UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 10-K


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

                    FOR THE FISCAL YEAR ENDED MARCH 31, 2002

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

        For the transition period from________________ to______________.


                        COMMISSION FILE NUMBER 333-48221

                           NEBRASKA BOOK COMPANY, INC.
             (Exact name of registrant as specified in its charter)

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

                             4700 SOUTH 19TH STREET
                             LINCOLN, NE 68501-0529
                    (Address of Principal executive offices)

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

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

    Indicate  by check mark  whether  the  registrant  (1) has filed all reports
required to be filed by Section 13 or 15(d) of the  Securities  Exchange  Act of
1934  during  the  preceding  12 months  (or for such  shorter  period  that the
registrant was required to file such reports),  and (2) has been subject to such
filing requirements for the past 90 days. [X] YES [ ] No

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

    THERE ARE NO SHARES OF THE REGISTRANT'S  VOTING STOCK HELD BY NON-AFFILIATES
OF THE REGISTRANT.

    THERE WERE 100 SHARES OF COMMON STOCK OUTSTANDING AS OF JUNE 14, 2002.


                    DOCUMENTS INCORPORATED BY REFERENCE: NONE

                            Total Number of Pages: 67

                             Exhibit Index: PAGE 67

                                       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.....................................17
Item 7A      Quantitative and Qualitative Disclosures about Market Risk.......25
Item 8       Financial Statements and Supplementary Data......................27
Item 9       Changes in and Disagreements with Accountants on Accounting
               and Financial Disclosure.......................................49

PART III:

Item 10     Directors and Executive Officers of the Registrant................50
Item 11     Executive Compensation............................................52
Item 12     Security Ownership of Certain Beneficial Owners and Management
               and Related Stockholder Matters................................57
Item 13     Certain Relationships and Related Transactions....................58

PART IV:

Item 14     Exhibits, Financial Statement Schedules, and Reports on
              Form 8-K........................................................60
Signatures....................................................................64
Supplemental Information to be Furnished......................................64
Financial Statement Schedule II - Valuation and Qualifying Accounts...........65
Exhibit Index.................................................................67

                                       2
<PAGE>

                                     PART I.

                                ITEM 1. BUSINESS.


RECAPITALIZATION AND PUBLIC REGISTRATION

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

    Pursuant  to a merger  agreement  dated  January 6, 1998 among NBC;  certain
shareholders of NBC, including members of senior management; and a newly created
corporation  controlled  and owned by affiliates of Haas Wheat & Partners,  L.P.
("HWP"),  the newly created  corporation merged with and into NBC (the "Merger")
with NBC as the surviving corporation.

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

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

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

GENERAL

    The Company is one of the largest  wholesale  distributors  of used  college
textbooks in North  America,  offering over 90,000  textbook  titles and selling
more than 7.6 million books annually primarily to campuses located in the United
States.  In  addition,  as of June 14,  2002,  the  Company  owns or manages 108
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


                                       3
<PAGE>

II, when the supply of new  textbooks  could not meet the demand  created by the
return of ex-GI  students.  In 1964, the Company became a national,  rather than
regional,  wholesaler  of used  textbooks  as a result  of its  purchase  of The
College Book Company of California.  During the 1970's the Company continued its
focus on the wholesale  business.  However,  realizing the synergies  that exist
between wholesale operations and college bookstore operations,  in the 1980's it
expanded its efforts in the college  bookstore market under a revised  strategy.
Under this strategy the Company operates  bookstores on or near larger campuses,
typically where the institution-owned college bookstore is contract-managed by a
competitor or where the Company does not have a significant  wholesale presence.
Today,  the  Company  services  the  college  bookstore   industry  through  its
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,  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 non  contract-managed  college  bookstores
nationwide  have  provided  important  access  to  valuable  market  information
regarding the  campus-by-campus  supply and demand of  textbooks,  as well as an
ability to procure large quantities of a wide variety of textbooks.  The Company
provides an internally-developed BUYER'S GUIDE to its wholesale customers, which
lists over 44,000 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 14, 2002,  the Company  operated
108  college  bookstores  on or  adjacent  to college  campuses  of which 14 are
operated on physical premises which are owned by and leased from the educational
institution  (i.e.,  "contract-managed").  Its college bookstores are located at
some of the nation's largest college campuses including: University of Nebraska,
University  of Michigan,  University  of  Maryland,  Arizona  State  University,
Pennsylvania State University,  University of Kansas, Michigan State University,
University  of  California  -  Berkeley,  Texas A&M  University,  University  of
Florida,  and University of Tennessee.  In addition to generating  profits,  the
Company's  college  bookstore  operations  provide an  exclusive  source of used
textbooks for sale across the Company's wholesale distribution network.

    COMPLEMENTARY  SERVICES.  With its  acquisition  of  Specialty  Books,  Inc.
("Specialty  Books") in May 1997,  the Company  entered the  distance  education
market,   which  consists  of  providing  education  materials  to  students  in
nontraditional  college  and  other  courses  (such as  correspondence  courses,
continuing  and  corporate   education   courses  and  courses  offered  through
electronic media such as the Internet).

    Other services  offered to college  bookstores  include the sale of computer
hardware  and  software,  such as the  Company's  turnkey  bookstore  management
software, and related maintenance  contracts.  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
almost 500 college bookstore  locations.  In total,  including the Company's own
bookstores,  over 800 college bookstore locations utilize the Company's software
products.  During fiscal 2001, the Company  licensed certain software related to
E-commerce to an entity that is partially owned by NBC's majority  owner.  These
services  generate  revenue and assist the Company in enhancing  and  developing
customer relationships.

    In January 1998,  the Company  acquired  Connect 2 One (formerly  Collegiate
Stores  Corporation),   a  centralized  buying  service  for  over  520  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.

                                       4
<PAGE>

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

INDUSTRY SEGMENT FINANCIAL INFORMATION

    Revenue,  operating profit or loss, and identifiable  assets attributable to
each of the  Company's  industry  segments  are  disclosed  in the  notes to the
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.  Additionally,  the Company recently  introduced an enhanced commission
structure  that rewards  customers who make a long-term  commitment to supplying
the Company with a large  portion of their  textbooks.  Finally,  the Company is
strengthening  its  marketing  campaign to  increase  student  awareness  of the
benefits of buying and selling used textbooks.

    CAPITALIZE  ON  COLLEGE  BOOKSTORE  OPPORTUNITIES.  The  Company  intends to
increase revenues for its 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 intends to
increase  same-store sales growth through a more coordinated effort to implement
best practices  across the Company's  entire  bookstore  network.  Finally,  the
Company  believes  there are  opportunities  to improve cash flow at its college
bookstores by reducing certain selling, general and administrative expenses.

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

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

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

INDUSTRY OVERVIEW

    Based on recent industry trade data, the college bookstore  industry remains
strong,  with over 5,000 college stores generating annual sales of approximately
$10.7 billion to college students and other consumers in North America. Sales of


                                       5
<PAGE>

textbooks and other education materials used for classroom  instruction comprise
approximately  two-thirds of that amount.  The Company  expects this market will
continue to grow as a result of  anticipated  increases  in  enrollment  at U.S.
colleges  attributable to the children of the baby boom generation  entering the
college population.

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

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

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

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

    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 three to four years, the
Company has been marketing its exclusive  supply  program to the industry.  This
program has grown to approximately  250  participating  bookstores at the end of
fiscal 2002.  The Company also  introduced  the NBC Advantage  program in fiscal
2001.  This  program  rewards  customers  who  make a  long-term  commitment  to
supplying the Company with a large portion of their books.  At the end of fiscal
2002,   approximately  400  bookstores  were   participating  in  this  program,
approximately  210 of which are also  participating  in the  exclusive  program.
Since  the  Company  is  usually  able to sell  the  vast  majority  of the used
textbooks it is able to purchase,  its ability to obtain  sufficient supply is a
critical factor in the Company's success.

                                       6
<PAGE>

    COLLEGE  BOOKSTORE   MARKET.   College  stores  generally  fall  into  three
categories: (i) INSTITUTIONAL -- stores that are primarily owned and operated by
institutions  of higher  learning  (represents  approximately  57.0% of the U.S.
market);  (ii)  CONTRACT-MANAGED  --  stores  owned by  institutions  of  higher
learning and managed by outside,  private  companies,  typically found on-campus
(represents  approximately  26.0% of the U.S.  market);  and  (iii)  INDEPENDENT
STORES -- privately  owned and  operated  stores,  generally  located off campus
(represents  approximately 17.0% of the U.S. market). In general,  the "captive"
portion of the college bookstore market includes those  contract-managed  stores
that sell their used textbooks to affiliated  companies,  and  institutional and
independent  stores to the extent that such used textbooks are repurchased  from
students  and are  retained  by the  bookstore  for resale  without  involving a
wholesaler.

    The Company  believes that sales at its college  bookstores will continue to
grow as a result of increased  enrollment at colleges and due to the  increasing
number  of  products  and  services  offered  in  these  bookstores,   including
E-commerce capabilities provided through its affiliate, TheCampusHub.com, Inc.

PRODUCTS AND SERVICES

    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 44,000
textbooks  according to author,  title, new copy retail price, and the Company's
repurchase  price.  The  BUYER'S  GUIDE is an  important  part of the  Company's
inventory control and book procurement  system. The Company updates and reprints
the BUYER'S  GUIDE nine times each year and makes it available in both print and
various  electronic  formats,  including  on all of  the  Company's  proprietary
information systems. A staff of dedicated professionals gathers information from
all over the  country in order to make the  BUYER'S  GUIDE into what the Company
believes to be the most  comprehensive and up-to-date pricing and buying aid for
college bookstores. The Company also maintains a database of over 166,000 titles
in order to better serve its customers.

    COLLEGE  BOOKSTORES.  As of June 14, 2002, the Company  operated 108 college
bookstores  on or adjacent to college  campuses.  These  bookstores  sell a wide
variety  of  used  and  new  textbooks,   general  books  and  assorted  general
merchandise,  including  apparel,  sundries and gift items.  Over the past three
years,  revenues of the Company's bookstores from activities other than used and
new textbook sales have been between 23% and 26% of total revenues.  The Company
has been, and intends to continue,  selectively  expanding its product offerings
at its bookstores in order to increase sales and profitability.  The Company has
also installed  software  providing  E-commerce  capabilities  in all of its own
bookstores,  thereby allowing its bookstores to further expand product offerings
and compete with online-only textbook sellers.

    COMPLEMENTARY  SERVICES.  Through Specialty Books, the Company has access to
the market for distance education products and services.  Currently, the Company
provides  students at approximately 70 colleges with textbooks and materials for
use in distance  education  courses,  and is a leading  provider of textbooks to
nontraditional  programs  and  students  such  as  correspondence  or  corporate
education  students.  The Company  believes the  fragmented  distance  education
market represents an opportunity for the Company to leverage its fulfillment and
distribution  expertise  in a rapidly  growing  sector.  Beyond  textbooks,  the
Company offers  services and specialty  course  materials to distance  education
students including  videotape  duplication and shipping;  shipping of specialty,
non-textbook course materials;  and a sales and ordering function.  Students can
order distance education materials from the Company over the Internet.  Over the
past three years,  revenues of Specialty  Books have been between 59% and 77% of
total complementary  services revenues.  The Company believes it can continue to
significantly  increase the service operations  revenues from distance education
products over the next several years,  although  presently the Company's primary
objective is increased profitability through improved cost containment.

    Other services offered to college bookstores include services related to the
Company's turnkey bookstore  management  software and the sale of other software
and hardware, and related maintenance contracts. These services generate revenue
and assist the Company in gaining access to new sources of used  textbooks.  The


                                       7
<PAGE>

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 almost 500 college  bookstore  locations.  In total,
including the Company's own  bookstores,  over 800 college  bookstore  locations
utilize the Company's software products.

    Through C2O, the Company is able to offer a variety of products and services
to  participating  college  bookstores.   C2O  negotiates  apparel  and  general
merchandise  discounts  and  develops and  executes  marketing  programs for its
membership.  As a centralized buying service for over 520 participating  college
bookstores including the Company's own bookstores, C2O has evolved into a buying
group with substantial purchasing power.

    C2O offers a shopping bag program to college  bookstores.  This shopping bag
program  provides  bookstores the  opportunity to purchase  customized bags at a
substantial  discount  from  the  vendor,  while  the  Company  earns a  monthly
administrative  fee  from  the  vendor  in  return  for  accepting  billing  and
collection  responsibilities  for  shopping  bags sold by the vendor.  Other C2O
marketing  services  include a freight savings  program,  a check  authorization
program, and retail display allowances for magazine displays.

    Additionally,  a staff of  experienced  C2O  professionals  consult with the
management of bookstores.  Services offered include  strategic  planning,  store
review,  merchandise  planning  and help with other  operational  aspects of the
business.  While  consulting  has  historically  represented a relatively  small
component of C2O's business,  it is nonetheless  strategically  important to the
ongoing success of this aspect of the Company's business.

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

WHOLESALE PROCUREMENT AND DISTRIBUTION

    Historically,  because  the  demand  for  used  textbooks  has  consistently
exceeded  supply,  the  Company's  sales have been  primarily  determined by the
amount of used  textbooks  that it can purchase.  The Company  believes that, on
average,  it is able to fulfill  approximately  20% to 25% of its  demand.  As a
result,   the  Company's  success  has  depended   primarily  on  its  inventory
procurement,  and the  Company  continues  to focus  its  efforts  on  obtaining
inventory.  In order to ensure  its  ability  to both  obtain  and  redistribute
inventory,  the Company's  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 36 account representatives (as of March
31, 2002) 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; (v) providing working capital flexibility for
bookstores making substantial purchases;  and (vi) establishing long-term supply
arrangements by rewarding customers who make a long-term commitment to supplying
the Company with a large portion of their books.

    The  two  major  used  textbook  purchasing  seasons  are at the end of each
academic  semester,  May/June and  December/January.  Although the Company makes
book purchases  during other  periods,  the inventory  purchased in May,  before
publishers  announce their price increases in June and July,  allows the Company


                                       8
<PAGE>

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.

    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 14, 2002 the Company operated 108 college bookstores  nationwide,
having  expanded  from 50  bookstores  in 1997.  During  fiscal 2002 the Company
purchased ten bookstores located in Norman,  Oklahoma;  Raleigh, North Carolina;
Radford, Virginia;  Orlando, Florida;  Gainesville,  Florida; Chadron, Nebraska;
Berkeley, California; and Bellingham, Washington; sold two bookstores located in
Austin,  Texas; and closed stores in Austin,  Texas and Flagstaff,  Arizona when
their leases expired.

                                       9
<PAGE>

    The table below  highlights  certain  information  regarding  the  Company's
bookstores opened through March 31, 2002.

                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)
   ----------- ----------  -----------  --------------  --------  --------------
       1998         50          9            0             59          474
       1999         59          8            2             65          537
       2000         65         35            2             98          733
       2001         98          4            0            102          740
       2002        102         10            4            108          797

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

    The  Company  plans to  continue  increasing  the  number of  bookstores  in
operation. The bookstore expansion plan will focus on campuses where the Company
does not already have a strong  relationship  with the on-campus  bookstore.  In
determining to open a bookstore,  the Company looks at several  criteria:  (i) a
large enough market to justify the  Company's  efforts  (typically  this means a
campus of at least 8,000  students);  (ii) a site in close  proximity  to campus
with adequate parking and accessibility; (iii) the potential of the bookstore to
have a broad product mix (larger  bookstores  are more  attractive  than smaller
bookstores because a full line of general merchandise can be offered in addition
to textbooks);  (iv) the availability of top-quality management; and (v) certain
other  factors,  including  leasehold  improvement  opportunities  and personnel
costs.

    The Company's bookstores have an average size of 7,400 gross square feet but
range in size  from 500 to  50,000  square  feet.  The  Company  estimates  that
leasehold  improvements,   furniture  and  fixtures,  and  automation  with  the
Company's PRISM system, the Company's proprietary total-store management system,
for new  bookstores  cost  approximately  $100,000 per  bookstore,  after giving
effect to construction allowances.

MANAGEMENT INFORMATION SYSTEMS

    The Company  believes  that it can  enhance  efficiency,  profitability  and
competitiveness through investments in technology.  The Company's MIS operations
process order entry,  control  inventory,  generate purchase orders and customer
invoices,  generate  various sales  reports,  and process and retrieve  textbook
information.  All the Company's  bookstores  operate with IBM RS/6000's.  At the
center  of its MIS  operations  are the  Company's  self-developed,  proprietary
software programs such as PRISM, its whole store management system, and PC-Text,
its  textbook   management  and  inventory  control  system.  This  software  is
maintained  and  continuously  enhanced by the  Company,  which is staffed by an
experienced team of development and design professionals.

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

    None  of  the  Company's  proprietary  software  programs  are  copyrighted,


                                       10
<PAGE>

although the Company  does have  registered  trademarks  for certain  names.  In
addition to using its software  programs for its own  management  and  inventory
control,  the Company  licenses the use of its software  programs to bookstores.
Although none of the Company's  software  programs are material to its business,
they enhance the efficiency and  cost-effectiveness of the Company's operations,
and their use by bookstores that are customers or suppliers of the Company tends
to  solidify  the  relationship  between  the  Company  and  such  customers  or
suppliers, resulting in increased sales or supplies for the Company.

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

    The Company conducts training courses for all systems users at the Company's
headquarters  in  Lincoln,  Nebraska.  Classes  are small and  provide  hands on
demonstrations  of the various systems.  Printed  reference manuals and training
materials  also  accompany  each system.  The  customer  support unit of CBMS is
staffed with approximately 40 experienced personnel.  Personnel are available 24
hours a day to answer questions on a toll-free number.

CUSTOMERS

    The Company sells its products and services to college bookstores throughout
the United  States,  Canada and Puerto Rico for  ultimate use by the students of
the respective colleges.  The Company's 25 largest wholesale customers accounted
for approximately  6.0% of the Company's fiscal 2002 revenues.  No one wholesale
customer  accounted for more than 1.0% of the Company's fiscal 2002 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,
University of Washington, and University of Minnesota.

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

    The  Company's  distance  education  program is the  exclusive  supplier  of
textbooks  and  educational  material  to students  enrolled  in either  on-line
courses or the College of Financial Planning at the University of Phoenix, which
accounts for  approximately  69.6% of total  revenues in the distance  education
program.

    No one customer  accounted for more than 10.0% of the Company's  fiscal 2002
revenues.

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 680 stores and 430 stores,
respectively.  The Company  believes  that its market  share of the used college
textbook wholesale distribution market is comparable to that of Follett and MBS,
individually.   The  remaining   competitors  are  smaller  regional  companies,
including Budgetext,  Texas Book Company and Southeastern Book Company.  Most of
the leading companies in the industry also have an established  retail presence,
either through direct store ownership/operation or through contract-management.

                                       11
<PAGE>

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

    MBS is controlled  by the same  shareholder  that  controls  Barnes & Noble.
Consequently,  MBS supplies approximately 430 Barnes & Noble college stores. MBS
faces the same challenges that Follett faces in supplying existing institutional
accounts.  MBS has a strong  systems  division that  competes  actively with the
Company for new  customers  and also  fulfills  all of the needs of the Barnes &
Noble stores.

    The Company's college bookstore operations 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.

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

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

GOVERNMENTAL REGULATION

    The Company is subject to various  federal,  state and local  environmental,
health and safety laws and regulations. Generally, these laws impose limitations
on the discharge of pollutants  and the presence of hazardous  substances in the
workplace  and establish  standards for vehicle and employee  safety and for the
handling  of solid  and  hazardous  wastes.  These  laws  include  the  Resource
Conservation  and  Recovery  Act,  the  Comprehensive   Environmental  Response,
Compensation  and  Liability  Act,  the Clean Air Act, the  Hazardous  Materials
Transportation   Act  and  the  Occupational   Safety  and  Health  Act.  Future
developments,  such as stricter environmental or employee health and safety laws
and regulations thereunder,  could affect the Company's operations.  The Company
does not currently  anticipate  that the cost of its compliance  with, or of any
foreseeable liabilities under, environmental and employee health and safety laws
and regulations will have a material adverse affect on its business or financial
condition.

EMPLOYEES

    As of  March  31,  2002  the  Company  had a total  of  approximately  2,900
employees,  of which approximately 1,000 were full-time,  approximately 300 were
part-time and approximately  1,600 were temporary.  The Company has no unionized
employees and believes that its relationship with its employees is satisfactory.

    In view of the  seasonal  nature  of its  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.  Recently,  the  Company has  employed up to 50  flex-pool
workers in the Nebraska and California facilities,  thereby enabling the Company


                                       12
<PAGE>

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 wholesale 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  wholesale  warehouse in Cypress,  California.
The Cypress  lease  expires on August 31, 2002 and has one  five-year  option to
renew. The Company's  distance education program resides in a 15,000 square foot
warehouse  owned by the Company in Athens,  Ohio;  however,  the Company will be
relocating  this  operation  to a leased  facility  with  49,500  square feet in
Athens,  Ohio during  fiscal  2003.  The new lease is for a period of five years
with one five-year option to renew.

    Listed  below,  set forth as of March 31, 2002,  are the  Company's  college
bookstores, their location, college served and the school's enrollment.

<TABLE>
<CAPTION>
Institution                                     Location         Enrollment(1)  Store Name
-----------                                     --------         ------------   ----------
<S>                                             <C>                <C>          <C>
University of Alabama                           Tuscaloosa, AL        19,000    The College Store
University of Arkansas - Little Rock            Little Rock, AR       10,500    Campus Bookstore
Northern Arizona University                     Flagstaff, AZ         20,000    The College Store
Northern Arizona University                     Flagstaff, AZ         20,000    University Text and Tools
Arizona State University                        Tempe, AZ             44,100    The College Store
Arizona State University                        Tempe, AZ             44,100    Rother's Bookstore
University of Arizona                           Tucson, AZ            34,500    Arizona Book Store
University of Arizona                           Tucson, AZ            34,500    Rother's University Bookstore
University of California - Berkeley             Berkeley, CA          30,400    Ned's Bookstore
University of California - Berkeley             Berkeley, CA          30,400    Ned's Bookstore II
University of California - Berkeley             Berkeley, CA          30,400    Ned's Bookstore - Boalt Hall
University of California - Berkeley             Berkeley, CA          30,400    Ned's Den
California State University - Northridge        Northridge, CA        27,900    The College Store
Daytona Beach Community College                 Daytona Beach, FL     11,000    College Book Rack
University of Florida                           Gainesville, FL       46,100    Florida Book Store
University of Florida                           Gainesville, FL       46,100    Florida Book Store, Volume II
Miami Dade Community College-Kendall            Miami, FL             48,700    Lemox College Book & Supply
University of Central Florida, also serving:    Orlando, FL           28,000    College Book & Supply
   Seminole Community College                                          9,200
   Valencia Community College                                          4,800
University of Central Florida                   Orlando, FL           28,000    Knight's Corner
Georgia State University                        Atlanta, GA           23,700    Georgia Book Store
Drake University                                Des Moines, IA         5,100    D-Shoppe (2)
Drake University, also serving:                 Des Moines, IA         5,100    University  Book  Store (3)
   Mercy College of Health Sciences                                      400
Southern Illinois University                    Carbondale, IL        22,600    Saluki Bookstore
Ball Sate University                            Muncie, IN            18,200    Collegiate Book Exchange
Valparaiso University                           Valparaiso, IN         3,600    University Book Center (2)
University of Kansas                            Lawrence, KS          29,100    University Book Shop
Johnson County Community College                Overland Park, KS     16,800    The College Store
University of Louisville                        Louisville, KY        21,100    College Book Warehouse
Eastern Kentucky University                     Richmond, KY          17,500    University Book & Supply
University of Maryland                          College Park, MD      34,900    Maryland Book Exchange
Prince George's Community College               Largo, MD             12,400    Prince George's Community
                                                                                  College Bookstore (2)
Concordia College                               Ann Arbor, MI            600    Concordia 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
Oakland University                              Auburn Hills, MI      20,000    Textbook Outlet
Wayne County Community College                  Belleville, MI        11,000    Ned's Bookstore (2)
Wayne County Community College                  Detroit, MI           11,000    Ned's WCCC Downtown (2)
Wayne County Community College                  Detroit, MI           11,000    Ned's WCCC Eastern (2)
Wayne County Community College                  Detroit, MI           11,000    Ned's WCCC Northwest (2)
Wayne County Community College                  Taylor, MI            11,000    Ned's WCCC Downriver (2)
Ferris State University                         Big Rapids, MI         9,700    The College Store
Michigan State University                       East Lansing,  MI     43,500    The College Store
Michigan State University                       East Lansing, MI      43,500    Ned's Bookstore
Kettering University                            Flint, MI              3,300    The Campus Store (2)
Eastern Michigan University, also serving:      Ypsilanti, MI         23,700    Campus Book & Supply
   Washtenaw Community College                                        11,400
Eastern Michigan University                     Ypsilanti, MI         23,700    Ned's Bookstore

                                       13
<PAGE>

Institution                                     Location         Enrollment(1)  Store Name
-----------                                     --------         ------------   ----------
Eastern Michigan University                     Ypsilanti, MI         23,700    Ned's College of Business
                                                                                  Bookstore
Mankato State University                        Mankato, MN           13,000    Maverick Bookstore (3)
North Carolina State University                 Raleigh, NC           29,000    Packbackers Student Bookstore
Chadron State College                           Chadron, NE            2,700    Chadron Book Shop
Chadron State College                           Chadron, NE            2,700    Eagle Pride Bookstore (2)
University of Nebraska - Kearney                Kearney, NE            6,800    The Antelope Bookstore (2)
University of Nebraska - Lincoln                Lincoln, NE           23,000    Big Red Shop - Gateway Mall
University of Nebraska - Lincoln                Lincoln, NE           23,000    Nebraska Bookstore (3)
Nebraska Wesleyan University                    Lincoln, NE            1,700    Prairie Wolves Bookstore (2)
Wayne State College                             Wayne, NE              3,600    Student Bookstore
University of Nevada Las Vegas                  Las Vegas, NV         24,900    Rebelbooks
State University of New York - Buffalo          Amherst, NY           24,800    The College Store
State University of New York - Binghamton       Vestal, NY            12,300    The Bookbridge
University of Akron                             Akron, OH             24,000    The College Store
Ohio University                                 Athens, OH            19,300    Specialty Books
Ohio State University                           Columbus, OH          50,000    College Town
Wright  State  University, also serving:        Fairborn, OH          16,900    The College Store
   Sinclair Community College                                         21,300
University of Oklahoma                          Norman, OK            21,600    Boomer Book Store
University of Oklahoma                          Norman, OK            21,600    Sooner Textbooks
Oklahoma State University                       Stillwater, OK        21,300    Cowboy Book
Indiana University of Pennsylvania              Indiana, PA           13,400    The College Store
University of Pittsburgh                        Pittsburgh, PA        26,300    The College Store
Pennsylvania State University                   State College, PA     40,000    University Book Centre
College of Charleston                           Charleston, SC        11,100    University Book of Charleston
Columbia College                                Columbia, SC           1,500    C-Square Bookstore (2)
University of South Carolina                    Columbia, SC          23,700    Carolina's
University of South Carolina                    Columbia, SC          23,700    South Carolina Bookstore
East Tennessee State University                 Johnson City, TN      11,200    The College Store
University of Tennessee                         Knoxville, TN         28,000    Rocky Top Books
University of Tennessee                         Knoxville, TN         28,000    Rocky Top East (3)
University of Texas - Arlington                 Arlington, TX         20,400    The College Store
Austin Community College                        Austin, TX            27,000    Bevo's ACC
Austin Community College                        Austin, TX            27,000    Bevo's Northridge
Blinn College                                   Bryan, TX              9,000    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 (Northgate)
Texas A&M University                            College Station, TX   44,000    Rother's Bookstore (Woodstone)
Southern Methodist University                   Dallas, TX             9,900    Varsity Book Store
University of North Texas, also serving:        Denton, TX            27,500    Voertman's (3)
   North Central Texas College                                         5,800
   Texas Woman's University                                            8,400
University of Texas - Pan American              Edinburg, TX          12,700    South Texas Book & Supply
North  Harris County Community College          Houston, TX            9,400    College Bookstore (3)
North Harris County Community College           Humble, TX             9,400    College Bookstore
University of Houston, also serving:            Houston, TX           32,600    Rother's Bookstore
   Houston Community College System                                   40,900
Texas Tech University                           Lubbock, TX           24,600    Double T Bookstore
Texas Tech University                           Lubbock, TX           24,600    Double T Bookstore II
Texas Tech University                           Lubbock, TX           24,600    Double T Bookstore III
Texas Tech University                           Lubbock, TX           24,600    Spirit Shop
South Texas Community College                   McAllen, TX           12,900    South Texas Book & Supply
San Antonio College, also serving:              San Antonio, TX       22,000    L&M Bookstore
   Northwest Vista College                                             4,600
   Palo Alto College                                                   6,900
   St. Philip's College                                                8,800
   UTSA - Downtown                                                     3,000
University of Texas - San Antonio               San Antonio, TX       20,800    L&M UTSA Bookstore
Southwest Texas State University                San Marcos, TX        22,500    Colloquium Bookstore
Southwest Texas State University                San Marcos, TX        22,500    Colloquium Too
Southwest Texas State University                San Marcos, TX        22,500    Rother's Bookstore
Tarleton State University                       Stephenville, TX       7,900    Rother's Bookstore
Baylor University                               Waco, TX              13,700    Rother's Bookstore
Baylor University                               Waco, TX              13,700    University Bookstore
                                                                                  and Spirit Shop
                                       14
<PAGE>
Institution                                     Location         Enrollment(1)  Store Name
-----------                                     --------         ------------   ----------
Midwestern State University                     Wichita Falls, TX      5,800    Rother's Bookstore
Virginia Polytechnic Institute and State        Blacksburg, VA        25,600    Tech Bookstore
   University
Old Dominion University                         Norfolk, VA           19,200    Dominion Bookstore
Radford University                              Radford, VA            8,700    Radford Book Exchange
Virginia Commonwealth University                Richmond, VA          26,100    The College Store
Western Washington University, also serving:    Bellingham, WA        12,300    The College Store
   Whatcom Community College                                           6,100

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

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

(3) Property is owned by the Company.
</TABLE>


                           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 2002.


                                       15
<PAGE>

                                     PART II

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

    There were no equity  securities of the  registrant  sold by the  registrant
during fiscal 2002.


                        ITEM 6. SELECTED FINANCIAL DATA.

    The following table sets forth selected historical  financial and other data
of the Company as of and for the fiscal years ended March 31, 2002,  2001, 2000,
1999, and 1998, respectively. The selected historical financial data was derived
from the Company's audited financial  statements.  The following table should be
read in  conjunction  with Item 7,  "Management's  Discussion  and  Analysis  of
Financial  Condition and Results of Operations" and the financial  statements of
the Company and the related notes thereto included in Item 8 herein.
<TABLE>
<CAPTION>

                                                                  Fiscal Years Ended March 31,
                                                 --------------------------------------------------------------
                                                    2002         2001         2000        1999        1998 (1)
                                                 -----------  ----------- -----------  -----------   ----------
<S>                                               <C>          <C>         <C>          <C>           <C>
Statement of Operations Data:                                          (dollars in thousands)
  Revenues                                        $ 338,917    $ 301,669   $ 267,069    $ 218,638     $200,086
  Costs of sales                                    206,976      187,099     164,984      137,989      125,632
                                                 -----------  ----------- -----------  -----------   ----------
      Gross profit                                  131,941      114,570     102,085       80,649       74,454
  Operating expenses:
  Selling, general, and administrative               84,871       74,100      65,820       51,289       47,911
  Depreciation                                        3,087        2,956       3,096        2,393        2,531
  Amortization (4)                                      505       10,446       9,320        6,149        5,626
  Stock compensation costs                                -            -           -            -        8,278
                                                 -----------  ----------- -----------  -----------   ----------
      Income from operations                         43,478       27,068      23,849       20,818       10,108
  Other expenses (income):
  Interest expense                                   17,189       17,487      17,469       17,508       17,736
  Interest income                                      (400)        (615)       (356)        (351)        (328)
  Loss on derivative instruments                        361            -           -            -            -
                                                 -----------  ----------- -----------  -----------   ----------
      Income (loss) before income taxes              26,328       10,196       6,736        3,661       (7,300)
  Income tax expense                                 10,492        5,857       4,845        2,604       (2,154)
                                                 -----------  ----------- -----------  -----------   ----------
      Net income (loss)                           $  15,836    $   4,339   $   1,891    $   1,057     $ (5,146)
                                                 ===========  =========== ===========  ===========   ==========

Other Data:
  EBITDA (2)                                      $  47,070    $  40,470   $  36,265    $  29,360     $ 26,572
  Net cash flows from operating activities           31,038        8,839      18,945       10,296       (2,842)
  Net cash flows from investing activities           (7,616)      (4,994)    (30,244)      (5,067)     (11,548)
  Net cash flows from financing activities          (16,412)      (3,887)     11,690       (6,976)      10,220
  Capital expenditures                                2,277        1,759       3,542        2,842        3,690
  Business acquisition expenditures (3)               6,110        2,975      26,072        2,086        7,714
  Number of bookstores open at end of the period        108          102          98           65           59

  Balance Sheet Data (At End of Period):
  Cash and cash equivalents                       $  11,419    $   4,410   $   4,451    $   4,060     $  5,807
  Working capital                                    75,865       72,394      62,244       55,442       54,018
  Total assets                                      182,794      165,136     166,100      139,662      148,742
  Total debt, including current maturities          147,576      161,773     166,302      169,257      175,985
</TABLE>

    (1) Effective  February 13,  1998,  NBC  consummated  a merger among a newly
        created  corporation  controlled and owned by affiliates of HWP, NBC and
        certain shareholders of NBC pursuant to which the Company's  outstanding
        debt and NBC's stock were restructured.  Following the Recapitalization,
        the results of operations of the Company  included higher interest costs
        due to  the  financing  of the  Recapitalization,  and in  fiscal  1998,
        non-recurring  charges  associated with the  extinguishment  of debt and
        buyout  of stock options.   Non-recurring charges  of  $6,481 associated

                                       16
<PAGE>

        with the  extinguishment  of debt and the  related tax benefit of $2,460
        that  were  originally  recorded  as an  extraordinary  loss  have  been
        reclassified  in  accordance  with  Statement  of  Financial  Accounting
        Standards  No. 145,  RESCISSION  OF FASB  STATEMENTS  NO. 4, 44, AND 64,
        AMENDMENT OF FASB STATEMENT NO. 13 AND TECHNICAL CORRECTIONS,  which was
        early-adopted by the Company in fiscal 2002.

    (2) EBITDA  is  defined  as  income  from  operations   plus   depreciation,
        amortization and non-cash  charges relating to stock based  compensation
        expense in the amount of $8,278 for the year ended March 31,  1998.  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.

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

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



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

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

    REVENUES.  Revenues  for the years  ended  March  31,  2002 and 2001 and the
corresponding increase (decrease) in revenues were as follows:

                                                             Increase (Decrease)
                                 2002           2001         Amount   Percentage
                            -------------- -------------- ----------- ----------
Wholesale operations        $ 122,893,781  $ 113,006,804  $ 9,886,977     8.7%
College bookstore operations  201,399,648    182,856,000   18,543,648    10.1%
Complementary services         38,093,091     26,647,451   11,445,640    43.0%
Intercompany eliminations     (23,470,111)   (20,841,402)  (2,628,709)   12.6%
                            -------------- -------------- ------------ ---------
                            $ 338,916,409  $ 301,668,853  $37,247,556    12.3%
                            ============== ============== ============ =========

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

                                       17
<PAGE>

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

    SELLING,   GENERAL  AND  ADMINISTRATIVE   EXPENSES.   Selling,  general  and
administrative  expenses for fiscal 2002 increased  $10.8 million,  or 14.5%, to
$84.9  million  from  $74.1  million  for  fiscal  2001.  Selling,  general  and
administrative  expenses as a  percentage  of  revenues  were 25.0% and 24.6% in
fiscal 2002 and fiscal 2001, respectively. The increase in expenses is primarily
the result of the  Company's  revenue  and  operational  growth,  as  previously
discussed. Expenses as a percentage of revenues increased to 25.0% primarily due
to $1.0  million in  increased  bad debt  expense  recognized  in  complementary
services.  Revenues  attributable to the management services and technology sale
and license agreements with TheCampusHub.com,  Inc., which is partially owned by
NBC's  majority  owner,  were  recognized in fiscal 2002 under the  anticipation
that,  if  necessary,  TheCampusHub.com,  Inc.  would make a capital call to its
shareholders to provide the funding  necessary to meet its obligations under the
aforementioned agreements.  TheCampusHub.com,  Inc. reached break-even on a cash
flow basis,  excluding amounts under the management services and technology sale
and license  agreements,  during its most recent fiscal year. While it remains a
viable  business  and  is  funding  its  own  operations,  it is  not  currently
generating  sufficient  excess  cash  flow to fund  its  obligations  under  the
aforementioned   agreements  and  the  remaining   capital  available  from  its
shareholders is being reserved to fund strategic development  opportunities and,
if required,  ongoing  operations.  Accordingly,  the Company has  increased the
allowance for doubtful  accounts for such  potential  uncollectible  amounts due
from TheCampusHub.com, Inc.

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

    INCOME (LOSS) BEFORE  INTEREST AND TAXES.  Income (loss) before interest and
taxes for fiscal  2002 and 2001 and the  corresponding  change in income  (loss)
before interest and taxes were as follows:

                                                                Change
                                2002           2001        Amount     Percentage
                            ------------- ------------- ------------- ----------
Wholesale operations         $31,044,127   $27,241,116   $ 3,803,011     14.0 %
College bookstore operations  20,309,602     9,206,616    11,102,986    120.6 %
Complementary services           151,753    (1,402,666)    1,554,419    110.8 %
Corporate administration      (8,027,319)   (7,977,326)      (49,993)    (0.6)%
                            ------------- ------------- ------------- ----------
                             $43,478,163   $27,067,740   $16,410,423     60.6 %
                            ============= ============= ============= ==========

    The increase in income before interest and taxes in wholesale operations was
attributable  to  increased  revenues  and strong  used  textbook  margins.  The
increase in income before interest and taxes in college bookstore operations was
primarily due to increased  revenues,  strong used textbook margins,  and a $7.3
million decrease in amortization  expense resulting from the adoption of the new
accounting  standard  previously  discussed.  The  improvement  in income (loss)
before  interest  and  taxes in  complementary  services  was  primarily  due to
increased revenues and a $0.9 million decrease in amortization expense resulting
from the adoption of the new accounting standard. Corporate administrative costs
have remained relatively stable between fiscal years, primarily due to increased
personnel  costs  attributable  to the  Company's  continued  growth  and rising
insurance costs being offset by a $1.8 million decrease in amortization  expense
resulting from the adoption of the new accounting standard.

    LOSS ON DERIVATIVE FINANCIAL INSTRUMENTS.  The $0.4 million loss incurred on
derivative  financial  instruments  in fiscal  2002 is  attributable  to a $10.0
million optional  prepayment of Tranche A and Tranche B Loans on March 29, 2002.


                                       18
<PAGE>

As a result of the optional prepayment, notional amounts under the interest rate
swap agreements no longer correlate with remaining  principal balances due under
the Tranche A and Tranche B Loans.  This loss represents the fair value on March
29,  2002 of the portion of the  interest  rate swap  agreements  that no longer
qualify as hedging instruments.

    INCOME TAXES.  Income tax expense for fiscal 2002 increased $4.6 million, or
79.1%,  to $10.5  million  from $5.9  million  for fiscal  2001.  The  Company's
effective  tax rate  for  fiscal  years  2002 and  2001  was  39.8%  and  57.4%,
respectively. The change in the effective tax rate is attributable to the impact
of non-deductible  goodwill amortization in fiscal 2001. The Company's effective
tax rate for fiscal 2002  differs  from the  statutory  tax rate  primarily as a
result of state income taxes.

FISCAL YEAR ENDED MARCH 31, 2001 COMPARED WITH FISCAL YEAR ENDED MARCH 31, 2000.

    REVENUES.  Revenues  for the years  ended  March  31,  2001 and 2000 and the
corresponding increase (decrease) in revenues were as follows:

                                                            Increase (Decrease)
                                  2001          2000        Amount    Percentage
                             ------------- ------------- ------------ ----------
Wholesale operations         $113,006,804  $108,074,521  $ 4,932,283      4.6%
College bookstore operations  182,856,000   158,076,869   24,779,131     15.7%
Complementary services         26,647,451    20,717,793    5,929,658     28.6%
Intercompany eliminations     (20,841,402)  (19,800,260)  (1,041,142)     5.3%
                             ------------- ------------- ------------ ----------
                             $301,668,853  $267,068,923  $34,599,930     13.0%
                             ============= ============= ============ ==========

    The increase in  wholesale  revenues  was due  primarily to publisher  price
increases.  The increase in college bookstore  revenues was due primarily to the
net addition of 37 new college bookstores either through  acquisition or startup
since  April 1,  1999.  Of the  $24.8  million  increase  in  college  bookstore
revenues,  $19.2 million was  attributable  to new college  bookstores  with the
remainder  accounted for by a 4.6% increase in revenues from stores open for the
full year for both the 2000 and 2001 fiscal years ("same stores"). Complementary
services  revenues  increased  primarily  due to an  increase  in the  Company's
distance  education  program  revenues  and  $0.9  million  attributable  to the
adoption of  management  services and  licensing  agreements in fiscal 2001 with
TheCampusHub.com,  Inc.,  an entity that is  partially  owned by NBC's  majority
owner.  Such growth was  partially  offset by a decrease  in  revenues  from the
Company's system sales program. 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 2001  increased  $12.5  million,  or
12.2%,  to $114.6 million from $102.1 million for fiscal 2000. This increase was
primarily due to higher revenues, partially offset by a decrease in gross margin
percent. Gross margin percent was 38.0% for fiscal 2001 as compared to 38.2% for
fiscal 2000. The decrease in gross margin percent was primarily  attributable to
revenue  mix,  with  the  lower-margin   revenues  from  the  college  bookstore
operations and complementary services comprising 65.0% of total revenues (before
intercompany eliminations) in fiscal 2001 as compared to 62.3% in fiscal 2000.

    SELLING,   GENERAL  AND  ADMINISTRATIVE   EXPENSES.   Selling,  general  and
administrative  expenses for fiscal 2001  increased $8.3 million,  or 12.6%,  to
$74.1  million  from  $65.8  million  for  fiscal  2000.  Selling,  general  and
administrative  expenses as a percentage  of revenues  were 24.6% in both fiscal
years. Approximately $4.9 million of 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.  Additionally,
expenses increased $2.6 million in the Company's distance education program as a
result of the revenue growth previously discussed.

    AMORTIZATION  EXPENSE.  Amortization  expense for fiscal 2001 increased $1.1
million,  or 12.1%,  to $10.4  million from $9.3  million for fiscal 2000.  This
increase was the result of additional amortization of goodwill related to recent

                                       19
<PAGE>

acquisitions,  offset in part by goodwill  associated with  acquisitions that is
becoming fully amortized.

    INCOME (LOSS) BEFORE  INTEREST AND TAXES.  Income (loss) before interest and
taxes for fiscal  2001 and 2000 and the  corresponding  increase  (decrease)  in
income (loss) before interest and taxes were as follows:

                                                          Increase (Decrease)
                                 2001         2000        Amount    Percentage
                             ------------ ------------ ------------ ----------
Wholesale operations         $27,241,116  $24,832,679  $ 2,408,437      9.7 %
College bookstore operations   9,206,616    9,588,784     (382,168)    (4.0)%
Complementary services        (1,402,666)  (2,449,321)   1,046,655     42.7 %
Corporate administration      (7,977,326)  (8,123,130)     145,804      1.8 %
                             ------------ ------------ ------------ ----------
                             $27,067,740  $23,849,012  $ 3,218,728     13.5 %
                             ============ ============ ============ ==========

    The increase in wholesale income before interest and taxes was primarily due
to increased  revenues.  Income before interest and taxes for college  bookstore
operations  decreased,  despite  increased  revenues,  as a result of additional
amortization  of  goodwill  related  to  recent  acquisitions.  The loss  before
interest and taxes decreased for the  complementary  services segment  primarily
due to revenues  attributable  to the  aforementioned  management  services  and
licensing agreements with  TheCampusHub.com,  Inc. Despite the Company's growth,
corporate  administrative  costs have remained  relatively stable between fiscal
years.

    INCOME TAXES.  Income tax expense for fiscal 2001 increased $1.1 million, or
20.9%,  to $5.9 million from $4.8  million for fiscal  2000.  This  increase was
primarily the result of an increase in income before income taxes. The Company's
effective  tax rates of 57.4% and 71.9% for the years  ended  March 31, 2001 and
2000,  respectively,  were  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.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

    Management's  Discussion and Analysis of Financial  Condition and Results of
Operations  discusses  the  Company's  financial  statements,  which  have  been
prepared in accordance  with  accounting  principles  generally  accepted in the
United States of America. The preparation of these financial statements requires
the Company to make estimates and assumptions  that affect the reported  amounts
of  assets  and  liabilities  and  the  disclosure  of  contingent   assets  and
liabilities at the date of the financial  statements and the reported amounts of
revenues and expenses during the reporting  period.  On an on-going  basis,  the
Company  evaluates  its  estimates  and  judgments,  including  those related to
product returns,  bad debts,  inventory  valuation and obsolescence,  intangible
assets,  rebate programs,  income taxes, and contingencies  and litigation.  The
Company  bases its  estimates  and  judgments on  historical  experience  and on
various   other   factors  that  are  believed  to  be   reasonable   under  the
circumstances,  the results of which form the basis for making  judgments  about
the carrying values of assets and liabilities that are not readily apparent from
other sources.  Actual results may differ from these  estimates  under different
assumptions  or  conditions.   The  Company  believes  the  following   critical
accounting  policies,  among others,  affect its more significant  judgments and
estimates used in the preparation of its financial statements:

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

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

                                       20
<PAGE>

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

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

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

LIQUIDITY AND CAPITAL RESOURCES

    The Company's primary liquidity  requirements are for debt service under the
Senior Credit  Facility,  the Senior  Subordinated  Notes 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 the Company's
Revolving Credit Facility.  At March 31, 2002, the Company's total  indebtedness
was approximately  $147.6 million,  consisting of approximately $34.9 million in
Term Loans,  $110.0 million of the Senior Subordinated Notes and $2.7 million of
other indebtedness,  including capital lease obligations.  To provide additional
financing to fund the  Recapitalization,  NBC issued Senior Discount  Debentures
which  provided  $41.6 million in net proceeds (face value of $76.0 million less
original  issue discount of $31.0 million and deferred  financing  costs of $3.4
million).

    Principal and interest  payments  under the Senior  Credit  Facility and the
Senior Subordinated Notes represent significant  liquidity  requirements for the
Company. Under the terms of the Tranche A and Tranche B Loans, after taking into
account a $10.0 million optional  prepayment made on March 29, 2002, the Company
is scheduled to make principal  payments totaling  approximately $4.5 million in
fiscal 2003,  $7.0 million in fiscal 2004, $8.8 million in fiscal 2005 and $14.6
million in fiscal 2006. Such scheduled  principal payments are subject to change
upon the annual payment and  application of excess cash flows (as defined in the
Credit Agreement underlying the Senior Credit Facility), if any, towards Tranche
A and Tranche B Loan principal  balances.  There was an excess cash flow payment
obligation at March 31, 2002 of approximately $3.1 million that was subsequently
waived by the lenders.  Loans under the Senior Credit  Facility bear interest at
floating  rates based upon the  borrowing  option  selected by the Company.  The
Company has separate five-year amortizing interest rate swap agreements with two
financial institutions whereby the Company's variable rate Tranche A and Tranche
B Loans  have  been  converted  into debt  with a fixed  rate of 5.815%  plus an
applicable margin (as defined in the Credit Agreement).  The Senior Subordinated
Notes require semi-annual  interest payments at a fixed rate of 8.75% and mature
on February 15, 2008. The Senior Discount  Debentures  require  semi-annual cash
interest  payments  commencing  August  15,  2003 at a fixed  rate of 10.75% and
mature on February 15, 2009.

    The Company's capital expenditures were $2.3 million, $1.8 million, and $3.5
million for the fiscal years ended March 31, 2002, 2001, and 2000, respectively.
Capital expenditures consist primarily of leasehold improvements and furnishings


                                       21
<PAGE>

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 $6.1 million, $3.0 million, and $26.1
million for the fiscal years ended March 31, 2002, 2001, and 2000, respectively.
Of the $26.1 million in business  acquisition  expenditures  made for the fiscal
year  ended  March  31,  2000,  approximately  $25.2  million  pertained  to the
acquisitions of Triro, Inc. and Ned's Bookstores. Approximately $14.9 million of
capital  raised by NBC in fiscal 2000 through the issuance of 284,923  shares of
NBC's Class A Common Stock to an HWP affiliate and members of senior  management
was contributed to the Company to assist in financing the acquisitions of Triro,
Inc. and Ned's Bookstores.

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

      The  Company's  ability  to make  acquisition  expenditures  is subject to
certain  restrictions  under the Senior Credit  Facility.  The Credit  Agreement
underlying  the Senior  Credit  Facility  was  amended  on  December  20,  2001,
effectively  to allow up to $20.0  million in additional  aggregate  acquisition
expenditures over the remaining term of the Credit Agreement.

    During  fiscal 2002,  the Company sold certain  assets of two of its college
bookstore  locations  serving  the  University  of Texas in  Austin,  Texas  for
approximately $1.1 million, recognizing a gain on disposal of approximately $0.5
million.  This  gain  is  presented  as  an  offset  to  selling,  general,  and
administrative  expenses  in the  Company's  statements  of  operations.  Annual
combined revenues for these two locations for the year ended March 31, 2001 were
approximately  $2.4 million.  The sale was made to one of the Company's  largest
wholesale customers,  thereby strengthening the long-term relationship with that
customer.

    The  Company's  principal  sources  of  cash to fund  its  future  operating
liquidity needs will be cash from operating  activities and borrowings under the
Revolving  Credit  Facility.  Usage of the Revolving Credit Facility to meet the
Company's  liquidity needs  fluctuates  throughout the year due to the Company's
distinct buying and selling periods, increasing substantially at the end of each
college  semester  (May  and  December).  For the year  ended  March  31,  2002,
weighted-average  borrowings  under the Revolving  Credit Facility  approximated
$14.0 million,  with actual borrowings  ranging from a low of no borrowings to a
high of $43.0  million.  Net cash flows from  operating  activities for the year
ended March 31, 2002 were $31.0 million,  an increase of $22.2 million from $8.8
million  for the  year  ended  March  31,  2001.  This  increase  was  primarily
attributable to the timing of payments made on accounts and income taxes payable
balances, decreases in accounts receivable, and improved operations.

    Access to the  Company's  principal  sources  of cash is  subject to various
restrictions.  The  availability  of additional  borrowings  under the Revolving
Credit Facility is subject to the calculation of a borrowing base,  which at any
time is equal to a percentage of eligible accounts receivable and inventory,  up
to a  maximum  of $50.0  million.  The  Senior  Credit  Facility  restricts  the
Company's  ability to make loans or advances  and pay  dividends,  except  that,
among other things,  the Company may pay dividends to NBC (i) on or after August
15, 2003 in an amount not to exceed the amount of  interest  required to be paid
on the Senior Discount  Debentures and (ii) to pay corporate  overhead  expenses
not to  exceed  $250,000  per  year and any  taxes  owed by NBC.  The  indenture
governing the Senior Discount Debentures (the "Indenture") restricts the ability
of NBC and its  Restricted  Subsidiaries  (as defined in the  Indenture)  to pay
dividends or make other  Restricted  Payments (as defined in the  Indenture)  to
their respective  stockholders,  subject to certain  exceptions,  unless certain
conditions are met, including that (i) no default under the Indenture shall have
occurred and be  continuing,  (ii) NBC shall be  permitted  by the  Indenture to
incur  additional  indebtedness  and (iii) the amount of the dividend or payment
may not exceed a certain amount based on, among other things, NBC's consolidated
net income.  The indenture  governing  the Senior  Subordinated  Notes  contains
similar   restrictions  on  the  ability  of  the  Company  and  its  Restricted


                                       22
<PAGE>

Subsidiaries  (as  defined  in the  indenture)  to pay  dividends  or make other
Restricted   Payments  (as  defined  in  the  indenture)  to  their   respective
stockholders. Such restrictions are not expected to affect the Company's ability
to meet its cash obligations for the foreseeable future.

    As of March 31, 2002, the Company could borrow up to $42.5 million under the
Revolving Credit Facility. The Revolving Credit Facility was unused at March 31,
2002.  Amounts  available  under the Revolving  Credit  Facility may be used for
working capital and general  corporate  purposes  (including up to $10.0 million
for letters of credit),  subject to certain  limitations under the Senior Credit
Facility.

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

    The following  tables  present  aggregated  information as of March 31, 2002
regarding the Company's contractual obligations and commercial commitments:
<TABLE>
<CAPTION>

                                                     Payments Due by Period
                                   -----------------------------------------------------------
   Contractual                        Less Than         1-3           4-5          After 5
   Obligations          Total          1 Year          Years         Years          Years
------------------ --------------- -------------- -------------- ------------- ---------------
<S>                 <C>             <C>            <C>            <C>           <C>
Long-term debt      $ 145,413,145   $  4,476,156   $ 15,932,978   $14,636,932   $ 110,367,079
Capital lease
obligations             2,163,301        111,015        241,406       429,815       1,381,065
Operating leases       34,388,000      7,300,000     10,773,000     7,271,000       9,044,000
                   --------------- -------------- -------------- ------------- ---------------
  Total             $ 181,964,446   $ 11,887,171   $ 26,947,384   $22,337,747   $ 120,792,144
                   =============== ============== ============== ============= ===============


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

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

TRANSACTIONS WITH RELATED AND CERTAIN OTHER PARTIES

    In fiscal 2001,  the Company  entered into several  agreements  with a newly
created  entity,  TheCampusHub.com,  Inc.,  which  is  partially  owned by NBC's
majority owner. TheCampusHub.com, Inc. was created to provide college bookstores
with a way to sell in-store  inventory and virtual brand name  merchandise  over
the Internet utilizing  technology  originally developed by NBC. Such agreements
included an equity option  agreement,  a management  services  agreement,  and a
technology sale and license agreement.  The equity option agreement provides the
Company the opportunity to acquire 25% of the initial common shares  outstanding
of  TheCampusHub.com,  Inc. The option is being  accounted  for as a cost method
investment  in  accordance  with APB  Opinion  No.  18,  THE  EQUITY  METHOD  OF
ACCOUNTING FOR INVESTMENTS IN COMMON STOCK. The management  services  agreement,
which is  effective  for a period of three  years,  reimburses  the  Company for
certain direct costs incurred on behalf of TheCampusHub.com,  Inc. and also pays
the  Company  $0.5  million  per  year  for  certain   shared   management   and
administrative  support.  Complementary  services  revenue  resulting  from  the
management  services agreement is recognized as the services are performed.  The
technology  sale and license  agreement  provides for the Company to license its
E-commerce software capabilities to TheCampusHub.com,  Inc. for $0.5 million per
year over a period of three years and provides  TheCampusHub.com,  Inc.  with an
option to purchase such software capabilities from the Company during that three
year period.  The license fees are recognized as complementary  services revenue


                                       23
<PAGE>

over the term of the  agreement.  For the year ended  March 31,  2002,  revenues
attributable  to  the  management  services  and  technology  sale  and  license
agreements  totaled $1.0  million,  and  reimbursable  direct costs  incurred on
behalf of TheCampusHub.com, Inc. totaled $0.8 million.

    Revenues  attributable  to the management  services and technology  sale and
license  agreements were recognized in fiscal 2002 under the anticipation  that,
if  necessary,  TheCampusHub.com,   Inc.  would  make  a  capital  call  to  its
shareholders to provide the funding  necessary to meet its obligations under the
aforementioned agreements.  TheCampusHub.com,  Inc. reached break-even on a cash
flow basis,  excluding amounts under the management services and technology sale
and license  agreements,  during its most recent fiscal year. While it remains a
viable  business  and  is  funding  its  own  operations,  it is  not  currently
generating  sufficient  excess  cash  flow to fund  its  obligations  under  the
aforementioned   agreements  and  the  remaining   capital  available  from  its
shareholders is being reserved to fund strategic development  opportunities and,
if required,  ongoing  operations.  As a result,  the Company has  established a
reserve of approximately $1.0 million on net amounts due from  TheCampusHub.com,
Inc., which  approximated $1.2 million at March 31, 2002. Due to the uncertainty
of collecting amounts due from TheCampusHub.com,  Inc., future revenues provided
for under the  management  services and technology  sale and license  agreements
will be  recognized  only upon  receipt of  payment.  The Company  continues  to
benefit from its  relationship  with  TheCampusHub.com,  Inc., as the technology
developed  further enhances the  product/service  offering of the Company to its
wholesale customers.

    In April,  2001,  NBC issued 2,621 shares of its Class A Common Stock to the
Senior Vice  President  of Retail  Division  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.  As of March 31, 2002,  notes  receivable  from  stockholders  and the
associated  interest  receivable  totaled  approximately  $730,000 and $136,000,
respectively.  Such notes mature between August, 2002 and January, 2010 and bear
interest at rates ranging from 4.99% to 5.25%.

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  college  semester  in August and  December.  The buying
periods for the wholesale  operations  occur at the end of each college semester
in late  December  and  May.  The  primary  selling  periods  for the  bookstore
operations are in September and January.  In fiscal 2002,  approximately  43% of
the  Company's  annual  revenues  were  earned  in  the  second  fiscal  quarter
(July-September),  while approximately 29% of the Company's annual revenues were
earned in the fourth fiscal quarter (January-March).  Accordingly, the Company's
working  capital  requirements   fluctuate   throughout  the  year,   increasing
substantially  at the end of each college  semester,  in May and December,  as a
result of the buying periods. The Company funds its working capital requirements
primarily  through the Revolving  Credit Facility,  which  historically has been
repaid with cash provided from operations.

IMPACT OF INFLATION

    The Company's  results of operations  and financial  condition are presented
based upon  historical  costs.  While it is difficult to accurately  measure the
impact of inflation due to the imprecise nature of the estimates  required,  the
Company  believes  that the  effects of  inflation,  if any,  on its  results of
operations and financial condition have not been material. However, there can be
no  assurance  that  during a period of  significant  inflation,  the  Company's
results of operations will not be adversely affected.

ACCOUNTING STANDARDS NOT YET ADOPTED

    In June, 2001 the Financial  Accounting Standards Board issued SFAS No. 143,
ACCOUNTING FOR ASSET RETIREMENT  OBLIGATIONS.  This standard addresses financial
accounting and reporting for  obligations  related to the retirement of tangible
long-lived  assets  and the  related  asset  retirement  costs.  SFAS No. 143 is
effective for fiscal years  beginning  after June 15, 2002. The Company does not
expect its adoption of this standard in fiscal 2004 to have a significant impact
on its financial statements.  In August, 2001 the Financial Accounting Standards
Board  issued  SFAS No.  144,  ACCOUNTING  FOR THE  IMPAIRMENT  OR  DISPOSAL  OF

                                       24
<PAGE>

LONG-LIVED ASSETS.  This standard addresses  financial  accounting and reporting
for the  impairment or disposal of certain  long-lived  assets.  SFAS No. 144 is
effective for fiscal years  beginning  after December 15, 2001. The Company does
not expect its  adoption of this  standard in fiscal 2003 to have a  significant
impact on its financial statements.

"SAFE HARBOR"  STATEMENT UNDER THE PRIVATE  SECURITIES  LITIGATION REFORM ACT OF
1995

    This  Annual  Report on Form 10-K  contains  or  incorporates  by  reference
certain statements that are not historical facts,  including,  most importantly,
information  concerning  possible or assumed future results of operations of the
Company and statements preceded by, followed by or that include the words "may,"
"believes,"  "expects,"  "anticipates,"  or the  negation  thereof,  or  similar
expressions, which constitute "forward-looking statements" within the meaning of
the Private  Securities  Litigation  Reform Act of 1995 (the "Reform Act").  All
statements which address operating performance,  events or developments that are
expected or anticipated to occur in the future, including statements relating to
volume and revenue  growth,  earnings per share growth or statements  expressing
general optimism about future operating results, are forward-looking  statements
within the meaning of the Reform Act. Such  forward-looking  statements  involve
risks, uncertainties and other factors which may cause the actual performance or
achievements of the Company to be materially  different from any future results,
performance  or  achievements  expressed  or  implied  by  such  forward-looking
statements.  For those statements, the Company claims the protection of the safe
harbor for  forward-looking  statements  contained  in the Reform  Act.  Several
important factors could affect the future results of the Company and could cause
those results to differ  materially from those expressed in the  forward-looking
statements  contained  herein.  The factors that could cause  actual  results to
differ  materially  include,  but are not limited to, the  following:  increased
competition; ability to integrate recent acquisitions; loss or retirement of key
members of management; increases in the Company's cost of borrowing or inability
to raise or  unavailability  of additional debt or equity capital;  inability to
purchase a sufficient supply of used textbooks; changes in pricing of new and/or
used textbooks;  changes in general economic conditions and/or in the markets in
which the Company competes or may, from time to time, compete; the impact of the
Internet and E-books on the Company's  operations;  and other risks  detailed in
the Company's  Securities  and Exchange  Commission  filings,  in particular the
Company's Registration  Statement on Form S-4 (No. 333-48221),  all of which are
difficult or impossible to predict  accurately  and many of which are beyond the
control of the Company. The Company will not undertake and specifically declines
any obligation to publicly release the result of any revisions which may be made
to any  forward-looking  statements to reflect events or circumstances after the
date  of  such  statements  or to  reflect  the  occurrence  of  anticipated  or
unanticipated events.


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

    The Financial Accounting Standards Board has issued SFAS No. 133, ACCOUNTING
FOR DERIVATIVE  INSTRUMENTS AND HEDGING ACTIVITIES,  as amended by SFAS No. 137,
ACCOUNTING FOR DERIVATIVE  INSTRUMENTS AND HEDGING  ACTIVITIES - DEFERRAL OF THE
EFFECTIVE  DATE OF FASB  STATEMENT  NO. 133,  and SFAS No. 138,  ACCOUNTING  FOR
CERTAIN  DERIVATIVE  INSTRUMENTS AND CERTAIN HEDGING  ACTIVITIES.  This standard
requires  that all  derivative  instruments  be recorded in the balance sheet at
fair value. Changes in the fair value of derivatives are recorded in earnings or
other comprehensive income (loss), based on whether the instrument is designated
as part of a hedge  transaction and, if so, the type of hedge  transaction.  The
Company utilizes derivative financial instruments solely to manage the risk that
changes in interest rates will affect the amount of its future interest payments
on the Tranche A and Tranche B Loans and adopted SFAS No. 133 effective April 1,
2001.  See  further  discussion  regarding  SFAS No.  133 in Item 8,  "Financial
Statements and Supplementary Data".

    The Company's  primary  market risk exposure is, and is expected to continue
to be, fluctuation in Eurodollar  interest rates. Of the $147.6 million in total
indebtedness  outstanding  at March 31,  2002,  approximately  $34.9  million is
subject to  fluctuations  in the  Eurodollar  rate. As provided in the Company's
Senior Credit  Facility,  exposure to interest rate  fluctuations  is managed by
maintaining fixed interest rate debt (primarily the Senior  Subordinated  Notes)


                                       25
<PAGE>

and by entering  into interest  rate swap  agreements  that qualify as cash flow
hedging  instruments to convert certain variable rate debt into fixed rate debt.
The Company has separate five-year amortizing interest rate swap agreements with
two financial  institutions  whereby the  Company's  variable rate Tranche A and
Tranche B Loans have been  converted  into debt with a fixed rate of 5.815% plus
an  applicable  margin (as  defined in the Credit  Agreement).  Such  agreements
terminate on July 31, 2003. The notional amount under each agreement as of March
31, 2002 was  approximately  $22.4  million.  Such notional  amounts are reduced
periodically by amounts equal to the originally-scheduled  principal payments on
the Tranche A and Tranche B Loans.

    The following table presents  quantitative  information  about the Company's
market risk sensitive instruments (the weighted-average variable rates are based
on implied forward rates in the yield curve at March 31, 2002):
<TABLE>
<CAPTION>

                    Fixed Rate Debt          Variable Rate Debt     Variable to Fixed Interest Rate Swaps
                -----------------------  -------------------------  -------------------------------------
                             Weighted-                  Weighted-                          Weighted-
                              Average                    Average                           Average
                  Principal   Interest      Principal    Interest       Notional         Pay/Receive
                 Cash Flows    Rate      Cash Flows (1)    Rate          Amounts             Rates
                ------------ ----------  --------------  ---------  ----------------  -------------------
<S>               <C>          <C>         <C>             <C>         <C>                <C>     <C>
Fiscal Year
Ended March 31:
  2003            $ 134,332    8.82%      $  4,452,839     5.21%       $ 41,413,542       5.81% / 2.79%
  2004              125,769    8.81%         7,037,966     7.32%         12,275,000       5.81% / 4.51%
  2005              170,468    8.81%         8,840,181     8.24%                  -                  -
  2006              223,258    8.81%        14,569,014     8.69%                  -                  -
  2007              274,475    8.80%                 -        -                   -                  -
  Thereafter    111,748,144    8.88%                 -        -                   -                  -
                ------------  -------      ------------   -------      -------------     -------------
   Total      $ 112,676,446    8.82%      $ 34,900,000     7.01%       $ 53,688,542       5.81% / 3.19%
                ============  =======      ============   =======      =============     =============

   Fair Value $ 109,443,478       -       $ 34,900,000        -        $ (1,618,397)                 -
                ============               ============                =============
</TABLE>

(1)     Principal  cash flows  represent  scheduled  principal  payments and are
        adjusted  for  anticipated   excess  cash  flow  payments  and  optional
        prepayments  (as defined in the Credit  Agreement  underlying the Senior
        Credit  Facility) to be applied toward  principal  balances.  The excess
        cash flow payment obligation for fiscal 2002 was subsequently  waived by
        the lenders and therefore is not reflected in such principal cash flows.

    Certain  quantitative  market risk  disclosures  have changed  significantly
since  March 31, 2001 as a result of market  fluctuations,  movement in interest
rates,  principal  payments,  and new capital lease  obligations.  The following
table presents  summarized market risk information for the years ended March 31,
2002 and 2001:


                                                 March 31,       March 31,
                                                    2002            2001
                                              --------------- ---------------
     Fair Values:
       Fixed rate debt                         $ 109,443,478    $ 95,285,793
       Variable rate debt                         34,900,000      51,187,500
       Interest rate swaps                        (1,618,397)     (1,004,400)

     Overall Weighted-Average Interest Rates:
       Fixed rate debt                                  8.82%           8.76%
       Variable rate debt                               7.01%           7.65%
       Interest rate swaps receive rate                 3.19%           4.77%



                                       26
<PAGE>

              ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

INDEX TO FINANCIAL STATEMENTS OF NEBRASKA BOOK COMPANY, INC. FOR THE
YEARS ENDED MARCH 31, 2002, 2001, AND 2000

  Independent Auditors' Report................................................28

  Balance Sheets..............................................................29

  Statements of Operations....................................................30

  Statements of Stockholder's Deficit.........................................31

  Statements of Cash Flows....................................................32

  Notes to Financial Statements...............................................33


                                       27
<PAGE>

INDEPENDENT AUDITORS' REPORT

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

    We have audited the  accompanying  balance  sheets of Nebraska Book Company,
Inc. (a wholly-owned  subsidiary of NBC Acquisition  Corp.) as of March 31, 2002
and 2001, and the related statements of operations,  stockholder's  deficit, and
cash flows for each of the three years in the period ended March 31, 2002. These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

    In our opinion,  such financial  statements  present fairly, in all material
respects,  the financial position of Nebraska Book Company, Inc. as of March 31,
2002 and 2001,  and the results of its operations and its cash flows for each of
the three years in the period ended March 31, 2002 in conformity with accounting
principles generally accepted in the United States of America.


/s/  Deloitte & Touche LLP

DELOITTE & TOUCHE LLP

Lincoln, Nebraska
May 24, 2002


                                       28
<PAGE>
<TABLE>
<CAPTION>
NEBRASKA BOOK COMPANY, INC.
BALANCE SHEETS
-----------------------------------------------------------------------------------------------
                                                                           March 31,
                                                                    2002               2001
                                                               -------------      -------------
<S>                                                            <C>                <C>
ASSETS

CURRENT ASSETS:
  Cash and cash equivalents                                    $ 11,419,277       $  4,409,505
  Receivables                                                    29,384,249         31,368,150
  Inventories                                                    69,908,414         61,834,563
  Recoverable income taxes                                                -            706,408
  Deferred income taxes                                           3,557,325          1,862,166
  Prepaid expenses and other assets                                 498,440            403,700
                                                               -------------      -------------
    Total current assets                                        114,767,705        100,584,492

PROPERTY AND EQUIPMENT, net of depreciation & amortization       26,478,915         24,474,887

GOODWILL                                                         29,791,335         26,659,797

IDENTIFIABLE INTANGIBLES, net of amortization                       414,564            481,948

DEBT ISSUE COSTS, net of amortization                             5,403,342          7,036,842

OTHER ASSETS                                                      5,937,710          5,897,647
                                                               -------------      -------------
                                                               $182,793,571       $165,135,613
                                                               =============      =============

LIABILITIES AND STOCKHOLDER'S DEFICIT

CURRENT LIABILITIES:
  Accounts payable                                             $ 15,084,077       $ 11,647,964
  Accrued employee compensation and benefits                      8,910,902          6,512,773
  Accrued interest                                                1,547,199          1,466,643
  Accrued incentives                                              3,595,628            981,894
  Accrued expenses                                                1,060,969            964,781
  Income taxes payable                                            3,684,439                  -
  Deferred revenue                                                  432,790            278,982
  Current maturities of long-term debt                            4,476,156          6,308,450
  Current maturities of capital lease obligations                   111,015             29,463
                                                               -------------      -------------
    Total current liabilities                                    38,903,175         28,190,950

LONG-TERM DEBT, net of current maturities                       140,936,989        155,413,140

CAPITAL LEASE OBLIGATIONS, net of current maturities              2,052,286             22,254

OTHER LONG-TERM LIABILITIES                                       1,892,250            238,970

DUE TO PARENT                                                     9,594,899          7,056,815

COMMITMENTS (Note I)

STOCKHOLDER'S DEFICIT:
  Common stock, voting, authorized 50,000 shares of $1.00
  par value; issued and outstanding 100 shares                          100                100
  Additional paid-in capital                                     46,404,474         46,435,726
  Accumulated deficit                                           (56,386,035)       (72,222,342)
  Accumulated other comprehensive loss                             (604,567)                 -
                                                               -------------      -------------
    Total stockholder's deficit                                 (10,586,028)       (25,786,516)
                                                               -------------      -------------

                                                               $182,793,571       $165,135,613
                                                               =============      =============

See notes to financial statements.
</TABLE>

                                       29
<PAGE>
<TABLE>
<CAPTION>
NEBRASKA BOOK COMPANY, INC.
STATEMENTS OF OPERATIONS
---------------------------------------------------------------------------------------

                                                       Year Ended March 31,
                                                2002           2001            2000
                                           -------------  -------------   -------------

<S>                                        <C>            <C>             <C>
REVENUES, net of returns                   $338,916,409   $301,668,853    $267,068,923

COSTS OF SALES                              206,975,716    187,098,970     164,984,418
                                           -------------  -------------   -------------

  Gross profit                              131,940,693    114,569,883     102,084,505

OPERATING EXPENSES:
  Selling, general and administrative        84,870,828     74,100,242      65,819,487
  Depreciation                                3,087,234      2,956,135       3,096,013
  Amortization                                  504,468     10,445,766       9,319,993
                                           -------------  -------------   -------------

                                             88,462,530     87,502,143      78,235,493
                                           -------------  -------------   -------------

INCOME FROM OPERATIONS                       43,478,163     27,067,740      23,849,012

OTHER EXPENSES (INCOME):
  Interest expense                           17,189,316     17,486,737      17,469,487
  Interest income                              (399,573)      (615,430)       (355,935)
  Loss on derivative financial instruments      360,445              -               -
                                           -------------  -------------   -------------

                                             17,150,188     16,871,307      17,113,552
                                           -------------  -------------   -------------

INCOME BEFORE INCOME TAXES                   26,327,975     10,196,433       6,735,460

INCOME TAX EXPENSE                           10,491,668      5,857,596       4,844,744
                                           -------------  -------------   -------------

NET INCOME                                 $ 15,836,307   $  4,338,837    $  1,890,716
                                           =============  =============   =============

See notes to financial statements.
</TABLE>

                                       30
<PAGE>
<TABLE>
<CAPTION>
NEBRASKA BOOK COMPANY, INC.
STATEMENTS OF STOCKHOLDER'S DEFICIT
--------------------------------------------------------------------------------------------------------

                                                                Accumulated
                                     Additional                    Other
                             Common    Paid-in    Accumulated  Comprehensive               Comprehensive
                             Stock     Capital      Deficit        Loss          Total        Income
                             ------ ------------ ------------- ------------- ------------- -------------
<S>                           <C>     <C>          <C>           <C>           <C>           <C>
BALANCE, April 1, 1999       $ 100  $30,876,942  $(78,451,895) $          -  $(47,574,853) $          -

  Contributed capital            -   14,953,006             -             -    14,953,006             -

  Net income                     -            -     1,890,716             -     1,890,716     1,890,716
                             ------ ------------ ------------- ------------- ------------- -------------

BALANCE, March 31, 2000        100   45,829,948   (76,561,179)            -   (30,731,131) $  1,890,716
                                                                                           =============

  Contributed capital            -      605,778             -             -       605,778             -

  Net income                     -            -     4,338,837             -     4,338,837     4,338,837
                             ------ ------------ ------------- ------------- ------------- -------------

BALANCE, March 31, 2001        100   46,435,726   (72,222,342)            -   (25,786,516) $  4,338,837
                                                                                           =============

  Contributed capital            -      (31,252)            -             -       (31,252)            -

  Net income                     -            -    15,836,307             -    15,836,307    15,836,307

  Other comprehensive
  loss, net of taxes:

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

    Unrealized losses on
    interest rate swap
    agreements, net of
    taxes of $1,285              -            -             -        (1,927)       (1,927)       (1,927)

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

BALANCE, March 31, 2002      $ 100  $46,404,474  $(56,386,035) $   (604,567) $(10,586,028) $ 15,231,740
                             ====== ============ ============= ============= ============= =============

See notes to financial statements.
</TABLE>

                                       31
<PAGE>
<TABLE>
<CAPTION>
NEBRASKA BOOK COMPANY, INC.
STATEMENTS OF CASH FLOWS
-----------------------------------------------------------------------------------------------------


                                                                        Year Ended March 31,
CASH FLOWS FROM OPERATING ACTIVITIES:                             2002         2001          2000
                                                              ------------ ------------ -------------
<S>                                                           <C>          <C>          <C>
  Net income                                                  $15,836,307  $ 4,338,837  $  1,890,716
  Adjustments to reconcile net income to net cash
  flows from operating activities:
    Provision for losses on accounts receivable                 1,629,704      434,070       140,927
    Depreciation                                                3,087,234    2,956,135     3,096,013
    Amortization                                                2,137,968   11,814,114    10,692,176
    Noncash interest expense from derivative
      financial instruments                                       250,340            -             -
    Loss on derivative financial instruments                      360,445            -             -
    (Gain) Loss on disposal of assets                            (482,810)      59,627        18,044
    Deferred income taxes                                        (500,000)  (1,351,000)     (773,000)
    Changes in operating assets and liabilities, net of
    effect of acquisitions/disposals:
      Receivables                                                 309,193   (7,618,872)   (3,330,361)
      Inventories                                              (6,554,490)     354,360    (4,665,275)
      Recoverable income taxes                                    706,408     (706,408)      319,630
      Prepaid expenses and other assets                           (94,740)      23,602        84,054
      Other assets                                               (683,573)     (85,526)      797,705
      Accounts payable                                          3,436,113   (4,497,902)    5,318,621
      Accrued employee compensation and benefits                2,398,129      211,662     2,231,461
      Accrued interest                                             80,556      117,419       (77,285)
      Accrued incentives                                        2,613,734      856,541       (64,075)
      Accrued expenses                                             96,188      271,867       197,200
      Income taxes payable                                      3,684,439     (553,893)      552,928
      Deferred revenue                                            153,808     (273,269)      175,695
      Other long-term liabilities                                  34,883       36,739        11,157
      Due to parent                                             2,538,084    2,450,624     2,328,925
                                                              ------------ ------------ -------------
        Net cash flows from operating activities               31,037,920    8,838,727    18,945,256

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property and equipment                          (2,276,892)  (1,759,010)   (3,542,471)
  Bookstore acquisitions, net of cash acquired                 (6,109,599)  (2,975,332)  (26,072,155)
  Proceeds from sale of bookstores                              1,139,400            -             -
  Proceeds from sale of property and equipment and other           49,487      144,834        65,197
  Software development costs                                     (418,463)    (403,996)     (694,830)
                                                              ------------ ------------ -------------
        Net cash flows from investing activities               (7,616,067)  (4,993,504)  (30,244,259)

CASH FLOWS FROM FINANCING ACTIVITIES:
  Deferred financing costs                                              -            -       (32,478)
  Principal payments on long-term debt                        (16,308,445)  (4,456,324)   (3,079,413)
  Principal payments on capital lease obligations                (117,388)     (72,320)     (177,411)
  Capital contributions                                            13,752      642,039    14,979,532
                                                              ------------ ------------ -------------
        Net cash flows from financing activities              (16,412,081)  (3,886,605)   11,690,230
                                                              ------------ ------------ -------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS            7,009,772      (41,382)      391,227

CASH AND CASH EQUIVALENTS, Beginning of year                    4,409,505    4,450,887     4,059,660
                                                              ------------ ------------ -------------
CASH AND CASH EQUIVALENTS, End of year                        $11,419,277  $ 4,409,505  $  4,450,887
                                                              ============ ============ =============


SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION:
  Cash paid during the year for:
    Interest                                                  $15,224,920  $16,000,970  $ 16,174,589
    Income taxes                                                4,062,737    6,018,273     2,424,436

Noncash investing and financing activities:

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

  Accumulated other comprehensive loss:

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

See notes to financial statements.
</TABLE>

                                       32
<PAGE>

NEBRASKA BOOK COMPANY, INC.

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


A.  NATURE OF OPERATIONS

    Nebraska Book Company, Inc. (the "Company") is a wholly-owned  subsidiary of
NBC Acquisition Corp. NBC Acquisition  Corp.  ("NBC") was formed for the purpose
of acquiring  all of the  outstanding  capital  stock of the Company,  effective
September  1,  1995.  NBC did  not  have  substantive  operations  prior  to the
acquisition  of the  Company.  The  purchase  price of the  Company  was  $106.0
million,  which was funded primarily through the issuance of long-term debt. The
acquisition  was accounted for by the purchase method of accounting and resulted
in excess  of cost  over  fair  value of net  assets  acquired  ("goodwill")  of
approximately $26.9 million.

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

    On February 13,  1998,  NBC  consummated  a Merger  Agreement  among a newly
created corporation controlled and owned by affiliates of Haas Wheat & Partners,
L.P.  ("HWP"),  NBC and  certain  shareholders  of NBC  pursuant  to  which  the
Company's   outstanding   debt  and   NBC's   stock   were   restructured   (the
"Recapitalization").  As the new investor did not acquire  substantially  all of
the  common  stock of NBC,  a new basis of  accounting  was not  established  in
connection with the Recapitalization, resulting in a negative charge to retained
earnings of  approximately  $75.3 million.  The Company  obtained  approximately
$170.0 million in new debt financing in  conjunction  with the  Recapitalization
and capitalized debt issue costs of approximately  $11.3 million associated with
such new debt financing.

B.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

    The significant accounting policies of the Company are as follows:

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

    SHIPPING  AND  HANDLING  FEES AND COSTS:  Amounts  billed to a customer  for
shipping and handling  have been  classified  as revenues in the  statements  of
operations and approximated $4.4 million, $2.9 million, and $2.2 million for the
years ended March 31, 2002, 2001, and 2000, respectively.  Shipping and handling
costs are included in operating  expenses in the  statements of  operations  and
approximated  $8.0 million,  $6.8 million,  and $5.8 million for the years ended
March 31, 2002, 2001, and 2000, respectively.

    ADVERTISING:  Advertising  costs are expensed as incurred  and  approximated
$2.7 million, $2.2 million, and $2.3 million for the years ended March 31, 2002,
2001, and 2000, respectively.

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

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

                                       33
<PAGE>

    INVENTORIES:  Inventories  are  stated  at the  lower  of  cost  or  market.
Inventories for wholesale operations are determined on the weighted-average cost
method.  The  Company's  college  bookstore  operations  value new  textbook and
non-textbook inventories using the retail inventory method (first-in,  first-out
cost basis).  Other  inventories are determined on the first-in,  first-out cost
method.

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

    SOFTWARE  DEVELOPMENT COSTS: The Company's primary activities  regarding the
internal   development  of  software  revolve  around  its  proprietary  college
bookstore information system (PRISM),  which is utilized by the Company's 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  Statement  of  Financial
Accounting  Standards  ("SFAS")  No. 86,  ACCOUNTING  FOR THE COSTS OF  COMPUTER
SOFTWARE TO BE SOLD,  LEASED, OR OTHERWISE  MARKETED as required by Statement of
Position  98-1,  ACCOUNTING  FOR THE COSTS OF  COMPUTER  SOFTWARE  DEVELOPED  OR
OBTAINED FOR INTERNAL USE.

    Development  costs included in the research and  development of new software
products and  enhancements  to existing  software  products  associated with the
Company's  proprietary  college  bookstore  information  systems are expensed as
incurred  until   technological   feasibility   has  been   established.   After
technological  feasibility  is  established,  additional  development  costs are
capitalized  and amortized over the lesser of five years or the economic life of
the related product. Recoverability of such capitalized costs is evaluated based
upon estimates of future  undiscounted  cash flows.  Software costs  capitalized
pertaining to WinPRISM,  the Company's new Windows-based  product,  approximated
$1.2 million,  $1.1 million, and $0.8 million at March 31, 2002, 2001, and 2000,
respectively.  Certain WinPRISM functionalities have been completed and released
to the general public.  Amortization of the  capitalized  costs  associated with
such functionalities  totaled $0.3 million and $0.1 million for the fiscal years
ended March 31, 2002 and 2001,  respectively.  During  fiscal 2000,  the Company
also capitalized and amortized  approximately  $0.3 million  associated with the
development of WebPRISM, which was licensed to TheCampusHub.com,  Inc. in fiscal
2001 (see Note P to the financial statements).

    GOODWILL  AND  OTHER  IDENTIFIABLE  INTANGIBLE  ASSETS:  Goodwill  and other
identifiable  intangible assets were acquired through the acquisition of 100% of
the stock of the Company  effective  September 1, 1995,  and the  acquisition of
various  bookstore  operations  and other  businesses.  Goodwill and  intangible
assets with indefinite useful lives are not amortized but rather tested at least
annually  for  impairment.  The test for  impairment  of  goodwill is a two-step
process that  identifies  potential  impairment  and then measures the amount of
such  impairment  to be  recorded  in the  financial  statements.  The  test for
impairment  of  intangible  assets  with  indefinite  useful  lives  consists of
comparing  the fair  value of the  intangible  asset with its  carrying  amount,
recognizing any excess carrying value as an impairment loss.  Intangible  assets
with finite useful lives continue to be amortized on a straight-line  basis over
useful lives of 2-3 years.  There were no impairment  losses  recognized  during
fiscal 2002.

    DEBT ISSUE COSTS:  The costs related to the issuance of debt are capitalized
and amortized to interest expense on a straight-line basis over the lives of the
related debt.  Accumulated  amortization  of such costs as of March 31, 2002 and
2001 was approximately $5.9 million and $4.3 million, respectively.

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

                                       34
<PAGE>

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

    FAIR VALUE OF  FINANCIAL  INSTRUMENTS:  The  carrying  amounts of  financial
instruments  including  cash  and cash  equivalents,  accounts  receivable,  and
accounts payable  approximate fair value as of March 31, 2002 and 2001,  because
of the  relatively  short  maturity  of these  instruments.  The  fair  value of
long-term  debt,  including the current  maturities,  was  approximately  $144.3
million  and $146.5  million  as of March 31,  2002 and 2001,  respectively,  as
determined  primarily by quoted  market  values.  The fair value of the interest
rate swap agreements (see note J) approximated $(1.6) million and $(1.0) million
as of March 31, 2002 and 2001 using  quotes  from  brokers  and  represents  the
Company's 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 ("APB") Opinion No.
25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES and related interpretations.

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

    COMPREHENSIVE  INCOME:  Comprehensive  income  includes net income and other
comprehensive  losses.  For the year ended March 31, 2002,  other  comprehensive
losses  consisted  of the  cumulative  effect of  adoption  of SFAS No.  133 and
unrealized losses on interest rate swap agreements, net of taxes.

    ACCOUNTING STANDARDS NOT YET ADOPTED: In June, 2001 the Financial Accounting
Standards   Board  issued  SFAS  No.  143,   ACCOUNTING  FOR  ASSET   RETIREMENT
OBLIGATIONS.  This standard  addresses  financial  accounting  and reporting for
obligations  related to the  retirement  of tangible  long-lived  assets and the
related  asset  retirement  costs.  SFAS No. 143 is  effective  for fiscal years
beginning  after June 15, 2002. The Company does not expect its adoption of this
standard  in  fiscal  2004  to  have  a  significant  impact  on  the  financial
statements.  In August,  2001, the Financial  Accounting  Standards Board issued
SFAS No. 144,  ACCOUNTING FOR THE  IMPAIRMENT OR DISPOSAL OF LONG-LIVED  ASSETS.
This standard addresses financial accounting and reporting for the impairment or
disposal of certain  long-lived  assets.  SFAS No. 144 is  effective  for fiscal
years  beginning  after  December  15,  2001.  The  Company  does not expect its
adoption of this  standard in fiscal  2003 to have a  significant  impact on the
financial statements.

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

C.  ACQUISITIONS

    On July 20, 2001, the Financial  Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 141, BUSINESS COMBINATIONS.  This
statement,  which  addresses  financial  accounting  and  reporting for business
combinations,  mandates the use of the "purchase  method" of accounting  for all
business  combinations.  The  purchase  method  involves  allocating  the  total
purchase  price to tangible  and  identifiable  intangible  assets  acquired and
liabilities assumed based on their estimated fair values at date of acquisition.
Any excess of the  purchase  price over the net of  amounts  assigned  to assets
acquired and  liabilities  assumed is recorded as goodwill.  The statement  also


                                       35
<PAGE>

provides  specific  criteria  for  separately  identifying  goodwill  and  other
intangible assets and expands the disclosure  requirements for material business
combinations.  SFAS No.  141 does not  fundamentally  change  the  guidance  for
determining  the cost of an acquired entity and allocating that cost to the fair
value  of the  assets  acquired  and  liabilities  assumed.  This  statement  is
effective for all business combinations initiated after June 30, 2001. This does
not  represent a  significant  change for the  Company,  as it has  historically
accounted for business combinations under the purchase method.

    Effective  November  12,  1999,  the  Company  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.  The Company
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.  The results of operations for Ned's  Bookstores have
been  included in the 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 NBC to the  Company.  NBC raised the $4.6 million in
capital through the sale of 87,922 shares of its Class A Common Stock to certain
shareholders,  including an affiliate of HWP and members of senior management on
December 6, 1999.  The remaining  funding was provided  through  available  cash
funds.

    Effective June 4, 1999, the Company  acquired all of the outstanding  common
stock of Triro, Inc., an independent  college bookstore operation with 17 retail
bookstores  located in Texas, New Mexico, and Arizona,  for approximately  $15.0
million, net of cash acquired.  The Company 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.  The
results of operations  for Triro,  Inc. have been included in the 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 NBC to the Company.
NBC raised the $10.3  million in capital  through the sale of 197,001  shares of
its Class A Common Stock to certain shareholders,  including an affiliate of HWP
and members of senior  management.  The remaining  funding was provided  through
available  cash  funds and  borrowings  under  the  Company's  revolving  credit
facility.

    The following table  summarizing  unaudited pro forma financial  information
assumes the  acquisitions  discussed  above had occurred at the beginning of the
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 the period presented, nor does
it purport to indicate the results of future operations.

                                       Year Ended
                                     March 31, 2000
                                     --------------
      Pro Forma Information:
        Revenues, net of returns     $ 278,137,891
        Net income                         792,147


    Additionally,  the Company from time to time acquires  bookstore  operations
which  generally  are not material in their impact to the Company.  The purchase
generally involves paying cash for the inventory and fixed assets, as well as an
amount for goodwill.  In fiscal 2002 and 2001, the Company acquired ten and four
such bookstore operations, respectively.

                                       36
<PAGE>

D.  RECEIVABLES

    Receivables are summarized as follows:

                                                     March 31,
                                            ---------------------------
                                                2002           2001
                                            ------------   ------------
   Trade  receivables, less allowance for
     doubtful accounts of $429,803
     and $407,033 at March 31, 2002 and
     2001, respectively                      $15,096,134    $14,739,915
   Receivables from book publishers
     for returns                               9,333,134     11,971,106
   Advances for book buy-backs                 2,162,439      1,784,687
   Computer finance agreements,
     current portion                             352,286        128,544
   Related party receivables, less
     allowance for doubtful accounts
     of $1.0 million at March 31, 2002           337,561        680,728
   Other                                       2,102,695      2,063,170
                                             -----------    -----------
                                             $29,384,249    $31,368,150
                                             ===========    ===========

   Trade receivables include the effect of estimated product returns. The amount
of estimated product returns at March 31, 2002 and 2001 was  approximately  $6.0
million and $2.7 million, respectively.

E.  INVENTORIES

    Inventories are summarized as follows:

                                                      March 31,
                                              -------------------------
                                                  2002          2001
                                              -----------   -----------
           Wholesale                          $30,256,654   $26,150,304
           College bookstores                  32,607,768    31,348,415
           Other                                7,043,992     4,335,844
                                              -----------   -----------
                                              $69,908,414   $61,834,563
                                              ===========   ===========

    Wholesale  inventories include the effect of estimated product returns.  The
amount of estimated product returns at March 31, 2002 and 2001 was approximately
$2.7 million and $1.4 million, respectively.

    General and administrative costs associated with the storage and handling of
inventory  totaled  approximately  $6.5  million and $5.6  million for the years
ended March 31, 2002 and 2001, respectively, of which approximately $1.9 million
and $1.6  million was  capitalized  into  inventory  at March 31, 2002 and 2001,
respectively.


                                       37
<PAGE>

F.  PROPERTY AND EQUIPMENT

    A summary of the cost of property and equipment follows:

                                                             March 31,
                                                  ------------------------------
                                                        2002            2001
                                                  --------------  --------------
   Land                                            $  2,408,999    $  2,412,818
   Buildings and improvements                        17,002,181      14,733,218
   Leasehold improvements                             6,526,231       6,100,691
   Furniture and fixtures                             5,361,476       4,737,487
   Information systems                               10,786,038       9,277,060
   Automobiles and trucks                               321,476         386,074
   Machinery                                            450,510         465,878
   Projects in process                                  204,521          40,929
                                                  --------------  --------------
                                                     43,061,432      38,154,155
   Less:  Accumulated depreciation &
   amortization                                     (16,582,517)    (13,679,268)
                                                  --------------  --------------
                                                   $ 26,478,915    $ 24,474,887
                                                  ==============  ==============

G.  GOODWILL AND OTHER IDENTIFIABLE INTANGIBLES

    On July 20, 2001, the Financial  Accounting  Standards Board issued SFAS No.
142, GOODWILL AND OTHER INTANGIBLE ASSETS. This statement addresses how goodwill
and other intangible assets should be accounted for in the financial  statements
upon acquisition and subsequent thereto.  The Company has elected early adoption
of the provisions of this statement beginning April 1, 2001.

    During the fiscal  year ended  March 31,  2002,  the  Company  acquired  ten
college bookstore  locations in three separate  transactions,  none of which was
material to the  Company's  financial  statements.  In May of 2001,  the Company
acquired  certain  assets  of  a  privately  owned  bookstore   serving  Western
Washington  University.  In June of 2001, the Company acquired certain assets of
bookstores serving the University of Florida, the University of Oklahoma,  North
Carolina  State   University,   the  University  of  Central  Florida,   Radford
University,  and Chadron State College.  In March of 2002, NBC acquired  certain
assets of a privately  owned  bookstore  serving the  University of California -
Berkeley.  The total purchase price, net of cash acquired,  of such acquisitions
was approximately $6.1 million, of which approximately $0.2 million was assigned
to covenants not to compete with  amortization  periods  ranging between two and
three  years and  approximately  $3.3  million was  assigned  to  tax-deductible
goodwill.

    Also during the fiscal year ended March 31, 2002, the Company sold inventory
and  certain  property,  plant  and  equipment  located  at two  of its  college
bookstore  locations  serving the  University  of Texas for  approximately  $1.1
million,  recognizing a gain on disposal of approximately $0.5 million. Included
in the  calculation  of such gain was $0.2 million of goodwill  associated  with
these two bookstores.  This gain is presented as an offset to selling,  general,
and administrative expenses in the Company's statements of operations.

                                       38
<PAGE>

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

                                                                     Year Ended March 31,
                                                           2002            2001           2000
                                                      --------------  -------------- -------------
<S>                                                     <C>              <C>           <C>
     Net Income:
       Net income, as reported                         $ 15,836,307    $  4,338,837   $ 1,890,716
       Add:  Goodwill amortization                                -      10,169,697     8,951,269
       Deduct:  Tax benefit of goodwill amortization              -      (2,364,766)   (1,805,387)
                                                      --------------  -------------- -------------
       Net income, as adjusted                         $ 15,836,307    $ 12,143,768   $ 9,036,598
                                                      ==============  ============== =============
</TABLE>

    The  following  table  presents the total  carrying  amount of goodwill,  by
reportable  segment,  as of March  31,  2002 and  2001,  respectively.  Goodwill
assigned to corporate  administration  represents the carrying value of goodwill
arising  from NBC  Acquisition  Corp.'s  ("NBC")  acquisition  of the Company on
September 1, 1995.  As is the case with a  significant  portion of the Company's
assets,  such  goodwill is not  allocated  between the  Company's  segments when
management makes operating decisions and assesses performance.  Such goodwill is
allocated to the Company's  reporting units for purposes of testing goodwill for
impairment and  calculating any gain or loss on the disposal of all or a portion
of a reporting unit.

                                                         March 31,
                                                    2002           2001
                                               -------------- --------------

       College bookstore operations             $ 13,020,761   $  9,889,223
       Complementary services                              -              -
                                               -------------- --------------
         Total for reportable segments            13,020,761      9,889,223
       Corporate administration                   16,770,574     16,770,574
                                               -------------- --------------
         Total goodwill                         $ 29,791,335   $ 26,659,797
                                               ============== ==============


    Identifiable intangible assets, net of amortization expense of approximately
$0.2 million and $0.1 million as of March 31, 2002 and 2001, respectively,  were
not material.

H.  LONG-TERM DEBT

    On February 13,  1998,  the Company  obtained  new  financing as part of the
Recapitalization  (See Note A). The new financing  included a  bank-administered
senior  credit  facility  (the  "Senior  Credit  Facility")  provided  through a
syndicate of investors.  The facility was comprised of a $27.5 million term loan
(the  "Tranche A Loan"),  a $32.5 million term loan (the "Tranche B Loan") and a
$50.0 million revolving credit facility (the "Revolving Credit Facility").

    The Revolving Credit Facility expires on March 31, 2004.  Availability under
the Revolving  Credit  Facility is determined by the  calculation of a borrowing
base, which at any time is equal to a percentage of eligible accounts receivable
and inventory,  up to a maximum of $50.0 million.  The calculated borrowing base
at March 31, 2002 was approximately $42.5 million. The Revolving Credit Facility
was unused at March 31, 2002.

    The interest rate on the Senior Credit  Facility is prime plus an applicable
margin of up to 1.50% or, on Eurodollar borrowings,  the Eurodollar rate plus an
applicable margin of up to 2.50%.  Additionally,  there is a 0.5% commitment fee
for the average  daily  unused  amount of the  Revolving  Credit  Facility.  The
average  borrowings under the Company's  Revolving Credit Facility for the years
ended March 31, 2002 and 2001 were approximately $14.0 million and $15.3 million
at an average rate of 7.8% and 10.7%, respectively.

                                       39
<PAGE>

    The Senior Credit Facility is  collateralized  by  substantially  all of the
assets of the Company and its parent, NBC. Additionally,  NBC has guaranteed the
prompt and complete payment and performance of the Company's  obligations  under
the Senior Credit  Facility.  The Senior Credit  Facility also  stipulates  that
excess cash flows as defined in the credit  agreement  dated  February  13, 1998
(the  "Credit  Agreement"),  as  amended,  shall be  applied  initially  towards
prepayment of the term loans and then utilized to permanently reduce commitments
under the Revolving Credit Facility. An optional prepayment of $10.0 million was
made on March 29, 2002 and applied towards the Tranche A Loan and Tranche B Loan
in  accordance  with the Credit  Agreement.  There was also an excess  cash flow
payment  obligation  at March 31, 2002 of  approximately  $3.1  million that was
subsequently waived by the lenders.

    Additional funding of the  Recapitalization  included the proceeds of $110.0
million  face amount of 8.75%  senior  subordinated  notes due 2008 (the "Senior
Subordinated  Notes") and the issuance by NBC of senior discount debentures (the
"Senior Discount Debentures").

    Borrowings consist of the following:

                                                        March 31,
                                             -------------------------------
                                                  2001             2000
                                             -------------    --------------
   Tranche A Loan, due March 31, 2004,
     quarterly principal payments, plus
     interest at a floating rate based
     on Eurodollar rate plus 2.25%
     (4.24% and 7.20% at March
     31, 2002 and 2001, respectively)        $ 11,095,713      $ 20,062,500

   Tranche B Loan, due March 31, 2006,
     quarterly principal payments, plus
     interest at a floating rate based
     on Eurodollar rate plus 2.50%
     (4.49% and 7.45% at March 31,
     2002 and 2001, respectively)              23,804,287        31,125,000

   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

   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%          513,145           534,090
                                             -------------     ------------
                                              145,413,145       161,721,590
   Less current maturities                     (4,476,156)       (6,308,450)
                                             -------------     -------------
                                             $140,936,989      $155,413,140
                                             =============     =============

    The  Senior  Credit  Facility  requires  the  Company  to  maintain  certain
financial  ratios and  contains  a number of other  covenants  that among  other
things,  restrict  the  ability  to incur  additional  indebtedness,  dispose of
assets,  make capital  expenditures,  make loans or advances and pay  dividends,
except that, among other things,  the Company may pay dividends to NBC (i) on or
after August 15, 2003 in an amount not to exceed the amount of interest required
to be paid  on  NBC's  Senior  Discount  Debentures  and  (ii) to pay  corporate
overhead expenses not to exceed $250,000 per year and any taxes owed by NBC.

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

                                       40
<PAGE>

    At March 31, 2002,  the aggregate  maturities of long-term debt for the next
five years were as follows:

   Fiscal Year
   -----------
   2003                              $ 4,476,156
   2004                                7,063,916
   2005                                8,869,062
   2006                               14,601,158
   2007                                   35,774

I.  LEASE OBLIGATIONS

    In  conjunction  with two  bookstores  acquired in June of 2001, the Company
entered into two bookstore  facility  leases that  qualified as capital  leases.
Such leases  expire in fiscal 2012 and both  contain  two  five-year  options to
renew.  Additionally,  the Company is obligated under various capital leases for
certain equipment that expire at various dates through 2003.  Capitalized leased
property and equipment included in property and equipment was approximately $2.0
million at March 31, 2002, net of accumulated depreciation.

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

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

                                          Capital     Operating
   Year                                   Leases        Leases
   ----                                ------------  ------------
   2003                                 $  359,843   $ 7,300,000
   2004                                    336,752     5,998,000
   2005                                    364,814     4,775,000
   2006                                    394,982     4,081,000
   2007                                    417,432     3,190,000
   Thereafter                            1,753,917     9,044,000
                                       ------------  ------------
   Total minimum lease payments          3,627,740   $34,388,000
                                                     ============
   Amount representing interest at
     11.8%                              (1,464,439)
                                       ------------
   Present value of minimum lease
     payments                          $ 2,163,301
                                       ============

    Total rent  expense for the years ended March 31, 2002,  2001,  and 2000 was
approximately  $10.6  million,  $9.6 million,  and $8.2  million,  respectively.
Percentage  rent expense for the years ended March 31, 2002,  2001, and 2000 was
approximately $2.5 million, $2.0 million, and $1.8 million, respectively.

J.  DERIVATIVE FINANCIAL INSTRUMENTS

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

                                       41
<PAGE>

    The Company's  primary  market risk exposure is, and is expected to continue
to be, fluctuation in Eurodollar  interest rates. Of the $147.6 million in total
indebtedness  outstanding  at March  31,  2002,  $34.9  million  is  subject  to
fluctuations  in the  Eurodollar  interest  rate.  As provided in the  Company's
Senior Credit  Facility,  exposure to interest rate  fluctuations  is managed by
maintaining fixed interest rate debt (primarily the Senior  Subordinated  Notes)
and by entering  into interest  rate swap  agreements  that qualify as cash flow
hedging  instruments to convert certain variable rate debt into fixed rate debt.
The Company has separate five-year amortizing interest rate swap agreements with
two financial  institutions  whereby the  Company's  variable rate Tranche A and
Tranche B Loans have been  converted  into debt with a fixed rate of 5.815% plus
an  applicable  margin (as  defined in the Credit  Agreement).  Such  agreements
terminate on July 31, 2003. The notional amount under each agreement as of March
31, 2002 was  approximately  $22.4  million.  Such notional  amounts are reduced
periodically by amounts equal to the originally-scheduled  principal payments on
the Tranche A and Tranche B Loans.  The Company is exposed to credit loss in the
event  of  nonperformance  by the  counterparties  to  the  interest  rate  swap
agreements.  The Company  anticipates the  counterparties  will be able to fully
satisfy their obligations under the agreements.

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

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

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

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

    The  interest  rate  swap  agreements  are  reflected  at fair  value in the
Company's  balance  sheets (as "other  long-term  liabilities")  and the related
gains or losses on these  agreements  are  generally  recorded in  stockholders'
deficit,  net of applicable  income taxes (as "accumulated  other  comprehensive
loss"). The gains or losses recorded in accumulated other comprehensive loss are
reclassified  into  earnings as an  adjustment  to interest  expense in the same
periods in which the related  interest  payments  being hedged are recognized in
earnings.  The net  effect  of  this  accounting  on the  Company's  results  of
operations  is that  interest  expense on the  Tranche A and  Tranche B Loans is
generally  being recorded based on fixed interest  rates.  The fair value of the
interest rate swap agreements reflected in other long-term  liabilities at March
31, 2002 approximated $1.6 million.

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

    As a result of the  aforementioned  $10.0  million  optional  prepayment  of
Tranche A and  Tranche B Loans on March 29,  2002,  notional  amounts  under the
interest  rate swap  agreements no longer  correlate  with  remaining  principal
balances due under the Tranche A and Tranche B Loans. The difference between the
notional  amounts  under the interest  rate swap  agreements  and the  remaining
principal balances due under the Tranche A and Tranche B Loans at March 31, 2002
represents  the  portion  of the  agreements  that no longer  qualify  for hedge


                                       42
<PAGE>

accounting.  The fair value of the interest  rate swap  agreements  on March 29,
2002 was allocated  between the portion of the agreements that no longer qualify
for hedge accounting and the portion of the agreements that were redesignated as
hedging instruments on the remaining amounts due under the Tranche A and Tranche
B Loans.  The fair value  allocated  to the  portion of the  interest  rate swap
agreements  that  no  longer  qualify  for  hedge   accounting  was  immediately
recognized  in the  Company's  results  of  operations  as a loss on  derivative
financial  instruments and totaled  approximately  $0.4 million.  Changes in the
fair value of this portion of the interest rate swap agreements,  along with the
proportionate share of actual net cash settlements  attributable to this portion
of the  agreements,  will  also be  recognized  as a gain or loss on  derivative
financial instruments in the statements of operations.

    As of March 31,  2002,  the fair value of the portion of the  interest  rate
swap agreements that were redesignated as hedging  instruments on March 29, 2002
declined  by   approximately   $0.2  million.   The  net  loss   resulting  from
ineffectiveness   attributable  to  this  portion  of  the  interest  rate  swap
agreements  for the year ended March 31, 2002  recorded as interest  expense was
approximately $0.2 million.

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

K.  INCOME TAXES

    The provision (benefit) for income taxes consists of:

                                                Year Ended March 31,
                                     -----------------------------------------
                                         2002           2001          2000
                                     -----------     -----------   -----------
       Current:
         Federal                     $ 9,311,719     $ 6,107,168   $ 4,524,517
         State                         1,679,949       1,101,428     1,093,227
       Deferred                         (500,000)     (1,351,000)     (773,000)
                                     -----------     -----------   -----------

                                     $10,491,668     $ 5,857,596   $ 4,844,744
                                     ===========     ===========   ===========


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

                                                  Year Ended March 31,
                                         -------------------------------------
                                            2002           2001         2000
                                         ---------      ---------     --------
   Statutory rate                          35.0%          34.0%         34.0%
   State income tax effect                  4.0            5.7           9.5
   Amortization of goodwill                   -           14.2          22.4
   Change in estimate of income tax
     liabilities                            0.4            2.4           3.7
   Other                                    0.4            1.1           2.3
                                         ---------      ---------     --------
                                           39.8%          57.4%         71.9%
                                         =========      =========     ========

                                       43
<PAGE>

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

                                                 March 31,
                                        --------------------------
                                            2002           2001
                                        -----------    -----------
   Deferred income tax assets
   (liabilities),
     current:
     Vacation accruals                  $  532,816     $  484,173
     Inventory                              69,490        544,378
     Allowance for doubtful accounts       542,753        154,510
     Product returns                     1,237,730        480,069
     Incentive programs                  1,312,059        321,784
     Other                                (137,523)      (122,748)
                                        -----------    -----------
                                         3,557,325      1,862,166
                                        -----------    -----------
   Deferred income tax assets,
   noncurrent:
     Deferred compensation agreements      103,955         90,713
     Book over tax goodwill
     amortization                        1,843,312      2,967,716
     Covenant not to compete             1,384,571      1,468,568
     Unrealized losses on derivatives      403,045              -
                                        -----------    -----------
                                         3,734,883      4,526,997
                                        -----------    -----------
                                        $7,292,208     $6,389,163
                                        ===========    ===========

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

L.  RETIREMENT PLAN

    The Company  participates  in and  sponsors a 401(k)  compensation  deferral
plan. The plan covers  substantially all employees.  The plan provisions include
employee  contributions  based on a  percentage  of  compensation  along  with a
sponsor base contribution in addition to a limited matching feature. The sponsor
contributions  for  the  years  ended  March  31,  2002,  2001,  and  2000  were
approximately $0.9 million, $0.8 million, and $0.8 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 either death
or voluntary/involuntary  resignation or termination. Interest is accrued at the
prime rate adjusted  semi-annually  on January 1 and July 1 and is compounded as
of March 31. The  liability for the deferred  compensation  is included in other
long-term liabilities and approximated $0.3 million and $0.2 million as of March
31, 2002 and 2001, respectively.

N.  STOCK-BASED COMPENSATION

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

    1998 PERFORMANCE  STOCK OPTION PLAN - This plan provides for the granting of
options to  purchase  52,000  shares of NBC's  Class A Common  Stock to selected
members of senior management of NBC and its affiliates.  All options granted are
intended to be nonqualified  stock options,  although the plan also provides for
incentive  stock options.  NBC will grant a portion of the available  options in
fiscal years 1999-2002 upon the attainment of pre-established financial targets.
Twenty-five  percent of the options granted become exercisable  immediately upon
granting, with the remaining options becoming exercisable in 25% increments over
the subsequent  three years on the anniversary of the date of grant. The options
have an  exercise  price  of not less  than  fair  market  value on the date the
options are  granted  and expire ten years from the date of grant.  At March 31,
2002, there were 11,229 options available for grant under the plan.

    1998 STOCK  OPTION PLAN - This plan  provides for the granting of options to
purchase  31,000  shares of NBC's Class A Common  Stock to  selected  employees,


                                       44
<PAGE>

officers,  and  directors  of NBC and its  affiliates.  All options  granted are
intended to be nonqualified  stock options,  although the plan also provides for
incentive  stock  options.  NBC will grant such options at the  discretion  of a
committee  designated  by the Board of Directors  (the  Committee).  Twenty-five
percent of the options  granted become  exercisable  immediately  upon granting,
with the remaining  options  becoming  exercisable  in 25%  increments  over the
subsequent three years on the anniversary of the date of grant.  Incentive stock
options  have an exercise  price of not less than fair market  value on the date
the options are granted,  while the Committee  determines the exercise price for
nonqualified  options,  which may be below  fair  market  value,  at the time of
grant.  All options expire ten years from the date of grant.  At March 31, 2002,
there were 3,906 options available for grant under the plan.

    No compensation  cost was recognized for the options granted to employees in
fiscal 2002, 2001, and 2000 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
on the date of grant. In fiscal 2002, the estimated fair value was based upon an
independent valuation of the Class A Common Stock performed during fiscal 2002.

    A summary of the  Company's  stock-based  compensation  activity  related to
stock  options for each of the plans for the three years ended March 31, 2002 is
as follows:
<TABLE>
<CAPTION>

                                                              Year Ended March 31,
                                               2002                    2001                   2000
                                     ----------------------- ----------------------  ---------------------
                                                 Weighted-               Weighted-              Weighted-
                                                  Average                 Average                Average
                                                  Exercise               Exercise               Exercise
                                       Number      Price       Number      Price      Number      Price
                                     ----------- ----------- ----------- ----------  ---------- ----------

<S>                                      <C>         <C>          <C>       <C>          <C>       <C>
1998 Performance Stock Option Plan:
   Outstanding - beginning of year       22,530      $52.47       9,530     $52.47       9,530     $52.47
   Granted                               18,241       52.47      13,000      52.47           -          -
   Expired/terminated                         -           -           -          -           -          -
   Exercised                                  -           -           -          -           -          -
                                     ----------- ----------- ----------- ----------  ---------- ----------
   Outstanding - end of year             40,771      $52.47      22,530     $52.47       9,530     $52.47
                                     =========== =========== =========== ==========  ========== ==========

     There were 20,592, 10,398, and 4,765 options exercisable at March 31, 2002,
     2001, and 2000, respectively, with a weighted-average exercise price per option
     of $52.47. All options outstanding at March 31, 2002 have an exercise price of
     $52.47 per option and a weighted-average remaining contractual life of 8.4
     years.

                                                             Year Ended March 31,
                                              2002                    2001                   2000
                                     ----------------------- ----------------------  ---------------------
                                                 Weighted-               Weighted-              Weighted-
                                                  Average                 Average                Average
                                                  Exercise               Exercise               Exercise
                                       Number      Price       Number      Price      Number      Price
                                     ----------- ----------- ----------- ----------  ---------- ----------

1998 Stock Option Plan:
   Outstanding - beginning of year       28,094      $52.47      24,694     $52.47      13,200     $52.47
   Granted                                    -           -       3,400      52.47      11,594      52.47
   Expired/terminated                    (1,000)      52.47           -          -        (100)     52.47
   Exercised                                  -           -           -          -           -          -
                                     ----------- ----------- ----------- ----------  ---------- ----------
   Outstanding - end of year             27,094      $52.47      28,094     $52.47      24,694     $52.47
                                     =========== =========== =========== ==========  ========== ==========

     There were 22,596, 16,472, and 9,448 options exercisable at March 31, 2002,
     2001, and 2000, respectively, with a weighted-average exercise price per option
     of $52.47. All options outstanding at March 31, 2002 have an exercise price of
     $52.47 per option and a weighted-average remaining contractual life of 7.2
     years.
</TABLE>

                                       45
<PAGE>

    If the Company  accounted for its  stock-based  compensation  using the fair
value  method   prescribed  by  SFAS  No.  123,   ACCOUNTING   FOR   STOCK-BASED
COMPENSATION,  the  weighted-average  grant-date  fair value of options  granted
under the 1998 Performance Stock Option Plan in fiscals 2002 and 2001 would have
been $2.83 and $7.37 per option,  respectively.  The weighted-average grant-date
fair value of options  granted  under the 1998 Stock Option Plan in fiscals 2001
and 2000  would  have been $7.68 and $9.26 per  option,  respectively.  The fair
value  of  options   granted  was  estimated  at  the  date  of  grant  using  a
Black-Scholes   option   pricing  model  with  the  following   weighted-average
assumptions:

                              Year Ended        Year Ended        Year Ended
                            March 31, 2002    March 31, 2001    March 31, 2000
                           -----------------  ----------------  ----------------

  Risk-free interest rate       3.71%             6.26%             6.06%
  Dividend yield                   -                 -                 -
  Expected volatility           1.00%             1.00%             1.00%
  Expected life (years)          1.5               3.0               3.0


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

                                             Year Ended March 31,
                                   2002            2001            2000
                               -------------   -------------   ------------
  Net income:
     As reported                $15,836,307     $ 4,338,837     $ 1,890,716
     Pro forma                   15,784,963       4,266,002       1,825,059


O.  SEGMENT INFORMATION

    The  Company's  operating  segments  are  determined  based  on the way that
management  organizes the segments for making operating  decisions and assessing
performance.   Management  has  organized  the  Company's  segments  based  upon
differences in products and services provided.  The Company has three reportable
segments:  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  college  semester  and  then  reselling  them to
college  bookstores.  The college bookstore  operations segment  encompasses the
operating  activities of the  Company's  108 college  bookstores as of March 31,
2002  located on or adjacent to college  campuses.  The  complimentary  services
segment  includes  book-related  services such as a centralized  buying service,
distance education materials, and computer hardware and software.

    The  accounting  policies of the  Company's  segments  are the same as those
described  in the  summary of  significant  accounting  policies  in Note B. The
Company primarily  accounts for intersegment sales as if the sales were to third
parties (at current market prices).  Assets  (excluding  inventories and certain
cash and cash  equivalents,  receivables,  intangibles,  and other assets),  net
interest  expense and taxes are not allocated  between the  Company's  segments;
instead, such balances are accounted for in a corporate administrative division.
The  following  table  provides  selected  information  about profit or loss and
assets on a segment basis for the three years ended March 31, 2002.

                                       46
<PAGE>
<TABLE>
<CAPTION>
                                                             College
                                             Wholesale       Bookstore     Complimentary
                                             Operations      Operations       Services         Total
                                           -------------   -------------   -------------   -------------
<S>                                        <C>             <C>              <C>            <C>
Year ended March 31, 2002:
  External customer revenues               $ 101,596,353   $ 200,850,901    $ 36,469,155   $ 338,916,409
  Intersegment revenues                       21,297,428         548,747       1,623,936      23,470,111
  Depreciation and amortization expense          246,825       2,089,677         544,582       2,881,084
  Income before interest and taxes            31,044,127      20,309,602         151,753      51,505,482
  Total assets                                34,153,681      51,033,959      10,051,447      95,239,087

Year ended March 31, 2001:
  External customer revenues               $  93,922,712   $ 182,479,980    $ 25,266,161   $ 301,668,853
  Intersegment revenues                       19,084,092         376,020       1,381,290      20,841,402
  Depreciation and amortization expense          293,408       9,429,428       1,475,914      11,198,750
  Income (loss) before interest and taxes     27,241,116       9,206,616      (1,402,666)     35,045,066
  Total assets                                29,771,356      45,626,064       6,449,572      81,846,992

Year ended March 31, 2000:
  External customer revenues               $  91,260,331   $ 157,896,805    $ 17,911,787   $ 267,068,923
  Intersegment revenues                       16,814,190         180,064       2,806,006      19,800,260
  Depreciation and amortization expense          321,936       7,444,799       2,280,512      10,047,247
  Income (loss) before interest and taxes     24,832,679       9,588,784      (2,449,321)     31,972,142
  Total assets                                28,636,070      50,048,978       7,737,641      86,422,689
</TABLE>

    The following  table  reconciles  segment  information  presented above with
information  as presented in the Company's  financial  statements  for the three
years ended March 31, 2002.

                                                   Year Ended March 31,
                                            2002          2001         2000
                                       ------------- ------------- -------------
Revenues:
  Total for reportable segments        $362,386,520  $322,510,255  $286,869,183
  Elimination of intersegment revenues  (23,470,111)  (20,841,402)  (19,800,260)
                                       ------------- ------------- -------------
    Financial statement total          $338,916,409  $301,668,853  $267,068,923
                                       ============= ============= =============

Depreciation and Amortization Expense:
  Total for reportable segments        $  2,881,084  $ 11,198,750  $ 10,047,247
  Corporate administration                  710,618     2,203,151     2,368,759
                                       ------------- ------------- -------------
    Financial statement total          $  3,591,702  $ 13,401,901  $ 12,416,006
                                       ============= ============= =============

Income Before Income Taxes:
  Total for reportable segments        $ 51,505,482  $ 35,045,066  $ 31,972,142
  Corporate administrative costs         (8,027,319)   (7,977,326)   (8,123,130)
                                       ------------- ------------- -------------
                                         43,478,163    27,067,740    23,849,012
  Interest expense, net                 (16,789,743)  (16,871,307)  (17,113,552)
  Loss on derivative financial
  instruments                              (360,445)            -             -
                                       ------------- ------------- -------------
    Income before income taxes         $ 26,327,975  $ 10,196,433  $  6,735,460
                                       ============= ============= =============

Total Assets:
  Total for reportable segments        $ 95,239,087  $ 81,846,992  $ 86,422,689
  Assets not allocated to segments:
    Cash and cash equivalents             6,798,602         1,177           224
    Receivables                          23,438,968    26,829,423    20,923,250
    Recoverable income taxes                      -       706,408             -
    Deferred income taxes                 3,557,325     1,862,166     1,598,793
    Property and equipment, net          26,478,915    24,474,887    25,760,825
    Goodwill                             16,770,574    16,770,574    18,567,418
    Debt issue costs, net                 5,403,342     7,036,842     8,405,190
    Other assets                          4,608,318     5,203,444     3,994,606
    Other                                   498,440       403,700       427,302
                                       ------------- ------------- -------------
      Financial statement total        $182,793,571  $165,135,613  $166,100,297
                                       ============= ============= =============


                                       47
<PAGE>

    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.  RELATED PARTY TRANSACTIONS

      In fiscal 2001, the Company 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 NBC's  majority
owner.  Such  agreements  included  an equity  option  agreement,  a  management
services agreement, and a technology sale and license agreement.

    The equity option agreement  provides the Company the opportunity to acquire
25% of the initial  common  shares  outstanding  of  TheCampusHub.com,  Inc. The
option is being accounted for as a cost method investment in accordance with APB
Opinion No. 18, THE EQUITY METHOD OF ACCOUNTING FOR INVESTMENTS IN COMMON STOCK.
The  management  services  agreement,  which is effective  for a period of three
years,  reimburses  the Company for certain  direct costs  incurred on behalf of
TheCampusHub.com,  Inc.  and also pays the  Company  $0.5  million  per year for
certain shared management and  administrative  support.  Complementary  services
revenue  resulting from the management  services  agreement is recognized as the
services are performed.  The technology sale and license agreement  provides for
the Company to license its E-commerce software capabilities to TheCampusHub.com,
Inc.  for $0.5  million  per year  over a period  of three  years  and  provides
TheCampusHub.com,  Inc. with an option to purchase  such  software  capabilities
from the Company during that three year period.  The license fees are recognized
as complementary  services revenue over the term of the agreement.  For the year
ended March 31,  2002,  revenues  attributable  to the  management  services and
technology sale and license  agreements  totaled $1.0 million,  and reimbursable
direct costs incurred on behalf of TheCampusHub.com, Inc. totaled $0.8 million.

    Revenues  attributable  to the management  services and technology  sale and
license  agreements were recognized in fiscal 2002 under the anticipation  that,
if  necessary,  TheCampusHub.com,   Inc.  would  make  a  capital  call  to  its
shareholders to provide the funding  necessary to meet its obligations under the
aforementioned agreements.  TheCampusHub.com,  Inc. reached break-even on a cash
flow basis,  excluding amounts under the management services and technology sale
and license  agreements,  during its most recent fiscal year. While it remains a
viable  business  and  is  funding  its  own  operations,  it is  not  currently
generating  sufficient  excess  cash  flow to fund  its  obligations  under  the
aforementioned   agreements  and  the  remaining   capital  available  from  its
shareholders is being reserved to fund strategic development  opportunities and,
if required,  ongoing  operations.  As a result,  the Company has  established a
reserve of approximately $1.0 million on net amounts due from  TheCampusHub.com,
Inc., which  approximated $1.2 million at March 31, 2002. Due to the uncertainty
of collecting amounts due from TheCampusHub.com,  Inc., future revenues provided
for under the  management  services and technology  sale and license  agreements
will be  recognized  only upon  receipt of  payment.  The Company  continues  to
benefit from its  relationship  with  TheCampusHub.com,  Inc., as the technology
developed  further enhances the  product/service  offering of the Company to its
wholesale customers.

    During  fiscal 2002,  NBC issued 2,621 shares of its Class A Common Stock to
the Company's Senior Vice President of Retail Division at the Founder's Price of
$52.47 per share,  in exchange for $13,752 in cash and a promissory  note in the
principal  amount of $123,765  maturing  January,  2009 and bearing  interest at
5.25% per year. This transaction, which did not involve any public offering, was
exempt from  registration  under the  Securities Act of 1933 pursuant to Section
4(2).  During fiscal 2001,  NBC issued 12,237 shares of its Class A Common Stock
to  certain  of  the  Company's   employees.   This  issuance  was  exempt  from
registration  under the Securities Act of 1933, as amended,  pursuant to Section
3(b) thereof and Rule 505 of  Regulation D promulgated  thereunder.  Such shares
were  issued at the  Founder's  Price of $52.47  per share,  resulting  in total
proceeds of $642,039.  Proceeds from these  issuances  were utilized for general
operating activities.

                                       48
<PAGE>

       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, 2002.


                                       49
<PAGE>

                                    PART III

          ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

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

         NAME           AGE                  POSITION
         ----           ---                  --------
   Robert B. Haas        55  Chairman and Director
   Douglas D. Wheat      52  Director
   Mark W. Oppegard      52  Chief Executive Officer, President and Director
   Barry S. Major        45  Chief Operating Officer
   Alan G. Siemek        41  Chief Financial Officer, Senior Vice President of
                               Finance and Administration, Treasurer, and
                               Assistant Secretary
   William H. Allen      59  Senior Vice President of Wholesale Division
   Robert A. Rupe        54  Senior Vice President of Retail Division
   Michael J. Kelly      44  Senior Vice President of Distance
                               Learning/Marketing Services and Other
                               Complementary Services
   Thomas A. Hoff        54  Vice President of Retail Development
   Larry R. Rempe        54  Vice President of Information Systems
   Kenneth F. Jirovsky   58  Vice President of Development
   Ardean A. Arndt       60  Vice President of Administration and Secretary



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

    ROBERT B. HAAS  became  Chairman  and a Director of the Company and NBC upon
the consummation of the Recapitalization. Mr. Haas has also served as a Director
of  TheCampusHub.com,  Inc.  since  its  inception  in 2000.  Mr.  Haas has been
actively  involved in private  investments since 1978. He has served as Chairman
of the Board and Chief  Executive  Officer of Haas Wheat & Partners,  L.P. since
1992 (a private  investment firm  specializing in leveraged  acquisitions).  Mr.
Haas is the Chairman of the Board of Playtex Products, Inc. (a consumer products
company) and AMN Healthcare  Services,  Inc. (a provider of staffing services to
the healthcare field).

    DOUGLAS  D.  WHEAT  became  a  Director  of the  Company  and NBC  upon  the
consummation of the Recapitalization. Mr. Wheat has also served as a Director of
TheCampusHub.com, Inc. since its inception in 2000. Mr. Wheat has been President
of Haas Wheat & Partners, L.P. since 1992; he was Co-Chairman of Grauer & Wheat,
Inc. (a private  investment firm) from 1989 to 1992 and Senior Vice President of
Donaldson, Lufkin & Jenrette Securities Corporation from 1985 to 1989. Mr. Wheat
serves as a director of Smarte Carte Corporation,  AMN Healthcare Services, Inc.
and Playtex Products, Inc.

    MARK W. OPPEGARD has served in the college  bookstore  industry for 32 years
(all of which have been with the Company) and became Chief Executive  Officer of
the Company and President/Chief  Executive Officer,  Secretary and a Director of
NBC  upon   consummation   of  the   Recapitalization   on  February  13,  1998.
Additionally, Mr. Oppegard has served as President of the Company since 1992 and
as a Director of the  Company  since 1995.  Prior to the  Recapitalization,  Mr.
Oppegard served as Vice President, Secretary, Assistant Treasurer and a Director
of NBC between 1995 and 1998.  Prior to 1992, Mr. Oppegard served in a series of
positions  at the Company,  including  Vice  President of the college  bookstore
operations.  Mr.  Oppegard  has  also  served  as  Chairman  and a  Director  of
TheCampusHub.com,  Inc.  since  May,  2000,  having  previously  served  as  the
President  and Chief  Executive  Officer  of  TheCampusHub.com,  Inc.  since its
inception  in  February,  2000.  Additionally,  he is  currently  a director  of
NACSCORP, INC., a distribution company serving the college bookstore industry.

                                       50
<PAGE>

    BARRY S. MAJOR was named Chief Operating  Officer of the Company in January,
1999.  Additionally,  Mr.  Major  has  served  as  Chief  Executive  Officer  of
TheCampusHub.com,  Inc.  since May,  2000,  having also served as  President  of
TheCampusHub.com,  Inc. from May, 2000 to November,  2000 and as Chief Operating
Officer of TheCampusHub.com,  Inc. from its inception in February,  2000 to May,
2000.  Prior to joining  the  Company,  Mr.  Major  served in various  executive
management  positions at SITEL Corporation  (SITEL), a company listed on the New
York Stock Exchange that provides outsourced  telephone and Internet-based sales
and customer  service.  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.

    ALAN G. SIEMEK was named Senior Vice President of Finance and Administration
of the Company in April,  2001.  Mr.  Siemek has also served as Chief  Financial
Officer, Treasurer and Assistant Secretary of the Company and Vice President and
Treasurer of NBC since July, 1999. Additionally,  Mr. Siemek has served as Chief
Financial Officer, Treasurer, and Secretary of TheCampusHub.com,  Inc. since its
inception in 2000. Prior to joining the Company,  Mr. Siemek served as Corporate
Controller at SITEL,  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.

    WILLIAM H. ALLEN has served in the college  bookstore  industry for 37 years
(of which 28 have been with the Company). The Company named Mr. Allen the Senior
Vice President of Wholesale  Division in April, 2001. Between 1994 and 2001, Mr.
Allen served as Vice President of Warehouse Operations for the Company.  Between
1974 and 1994,  Mr. Allen served in a series of positions,  including  assistant
manager of the wholesale  operations.  Prior to joining the Company in 1974, Mr.
Allen was employed by the Missouri Store Company, a predecessor of MBS.

    ROBERT A. RUPE was named Senior Vice President of Retail  Division in April,
2001.  Prior to  joining  the  Company  and a  one-year  period  in which he was
self-employed  as a  management  training  consultant,  Mr.  Rupe served as Vice
President of  Operations of Busybody,  Inc., a specialty  retailer with over 100
retail locations, from 1995 to 2000. Mr. Rupe has 32 years of retail experience,
including a variety of senior  management  positions at May  Department  Stores,
Marshall Field and Company, Phillips Van-Huesen and International Paper.

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

    THOMAS A. HOFF has served in the  college  bookstore  industry  for 15 years
(all of which have been with the Company) and was named Vice President of Retail
Development  for the Company in April,  2001.  Between  1992 and 2001,  Mr. Hoff
served as Vice President of Retail Division for the Company.  Mr. Hoff served as
an assistant to the Vice President of College Bookstore  Operations between 1987
and 1992.

                                       51
<PAGE>

    LARRY R. REMPE has served in the  college  bookstore  industry  for 16 years
(all of which  have  been  with the  Company)  and has been  Vice  President  of
Information Systems for the Company 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 41
years (all of which have been with the Company) and was named Vice  President of
Development for the Company in April,  2001. Between 1986 and 2001, Mr. Jirovsky
served as Vice  President of Sales and Marketing for the Company.  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 17 years
(all of which have been with the  Company)  and has served as Vice  President of
Administration  and Secretary for the Company since 1985. Between 1981 and 1985,
Mr. Arndt was Vice  President of  Administration  for Lincoln.  Between 1966 and
1982, Mr. Arndt served in various positions for Lincoln.


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

                                       52
<PAGE>

    The table  presented  below  summarizes  annual and long-term  compensation,
including stock compensation, to such persons for the last three fiscal years:
<TABLE>
<CAPTION>

                                               SUMMARY COMPENSATION TABLE

                                                                            Long-Term
                                                                          Compensation
                                               Annual Compensation           Awards
                                            ---------------------------   --------------
                                                                             Number
                                                                          of Securities
                                    Fiscal                                 Underlying         All Other
  Name and Principal Position       Year       Salary         Bonus        Options (1)    Compensation (2)
---------------------------------   ------  --------------  -----------   --------------  ------------------
<S>                                  <C>         <C>          <C>                 <C>               <C>
Mark W. Oppegard - Chief Executive
Officer, President, and Director     2002        $253,731     $236,000            2,900             $ 2,962
                                     2001         246,731      138,000            3,050               4,928
                                     2000         230,769      152,000                -               3,315

Barry S. Major - Chief Operating
Officer                              2002         235,539      215,000            2,600               2,430
                                     2001         219,231      118,000            2,650               2,120
                                     2000         204,615      130,000                -               2,080

Alan G. Siemek - Chief Financial
Officer, Senior Vice President of
Finance and Administration,
Treasurer, and Assistant Secretary   2002         173,923      120,000            2,100               2,430
                                     2001         161,923       97,000            1,875               2,120
                                     2000         111,481      133,000            6,353               2,027

Larry R. Rempe - Vice President of
Information Systems                  2002         155,000       91,000              800               2,679
                                     2001         152,769       40,000            1,000               2,964
                                     2000         122,385       50,000                -               2,564

Robert A. Rupe - Senior Vice
President of Retail Division         2002         128,704      135,000            5,241               2,312
                                     2001               -            -                -                   -
                                     2000               -            -                -                   -

</TABLE>
(1)     The stock options were granted at an exercise price of $52.47/share. The
        estimated fair market value of NBC'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.  The estimated fair market
        value  was based  upon an  independent  valuation  of the Class A Common
        Stock performed during fiscal 2002.

(2)     Consists of Company  matching  contributions  to the NBC Retirement Plan
        and life  insurance  premiums  paid by the  Company  on the  executive's
        behalf. For Messrs. Oppegard and Rempe, balances also include the dollar
        value of  above-market  amounts  earned on deferred  compensation.  Such
        amounts totaled $376, $2,652, and $1,135 for Mr. Oppegard and $93, $688,
        and $288 for Mr. Rempe for fiscal 2002, 2001, and 2000, respectively.

                                       53
<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, 2002:
<TABLE>
<CAPTION>

                        Options Granted During the Year Ended March 31, 2002

                             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        2002     Per Share   Date (1)    Value (2)
----------------------------------------- -----------  -----------  ---------  ----------  ------------
<S>                                         <C>           <C>       <C>         <C>   <C>     <C>
Mark W. Oppegard - Chief Executive
Officer, President, and Director            2,900         15.9%     $ 52.47      08/17/11    $ 7,308

Barry S. Major - Chief Operating Officer    2,600         14.3%       52.47      08/17/11      6,552

Alan G. Siemek - Chief Financial
Officer, Senior Vice President of
Finance and Administration,
Treasurer, and Assistant Secretary          2,100         11.5%       52.47      08/17/11      5,292

Larry R. Rempe - Vice President of
Information Systems                           800          4.4%       52.47      08/17/11      2,016

Robert A. Rupe - Senior Vice President of
Retail Division                             5,241         28.7%       52.47      04/23/11     18,868

</TABLE>

(1)     Twenty-five percent of the options granted to Messrs.  Oppegard,  Major,
        Siemek,  and Rempe were exercisable  immediately upon granting on August
        17,  2001,  with  the  remaining  options  becoming  exercisable  in 25%
        increments over the subsequent three years.  Twenty-five  percent of the
        options granted to Mr. Rupe were exercisable on March 31, 2002, with the
        remaining  options  becoming  exercisable  in 25%  increments  over  the
        subsequent three years.

(2)     Grant date present value was  determined  using a  Black-Scholes  option
        pricing model,  assuming a 3.53% risk-free  interest rate, 1.0% expected
        volatility,  and an  expected  life of  approximately  1.5 years for the
        options  granted to Messrs.  Oppegard,  Major,  Siemek,  and Rempe and a
        4.15%  risk-free  interest  rate,  1.0 %  expected  volatility,  and  an
        expected life of  approximately  2 years for the options  granted to Mr.
        Rupe.


                                       54
<PAGE>

    The following table provides  information  concerning each exercise of stock
options by certain executive officers of the Company during the year ended March
31, 2002 as well as the value of unexercised options as of March 31, 2002:

                Aggregated Option Exercises During the Year Ended March 31, 2002
                             and Option Value as of March 31, 2002
<TABLE>
<CAPTION>
                                                                    Number
                                                                 of Securities          Value of
                                                                  Underlying          Unexercised
                                                                  Unexercised         in-the-Money
                                                                  Options at           Options at
                                                                March 31, 2002     March 31, 2002 (1)
                                                                ----------------  ---------------------
                                        Shares
                                       Acquired       Value      Exercisable/         Exercisable/
               Name                   on Exercise   Realized     Unexercisable       Unexercisable
------------------------------------  ------------  ----------  ----------------  ---------------------
<S>                                                 <C>           <C>     <C>           <C>   <C>
Mark W. Oppegard - Chief Executive
Officer, President, and Director               -    $      -      2,250 / 3,700         $90 / $148

Barry S. Major - Chief Operating Officer       -           -     11,505 / 3,275          460 / 131

Alan G. Siemek - Chief Financial Officer,
Senior Vice President of Finance and
Administration, Teasurer, and Assistant
Secretary                                      -           -      6,228 / 4,100          249 / 164

Larry R. Rempe - Vice President of
Information Systems                            -           -        700 / 1,100            28 / 44

Robert A. Rupe - Senior Vice President
of Retail Division                             -           -      1,310 / 3,931           52 / 157
</TABLE>

(1)     Represents  the excess of the March 31, 2002 estimated fair market value
        of NBC's  Class A Common  Stock  underlying  the  stock  options,  which
        includes a discount  for the  holder's  minority  interest  position and
        illiquidity  of the Class A Common  Stock,  over the  exercise  price of
        $52.47/share.  The  estimated  fair  market  value  was  based  upon  an
        independent  valuation  of the  Class A Common  Stock  performed  during
        fiscal 2002.

COMPENSATION OF DIRECTORS AND ADDITIONAL INFORMATION

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

EMPLOYMENT AGREEMENTS

   The Company has  employment  agreements  with Mark W.  Oppegard and the 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 after considering the  recommendation of the chief executive  officer,
for incentive  compensation based upon the attainment of financial objectives to
be  established  by the  Board  of  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,  $271,000
per annum; Mr. Major,  $242,000 per annum;  Mr. Siemek,  $178,500 per annum; Mr.
Rempe,  $162,000 per annum;  and Mr. Rupe,  $140,000 per annum.  The  Employment
Agreements  provide that their term will be automatically  extended from year to
year , unless terminated upon specified notice by either party.

                                       55
<PAGE>

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

                                       56
<PAGE>

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

    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT - As a result
of the Recapitalization,  all shares of common stock of the Company are owned by
NBC. The  information in the following  table sets forth NBC  Acquisition  Corp.
Class A Common Stock  beneficially  owned by each person who owns more than 5.0%
of such shares; each director;  each executive officer named in Item 11; and all
directors and executive  officers of the Company treated as a group.  The shares
listed and percentages  calculated  thereon are based upon NBC Acquisition Corp.
Class A Common Stock  outstanding as of June 14, 2002 and NBC Acquisition  Corp.
Class A Common Stock underlying  nonqualified stock options that are exercisable
within  sixty days,  pursuant to Rule 13d-3 of the  Securities  Exchange  Act of
1934.  To the  knowledge of NBC,  each of such holders of shares has sole voting
and investment  power as to the shares owned unless otherwise noted. The address
for each  executive  officer and  director is 4700 South 19th  Street,  Lincoln,
Nebraska 68501 unless otherwise noted.
<TABLE>
<CAPTION>

                                                                      Amount and
                                                                       Nature of
                                                                       Beneficial    Percent of
               Title of Class/Name of Beneficial Owner               Ownership (1)   Class (4)
-------------------------------------------------------------------  -------------   ----------
<S>                                                                     <C>            <C>
    Class A Common Stock:
      Owning Greater Than 5% of Shares:
        HWH Capital Partners, L.P. (2)                                   793,497        62.8%
        HWH Cornhusker Partners, L.P. (3)                                343,071        27.2%

      Ownership of Directors:
        Robert B. Haas (2) (3)                                         1,136,568        90.0%
        Douglas D. Wheat (2) (3)                                               -            -

      Ownership of Executive Officers Named in Item 11:
        Mark W. Oppegard                                                  26,979         2.1%
        Barry S. Major                                                    22,651         1.8%
        Alan G. Siemek                                                    12,732         1.0%
        Larry R. Rempe                                                    17,198         1.4%
        Robert A. Rupe                                                     3,931         0.3%

      Ownership of Directors and All Executive Officers as a Group     1,272,522        98.5%

</TABLE>

    (1) Beneficial  ownership is determined in accordance  with the rules of the
        SEC and includes voting and investment  power with respect to the shares
        of NBC  Acquisition  Corp.  Class A Common  Stock.  Such shares  include
        shares underlying  nonqualified  stock options  exercisable within sixty
        days,  as  follows:  Mr.  Oppegard - 3,013  shares;  Mr.  Major - 12,168
        shares;  Mr. Siemek - 6,696 shares;  Mr. Rempe - 950 shares;  Mr. Rupe -
        1,310 shares; and 32,538 shares for all directors and executive officers
        as a group.

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

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

                                       57
<PAGE>

    (4) The  percentages  are  calculated  based  upon  1,263,371  shares of NBC
        Acquisition  Corp. Class A Common Stock  outstanding as of June 14, 2002
        and shares  underlying  nonqualified  stock options  exercisable  within
        sixty days as detailed in footnote (1).

    SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS - NBC has
two stock-based  compensation  plans  established to provide for the granting of
options to purchase  NBC Class A Common  Stock.  Details  regarding  each of the
plans in effect are presented in the footnotes to the financial statements found
in Item 8, Financial  Statements and Supplementary Data. Specific information as
of March 31,  2002  regarding  each of the plans,  which were not subject to the
approval by security holders, is also presented in the following table.

                                       Number of       Weighted-     Number of
                                     Securities to      Average     Securities
                                     be Issued Upon     Exercise     Remaining
                                      Exercise of       Price of   Available for
                                      Outstanding     Outstanding     Future
                   Plan                 Options         Options      Issuance
---------------------------------- ---------------- ------------- -------------

1998 Performance Stock Option Plan          40,771       $ 52.47        11,229

1998 Stock Option Plan                      27,094         52.47         3,906

                                   ---------------- ------------- -------------
  Total                                     67,865       $ 52.47        15,135
                                   ================ ============= =============


            ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     CERTAIN  BUSINESS  RELATIONSHIPS - In fiscal 2001, the Company 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 NBC's majority  owner.  Such  agreements  included an equity
option agreement,  a management  services  agreement,  and a technology sale and
license  agreement.  The  equity  option  agreement  provides  the  Company  the
opportunity  to  acquire  25%  of  the  initial  common  shares  outstanding  of
TheCampusHub.com, Inc. The management services agreement, which is effective for
a period of three  years,  reimburses  the  Company  for  certain  direct  costs
incurred on behalf of  TheCampusHub.com,  Inc.  and also pays the  Company  $0.5
million per year for certain shared management and administrative  support.  The
technology  sale and license  agreement  provides for the Company to license its
E-commerce software capabilities to TheCampusHub.com,  Inc. for $0.5 million per
year over a period of three years and provides  TheCampusHub.com,  Inc.  with an
option to purchase such software capabilities from the Company during that three
year period.

     For the year ended March 31, 2002, revenues  attributable to the management
services and technology sale and license  agreements  totaled $1.0 million,  and
reimbursable direct costs incurred on behalf of  TheCampusHub.com,  Inc. totaled
$0.8 million. Additionally, Messrs. Haas, Wheat, and Oppegard serve as Directors
of  TheCampusHub.com,  Inc.  and  Messrs.  Major and Siemek  serve as  executive
officers of  TheCampusHub.com,  Inc.  As of March 31,  2002,  Messrs.  Oppegard,
Major, Siemek, Rempe, and Kelly have been granted 13,900,  13,900, 9,690, 1,155,
and 16,800 options,  respectively,  from TheCampusHub.com,  Inc. as compensation
for services provided to TheCampusHub.com,  Inc. since its inception.  In total,
such  options  represent   approximately   4.0%  of   TheCampusHub.com,   Inc.'s
outstanding shares and options at March 31, 2002.

     Revenues  attributable  to the management  services and technology sale and
license  agreements were recognized in fiscal 2002 under the anticipation  that,
if  necessary,  TheCampusHub.com,   Inc.  would  make  a  capital  call  to  its
shareholders to provide the funding  necessary to meet its obligations under the


                                       58
<PAGE>

aforementioned agreements.  TheCampusHub.com,  Inc. reached break-even on a cash
flow basis,  excluding amounts under the management services and technology sale
and license  agreements,  during its most recent fiscal year. While it remains a
viable  business  and  is  funding  its  own  operations,  it is  not  currently
generating  sufficient  excess  cash  flow to fund  its  obligations  under  the
aforementioned   agreements  and  the  remaining   capital  available  from  its
shareholders is being reserved to fund strategic development  opportunities and,
if required,  ongoing  operations.  As a result,  the Company has  established a
reserve of approximately $1.0 million on net amounts due from  TheCampusHub.com,
Inc., which  approximated $1.2 million at March 31, 2002. Due to the uncertainty
of collecting amounts due from TheCampusHub.com,  Inc., future revenues provided
for under the  management  services and technology  sale and license  agreements
will be  recognized  only upon  receipt of  payment.  The Company  continues  to
benefit from its  relationship  with  TheCampusHub.com,  Inc., as the technology
developed  further enhances the  product/service  offering of the Company to its
wholesale customers.

     INDEBTEDNESS  OF  MANAGEMENT  - As of March 31, 2002,  NBC  reported  notes
receivable from stockholders and associated interest receivable of approximately
$730,000  and  $136,000,  respectively.  Approximately  $159,000  of such  notes
originated  during the  leveraged  buyout of the  Company  by  Olympus  Advisory
Partners,  Inc. in 1995. In conjunction with the buyout, the Company's executive
officers were given the  opportunity  to acquire  shares of NBC's Class A Common
Stock with a portion of the purchase  price of such shares being provided to the
officers in the form of interest bearing notes.  Such notes are dated August 31,
1995,  become due August 31, 2002, and bear interest at the  applicable  Federal
rate for mid-term loans.

     The  remaining  balance of such notes  originated  pursuant to the terms of
employment  agreements  with the Company's  Chief  Operating  Officer,  Barry S.
Major;  Chief  Financial  Officer,  Alan G.  Siemek;  Senior Vice  President  of
Distance  Learning/Marketing  Services and Other Complementary Services, Michael
J. Kelly;  and Senior Vice  President  of Retail  Division,  Robert A. Rupe.  In
January,  1999, NBC issued 4,765 shares of its Class A Common Stock to Mr. Major
at a price of $52.47 per share, 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,  2002  was  approximately
$266,000.  In July, 1999, NBC 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,  2002  was
approximately $171,000. In January, 2000, NBC 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, 2002 was  approximately  $140,000.  In April,  2001,  NBC issued 2,621
shares of its Class A Common  Stock to Mr.  Rupe at a price of $52.47 per share,
in exchange for $13,752 in cash and a promissory note in the principal amount of
$123,765  maturing  January,  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, 2002 was approximately $130,000.


                                       59
<PAGE>


                                     PART IV

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

     (a)  FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES.

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

                Index to Financial Statements.
                Independent Auditors' Report.
                Balance Sheets as of March 31, 2002 and 2001.
                Statements  of  Operations  for the Years Ended March 31,  2002,
                   2001, and 2000.
                Statements  of   Stockholder's  Deficit   for  the  Years  Ended
                   March 31, 2002, 2001, and 2000.
                Statements  of Cash Flows for the Years  Ended  March 31,  2002,
                   2001, and 2000.
                Notes to Financial Statements.

         (2)  Financial Statement Schedules.

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

         (3)  Management Contract and Compensatory Plan Arrangement Exhibits.

                Exhibits   10.7  through  10.19  are   incorporated   herein  by
                reference.

     (b) REPORTS ON FORM 8-K.

                 No  reports on Form 8-K were filed  during  the  quarter  ended
                 March 31, 2002.

     (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 Nebraska Book
                Company,  Inc.  Form 8-K,  as  amended,  dated June 4, 1999,  is
                incorporated herein by reference.

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

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

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

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

                                       60
<PAGE>

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

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

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

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

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

        10.2    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 Nebraska Book  Company,  Inc. Form 10-Q for the quarter ended
                June 30, 1999, is incorporated herein by reference.

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

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

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

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

        10.7    Form of  Memorandum of  Understanding,  dated as of February 13,
                1998 between NBC Acquisition Corp. and each of Mark W. Oppegard,


                                       61
<PAGE>

                Bruce E. Nevius, Larry R. Rempe, Kenneth F. Jirovsky, William H.
                Allen, Thomas A. Hoff and Ardean A. Arndt, filed as Exhibit 10.4
                to Nebraska Book Company,  Inc.  Registration  Statement on Form
                S-4, as amended (File No. 333-48221),  is incorporated herein by
                reference.

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

        10.9    Addendum  to  the  Memorandum  of  Understanding,  dated  as  of
                December 22, 1998 between Nebraska Book Company,  Inc. and Barry
                S. Major, dated March 29, 2002.

        10.10   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 Nebraska Book  Company,  Inc.
                Form  10-Q  for  the  quarter  ended   September  30,  1999,  is
                incorporated herein by reference.

        10.11   Addendum to the Memorandum of Understanding, dated as of July 1,
                1999 between Nebraska Book Company,  Inc. and Alan Siemek, dated
                March 29, 2002.

        10.12   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 Nebraska Book
                Company, Inc. Form 10-Q for the quarter ended December 31, 1999,
                is incorporated herein by reference.

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

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

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

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

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

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

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

                                       62
<PAGE>

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

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

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

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

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

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

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

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

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



     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.


                                       63
<PAGE>

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

                           NEBRASKA BOOK COMPANY, INC.


                           /s/  Mark W. Oppegard
                           ------------------------------------------------
                           Mark W. Oppegard
                           Chief Executive Officer, President, and Director
                           June 14, 2002

     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
                            Chief Executive Officer, President, and Director
                            June 14, 2002


                            /s/ Alan G. Siemek
                           ------------------------------------------------
                            Alan G. Siemek
                            Chief Financial Officer, Senior Vice President
                            of Finance and Administration,
                            Treasurer, and Assistant Secretary
                            June 14, 2002


                            /s/  Robert B. Haas
                           ------------------------------------------------
                            Robert B. Haas
                            Chairman and Director
                            June 14, 2002


                            /s/  Douglas D. Wheat
                           ------------------------------------------------
                            Douglas D. Wheat
                            Director
                            June 14, 2002


     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, 2002
HAS BEEN, NOR WILL BE, SENT TO SECURITY HOLDERS.


                                       64
<PAGE>

                          FINANCIAL STATEMENT SCHEDULES



INDEPENDENT AUDITORS' REPORT

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

     We have audited the financial statements of Nebraska Book Company,  Inc. (a
wholly-owned  subsidiary of NBC Acquisition Corp.) as of March 31, 2002 and 2001
and for each of the three  years in the period  ended March 31,  2002,  and have
issued our report thereon dated May 24, 2002; such report is included  elsewhere
in this Form 10-K.  Our audits also  included the financial  statement  schedule
listed in Item 14(a)(2). This financial statement schedule is the responsibility
of the Company's  management.  Our responsibility is to express an opinion based
on  our  audits.  In  our  opinion,  such  financial  statement  schedule,  when
considered  in  relation  to the basic  financial  statements  taken as a whole,
presents fairly in all material respects the information set forth therein.


/s/  Deloitte & Touche LLP

DELOITTE & TOUCHE LLP

Lincoln, Nebraska
May 24, 2002


                                       65
<PAGE>
<TABLE>
<CAPTION>

NEBRASKA BOOK COMPANY, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
-------------------------------------------------------------------------------------------------------

                                                  Charged to    Charged to
                                    Beginning of   Costs and      Other         Net        End of Year
                                    Year Balance   Expenses      Accounts   Charge-Offs      Balance
                                   -------------- ------------ ----------- -------------  -------------
<S>                                   <C>          <C>           <C>        <C>            <C>
YEAR ENDED MARCH 31, 2002
 Allowance for doubtful accounts      $ 407,033    $1,629,704    $     -    $ (606,934)    $ 1,429,803


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


YEAR ENDED MARCH 31, 2000
 Allowance for doubtful accounts        165,899       140,927          -      (130,927)        175,899
</TABLE>



                                       66
<PAGE>


                                  EXHIBIT INDEX


        10.9    Addendum  to  the  Memorandum  of  Understanding,  dated  as  of
                December 22, 1998 between Nebraska Book Company,  Inc. and Barry
                S. Major, dated March 29, 2002.

        10.11   Addendum to the Memorandum of Understanding, dated as of July 1,
                1999 between Nebraska Book Company,  Inc. and Alan Siemek, dated
                March 29, 2002.



                                       67