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, 2001

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

        For the transition period from______________ to_________________.


                        COMMISSION FILE NUMBER 333-48225

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

          DELAWARE                                               47-0793347
(State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                               Identification No.)

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

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

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

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

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

    THERE ARE 11,893  SHARES OF THE  REGISTRANT'S  VOTING  STOCK  VALUED AT $0.6
MILLION HELD BY NON-AFFILIATES OF THE REGISTRANT.

    THERE WERE 1,263,371  SHARES OF CLASS A COMMON STOCK  OUTSTANDING AS OF JUNE
26, 2001.

                    DOCUMENTS INCORPORATED BY REFERENCE: NONE

                            Total Number of Pages: 66

                             Exhibit Index: PAGE 66

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                                TABLE OF CONTENTS


PART I:

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

PART II:

Item 5       Market for Registrant's Common Equity and
             Related Stockholder Matters......................................15
Item 6       Selected Financial Data..........................................15
Item 7       Management's Discussion and Analysis of Financial Condition and
             Results of Operations............................................17
Item 7A      Quantitative and Qualitative Disclosures about Market Risk.......23
Item 8       Financial Statements and Supplementary Data......................25
Item 9       Changes in and Disagreements with Accountants on
             Accounting and Financial Disclosure..............................45

PART III:

Item 10     Directors and Executive Officers of the Registrant................46
Item 11     Executive Compensation............................................48
Item 12     Security Ownership of Certain Beneficial Owners and Management....51
Item 13     Certain Relationships and Related Transactions....................52

PART IV:

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



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                                     PART I.

                                ITEM 1. BUSINESS.


RECAPITALIZATION AND PUBLIC REGISTRATION

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

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

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

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

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

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

GENERAL

    The Company is one of the largest  wholesale  distributors  of used  college
textbooks in North America,  offering over 100,000  textbook  titles and selling
more than 7 million books annually,  primarily to campuses located in the United
States.  In  addition,  as of June 26,  2001,  the  Company  owns or manages 108

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bookstores on or adjacent to college  campuses  through which it sells a variety
of new and used textbooks and general merchandise. The Company is also a leading
provider of distance education materials to students in nontraditional  courses,
which include correspondence and corporate education courses.  Furthermore,  the
Company  provides  the  college  bookstore  industry  with a variety of services
including  in-store   promotions,   buying  programs,   marketing  services  and
proprietary  information  systems.  With origins dating to 1915, the Company has
built a consistent  reputation  for  excellence in order  fulfillment,  shipping
performance and customer service.

    The Company entered the wholesale used textbook  market  following World War
II, when the supply of new  textbooks  could not meet the demand  created by the
return of ex-GI  students.  In 1964, the Company became a national,  rather than
regional,  wholesaler  of used  textbooks  as a result  of its  purchase  of The
College Book Company of California.  During the 1970's the Company continued its
focus on the wholesale  business.  However,  realizing the synergies  that exist
between wholesale operations and college bookstore operations,  in the 1980's it
expanded its efforts in the college  bookstore market under a revised  strategy.
Under this strategy the Company operates  bookstores on or near larger campuses,
typically where the institution-owned college bookstore is contract-managed by a
competitor or where the Company does not have a significant  wholesale presence.
Today,  the  Company  services  the  college  bookstore   industry  through  its
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  independently-owned  college  bookstores
nationwide  have  provided  important  access  to  valuable  market  information
regarding the  campus-by-campus  supply and demand of  textbooks,  as well as an
ability to procure large quantities of a wide variety of textbooks.  The Company
provides an internally-developed BUYER'S GUIDE to its wholesale customers, which
lists over 42,000 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 26, 2001,  the Company  operated
108  college  bookstores  on or  adjacent  to college  campuses  of which 15 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.   In  fiscal  1998,  the  Company   completed  two
acquisitions  representing  new  initiatives  for  it in the  college  bookstore
industry.  In  January  1998,  the  Company  acquired  Connect  2 One  (formerly
Collegiate  Stores  Corporation),  a  centralized  buying  service  for over 440
college  bookstores  across the United States.  Through the enhanced  purchasing
power of such a large group of bookstores,  participating bookstores are able to
purchase  certain  general  merchandise at lower prices than those that would be
paid by the stores  individually.  Bookstores  participating  in Connect 2 One's
("C2O") programs also provide the Company with another  potential source of used
textbooks.  With its acquisition of Specialty Books, Inc. ("Specialty Books") in
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


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hardware  and  software,  such as the  Company's  turnkey  bookstore  management
software,  and related  maintenance  contracts.  During fiscal 2001, the Company
licensed  certain  software related to E-commerce to an entity that is partially
owned by the  Company's  majority  owner (see  further  discussion  below  under
Business  Strategy).  These services  generate revenue and assist the Company in
enhancing and developing customer relationships.

INDUSTRY SEGMENT FINANCIAL INFORMATION

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

BUSINESS STRATEGY

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

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

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

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

       In fiscal  2001,  NBC entered into  several  agreements  related to these
software products with a newly created entity, TheCampusHub.com,  Inc., which is
partially  owned by the  Company's  majority  owner.  In  connection  with these
agreements,  NBC has  licensed  these  products to  TheCampusHub.com,  Inc.  who
assumed the on-going  marketing,  operating  and further  development  costs for
these products.  The three-year  license agreement  requires the payment of $0.5
million   per  year  from   TheCampusHub.com,   Inc.   to  NBC  and  also  gives
TheCampusHub.com,  Inc. the option to purchase the software products from NBC at
any time during the term of the agreement. The annual license payment is payable
even if the purchase option is exercised  before the end of the three-year term.
NBC is also providing certain management services to TheCampusHub.com,  Inc. for
three years in return for approximately $0.5 million per year plus reimbursement
of certain other direct costs.  In connection  with these  agreements,  NBC also
acquired the option to purchase 25% of the initial common shares  outstanding of
TheCampusHub.com, Inc.

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

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

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

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

INDUSTRY OVERVIEW

    Based on recent industry trade data, the college bookstore  industry remains
strong,  with over 4,800 college stores generating annual sales of approximately
$10.1 billion to college students and other consumers in North America. Sales of
textbooks and other education materials used for classroom  instruction comprise
approximately  two-thirds of that amount.  The Company  expects this market will
continue to grow as a result of  anticipated  increases  in  enrollment  at U.S.
colleges  attributable to the children of the baby boom generation  entering the
college population.

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

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

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

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

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    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  230  participating  bookstores at the end of
fiscal 2001.  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
2001,   approximately  220  bookstores  were   participating  in  this  program,
approximately  130 of which are also  participating  in the  exclusive  program.
Since  the  Company  is  usually  able to sell  the  vast  majority  of the used
textbooks it is able to purchase,  its ability to obtain  sufficient supply is a
critical factor in the Company's success.

    COLLEGE  BOOKSTORE   MARKET.   College  stores  generally  fall  into  three
categories: (i) INSTITUTIONAL -- stores that are primarily owned and operated by
institutions of higher learning (represents  approximately 59.0% of the market);
(ii)  CONTRACT-MANAGED  -- stores owned by  institutions  of higher learning and
managed by outside,  private  companies,  typically found on-campus  (represents
approximately  26.0% of the market);  and (iii) INDEPENDENT  STORES -- privately
owned  and   operated   stores,   generally   located  off  campus   (represents
approximately  15.0% of the market).  In general,  the "captive"  portion of the
college bookstore market includes those contract-managed  stores that sell their
used textbooks to affiliated companies, and institutional and independent stores
to the extent that such used  textbooks  are  repurchased  from students and are
retained by the bookstore for resale without involving a wholesaler.

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

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 42,000
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 174,000 titles
in order to better serve its customers.

    COLLEGE  BOOKSTORES.  As of June 26, 2001, 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 24% and 28% 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


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also  installed  WebPRISM and  CampusHub in all of its own  bookstores,  thereby
allowing its  bookstores to further  expand  product  offerings and compete with
online-only textbook sellers.

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

    COMPLEMENTARY SERVICES.  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 440
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  while the  Company  generates  a profit due to receipt of
revenue from  advertising  inserts which are placed  inside the bags.  Other C2O
marketing  services  include a freight savings  program,  a check  authorization
program, and retail display allowances for magazine displays.

    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.

    Through  Specialty  Books, the Company has access to the market for distance
education  products and services.  Currently,  the Company provides  students at
approximately  60 colleges  with  textbooks  and  materials  for use in distance
education  courses,  and is a leading  provider of textbooks  to  nontraditional
programs and students such as  correspondence or corporate  education  students.
The Company  believes the fragmented  distance  education  market  represents an
opportunity  for the  Company  to  leverage  its  fulfillment  and  distribution
expertise in a rapidly  growing  sector.  Beyond  textbooks,  the Company offers
services and specialty course materials to distance education students including
videotape  duplication and shipping,  shipping of specialty,  nontextbook course
materials  and a sales  and  ordering  function.  Students  can  order  distance
education materials from the Company over the Internet.  The Company believes it
can continue to  significantly  increase the service  operations  revenues  from
distance education products over the next several years,  although presently the
Company's  primary  objective is increased  profitability  through improved cost
containment.

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

WHOLESALE PROCUREMENT AND DISTRIBUTION

    Historically,  because  the  demand  for  used  textbooks  has  consistently
exceeded  supply,  the  Company's  sales have been  primarily  determined by the
amount of used  textbooks  that it can purchase.  The Company  believes that, on
average, it is able to fulfill approximately 20% of its demand. As a result, the
Company's success has depended primarily on its inventory  procurement,  and the
Company  continues  to focus its  efforts on  obtaining  inventory.  In order to
ensure its  ability to both obtain and  redistribute  inventory,  the  Company's
wholesale  strategy has emphasized  establishing and maintaining strong customer
and supplier relationships with college bookstores  (primarily,  independent and
institutional college bookstores) through its employee account  representatives.


                                       8
<PAGE>

These 37 account  representatives  (as of March 31,  2001) 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
to purchase inventory based on the lower retail prices of the previous year. The
combination  of this  purchasing  cycle and the fact that the Company is able to
sell its inventory in relation to retail  prices for the following  year permits
the Company to realize additional gross profit. The Company advances cash to its
representatives  during these two periods,  and the  representatives in turn buy
books directly from students, generally through the on-campus bookstore.

    After the Company  purchases the books, the Company arranges for shipment to
one of its two warehouses  (Nebraska and California) via common carrier.  At the
warehouse, the Company refurbishes damaged books and categorizes and shelves all
other  books in a timely  manner,  and enters  them into the  Company's  on-line
inventory  system.  These  two  locations  function  as  one  facility  allowing
customers to access inventory at both locations.

    Customers place orders by phone, mail, fax or other electronic method.  Upon
receiving an order,  the Company removes the books from available  inventory and
holds them for future shipping.  Customers may return books within 60 days after
the start of classes if a written request is enclosed. Returns currently average
approximately   20.5%  of  sales  and  generally  are   attributable  to  course
cancellations  or  overstocking.  The majority of returns are textbooks that the
Company is able to resell for the next semester.

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.

                                       9
<PAGE>

    As of June 26, 2001 the Company operated 108 college bookstores  nationwide,
having  expanded from 39 bookstores in 1996.  During fiscal 2001 NBC purchased 4
new  bookstores  located in Michigan,  Oklahoma,  Tennessee,  and Texas,  adding
estimated  combined  annual  revenues in excess of $6.2  million.  Subsequent to
March 31,  2001,  NBC acquired  eight  bookstores  located in Norman,  Oklahoma;
Raleigh,  North Carolina;  Radford,  Virginia;  Orlando,  Florida;  Gainesville,
Florida; Chadron,  Nebraska; and Bellingham,  Washington and sold two bookstores
located in Austin, Texas.

    The table below  highlights  certain  information  regarding  the  Company's
bookstores opened through March 31, 2001.

                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)
   -----------  ----------  ----------- --------------  --------  --------------
       1997         39          12            1            50          438
       1998         50           9            0            59          474
       1999         59           8            2            65          537
       2000         65          35            2            98          733
       2001         98           4            0           102          740


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

(1) In  fiscal   1997,   the   management   contract   was  not   renewed  on  a
    contract-managed  bookstore.  In fiscal  1999,  the  property  leases at two
    bookstore  locations expired and were not renewed by the Company.  In fiscal
    2000,  the  property  lease at one  bookstore  location  expired and was not
    renewed by the Company and one Triro, Inc.  bookstore location which did not
    meet the Company's expansion criteria described below was closed.

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

    The Company's bookstores have an average size of 7,300 gross square feet but
range in size  from 900 to  50,000  square  feet.  The  Company  estimates  that
leasehold  improvements,   furniture  and  fixtures,  and  automation  with  the
Company's PRISM system, the Company's proprietary total-store management system,
for new  bookstores  cost  approximately  $100,000 per  bookstore,  after giving
effect to construction allowances.

MANAGEMENT INFORMATION SYSTEMS

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

                                       10
<PAGE>

    In addition, the Company and its consultants have been developing E-commerce
capabilities  called  WebPRISM and  CampusHub.  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 WebPRISM and CampusHub was assumed in fiscal 2001 by an
entity that is partially owned by the Company's majority owner.

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

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

    The Company conducts training courses for all systems users at the Company's
headquarters  in  Lincoln,  Nebraska.  Classes  are small and  provide  hands on
demonstrations  of the various systems.  Printed  reference manuals and training
materials  also  accompany  each system.  The  customer  support unit of CBMS is
staffed with over 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  5.6% of fiscal 2001 revenues.  No one customer  accounted for
more than 1.0% of the Company's fiscal 2001 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.

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 640 stores and 380 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 380 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.

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

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

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,  2001  the  Company  had a total  of  approximately  2,700
employees,  of which  approximately  1,000 are full-time,  approximately 200 are
part-time and  approximately  1,500 are temporary.  The Company has no unionized
employees and believes that its relationship with its employees is satisfactory.

    In view of the  seasonal  nature  of its  wholesale  business,  the  Company
utilizes seasonal labor to improve operating  efficiency.  The Company employs a
small  number of  "flex-pool"  workers  who are  cross-trained  in a variety  of
warehouse  functions.  Over the past eight years, the Company has employed up to


                                       12
<PAGE>

50 flex-pool workers in the Nebraska and California facilities, thereby enabling
the  Company to lower its  wholesale  operating  expenses.  Temporary  employees
augment the flex-pool to meet periodic labor demands.


                               ITEM 2. PROPERTIES.

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

    Listed  below,  set forth as of March 31, 2001,  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
   Coconino Community College                Flagstaff, AZ           3,700    Coconino Community College
                                                                                Bookstore (2)
   Arizona State University                  Tempe, AZ              43,700    The College Store
   Arizona State University                  Tempe, AZ              43,700    Rother's Bookstore
   University of Arizona                     Tucson, AZ             34,300    Arizona Book Store
   University of Arizona                     Tucson, AZ             34,300    Rother's University Bookstore
   University of California - Berkeley       Berkeley, CA           30,400    Ned's Bookstore (2 locations)
   California State University - Northridge  Northridge, CA         27,900    The College Store
   Daytona Beach Community College           Daytona Beach, FL 11,000 & 4,900 College Book Rack
     and Embry-Riddle Aeronautical University
   Miami Dade Community College-Kendall      Miami, FL              18,800    Lemox  College  Book  & Supply
   University of Central Florida             Orlando, FL            28,000    Knight's Corner
   Georgia State University                  Atlanta, GA            24,000    Georgia Book Store
   Drake University                          Des Moines, IA          5,300    University Book Store (2 locations) (2)
   Southern Illinois University              Carbondale, IL         22,400    Saluki   Bookstores  (2 locations)
   Ball Sate University                      Muncie, IN             18,100    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    16,000    The College Store
   University of Louisville                  Louisville, KY         21,100    College Book Warehouse
   Eastern Kentucky University               Richmond, KY           17,500    University Book & Supply
   University of Maryland                    College Park, MD       32,700    Maryland Book Exchange
   Prince George's Community College         Largo, MD              12,300    Prince George's Community
                                                                                College Bookstore (2)
   University of Michigan                    Ann Arbor, MI          37,200    Michigan Book & Supply
   University of Michigan                    Ann Arbor, MI          37,200    Ulrich's Bookstore
   Oakland University                        Auburn Hills, MI       15,100    Textbook Outlet
   Wayne County Community College            Belleville, Detroit &  11,000    Ned's Bookstore (5 locations) (2)
                                               Taylor, MI
   Ferris State University                   Big Rapids, MI          9,700    The College Store
   Michigan State University                 East Lansing, MI       43,000    The College Store
   Michigan State University                 East Lansing, MI       43,000    Ned's Bookstore
   Kettering Engineering &                   Flint, MI               3,200    The Campus Store (2)
     Management Institute
   Eastern Michigan University               Ypsilanti, MI          23,300    Campus Book & Supply
   Eastern  Michigan  University and         Ypsilanti &         23,300 & 600 Ned's Bookstore (3 locations)(2)
     Concordia College                         Ann Arbor, MI
   Mankato State University                  Mankato, MN            11,700    Maverick Bookstore
   Chadron State College                     Chadron, NE             2,800    Chadron Book Shop
   University of Nebraska - Kearney          Kearney, NE             7,200    The Antelope  Bookstore (2)
   University of Nebraska - Lincoln          Lincoln, NE            23,000    Nebraska  Bookstore  (2 locations)
   Nebraska Wesleyan University              Lincoln, NE             1,700    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            24,300    The College Store
   State University of New York - Binghamton Vestal, NY             12,300    The Bookbridge
   University of Akron                       Akron, OH              23,200    The College Store
   Ohio University                           Athens, OH             19,200    Specialty Books
   Ohio State University                     Columbus, OH           50,000    College Town
   Wright State University                   Fairborn, OH           16,800    The College Store
   University of Oklahoma                    Norman, OK             21,300    Boomer Book Store


                                       13
<PAGE>

   Oklahoma State University                 Stillwater, OK         21,100    Cowboy Book
   Indiana University of Pennsylvania        Indiana, PA            13,400    The College Store
   University of Pittsburgh                  Pittsburgh, PA         26,200    The College Store
   Pennsylvania State University             State College, PA      40,000    University Book Centre
   College of Charleston                     Charleston, SC         11,600    University Book of Charleston
   Columbia College                          Columbia, SC            1,300    C-Square Bookstore (2)
   University of South Carolina              Columbia, SC           25,500    South Carolina Bookstore
                                                                               (2 locations)
   East Tennessee State University           Johnson City, TN       11,200    The College Store
   University of Tennessee                   Knoxville, TN          26,000    Rocky Top East
   University of Tennessee                   Knoxville, TN          26,000    Rocky Top Books
   University of Texas - Arlington           Arlington, TX          19,100    The College Store
   Austin Community College                  Austin, TX             27,000    Bevo's Northridge
   Austin Community College                  Austin, TX             27,000    Bevo's ACC (2 locations)
   University of Texas                       Austin, TX             48,000    Bevo's West (2 locations)
   Blinn College                             Bryan, TX               7,800    Rother's Bookstore
   Texas A&M University                      College Station, TX    43,400    Rother's Bookstore
   Texas A&M University                      College Station, TX    43,400    Rother's Bookstore (Woodstone)
   Texas A&M University                      College Station, TX    43,400    Rother's  Bookstore (Northgate)
   Southern Methodist University             Dallas, TX             10,000    Varsity Book Store
   University of North Texas                 Denton, TX             26,500    Voertman's
   University of Texas - Pan                 Edinburg &            12,700 &   South Texas Book & Supply
     American and South                        McAllen, TX          12,900      (2 locations)
     Texas Community College
   North Harris County Community College     Houston, TX             9,400    College Bookstore
   University of Houston                     Houston, TX            33,200    Rother's Bookstore
   Texas Tech University                     Lubbock, TX            24,200    Spirit Shop
   Texas Tech University                     Lubbock, TX            24,200    Double T Bookstore (3 locations)
   San Antonio College, St. Philip's         San Antonio, TX  22,000; 21,200; L&M Bookstore
     College, and Palo Alto College                                & 6,900
   University of Texas - San Antonio         San Antonio, TX        18,800    L&M  UTSA Bookstore
   Southwest Texas State University          San Marcos, TX         21,100    Colloquium Bookstore (2 locations)
   Southwest Texas State University          San Marcos, TX         21,100    Rother's Bookstore
   Tarleton State University                 Stephenville, TX        6,400    Rother's Bookstore
   Baylor University                         Waco, TX               13,400    University Bookstore and Spirit Shop
   Baylor University                         Waco, TX               13,400    Rother's Bookstore
   Midwestern State University               Wichita Falls, TX       5,700    Rother's Bookstore
   Virginia Polytechnic and State University Blacksburg, VA         25,000    Tech Bookstore
   Old Dominion University                   Norfolk, VA            19,100    Dominion Bookstore
   Virginia Commonwealth University          Richmond, VA           23,200    The College Store

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

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

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


                           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 2001.


                                       14
<PAGE>

                                     PART II


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

    As of June 26, 2001, based upon the number of holders on record,  there were
45 holders of the Company's Class A Common Stock and  outstanding  stock options
to purchase 55,865 shares of the Company's Class A Common Stock. As discussed in
Item 7, "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and Item 8, "Financial  Statements and  Supplementary  Data", the
payment of dividends is subject to various restrictions under the Company's debt
instruments.  As a result,  the Company has declared no dividends on its Class A
Common Stock during fiscal 2001 and 2000. There is no established public trading
market for the Company's Class A Common Stock.


                        ITEM 6. SELECTED FINANCIAL DATA.

    The following table sets forth selected  historical  consolidated  financial
and other data of the  Company as of and for the fiscal  years  ended  March 31,
2001,  2000,  1999,  1998,  and  1997,  respectively.  The  selected  historical
consolidated  financial data was derived from the audited consolidated financial
statements of the Company.  Consistent with the Company's  audited  consolidated
financial  statements,  certain  prior year  amounts have been  reclassified  to
conform to the current year presentation.  The following table should be read in
conjunction  with Item 7,  "Management's  Discussion  and  Analysis of Financial
Condition and Results of Operations" and the consolidated  financial  statements
of the Company and the related notes thereto included in Item 8 herein.

                                       15
<PAGE>
<TABLE>
<CAPTION>

                                                        Fiscal Years Ended March 31,
                                           ----------------------------------------------------
                                              2001       2000      1999      1998 (1)    1997
                                           ---------- ---------- --------- ---------- ---------
<S>                                        <C>        <C>       <C>        <C>       <C>
Statement of Operations Data:                            (dollars in thousands)
  Revenues                                 $ 301,669  $ 267,069  $218,638  $ 200,086  $173,730
  Costs of sales                             187,099    164,984   137,989    125,632   110,466
                                           ---------- ---------- --------- ---------- ---------
      Gross profit                           114,570    102,085    80,649     74,454    63,264
  Operating expenses:
    Selling, general, and administrative      74,100     65,820    51,289     47,882    40,231
    Depreciation                               2,956      3,096     2,393      2,531     2,706
    Amortization                              10,446      9,320     6,149      5,626     4,072
    Stock compensation costs                       -          -         -      8,278       297
                                           ---------- ---------- --------- ---------- ---------
      Income from operations                  27,068     23,849    20,818     10,137    15,958
  Other expenses (income):
    Interest expense                          24,008     23,398    22,854     11,938    10,760
    Interest income                             (615)      (356)     (351)      (328)     (561)
                                           ---------- ---------- --------- ---------- ---------
      Income (loss) before income taxes
      and extraordinary item                   3,675        807    (1,685)    (1,473)    5,759
  Income tax expense                           3,407      2,516       574         58     2,325
                                           ---------- ---------- --------- ---------- ---------
      Income (loss) before
      extraordinary item                         268     (1,709)   (2,259)    (1,531)    3,434
  Extraordinary loss on extinguishment
  of debt, net of taxes                            -          -         -     (4,021)        -
                                           ---------- ---------- --------- ---------- ---------
      Net income (loss)                    $     268  $  (1,709) $( 2,259) $  (5,552) $  3,434
                                           ========== ========== ========= ========== =========
  Earnings (loss) per share:
    Basic:
      Income (loss) before extraordinary
      item                                 $    0.21  $   (1.48) $  (2.37) $   (0.59) $   1.23
      Extraordinary loss on extinguishment
      of debt                                      -          -         -      (1.57)        -
                                           ---------- ---------- --------- ---------- ---------
      Net income (loss)                    $    0.21  $   (1.48) $  (2.37) $   (2.16) $   1.23
                                           ========== ========== ========= ========== =========
    Diluted:
      Income (loss) before extraordinary
      item                                 $    0.21  $   (1.48) $  (2.37) $   (0.59) $   1.16
      Extraordinary loss on extinguishment
      of debt                                      -          -         -      (1.57)        -
                                           ---------- ---------- --------- ---------- ---------
      Net income (loss)                    $    0.21  $   (1.48) $  (2.37) $   (2.16) $   1.16
                                           ========== ========== ========= ========== =========

Other Data:
  EBITDA (2)                               $  40,470  $  36,265  $ 29,360  $  26,572  $ 23,033
  Net cash flows from operating activities     8,839     18,945    10,296     (2,842)   10,774
  Net cash flows from investing activities    (4,994)   (30,244)   (5,067)   (11,548)   (3,427)
  Net cash flows from financing activities    (3,887)    11,690    (6,976)    10,220    (7,471)
  Capital expenditures                         1,759      3,542     2,842      3,690     2,243
  Business acquisition expenditures (3)        2,975     26,072     2,086      7,714     1,252
  Number of bookstores open at end of
  the period                                     102         98        65         59        50

Balance Sheet Data (At End of Period):
  Cash and cash equivalents                $   4,410  $   4,451  $  4,060  $   5,807  $  9,977
  Working capital                             72,394     62,244    55,442     54,018    55,913
  Total assets                               167,701    168,991   142,879    152,110   127,146
  Total debt, including current maturities   224,219    222,552   219,904    221,597    79,524
</TABLE>

    (1) Effective February 13, 1998, the Company  consummated a merger among NBC
        Merger  Corp.,  the  Company  and  certain  shareholders  of the Company
        pursuant  to  which  the  Company's  outstanding  debt  and  stock  were
        restructured. Following the Recapitalization,  the results of operations
        of the Company  included  higher  interest costs due to the financing of
        the  Recapitalization,   and  in  fiscal  1998,   non-recurring  charges
        associated with the extinguishment of debt and buyout of stock options.

    (2) EBITDA  is  defined  as  income  from  operations   plus   depreciation,
        amortization and non-cash  charges relating to stock based  compensation
        expense in the  amounts of $8,278 and $297 for the years ended March 31,
        1998 and 1997,  respectively.  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


                                       16
<PAGE>

        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.


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

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:
<TABLE>
<CAPTION>

                                                                 Increase (Decrease)
                                   2001           2000          Amount     Percentage
                             -------------- ---------------  ------------- -----------
<S>                          <C>             <C>             <C>                <C>
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%
                             ============== ===============  ============= ===========
</TABLE>

    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 the  Company'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,


                                       17
<PAGE>

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
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:
<TABLE>
<CAPTION>

                                                               Increase (Decrease)
                                 2001           2000          Amount     Percentage
                            -------------- --------------  ------------- ----------
<S>                          <C>            <C>             <C>              <C>
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 %
                            ============== ==============  ============= ==========
</TABLE>

    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.

    INTEREST EXPENSE,  NET. Interest expense, net for fiscal 2001 increased $0.4
million,  or 1.5%, to $23.4 million from $23.0 million for fiscal 2000 primarily
as a result of  increasing  original  issue debt  discount  amortization  on the
Company's Senior Discount Debentures,  which will continue to increase until the
Senior Discount  Debentures are fully-accreted to face value of $76.0 million in
fiscal 2003.

    INCOME TAXES.  Income tax expense for fiscal 2001 increased $0.9 million, or
35.4%,  to $3.4 million from $2.5  million for fiscal  2000.  This  increase was
primarily the result of an increase in income before income taxes. The Company's
effective  tax  rate  was  significantly  higher  than  the  statutory  tax rate
primarily as a result of state income taxes and  non-deductible  amortization on
goodwill associated with recent acquisitions.

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

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

                                                                Increase (Decrease)
                                  2000            1999          Amount     Percentage
                             -------------- ---------------  ------------- -----------
<S>                          <C>              <C>            <C>                <C>
Wholesale operations         $ 108,074,521   $  98,751,112   $  9,323,409       9.4%
College bookstore operations   158,076,869     120,872,556     37,204,313      30.8%
Complementary services          20,717,793      12,637,553      8,080,240      63.9%
Intercompany eliminations      (19,800,260)    (13,623,650)    (6,176,610)     45.3%
                             -------------- ---------------  ------------- -----------
                             $ 267,068,923   $ 218,637,571   $ 48,431,352      22.2%
                             ============== ===============  ============= ===========
</TABLE>

    The increase in  wholesale  revenues  was due  primarily to publisher  price
increases,  coupled with an increase in units  shipped and a decrease in returns
as a percent of sales. This increase was partially offset by the  discontinuance


                                       18
<PAGE>

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

    GROSS  PROFIT.  Gross profit for fiscal 2000  increased  $21.5  million,  or
26.6%,  to $102.1 million from $80.6 million for fiscal 1999.  This increase was
primarily due to higher  revenues,  combined with an increase in gross  margins.
Gross margin was 38.2% for fiscal 2000 as compared to 36.9% for fiscal 1999. The
increase in gross margin was primarily  attributable to increased margins in the
Company's wholesale and college bookstore  operations,  including an increase in
used  textbook  sales through the  Company's  bookstores,  which can generate an
average gross margin of approximately  55%-60% compared to average gross margins
of 35% - 40% for external wholesale sales.

    SELLING,   GENERAL  AND  ADMINISTRATIVE   EXPENSES.   Selling,  general  and
administrative  expenses for fiscal 2000 increased  $14.5 million,  or 28.3%, to
$65.8  million  from  $51.3  million  for  fiscal  1999.  Selling,  general  and
administrative  expenses as a  percentage  of revenues  were 24.6% and 23.5% for
fiscal 2000 and fiscal 1999,  respectively.  The  increase in expenses  resulted
primarily from the expected  higher expense base  associated  with the Company's
expansion of its operations  through  bookstore  acquisitions and startups.  The
Company  has also  incurred  higher  corporate-level  expense  in  fiscal  2000,
primarily  due to additional  personnel and other costs  designed to help manage
its continued growth.

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

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

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

                                                               Increase (Decrease)
                                 2000           1999           Amount    Percentage
                            -------------- --------------  ------------- ----------
<S>                          <C>            <C>             <C>             <C>
Wholesale operations         $ 24,832,679   $ 21,590,426    $ 3,242,253     15.0 %
College bookstore operations    9,588,784      8,339,047      1,249,737     15.0 %
Complementary services         (2,449,321)    (2,442,717)        (6,604)    (0.3)%
Corporate administration       (8,123,130)    (6,668,446)    (1,454,684)   (21.8)%
                            -------------- --------------  ------------- ----------
                             $ 23,849,012   $ 20,818,310    $ 3,030,702     14.6 %
                            ============== ==============  ============= ==========
</TABLE>

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


                                       19
<PAGE>

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

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

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

LIQUIDITY AND CAPITAL RESOURCES

    The Company's primary liquidity  requirements are for debt service under the
Senior Credit  Facility,  the Senior  Subordinated  Notes and other  outstanding
indebtedness,  for working  capital,  for capital  expenditures  and for certain
acquisitions.  The Company has historically funded these requirements  primarily
through internally  generated cash flow and funds borrowed under NBC's Revolving
Credit  Facility.  At March 31,  2001,  the  Company's  total  indebtedness  was
approximately $224.2 million,  consisting of approximately $51.2 million in Term
Loans,  $110.0 million of the Senior  Subordinated  Notes,  $62.4 million of the
Senior  Discount  Debentures and $0.6 million of other  indebtedness,  including
capital lease obligations.

    Principal and interest  payments  under the Senior  Credit  Facility and the
Senior Subordinated Notes represent significant  liquidity  requirements for the
Company.  Under the terms of the Tranche A and B Loans, NBC is scheduled to make
principal  payments  totaling  approximately  $6.3 million in fiscal 2002,  $6.8
million in fiscal 2003,  $8.5 million in fiscal  2004,  $11.2  million in fiscal
2005, and $18.4 million in fiscal 2006.  Such scheduled  principal  payments are
subject to change upon the annual  payment and  application of excess cash flows
(as  defined in the Credit  Agreement  underlying  the Senior  Credit  Facility)
towards Tranche A and B Loan principal  balances.  There was no excess cash flow
payment  obligation at March 31, 2001.  Loans under the Senior  Credit  Facility
bear interest at floating rates based upon the interest rate option  selected by
NBC. The Senior  Subordinated Notes require  semi-annual  interest payments at a
fixed  rate of 8.75% and  mature on  February  15,  2008.  The  Senior  Discount
Debentures require semi-annual 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 $1.8 million, $3.5 million, and $2.8
million for the fiscal years ended March 31, 2001, 2000, and 1999, respectively.
Capital expenditures consist primarily of leasehold improvements and furnishings
for new bookstores,  bookstore renovations,  computer upgrades and miscellaneous
warehouse  improvements.  The Company's ability to make capital  expenditures is
subject to certain restrictions under the Senior Credit Facility.

    Business acquisition expenditures were $3.0 million, $26.1 million, and $2.1
million for the fiscal years ended March 31, 2001, 2000, and 1999, respectively.
Of the $26.1 million in business  acquisition  expenditures  made for the fiscal
year  ended  March  31,  2000,  approximately  $25.2  million  pertains  to  the
acquisitions of Triro, Inc. and Ned's Bookstores. Approximately $14.9 million of
capital was raised in fiscal 2000 through the issuance of 284,923  shares of the
Company's Class A Common Stock to HWH and members of senior management to assist
in financing the acquisitions of Triro, Inc. and Ned's Bookstores.

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

                                       20
<PAGE>

    Subsequent  to March 31, 2001,  NBC acquired  certain  assets of a privately
owned  college  bookstore  serving  Western  Washington   University  and  seven
Wallace's  Bookstores,  Inc.  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 for a total of
approximately   $5.8  million.   Such   acquisitions   were  estimated  to  have
approximately $14 million in annual revenues and were funded through  internally
generated cash flows. Future acquisitions, if any, may require additional equity
financing.

    Also  subsequent  to March 31, 2001,  NBC sold certain  assets of two of its
college bookstore locations serving the University of Texas in Austin, Texas for
approximately $1.2 million. 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,  2001,
weighted-average  borrowings  under the Revolving  Credit Facility  approximated
$15.3 million,  with actual borrowings  ranging from a low of no borrowings to a
high of $46.1  million.  Net cash flows from  operating  activities for the year
ended March 31, 2001 were $8.8  million,  a decrease of $10.1 million from $18.9
million for the year ended March 31, 2000.  This  decrease was  primarily due to
the timing of payments  made on  accounts  payable  balances  and  increases  in
accounts receivable.

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

    As of March  31,  2001,  NBC  could  borrow  up to $38.6  million  under the
Revolving Credit Facility. The Revolving Credit Facility was unused at March 31,
2001.  Amounts  available  under the Revolving  Credit  Facility may be used for
working capital and general  corporate  purposes  (including up to $10.0 million
for letters of credit),  subject to certain  limitations under the Senior Credit
Facility.

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

                                       21
<PAGE>

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 2001,  approximately  43% of
the  Company's  annual  revenues  were  earned  in  the  second  fiscal  quarter
(July-September),  while approximately 30% 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 semester,  in May and December,  as a result of
the buying periods. The Company funds its working capital requirements primarily
through a revolving  credit  facility,  which  historically has been repaid with
cash provided from operations.

IMPACT OF INFLATION

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

ACCOUNTING STANDARDS NOT YET ADOPTED

    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,  based on whether the  instrument is designated as
part of a hedge  transaction  and,  if so,  the type of hedge  transaction.  The
initial  adoption  of SFAS No.  133,  which  occurred  on April 1, 2001,  had no
material impact on the Company's consolidated financial statements.

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

    This  Annual  Report on Form 10-K  contains  or  incorporates  by  reference
certain statements that are not historical facts,  including,  most importantly,
information  concerning  possible or assumed future results of operations of the
Company and statements preceded by, followed by or that include the words "may,"
"believes,"  "expects,"  "anticipates,"  or the  negation  thereof,  or  similar
expressions, which constitute "forward-looking statements" within the meaning of
the Private  Securities  Litigation  Reform Act of 1995 (the "Reform Act").  All
statements which address operating performance,  events or developments that are
expected or anticipated to occur in the future, including statements relating to
volume and revenue  growth,  earnings per share growth or statements  expressing
general optimism 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


                                       22
<PAGE>

Internet and E-books on the Company's  operations;  and other risks  detailed in
the Company's  Securities  and Exchange  Commission  filings,  in particular the
Company's Registration  Statement on Form S-4 (No. 333-48225),  all of which are
difficult or impossible to predict  accurately  and many of which are beyond the
control of the Company. The Company will not undertake and specifically declines
any obligation to publicly release the result of any revisions which may be made
to any  forward-looking  statements to reflect events or circumstances after the
date  of  such  statements  or to  reflect  the  occurrence  of  anticipated  or
unanticipated events.


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

    The Company's  primary  market risk exposure is, and is expected to continue
to be,  fluctuation  in  Eurodollar  interest  rates.  Of the $224.2  million in
long-term  debt and capital  lease  obligations  outstanding  at March 31, 2001,
approximately  $51.2 million is subject to fluctuations in the Eurodollar  rate.
As  provided  in  NBC's  Senior  Credit  Facility,  exposure  to  interest  rate
fluctuations  is managed by maintaining  fixed interest rate debt (primarily the
Senior  Subordinated Notes and Senior Discount  Debentures) and by entering into
interest rate swap agreements to effectively  convert certain variable rate debt
into fixed rate debt. NBC has separate five-year  amortizing  interest rate swap
agreements with two financial institutions whereby NBC's variable rate Tranche A
and B Term Loans have been effectively  converted into debt with a fixed rate of
5.815%  plus an  applicable  margin (as  defined in the Credit  Agreement).  The
notional  amount  under each  agreement  as of March 31, 2001 was  approximately
$25.6 million.  Such notional amounts are reduced  periodically by amounts equal
to the scheduled  principal  payments on the Tranche A and B Term Loans.  NBC is
exposed to credit loss in the event of nonperformance  by the  counterparties to
the interest rate swap agreements.  NBC anticipates the  counterparties  will be
able to fully satisfy their obligations under the agreements.

    The following table presents  quantitative  information  about the Company's
market risk sensitive instruments (the weighted-average variable rates are based
on implied forward rates in the yield curve at March 31, 2001):
<TABLE>
<CAPTION>
                                                                                  Variable to Fixed
                        Fixed Rate Debt            Variable Rate Debt            Interest Rate Swaps
                   --------------------------  --------------------------  --------------------------------
                                    Weighted-                   Weighted-                      Weighted-
                                    Average                     Average                         Average
                     Principal      Interest     Principal      Interest        Notional      Pay/Receive
                     Cash Flows       Rate     Cash Flows (1)     Rate           Amounts         Rates
                   --------------  ----------  --------------  ----------  ---------------- ---------------
<S>                 <C>                <C>       <C>               <C>        <C>                <C>
Fiscal Year
Ended March 31:
  2002              $      50,412      9.48%     $  6,287,500      6.90%     $  48,170,833   5.81% / 4.50%
  2003                     45,571      9.53%        6,800,000      7.31%        41,413,542   5.81% / 4.89%
  2004                     25,950      9.57%        8,475,000      8.00%        12,275,000   5.81% / 5.44%
  2005                     28,881      9.57%       11,187,500      8.39%               -              -
  2006                     32,144      9.57%       18,437,500      8.64%               -              -
  Thereafter          186,402,849      9.77%              -          -                 -              -
                   --------------  ---------    -------------  ---------    ---------------  --------------
    Total           $ 186,585,807      9.62%     $ 51,187,500      7.65%     $ 101,859,375   5.81% / 4.77%
                   ==============  =========    =============  =========    ===============  ==============

    Fair Value      $ 148,485,793        -       $ 51,187,500        -       $  (1,004,400)           -
                   ==============               =============               ===============
</TABLE>


(1)     Principal  cash flows  represent  scheduled  principal  payments and are
        adjusted for  anticipated  excess cash flow  payments (as defined in the
        Credit  Agreement  underlying the Senior Credit  Facility) to be applied
        toward  principal  balances.  For Fiscal 2001,  there was no excess cash
        flow payment obligation.

                                       23
<PAGE>

    Certain  quantitative  market risk  disclosures  have changed  significantly
since  March 31, 2000 as a result of market  fluctuations,  movement in interest
rates, and principal  payments.  The following table presents  summarized market
risk information for the years ended March 31, 2001 and 2000:

                                                   March 31,       March 31,
                                                     2001           2000
                                                 -------------  -------------
Fair Values:
  Fixed rate debt                                $148,485,793   $124,703,075
  Variable rate debt                               51,187,500     55,625,000
  Interest rate swaps                              (1,004,400)     1,735,657

Overall Weighted-Average Interest Rates:
  Fixed rate debt                                       9.62%          9.60%
  Variable rate debt                                    7.65%          9.46%
  Interest rate swaps receive rate                      4.77%          6.96%




                                       24
<PAGE>

             ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Index to Consolidated Financial Statements of NBC Acquisition Corp. for the
Years Ended March 31, 2001, 2000, and 1999

  Independent Auditors' Report................................................26

  Consolidated Balance Sheets.................................................27

  Consolidated Statements of Operations.......................................28

  Consolidated Statements of Stockholders' Deficit............................29

  Consolidated Statements of Cash Flows.......................................30

  Notes to Consolidated Financial Statements..................................31




                                       25
<PAGE>

INDEPENDENT AUDITORS' REPORT

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

    We  have  audited  the  accompanying  consolidated  balance  sheets  of  NBC
Acquisition  Corp. and subsidiary as of March 31, 2001 and 2000, and the related
consolidated statements of operations, stockholders' deficit, and cash flows for
each of the three years in the period  ended  March 31,  2001.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

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

    In our opinion,  such consolidated  financial  statements present fairly, in
all material  respects,  the financial  position of NBC  Acquisition  Corp.  and
subsidiary  as of March 31, 2001 and 2000,  and the results of their  operations
and their cash flows for each of the three  years in the period  ended March 31,
2001 in conformity with accounting  principles  generally accepted in the United
States of America.




DELOITTE & TOUCHE LLP

Lincoln, Nebraska
May  23, 2001



                                       26

<PAGE>

NBC ACQUISITION CORP.

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

                                                              March 31,
                                                          2001         2000
                                                      ------------ ------------
ASSETS

CURRENT ASSETS:
  Cash and cash equivalents                          $  4,409,505  $  4,450,887
  Receivables                                          31,368,150    24,193,668
  Inventories                                          61,834,563    61,809,630
  Recoverable income taxes                                706,408             -
  Deferred income taxes                                 1,862,166     1,598,793
  Prepaid expenses and other assets                       403,700       427,302
                                                     ------------- -------------
    Total current assets                              100,584,492    92,480,280

PROPERTY AND EQUIPMENT, net of depreciation &
amortization                                           24,474,887    25,760,825

GOODWILL AND OTHER INTANGIBLES, net of amortization    36,743,498    46,073,844

OTHER ASSETS                                            5,897,647     4,676,047
                                                     ------------- -------------
                                                     $167,700,524  $168,990,996
                                                     ============= =============

LIABILITIES AND STOCKHOLDERS' DEFICIT

CURRENT LIABILITIES:
  Accounts payable                                   $ 11,647,964  $ 16,145,566
  Accrued employee compensation and benefits            6,512,773     6,301,111
  Accrued interest                                      1,466,643     1,349,224
  Accrued expenses                                      1,946,675       819,010
  Income taxes payable                                          -       553,893
  Deferred revenue                                        278,982       552,251
  Current maturities of long-term debt                  6,308,450     4,456,324
  Current maturities of capital lease obligations          29,463        59,181
                                                     ------------- -------------
    Total current liabilities                          28,190,950    30,236,560

LONG-TERM DEBT, net of current maturities             217,858,635   217,971,490

CAPITAL LEASE OBLIGATIONS, net of current maturities       22,254        64,856

OTHER LONG-TERM LIABILITIES                               238,970       202,231

COMMITMENTS (Note K)

STOCKHOLDERS' DEFICIT:
  Class A common stock, voting, authorized
  5,000,000 shares of $.01 par va1ue;
  issued and outstanding 1,260,750 and 1,248,513
  shares at March 31, 2001 and 2000, respectively          12,607        12,485
  Additional paid-in capital                           65,167,394    64,525,477
  Notes receivable from stockholders                     (697,171)     (660,910)
  Accumulated deficit                                (143,093,115) (143,361,193)
                                                     ------------- -------------
    Total stockholders' deficit                       (78,610,285)  (79,484,141)
                                                     ------------- -------------
                                                     $167,700,524  $168,990,996
                                                     ============= =============

See notes to consolidated financial statements.

                                       27
<PAGE>
NBC ACQUISITION CORP.

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

                                                 Year Ended March 31,
                                          2001           2000          1999
                                      ------------- -------------  -------------
REVENUES, net of returns              $301,668,853  $267,068,923   $218,637,571

COSTS OF SALES                         187,098,970   164,984,418    137,988,909
                                      ------------- -------------  -------------

  Gross profit                         114,569,883   102,084,505     80,648,662

OPERATING EXPENSES:
  Selling, general and administrative   74,100,242    65,819,487     51,288,680
  Depreciation                           2,956,135     3,096,013      2,392,701
  Amortization                          10,445,766     9,319,993      6,148,971
                                      ------------- -------------  -------------

                                        87,502,143    78,235,493     59,830,352
                                      ------------- -------------  -------------

INCOME FROM OPERATIONS                  27,067,740    23,849,012     20,818,310

OTHER EXPENSES (INCOME):
  Interest expense                      24,008,120    23,398,521     22,854,164
  Interest income                         (615,430)     (355,935)      (351,231)
                                      ------------- -------------  -------------

                                        23,392,690    23,042,586     22,502,933
                                      ------------- -------------  -------------

INCOME (LOSS) BEFORE INCOME TAXES        3,675,050       806,426     (1,684,623)

INCOME TAX EXPENSE                       3,406,972     2,515,819        574,482
                                      ------------- -------------  -------------

NET INCOME (LOSS)                     $    268,078  $ (1,709,393)  $ (2,259,105)
                                      ============= =============  =============

EARNINGS (LOSS) PER SHARE:
  Basic                               $       0.21  $      (1.48)  $      (2.37)
                                      ============= =============  =============

  Diluted                             $       0.21  $      (1.48)  $      (2.37)
                                      ============= =============  =============



See notes to consolidated financial statements.

                                       28
<PAGE>
<TABLE>
<CAPTION>

NBC ACQUISITION CORP.

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

                                                      Notes
                                       Additional   Receivable
                             Common     Paid-in       From       Accumulated
                             Stock      Capital    Stockholder     Deficit         Total
                            --------  -----------  ----------- --------------   -------------
<S>                             <C>       <C>          <C>         <C>             <C>
BALANCE, April 1, 1998      $ 9,530   $49,025,135  $(247,098)  $(139,392,695)  $(90,605,128)

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

  Payment on stockholder
  note                            -             -    125,737               -        125,737

  Interest accrued on
  stockholder notes               -             -    (14,258)              -        (14,258)

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

BALANCE, March 31, 1999       9,578    49,275,087   (360,619)   (141,651,800)   (92,727,754)

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

  Interest accrued on
  stockholder notes               -             -    (26,526)              -        (26,526)

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

BALANCE, March 31, 2000      12,485    64,525,477   (660,910)   (143,361,193)   (79,484,141)

  Issuance of Class A
  Common Stock                  122       641,917          -               -        642,039

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

  Net income                      -             -          -         268,078        268,078
                            -------   -----------  ----------  --------------  -------------

BALANCE, March 31, 2001     $12,607   $65,167,394  $(697,171)  $(143,093,115)  $(78,610,285)
                            =======   ===========  ==========  ==============  =============
</TABLE>

See notes to consolidated financial statements.


                                       29
<PAGE>
<TABLE>
<CAPTION>

NBC ACQUISITION CORP.

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


                                                         Year Ended March 31,
CASH FLOWS FROM OPERATING ACTIVITIES:              2001         2000           1999
                                               ------------ ------------   ------------
<S>                                                <C>         <C>           <C>
  Net income (loss)                            $   268,078  $(1,709,393)   $(2,259,105)
  Adjustments to reconcile net income
  (loss) to net cash flows from
  operating activities:
    Depreciation                                 2,956,135    3,096,013      2,392,701
    Amortization of intangibles                 12,139,902   11,017,964      7,802,928
    Original issue debt discount amortization    6,195,595    5,603,246      5,034,486
    Loss on disposal of assets                      59,627       18,044         89,800
    Deferred income taxes                       (1,351,000)    (773,000)      (883,200)
    Changes in operating assets and liabilities,
    net of effect of acquisitions:
     Receivables                                (7,184,802)  (3,189,434)       368,840
     Inventories                                   354,360   (4,665,275)        18,827
     Recoverable income taxes                     (706,408)     319,630      4,369,146
     Prepaid expenses and other assets              23,602       84,054       (123,460)
     Other assets                                  (85,526)     797,705     (1,019,776)
     Accounts payable                           (4,497,902)   5,318,621     (5,297,973)
     Accrued employee compensation and benefits    211,662    2,231,461         28,651
     Accrued interest                              117,419      (77,285)      (362,038)
     Accrued expenses                            1,128,408      133,125        182,985
     Income taxes payable                         (553,893)     552,928              -
     Deferred revenue                             (273,269)     175,695        (87,361)
     Other long-term liabilities                    36,739       11,157         40,470
                                               ------------ ------------   ------------

       Net cash flows from operating activities  8,838,727   18,945,256     10,295,921

CASH FLOWS FROM INVESTING ACTIVITIES:
  Purchases of property and equipment           (1,759,010)  (3,542,471)    (2,842,036)
  Bookstore acquisitions, net of cash acquired  (2,975,332) (26,072,155)    (2,085,881)
  Proceeds from sale of property and
  equipment and other                              144,834       65,197         97,586
  Software development costs                      (403,996)    (694,830)      (236,328)
                                               ------------ ------------   ------------

       Net cash flows from investing
       activities                               (4,993,504) (30,244,259)    (5,066,659)

CASH FLOWS FROM FINANCING ACTIVITIES:
  Deferred financing costs                               -      (32,478)      (377,966)
  Principal payments on long-term debt          (4,456,324)  (3,079,413)    (1,327,696)
  Principal payments on capital
  lease obligations                                (72,320)    (177,411)             -
  Proceeds from issuance of common stock           642,039   14,979,532         25,000
  Net decrease in revolving credit facility              -            -     (5,400,000)
  Proceeds from payment on notes receivable
  from stockholders                                      -            -        104,170
                                               ------------ ------------   ------------

       Net cash flows from financing activities (3,886,605)  11,690,230     (6,976,492)
                                               ------------ ------------   ------------

NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS                                   (41,382)     391,227     (1,747,230)

CASH AND CASH EQUIVALENTS, Beginning of year     4,450,887    4,059,660      5,806,890
                                               ------------ ------------   ------------

CASH AND CASH EQUIVALENTS, End of year         $ 4,409,505  $ 4,450,887    $ 4,059,660
                                               ============ ============   ============


SUPPLEMENTAL DISCLOSURES OF
CASH FLOWS INFORMATION:
  Cash paid (refunded) during the year for:
    Interest                                   $16,000,970  $16,174,589    $16,527,759
    Income taxes                                 6,018,273    2,424,436     (2,911,464)

  Noncash investing and financing activities:
    Notes receivable from shareholders
    recorded upon issuance of common stock     $         -  $   273,765    $   225,000
</TABLE>

See notes to consolidated financial statements.


                                       30
<PAGE>


NBC ACQUISITION CORP.

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

A.  NATURE OF OPERATIONS

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

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

    RECAPITALIZATION:  On February 13, 1998,  the Company  consummated  a Merger
Agreement  among  NBC  Merger  Corp.  (a newly  created,  indirect  wholly-owned
subsidiary  of HWH  Capital  Partners,  LP.  ["HWH"]),  the  Company and certain
shareholders of the Company pursuant to which the Company's outstanding debt and
stock were  restructured (the  "Recapitalization").  As the new investor did not
acquire  substantially  all of the common stock of the  Company,  a new basis of
accounting  was  not  established  in  connection  with  the   Recapitalization.
Significant  components of the  Recapitalization,  together with the  applicable
accounting effects, were as follows:

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

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

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

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

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

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

                                       31
<PAGE>

B.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

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

    SHIPPING  AND  HANDLING  FEES AND COSTS:  Amounts  billed to a customer  for
shipping  and  handling  have been  classified  as revenues in the  consolidated
statements of operations and approximated $2.9 million,  $2.2 million,  and $1.5
million  for the years  ended  March 31,  2001,  2000,  and 1999,  respectively.
Shipping  and  handling  costs  are  included  in  operating   expenses  in  the
consolidated  statements  of operations  and  approximated  $6.8  million,  $5.8
million,  and $4.7 million for the years ended March 31, 2001,  2000,  and 1999,
respectively.

    ADVERTISING:  Advertising  costs are expensed as incurred  and  approximated
$2.2 million, $2.3 million, and $2.0 million for the years ended March 31, 2001,
2000, and 1999, respectively.

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

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

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

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

    SOFTWARE  DEVELOPMENT COSTS: 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 net revenues.  Software costs capitalized
pertaining to WinPRISM,  the Company's new Windows-based  product,  approximated
$1.1 million and $0.8 million at March 31, 2001 and 2000,  respectively.  During


                                       32
<PAGE>

the fiscal year ended March 31,  2001,  certain  WinPRISM  functionalities  were
completed and released to the general  public.  Amortization  of the capitalized
costs associated with such  functionalities  totaled $0.1 million for the fiscal
year ended March 31, 2001.  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 Q
to the consolidated financial statements).

    GOODWILL AND INTANGIBLE ASSETS:  Intangible assets were acquired through the
acquisition  of 100% of the stock of NBC  effective  September 1, 1995,  and the
acquisition of various bookstore  operations and other  businesses.  The Company
monitors events and changes in  circumstances  which may require a review of the
carrying  value of goodwill at each  consolidated  balance  sheet date to assess
recoverability  based on estimated  undiscounted  future  operating  cash flows.
Impairments are recognized in operating  results when a permanent  diminution in
value  occurs  based on fair value.  The  assessment  of the  recoverability  of
goodwill  will be  impacted if  estimated  future  operating  cash flows are not
achieved.  Goodwill is amortized on a  straight-line  basis over periods ranging
from 3-15 years. Covenants not to compete are amortized on a straight-line basis
over the term of the agreements.

    DEBT ISSUE COSTS:  The costs related to the issuance of debt are capitalized
and amortized to interest expense on a straight-line basis over the lives of the
related debt.

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

    FAIR VALUE OF  FINANCIAL  INSTRUMENTS:  The  carrying  amounts of  financial
instruments  including  cash  and cash  equivalents,  accounts  receivable,  and
accounts payable  approximate fair value as of March 31, 2001 and 2000,  because
of the  relatively  short  maturity  of these  instruments.  The  fair  value of
long-term  debt,  including the current  maturities,  was  approximately  $199.7
million  and $180.3  million  as of March 31,  2001 and 2000,  respectively,  as
determined  primarily by quoted  market  values.  The fair value of the interest
rate swap agreements  (see note H) approximated  $(1.0) million and $1.7 million
as of March 31, 2001 and 2000 using  quotes  from  brokers  and  represents  the
Company's gain (loss) on settlement if the existing  agreements had been settled
on that date.

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

    INCOME  TAXES:  The Company  provides for  deferred  income taxes based upon
temporary differences between financial statement and income tax bases of assets
and  liabilities,  and tax rates in effect for  periods in which such  temporary
differences are estimated to reverse.

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

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

    ACCOUNTING  STANDARDS NOT YET ADOPTED:  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,  based on


                                       33
<PAGE>

whether the instrument is designated as part of a hedge  transaction and, if so,
the type of hedge  transaction.  The initial  adoption  of SFAS No.  133,  which
occurred on April 1, 2001, had no material impact on the Company's  consolidated
financial statements.

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

C.  ACQUISITIONS

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

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

     The following table summarizing  unaudited pro forma financial  information
assumes the  acquisitions  discussed  above had occurred at the beginning of 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 loss                                       (2,807,962)
          Earnings (loss) per share:
            Basic                                             (2.25)
            Diluted                                           (2.25)

    Additionally,  NBC 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.  Goodwill  recorded  in such  transactions  is  generally
amortized on a straight-line  basis over a period of three years. In fiscal 2001
and 2000, NBC acquired four and two such bookstore operations, respectively.

                                       34
<PAGE>

D.  RECEIVABLES

    Receivables are summarized as follows:

                                                       March 31,
                                              -----------------------------
                                                  2001             2000
                                              ------------    -------------
   Trade receivables, less allowance for
    doubtful accounts of $407,033 and
    $175,899 at March 31, 2001 and 2000,
   respectively                               $ 14,739,915    $ 12,935,801
   Receivables from book publishers
   for returns                                  11,971,106       7,589,663
   Advances for book buy-backs                   1,784,687       1,738,587
   Computer finance agreements,
   current portion                                 128,544         145,910
   Other                                         2,743,898       1,783,707
                                              ------------    ------------
                                              $ 31,368,150    $ 24,193,668
                                              ============    ============


   Trade receivables include the effect of estimated product returns. The amount
of estimated product returns at March 31, 2001 and 2000 was  approximately  $2.7
million and $3.3 million, respectively.

E.  INVENTORIES

    Inventories are summarized as follows:

                                                        March 31,
                                              ----------------------------
                                                  2001             2000
                                              ------------    ------------
   Wholesale                                  $ 26,150,304    $ 25,413,484
   College bookstores                           31,348,415      31,137,643
   Other                                         4,335,844       5,258,503
                                              ------------    ------------
                                              $ 61,834,563    $ 61,809,630
                                              ============    ============

    Wholesale  inventories include the effect of estimated product returns.  The
amount of estimated product returns at March 31, 2001 and 2000 was approximately
$1.4 million and $1.6 million, respectively.

F.  PROPERTY AND EQUIPMENT

    A summary of the cost of property and equipment follows:

                                                          March 31,
                                               ------------------------------
                                                    2001            2000
                                               --------------  --------------
    Land                                        $  2,412,818    $  2,412,818
    Buildings and improvements                    14,733,218      14,443,622
    Leasehold improvements                         6,100,691       5,912,012
    Furniture and fixtures                         4,737,487       4,571,529
    Information systems                            9,277,060       8,352,241
    Automobiles and trucks                           386,074         433,956
    Machinery                                        465,878         425,295
    Projects in process                               40,929           7,147
                                               --------------  --------------
                                                  38,154,155      36,558,620
    Less:  Accumulated depreciation &
    amortization                                 (13,679,268)    (10,797,795)
                                               --------------  --------------
                                                $ 24,474,887    $ 25,760,825
                                               ==============  ==============


                                       35
<PAGE>

G.  GOODWILL AND OTHER INTANGIBLES

    Goodwill and intangible assets and related amortization are as follows:

                                                         March 31,
                                            ---------------------------------
                                                  2001              2000
                                            ---------------   ---------------
       Goodwill                              $ 47,883,906      $ 53,901,655
       Covenants not to compete                   610,000           150,000
       Debt issue costs                        14,854,282        14,854,282
                                            ---------------   ---------------
                                               63,348,188        68,905,937
       Less:  Accumulated amortization        (26,604,690)      (22,832,093)
                                            ---------------   ---------------
                                             $ 36,743,498      $ 46,073,844
                                            ===============   ===============

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 to NBC through a
syndicate of  investors.  The facility is comprised of a $27.5 million term loan
(the  "Tranche A Loan"),  a $32.5 million term loan (the "Tranche B Loan") and a
$50.0 million revolving credit facility (the "Revolving Credit Facility").

    The Revolving Credit Facility expires on March 31, 2004.  Availability under
the Revolving  Credit  Facility is determined by the  calculation of a borrowing
base, which at any time is equal to a percentage of eligible accounts receivable
and inventory. The calculated borrowing base at March 31, 2001 was approximately
$38.6 million. The Revolving Credit Facility was unused at March 31, 2001.

    The interest rate on the Senior Credit  Facility is prime plus an applicable
margin of up to 1.50%  or, on  Eurodollar  borrowings,  Eurodollar  rate plus an
applicable margin of up to 2.50%.  Additionally,  there is a 0.5% commitment fee
for the average  daily  unused  amount of the  Revolving  Credit  Facility.  The
average borrowings under the Revolving Credit Facility for the years ended March
31,  2001 and 2000 were  approximately  $15.3  million  and $14.2  million at an
average rate of 10.7% and 9.3%, respectively.

    The Senior Credit Facility is  collateralized  by  substantially  all of the
Company's  assets.  The Senior Credit  Facility also stipulates that excess cash
flows as defined in the credit  agreement  dated  February 13, 1998 (the "Credit
Agreement") shall be applied initially towards  prepayment of the term loans and
then utilized to  permanently  reduce  commitments  under the  Revolving  Credit
Facility. At March 31, 2001 and 2000, there was no excess cash flow payment due.

    Additional  funding of the  Recapitalization  included  the  proceeds of the
issuance by NBC of $110.0 million face amount of 8.75% senior subordinated notes
due 2008 (the  "Senior  Subordinated  Notes") and the issuance by the Company of
$76.0 million face amount of 10.75%  senior  discount  debentures  due 2009 (the
"Senior Discount  Debentures").  The proceeds of the Senior Discount  Debentures
were discounted in the amount of approximately $31.0 million and will accrete in
value at the rate of 10.75% compounded  semiannually until February 15, 2003, at
which time interest payments will begin.


                                       36
<PAGE>

    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%  (7.20%
     and 8.46% at March 31, 2001 and 2000,
     respectively)                            $ 20,062,500    $ 24,000,000
   Tranche B Loan, due March 31, 2006,
     quarterly principal payments, plus
     interest at a floating  rate  based on
     Eurodollar rate plus 2.50% (7.45% and
     8.71% at March 31, 2001 and 2000,
     respectively)                              31,125,000      31,625,000
   Senior subordinated notes, unsecured,
     due February 15, 2008, semi-annual
     interest payments at a fixed rate
     of 8.75%                                  110,000,000     110,000,000
   Senior discount debentures, unsecured,
     maturing February 15, 2009, semi-annual
     interest payments at a rate of 10.75%,
     commencing August 15, 2003, net
     of a discount of $13,554,505 and
     $19,750,100 at March 31, 2001 and
     2000, respectively                         62,445,495      56,249,900
   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%           534,090         552,914
                                              -------------   -------------
                                               224,167,085     222,427,814
   Less current maturities                      (6,308,450)     (4,456,324)
                                              -------------   -------------
                                              $217,858,635    $217,971,490
                                              =============   =============

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

    The indenture governing the Senior Discount Debentures restricts the ability
of the Company and its Restricted  Subsidiaries (as defined in the indenture) to
pay dividends or make other Restricted Payments (as defined in the indenture) to
their respective  stockholders,  subject to certain  exceptions,  unless certain
conditions are met, including that (i) no default under the indenture shall have
occurred and be continuing, (ii) the Company shall be permitted by the indenture
to incur additional indebtedness and (iii) the amount of the dividend or payment
may not exceed a certain  amount based on,  among other  things,  the  Company's
consolidated net income. The indenture  governing the Senior  Subordinated Notes
contains  similar  restrictions  on  the  ability  of  NBC  and  its  Restricted
Subsidiaries  to pay  dividends  or make  other  Restricted  Payments  to  their
respective stockholders.

    NBC has separate five-year amortizing interest rate swap agreements with two
financial  institutions  whereby NBC's  variable rate Tranche A and B Term Loans
have been  effectively  converted into debt with a fixed rate of 5.815% plus the
applicable  margin.  The notional amount under each agreement was  approximately
$25.6 million at March 31, 2001. Such notional amounts are reduced  periodically
by amounts equal to the scheduled principal payments on the Tranche A and B Term
Loans.  NBC is  exposed  to credit  loss in the event of  nonperformance  by the
counterparties  to the  interest  rate  swap  agreements.  NBC  anticipates  the
counterparties  will  be able to  fully  satisfy  their  obligations  under  the
agreements.

                                       37
<PAGE>

    At March 31, 2001,  the aggregate  maturities of long-term debt for the next
five years were as follows:

   Fiscal Year
   2002                              $ 6,308,450
   2003                                6,823,317
   2004                                8,500,950
   2005                               11,216,381
   2006                               18,469,644

I.  NOTES RECEIVABLE FROM STOCKHOLDERS

    Notes receivable from stockholders reflected as a component of stockholders'
deficit  pertain to notes  obtained  from  certain  NBC  executive  officers  in
conjunction with certain  issuances of the Company's Class A Common Stock.  Such
notes mature on various dates from August, 2002 to January, 2010, are payable at
maturity, and bear interest at various rates from 5.25% to 6.04%.

J.  INCOME TAXES

    The provision (benefit) for income taxes consists of:

                                                 Year Ended March 31,
                                      -----------------------------------------
                                          2001            2000         1999
                                      ------------    -----------   -----------
   Current:
     Federal                          $ 3,811,112     $2,669,915    $1,258,891
     State                                946,860        618,904       198,791
   Deferred                            (1,351,000)      (773,000)     (883,200)
                                      ------------    -----------   -----------
                                      $ 3,406,972     $2,515,819    $  574,482
                                      ============    ===========   ===========

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

                                                   Year Ended March 31,
                                           -----------------------------------
                                            2001          2000          1999
                                           ------       -------       --------
   Statutory rate                           34.0%         34.0%        (34.0)%
   State income tax effect                  13.2          40.7           1.3
   Amortization of goodwill                 39.3         187.1          38.0
   Change in estimate of income tax
     liabilities                             3.0          31.0          21.9
   Other                                     3.2          19.2           6.9
                                           ------       -------       --------
                                            92.7%        312.0%         34.1 %
                                           ======       =======       ========


                                       38
<PAGE>

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

                                                March 31,
                                        ---------------------------
                                            2001           2000
                                        -----------    ------------
   Deferred income tax assets
   (liabilities), current:
     Vacation accruals                  $  484,173     $  420,483
     Inventory                             544,378        603,037
     Allowance for doubtful accounts       154,510         66,771
     Product returns                       480,069        618,637
     Other deferred tax assets             321,784           -
     Other deferred tax liabilities       (122,748)      (110,135)
                                        -----------    -----------
                                         1,862,166      1,598,793
   Deferred income tax assets,
   noncurrent:
     Deferred compensation agreements       90,713         76,767
     Book over tax goodwill
     amortization                        2,967,716      1,775,263
     Covenant not to compete             1,468,568      1,587,340
                                        -----------    -----------
                                         4,526,997      3,439,370
                                        -----------    -----------
                                        $6,389,163     $5,038,163
                                        ===========    ===========

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

K.  LEASE OBLIGATIONS

    The Company is obligated under various capital leases for certain  equipment
that expire at various dates through 2003. Capitalized leased equipment included
in property and equipment was  approximately  $27,000 at March 31, 2001,  net of
accumulated amortization.

    The Company leases bookstore  facilities and data processing equipment under
noncancelable  operating  leases  expiring at various dates through fiscal 2013,
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 2.5% to 10.5%.

    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
   ----                                 -----------  ------------
   2002                                 $   32,160   $ 6,627,000
   2003                                     23,091     5,652,000
   2004                                       -        4,513,000
   2005                                       -        3,511,000
   2006                                       -        2,872,000
   Thereafter                                 -        8,451,000
                                        -----------   -----------
   Total minimum lease payments             55,251   $31,626,000
                                                     ============
   Amount representing interest             (3,534)
                                        -----------
   Present value of minimum lease
     payments                           $   51,717
                                        ===========

    Total rent  expense for the years ended March 31, 2001,  2000,  and 1999 was
approximately  $9.6  million,  $8.2  million,  and $6.2  million,  respectively.
Percentage  rent expense for the years ended March 31, 2001,  2000, and 1999 was
approximately $2.0 million, $1.8 million, and $1.6 million, respectively.

L.  RETIREMENT PLAN

    The Company's subsidiary  participates in and sponsors a 401(k) compensation
deferral plan. The plan covers substantially all employees.  The plan provisions
include employee  contributions based on a percentage of compensation along with
a sponsor  base  contribution  in addition to a limited  matching  feature.  The
sponsor  contributions  for the years ended March 31, 2001,  2000, and 1999 were
approximately $0.8 million, $0.8 million, and $0.7 million, respectively.

                                       39
<PAGE>

M. DEFERRED COMPENSATION

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

N.  STOCK-BASED COMPENSATION

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

    1998 PERFORMANCE  STOCK OPTION PLAN - This plan provides for the granting of
options to  purchase  52,000  shares of the  Company's  Class A Common  Stock to
selected  members of senior  management of the Company and its  affiliates.  All
options granted are intended to be nonqualified stock options, although the plan
also provides for incentive  stock options.  The Company will grant a portion of
the  available  options  in  fiscal  years  1999-2002  upon  the  attainment  of
pre-established  financial targets.  Twenty-five  percent of the options granted
become  exercisable  immediately  upon  granting,  with  the  remaining  options
becoming  exercisable in 25% increments  over the subsequent  three years on the
anniversary of the date of grant. The options have an exercise price of not less
than fair market  value on the date the options are granted and expire ten years
from the date of grant. At March 31, 2001,  there were 29,470 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 the  Company's  Class A Common  Stock  to  selected
employees,  officers,  and  directors  of the  Company and its  affiliates.  All
options granted are intended to be nonqualified stock options, although the plan
also provides for incentive  stock options.  The Company will grant such options
at the  discretion  of a committee  designated  by the Board of  Directors  (the
Committee).  Twenty-five  percent  of the  options  granted  become  exercisable
immediately upon granting,  with the remaining  options becoming  exercisable in
25% increments over the subsequent three years on the anniversary of the date of
grant.  Incentive  stock  options  have an exercise  price of not less than fair
market value on the date the options are granted, while the Committee determines
the  exercise  price for  nonqualified  options,  which may be below fair market
value,  at the time of grant.  All  options  expire  ten years  from the date of
grant. At March 31, 2001, there were 2,906 options available for grant under the
plan.

    No compensation  cost was recognized for the options granted to employees in
fiscal 2001, 2000, and 1999 as the exercise price was greater than the estimated
fair value (including a discount for the holder's minority interest position and
illiquidity  of the Class A Common Stock) of the Company's  Class A Common Stock
on the date of grant.


                                       40
<PAGE>

    A summary of the  Company's  stock-based  compensation  activity  related to
stock  options for each of the plans for the three years ended March 31, 2001 is
as follows:
<TABLE>
<CAPTION>


                                                               Year Ended March 31,
                                                2001                   2000                  1999
                                      ---------------------- ---------------------- ---------------------
                                                 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        9,530      $52.47       9,530     $52.47           -    $    -
   Granted                               13,000       52.47           -          -       9,530     52.47
   Expired/terminated                         -           -           -          -           -         -
   Exercised                                  -           -           -          -           -         -
                                      ---------- ----------- ----------- ---------- ----------- ---------
   Outstanding - end of year             22,530      $52.47       9,530     $52.47       9,530    $52.47
                                      ========== =========== =========== ========== =========== =========

    There were 10,398,  4,765, and 2,382 options  exercisable at March 31, 2001, 2000, and 1999,
    respectively,  with a  weighted-average  exercise price per option of $52.47. All options
    outstanding at March 31, 2001 have an exercise price of $52.47 per option and a
    weighted-average remaining contractual life of 8.7 years.

                                                                Year Ended March 31,
                                               2001                    2000                   1999
                                     ----------------------- ---------------------- ---------------------
                                                 Weighted-               Weighted-              Weighted-
                                                  Average                 Average               Average
                                                  Exercise               Exercise               Exercise
                                       Number      Price       Number      Price      Number     Price
                                     ----------- ----------- ----------- ---------- ----------- ---------

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

    There were 16,472,  9,448, and 3,300 options  exercisable at March 31, 2001, 2000, and 1999,
    respectively,  with a  weighted-average  exercise price per option of $52.47. All options
    outstanding at March 31, 2001 have an exercise price of $52.47 per option and a
    weighted-average remaining contractual life of 8.2 years.

</TABLE>

    If the Company  accounted for its  stock-based  compensation  using the fair
value  method   prescribed  by  SFAS  No.  123,   ACCOUNTING   FOR   STOCK-BASED
COMPENSATION,  the  weighted-average  grant-date  fair value of options  granted
under the 1998 Performance  Stock Option Plan in fiscal 2001 and 1999 would have
been $7.37 and $8.85 per option,  respectively.  The weighted-average grant-date
fair value of options  granted  under the 1998 Stock Option Plan in fiscal 2001,
2000, and 1999 would have been $7.68, $9.26, and $8.64 per option, respectively.
The fair value of options  granted  was  estimated  at the date of grant using a
Black-Scholes   option   pricing  model  with  the  following   weighted-average
assumptions:

                               Year Ended        Year Ended       Year Ended
                             March 31, 2001    March 31, 2000   March 31, 1999
                            ----------------- ----------------- ---------------

   Risk-free interest rate         6.26%             6.06%            4.50%
   Dividend yield                     -                 -                -
   Expected volatility             1.00%             1.00%            1.00%
   Expected life (years)              3                 3                4



                                       41
<PAGE>

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

                                                 Year Ended March 31,
                                        2001            2000            1999
                                     ----------     ------------    ------------
Net income (loss):
   As reported                       $ 268,078      $(1,709,393)    $(2,259,105)
   Pro forma                           195,243       (1,775,050)     (2,321,093)

Basic earnings (loss) per share:
   As reported                       $    0.21      $     (1.48)    $     (2.37)
   Pro forma                              0.15            (1.54)          (2.43)

Diluted earnings (loss) per share:
   As reported                       $    0.21      $     (1.48)    $     (2.37)
   Pro forma                              0.15            (1.54)          (2.43)


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  102 college  bookstores as of March 31,
2001  located on or adjacent to college  campuses.  The  complementary  services
segment  includes  book-related  services such as a centralized  buying service,
distance education materials, and computer hardware and software.

    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 cash and cash equivalents,
certain receivables and other assets, and inventories), 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, 2001.

                                       42
<PAGE>
<TABLE>
<CAPTION>

                                                              College
                                            Wholesale       Bookstore      Complementary
                                            Operations      Operations        Services         Total
                                          -------------- ---------------- --------------- --------------
<S>                                         <C>            <C>              <C>            <C>
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      35,254,893       5,354,837      70,381,086

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      34,829,430       5,950,258      69,415,758

Year ended March 31, 1999:
  External customer revenues                $ 86,386,611   $ 120,872,556    $ 11,378,404   $ 218,637,571
  Intersegment revenues                       12,364,501               -       1,259,149      13,623,650
  Depreciation and amortization expense          319,702       3,171,027       1,894,323       5,385,052
  Income (loss) before interest and taxes     21,590,426       8,339,047      (2,442,717)     27,486,756
  Total assets                                28,898,295      23,600,603       4,228,300      56,727,198
</TABLE>

    The following  table  reconciles  segment  information  presented above with
consolidated  information as presented in the consolidated  financial statements
for the three years ended March 31, 2001.
<TABLE>
<CAPTION>

                                                          Year Ended March 31,
                                                2001             2000             1999
                                           ---------------- ---------------- ---------------
<S>                                          <C>              <C>             <C>
Revenues:
  Total for reportable segments              $ 322,510,255    $ 286,869,183   $ 232,261,221
  Elimination of intersegment revenues         (20,841,402)     (19,800,260)    (13,623,650)
                                           ---------------- ---------------- ---------------
    Consolidated total                       $ 301,668,853    $ 267,068,923   $ 218,637,571
                                           ================ ================ ===============

Depreciation and Amortization Expense:
  Total for reportable segments              $  11,198,750    $  10,047,247   $   5,385,052
  Corporate administration                       2,203,151        2,368,759       3,156,620
                                           ---------------- ---------------- ---------------
    Consolidated total                       $  13,401,901    $  12,416,006   $   8,541,672
                                           ================ ================ ===============

Income (Loss) Before Interest and Taxes:
  Total for reportable segments              $  35,045,066    $  31,972,142   $  27,486,756
  Corporate administrative costs                (7,977,326)      (8,123,130)     (6,668,446)
                                           ---------------- ---------------- ---------------
                                                27,067,740       23,849,012      20,818,310
  Interest expense, net                        (23,392,690)     (23,042,586)    (22,502,933)
                                           ---------------- ---------------- ---------------
    Consolidated income (loss) before taxes  $   3,675,050    $     806,426   $  (1,684,623)
                                           ================ ================ ===============

Total Assets:
  Total for reportable segments              $  70,381,086    $  69,415,758   $  56,727,198
  Assets not allocated to segments:
    Receivables                                 26,829,423       20,923,250      17,544,101
    Recoverable income taxes                       706,408                -           4,902
    Deferred income taxes                        1,862,166        1,598,793       1,468,156
    Property and equipment, net                 24,474,887       25,760,825      23,188,485
    Goodwill and other intangibles, net         36,743,498       46,073,844      38,778,577
    Other assets                                 6,298,179        4,791,000       3,653,180
    Other                                          404,877          427,526       1,514,255
                                           ---------------- ---------------- ---------------
      Consolidated total                     $ 167,700,524    $ 168,990,996   $ 142,878,854
                                           ================ ================ ===============
</TABLE>


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


                                       43
<PAGE>

P.  EARNINGS PER SHARE

    Basic  earnings per share data are based on the  weighted-average  number of
common  shares  outstanding  during the period.  Weighted-average  common shares
outstanding  for the years ended March 31, 2001,  2000,  and 1999 were 1,260,314
shares, 1,152,325 shares, and 954,059 shares, respectively. Diluted earnings per
share data are based on the weighted-average number of common shares outstanding
and the dilutive effect of potential common shares including stock options.  For
purposes of  calculating  diluted  earnings per share,  weighted-average  common
shares  outstanding for the year ended March 31, 2001 include 3,232  incremental
shares  attributable to the 50,624 stock options  outstanding at March 31, 2001.
There were 34,224 and 22,730  stock  options  outstanding  at March 31, 2000 and
1999,  respectively,  that had no impact on  diluted  earnings  per share as the
exercise  price of such  options  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 Class A Common Stock  underlying
the options as of March 31, 2000 and 1999.

Q.  RELATED PARTY TRANSACTIONS

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

    The equity option  agreement  provides NBC the opportunity to acquire 25% of
the initial common shares  outstanding of  TheCampusHub.com,  Inc. The option is
being  accounted for as a cost method  investment in accordance with APB Opinion
No. 18, THE EQUITY METHOD OF ACCOUNTING  FOR  INVESTMENTS  IN COMMON STOCK.  The
management services  agreement,  which is effective for a period of three years,
reimburses NBC for certain direct costs incurred on behalf of  TheCampusHub.com,
Inc. and also pays NBC $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 NBC 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 NBC during that three year period. The
license fees are recognized as  complementary  services revenue over the term of
the  agreement.  NBC's  Senior  Credit  Facility  was amended in April,  2000 to
provide  for these  transactions.  For the year ended March 31,  2001,  revenues
attributable  to  the  management  services  and  technology  sale  and  license
agreements  totaled $0.9  million,  and  reimbursable  direct costs  incurred on
behalf of TheCampusHub.com, Inc. totaled $0.9 million.

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

R.      SUBSEQUENT EVENT

       Subsequent to March 31, 2001,  NBC entered into an Agreement of Sale with
the University  Co-operative Society (the "Co-op") at the University of Texas in
Austin.  Pursuant  to the  Agreement  of Sale,  NBC sold  inventory  and certain
property,  plant and equipment located at two of its college bookstore locations
serving the University of Texas to the Co-op for approximately $1.2 million. NBC
also assigned an associated real estate operating lease to the Co-op.

    Also  subsequent  to March  31,  2001,  NBC  acquired  certain  assets  of a
privately  owned college  bookstore  serving Western  Washington  University and
seven Wallace's  Bookstores,  Inc. 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 for a total of
approximately  $5.8 million.  NBC will account for these  acquisitions under the
purchase method of accounting with any excess cost over fair value of net assets
acquired being recorded as goodwill.

                                       44
<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, 2001.



                                       45
<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        54     Chairman and Director
   Douglas D. Wheat      51     Director
   Mark W. Oppegard      51     President/Chief  Executive  Officer, Secretary
                                and Director
   Alan G. Siemek        40     Vice President and Treasurer

   Barry S. Major        44     Chief Operating Officer, NBC
   William H. Allen      58     Senior Vice President of Wholesale Division, NBC
   Thomas A. Hoff        53     Vice President of Retail Development, NBC
   Michael J. Kelly      43     Vice President of E-commerce, NBC
   Larry R. Rempe        53     Vice President of Information Systems, NBC
   Kenneth F. Jirovsky   57     Vice President of Development, NBC
   Ardean A. Arndt       59     Vice President of Administration and
                                Secretary, NBC


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

    ROBERT B. HAAS  became  Chairman  and a Director of the Company and NBC upon
the consummation of the Recapitalization. Mr. Haas has also served as a Director
of  TheCampusHub.com,  Inc.  since  its  inception  in 2000.  Mr.  Haas has been
actively  involved in private  investments since 1978. He has served as Chairman
of the Board and Chief  Executive  Officer of Haas Wheat since 1995; he has also
been Chairman of the Board and Chief  Executive  Officer of Haas Wheat  Advisory
Partners  Incorporated  since 1992 and  Chairman of the Board of Haas & Partners
Incorporated since 1989 (each of which is a private investment firm specializing
in   leveraged   acquisitions).   Mr.  Haas  serves  as  a  director  of  Sybron
International  Corporation,  AMN  Healthcare  Services,  Inc. and Walls  Holding
Company,  Inc.  and is the  Chairman of the Board of Playtex  Products,  Inc. (a
consumer products company).

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

    MARK W. OPPEGARD has served in the college  bookstore  industry for 31 years
(all of which have been with NBC) and became President/Chief  Executive Officer,
Secretary and a Director of the Company and Chief Executive  Officer of NBC upon
consummation of the  Recapitalization  on February 13, 1998.  Additionally,  Mr.
Oppegard  has served as  President  of NBC since  1992 and as a Director  of NBC
since  1995.  Prior  to  the  Recapitalization,  Mr.  Oppegard  served  as  Vice
President,  Secretary, Assistant Treasurer and a Director of the Company between
1995 and 1998.  Prior to 1992, Mr.  Oppegard  served in a series of positions at
NBC, including Vice President of the college bookstore operations.  Mr. Oppegard
has also served as Chairman and a Director of  TheCampusHub.com,  Inc. since its
inception in 2000. Additionally, he is currently a director of NACSCORP, INC., a
distribution company serving the college bookstore industry.

    ALAN G. SIEMEK was named Senior Vice President of Finance and Administration
of NBC in  April,  2001.  Mr.  Siemek  has also  served  as Vice  President  and
Treasurer of the Company and Chief  Financial  Officer,  Treasurer and Assistant


                                       46
<PAGE>

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

    BARRY S. MAJOR was named Chief  Operating  Officer of NBC in January,  1999.
Additionally,  Mr. Major served as President of TheCampusHub.com,  Inc. from its
inception to November,  2000, at which time he was named Chief Executive Officer
of  TheCampusHub.com,  Inc.  Prior to joining  NBC,  Mr. Major served in various
executive  management positions at SITEL. Joining SITEL in 1995 as the Executive
Vice President of Finance,  Mr. Major was named Chief Financial  Officer in 1996
and assumed the role of President of the North America  Region in 1997.  Between
1985 and 1995, Mr. Major served in a series of positions, including President in
1995, Executive Vice President,  and Senior Vice President/Credit  Manager, with
American  National  Corporation,  a multi-bank  holding company  operating three
banks throughout Omaha and Southeast Nebraska.

    WILLIAM H. ALLEN has served in the college  bookstore  industry for 36 years
(of which 27 have been with NBC).  NBC 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 NBC. Between 1974 and 1994, Mr. Allen
served in a series of positions,  including  assistant  manager of the wholesale
operations. Prior to joining NBC in 1974, Mr. Allen was employed by the Missouri
Store Company, a predecessor of MBS.

    THOMAS A. HOFF has served in the  college  bookstore  industry  for 14 years
(all of which  have  been  with  NBC) and was  named  Vice  President  of Retail
Development  for NBC in April,  2001.  Between 1992 and 2001, Mr. Hoff served as
Vice  President  of Retail  Division for NBC. Mr. Hoff served as an assistant to
the Vice President of College Bookstore Operations between 1987 and 1992.

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

    LARRY R. REMPE has served in the  college  bookstore  industry  for 15 years
(all of which  have been with NBC) and has been Vice  President  of  Information
Systems for NBC since 1986.  Between 1974 and 1986,  Mr. Rempe served in various
positions for Lincoln Industries, Inc. ("Lincoln"), a holding company that owned
NBC until 1995.

    KENNETH F.  JIROVSKY  has served in the college  bookstore  industry  for 40
years  (all of which  have  been  with  NBC) and was  named  Vice  President  of
Development for NBC in April,  2001.  Between 1986 and 2001, Mr. Jirovsky served
as Vice  President of Sales and  Marketing for NBC.  Prior to 1986 Mr.  Jirovsky
served in a series of positions,  including  assistant  manager of the wholesale
operations.

    ARDEAN A. ARNDT has served in the college  bookstore  industry  for 16 years
(all of  which  have  been  with  NBC)  and has  served  as  Vice  President  of
Administration  and  Secretary  for NBC since 1985.  Between 1981 and 1985,  Mr.
Arndt was Vice President of Administration  for Lincoln.  Between 1966 and 1981,
Mr. Arndt served in various positions for Lincoln.

                                       47
<PAGE>


                        ITEM 11. EXECUTIVE COMPENSATION.

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

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

                                        Summary Compensation Table

                                                                            Long-Term
                                                                          Compensation
                                                Annual Compensation           Awards
                                            ---------------------------   --------------

                                                                             Number
                                                                          of Securities
                                    Fiscal                                 Underlying         All Other
  Name and Principal Position       Year        Salary         Bonus        Options (1)    Compensation (2)
---------------------------------   ------  --------------  -----------   --------------  ------------------
<S>                                  <C>        <C>          <C>                 <C>               <C>
Mark W. Oppegard - Chief Executive
Officer, President, and
Director, NBC                        2001       $ 246,731    $ 138,000            3,050            $ 2,276
                                     2000         230,769      152,000                -              2,180
                                     1999         197,808            -                -              2,985

Barry S. Major - Chief Operating
Officer, NBC                         2001         219,231      118,000            2,650              2,120
                                     2000         204,615      130,000                -              2,080
                                     1999          40,769       60,000            9,530                  -

Alan G. Siemek - Chief Financial
Officer, Senior Vice President of
Finance and Administration,
Treasurer, and Assistant
Secretary, NBC                       2001         161,923       97,000            1,875              2,120
                                     2000         111,481      133,000            6,353              2,027
                                     1999               -            -                -                  -

Larry R. Rempe - Vice President
of Information Systems, NBC          2001         152,769       40,000            1,000              2,276
                                     2000         122,385       50,000                -              2,276
                                     1999         106,846            -                -              3,092

William H. Allen - Senior Vice
President of Wholesale
Division, NBC                        2001         106,846       50,000            1,200              2,516
                                     2000         103,385       60,000                -              2,516
                                     1999         100,923            -                -              3,376

</TABLE>

(1)     The stock  options  were  granted at an exercise  price of  $52.47/share
        ("Founder's  Price").  The estimated  fair market value of the Company's
        Class A Common Stock  underlying  the stock  options,  which  includes a
        discount for the holder's  minority interest position and illiquidity of
        the Class A Common Stock,  was less than the exercise  price on the date
        of grant.

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



                                       48
<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, 2001:
<TABLE>
<CAPTION>

                          Options Granted During the Year Ended March 31, 2001

                         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        2001      Per Share      Date       Value (1)
------------------------------------  ------------  -----------  ----------  -----------   ----------
<S>                                      <C>          <C>          <C>           <C>         <C>
Mark W. Oppegard - Chief Executive
Officer, President, and
Director, NBC                            3,050        18.6%        $52.47     07/31/10      $22,479

Barry S. Major - Chief Operating
Officer, NBC                             2,650        16.2%         52.47     07/31/10       19,531

Alan G. Siemek - Chief Financial
Officer, Senior Vice President of
Finance and Administration,
Treasurer, and Assistant
Secretary, NBC                           1,875        11.4%         52.47     07/31/10       13,819

Larry R. Rempe - Vice President
of Information Systems, NBC              1,000         6.1%         52.47     07/31/10        7,370

William H. Allen - Senior Vice
President of Wholesale
Division, NBC                            1,200         7.3%         52.47     07/31/10        8,844
</TABLE>

(1)     Grant date present value was  determined  using a  Black-Scholes  option
        pricing model,  assuming a 6.24% risk-free  interest rate, 1.0% expected
        volatility, and an expected life of approximately 2.5 years.


                                       49
<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, 2001 as well as the value of unexercised options as of March 31, 2001:
<TABLE>
<CAPTION>

              Aggregated Option Exercises During the Year Ended March 31, 2001
                           and Option Value as of March 31, 2001

                                                                    Number
                                                                 of Securities         Value of
                                                                  Underlying          Unexercised
                                                                  Unexercised        in-the-Money
                                                                  Options at          Options at
                                                                March 31, 2001    March 31, 2001 (1)
                                                                ----------------  --------------------
                                        Shares
                                       Acquired       Value      Exercisable/        Exercisable/
               Name                   on Exercise   Realized     Unexercisable       Unexercisable
------------------------------------  ------------  ----------  ----------------  --------------------
<S>                                       <C>         <C>            <C>             <C>

Mark W. Oppegard - Chief Executive
Officer, President, and
Director, NBC                              -         $    -        763/2,287        $10,400/$31,172

Barry S. Major - Chief Operating
Officer, NBC                               -              -      7,811/4,369        106,464/59,549

Alan G. Siemek - Chief Financial
Officer, Senior Vice President of
Finance and Administration,
Treasurer, and Assistant
Secretary, NBC                             -              -      3,646/4,582         49,695/62,453

Larry R. Rempe - Vice President
of Information Systems, NBC                -              -        250/750            3,407/10,222

William H. Allen - Senior Vice
President of Wholesale
Division, NBC                              -              -        300/900            4,089/12,267
</TABLE>


(1)     Represents  the excess of the March 31, 2001 estimated fair market value
        of the  Company's  Class A Common Stock  underlying  the stock  options,
        which includes a discount for the holder's  minority  interest  position
        and illiquidity of the Class A Common Stock,  over the exercise price of
        $52.47/share.


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 the
Company'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,  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,
$257,500 per annum;  Mr. Major,  $230,000 per annum;  Mr.  Siemek,  $170,000 per
annum;  Mr. Rempe,  $156,000 per annum;  and Mr. Allen,  $109,000 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.

                                       50
<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
the Company of an initial public offering of NBC Acquisition Corp. Common Stock,
the  Executives  will not sell,  transfer,  pledge or  otherwise  dispose of any
shares of NBC Acquisition  Corp.  Common Stock,  except for certain transfers to
immediate  family  members,  in the event of disability and for estate  planning
purposes.  The Employment Agreements also provide that, in the event of the sale
of a majority  of the  outstanding  NBC  Acquisition  Corp.  Common  Stock,  the
Executives will have the option, and (at the option of HWH) will be required, to
sell their shares  ratably with,  and on the same terms and  conditions  as, the
other selling shareholders.


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

    The  information  in the following  table sets forth 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 26, 2001 and NBC Acquisition  Corp.
Class A Common Stock underlying  nonqualified stock options that are exercisable
within  sixty days,  pursuant to Rule 13d-3 of the  Securities  Exchange  Act of
1934. To the  knowledge of the Company,  each of such holders of shares has sole
voting and investment  power as to the shares owned unless  otherwise noted. The
address  for each  executive  officer and  director  is 4700 South 19th  Street,
Lincoln, Nebraska 68501 unless otherwise noted.

                                       51
<PAGE>
<TABLE>
<CAPTION>

                                                                            Amount and
                                                                            Nature of
                                                                            Beneficial     Percent of
               Title of Class/Name of Beneficial Owner                     Ownership (1)    Class (3)
-----------------------------------------------------------------------   ---------------  -----------
<S>                                                                          <C>              <C>
Class A Common Stock:
  Owning Greater Than 5% of Shares:
    HWH (2)                                                                    1,136,568        90.0%

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

Ownership of Executive Officers Named in Item 11:
  Mark W. Oppegard                                                                25,491         2.0%
  Barry S. Major                                                                  18,956         1.5%
  Alan G. Siemek                                                                  10,151         0.8%
  Larry R. Rempe                                                                  16,748         1.3%
  William H. Allen                                                                10,130         0.8%

Ownership of Directors and All Executive Officers as a Group                   1,259,431        98.2%
</TABLE>


    (1) Beneficial  ownership is determined in accordance  with the rules of the
        SEC and includes voting and investment  power with respect to the shares
        of NBC  Acquisition  Corp.  Class A Common  Stock.  Such shares  include
        shares underlying  nonqualified  stock options  exercisable within sixty
        days, as follows: Mr. Oppegard - 1,525 shares; Mr. Major - 8,473 shares;
        Mr.  Siemek - 4,115  shares;  Mr.  Rempe - 500 shares;  Mr.  Allen - 600
        shares;  and 19,447 shares for all directors and executive officers as a
        group.

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

    (3) The  percentages  are  calculated  based  upon  1,263,371  shares of NBC
        Acquisition  Corp. Class A Common Stock  outstanding as of June 26, 2001
        and shares  underlying  nonqualified  stock options  exercisable  within
        sixty days as detailed in footnote (1).


            ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

    TRANSACTIONS  WITH MANAGEMENT AND OTHERS - Subsequent to year-end,  pursuant
to the terms of an employment  agreement dated April 17, 2001, NBC appointed Mr.
Rob Rupe to the position of Senior Vice President of Retail Division.  Under the
terms of the employment  agreement,  the Company issued Mr. Rupe 2,621 shares of
the Company's Class A Common Stock at a price of $52.47 per share. In connection
with this  issuance  of stock,  Mr.  Rupe  delivered  a $123,765  note  maturing
January, 2009 and bearing interest at 5.25% per year and will remit cash payment
on the remainder of $13,752.

    CERTAIN  BUSINESS  RELATIONSHIPS  - In fiscal 2001, NBC entered into several
agreements   related  to  its  WebPRISM  and   CampusHub   E-commerce   software
capabilities  with a newly  created  entity,  TheCampusHub.com,  Inc.,  which is
partially  owned by the Company's  majority owner.  Such agreements  included an
equity option agreement, a management services agreement,  and a technology sale
and license agreement.  The equity option agreement provides NBC the opportunity
to acquire 25% of the initial  common shares  outstanding  of  TheCampusHub.com,
Inc. The management services agreement, which is effective for a period of three


                                       52
<PAGE>

years,   reimburses   NBC  for  certain  direct  costs  incurred  on  behalf  of
TheCampusHub.com,  Inc.  and also  pays NBC $0.5  million  per year for  certain
shared management and  administrative  support.  The technology sale and license
agreement  provides for NBC to license its E-commerce  software  capabilities to
TheCampusHub.com,  Inc.  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 NBC during that three year period.

    For the year ended March 31, 2001,  revenues  attributable to the management
services and technology sale and license  agreements  totaled $0.9 million,  and
reimbursable direct costs incurred on behalf of  TheCampusHub.com,  Inc. totaled
$0.9 million.  Included in the  reimbursable  direct costs incurred on behalf of
TheCampusHub.com,  Inc. are annual and other  compensation  costs  totaling $0.2
million for NBC's Vice  President of  E-commerce,  who serves as  President  and
Chief Operating Officer of TheCampusHub.com,  Inc.  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.

    INDEBTEDNESS  OF MANAGEMENT - As of March 31, 2001,  notes  receivable  from
stockholders  and  the  associated  interest  receivable  totaled  approximately
$606,000  and  $91,000,  respectively.  Approximately  $150,000  of  such  notes
originated during the leveraged buyout of NBC by Olympus Advisory Partners, Inc.
in 1995. In conjunction with the buyout,  the Company's  executive officers were
given the  opportunity to acquire  shares of the Company's  Class A Common Stock
with a portion  of the  purchase  price of such  shares  being  provided  to the
officers in the form of interest bearing notes.  Such notes are dated August 31,
1995,  become due August 31, 2002, and bear interest at the  applicable  Federal
rate for mid-term loans.

    The  remaining  balance of such notes  originated  pursuant  to the terms of
employment agreements with NBC's Chief Operating Officer,  Barry S. Major; Chief
Financial Officer, Alan G. Siemek; and Vice President of E-commerce,  Michael J.
Kelly.  In January,  1999, the Company issued 4,765 shares of its Class A Common
Stock to Mr.  Major at a price of $52.47 per share,  in exchange  for $25,000 in
cash and a promissory note in the principal amount of $225,000  maturing January
19, 2009 and bearing  interest at 5.25% per year. The largest  aggregate  amount
outstanding under this note at any time during the year ended March 31, 2001 was
approximately  $252,000.  In July,  1999, the Company issued 3,177 shares of its
Class A Common Stock to Mr.  Siemek at a price of $52.47 per share,  in exchange
for $16,688 in cash and a promissory  note in the  principal  amount of $150,000
maturing  September,  2009 and bearing  interest at 5.25% per year.  The largest
aggregate amount  outstanding  under this note at any time during the year ended
March 31, 2001 was approximately  $162,000. In January, 2000, the Company issued
2,621  shares of its Class A Common  Stock to Mr. Kelly at a price of $52.47 per
share,  in exchange for $13,752 in cash and a promissory  note in the  principal
amount of $123,765  maturing  January,  2010 and  bearing  interest at 5.25% per
year.  The  largest  aggregate  amount  outstanding  under this note at any time
during the year ended March 31, 2001 was approximately $133,000.



                                       53
<PAGE>

                                     PART IV

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

    (a) FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES.

        (1)  Consolidated Financial Statements of NBC Acquisition Corp.

             Index to Consolidated Financial Statements.
             Independent Auditors' Report.
             Consolidated Balance Sheets as of March 31, 2001 and 2000.
             Consolidated Statements of Operations for the Years Ended March 31,
             2001,  2000,  and 1999.
             Consolidated  Statements of  Stockholders' Deficit for the Years
             Ended March 31, 2001, 2000, and 1999.
             Consolidated Statements of Cash Flows for the Years Ended March 31,
             2001, 2000, and 1999.
             Notes to Consolidated Financial Statements.

        (2)  Financial Statement Schedules.

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

        (3)  Management Contract and Compensatory Plan Arrangement Exhibits.

             Exhibits 10.7 through 10.16 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, 2001.

    (c) EXHIBITS.

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

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

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

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

                                       54
<PAGE>

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

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

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

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

        4.5 Indenture dated as of February 13, 1998 by and between Nebraska Book
            Company,  Inc.  and United  States  Trust  Company  of New York,  as
            Trustee, filed as Exhibit 4.5 to NBC Acquisition Corp.  Registration
            Statement  on  Form  S-4,  as  amended  (File  No.  333-48225),   is
            incorporated herein by reference.

        4.6 Exchange and Registration  Rights Agreement dated as of February 13,
            1998 by and between Nebraska Book Company, Inc. and Chase Securities
            Inc.,  filed as Exhibit 4.6 to NBC  Acquisition  Corp.  Registration
            Statement  on  Form  S-4,  as  amended  (File  No.  333-48225),   is
            incorporated herein by reference.

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

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

       10.1 Credit  Agreement  dated as of  February  13,  1998 by and among NBC
            Acquisition Corp., Nebraska Book Company,  Inc., the Chase Manhattan
            Bank and certain other financial institutions, filed as Exhibit 10.1
            to NBC  Acquisition  Corp.  Registration  Statement  on Form S-4, as
            amended (File No. 333-48225), is incorporated herein by reference.

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

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

       10.4 Guarantee and  Collateral  Agreement,  dated as of February 13, 1998
            made by NBC  Acquisition  Corp.  and Nebraska Book Company,  Inc. in
            favor of the Chase Manhattan Bank, as administrative agent, filed as
            Exhibit 10.2 to NBC Acquisition Corp. Registration Statement on Form
            S-4, as amended  (File No.  333-48225),  is  incorporated  herein by
            reference.

                                       55
<PAGE>

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

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

       10.7 Form of Memorandum of  Understanding,  dated as of February 13, 1998
            between NBC Acquisition Corp. and each of Mark W. Oppegard, Bruce E.
            Nevius,  Larry R.  Rempe,  Kenneth F.  Jirovsky,  William H.  Allen,
            Thomas A. Hoff and Ardean A.  Arndt,  filed as  Exhibit  10.5 to NBC
            Acquisition  Corp.  Registration  Statement  on Form S-4, as amended
            (File No. 333-48225), is incorporated herein by reference.

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

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

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

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

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

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

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

      10.15 Form  of  Deferred  Compensation  Agreement by and between  Nebraska
            Book Company,  Inc. and each of Mark W.  Oppegard,  Bruce E. Nevius,
            Larry R.  Rempe and Thomas A.  Hoff,  filed as  Exhibit  10.7 to NBC
            Acquisition  Corp.  Registration  Statement  on Form S-4, as amended
            (File No. 333-48225), is incorporated herein by reference.

                                       56
<PAGE>

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

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

      10.18 Agreement  for  Purchase  and Sale  of  Stock  made  January 9, 1998
            between and among Nebraska Book Company,  Inc. and Martin D. Levine,
            the  Lauren E.  Levine  Grantor  Trust and the  Jonathan  L.  Levine
            Grantor Trust (the "Collegiate Stores Corporation Agreement"), filed
            as Exhibit 10.10.1 to NBC Acquisition Corp.  Registration  Statement
            on Form S-4, as amended (File No. 333-48225), is incorporated herein
            by reference.

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

      10.20 Commercial Lease Agreement made and entered into March  8,  1989, by
            and between Robert J. Chaney,  Mary  Charlotte  Chaney and Robert J.
            Chaney,  as  Trustee  under the Last Will and  Testament  of James A
            Chaney,  and Nebraska Book Company,  Inc., filed as Exhibit 10.11 to
            NBC Acquisition Corp. Registration Statement on Form S-4, as amended
            (File No. 333-48225), is incorporated herein by reference.

      10.21 Lease  Agreement  entered  into as of  September  1, 1986,   by  and
            between  Odell  Associates  Limited  Partnership  and Nebraska  Book
            Company,  Inc.,  filed as  Exhibit  10.12 to NBC  Acquisition  Corp.
            Registration Statement on Form S-4, as amended (File No. 333-48225),
            is incorporated herein by reference.

      10.22 Lease  Agreement  entered  into as of  September  1, 1986,   by  and
            between  John B.  DeVine,  successor  trustee of the Fred C.  Ulrich
            Trust, as amended, and Nebraska Book Company, Inc., filed as Exhibit
            10.13 to NBC Acquisition Corp.  Registration  Statement on Form S-4,
            as  amended  (File  No.  333-48225),   is  incorporated   herein  by
            reference.

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

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

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

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

                                       57
<PAGE>

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

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


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


                                       58
<PAGE>

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

                              NBC ACQUISITION CORP.


                              /s/ Mark W. Oppegard
                              --------------------------------------------
                              Mark W. Oppegard
                              President/Chief Executive Officer, Secretary,
                              and Director
                              June 26, 2001

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


                              /s/ Mark W. Oppegard
                              ----------------------------------------------
                              Mark W. Oppegard
                              President/Chief Executive Officer, Secretary,
                              and Director
                              June 26, 2001


                                         *
                              --------------------------------------------
                              Alan G. Siemek
                              Vice President and Treasurer
                              (Principal Financial and Accounting Officer)
                              June 26, 2001


                                         *
                              --------------------------------------------
                              Robert B. Haas
                              Chairman and Director
                              June 26, 2001


                                         *
                              --------------------------------------------
                              Douglas D. Wheat
                              Director
                              June 26, 2001


                           *By: /s/ Mark W. Oppegard
                              --------------------------------------------
                              Mark W. Oppegard
                              Attorney-In-Fact
                              June 26, 2001


    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, 2001
HAS BEEN, NOR WILL BE, SENT TO SECURITY HOLDERS.


                                       59
<PAGE>

                          FINANCIAL STATEMENT SCHEDULES



INDEPENDENT AUDITORS' REPORT

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

    We have audited the  consolidated  financial  statements of NBC  Acquisition
Corp.  and  subsidiary  as of March 31,  2001 and 2000 and for each of the three
years in the period  ended March 31,  2001,  and have issued our report  thereon
dated May 23, 2001;  such report is included  elsewhere  in this Form 10-K.  Our
audits also included the financial  statement schedules listed in Item 14(a)(2).
These  financial  statement  schedules are the  responsibility  of the Company's
management.  Our responsibility is to express an opinion based on our audits. In
our opinion, such financial statement schedules,  when considered in relation to
the basic consolidated  financial statements taken as a whole, present fairly in
all material respects the information set forth therein.




DELOITTE & TOUCHE LLP

Lincoln, Nebraska
May 23, 2001


                                       60
<PAGE>


NBC ACQUISITION CORP. (PARENT COMPANY ONLY)

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

                                                          March 31,
                                                     2001           2000
                                                --------------  --------------
ASSETS

OTHER ASSETS:
  Due from subsidiary (Note A)                   $  7,056,815   $   4,606,191
  Prepaid transaction/loan costs                    2,564,911       2,890,699
                                                --------------  --------------
                                                 $  9,621,726   $   7,496,890
                                                ==============  ==============

LIABILITIES AND STOCKHOLDERS' DEFICIT

INVESTMENT IN SUBSIDIARY (Note A)                $ 25,786,516   $  30,731,131

SENIOR DISCOUNT DEBENTURES                         62,445,495      56,249,900

COMMITMENTS AND CONTINGENCIES (Note B)

STOCKHOLDERS' DEFICIT:
  Class A common stock, voting,
  authorized 5,000,000
  shares of $.01 par value;
  issued and outstanding
  1,260,750 and 1,248,513
  shares at March 31, 2001
  and 2000, respectively                               12,607          12,485
  Additional paid-in-capital                       65,167,394      64,525,477
  Notes receivable from stockholders                 (697,171)       (660,910)
  Accumulated deficit                            (143,093,115)   (143,361,193)
                                                --------------  --------------
    Total stockholders' deficit                   (78,610,285)    (79,484,141)
                                                --------------  --------------

                                                 $  9,621,726   $   7,496,890
                                                ==============  ==============


See notes to condensed financial statements.

                                       61

<PAGE>


NBC ACQUISITION CORP. (PARENT COMPANY ONLY)

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

                                                Year Ended March 31,
                                         2001           2000         1999
                                     ------------  ------------- -------------

INTEREST EXPENSE                     $(6,521,383)  $ (5,929,034) $ (5,345,563)

INCOME TAX BENEFIT                     2,450,624      2,328,925     2,029,175

EQUITY IN EARNINGS OF SUBSIDIARY       4,338,837      1,890,716     1,057,283

                                     ------------  ------------- -------------
NET INCOME (LOSS)                    $   268,078   $ (1,709,393) $ (2,259,105)
                                     ============  ============= =============


EARNINGS (LOSS) PER SHARE:

  Basic                              $      0.21   $      (1.48) $      (2.37)
                                     ============  ============= =============

  Diluted                            $      0.21   $      (1.48) $      (2.37)
                                     ============  ============= =============



See notes to condensed financial statements.


                                       62
<PAGE>
<TABLE>
<CAPTION>

NBC ACQUISITION CORP. (PARENT COMPANY ONLY)

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

                                                                     Year Ended March 31,
                                                              2001        2000           1999
                                                          ----------- --------------  -----------
 <S>                                                         <C>         <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net cash flows from operating activities                  $      -   $          -    $       -
                                                          ----------- --------------  -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Deferred financing costs                                         -              -     (159,489)
  Proceeds from issuance of common stock                     642,039     14,979,532       25,000
  Advances (to) from subsidiary                             (642,039)   (14,979,532)      30,319
  Proceeds from payment on notes
  receivable from stockholders                                     -              -      104,170
                                                          ----------- --------------  -----------
    Net cash flows from financing activities                       -              -            -
                                                          ----------- --------------  -----------

NET INCREASE IN CASH AND CASH EQUIVALENTS                          -              -            -

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

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


SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:

Notes receivable from stockholders recorded upon
issuance of common stock                                    $      -   $    273,765    $ 225,000


</TABLE>

See notes to condensed financial statements.

                                       63

<PAGE>


NBC ACQUISITION CORP. (PARENT COMPANY ONLY)

SCHEDULE I - CONDENSED FINANCIAL INFORMATION
NOTES TO CONDENSED FINANCIAL STATEMENTS


A.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

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

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

B.  COMMITMENTS AND CONTINGENCIES

    The Company has guaranteed repayment of indebtedness under the Senior Credit
Facility held by NBC. Such indebtedness totaled $51.2 million at March 31, 2001.

                                       64
<PAGE>
<TABLE>
<CAPTION>


NBC ACQUISITION CORP.

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

                                                  Charged to    Charged to
                                 Beginning of     Costs and       Other           Net       End of Year
                                 Year Balance      Expenses      Accounts     Charge-Offs     Balance
                                --------------  -------------  ------------  ------------- -------------
<S>                                <C>           <C>               <C>      <C>             <C>
YEAR ENDED MARCH 31, 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


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

</TABLE>



                                       65
<PAGE>


                                  EXHIBIT INDEX


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





                                       66
<PAGE>