE>
See notes to consolidated financial statements.


                                       30
<PAGE>

NBC ACQUISITION CORP.
<TABLE>
<CAPTION>

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

                                                Year Ended March 31,
CASH FLOWS FROM OPERATING ACTIVITIES:       2000           1999              1998
                                       ------------    ------------      -----------
<S>                                   <C>             <C>              <C>
Net loss                              $ (1,709,393)   $ (2,259,105)    $ (5,551,605)
Adjustments to reconcile net
loss to net cash flows from
operating activities:
  Depreciation                           3,096,013       2,392,701        2,531,181
  Amortization of intangibles           11,017,964       7,802,928        9,336,363
  Original issue debt discount
  amortization                           5,603,246       5,034,486        3,139,848
  Loss on disposal of assets                18,044          89,800          264,285
  Deferred income taxes                   (773,000)       (883,200)        (902,458)
  Changes in operating assets and
  liabilities, net of effect of
  acquisitions:
  Receivables                           (3,189,434)        368,840       (6,060,871)
  Inventories                           (4,665,275)         18,827       (4,522,322)
  Recoverable income tax                   319,630       4,369,146       (3,799,673)
  Prepaid expenses and other assets         84,054        (123,460)         140,573
  Other assets                             797,705      (1,019,776)           5,852
  Accounts payable                       5,318,621      (5,297,973)         955,350
  Accrued employee compensation
    and benefits                         2,231,461          28,651          837,167
  Accrued interest                         (77,285)       (362,038)         522,667
  Accrued expenses                         133,125         182,985          145,798
  Income taxes payable                     552,928               -                -
  Deferred revenue                         175,695         (87,361)         463,917
  Other long-term liabilities               11,157          40,470         (348,082)
                                       -----------      ----------        ---------

    Net cash flows from operating
    activities                          18,945,256      10,295,921       (2,842,010)

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property and equipment   (3,542,471)     (2,842,036)      (3,689,571)
  Bookstore acquisitions, net of
    cash acquired                      (26,072,155)     (2,085,881)      (1,231,825)
  Acquisition of other businesses                -               -       (6,481,832)
  Proceeds from sale of property
    and equipment                           65,197          97,586           64,754
  Software development costs              (694,830)       (236,328)        (209,535)
                                       -----------      ----------        ---------

    Net cash flows from
    investing activities               (30,244,259)     (5,066,659)     (11,548,009)

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from  issuance of long-term
    debt                                         -               -      214,997,320
  Deferred  financing costs                (32,478)       (377,966)     (14,443,839)
  Principal  payments on long-term
    debt                                (3,079,413)     (1,327,696)     (81,463,655)
  Principal payments on capital lease
    obligations                           (177,411)              -                -
  Proceeds  from issuance of
    common stock                        14,979,532          25,000       49,034,665
  Net increase (decrease) in
    revolving credit facility                    -      (5,400,000)       5,400,000
  Payment of merger  consideration               -               -     (163,328,856)
  Proceeds from payment on notes
   receivable from stockholders                  -         104,170           24,310
                                       -----------      ----------       ----------

    Net cash flows from financing
    activities                          11,690,230      (6,976,492)      10,219,945
                                       -----------      ----------       ----------

NET INCREASE (DECREASE) IN CASH
 AND CASH EQUIVALENTS                      391,227      (1,747,230)      (4,170,074)

CASH AND CASH EQUIVALENTS,
  Beginning of year                      4,059,660       5,806,890        9,976,964
                                       -----------      ----------       ----------

CASH AND CASH EQUIVALENTS,
  End of year                         $  4,450,887    $  4,059,660     $  5,806,890
                                       ===========      ==========       ==========


SUPPLEMENTAL DISCLOSURES OF
CASH FLOWS INFORMATION:
  Cash paid (refunded) during
  the year for:
    Interest                          $ 16,174,589    $ 16,527,759     $ 13,518,646
    Income taxes                         2,424,436      (2,911,464)       2,300,081

Noncash investing and
financing activities:
    Notes receivable from
      shareholders  recorded
      upon issuance of common stock   $    273,765    $    225,000     $          -
    Stock repurchases  accrued in
      accounts  payable                          -               -        2,592,673
    Common Stock issued for business
      acquisitions                               -               -          147,150
</TABLE>

See notes to consolidated financial statements.
                                       31
<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 $28.1 million.

    The  Company  does  not  conduct  significant   activities  apart  from  its
investment in NBC.  Operational matters discussed in this report,  including the
acquisition  of  retail  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 by providing used textbooks to college bookstore
operators,  by operating its own college bookstores and by providing proprietary
college bookstore information systems and consulting services.

    RECAPITALIZATION:  On February 13, 1998,  the Company  consummated  a Merger
Agreement  among  NBC  Merger  Corp.  (a newly  created,  indirect  wholly-owned
subsidiary  of HWH  Capital  Partners,  LP.  ["HWH"]),  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.
Significant  components of the  Recapitalization,  together with the  applicable
accounting effects, were as follows:

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

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

      (iii) The Company and NBC  obtained  approximately  $215.0  million in new
            debt financing and retired substantially all of NBC's existing debt.
            The early  extinguishment of debt resulted in an extraordinary  loss
            on the transaction.

      (iv)  NBC agreed to purchase  management's  outstanding  options under the
            Company's  1995 Stock  Incentive  Plan for a cash payment in lieu of
            the  options.   This  resulted  in  stock  based   compensation   of
            approximately  $8.3  million for the year ended March 31,  1998.  In
            addition,  the Company agreed to purchase all  outstanding  warrants
            for  approximately  $16.7  million,  which was charged to additional
            paid-in capital and retained earnings.

      (v)   The Company reacquired the outstanding shares of Class A and Class B
            Common  Stock  of  certain  shareholders  for  approximately  $149.2
            million.  This  reacquisition  of  shares  was  accounted  for  as a
            treasury stock transaction, and such reacquired shares were retired.

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

                                       32
<PAGE>

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.

    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.

    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 wholesale operations are determined on the weighted average cost
method. Other inventories are determined on the first-in, first-out cost method.

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

    SOFTWARE  DEVELOPMENT  COSTS:  On March 4, 1998 the  American  Institute  of
Certified Public Accountants  issued Statement of Position 98-1,  ACCOUNTING FOR
THE COSTS OF COMPUTER  SOFTWARE  DEVELOPED OR OBTAINED FOR INTERNAL  USE,  which
provides guidance on accounting for the costs of computer software  developed or
obtained  for internal use and is  effective  for fiscal years  beginning  after
December 15, 1998.  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 retail bookstores
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 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. As a result,  there was no significant impact on the
Company's  financial  position and results of operations from the early adoption
of Statement of Position 98-1 in fiscal 1998.

    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 net revenues.  Software costs capitalized
pertaining  to WinPRISM,  the  Company's  new  Windows-based  product  which was
installed at four test sites in fiscal 2000 with three more sites slated for the
first quarter of fiscal 2001, approximated $0.4 million and $0.2 million for the
fiscal  years  ended  March 31,  2000 and 1999,  respectively.  This  product is
anticipated  to be  available  for  general  release  to the public in the third
quarter of fiscal 2001.  During fiscal 2000,  the Company also  capitalized  and
amortized  certain costs associated with the development of WebPRISM,  which was
licensed to  TheCampusHub.com,  Inc. subsequent to March 31, 2000 (see Note R to
the consolidated financial statements).

                                       33
<PAGE>

    GOODWILL AND INTANGIBLE ASSETS:  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.  The Company
monitors events and changes in  circumstances  which may require a review of the
carrying  value of goodwill at each  consolidated  balance  sheet date to assess
recoverability  based on estimated  undiscounted  future  operating  cash flows.
Impairments are recognized in operating  results when a permanent  diminution in
value  occurs  based on fair value.  The  assessment  of the  recoverability  of
goodwill  will be  impacted if  estimated  future  operating  cash flows are not
achieved.  Goodwill is amortized on a  straight-line  basis over periods ranging
from 3-15 years. Covenants not to compete are amortized on a straight-line basis
over the term of the agreements.

    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.

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

    FAIR VALUE OF  FINANCIAL  INSTRUMENTS:  The  carrying  amounts of  financial
instruments  including  cash  and cash  equivalents,  accounts  receivable,  and
accounts payable  approximate fair value as of March 31, 2000 and 1999,  because
of the  relatively  short  maturity  of these  instruments.  The  fair  value of
long-term debt,  including the current maturities and revolving credit facility,
was  approximately  $180.3  million and $203.1  million as of March 31, 2000 and
1999, respectively,  as determined by quoted market value. The fair value of the
interest rate swap agreements (see note H) approximated  $1.7 million and $(0.6)
million as of March 31, 2000 and 1999 using quotes from  brokers and  represents
the  Company's  gain (loss) on settlement  if the existing  agreements  had been
settled on that date.

    STOCK  BASED   COMPENSATION:   The  Company  accounts  for  its  stock-based
compensation  under  provisions of Accounting  Principles  Board Opinion No. 25,
ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES ("APB 25").

    INCOME  TAXES:  The Company  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:  The  Company  has no sources of other  comprehensive
income. Therefore, comprehensive income consists solely of net income.

    ACCOUNTING  STANDARDS NOT ADOPTED:  In June 1998,  the Financial  Accounting
Standards Board issued SFAS No. 133,  ACCOUNTING FOR DERIVATIVE  INSTRUMENTS AND
HEDGING  ACTIVITIES,  which establishes  accounting and reporting  standards for
derivative  instruments,  including certain derivative  instruments  embedded in
other contracts,  and for hedging  activities.  The Statement becomes effective,
and will be adopted by the Company,  in the first  quarter of fiscal  2002.  The
impact on the  Company's  financial  position and results of  operations  is not
expected to be material.

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


                                       34
<PAGE>

C.  ACQUISITIONS

    Effective  November 12, 1999, NBC acquired certain assets and liabilities of
Michigan  College Book  Company,  Inc. and Ned's  Berkeley  Book  Company,  Inc.
(collectively  referred  to  as  "Ned's  Bookstores"),  an  independent  college
bookstore   operation  with  11  retail  bookstores   located  in  Michigan  and
California, for approximately $10.2 million, net of cash acquired. NBC accounted
for this acquisition  under the purchase method of accounting.  Excess cost over
fair  value of net  assets  acquired  of  approximately  $7.8  million  has been
recorded as goodwill and is being  amortized over a period of three years.  Such
amortization  period was assigned based upon the factors outlined in APB Opinion
No. 17. The results of operations for Ned's Bookstores have been included in the
consolidated  results  of  the  Company  from  the  date  of  acquisition.   The
acquisition  of Ned's  Bookstores  was  funded in part  through  a $4.6  million
capital  contribution  from the  Company  to NBC.  The  Company  raised the $4.6
million in capital through the sale of 87,922 shares of its Class A Common Stock
to certain  shareholders,  including HWH Capital  Partners,  L.P. and members of
senior  management  on  December 6, 1999.  The  remaining  funding was  provided
through available cash funds.

    Effective June 4, 1999, NBC acquired all of the outstanding  common stock of
Triro,  Inc.,  an  independent   college  bookstore  operation  with  17  retail
bookstores  located in Texas, New Mexico, and Arizona,  for approximately  $15.0
million,  net of cash  acquired.  NBC accounted for this  acquisition  under the
purchase  method  of  accounting.  Excess  cost over  fair  value of net  assets
acquired of  approximately  $9.3  million has been  recorded as goodwill  and is
being  amortized  over a period of three  years.  Such  amortization  period was
assigned  based upon the factors  outlined in APB Opinion No. 17. The results of
operations for Triro, Inc. have been included in the consolidated results of the
Company from the date of acquisition.  The acquisition of Triro, Inc. was funded
in part through a $10.3 million  capital  contribution  from the Company to NBC.
The  Company  raised the $10.3  million in capital  through  the sale of 197,001
shares  of its  Class A Common  Stock to  certain  shareholders,  including  HWH
Capital Partners,  L.P. and members of senior management.  The remaining funding
was provided  through  available cash funds and borrowings under NBC's revolving
credit facility.

     The following table summarizing  unaudited pro forma financial  information
assumes the  acquisitions  discussed above had occurred at the beginning of each
period  presented.   The  unaudited  pro  forma  financial  information  is  not
necessarily  indicative of what the actual results of operations would have been
had the  acquisitions  occurred at the beginning of each period  presented,  nor
does it purport to indicate the results of future operations.


                                       Year Ended March 31,
                                       2000          1999
                                  ------------- --------------
   Pro Forma Information:
     Revenues, net of returns     $ 278,137,891  $ 259,092,006
     Net loss                        (2,807,962)    (5,400,508)
     Earnings (loss) per share:
       Basic                              (2.25)         (4.36)
       Diluted                            (2.25)         (4.36)


    Additionally,  NBC from time to time  acquires  bookstore  operations  which
generally  are minimal in their  impact to the Company.  The purchase  generally
involves  paying cash for the inventory  and fixed assets,  as well as an amount
for goodwill. Goodwill recorded in such transactions is generally amortized on a
straight-line  basis over a period of three years.  In fiscal 2000 and 1999, NBC
acquired two and six such bookstore operations, respectively.


                                       35
<PAGE>

D.  RECEIVABLES

    Receivables are summarized as follows:

                                                      MARCH 31,
                                              ---------------------------
                                                  2000           1999
                                              -----------     -----------
   Trade  receivables,  less  allowance for
     doubtful accounts of $175,899
     and $165,899 at March 31, 2000
     and 1999, respectively                   $12,935,801     $11,112,281
   Receivables from book publishers for
     returns                                    7,589,663       5,934,871
   Advances for book buy-backs                  1,738,587       1,721,953
   Computer finance agreements, current
     portion                                      145,910          95,999
   Other                                        1,838,222       1,973,442
                                               ----------      ----------
                                              $24,248,183     $20,838,546
                                               ==========      ==========


   Trade receivables include the effect of estimated product returns. The amount
of estimated  product returns at both March 31, 2000 and 1999 was  approximately
$3.3 million.

E.  INVENTORIES

    Inventories are summarized as follows:

                                                       MARCH 31,
                                              ---------------------------
                                                 2000            1999
                                              -----------     -----------
   Wholesale                                  $25,413,484     $25,889,722
   College bookstores                          31,137,643      21,400,003
   Other                                        5,258,503       2,588,836
                                               ----------      ----------
                                              $61,809,630     $49,878,561
                                               ==========      ==========

    Wholesale  inventories include the effect of estimated product returns.  The
amount  of  estimated  product  returns  at both  March  31,  2000  and 1999 was
approximately $1.6 million.

F.  PROPERTY AND EQUIPMENT

    A summary of the cost of property and equipment follows:

                                                        MARCH 31,
                                               --------------------------
                                                  2000            1999
                                               ----------      ----------
   Land                                       $ 2,412,818     $ 2,385,293
   Buildings and improvements                  14,443,622      13,714,392
   Leasehold improvements                       5,912,012       4,756,844
   Furniture and fixtures                       4,571,529       3,710,158
   Information systems                          8,352,241       5,841,875
   Automobiles and trucks                         433,956         362,966
   Machinery                                      425,295         344,531
   Projects in process                              7,147          96,475
                                               ----------      ----------
                                              $36,558,620     $31,212,534
                                               ==========      ==========


                                       36
<PAGE>

G.  GOODWILL AND OTHER INTANGIBLES

    Goodwill and intangible assets and related amortization are as follows:

                                                MARCH 31,
                                        --------------------------
                                           2000            1999
                                        ----------      ----------
   Goodwill                            $53,901,655     $37,624,132
   Covenants not to compete                150,000               -
   Debt issue costs                     14,854,282      14,821,804
                                        ----------      ----------
                                        68,905,937      52,445,936
   Less:  accumulated amortization      22,832,093      13,667,359
                                        ----------      ----------
                                       $46,073,844     $38,778,577
                                        ==========      ==========

H.  LONG-TERM DEBT

    On February 13,  1998,  the Company  obtained  new  financing as part of the
Recapitalization  (See Note A). Substantially all of the Company's previous debt
facilities  were  paid off with the  proceeds  of the new  financing.  The early
retirement of the previous debt facilities resulted in an extraordinary loss for
the prepayment fees and unamortized  discount on the subordinated  notes as well
as the write-off of the debt issue costs on the retired debt.  The new financing
included  a  bank-administered   senior  credit  facility  (the  "Senior  Credit
Facility")  provided 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").

    The Revolving Credit Facility expires on March 31, 2004.  Availability under
the Revolving  Credit  Facility is determined by the  calculation of a borrowing
base, which at any time is equal to a percentage of eligible accounts receivable
and inventory. The calculated borrowing base at March 31, 2000 was approximately
$38.5 million. The Revolving Credit Facility was unused at March 31, 2000.

    The interest rate on the Senior Credit  Facility is prime plus an applicable
margin of up to 1.50%  or, on  Eurodollar  borrowings,  Eurodollar  rate plus an
applicable margin of up to 2.50%.  Additionally,  there is a 0.5% 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,  2000 and 1999 were  approximately  $14.2  million  and $12.0  million at an
average rate of 9.3% and 9.6%, 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") shall be applied initially towards  prepayment of the term loans and
then utilized to  permanently  reduce  commitments  under the  Revolving  Credit
Facility.  As of March 31, 2000,  there was no excess cash flow payment due. The
fiscal 1999 excess cash flow payment of approximately $3.6 million due September
29, 1999 was waived by the lenders.

    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 proceeds of the Senior Discount  Debentures
were discounted in the amount of approximately $31.0 million and will accrete in
value at the rate of 10.75% compounded  semiannually until February 15, 2003, at
which time interest payments will begin.

                                       37
<PAGE>

    Borrowings consist of the following:

                                                       MARCH 31,
                                              --------------------------
                                                  2000           1999
                                              -----------     ----------
   Tranche A Loan, due March 31, 2004,
     quarterly principal payments, plus
     interest at a floating rate based on
     Eurodollar rate plus 2.25% (8.46% and
     7.25% at March 31, 2000 and 1999,
     respectively)                           $ 24,000,000    $ 26,562,500
   Tranche B Loan, due March 31, 2006,
     quarterly principal payments, plus
     interest at a floating rate based on
     Eurodollar rate plus 2.50% (8.71% and
     7.50% at March 31, 2000 and 1999,
     respectively)                             31,625,000      32,125,000
   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
     $19,750,100 and $25,353,346
     at March 31, 2000 and 1999,
     respectively                              56,249,900      50,646,654
   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%                 552,914         569,827
                                             ------------    ------------
                                              222,427,814     219,903,981
   Less current maturities                     (4,456,324)     (5,644,838)
                                             ------------    ------------
                                             $217,971,490    $214,259,143
                                             ============    ============

    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) after
August 15, 2003 in an amount not to exceed the amount of interest required to be
paid on the  Senior  Discount  Debentures  and  (ii) to pay  corporate  overhead
expenses not to exceed $250,000 per year and any taxes due by 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  to pay  dividends  or make  other  Restricted  Payments  to  their
respective stockholders.

    During fiscal 1999, NBC entered into separate five-year  amortizing interest
rate swap agreements with two financial institutions whereby NBC's variable rate
Tranche A and B Term  Loans  have been  effectively  converted  into debt with a
fixed rate of 5.815% plus the applicable  margin. The notional amount under each
agreement  was  approximately  $27.8  million at March 31, 2000.  Such  notional
amounts are reduced  periodically  by amounts equal to the  scheduled  principal
payments on the Tranche A and B Term Loans. NBC is exposed to credit loss in the
event  of  nonperformance  by the  counterparties  to  the  interest  rate  swap


                                       38
<PAGE>

agreements.  NBC  anticipates the  counterparties  will be able to fully satisfy
their  obligations  under the agreements.  NBC settled a previous  interest rate
swap agreement in February,  1998 as part of the  Recapitalization  at a cost of
approximately $0.5 million. Such cost is reflected in the consolidated statement
of operations as part of the extraordinary loss on extinguishment of debt.

    At March 31, 2000,  the aggregate  maturities of long-term debt for the next
five years were as follows:

   FISCAL YEAR
   -----------
   2001                               $4,456,324
   2002                                6,308,449
   2003                                6,823,317
   2004                                8,500,950
   2005                               11,216,381

I.  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 August, 2002 to January, 2010, are payable at
maturity, and bear interest at various rates from 5.25% to 6.04%.

J.  INCOME TAXES

    The provision (benefit) for income taxes consists of:

                                                YEAR ENDED MARCH 31,
                                       -------------------------------------
                                          2000           1999         1998
                                       ----------     ---------     --------
   Current:
     Federal                           $2,669,915    $1,258,891     $848,562
     State                                618,904       198,791      112,084
   Deferred                              (773,000)     (883,200)    (902,458)
                                       ----------    ----------     --------
                                       $2,515,819    $  574,482     $ 58,188
                                       ==========    ==========     ========

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

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

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

                                                 YEAR ENDED MARCH 31,
                                         -----------------------------------
                                           2000          1999         1998
                                         --------      --------      -------
   Statutory rate                          34.0%        (34.0)%       (34.0)%
   State income tax effect                 40.7           1.3          (4.0)
   Amortization in excess of
     purchase price over net assets
     acquired                             187.1          38.0          17.6
   Change in estimate of income tax
     liabilities                           31.0          21.9          17.1
   Other                                   19.2           6.9           7.3
                                         ------        ------        ------
                                          312.0%         34.1%          4.0%
                                         ======        ======        ======

                                       39
<PAGE>

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

                                                 MARCH 31,
                                          -----------------------
                                             2000          1999
                                          ----------    ---------
   Deferred income tax assets
   (liabilities), current:
     Vacation accruals                  $  420,483     $  372,749
     Inventory                             603,037        456,360
     Allowance for doubtful accounts        66,771         62,975
     Product returns                       618,637        618,637
     Other                                (110,135)       (42,565)
                                        ----------     ----------
                                         1,598,793      1,468,156
                                        ----------     ----------
   Deferred income tax assets,
   noncurrent:
     Deferred compensation agreements       76,767         72,532
     Book over tax goodwill
     amortization                        1,775,263        944,676

     Covenant not to compete             1,587,340      1,733,511
                                        ----------     ----------
                                         3,439,370      2,750,719
                                        ----------     ----------
                                        $5,038,163     $4,218,875
                                        ==========     ==========

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

K.  LEASE OBLIGATIONS

    The Company is obligated under various capital leases for certain  equipment
that expire at various dates through 2003. Capitalized leased equipment included
in property and equipment was approximately  $0.1 million at March 31, 2000, net
of accumulated amortization.

    The Company leases bookstore  facilities and data processing equipment under
noncancelable  operating  leases  expiring at various dates through fiscal 2023.
Certain of the leases are based on a percentage  of sales,  ranging from 3.0% to
11.0%.

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

                                          Capital      Operating
   Year                                   Leases         Leases
   ----                                 -----------    ---------
   2001                                $    67,904   $ 6,649,000
   2002                                     46,250     6,067,000
   2003                                     23,880     5,073,000
   2004                                          -     4,049,000
   2005                                          -     2,984,000
   Thereafter                                    -    10,661,000
                                       -----------   -----------
   Total minimum lease payments            138,034   $35,483,000
                                                     ===========
   Amount representing interest            (13,997)
                                       -----------
   Present value of minimum lease
     payments                          $   124,037
                                       ===========


    Total rent  expense for the years ended  March 31,  2000,  1999 and 1998 was
approximately  $8.2  million,  $6.2  million  and  $6.0  million,  respectively.
Percentage  rent expense for the years ended March 31, 2000,  1999, and 1998 was
approximately $1.8 million, $1.6 million and $1.5 million, respectively.


                                       40
<PAGE>

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, 2000,  1999, and 1998 were
approximately $0.8 million, $0.7 million and $0.7 million, respectively.

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 death,
resignation or termination, voluntary or involuntary. Interest is accrued at the
prime rate adjusted  semi-annually  on January 1 and July 1 and is compounded as
of March 31. The  liability for the deferred  compensation  is included in other
long-term liabilities.

N.  STOCK-BASED COMPENSATION

    The Company had three stock-based  compensation plans established to provide
for the granting of options to purchase  Class A Common Stock,  two of which are
in effect at March 31, 2000.  Details  regarding  each of the three plans are as
follows:

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


    1998  PERFORMANCE  STOCK OPTION PLAN - This plan,  which was adopted on June
30, 1998,  provides for the granting of options to purchase 52,000 shares of the
Company's Class A Common Stock to selected  members of senior  management of the
Company and its affiliates.  All options granted are intended to be nonqualified
stock options,  although the plan also provides for incentive stock options. The
Company will grant a portion of the available  options in fiscal years 1999-2002
upon the attainment of pre-established financial targets. Twenty-five percent of
the options  granted become  exercisable  immediately  upon  granting,  with the
remaining  options  becoming  exercisable in 25% increments  over the subsequent
three  years  on the  anniversary  of the date of  grant.  The  options  have an
exercise  price of not less than fair  market  value on the date the options are
granted and expire ten years from the date of grant.  At March 31,  2000,  there
were 42,470 options available for grant under the plan.

    1998 STOCK OPTION PLAN - This plan, which was also adopted on June 30, 1998,
provides for the granting of options to purchase  31,000 shares of the Company's
Class A Common  Stock to selected  employees,  officers,  and  directors  of the
Company and its affiliates.  All options granted are intended to be nonqualified
stock options,  although the plan also provides for incentive stock options. The
Company will grant such options at the  discretion of a committee  designated by
the Board of  Directors  (the  Committee).  Twenty-five  percent of the  options
granted become exercisable immediately upon granting, with the remaining options
becoming  exercisable in 25% increments  over the subsequent  three years on the
anniversary of the date of grant. Incentive stock options have an exercise price
of not less than fair market  value on the date the options are  granted,  while
the Committee determines the exercise price for nonqualified options,  which may
be below fair market value,  at the time of grant.  All options expire ten years
from the date of grant.  At March 31, 2000,  there were 6,306 options  available
for grant under the plan.


    No compensation  cost was recognized for the options granted to employees in
fiscal 2000 and 1999 as the exercise  price was greater than 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


                                       41
<PAGE>

on the date of grant.  Compensation cost related to stock-based compensation was
$8,277,748 for the year ended March 31, 1998.

    A summary of the  Company's  stock-based  compensation  activity  related to
stock  options  for each of the three  plans for the three years ended March 31,
2000 is as follows:

                                         Year Ended March 31,
                                                1998
                                       ---------------------
                                                    Weighted-
                                                    Average
                                                    Exercise
                                         Number      Price
                                       -----------  --------

1995 Stock Incentive Plan:
   Outstanding - beginning of year        170,000   $ 10.00
   Granted                                 30,000     10.00
   Expired/terminated                    (200,000)    10.00
   Exercised                                    -         -
                                       ----------  --------
   Outstanding - end of year                    -   $     -
                                       ==========  ========

      There were no options exercisable at March 31, 1998.

                                                  Year Ended March 31,
                                              2000                   1999
                                       -------------------  --------------------
                                                  Weighted-            Weighted-
                                                  Average              Average
                                                  Exercise             Exercise
                                         Number     Price     Number    Price
                                       ---------  --------  ---------- ---------

1998 Performance Stock Option Plan:
   Outstanding - beginning of year        9,530   $ 52.47           -   $     -
   Granted                                    -         -       9,530     52.47
   Expired/terminated                         -         -           -         -
   Exercised                                  -         -           -         -
                                       --------  --------  ---------- ---------
   Outstanding - end of year              9,530   $ 52.47       9,530   $ 52.47
                                       ========  ========  ========== =========

There  were  4,765 and 2,382  options  exercisable  at March 31,  2000 and 1999,
respectively,  with a weighted-average  exercise price per option of $52.47. All
options  outstanding  at March 31,  2000 have an  exercise  price of $52.47  per
option and a weighted-average remaining contractual life of 8.8 years.

                                                  Year Ended March 31,
                                               2000                   1999
                                       -------------------  --------------------
                                                  Weighted-            Weighted-
                                                  Average              Average
                                                  Exercise             Exercise
                                         Number    Price      Number    Price
                                       ---------  --------  ---------- ---------

1998 Stock Option Plan:
   Outstanding - beginning of year       13,200   $ 52.47           -   $     -
   Granted                               11,594     52.47      13,200     52.47
   Expired/terminated                      (100)    52.47           -         -
   Exercised                                  -         -           -         -
                                       --------  --------    --------  --------
   Outstanding - end of year             24,694   $ 52.47      13,200   $ 52.47
                                       ========  ========    ========  ========

There  were  9,448 and 3,300  options  exercisable  at March 31,  2000 and 1999,
respectively,  with a weighted-average  exercise price per option of $52.47. All
options  outstanding  at March 31,  2000 have an  exercise  price of $52.47  per
option and a weighted-average remaining contractual life of 9.1 years.


                                       42
<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 fiscal  1999 would have been
$8.85 per option. The weighted-average  grant-date fair value of options granted
under the 1998 Stock  Option  Plan in fiscal 2000 and 1999 would have been $9.26
and $8.64 per  option,  respectively.  The fair  value of  options  granted  was
estimated at the date of grant using a  Black-Scholes  option pricing model with
the following weighted-average assumptions:


                                Year Ended      Year Ended
                              March 31, 2000  March 31, 1999
                              --------------  ---------------

   Risk-free interest rate           6.06%         4.50%
   Dividend yield                        -             -
   Expected volatility               1.00%         1.00%
   Expected life (years)                 3             4



    The weighted-average grant-date fair value of options granted under the 1995
Stock  Incentive  Plan in fiscal 1998 was $42.47 per option.  The fair value was
determined  based  upon the  buy-out  price as part of the  Recapitalization  on
February 13, 1998.

    The pro forma  impact on net loss and diluted  loss per share of  accounting
for stock-based compensation using the fair value method required by SFAS 123 is
as follows:

                                           Year Ended March 31,
                                  2000            1999           1998
                             ---------------  -------------- --------------
   Net loss:
     As reported             $ (1,709,393)   $ (2,259,105)  $ (5,551,605)
     Pro forma                 (1,775,050)     (2,321,093)    (1,692,220)

  Diluted loss per share:
     As reported             $      (1.48)   $      (2.37)  $      (2.16)
     Pro forma                      (1.54)          (2.43)         (0.66)

O.  SEGMENT INFORMATION

    The following segment  reporting  information is provided in accordance with
SFAS  No.  131,   DISCLOSURES  ABOUT  SEGMENTS  OF  AN  ENTERPRISE  AND  RELATED
INFORMATION.

    The  Company's  operating  segments  are  determined  based  on the way that
management  organizes the segments for making operating  decisions and assessing
performance.   Management  has  organized  the  Company's  segments  based  upon
differences in products and services provided.  The Company has three reportable
segments:  wholesale operations,  college bookstore operations and complementary
services.  The wholesale  operations  segment consists primarily of selling used
textbooks  to college  bookstores,  buying  them back from  students  or college
bookstores at the end of each school semester and then reselling them to college
bookstores.  The college bookstore  operations segment encompasses the operating
activities of the  Company's 98 college  bookstores as of March 31, 2000 located
on or adjacent to college campuses.  The complementary services segment includes
book-related  services such as a centralized buying service,  distance education
materials, and computer hardware and software.


                                       43
<PAGE>

    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).  With  the  exception  of cash  and cash
equivalents,  certain receivables and other assets, and inventories, assets, net
interest expense,  taxes, and  extraordinary  item are not allocated between the
Company's  segments;  instead,  such  balances are  accounted for in a corporate
administrative division. The following table provides selected information about
profit or loss and assets on a segment basis for the three years ended March 31,
2000.
<TABLE>
<CAPTION>

                                                 College
                                   Wholesale    Bookstore   Complimentary
                                   Operations   Operations    Services       Total
                                  ------------ ------------ ------------ -------------
Year ended March 31, 2000:
<S>                                <C>          <C>          <C>          <C>
  External customer revenues       $ 89,999,597 $157,748,537 $ 17,542,096 $ 265,290,230
  Intersegment revenues              16,458,427      180,064    2,407,090    19,045,581
  Depreciation and amortization
  expense                               321,936    7,444,799    2,280,512    10,047,247
  Income (loss) before interest,
  taxes and extraordinary item       26,335,614    8,520,861   (2,884,333)   31,972,142
  Total assets                       28,636,070   34,829,430    5,950,258    69,415,758

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

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

</TABLE>
    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, 2000.

                                       44
<PAGE>
<TABLE>
<CAPTION>

                                                        Year Ended March 31,
                                                 2000         1999          1998
                                             ------------- ------------ -------------
 Revenues:
<S>                                          <C>           <C>           <C>
  Total for reportable segments               $284,335,811 $230,537,725  $210,777,759
  Elimination of intersegment revenues         (19,045,581) (13,021,413)  (12,004,821)
                                             ------------- ------------ -------------
    Consolidated total                        $265,290,230 $217,516,312  $198,772,938
                                             ============= ============ =============
Depreciation and Amortization Expense:
  Total for reportable segments               $ 10,047,247 $  5,385,052  $  3,844,891
  Corporate administration                       2,368,759    3,156,620     4,312,624
                                             ------------- ------------ -------------
    Consolidated total                        $ 12,416,006    8,541,672  $  8,157,515
                                             ============= ============ =============

Income Before Interest, Taxes and
Extraordinary Item:
  Total for reportable segments               $ 31,972,142 $ 27,502,613   $26,241,571
  Corporate administrative costs                (8,123,130)  (6,684,303)  (16,105,058)
                                              ------------ ------------ -------------
                                                23,849,012   20,818,310    10,136,513
  Interest expense, net                        (23,042,586) (22,502,933)  (11,609,037)
                                              ------------ ------------ -------------
    Consolidated income (loss) before taxes
    and extraordinary item                    $    806,426 $ (1,684,623) $ (1,472,524)
                                              ============ ============ =============

Total Assets:
  Total for reportable segments               $ 69,415,758 $ 56,727,198  $ 57,162,873
  Assets not allocated to segments:
    Receivables                                 20,977,765   17,572,090    17,414,958
    Recoverable income tax                               -        4,902     4,374,048
    Deferred income taxes                        1,598,793    1,468,156     1,183,529
    Property and equipment, net                 25,760,825   23,188,485    22,731,907
    Goodwill and other intangibles, net         46,073,844   38,778,577    44,866,800
    Other assets                                 4,791,000    3,653,180     2,798,270
    Other                                          427,526    1,514,255     1,612,869
                                              ------------ ------------ -------------
      Consolidated total                      $169,045,511 $142,906,843  $152,145,254
                                              ============ ============ =============
</TABLE>

    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

    Weighted-average shares outstanding for the years ended March 31, 2000, 1999
and  1998  were  1,152,325   shares,   954,059  shares  and  2,565,267   shares,
respectively. Options outstanding under the Company's stock option plans have no
impact on diluted  earnings per share as the  exercise  price of such options is
greater  that the  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, 2000 and 1999. There
were no stock options or warrants outstanding for the year ended March 31, 1998.

Q.  OTHER INCOME

    Other income is summarized as follows:
                                                   Year Ended March 31,
                                           2000            1999         1998
                                      -------------    ------------  -----------

    Reimbursed freight out             $   916,875     $   402,518    $ 253,523
    Equity in earnings (loss) of
     joint venture                        (101,709)        282,703       (7,616)
    Rental income                          224,723         122,975      210,942
    Commission income                      163,232         125,149       99,982
    Other                                  274,901         166,421      (45,019)
                                      ------------    ------------   ----------
                                       $ 1,478,022     $ 1,099,766    $ 511,812
                                      ============    ============   ==========


                                       45
<PAGE>

R.  SUBSEQUENT EVENT

    Subsequent to March 31, 2000, 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  providing
NBC the  opportunity to acquire 25% of the initial common shares  outstanding of
TheCampusHub.com,  Inc.; a management  services agreement effective for a period
of three years that  reimburses  NBC for certain direct costs incurred on behalf
of TheCampusHub.com, Inc. and also pays NBC $500,000 per year for certain shared
management  and  administrative  support;  and a  technology  sale  and  license
agreement that provides for NBC to license its E-commerce software  capabilities
to TheCampusHub.com, Inc. for $500,000 per year over a period of three years and
provides  TheCampusHub.com,  Inc.  with an  option  to  purchase  such  software
capabilities  from NBC during  that  three  year  period.  NBC's  Senior  Credit
Facility was amended in April, 2000 to provide for these transactions.


       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, 2000.

                                       46
<PAGE>


                                    PART III

          ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

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

         NAME           AGE         POSITION
         ----           ---         --------
   Robert B. Haas        52  Chairman and Director
   Douglas D. Wheat      49  Director
   Mark W. Oppegard      50  President/Chief Executive Officer, Secretary and
                               Director
   Alan G. Siemek        39  Vice President and Treasurer

   Barry S. Major        43  Chief Operating Officer, NBC
   William H. Allen      57  Vice President of Warehouse Operations, NBC
   Thomas A. Hoff        52  Vice President of Retail Division, NBC
   Michael J. Kelly      42  Vice President of E-commerce, NBC
   Larry R. Rempe        52  Vice President of Information Systems, NBC
   Kenneth F. Jirovsky   56  Vice President of Sales and Marketing, NBC
   Ardean A. Arndt       58  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  upon the
consummation  of the  Recapitalization.  Mr. Haas has been actively  involved in
private investments since 1978. He has served as Chairman of the Board and Chief
Executive  Officer of Haas Wheat  since 1995;  he has also been  Chairman of the
Board and Chief Executive Officer of Haas Wheat Advisory  Partners  Incorporated
since 1992 and Chairman of the Board of Haas & Partners  Incorporated since 1989
(each  of  which  is  a  private   investment  firm  specializing  in  leveraged
acquisitions).  Mr.  Haas serves as a director of  Specialty  Foods  Acquisition
Corporation,   Specialty  Foods   Corporation  (a  producer  of  specialty  food
products),  Sybron  International  Corporation,  AMN Healthcare,  Inc. and Walls
Holding Company, Inc. and is the Chairman of the Board of Playtex Products, Inc.
(a consumer products company).

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


    MARK W. OPPEGARD has served in the college  bookstore  industry for 30 years
(all of which have been with the Company  (since its  inception in 1995) and its
wholly-owned  subsidiary,  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  college  bookstore  operations.  He is
currently a director of  NACSCORP,  INC.,  a  distribution  company  serving the
college bookstore industry.


                                       47
<PAGE>

    ALAN G. SIEMEK was named Vice  President  and  Treasurer  of the Company and
Chief Financial Officer, Treasurer and Assistant Secretary of NBC in July, 1999.
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.
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 35 years
(of which 26 have been with the Company  (since its  inception  in 1995) and its
wholly-owned  subsidiary,   NBC)  and  has  been  Vice  President  of  Warehouse
Operations  for NBC since 1994.  Between  1974 and 1994,  Mr.  Allen served in a
series of positions,  including  assistant manager of the wholesale  operations.
Prior to joining  NBC in 1974,  Mr.  Allen was  employed by the  Missouri  Store
Company, a predecessor of MBS.

    THOMAS A. HOFF has served in the  college  bookstore  industry  for 13 years
(all of which have been with the Company  (since its  inception in 1995) and its
wholly-owned subsidiary, NBC) and has been Vice President of Retail Division for
NBC since 1992. Mr. Hoff served as an assistant to the Vice President of College
Bookstore Operations between 1987 and 1992.

    MICHAEL J. KELLY was named Vice  President of E-commerce of NBC in November,
1999.  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.

    LARRY R. REMPE has served in the  college  bookstore  industry  for 14 years
(all of which have been with the Company  (since its  inception in 1995) and its
wholly-owned subsidiary, 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 39
years (all of which have been with the Company (since its inception in 1995) and
its  wholly-owned  subsidiary,  NBC) and has been  Vice  President  of Sales and
Marketing for NBC since 1986.  Prior to 1986 Mr.  Jirovsky served in a series of
positions, including assistant manager of the wholesale operations.

    ARDEAN A. ARNDT has served in the college  bookstore  industry  for 15 years
(all of which have been with the Company  (since its  inception in 1995) and its
wholly-owned subsidiary, NBC) and has served as Vice President of Administration
and  Secretary  for NBC since 1985.  Between  1981 and 1985,  Mr. Arndt was Vice
President of Administration for Lincoln. Between 1966 and 1981, Mr. Arndt served
in various positions for Lincoln.


                                       48
<PAGE>

                        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 five other most highly compensated
executive  officers  earning in excess of $100,000 in annual salary and bonuses;
compensation paid to Directors; and employment contracts in place with executive
officers.


    The table  presented  below  summarizes  annual and long-term  compensation,
including stock compensation, 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 - President, Chief
Executive Officer and Director, NBC  2000     $230,769   $152,000       $     -     $ 2,180
                                     1999      197,808          -             -       2,985
                                     1998      176,539          -             -       3,017

Barry S. Major - Chief Operating
Officer, NBC                         2000      204,615    130,000             -       2,080
                                     1999       40,769     60,000         9,530           -
                                     1998            -          -             -           -

Alan G. Siemek - Chief Financial
Officer, Treasurer, and Assistant
Secretary, NBC                       2000      111,481    133,000         6,353       2,027
                                     1999            -          -             -           -
                                     1998            -          -             -           -

Larry R. Rempe - Vice President of
Information Systems, NBC             2000      122,385     50,000             -       2,276
                                     1999      106,846          -             -       3,092
                                     1998      102,846          -             -       3,017

Kenneth F. Jirovsky - Vice President
of Sales and Marketing, NBC          2000      103,385     60,000             -       2,516
                                     1999      100,923          -             -       3,376
                                     1998       98,923          -             -       3,017

William H Allen - Vice President of
Warehouse Operations, NBC            2000      103,385     60,000             -       2,516
                                     1999      100,923          -             -       3,376
                                     1998       85,923          -             -       3,521

</TABLE>

(1)     The stock  options  were  granted at an exercise  price of  $52.47/share
        ("Founder's  Price").  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 the exercise  price on the date
        of grant.

(2)     Consists of Company  matching  contributions  to the NBC Retirement Plan
        and life  insurance  premiums  paid by the  Company  on the  executive's
        behalf.

                                       49
<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, 2000:

<TABLE>
<CAPTION>

                 Options Granted During the Year Ended March 31, 2000

                            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      2000    Per Share     Date     Value (1)
------------------------------  ---------   --------- ---------  ---------   --------
<S>                                <C>       <C>       <C>        <C>        <C>
Alan G. Siemek - Chief Financial
Officer, Treasurer, and Assistant
Secretary, NBC                     6,353     54.8%     $ 52.47    07/01/09  $ 59,868

</TABLE>

(1)     Grant date present value was  determined  using a  Black-Scholes  option
        pricing model,  assuming a 5.68% risk-free  interest rate, 1.0% expected
        volatility, and an expected life of approximately 3.5 years.

    The following table provides  information  concerning each exercise of stock
options by certain executive officers of the Company during the year ended March
31, 2000 as well as the value of unexercised options as of March 31, 2000:

           Aggregated Option Exercises During the Year Ended March 31, 2000
                        and Option Value as of March 31, 2000

                                                       Number
                                                    of Securities    Value of
                                                     Underlying    Unexercised
                                                    Unexercised    in-the-Money
                                                     Options at     Options at
                                                   March 31, 2000 March 31, 2000
                                                   -------------  -------------
                                 Shares
                                Acquired     Value   Exercisable/   Exercisable/
            Name               on Exercise Realized Unexercisable  Unexercisable
------------------------------  ---------  -------- -------------  -------------

Barry S. Major - Chief
Operating Officer, NBC              -       $ -     4,765/4,765      $ - / $ -

Alan G. Siemek - Chief
Financial Officer, Treasurer,
and Assistant Secretary, NBC        -         -     1,588/4,765        - /-


COMPENSATION OF DIRECTORS

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



                                       50
<PAGE>

EMPLOYMENT AGREEMENTS

   The Company has  employment  agreements  expiring March 31, 2001 with Mark W.
Oppegard  and  eight  other  senior  executive  officers  of the  Company.  Such
agreements  (the  "Employment   Agreements")  with  the  aforementioned   senior
executive  officers (each, an "Executive")  provide for an annual base salary as
determined by the Board of Directors,  for incentive compensation based upon the
attainment of financial  objectives to be  established by the Board of Directors
(or a committee  thereof)  after  considering  the  recommendation  of the chief
executive  officer,  and for customary fringe benefits.  The amounts of salaries
are as follows: Mr. Oppegard, $237,500 per annum; Mr. Major, $210,000 per annum;
Mr. Siemek,  $155,000 per annum;  Mr. Rempe,  $150,000 per annum;  Mr. Jirovsky,
$105,000 per annum; and Mr. Allen, $105,000 per annum. The Employment Agreements
provide that their term will be  automatically  extended from year to year after
March 31, 2001, unless terminated upon specified notice by either party.

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

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

   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 HWH) will be required, to
sell their shares  ratably with,  and on the same terms and  conditions  as, the
other selling shareholders.


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


    The  information  in the  following  table sets forth the  ownership  of NBC
Acquisition Corp. Class A Common Stock by each person who beneficially owns more
than  5.0% of the  outstanding  shares  of the  Class A Common  Stock,  and each
director,  executive  officer,  and all directors and executive  officers of the
Company  treated  as a group who  beneficially  own shares of the Class A Common
Stock as of June 20, 2000. 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.


                                       51
<PAGE>


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

Class A Common Stock:
  Owning Greater Than 5% of Shares:
   HWH (2)                                               1,136,568      90.1%
                                                        ==========   ========

Ownership of Management:
  Robert B. Haas (2)                                     1,136,568      90.1%
  Mark W. Oppegard                                          23,966       1.9%
  Larry R. Rempe                                            16,248       1.3%
  Thomas A Hoff                                             11,964       1.0%
  Kenneth F. Jirovsky                                       10,507       0.8%
  Barry S. Major                                            10,483       0.8%
  William H. Allen                                           9,530       0.8%
  Ardean A. Arndt                                            9,154       0.7%
  Alan G. Siemek                                             6,036       0.5%
  Michael J. Kelly                                           2,907       0.2%
  Douglas D. Wheat (2)                                           -         -
                                                        ----------   --------
    Total for Directors and Executive Officers
    as a Group                                           1,237,363      98.1%
                                                        ==========   ========

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

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


            ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

    Effective  November 12, 1999, NBC acquired certain assets and liabilities of
Ned's Bookstores. The acquisition of Ned's Bookstores was funded in part through
a $4.6 million capital  contribution from the Company to NBC. The Company raised
the $4.6  million in capital  through  the sale of 87,922  shares of its Class A
Common  Stock at a price of $52.47 per share  (based upon the  buy-out  price as
part of the  Recapitalization  on February  13,  1998) to certain  shareholders,
including  among  others,  76,238  shares to HWH;  3,812  shares to NBC's  Chief
Operating  Officer,  2,859 shares to the Company's Vice President and Treasurer,
and 1,906 shares to NBC's Vice President of Warehouse Operations.


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


    As of March 31, 2000, notes receivable from  stockholders and the associated
interest receivable totaled  approximately  $606,000 and $55,000,  respectively.
Approximately  $141,000 of such notes originated  during the leveraged buyout of
NBC by Olympus Advisory Partners,  Inc. in 1995. In conjunction with the buyout,


                                       52
<PAGE>

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 are dated  August 31,  1995,  become  due August 31,  2002,  and bear
interest at the applicable Federal rate for mid-term loans.

    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; and Vice President of E-commerce,  Michael J.
Kelly.  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  maturing January
19, 2009 and bearing  interest at 5.25% per year. The largest  aggregate  amount
outstanding under this note at any time during the year ended March 31, 2000 was
approximately  $239,000.  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
maturing  September,  2009 and bearing  interest at 5.25% per year.  The largest
aggregate amount  outstanding  under this note at any time during the year ended
March 31, 2000 was approximately  $154,000. 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  maturing  January,  2010 and  bearing  interest at 5.25% per
year.  The  largest  aggregate  amount  outstanding  under this note at any time
during the year ended March 31, 2000 was approximately $126,000.


                                       53
<PAGE>

                                     PART IV

   ITEM 14. 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, 2000 and 1999.
             Consolidated Statements of Operations for the Years Ended March 31,
               2000, 1999 and 1998.
             Consolidated  Statements  of  Stockholders'  Equity  (Deficit) for
               the Years Ended March 31, 2000, 1999 and 1998.
             Consolidated Statements of Cash Flows for the Years Ended March 31,
               2000, 1999 and 1998.
             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 10.6 through 10.15 are incorporated herein by reference.

    (B) REPORTS ON FORM 8-K.

           Current  Report on Form 8-K/A filed  January 25, 2000  reporting  the
           acquisition of Michigan College Book Company, Inc. and Ned's Berkeley
           Book Company, Inc.  (collectively  referred to as "Ned's Bookstores")
           and submitting  audited financial  statements of Ned's Bookstores for
           the nine months  ended  September  30, 1999 and  unaudited  pro forma
           financial information as of September 30, 1999 and for the six months
           ended September 30, 1999 and year ended March 31, 1999.

(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 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  dated  November  12,  1999,  is
                incorporated herein by reference.

                                       54
<PAGE>

        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.

        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.

        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.

        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.

                                       55
<PAGE>

        10.3    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.

        10.4    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.

        10.5    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.

        10.6    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.

        10.7    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.

        10.8    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.

        10.9    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.

        10.10   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.

        10.11   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.

        10.12   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.

        10.13   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.


                                       56
<PAGE>


        10.14   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.

        10.15   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.

        10.16   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.

        10.17   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.

        10.18   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.

        10.19   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.

        10.20   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.

        10.21   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.

        10.22   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.

        10.23   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.

                                       57
<PAGE>

        10.24   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.

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

        27.     Financial Data Schedule for the Year Ended March 31, 2000 [EDGAR
                filing only].


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

                                       58
<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
                              June 20, 2000

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


                              /s/ Mark W. Oppegard
                              ------------------------
                              Mark W. Oppegard
                              President/Chief Executive Officer, Secretary
                              and Director
                              June 20, 2000

                                      *
                              ------------------------
                              Alan G. Siemek
                              Vice President and Treasurer
                              (Principal Financial and Accounting Officer)
                              June 20, 2000


                                      *
                              ------------------------
                              Robert B. Haas
                              Chairman and Director
                              June 20, 2000


                                      *
                              ------------------------
                              Douglas D. Wheat
                              Director
                              June 20, 2000


                             *By: /s/ Mark W. Oppegard
                              ------------------------
                              Mark W. Oppegard
                              Attorney-In-Fact
                              June 20, 2000


    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, 2000
HAS BEEN, NOR WILL BE, SENT TO SECURITY HOLDERS.

                                       59
<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,  2000 and 1999 and for each of the three
years in the period  ended March 31,  2000,  and have issued our report  thereon
dated May 16, 2000;  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.




DELOITTE & TOUCHE LLP

Lincoln, Nebraska
May 16, 2000
                                       60
<PAGE>

NBC ACQUISITION CORP. (PARENT COMPANY ONLY)

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

                                                             March 31,
                                                         2000         1999
                                                     ------------- ------------
ASSETS

OTHER ASSETS:
  Due from subsidiary (Note A)                       $  4,606,191  $  2,277,266
  Prepaid transaction/loan costs                        2,890,699     3,216,487
                                                     ------------  ------------
                                                     $  7,496,890  $  5,493,753
                                                     ============  ============
LIABILITIES AND STOCKHOLDERS' DEFICIT

INVESTMENT IN AND ADVANCES FROM SUBSIDIARY (Note A)  $ 30,676,616  $ 47,546,864

SENIOR DISCOUNT DEBENTURES                             56,249,900    50,646,654

COMMITMENTS AND CONTINGENCIES (Note B)

STOCKHOLDERS' DEFICIT:
  Class A common stock, voting, authorized
  5,000,000 shares of $.01 par
  value; issued and outstanding 1,248,513
  and 957,792 shares at March 31, 2000 and
  1999, respectively                                       12,485         9,578
  Additional paid-in-capital                           64,525,477    49,275,087
  Notes receivable from stockholders                     (606,395)     (332,630)
  Accumulated deficit                                (143,361,193) (141,651,800)
                                                     ------------  ------------
    Total stockholders' deficit                       (79,429,626)  (92,699,765)
                                                     ------------  ------------
                                                     $  7,496,890  $  5,493,753
                                                     ============  ============

See notes to condensed financial statements.


                                       61
<PAGE>
NBC ACQUISITION CORP. (PARENT COMPANY ONLY)

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

                                                 Year Ended March 31,
                                           2000         1999         1998
                                       ------------- ------------ ------------
INTEREST EXPENSE                        $(5,929,034) $(5,345,563) $  (653,558)

INCOME TAX BENEFIT                        2,328,925    2,029,175      248,091

EQUITY IN EARNINGS (LOSS) OF SUBSIDIARY   1,890,716    1,057,283   (5,146,138)

                                       ------------  ------------ -----------
NET LOSS                                $(1,709,393) $(2,259,105) $(5,551,605)
                                       ============= ============ ===========


See notes to condensed financial statements.


                                       62
<PAGE>
NBC ACQUISITION CORP. (PARENT COMPANY ONLY)
<TABLE>
<CAPTION>

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

                                                                      Year Ended March 31,
                                                              2000          1999           1998
                                                          ------------- -------------- --------------

CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                <C>            <C>            <C>
  Net cash flows from operating activities                 $         -     $        -   $          -
                                                          -------------   ------------ --------------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from issuance of long-term debt                           -              -     44,997,320
  Deferred financing costs                                           -       (159,489)    (3,406,785)
  Proceeds from issuance of common stock                    14,979,532         25,000     49,034,665
  Payment of merger consideration                                    -              -   (163,328,856)
  Merger consideration contributed by
    Nebraska Book Company                                            -              -     72,703,656
  Advances (to) from subsidiary                            (14,979,532)        30,319        (24,310)
  Proceeds from payment on notes receivable
    from stockholders                                                -        104,170         24,310
                                                           -----------   ------------  -------------
  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                            $   273,765     $  225,000   $          -
  Stock repurchases accrued by Nebraska Book Company                 -              -      2,592,673
  Common stock contributed to Nebraska Book Company                  -              -        147,150


</TABLE>

See notes to condensed financial statements.

                                       63
<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 AND ADVANCES FROM  SUBSIDIARY - The Company  accounts for its
investment in NBC under the equity method of  accounting.  Advances from NBC are
included within the investment in subsidiaries.

B.  COMMITMENTS AND CONTINGENCIES

    The Company has guaranteed repayment of indebtedness under the Senior Credit
Facility held by NBC. Such indebtedness totaled $55.6 million at March 31, 2000.

                                       64
<PAGE>

NBC ACQUISITION CORP.
<TABLE>
<CAPTION>

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, 2000
  Allowance for doubtful accounts   $ 165,899   $ 140,927  $    -   $ (130,927)    $ 175,899


YEAR ENDED MARCH 31, 1999
  Allowance for doubtful accounts     164,829     134,661       -     (133,591)      165,899


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


                                       65
<PAGE>


                                  EXHIBIT INDEX


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

        27.     Financial Data Schedule for the Year Ended March 31, 2000 [EDGAR
                filing only].



                                       66