SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-K

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

                    For the fiscal year ended March 31, 1999

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

             For the transition period from -----------to----------.


                        Commission File Number 333-48225

                              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 (Section 229.405 of this chapter) is not contained herein,
and will not be contained,  to the best of registrant's knowledge, in definitive
proxy or information  statements  incorporated  by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [x]

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

    There were 1,154,793  shares of Class A Common Stock  outstanding as of June
18, 1999.


                    DOCUMENTS INCORPORATED BY REFERENCE: None


                            Total Number of Pages: 60

                             Exhibit Index: Page 60

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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.......22
Item 8    Financial Statements and Supplementary Data......................24
Item 9    Changes in and Disagreements with Accountants on
           Accounting and Financial Disc1osure.............................42

PART III:

Item 10   Directors and Executive Officers of the Registrant...............43
Item 11   Executive Compensation...........................................44
Item 12   Security Ownership of Certain Beneficial Owners and Management...47
Item 13   Certain Relationships and Related Transactions...................48

PART IV:

Item 14   Exhibits, Financial Statement Schedules,
           and Reports on Form 8-K.........................................49
Signatures.................................................................53
Supplemental Information to be Furnished...................................53
Financial Statement Schedule I - Condensed Financial Information
  (Parent Company Only)....................................................54
Financial Statement Schedule II - Valuation and Qualifying Accounts........59
Exhibit Index..............................................................60



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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"). The Company raised
a total of $91.6  million,  which it  contributed  to NBC as equity (the "Equity
Contribution"),  through:  (i) the sale of  approximately  $45.6  million of NBC
Acquisition  Corp.  Class A  Common  Stock  to HWH;  (ii)  the  reinvestment  of
approximately  $4.4 million in NBC Acquisition Corp. Class A Common Stock by the
Company's  senior  management;  and (iii) net  proceeds of  approximately  $41.6
million from the issuance of senior discount  debentures  (the "Senior  Discount
Debentures").

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

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

    The  Company  does  not  conduct  significant   activities  apart  from  its
investment in NBC.  Operational matters discussed in this report,  including the
acquisition  of  retail  bookstores  and  other  related  businesses,  refer  to
operations  of NBC. We refer 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  approximately  90,000 textbook titles and
selling more than 7.1 million  books  annually at  approximately  2,000  college
campuses. In addition,  the Company owns or manages 65 bookstores on or adjacent

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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.  For the fiscal year ended March 31, 1999,  the Company's
revenues were $217.5 million.

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

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

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

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


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<PAGE>

continuing  and  corporate   education   courses  and  courses  offered  through
electronic  media  such as the  Internet).  Other  services  offered  to college
bookstores  include  the sale of computer  hardware  and  software,  such as the
Company's  turnkey  bookstore  management  software,   and  related  maintenance
contracts.  These services  generate revenue and assist the Company in enhancing
and developing customer relationships.

Industry Segment Financial Information

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

Business Strategy

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

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

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

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

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

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

Industry Overview

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

    Wholesale  textbook  market.  The Company  believes that used textbooks will
continue  to be  attractive  to  both  students  and  college  bookstores.  Used


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textbooks  provide  students with a lower-cost  alternative to new textbooks and
bookstores typically achieve higher margins through the sale of used rather than
new textbooks.

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

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

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

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

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

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

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

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

Products and Services

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

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

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

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

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

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

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<PAGE>

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

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

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

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

Wholesale Procurement and Distribution

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

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


                                       8
<PAGE>

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

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

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

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

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

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

College Bookstore Operations

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

                                       9
<PAGE>

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

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

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

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

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

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

    The Company  plans to increase the number of  bookstores  in operation by at
least three  bookstores  annually.  The bookstore  expansion  plan will focus on
campuses where the Company does not already have a strong  relationship with the
on-campus  bookstore.  In determining to open a bookstore,  the Company looks at
several  criteria:  (i) a large enough market to justify the  Company's  efforts
(typically  this  means a campus of at least  10,000  students);  (ii) a site in
close  proximity to campus with adequate  parking and  accessibility;  (iii) the
potential of the  bookstore to have a broad product mix (larger  bookstores  are
more  attractive  than  smaller  bookstores  because  a  full  line  of  general


                                       10
<PAGE>

merchandise can be offered in addition to textbooks);  (iv) the  availability of
top-quality  management;  and (v) certain  other  factors,  including  leasehold
improvement opportunities and personnel costs.

    The 59 Company  bookstores  that were opened prior to April 1, 1998 averaged
approximately  $2.0 million per store in annualized sales and produced sales per
gross  square  foot of  approximately  $239 for the fiscal  year ended March 31,
1999. The Company's  bookstores  have an average size of 8,300 gross square feet
but range in size from 900 to 50,000  square feet.  The Company  estimates  that
leasehold  improvements,   furniture  and  fixtures,  and  automation  with  the
Company's PRISM system, the Company's proprietary total-store management system,
for new bookstores is approximately $100,000 per bookstore,  after giving effect
to construction allowances.

Management Information Systems

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

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

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

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

Customers

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

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

                                       11
<PAGE>

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

Competition

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

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

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

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

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

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

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

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

                                       12
<PAGE>

Governmental Regulation

    The Company is subject to various  federal,  state and local  environmental,
health and safety laws and regulations. Generally, these laws impose limitations
on the discharge of pollutants  and the presence of hazardous  substances in the
workplace  and establish  standards for vehicle and employee  safety and for the
handling  of solid  and  hazardous  wastes.  These  laws  include  the  Resource
Conservation  and  Recovery  Act,  the  Comprehensive   Environmental  Response,
Compensation  and  Liability  Act,  the Clear 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, 1999 the Company  had a total of 2,121  employees,  of which
841 are full-time, 185 are part-time and 1,095 are temporary. The Company has no
unionized  employees  and believes that its  relationship  with its employees is
satisfactory.

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


                               ITEM 2. PROPERTIES.

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

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

Institution                              Location       Enrollment(1)        Store Name
------------                             ---------      -------------   ----------------------
<S>                                        <C>            <C>              <C>
University of Alabama                    Tuscaloosa, AL     19,200      The College Store
Northern Arizona University              Flagstaff, AZ      20,400      The College Store
Northern Arizona University              Flagstaff, AZ      20,400      University Text and Tools
Coconino Community College               Flagstaff, AZ       5,500      Coconino Community College
                                                                           Bookstore(2)
Arizona State University                 Tempe, AZ          44,000      The College Store
University of Arizona                    Tucson, AZ         34,000      Arizona Book Store
University of Arkansas-Little Rock       Little Rock, AR    11,300      Campus Bookstore
Miami Dade Community College-Kendall     Miami, FL          18,400      Lemox College Book & Supply
Georgia State University                 Atlanta, GA        24,000      Georgia Book Store
Southern Illinois University             Carbondale, IL     23,000      Saluki Bookstore(2 locations)
Ball Sate University                     Muncie, IN         19,700      Collegiate Book Exchange
Valparaiso University                    Valparaiso, IN      3,500      University Book Center(2)
Drake University                         Des Moines, IA      5,600      University Book Store
                                                                           (2 locations) (2)
University of Kansas                     Lawrence, KS       29,100      University Book Shop
Johnson County Community College         Overland Park, KS  15,000      The College Store
University of Louisville                 Louisville, KY     21,100      College Book Warehouse
Eastern Kentucky University              Richmond, KY       17,500      University Book & Supply
University of Maryland                   College Park, MD   32,500      Maryland Book Exchange
Prince Georges Community College         Largo, MD          12,000      Prince Georges Community
                                                                           College Bookstore(2)
University of Michigan                   Ann Arbor, MI      36,200      Michigan Book & Supply
University of Michigan                   Ann Arbor, MI      36,200      Ulrich's Bookstore

                                       13
<PAGE>

Ferris State University                  Big Rapids, MI      9,500      The College Store
Michigan State University                East Lansing, MI   42,000      The College Store
Kettering Engineering &
   Management Institute                  Flint, MI           2,600      Kettering Campus Store(2)
Eastern Michigan University              Ypsilanti, MI      23,100      Campus Book & Supply
Mankato State University                 Mankato, MN        13,600      Maverick Bookstore
Chadron State College                    Chadron, NE         3,000      Eagle Book Shoppe
University of Nebraska - Kearney         Kearney, NE         8,000      The Antelope Bookstore(2)
University of Nebraska - Lincoln         Lincoln, NE        24,000      Nebraska Bookstore(2 locations)
Nebraska Wesleyan University             Lincoln, NE         1,400      Plainsman Bookstore(2)
Wayne State College                      Wayne, NE           4,000      Student Bookstore
University of Nevada Las Vegas           Las Vegas, NV      21,300      Rebelbooks
State University of New York - Buffalo   Amherst, NY        25,000      The College Store
State University of New  York -
   Binghamton                            Vestal, NY         11,800      Bookbridge
Cornell University                       Ithaca, NY         19,600      Triangle Book Shop
University of Akron                      Akron, OH          25,000      The College Store
Ohio University                          Athens, OH         19,200      Specialty Books
Wright State University                  Fairborn, OH       16,200      The College Store
Oklahoma State University                Stillwater, OK     19,200      Cowboy Book
Indiana University of Pennsylvania       Indiana, PA        14,000      The College Store
University of Pittsburgh                 Pittsburgh, PA     25,500      The College Store
Pennsylvania State University            State College, PA  40,500      University Book Centre
College of Charleston                    Charleston, SC     10,000      University Books of
                                                                          Charleston
Columbia College                         Columbia, SC        1,200      C-Squared Bookstore(2)
University of South Carolina             Columbia, SC       26,000      South Carolina Bookstore
                                                                          (2 locations)
University of Tennessee                  Knoxville, TN      26,000      Campus Bookstore
University of North Texas                Denton, TX         25,200      Voertman's
University of Texas - Pan American and                      12,700 &
   South Texas Community College         Edinburg, TX        7,200      South Texas Book & Supply
North  Harris County Community College   Houston, TX         9,200      College Bookstore
Texas Tech University                    Lubbock, TX        24,800      Spirit Shop
Texas Tech University                    Lubbock, TX        24,800      Double T Bookstores (3 locations)
San Antonio College, St. Philip's                           22,000;
   College, and Palo Alto                                    8,300; &
   College                               San Antonio, TX     7,100      L&M
University of Texas - San Antonio        San Antonio, TX    17,600      L&M - UTSA
Southwest Texas State                    San Marcos, TX     21,000      Colloquium Books (2 locations)
Baylor University                        Waco, TX           12,400      University Bookstore and
                                                                          Spirit Shop
Virginia  Polytechnic and
   State University                      Blacksburg, VA     24,800      Tech Bookstore
Old Dominion University                  Norfolk, VA        18,000      Dominion Bookstore
Virginia Commonwealth University         Richmond, VA       22,400      The College Store
</TABLE>

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

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


                           ITEM 3. LEGAL PROCEEDINGS.

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


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

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



                                       14
<PAGE>


                                     PART II


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

    On December 11, 1998,  the Company  granted  nonqualified  stock  options to
purchase  13,200  shares of the  Company's  Class A Common  Stock at an exercise
price of $52.47 per share ("Founder's Price"). Such options, available under the
NBC  Acquisition  Corp.  1998 Stock Option Plan, were granted to 57 employees of
NBC.  Twenty-five  percent of options  granted were  exercisable on December 11,
1998,  while the  remaining  options  become  exercisable  in 25%  increments on
December 11, 1999, 2000, and 2001.

    On January 4, 1999, the Company  granted options to purchase 9,530 shares of
the  Company's  Class A Common  Stock at an exercise  price of $52.47 per share.
Such options,  available under the NBC Acquisition  Corp. 1998 Performance Stock
Option Plan, were granted to NBC's Chief Operating  Officer.  The options become
exercisable in 25% increments on March 31, 1999, 2000, 2001 and 2002.

    On January 13, 1999,  the Company  issued 4,765 shares of its Class A Common
Stock to NBC's Chief Operating Officer at a price of $52.47 per share, receiving
$25,000 in cash and a $225,000 note maturing January,  2009 and bearing interest
at 5.25% per year.

    The  aforementioned  transactions  were exempt from  registration  under the
Securities Act of 1933 pursuant to Section 4(2). No  underwriters  were involved
in these transactions.  As of June 18, 1999, based upon the number of holders on
record,  there  were nine  holders 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 1998 and 1999.  There is no
established public trading market for the Company's Class A Common Stock.

    Although amended  Registration  Statement No.'s 333-48225 and 333-48221 were
filed and became  effective  in fiscal  1999,  disclosure  regarding  the use of
proceeds  pursuant to Rule 463 of the  Securities Act of 1933 is not required in
as such registration  statements provided for the registering of debt securities
to be exchanged for other debt securities of the Company.


                        ITEM 6. SELECTED FINANCIAL DATA.

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

                                       15

<PAGE>
<TABLE>
<CAPTION>

                                           Successor(1)                 Predecessor
                                  ---------------------------- --------------------------------
                                                                  Seven       Five      Fiscal
                                                                  Months     Months      Year
                                                                  Ended      Ended      Ended
                                  Fiscal Years Ended March 31,   March 31,  August 31,  March 31,
                                     1999       1998      1997     1996       1995       1995
                                  ---------- --------- --------- --------- ---------  ---------
Statement of Operations Data:                            (dollars in thousands)
<S>                               <C>        <C>       <C>       <C>       <C>        <C>
Revenues                          $ 217,516  $ 198,773 $ 172,600 $ 79,423  $ 83,328   $ 149,227
Cost of sales                       137,709    125,632   110,466   51,866    52,753      96,317
                                  ---------- --------- --------- --------- ---------  ---------
    Gross profit                     79,807     73,141    62,134   27,557    30,575      52,910
Operating expenses:
  Selling, general, and
    administrative                   51,547     47,081    39,491   22,517    14,729      35,325
  Depreciation                        2,393      2,531     2,706      904       872       1,889
  Amortization                        6,149      5,626     4,072    2,259         -           -
  Stock compensation costs                -      8,278       297       82         -           -
                                  ---------- --------- --------- --------- ---------  ---------
    Income from operations           19,718      9,625    15,568    1,795    14,974      15,696
Other expenses (income):
  Interest expense                   22,854     11,938    10,760    6,035       952         766
  Interest income                      (351)      (328)     (561)    (433)      (51)       (224)
  Other income (2)                   (1,100)      (512)     (390)    (339)     (469)       (416)
                                  ---------- --------- --------- --------- ---------  ---------
    Income (loss) before income
    taxes and extraordinary item     (1,685)    (1,473)    5,759   (3,468)   14,542      15,570
Income tax expense (benefit)            574         58     2,325     (967)    5,583       5,950
                                  ---------- --------- --------- --------- ---------  ---------
    Income (loss) before
    extraordinary item               (2,259)    (1,531)    3,434   (2,501)    8,959       9,620
Extraordinary loss on
extinguishment of debt,
net of taxes                              -     (4,021)        -        -         -           -
                                  ---------- --------- --------- --------- ---------  ---------
    Net income (loss)               $(2,259) $  (5,552)$   3,434 $ (2,501) $  8,959   $   9,620
                                  ========== ========= ========= ========= =========  =========

Earnings (loss) per share (3):
  Basic:

    Income (loss) before
      extraordinary item            $ (2.37)  $ (0.59)   $ 1.23   $ (0.89)
    Extraordinary loss on
      extinguishment of debt              -     (1.57)        -         -
                                  ---------- --------- --------- ---------
    Net income (loss)               $ (2.37)  $ (2.16)   $ 1.23   $ (0.89)
                                  ========== ========= ========= =========
  Diluted:
    Income (loss) before
      extraordinary item            $ (2.37)  $ (0.59)   $ 1.16   $ (0.89)
    Extraordinary loss on
      extinguishment of debt              -     (1.57)        -         -
                                  ---------- --------- --------- ---------
    Net income (loss)               $ (2.37)  $ (2.16)   $ 1.16   $ (0.89)
                                  ========== ========= ========= =========

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

Balance Sheet Data
(At End of Period):
  Cash and cash equivalents        $  4,060  $  5,807  $  9,977 $  10,101  $  4,741  $  2,291
  Working capital                    55,470    54,053    55,936    52,469    43,879    32,781
  Total assets                      142,907   152,145   127,169   129,023    92,505    75,179
  Total debt, including current
    maturities                      219,904   221,597    79,524    86,712     9,376     8,940

</TABLE>

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

                                       16
<PAGE>

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

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

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

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



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

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

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

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

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

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

                                       17
<PAGE>

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

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

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

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

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

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

    Income taxes. Income taxes for fiscal 1999 were recorded at an effective tax
rate of 34.1% as compared with an effective tax rate of 4.0% for fiscal 1998. In
both fiscal years,  the tax benefit  generated by the loss from  operations  was
reduced as a result of non-deductible  amortization on goodwill  associated with
recent acquisitions and a change in estimate of income tax liabilities.

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

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

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

    Wholesale  sales for  fiscal  1998  increased  to $90.6  million  from $84.5
million for fiscal 1997.  The increase in wholesale  sales was due  primarily to
publisher  price  increases  averaging 4% and unit volume sales growth of 3%. In


                                       18
<PAGE>

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

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

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

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

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

    Interest expense,  net. Interest expense, net for fiscal 1998 increased $1.4
million,  or 13.8%,  to $11.6  million  from $10.2  million for fiscal 1997 as a
result of the additional debt incurred relating to the  Recapitalization,  which
occurred on February 13, 1998.

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

    Income taxes. Income taxes for fiscal 1998 were recorded at an effective tax
rate of 4.0% as compared  with an  effective  tax rate of 40.4% for fiscal 1997.
The fiscal 1998 tax benefit generated by the loss from operations was reduced as
a result of  non-deductible  amortization  on  goodwill  associated  with recent
acquisitions and a change in estimate of income tax liabilities.

Liquidity and Capital Resources

    The Company's primary liquidity  requirements are for debt service under the
Senior Credit  Facility,  the Senior  Subordinated  Notes and other  outstanding
indebtedness, for working capital, and for capital expenditures. The Company has
historically  funded these requirements  primarily through internally  generated
cash flow and funds borrowed under NBC's Revolving Credit Facility. At March 31,
1999,  the  Company's  total  indebtedness  was  approximately  $219.9  million,
consisting of approximately  $58.7 million in Term Loans,  $110.0 million of the
Senior  Subordinated  Notes, $50.6 million of the Senior Discount Debentures and
$0.6 million of other indebtedness.

                                       19
<PAGE>

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

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

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

    Excluding  the sale of  additional  shares of the  Company's  Class A Common
Stock to finance certain acquisition  expenditures occurring subsequent to March
31, 1999 (discussed in Item 8, "Financial  Statements and Supplementary  Data"),
the Company's  principal sources of cash to fund its future liquidity needs will
be net cash from operating  activities and borrowings under the Revolving Credit
Facility.  Net cash flows  provided from (used in) operating  activities for the
year ended March 31, 1999 were $10.3 million,  an increase of $13.1 million from
$(2.8)  million for the year ended March 31, 1998.  This  increase was primarily
due to the  combination  of higher uses of cash in fiscal 1998 to fund increases
in working  capital,  stock  compensation  in excess of $8.0 million paid out in
fiscal  1998  in  conjunction  with  the  Recapitalization,  and a $3.0  million
increase in cash interest paid during fiscal 1999 as a result of the  additional
debt incurred in conjunction with the  Recapitalization in fiscal 1998. Usage of
the Revolving  Credit Facility to meet the Company's  liquidity needs fluctuates
throughout the year due to the Company's  distinct  buying and selling  periods,
increasing substantially at the end of each semester (May and December). For the
year ended  March 31,  1999,  weighted-average  borrowings  under the  Revolving
Credit Facility  approximated $12.0 million, with actual borrowings ranging from
a low of no borrowings to a high of $35.4 million.

    Access to the  Company's  principal  sources  of cash is  subject to various
restrictions.  The  availability  of additional  borrowings  under the Revolving
Credit Facility is subject to the calculation of a borrowing base,  which at any
time is equal to a percentage of eligible accounts receivable and inventory. The
Senior Credit Facility restricts the Company's ability to make loans or advances
and pay dividends, except that, among other things, NBC may pay dividends to the
Company  (i) after  August  15,  2003 in an amount  not to exceed  the amount of
interest  required to be paid on the Senior Discount  Debentures and (ii) to pay
corporate overhead expenses not to exceed $250,000 per year and any taxes due by
the  Company.  The  indenture  governing  the Senior  Discount  Debentures  (the
"Indenture")   restricts   the  ability  of  the  Company  and  its   Restricted
Subsidiaries  (as  defined  in the  Indenture)  to pay  dividends  or make other


                                       20
<PAGE>

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

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

Seasonality

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

Impact of Inflation

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

Impact of Year 2000

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

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

                                       21
<PAGE>

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

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

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

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

    This  Annual  Report on Form 10-K  contains  or  incorporates  by  reference
certain statements that are not historical facts,  including,  most importantly,
information  concerning  possible or assumed future results of operations of the
Company and statements preceded by, followed by or that include the words "may,"
"believes,"  "experts,"  "anticipates,"  or the  negation  thereof,  or  similar
expressions, which constitute "forward-looking statements" within the meaning of
the Private  Securities  Litigation  Reform Act of 1995 (the "Reform Act").  All
statements which address operating performance,  events or developments that are
expected or anticipated to occur in the future, including statements relating to
volume and revenue  growth,  earnings per share growth or statements  expressing
general optimism about future operating results, are forward-looking  statements
within the meaning of the Reform Act. Such  forward-looking  statements  involve
risks, uncertainties and other factors which may cause the actual performance or
achievements of the Company to be materially  different from any future results,
performance  or  achievements  expressed  or  implied  by  such  forward-looking
statements.  For those statements, the Company claims the protection of the safe
harbor for  forward-looking  statements  contained  in the Reform  Act.  Several
important factors could affect the future results of the Company and could cause
those results to differ  materially from those expressed in the  forward-looking
statements  contained  herein.  The factors that could cause  actual  results to
differ  materially  include,  but are not limited to, the  following:  increased
competition; ability to integrate recent acquisitions; loss or retirement of key
members of management; increases in the Company's cost of borrowing or inability
or unavailability of additional debt or equity capital;  inability to purchase a
sufficient  supply of used  textbooks;  changes in  pricing  of new and/or  used
textbooks; changes in general economic conditions and/or in the markets in which
the  Company  competes  or may,  from time to time,  compete;  and  other  risks
detailed  in the  Company's  Securities  and  Exchange  Commission  filings,  in
particular the Company's Registration Statement on Form S-4 (No. 333-48225), 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 LIBOR interest  rates. Of the $219.9 million in long-term
debt  outstanding at March 31, 1999,  approximately  $58.7 million is subject to


                                       22
<PAGE>

fluctuations  in the LIBOR rate.  As provided in NBC's Senior  Credit  Facility,
exposure to interest rate  fluctuations is managed by maintaining fixed interest
rate  debt  (primarily  the  Senior   Subordinated  Notes  and  Senior  Discount
Debentures)  and by entering into interest rate swap  agreements to  effectively
convert the  Company's  variable  rate debt into fixed rate debt.  During fiscal
1999,  NBC  entered  into  separate  five-year  amortizing  interest  rate  swap
agreements with two financial institutions whereby NBC's variable rate Tranche A
and B Term Loans have been  effectively  converted  into debt with a fixed LIBOR
rate of 5.815%  plus an  applicable  margin (as  defined  in the  Senior  Credit
Facility  Agreement).  The  current  notional  amount  under each  agreement  is
approximately $29.3 million.  Such notional amounts are reduced  periodically by
amounts  equal to the scheduled  principal  payments on the Tranche A and B Term
Loans.  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, 1999):
<TABLE>
<CAPTION>

                   Fixed Rate Debt      Variable Rate Debt   Variable to Fixed Interest Rate Swaps
                ---------------------  --------------------- -------------------------------------
                              Weighted               Weighted                 Weighted
                              Average                Average                  Average
                 Principal    Interest  Principal    Interest   Notional     Pay/Receive
                Cash Flows     Rate    Cash Flows(1)   Rate      Amounts        Rates
                ------------  -------  ------------  -------  -------------  -----------
Fiscal Year
Ended March 31:
<S>                <C>         <C>     <C>            <C>     <C>            <C>
2000           $     16,913    9.39%   $ 5,627,925    7.49%   $ 57,286,458   5.81% / 5.10%
2001                 18,824    9.43%     4,232,843    7.90%     53,471,354   5.81% / 5.51%
2002                 20,949    9.48%     5,997,521    8.13%     48,170,833   5.81% / 5.72%
2003                 23,317    9.53%     6,486,384    8.27%     41,413,542   5.81% / 5.85%
2004                 25,950    9.57%     8,084,133    8.47%     12,275,000   5.81% / 5.95%
Thereafter      186,463,874    9.68%    28,258,694    8.76%              -            -
                ------------  -------  ------------  -------  -------------  -------------
Total          $186,569,827    9.58%   $58,687,500    8.12%   $212,617,187   5.81% / 5.54%
                ============  =======  ============  ======= =============   =============

Fair Value     $162,522,662      -     $58,687,500       -    $   (564,380)           -
                ============           ============          =============
</TABLE>


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


                                       23
<PAGE>

             ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Index to Consolidated Financial Statements of NBC Acquisition Corp. for
the Years Ended March 31, 1999, 1998, and 1997

Independent Auditors' Report...............................................25

Consolidated Balance Sheets............................................... 26

Consolidated Statements of Operations......................................27

Consolidated Statements of Stockholders' Equity (Deficit)..................28

Consolidated Statements of Cash Flows......................................29

Notes to Consolidated Financial Statements.................................30



                                       24
<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, 1999 and 1998, and the related
consolidated statements of operations,  stockholders' equity (deficit), and cash
flows for each of the three  years in the period  ended  March 31,  1999.  These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility is to express an opinion on the financial statements based on our
audits.

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

    In our opinion,  such consolidated  financial  statements present fairly, in
all material  respects,  the financial  position of NBC  Acquisition  Corp.  and
subsidiary  as of March 31, 1999 and 1998,  and the results of their  operations
and their cash flows for each of the three  years in the period  ended March 31,
1999 in conformity with generally accepted accounting principles.




DELOITTE & TOUCHE LLP

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




                                       25

<PAGE>

NBC ACQUISITION CORP.

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

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

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

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

GOODWILL AND OTHER INTANGIBLES, net of amortization    38,778,577    44,866,800

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

                                                    $ 142,906,843  $152,145,254
                                                    ============== ============

LIABILITIES AND STOCKHOLDERS' DEFICIT

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

LONG-TERM DEBT, net of current maturities             214,259,143   214,869,495

OTHER LONG-TERM LIABILITIES                               191,074       150,604

COMMITMENTS (Note J)

STOCKHOLDERS' DEFICIT (Note A):
  Class A common stock,  voting,  authorized
   5,000,000  shares of $.01 par value;
   issued  and outstanding  957,792 and 953,027
   shares at March 31, 1999 and 1998, respectively          9,578         9,530

  Additional paid-in capital                           49,275,087    49,025,135
  Notes receivable from stockholders                     (332,630)     (211,800)
  Retained deficit                                   (141,651,800) (139,392,695)
                                                     ------------  ------------
     Total stockholders' deficit                      (92,699,765)  (90,569,830)
                                                     ------------  ------------

                                                    $ 142,906,843 $ 152,145,254
                                                    ============= =============


See notes to consolidated financial statements.

                                       26
<PAGE>

NBC ACQUISITION CORP.

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

                                               Year Ended March 31,

                                          1999           1998         1997
                                       -----------   ------------  ------------
REVENUES, net of returns              $217,516,312   $198,772,938  $172,600,193

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

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

OTHER EXPENSES (INCOME):
  Interest expense                      22,854,164     11,937,787    10,760,139
  Interest income                         (351,231)      (328,750)     (561,494)
  Other income                          (1,099,766)      (511,812)     (389,446)
                                       -----------    -----------   -----------
                                        21,403,167     11,097,225     9,809,199

INCOME (LOSS) BEFORE INCOME TAXES
AND EXTRAORDINARY ITEM                  (1,684,623)    (1,472,524)    5,759,111

INCOME TAX EXPENSE                         574,482         58,188     2,324,619
                                       -----------    -----------   -----------
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM                      (2,259,105)    (1,530,712)    3,434,492

EXTRAORDINARY LOSS ON EXTINGUISHMENT
  OF DEBT (net of income tax benefit
  of $2,460,238)                                -      (4,020,893)            -
                                       -----------    -----------   -----------
NET INCOME (LOSS)                      $(2,259,105)   $(5,551,605)  $ 3,434,492
                                       ===========    ===========   ============
EARNINGS (LOSS) PER SHARE (Note O):
Basic:
  Income (loss) before
    extraordinary item                     $ (2.37)       $ (0.59)       $ 1.23
  Extraordinary loss on extinguishment
    of debt                                      -          (1.57)            -
                                       -----------    -----------   -----------
  Net income (loss)                        $ (2.37)       $ (2.16)       $ 1.23
                                       ===========    ===========   ============

Diluted:
  Income (loss) before
   extraordinary item                      $ (2.37)       $ (0.59)       $ 1.16
  Extraordinary loss on extinguishment
   of debt                                       -          (1.57)            -
                                       -----------    -----------   -----------
  Net income (loss)                        $ (2.37)       $ (2.16)       $ 1.16
                                       ===========    ===========   ============


See notes to consolidated financial statements.


                                       27
<PAGE>

<TABLE>
<CAPTION>

NBC ACQUISITION CORP.

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

                                                             Notes
                           Common    Common    Additional   Receivable    Retained
                           Stock      Stock      Paid-in      From        Earnings
                             A          B        Capital   Stockholders   (Deficit)        Total
                         ---------  --------  ------------  ----------  -------------   -----------
<S>                       <C>          <C>      <C>           <C>         <C>             <C>
BALANCE, April 1, 1996   $ 27,519     $ 481   $ 30,972,000  $ (236,110) $ (2,501,203)  $ 28,262,687

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

BALANCE, March 31, 1997    27,519       481     30,972,000    (236,110)      933,289     31,697,179

  Issuance of Class A
  common stock                 39         -        147,111           -             -        147,150

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

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

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

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

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

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

  Issuance of Class A
  common stock                 48         -        249,952    (225,000)             -        25,000

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

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

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


</TABLE>

See notes to consolidated financial statements.

                                       28
<PAGE>
<TABLE>
<CAPTION>

NBC ACQUISITION CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------------------------------------------------------

                                                                Year Ended March 31,
                                                        1999           1998            1997
                                                    -----------     ----------      ---------
<S>                                                 <C>            <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net income (loss)                                 $(2,259,105)   $(5,551,605)    $3,434,492
  Adjustment  to  reconcile  net income
  (loss) to net cash  flows from  operating
  activities:
    Depreciation                                      2,392,701      2,531,181      2,705,687
    Amortization of intangibles                       7,802,928      9,336,363      4,747,486
    Original issue debt discount amortization         5,034,486      3,139,848        282,500
    Loss on disposal of assets                           89,800        264,285        113,925
    Deferred income taxes                              (883,200)      (902,458)      (278,326)
    Changes in operating assets and liabilities,
    net of effect of acquisitions:
      Receivables                                       368,840     (6,060,871)      (798,645)
      Inventories                                        18,827     (4,522,322)      (789,386)
      Recoverable income tax                          4,369,146     (3,799,673)      (574,375)
      Prepaid expenses and other assets                (123,460)       140,573       (123,502)
      Other assets                                   (1,019,776)         5,852        153,838
      Accounts payable                               (5,297,973)       955,350      1,052,933
      Accrued employee compensation and benefits         28,651        837,167        326,063
      Accrued interest                                 (362,038)       522,667        238,832
      Accrued expenses                                  182,985        145,798        (19,620)
      Income taxes payable                                    -              -       (107,001)
      Deferred revenue                                  (87,361)       463,917              -
      Other long-term liabilities                        40,470       (348,082)       408,853
                                                     ----------      ---------      ---------
         Net cash flows from operating activities    10,295,921     (2,842,010)    10,773,754

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

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from issuance of long-term debt                    -    214,997,320              -
  Deferred financing costs                             (377,966)   (14,443,839)             -
  Principal payments on long-term debt               (1,327,696)   (81,463,655)    (7,471,157)
  Proceeds from issuance of stock                        25,000     49,034,665              -
  Net increase (decrease) in
    revolving credit facility                        (5,400,000)     5,400,000              -
  Payment of merger consideration                             -   (163,328,856)             -
  Proceeds from payment on notes
    receivable from stockholders                        104,170         24,310              -
                                                     ----------      ---------     ----------
     Net cash flows from financing activities        (6,976,492)    10,219,945     (7,471,157)
                                                     ----------      ---------     ----------
NET DECREASE IN CASH AND CASH EQUIVALENTS            (1,747,230)    (4,170,074)      (123,979)

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

Noncash investing and financing activities:
  Note receivable from shareholder recorded
    upon issuance of common stock                   $   225,000    $         -     $        -
  Stock repurchases accrued in accounts payable               -      2,592,673              -
  Common stock issued for business acquisitions               -        147,150              -

See notes to consolidated financial statements.

</TABLE>

                                       29
<PAGE>

NBC ACQUISITION CORP.

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


A.  NATURE OF OPERATIONS

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

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

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

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

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

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

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

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

    In connection with the  Recapitalization,  a transaction fee of $4.0 million
was paid to HWH. Additionally, HWH was reimbursed approximately $0.1 million for
expenses incurred by HWH in conjunction with the Recapitalization. Approximately
$0.6  million of such costs was  charged by the  Company to  additional  paid-in


                                       30
<PAGE>

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.

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  and the current  period  accounts are  adjusted  accordingly.  The
Company  recognizes  revenues from the  licensing of its software  products upon
delivery or  installation if the Company is  contractually  obligated to install
the software.

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

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

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

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

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

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

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

                                       31
<PAGE>

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

    Fair Value of  Financial  Instruments:  The  carrying  amounts of  financial
instruments  including  cash  and cash  equivalents,  accounts  receivable,  and
accounts payable  approximate fair value as of March 31, 1999 and 1998,  because
of the  relatively  short  maturity  of these  instruments.  The  fair  value of
long-term debt,  including the current maturities and revolving credit facility,
was  approximately  $221.2  million and $221.6  million as of March 31, 1999 and
1998, respectively, based upon prevailing interest rates for the same or similar
debt issues.  The fair value of the interest rate swap  agreements  (see note H)
approximated  $564,000  as of March 31,  1999  using  quotes  from  brokers  and
represents the Company's cost of settlement if the existing  agreements had been
settled on that date.

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

    Income  Taxes:  The Company  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:  Earnings per share are  calculated in  accordance  with
SFAS No. 128, 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.

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

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

C.  ACQUISITIONS

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

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


                                       32
<PAGE>

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

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

                                     Year Ended
   PRO FORMA INFORMATION           March 31, 1998
   ---------------------            -------------
   Sales, net of returns            $215,322,319
   Net income (loss)                  (5,185,808)
   Earnings (loss) per share:
      Basic                                (2.02)
      Diluted                              (2.02)

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

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

D.  RECEIVABLES

    Receivables are summarized as follows:


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

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

E.  INVENTORIES

    Inventories are summarized as follows:

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

                                       33
<PAGE>


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

F.  PROPERTY AND EQUIPMENT

    A summary of the cost of property and equipment follows:

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

G.  GOODWILL AND OTHER INTANGIBLES

    Goodwill and intangible assets and related amortization are as follows:

                                               March 31,
                                       --------------------------
                                           1999           1998
                                       -----------    -----------
    Goodwill                           $37,624,132    $36,287,391
    Covenants not to compete                     -      6,300,000
    Debt issue costs                    14,821,804     14,443,839
                                       -----------    -----------
                                        52,445,936     57,031,230
    Less:  accumulated amortization     13,667,359     12,164,430
                                       -----------    -----------
                                       $38,778,577    $44,866,800
                                       ===========    ===========

H.  LONG-TERM DEBT

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

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

    The Senior Credit Facility is  collateralized  by  substantially  all of the
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


                                       34
<PAGE>

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

    Additional  funding of the  Recapitalization  included  the  proceeds of 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. 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.  Such Registration  Statements were declared  effective by the Securities
and Exchange  Commission on July 14, 1998.  All notes were tendered in the offer
to exchange, which was completed on August 13, 1998.

    Borrowings consist of the following:

                                                         March 31,
                                                ---------------------------
                                                    1999             1998
                                                ------------    -----------
   Tranche A Loan, due March 31, 2004,
     quarterly  principal  payments beginning
     July 31, 1998, plus interest at a
     floating rate based on LIBOR plus 2.25%
     (7.25% at March 31, 1999)                  $ 26,562,500    $ 27,500,000
   Tranche B Loan, due March 31, 2006,
     quarterly principal payments beginning
     July 31, 1998, plus interest at a
     floating rate based on LIBOR plus  2.50%
     (7.50% at March 31, 1999)                    32,125,000      32,500,000
   Senior subordinated  notes, unsecured,
     due February 15, 2008, semi-annual
     interest payments, commencing
     August 15, 1998, at a fixed rate of 8.75%   110,000,000     110,000,000

   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 $25,353,346 at March 31, 1999    50,646,654      45,612,168
   Mortgage note payable with an insurance
     company  assumed with the  acquisition
     of a bookstore facility, due
     December 1, 2013, monthly payments
     of $6,446 including interest at 10.75%          569,827         585,023
                                                ------------    ------------
                                                 219,903,981     216,197,191
   Less current maturities                        (5,644,838)     (1,327,696)
                                                ------------    ------------
                                                $214,259,143    $214,869,495
                                                ============    ============

    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


                                       35
<PAGE>

expenses not to exceed  $250,000 per year and any taxes due by the Company.  The
Credit  Agreement  underlying the Senior Credit  Facility was amended on May 21,
1999 to permit the January 13, 1999 sale of 4,765 shares of the Company's  Class
A Common Stock to NBC's Chief  Operating  Officer and the  acquisition of Triro,
Inc. discussed in Note P to the consolidated financial statements.

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

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

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

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

I.  INCOME TAXES

    The provision (benefit) for income taxes consists of:

                                               Year Ended March 31,
                                      ---------------------------------------
                                         1999           1998          1997
   Current:                           ----------      --------     ----------
     Federal                          $1,258,891      $848,562     $2,192,687
     State                               198,791       112,084        410,258
   Deferred                             (883,200)     (902,458)      (278,326)
                                       ---------      --------     ----------
                                       $ 574,482      $ 58,188     $2,324,619
                                       =========      ========     ==========

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

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


                                       36
<PAGE>

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

                                                 Year Ended March 31,
                                          ----------------------------------
                                           1999         1998           1997
                                          ------       ------         -----
   Statutory rate                         (34.0)%       (34.0)%        34.0%
   State income tax effect                  1.3          (4.0)          4.0
   Amortization in excess of
     purchase price over net assets
     acquired                              38.0          17.6           0.4
   Change in estimate of income tax
     liabilities                           21.9          17.1             -
   Other                                    6.9           7.3           2.0
                                         ------        ------        ------
                                           34.1%          4.0%         40.4%
                                         ======        ======        ======

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

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

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

J.  COMMITMENTS

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

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

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


                                       37
<PAGE>

K.  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,  1999,  1998 and 1997 were
approximately $0.7 million, $0.7 million and $0.7 million, respectively.

L. DEFERRED COMPENSATION

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

M.  STOCK-BASED COMPENSATION

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

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

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

    1998 Stock Option Plan - This plan, which was also adopted on June 30, 1998,
provides for the granting of options to purchase  31,000 shares of 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, 1999,  17,800  options were  available for
grant under the plan.

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


                                       38
<PAGE>

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

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

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

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

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

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

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

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

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


                                       39
<PAGE>

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

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


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

    The pro forma  impact on net income  (loss) and  diluted  income  (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,
                                  1999            1998           1997
                             ---------------  -------------- --------------
Net income (loss):
   As reported                 $ (2,259,105)   $ (5,551,605)   $ 3,434,492
   Pro forma                     (2,321,093)     (1,692,220)     3,502,981

Diluted income (loss) per share:
   As reported                      $ (2.37)        $ (2.16)        $ 1.16
   Pro forma                          (2.43)          (0.66)          1.19


N.  SEGMENT INFORMATION

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

    The  Company's  operating  segments  are  determined  based  on the way that
management  organizes the segments for making operating  decisions and assessing
performance.   Management  has  organized  the  Company's  segments  based  upon
differences in products and services provided.  The Company has three reportable
segments:  wholesale operations,  college bookstore operations and complementary
services.  The wholesale  operations  segment consists primarily of selling used
textbooks  to college  bookstores,  buying  them back from  students  or college
bookstores at the end of each school semester and then reselling them to college
bookstores.  The college bookstore  operations segment encompasses the operating
activities  of the  Company's  65 college  bookstores  located on or adjacent to
college  campuses.  The  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  accounts for  intersegment  sales as if the sales were to third parties
(at current  market  prices).  With the exception of cash and cash  equivalents,
certain  receivables and other assets,  and  inventories,  assets,  net interest
expense,  taxes, and extraordinary  item are not allocated between the Company's
segments; instead, such balances are accounted for in a corporate administrative


                                       40
<PAGE>

division. The following table provides selected information about profit or loss
and assets on a segment basis for the three years ended March 31, 1999.

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

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

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


</TABLE>

    The following  table  reconciles  segment  information  presented above with
consolidated  information as presented in the consolidated  financial statements
for the three years ended March 31, 1999.

                                           Year Ended March 31,
                                       1999          1998          1997
                                    ------------ ------------- -----------
Revenues:
  Total for reportable segments    $230,537,725 $210,777,759  $181,917,372
  Elimination of intersegment
    revenues                        (13,021,413) (12,004,821)   (9,317,179)
                                   ------------ ------------- ------------
      Consolidated total           $217,516,312 $198,772,938  $172,600,193
                                   ============ ============= ============

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

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

Total Assets:
  Total for reportable segments    $ 56,727,198 $ 57,162,873  $ 50,006,230
  Assets not allocated to segments:
    Receivables                      17,572,090   17,414,958    12,141,061
    Recoverable income tax                4,902    4,374,048       574,375
    Deferred income tax benefit       1,468,156    1,183,529     1,156,540
    Property and equipment, net      23,188,485   22,731,907    21,902,556
    Goodwill and other
      intangibles, net               38,778,577   44,866,800    31,898,517
    Other assets                      3,653,180    2,798,270     1,719,118
    Other                             1,514,255    1,612,869     7,770,863
                                     ---------- ------------  ------------
      Consolidated total           $142,906,843 $152,145,254  $127,169,260
                                    =========== ============  ============


                                       41
<PAGE>

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

O. EARNINGS PER SHARE

    The following table provides a reconciliation  between Basic and Diluted EPS
for the year ended March 31, 1997.

                                           Year Ended March 31, 1997
                                                                 Per-Share
                                         Income       Shares      Amount
                                      ------------- ------------ ----------
Basic Earnings Per Share:
Income Before Extraordinary Item       $ 3,434,492    2,800,000     $ 1.23
Effect of Dilutive Securities:
  Stock Options                                          14,877
  Warrants                                              135,006
                                      ------------- ------------ ----------
Diluted Earnings Per Share             $ 3,434,492    2,949,883     $ 1.16
                                      ============= ============ ==========

    Weighted-average  shares  outstanding for the years ended March 31, 1999 and
1998 were 954,059 shares and 2,565,267 shares,  respectively.  The stock options
outstanding  for the year ended March 31, 1999 were  antidilutive as a result of
the net loss for the year.  There were no stock options or warrants  outstanding
for the year ended March 31, 1998.

P.  SUBSEQUENT EVENTS

    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.  The  purchase  price
consisted of $13.2 million paid to the former  shareholders and $1.9 million for
the average annual debt level.  The actual amount of debt assumed and retired at
closing was approximately $3.2 million,  which exceeded the average  outstanding
debt level of $1.9  million due to the seasonal  incurrence  of debt to fund the
buyback of used  textbooks  at the end of the Spring  semester.  Offsetting  the
higher  debt  balances  at  Closing  was a  compensating  increase  in net asset
balances  (consisting  primarily  of  inventory).  NBC  will  account  for  this
acquisition  under the purchase  method of  accounting.  Upon  completion of the
closing  balance sheet,  any excess cost over fair value of net assets  acquired
will be recorded as goodwill and amortized over a period of three years.

    The  acquisition  of Triro,  Inc. was funded in part through a $10.3 million
capital  contribution  from 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 and members of senior management.
The remaining  funding was provided through  available cash funds and borrowings
under NBC's revolving credit facility.  Also in conjunction with the acquisition
of Triro,  Inc., NBC  established  an  irrevocable  standby letter of credit for
$52,000 which expires June 2, 2000.


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

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



                                       42
<PAGE>

                                   PART III

          ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

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

         Name           Age                Position
     ------------     ------ ------------------------------------------
   Robert B. Haas        52  Chairman and Director
   Douglas D. Wheat      48  Director
   Mark W. Oppegard      49  President, Secretary and Director
   Bruce E. Nevius       47  Vice President and Treasurer

   Barry S. Major        42  Chief Operating Officer, NBC
   William H. Allen      56  Vice President of Warehouse Operations, NBC
   Thomas A. Hoff        51  Vice President of Retail Division, NBC
   Larry R. Rempe        51  Vice President of Information Systems, NBC
   Kenneth F. Jirovsky   55  Vice President of Sales and Marketing, NBC
   Ardean A. Arndt       57  Vice   President   of   Administration   and
                             Secretary, NBC
   John D. Baumeister    52  Assistant Treasurer, NBC

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

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

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

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

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

                                       43
<PAGE>

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

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

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

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

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

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

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


                        ITEM 11. EXECUTIVE COMPENSATION.

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

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

                                       44
<PAGE>
<TABLE>
<CAPTION>

                           Summary Compensation Table

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

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

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

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

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

</TABLE>

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

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

              Options Granted During the Year Ended March 31, 1999

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

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

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


                                       45
<PAGE>

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

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

                                                       Number
                                                    of Securities     Value of
                                                     Underlying     Unexercised
                                                     Unexercised    in-the-Money
                                                     Options at     Options at
                                                    March 31, 1999  March 31, 1999
                                                     -------------  -------------
                                 Shares
                                Acquired     Value    Exercisable/  Exercisable/
            Name               on Exercise  Realized  Unexercisable Unexercisable
------------------------------ -----------  --------  ------------- -------------
<S>                                <C>       <C>          <C>             <C>
Barry S. Major - Chief
Operating Officer, NBC                -       $ -      2,382/7,148      $-/$-

</TABLE>

Compensation of Directors

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

Employment Agreements

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

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

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

                                       46
<PAGE>

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


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

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

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

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

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


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

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


                                       47
<PAGE>

            ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

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

    As of March 31, 1999, notes receivable from  stockholders and the associated
interest receivable totaled approximately  $361,000.  Approximately  $133,000 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 largest aggregate amount outstanding at any
time during the year ended  March 31,  1999 under a note due from the  Company's
President was approximately  $85,000,  bore interest at a rate of 6.04%, and was
repaid in full in December, 1998.

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

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



                                       48
<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, 1999 and 1998.
             Consolidated Statements of Operations for the Years Ended
               March 31, 1999, 1998 and 1997.
             Consolidated Statements of Stockholders' Equity  (Deficit) for
               the Years Ended March 31, 1999, 1998 and 1997.
             Consolidated Statements of Cash Flows for the Years Ended
               March 31, 1999, 1998 and 1997.
             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 10.5 through 10.12 are incorporated herein by reference.

(b)     Reports on Form 8-K.

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

(c)     Exhibits.

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

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

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

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

                                       49
<PAGE>

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

        10.3    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.

        10.4    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.

        10.5    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.

        10.6    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.

                                       50
<PAGE>

        10.7    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.

        10.8    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.

        10.9    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.

        10.10   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.

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

        10.12   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.

        10.13   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.

        10.14   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.

        10.15   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.

        10.16   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.

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

                                       51
<PAGE>

        10.18   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.

        10.19   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.

        10.20   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.

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

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

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

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

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


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


                                       52
<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, Secretary and Director
                                  June 18, 1999

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


                                 /s/ Mark W. Oppegard
                                 ----------------------------------
                                  Mark W. Oppegard
                                  President, Secretary and Director
                                  June 18, 1999


                                      *
                                 ----------------------------------
                                 Bruce E. Nevius
                                 Vice President and Treasurer
                                 (Principal Financial and Accounting Officer)
                                 June 18, 1999


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


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


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


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

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


                                       53
<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,  1999 and 1998 and for each of the three
years in the period  ended March 31,  1999,  and have issued our report  thereon
dated  May 22,  1999  (June  4,  1999 as to Note P);  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

Omaha, Nebraska
May 22, 1999



                                       54
<PAGE>

NBC ACQUISITION CORP. (PARENT COMPANY ONLY)

SCHEDULE I - CONDENSED FINANCIAL INFORMATION
BALANCE SHEETS
--------------------------------------------------------------------------------
                                                               March 31,
                                                         1999           1998
ASSETS                                               ----------     ---------

OTHER ASSETS:
  Due from subsidiary (Note A)                      $ 2,277,266   $   248,091
  Prepaid transaction/loan costs                      3,216,487     3,368,075
                                                     ----------     ---------
                                                    $ 5,493,753   $ 3,616,166
                                                     ===========  ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT

INVESTMENT IN AND ADVANCES FROM
SUBSIDIARY (Note A)                                $ 47,546,864  $ 48,573,828

SENIOR DISCOUNT DEBENTURES                           50,646,654    45,612,168

COMMITMENTS AND CONTINGENCIES (Note B)

STOCKHOLDERS' DEFICIT:
  Class A common stock, voting,
    authorized 5,000,000 shares of $.01
    par value; issued and outstanding
    957,792 and 953,027 shares at
    March 31, 1999  and 1998, respectively                9,578         9,530

  Additional paid-in-capital                         49,275,087    49,025,135
  Notes receivable from stockholders                   (332,630)     (211,800)
  Retained deficit                                 (141,651,800) (139,392,695)
                                                    ------------  ------------
    Total stockholders' deficit                     (92,699,765)  (90,569,830)
                                                     -----------  ------------
                                                   $  5,493,753  $  3,616,166
                                                   ============= =============

See notes to condensed financial statements.

                                       55
<PAGE>
NBC ACQUISITION CORP. (PARENT COMPANY ONLY)

SCHEDULE I - CONDENSED FINANCIAL INFORMATION
STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------
                                                  Year Ended March 31,
                                              1999         1998         1997
                                          ------------  ----------   -----------
INTEREST EXPENSE                          $(5,345,563) $  (653,558)  $        -

INCOME TAX BENEFIT                          2,029,175      248,091            -

EQUITY IN EARNINGS (LOSS) OF SUBSIDIARY     1,057,283   (5,146,138)   3,434,492
                                            ---------   ----------    ---------

NET INCOME (LOSS)                         $(2,259,105) $(5,551,605)  $3,434,492
                                           ==========   ==========   ==========


See notes to condensed financial statements.

                                      56

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

SCHEDULE I - CONDENSED FINANCIAL INFORMATION
STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------
                                                     Year Ended March 31,
                                                1999         1998        1997
                                              --------   -----------   --------
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net cash flows from operating activities  $       -   $          -   $   -
                                              --------   -----------   --------
CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from issuance of long-term debt          -     44,997,320       -
  Deferred financing costs                   (159,489)    (3,406,785)      -
  Proceeds from issuance of stock              25,000     49,034,665       -
  Payment of merger consideration                   -   (163,328,856)      -
  Merger consideration contributed by
   Nebraska Book Company                            -     72,703,656       -
  Advances (to) from subsidiary                30,319        (24,310)      -
  Proceeds from payment on notes
   receivable from stockholders               104,170         24,310       -
                                              -------     ----------   -------
     Net cash flows from financing activities       -              -       -
                                              -------     ----------   -------
NET INCREASE IN CASH AND CASH EQUIVALENTS           -              -       -

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

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:

  Note receivable from stockholder
   recorded upon issuance of common stock    $225,000     $        -    $  -
  Stock repurchases accrued by
   Nebraska Book Company                            -      2,592,673       -
  Common stock contributed to
   Nebraska Book Company                            -        147,150       -


See notes to condensed financial statements.

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<PAGE>


NBC ACQUISITION CORP. (PARENT COMPANY ONLY)

SCHEDULE I - CONDENSED FINANCIAL INFORMATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

A.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

    Investment  In and Advances From  Subsidiary - The Company  accounts for its
investment in NBC under the equity method of  accounting.  Advances from NBC are
included within the investment in subsidiaries.

B.  COMMITEMNTS AND CONTINGENCIES

    The Company has guaranteed repayment of indebtedness under the Senior Credit
Facility held by NBC. Such indebtedness totaled $58.7 million at March 31, 1999.


                                       58
<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, 1999
  Allowance for doubtful accounts $ 164,829      $134,661      $ -      $ (133,591)  $165,899


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


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

</TABLE>

                                       59
<PAGE>

                                  EXHIBIT INDEX


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

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





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