##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE
COMMISSION

Washington, D.C. 20549




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Form 10-K

FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO

SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934


|   |  |                                                                                             
|-- |  | --------------------------------------------------------------------------------------------
|þ  |  | ANNUAL REPORT PURSUANT TO SECTION 13 OR
    15(d) OF THE SECURITIES EXCHANGE ACT OF 1934    
|  
|   |  | For the fiscal year ended February 1,
    2003                                              
|  
|or
|  
|o  |  | TRANSITION REPORT PURSUANT TO SECTION 13
    OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|  
|   |  | For the transition period
    from           to                                             

Commission File No. 1-31228



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GameStop Corp.

(Exact name of registrant as specified in its
Charter)


|                                                                   |  |                                         
|------------------------------------------------------------------ |  | ----------------------------------------
|Delaware                                                           |  | 75-2951347                              
|(State or other jurisdiction of
    incorporation or organization) |  | (I.R.S. Employer
    Identification No.)
|                                                                  
|2250 William D. Tate Avenue, Grapevine,
    Texas                  |  | 76051                                   
|(Address of principal executive
    offices)                       |  | (Zip Code)                              

Registrants telephone number, including
area code:

(817) 424-2000


Securities registered pursuant to
Section 12(b) of the Act:

|                                                    |  |                                       
|--------------------------------------------------- |  | --------------------------------------
|(Title of Class)                                    |  | (Name of Exchange on which registered)
|                                                    |  |                                       
|Class A Common Stock, $.001 par value
    per share |  | New York Stock Exchange               

Securities registered pursuant to
Section 12(g) of the Act:

None


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

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

Indicate by check mark whether the registrant is
an accelerated filer (as defined on Rule 12b-2 of the
Act).     Yes þ          No o

The aggregate market value of the voting and
non-voting stock held by non-affiliates of the registrant was
approximately $314,615,899 based upon the closing market price
of $15.10 per share of Class A Common Stock on the New
York Stock Exchange as of August 2, 2002.

Number of shares of $.001 par value
Class A Common Stock outstanding as of April 2, 2003:
21,090,740

Number of shares of $.001 par value
Class B Common Stock outstanding as of April 2, 2003:
36,009,000

DOCUMENTS INCORPORATED BY REFERENCE

Parts of the definitive proxy statement for the
Registrants 2003 Annual Meeting of Stockholders, which is
to be filed with the Commission pursuant to Regulation 14A
not later than 120 days after the end of the fiscal year
covered by this Report, are incorporated by reference into
Part III of this Report.



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TABLE OF CONTENTS



|                                                                                                                       |                                                                                              |  |  |  |  |  |  | 
|---------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|TABLE OF CONTENTS                                                                                                     
|PART I                                                                                                                
|                                                                                                                       | Item 1. Business                                                                            
|                                                                                                                       | Item 2. Properties                                                                          
|                                                                                                                       | Item 3. Legal Proceedings                                                                   
|                                                                                                                       | Item 4. Submission of Matters to a Vote of Security Holders                                 
|PART II                                                                                                               
|                                                                                                                       | Item 5. Market For Registrants Common Equity and Related Stockholder Matters               
|                                                                                                                       | Item 6. Selected Consolidated Financial Data                                                
|                                                                                                                       | Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                                                                                                       | Item 7A. Quantitative and Qualitative Disclosures About Market Risk                         
|                                                                                                                       | Item 8. Consolidated Financial Statements and Supplementary Data                            
|                                                                                                                       | Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
|PART III                                                                                                              
|                                                                                                                       | Item 10. Directors and Executive Officers of the Registrant(*)                              
|                                                                                                                       | Item 11. Executive Compensation(*)                                                          
|                                                                                                                       | Item 12. Security Ownership of Certain Beneficial Owners and Management(*)                  
|                                                                                                                       | Item 13. Certain Relationships and Related Transactions(*)                                  
|PART IV                                                                                                               
|                                                                                                                       | Item 14. Controls and Procedures                                                            
|                                                                                                                       | Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K                   
|SIGNATURES                                                                                                            
|CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
|INDEX TO CONSOLIDATED FINANCIAL STATEMENTS                                                                            
|EXHIBIT INDEX                                                                                                         
|EX-23.1 Consent of BDO Seidman, LLP                                                                                   
|EX-99.1 Certification of Chief Executive Officer                                                                      
|EX-99.2 Certification of Chief Financial Officer                                                                      



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##### Table of Contents






TABLE OF CONTENTS

|                     |  |                                                                                           |     |      |    | 
|-------------------- |  | ----------------------------------------------------------------------------------------- | --- | ---- | -- | 
|                     |  |                                                                                           |     | Page
|                     |  |                                                                                           |     |     
|PART I              
|Item 1.              |  | Business                                                                                  |     |      | 2  | 
|Item 2.              |  | Properties                                                                                |     |      | 17 | 
|Item 3.              |  | Legal Proceedings                                                                         |     |      | 17 | 
|Item 4.              |  | Submission of Matters to a Vote of Security
    Holders                                   |     |      | 17 | 
|PART II             
|Item 5.              |  | Market for Registrants Common Equity and
    Related Stockholder Matters                 |     |      | 18 | 
|Item 6.              |  | Selected Consolidated Financial Data                                                      |     |      | 19 | 
|Item 7.              |  | Managements Discussion and Analysis of
    Financial Condition and Results of Operations |     |      | 21 | 
|Item 7A.             |  | Quantitative and Qualitative Disclosures About
    Market Risk                            |     |      | 29 | 
|Item 8.              |  | Consolidated Financial Statements and
    Supplementary Data                              |     |      | 29 | 
|Item 9.              |  | Changes in and Disagreements with Accountants on
    Accounting and Financial Disclosure  |     |      | 29 | 
|PART III            
|Item 10.             |  | Directors and Executive Officers of the Registrant                                        |     |      | 29 | 
|Item 11.             |  | Executive Compensation                                                                    |     |      | 29 | 
|Item 12.             |  | Security Ownership of Certain Beneficial Owners
    and Management                        |     |      | 29 | 
|Item 13.             |  | Certain Relationships and Related Transactions                                            |     |      | 29 | 
|PART IV             
|Item 14.             |  | Controls and Procedures                                                                   |     |      | 30 | 
|Item 15.             |  | Exhibits, Financial Statement Schedules, and
    Reports on Form 8-K                      |     |      | 30 | 
|SIGNATURES           |  |                                                                                           | 32  |     
|CERTIFICATIONS       |  |                                                                                           | 33  |     
|FINANCIAL STATEMENTS |  |                                                                                           | F-1 |     
|EXHIBITS             |  |                                                                                           | E-1 |     

1



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PART I




Item 1. Business

General

GameStop Corp. (GameStop or the
Company) is the largest video game and PC
entertainment software specialty retailer in the United States,
based on the number of stores we operate and our total revenues.
We carry one of the largest assortments of new and used video
game hardware, video game software and accessories, PC
entertainment software, and related products, including action
figures, trading cards and strategy guides. As of
February 1, 2003, we operated 1,231 stores in the
United States, Puerto Rico and Guam. We currently operate our
stores under the GameStop, Babbages, Software Etc. and
FuncoLand names and are in the process of rebranding most of our
stores under the GameStop name, which is expected to be
completed by the fourth quarter of fiscal 2003 (the 52-week
period ending January 31, 2004). We carry a constantly
changing selection of more than 4,000 stock keeping units
(SKUs) of electronic game merchandise in most
stores. In addition, we operate a web site at gamestop.com and
publish Game Informer, the industrys largest
circulation multi-platform video game magazine, with over
1,000,000 subscribers.

Of our 1,231 stores, 693 stores are
located in strip centers and 538 stores are located in
shopping malls and other locations. Our strip center stores,
which average approximately 1,500 square feet, carry a
balanced mix of new and used video game hardware, video game
software and accessories, which we refer to as video game
products and, in selected stores, PC entertainment
software. Our mall stores, which average approximately
1,200 square feet, carry primarily new video game products,
and PC entertainment software, as well as a limited selection of
used video game products. Our used video game products provide a
unique value proposition to our customers, and our purchasing of
video game products provides our customers with an opportunity
to trade in their used video game products for store credits and
apply those credits towards other merchandise, which, in turn,
drives more sales.

Prior to February 12, 2002, we were a
wholly-owned subsidiary of Barnes & Noble, Inc
(Barnes & Noble). On February 12,
2002, we completed an initial public offering of shares of our
Class A common stock at a price of $18.00 per share,
raising net proceeds of approximately $347.3 million. A
portion of those proceeds was used to repay $250.0 million
of our indebtedness to Barnes & Noble, with
Barnes & Noble contributing the remaining
$150.0 million of indebtedness to the Company as additional
paid-in-capital. Of the balance of the proceeds (approximately
$97.3 million), approximately $33.8 million was used
for capital expenditures and the remainder was used for working
capital and general corporate purposes. Currently,
Barnes & Noble owns approximately 63.1% of the
outstanding shares of our capital stock through its ownership of
100% of our Class B common stock, which represents 94.5% of
the combined voting power of all classes of our voting stock.

Disclosure Regarding Forward-looking
Statements

This report on Form 10-K and other oral and
written statements made by the Company to the public contain
forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended (the
Securities Act), and Section 21E of the
Securities Exchange Act of 1934. The forward-looking statements
involve a number of risks and uncertainties. A number of factors
could cause our actual results, performance, achievements or
industry results to be materially different from any future
results, performance or achievements expressed or implied by
these forward-looking statements. These factors include, but are
not limited to:



| |   |                                                                    
| | - | -------------------------------------------------------------------
| |  | our reliance on suppliers and vendors for new
    product releases;
|
| |  | economic conditions affecting the electronic game
    industry;    
|
| |  | the competitive environment in the electronic
    game industry;   
|
| |  | our ability to open and operate new stores;                        

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| |   |                                                                                                                          
| | - | -------------------------------------------------------------------------------------------------------------------------
| |  | our ability to attract and retain qualified
    personnel; and                                                           
|
| |  | other factors described in this Form 10-K,
    including those set forth under the caption
    Business  Risk Factors.

In some cases, forward-looking statements can be
identified by the use of terms such as anticipates,
believes, continues, could,
estimates, expects, intends,
may, plans, potential,
predicts, will, should,
seeks, pro forma or similar expressions.
These statements are only predictions based on current
expectations and assumptions and involve known and unknown
risks, uncertainties and other factors that may cause our or our
industrys actual results, levels of activity, performance
or achievements to be materially different from any future
results, levels of activity, performance or achievements
expressed or implied by such forward-looking statements. You
should not place undue reliance on these forward-looking
statements.

Although we believe that the expectations
reflected in our forward-looking statements are reasonable, we
cannot guarantee future results, levels of activity, performance
or achievements. We undertake no obligation to publicly update
or revise any forward-looking statements, whether as a result of
new information, future events or otherwise after the date of
this Form 10-K. In light of these risks and uncertainties,
the forward-looking events and circumstances contained in this
Form 10-K may not occur, causing actual results to differ
materially from those anticipated or implied by our
forward-looking statements.

Risk Factors

An investment in our Company involves a high
degree of risk. You should carefully consider the risks below,
together with the other information contained in this report,
before you make an investment decision with respect to our
Company. The risks described below are not the only ones facing
our Company. Additional risks not presently known to us, or that
we consider immaterial, may also impair our business operations.
Any of the following risks could materially adversely affect our
business, operating results or financial condition, and could
cause a decline in the trading price of our Class A common
stock and the value of your investment.



| |                              
| | -----------------------------
| | Risks Related to Our Business



| |                                                    
| | ---------------------------------------------------
| | We depend upon the timely delivery of
    products.

We depend on major hardware manufacturers to
deliver new and existing video game platforms on a timely basis
and in anticipated quantities. In addition, we depend on
software publishers to introduce new and updated software
titles. Any material delay in the introduction or delivery of
hardware platforms or software titles could result in reduced
sales in one or more fiscal quarters.



| |                                                                   
| | ------------------------------------------------------------------
| | We depend upon third parties to develop
    products and software.

Our business depends upon the continued
development of new and enhanced video game platforms,
PC hardware and video game and PC entertainment
software. Our business could suffer due to the failure of
manufacturers to develop new or enhanced video game platforms, a
decline in the continued technological development and use of
multimedia PCs, or the failure of software publishers to develop
popular game and entertainment titles for current or future
generation video game systems or PC hardware.



| |                                                                                               
| | ----------------------------------------------------------------------------------------------
| | Our ability to obtain favorable terms from our
    suppliers may impact our financial results.

Our financial results depend significantly upon
the business terms we can obtain from our suppliers, including
competitive prices, unsold product return policies, advertising
and market development allowances, freight charges and payment
terms. We purchase substantially all of our products directly
from manufacturers, software publishers and approximately five
distributors. Our largest vendors are Sony Computer
Entertainment of America, Inc. and Electronic Arts, Inc., which
accounted for 18% and 12%, respectively, of our new product
purchases in fiscal 2002 (the 52-week period ended
February 1, 2003). If our suppliers do not provide us with
favorable business terms, we may not be able to offer products
to our customers at competitive prices.

3



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| |                                                                                                                                       
| | --------------------------------------------------------------------------------------------------------------------------------------
| | The video game system and software product
    industries are cyclical, which could cause significant
    fluctuation in our earnings.

The electronic game industry has been cyclical in
nature in response to the introduction and maturation of new
technology. Following the introduction of new video game
platforms, sales of these platforms and related software and
accessories generally increase due to initial demand, while
sales of older platforms and related products generally decrease
as customers migrate toward the new platforms. New video game
platforms have historically been introduced approximately every
five years. If video game platform manufacturers fail to develop
new hardware platforms, our sales of video game products could
decline.



| |                                                                                                    
| | ---------------------------------------------------------------------------------------------------
| | An adverse trend in sales during the holiday
    selling season could impact our financial results.

Our business, like that of many specialty
retailers, is seasonal, with the major portion of our sales and
operating profit realized during the fourth fiscal quarter,
which includes the holiday selling season. During fiscal 2002,
we generated approximately 38% of our sales and approximately
60% of our operating earnings during the fourth quarter. In
addition, prior to fiscal 2002, we have historically experienced
net losses in each of our first three fiscal quarters. Any
adverse trend in sales during the holiday selling season could
lower our results of operations for the fourth quarter and the
entire year.



| |                                                                                                                                           
| | ------------------------------------------------------------------------------------------------------------------------------------------
| | Our results of operations may fluctuate from
    quarter to quarter, which could result in a lower price for our
    Class A common stock.

Our results of operations may fluctuate from
quarter to quarter depending upon several factors, most of which
are beyond our control. These factors include:



| |   |                                            
| | - | -------------------------------------------
| |  | the timing of new product releases;        
|
| |  | the timing of new store openings; and      
|
| |  | shifts in the timing of certain promotions.

These and other factors could affect our
business, financial condition and results of operations, and
this makes the prediction of our financial results on a
quarterly basis difficult. Also, it is possible that our
quarterly financial results may be below the expectations of
public market analysts and investors.



| |                                                                                                  
| | -------------------------------------------------------------------------------------------------
| | Our failure to effectively manage new store
    openings could lower our sales and profitability.

Our growth strategy is largely dependent upon
opening new stores and operating them profitably. We opened
210 stores in fiscal 2002 and expect to open approximately
235 to 265 new stores in fiscal 2003. Our ability to open
new stores and operate them profitably depends upon a number of
factors, some of which may be beyond our control. These factors
include:



| |   |                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------
| |  | the ability to identify new store locations,
    negotiate suitable leases and build out the stores in a timely
    and cost efficient manner;
|
| |  | the ability to hire and train skilled
    associates; and                                                                                     
|
| |  | the ability to integrate new stores into our
    existing operations.                                                                         

Our growth will also depend on our ability to
process increased merchandise volume resulting from new store
openings through our inventory management systems and
distribution facility in a timely manner. If we fail to manage
new store openings in a timely and cost efficient manner, our
growth may decrease.



| |                                                                                                                                      
| | -------------------------------------------------------------------------------------------------------------------------------------
| | Pressure from our competitors may force us to
    reduce our prices or increase spending, which could decrease our
    profitability.

The electronic game industry is intensely
competitive and subject to rapid changes in consumer preferences
and frequent new product introductions. We compete with mass
merchants and regional chains, including Wal-Mart Stores, Inc.,
Target Corporation and Kmart Corporation; other video game and

4



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PC software specialty stores located in
malls and other locations, including Electronics Boutique
Holdings Corp.; toy retail chains, including Toys R
Us, Inc. and KB Holdings, L.L.C.; mail-order businesses;
catalogs; direct sales by software publishers; online retailers;
and computer product and consumer electronics stores, including
Best Buy Co., Inc. and Circuit City Stores, Inc. In addition,
video games are available for rental from many video stores,
some of whom, like Hollywood Entertainment Corp., have increased
the availability of video game products for sale. Video game
products may also be distributed through other methods which may
emerge in the future. We also compete with sellers of used video
game products. Some of our competitors in the electronic game
industry have longer operating histories and may have greater
financial resources than we do. Additionally, we compete with
other forms of entertainment activities, including movies,
television, theater, sporting events and family entertainment
centers. If we lose customers to our competitors, or if we
reduce our prices or increase our spending to maintain our
customers, we may be less profitable.




| |                                                                                           
| | ------------------------------------------------------------------------------------------
| | International events could delay or prevent
    the delivery of products to our suppliers.

Our suppliers rely on foreign sources, primarily
in Asia, to manufacture a significant portion of the products we
purchase from them. As a result, any event causing a disruption
of imports, including the imposition of import restrictions or
trade restrictions in the form of tariffs or quotas, could
increase the cost and reduce the supply of products available to
us, which could lower our sales and profitability.



| |                                                                                                               
| | --------------------------------------------------------------------------------------------------------------
| | If we are unable to renew or enter into new
    leases on favorable terms, our revenue growth may
    decline.

All of our retail stores are located in leased
premises. If the cost of leasing existing stores increases, we
cannot assure you that we will be able to maintain our existing
store locations as leases expire. In addition, we may not be
able to enter into new leases on favorable terms or at all, or
we may not be able to locate suitable alternative sites or
additional sites for new store expansion in a timely manner. Our
revenues and earnings may decline if we fail to maintain
existing store locations, enter into new leases, locate
alternative sites or find additional sites for new store
expansion.



| |                                                                                                    
| | ---------------------------------------------------------------------------------------------------
| | The ability to download video games and play
    video games on the Internet could lower our sales.

While it is currently not possible to download
video game software onto existing video game platforms over the
Internet, at some point in the future this technology may become
available. A limited selection of PC entertainment software may
currently be purchased for download over the Internet, and as
technology advances, a broader selection of PC entertainment
software may become available for purchase and download. If
advances in technology continue to expand our customers
ability to access software through these and other sources, our
customers may no longer choose to purchase video games or PC
entertainment software in our stores. As a result, our sales and
earnings could decline.



| |                                                                                 
| | --------------------------------------------------------------------------------
| | The terms of our credit facility could
    restrict our operational flexibility.

We are subject to operational and financial
covenants and other restrictions under our revolving credit
facility. The covenants place restrictions on our ability to,
among other things, incur more debt or create liens on our
assets, merge or consolidate with others, make acquisitions and
investments, dispose of assets, pay dividends, and enter into
transactions with affiliates. These covenants could limit our
operational flexibility and restrict our ability to borrow
additional funds, if necessary, to finance operations. In
addition, our credit facility includes a number of covenants
relating to financial ratios.

Failure to comply with these operational and
financial covenants could result in an event of default under
the terms of the credit facility which, if not cured or waived,
could result in the borrowed amounts becoming due and payable.
In addition, our obligations under the credit facility are
secured by all assets owned by us and our subsidiaries. An event
of default under the credit facility would permit the lenders to
proceed directly against those assets.

5



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| |                                                                             
| | ----------------------------------------------------------------------------
| | We depend upon our key personnel and they
    would be difficult to replace.

Our success depends upon our ability to attract,
motivate and retain key management for our stores and skilled
merchandising, marketing and administrative personnel at our
headquarters. We depend upon the continued services of our key
executive officers, R. Richard Fontaine, our Chairman of
the Board and Chief Executive Officer, Daniel A. DeMatteo, our
President and Chief Operating Officer, and David W. Carlson, our
Executive Vice President and Chief Financial Officer. We do not
have employment contracts with any of our key personnel. The
loss of services of any of our key personnel could have a
negative impact on our business.



| |                                                                                                                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Legislative actions, higher director and
    officer insurance costs and potential new accounting
    pronouncements are likely to cause our general and
    administrative expenses to increase and impact our future
    financial condition and results of operations.

In order to comply with the newly adopted
Sarbanes-Oxley Act of 2002, as well as changes to the New York
Stock Exchange listing standards and rules adopted by the
Securities and Exchange Commission (the SEC), we may
be required to increase our internal controls, hire additional
personnel and additional outside legal, accounting and advisory
services, all of which may cause our general and administrative
costs to increase. Insurers are also likely to increase premiums
as a result of the high claims rates they have incurred over the
past year, and so our premiums for our directors and
officers insurance policies are likely to increase.
Changes in the accounting rules, including legislative and other
proposals to account for employee stock options as a
compensation expense among others, could materially increase the
expenses that we report under generally accepted accounting
principles and adversely affect our operating results.



| |                                                          
| | ---------------------------------------------------------
| | Risks Related to our Relationship with
    Barnes & Noble



| |                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Barnes & Nobles control of our
    company could increase the difficulty of our acquisition by
    another company, even if such acquisition would be
    beneficial.

Barnes & Noble owns 100% of our
outstanding Class B common stock, which represents 94.5% of
the combined voting power of all classes of our voting stock. In
addition, some of the members of our board of directors also
serve as directors of Barnes & Noble. As a result,
Barnes & Noble has control over us, the election of our
board of directors and our management and policies.
Barnes & Noble also has control over all matters
requiring stockholder approval, including the amendment of
certain provisions of our certificate of incorporation and
by-laws and the approval of fundamental corporate transactions,
including mergers. In light of this control, other companies
could be discouraged from initiating a potential merger,
takeover or any other transaction resulting in a change of
control. Such a transaction potentially could be beneficial to
our business or to our stockholders. This may in turn reduce the
price that investors are willing to pay in the future for shares
of our Class A common stock.



| |                                                                                                     
| | ----------------------------------------------------------------------------------------------------
| | Any conflict of interest between us and
    Barnes & Noble could hurt our business or
    prospects.

There is a possibility that conflicts of interest
will arise between Barnes & Noble and us in various
areas pertaining to our past and ongoing relationships.
Potential factors that may create a conflict of interest between
Barnes & Noble and us are:



| |   |                                                                                                                                                                                                                                                  
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | some of the members of our board of directors
    also sit on Barnes & Nobles board of directors,
    which could result in Barnes & Nobles interests
    being prioritized over our interests; and                                            
|
| |  | some of the members of our board of directors
    currently have, or may have in the future, an equity interest in
    Barnes & Noble, which could affect their decisions in
    resolving potential conflicts between us and Barnes &
    Noble.

In addition, Leonard Riggio, one of our
directors, is the Chairman of the Board and a principal
stockholder of Barnes & Noble. As of March 31,
2003, Mr. Riggio beneficially owned approximately 22.0% of
the outstanding common stock of Barnes & Noble.
Mr. Riggio also currently has options to acquire

6



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##### Table of Contents



approximately 7.3% of our outstanding common
stock. As a result, Mr. Riggio may have substantial control
over the management and affairs of our company.


Barnes & Noble is under no obligation to
resolve any potential conflicts between it and us in a manner
that is favorable to us, and we cannot guarantee that the
resolution of such conflicts would not adversely impact our
business or prospects.



| |                                                                                                                                                                                            
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | If Barnes & Noble distributes our
    shares of Class B common stock in a tax-free distribution,
    the Class A common stock may trade at a lower price than
    the Class B common stock.

If Barnes & Noble distributes our
Class B common stock to its stockholders in a tax-free
distribution, we will have two separate classes of publicly
traded common stock. Following a tax-free distribution of the
Class B common stock, the Class B common stockholders
will continue to exercise voting control over us. This could
result in less liquidity for either class of our common stock
than if there were only one class of common stock and could
result in the market price of our Class A common stock
being lower than the market price of our Class B common
stock.



| |                                                                                                                                                                 
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The limited voting rights of our Class A
    common stock could impact its attractiveness to investors and
    its liquidity and, as a result, its market value.

The holders of our Class A and Class B
common stock generally have identical rights, except that
holders of our Class A common stock are entitled to one
vote per share and holders of our Class B common stock are
entitled to ten votes per share on all matters to be voted on by
stockholders. The difference in the voting rights of the
Class A and Class B common stock could diminish the
value of the Class A common stock to the extent that
investors or any potential future purchasers of our Class A
common stock ascribe value to the superior voting rights of the
Class B common stock.



| |                                                                                                                                                                          
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Our ability to issue common stock may be
    hampered because of our relationship with Barnes &
    Noble, which may interfere with our ability to grow our
    business.

Barnes & Noble may wish to maintain
until October 2004 or thereafter its current ownership of our
Class B common stock in order to qualify for a tax-free
distribution of such stock to its stockholders.
Barnes & Noble owns 100% of the outstanding
Class B common stock, which represents 94.5% of the
combined voting power of all classes of our voting stock. It may
be difficult for us to issue common stock in the future because
of Barnes & Nobles control of us. In addition, we
have entered into a separation agreement with Barnes &
Noble that restricts our ability to issue equity securities or
securities convertible into equity securities if the effect of
the issuance would be to preclude a tax-free distribution by
Barnes & Noble to its stockholders or our consolidation
with Barnes & Noble for its financial reporting
purposes. If we are unable to issue common stock, we may be
unable to raise additional capital, which we may need to fund
our business.



| |                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------
| | Certain affiliate agreements we have with
    Barnes & Noble could prevent us from, or increase our
    cost in, taking certain actions.

We have entered into various agreements with
Barnes & Noble, including a separation agreement, an
insurance agreement, an operating agreement, a tax
disaffiliation agreement and a registration rights agreement.
Because of our current status as a majority-owned subsidiary of
Barnes & Noble, these agreements, or some of our future
intercompany agreements with Barnes & Noble, may not be
the result of arms length negotiations. For example, these
agreements may contain terms and conditions that are less
favorable to us than we could have obtained from independent
third parties, and may prevent change of control attempts that
are beneficial to our stockholders and restrict our ability to
take certain business actions, such as selling our assets or
business or issuing additional shares of our common stock.



| |                                                                                          
| | -----------------------------------------------------------------------------------------
| | A change of control may result if
    Barnes & Noble defaults on its credit
    facility.

Barnes & Noble has pledged to its
lenders its ownership interest in the entity that owns our
shares of common stock as collateral for its credit facility. If
Barnes & Noble defaults on its credit facility, our
common

7



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##### Table of Contents



stock owned by Barnes & Noble could be
transferred to its lenders or sold to third parties. There can
be no assurance that any new owner will have the qualifications
or ability to successfully operate our business.


Industry Background

According to NPD Group, Inc., a market research
firm, the electronic game industry was an approximately
$11.9 billion market in the United States in 2002. Of this
$11.9 billion market, approximately $10.3 billion was
attributable to video game products, excluding sales of used
video game products, and approximately $1.6 billion was
attributable to PC entertainment software.

New Video Game Products.The Interactive Digital Software
Association, or IDSA, estimates that 60% of all Americans, or
approximately 145 million people, play video or computer
games on a regular basis. We expect the following trends to
result in increased sales of video game products:



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Hardware Platform Technology Evolution.Video game hardware has evolved
    significantly from the early products launched in the
    1980s. The processing speed of video game hardware has
    increased from 8-bit speeds in the 1980s to 128-bit speeds
    in next-generation systems such as Sony PlayStation 2,
    launched in 2000, and Nintendo GameCube and Microsoft Xbox,
    which both launched in November 2001. In addition, portable
    handheld video game devices have evolved from the 8-bit Nintendo
    Game Boy to the 32-bit Game Boy Advance SP, which was
    introduced in March 2003. Technological developments in both
    chip processing speed and data storage have provided significant
    improvements in advanced graphics and audio quality, which allow
    software developers to create more advanced games, encourage
    existing players to upgrade their hardware platforms and attract
    new video game players to purchase an initial system. As general
    computer technology advances, we expect video game technology to
    make similar advances.
|
| |  | Next-Generation Systems Provide Multiple
    Capabilities Beyond Gaming.Many
    next-generation hardware platforms, including Sony
    PlayStation 2 and Microsoft Xbox, utilize a DVD software
    format and have the potential to serve as multi-purpose
    entertainment centers by doubling as a player for DVD movies and
    compact discs. In addition, in 2002, both Sony
    PlayStation 2 and Microsoft Xbox introduced accessories
    which provide internet connectivity.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|
| |  | Backward Compatibility.Sony PlayStation 2 and Nintendo Game
    Boy Advance SP are both backward compatible, meaning that
    titles produced for the earlier version of the hardware platform
    may be used on the new hardware platform. We believe that
    backward compatibility may result in more stable industry growth
    because the decrease in consumer demand for products associated
    with existing hardware platforms that typically precedes the
    release of next-generation hardware platforms may be diminished.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|
| |  | Introduction of Next-Generation Hardware
    Platforms Drives Software Demand.Sales of video game software generally increase as
    next-generation platforms mature and gain wider acceptance.
    Historically, when a new platform is released, a limited number
    of compatible game titles are immediately available, but the
    selection grows rapidly as manufacturers and third-party
    publishers develop and release game titles for that new
    platform. For example, when Sony PlayStation 2 was released
    in October 2000, approximately 30 game titles were
    available for sale. By January 2003, over 450 game titles
    for the Sony PlayStation 2 platform were available for sale.                                                                                                                                                                                                                                                                                                                                                                                        
|
| |  | Broadening Demographic Appeal.While the typical electronic game
    enthusiast is male between the ages of 14 and 34, the electronic
    game industry is broadening its appeal. More females are playing
    electronic video games, in part due to the development of video
    game products that appeal to them. According to IDSA,
    approximately 43% of all electronic game players currently are
    female. More adults are also playing video games as a portion of
    the population that played video games in their childhood
    continues to play and advance to the next-generation video game
    products. In addition, the availability of used video game
    products for sale has enabled a lower-economic demographic, that
    may not have been able to afford the considerably more expensive
    new video game products, to participate in the video game
    industry.                                                                                                                                                                                                      

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PC Entertainment Software.PC entertainment software is generally
sold in the form of CD-ROMs and played on multimedia PCs
featuring fast processors, expanded memories, and enhanced
graphics and audio capabilities.

Used Video Game Market.As the installed base of video game
hardware platforms has increased and new hardware platforms are
introduced, a growing used video game market has evolved in the
United States. Based on reports published by NPD, management
believes that, as of January 2003, the installed base of video
game hardware systems in the United States, based on original
sales, totaled over 111.3 million units, including
approximately 27.2 million Sony PlayStation units,
4.2 million Sega Dreamcast units, 17.9 million
Nintendo 64 units, 21.1 million Nintendo Game Boy and
Game Boy Color units and approximately 40.9 million total
units of Sega Genesis and Super Nintendo systems, of which, only
the Sony PlayStation is still being manufactured. Hardware
manufacturers and third-party software publishers produce a wide
variety of software titles for each of these hardware platforms.
Based on internal company estimates, management believes that
the installed base of video game software units in the United
States exceeds 625 million units.

Business Strategy

Our goal is to enhance our position as the
nations largest specialty retailer of new and used video
game products and PC entertainment software by focusing on the
following strategies:

Targeting a Broad Audience of Game Players.We have created a store environment
targeting a broad audience including the electronic game
enthusiast, the casual gamer and the seasonal gift giver. Our
mall stores primarily focus on the electronic game enthusiast
who demands the latest merchandise featuring the
hottest technology immediately on the day of
release. Our strip center stores also serve the electronic game
enthusiast, but focus on serving the value-oriented customer by
offering a wide selection of value-priced used video game
products and the opportunity to trade in used video game
products in exchange for store credits applicable to future
purchases, which, in turn, drives more sales.

Enhancing our Image as a Destination Location.Our stores serve as destination
locations for game players due to our broad selection of
products, knowledgeable sales associates, game-oriented
environment and unique pricing proposition. We offer all major
video game platforms, provide a broad assortment of video game
products and offer a larger and more current selection of
merchandise than other retailers. We provide a high level of
customer service by hiring game enthusiasts and providing them
with ongoing sales training, as well as training in the latest
technical and functional elements of our products and services.
Our stores are equipped with several video game sampling areas,
which provide our customers the opportunity to play games before
purchase, as well as equipment to play video game clips.

Providing a First-to-Market Distribution
Network.We employ a variety of
rapid-response distribution methods in our efforts to be the
first-to-market for new video game products and PC entertainment
software. We strive to deliver popular new releases to selected
stores within hours of release and to all of our stores by the
next morning. This highly efficient distribution network is
essential, as a significant portion of a new titles sales
will be generated in the first few days and weeks following its
release. As the largest specialty retailer of video game
products and PC entertainment software in the United
States, with a proven capability to distribute new releases to
our customers quickly, our management believes that we regularly
receive a disproportionately large allocation of popular new
video game products and PC entertainment software. On a
daily basis, we actively monitor sales trends, customer
reservations and store manager feedback to ensure a high
in-stock position for each store. To assure our customers
immediate access to new releases, we offer our customers the
opportunity to pre-order products in our stores or through our
web site prior to their release.

Offering the Largest Selection of Used Video
Game Products.We are the
nations leading provider and carry the broadest selection
of used video game products for both current and previous
generation platforms. We are one of the only retailers that
provide video game software for previous generation platforms,
giving us a unique advantage in the video game retail industry.
The opportunity to trade in and purchase used video game
products offers our customers a unique value proposition
unavailable at mass merchants, toy stores and consumer
electronic retailers. We obtain most of our used video game
products from trade-ins made in our

9



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stores by our customers. Used video game products
generate significantly higher gross margins than new video game
products.


Rebranding our Stores with the GameStop Name.We currently operate stores under the
GameStop, Babbages, Software Etc. and FuncoLand names. We
have initiated a rebranding strategy under which all new stores
opened since December 2000 operate under the GameStop name and
existing stores in targeted markets are being rebranded under
the GameStop name. We intend to complete the rebranding of our
stores by the fourth quarter of 2003. At the end of fiscal 2002,
we operated approximately 900 stores under the GameStop
name. Rebranding to a single GameStop name enables us to
leverage brand awareness and to capture advertising and
marketing efficiencies. Our rebranding strategy is further
supported by the GameStop loyalty card and our web site. The
GameStop loyalty card, which is obtained as a bonus with a paid
subscription to our Game Informer magazine, offers
customers discounts on selected merchandise in our stores. Our
web site allows our customers to buy games on-line and to learn
about the latest video game products and PC entertainment
software and their availability in our stores.

Investing in our Information Systems and
Distribution Capabilities.We employ
sophisticated and fully-integrated inventory management,
store-level point of sale and financial systems and a
centralized state-of-the-art distribution facility. These
systems enable us to maximize the efficiency of the flow of over
4,000 SKUs, improve store efficiency, optimize store
in-stock positions, and carry a broad selection of inventory.
Our proprietary inventory management system enables us to
maximize sales of new release titles and avoid markdowns as
titles mature and utilizes electronic point-of-sale equipment
that provides corporate headquarters with daily information
regarding store-level sales and available inventory levels to
automatically generate replenishment shipments to each store at
least twice a week. In addition, our highly-customized inventory
management system allows us to actively manage the pricing and
product availability of our used video game products across our
store base and to reallocate our inventory as necessary. Our
systems enable each store to carry a merchandise assortment
uniquely tailored to its own sales mix and customer needs. Our
ability to react quickly to consumer purchasing trends has
resulted in a target mix of inventory, reduced shipping and
handling costs for overstocks and reduced our need to discount
products.

Growth Strategy

New Store Expansion.We intend to continue to open new
strip center stores in our targeted markets and new mall stores
in selected mall locations. We opened 74 new stores in
fiscal 2001 (the 52-week period ended February 2, 2002) and
210 new stores in fiscal 2002. We plan on opening
approximately 235 to 265 new stores in fiscal 2003. Our
primary growth vehicle will be the expansion of our strip center
store base, which we believe could grow to over
2,000 stores in the United States. Our strategy is to open
clusters of strip center stores in targeted major metropolitan
markets under the GameStop brand name. For example, we opened
25 new stores in the Dallas/ Ft. Worth metropolitan
area in the last eighteen months and now operate a total of
58 stores in the Dallas/ Ft. Worth area. We analyze
each market relative to target population and other demographic
indices, real estate availability, competitive factors and past
operating history, if available. In some cases, these new stores
may adversely impact sales at existing stores.

Increase Comparable Store Sales.We plan to increase our comparable
store sales by capitalizing on the growth in the video game
industry, expanding our sales of used video game products and
increasing awareness of the GameStop name.



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Capitalize on Industry Growth.In fiscal 2002 and fiscal 2001, our
    comparable store sales increased 11.4% and 32.0%, respectively,
    driven in large measure by the success of Sony
    PlayStation 2, which was launched in October 2000, Nintendo
    Game Boy Advance, which was launched in June 2001 and Microsoft
    Xbox and Nintendo GameCube, both of which were launched in
    November 2001. During fiscal 2002, we successfully capitalized
    on the growth in demand for video game software and accessories
    that followed the launch of these four new video game platforms
    and the related increase in installed hardware base. Over the
    next few years, we expect to continue to capitalize on the
    increasing installed base for these platforms and the related
    growth in video game software and accessories sales.

10



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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Increase Sales of Used Video Game Products.We will continue to expand the
    selection and availability of used video game products in both
    our mall and strip center stores. Our strategy consists of
    increasing consumer awareness of the benefits of trading in and
    buying used video game products at our stores through increased
    marketing activities. We expect the continued growth of new
    platform technology to drive trade-ins of previous generation
    products, including Nintendo Game Boy Color and
    Nintendo 64, Sega Dreamcast and Sony PlayStation, as well
    as next generation platforms, thereby expanding the supply of
    used video game products.
|
| |  | Increase GameStop Brand Awareness.We intend to increase customer
    awareness of the benefits of shopping in our stores. In
    connection with our rebranding efforts, in fiscal 2002, we
    enhanced GameStop brand awareness by increasing the amount of
    media advertising in targeted markets. In 2003, we plan to
    continue to increase media advertising, to expand our GameStop
    loyalty card program, to aggressively promote trade-ins of used
    video game products in our stores and to leverage our web site
    at gamestop.com.                                                                                                                                            

Merchandise

Our product offerings consist of video game
products, PC entertainment software, and related products,
such as action figures, trading cards and strategy guides. We
also market selected PC productivity and educational
software titles. Our in-store inventory generally consists of a
constantly changing selection of over 4,000 SKUs. We have a
central buying group that negotiates terms, discounts and
cooperative advertising allowances for all of our stores. We use
customer requests and feedback, advance orders, industry
magazines and product reviews to determine which new releases
are expected to be hits. Call lists and advance orders are
tracked at individual stores to distribute titles and capture
demand effectively. This merchandise management is essential
because a significant portion of a games sales are usually
generated in the first days and weeks following its release. We
also carefully manage product pricing utilizing a tiered pricing
strategy that enables us to tailor pricing at our stores based
on each stores competitive environment.

Video Game Hardware.We offer the video game platforms of
all major manufacturers, including Sony PlayStation 2 and
PlayStation, Microsoft Xbox, Nintendo GameCube, Game Boy Advance
and Game Boy Advance SP. We also offer extended service
agreements on video game hardware. In support of our strategy to
be the destination location for electronic game players, we
aggressively promote the sale of video game platforms. Video
game hardware sales are generally driven by the introduction of
new platform technology and the reduction in price points as
platforms mature. Due to our strong relationships with the
manufacturers of these platforms, we often receive
disproportionately large allocations of new release hardware
products, which is an important component of our strategy to be
the destination of choice for electronic game players. We
believe that selling video game hardware increases store traffic
and promotes customer loyalty, leading to increased sales of
video game software and accessories, which have higher gross
margins than video game hardware.

Video Game Software.We purchase video game software
directly from the leading manufacturers, including Sony,
Microsoft Corporation and Nintendo of America, Inc., as well as
over 40 third-party game publishers, such as Electronic
Arts, THQ Inc. and Activision, Inc. We are one of the largest
customers in the United States of video game titles sold by
these publishers. We carry over 1,000 SKUs at any given
time across a variety of genres, including Sports, Action,
Strategy, Adventure/ Role Playing and Simulation.

Used Video Game Products.We are the largest retailer of used
video games in the United States. We provide our customers with
an opportunity to trade in their used video game products in our
stores in exchange for store credits which can be applied
towards the purchase of other products, including new
merchandise. We have the largest selection (over
2,000 SKUs) of used video game titles which have an average
price of $17 as compared to $38 for new video game titles and
which generate significantly higher gross margins than new video
game products. Our trade-in program provides our customers with
a unique value proposition which is unavailable at mass
merchants, toy stores and consumer electronics retailers. This
program provides us with an inventory of used video game
products which we resell to our more value-oriented customers.
In addition, our highly-customized inventory management system
allows us to actively manage the pricing and product

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availability of our used video game products
across our store base and to reallocate our inventory as
necessary. Our trade-in program also allows us to be one of the
only suppliers of previous generation platforms and related
video games. We also operate a refurbishment center where
defective video game products can be tested, repaired,
relabeled, repackaged and redistributed back to our stores.


PC Entertainment and Other Software.We purchase PC entertainment
software from over 30 publishers, including Electronic
Arts, Microsoft and Vivendi Universal. We offer
PC entertainment software across a variety of genres,
including Action, Simulation, Sports, Strategy and Adventure/
Role Playing. We also carry a limited assortment of educational,
productivity and reference titles.

Accessories and Other Products.Video game accessories consist
primarily of controllers, memory cards and other add-ons.
PC entertainment accessories consist primarily of video
cards, joysticks and mice. We also carry strategy guides and
magazines, as well as character-related merchandise, including
action figures and trading cards. We carry over 400 SKUs of
accessories and other products. In general, this category has
higher margins than new video game and PC entertainment products.

The following table sets forth sales mix,
expressed as a percentage of net sales for the periods indicated:

|                                  |                        |                |   |                |   |  |    |    |  
|--------------------------------- | ---------------------- | -------------- | - | -------------- | - |  | -- | -- | -
|                                  |                        | 52 Weeks Ended |   | 52 Weeks Ended
|                                  |                        | February 1,    |   | February 2,   
|                                  |                        | 2003           |   | 2002          
|                                  |                        |                |   |               
|Video Games:*                     |                        |                |   |                |   |  |    |   
|                                  | Video Game Hardware    |                |   | 19             | % |  |    | 25 | %
|                                  | Video Game Software    |                |   | 58             | % |  |    | 48 | %
|                                  | Video Game Accessories |                |   | 12             | % |  |    | 12 | %
|PC Software                       |                        |                | 7 | %              |   |  | 10 | % 
|PC Accessories and Other Products |                        |                | 4 | %              |   |  | 5  | % 



---



|  |                                   
|- | ----------------------------------
|* | Includes new and used merchandise.

Store Operations

As of February 1, 2003, we operated
1,231 stores, primarily under the GameStop, Babbages,
Software Etc. and FuncoLand names. Each of our stores typically
carries over 4,000 SKUs. We design our stores to provide an
electronic gaming atmosphere with an engaging and visually
captivating layout. Our stores are equipped with several video
game sampling areas, which provide our customers the opportunity
to play games before purchase, as well as equipment to play
video game clips. We use store configuration, in-store signage
and product demonstrations to produce marketing opportunities
both for our vendors and for us.



| |              
| | -------------
| | Store Formats



| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Strip Center Stores.Our strip center stores, which average
    approximately 1,500 square feet, carry a balanced mix of
    new and used video game products and, in selected stores,
    PC entertainment software. As of February 1, 2003, we
    operated 693 strip center stores in the United States and
    Puerto Rico. Our strip center stores are located in both high
    traffic power strip centers and local neighborhood
    strip centers, primarily in major metropolitan areas. These
    locations provide visibility, easy access and high frequency of
    visits. We target strip centers that are conveniently located,
    have a mass merchant or supermarket anchor tenant and have a
    high volume of customers.
|
| |  | Mall-Based Stores.Our mall-based stores, which average
    approximately 1,200 square feet, carry primarily new video
    game products and PC entertainment software, as well as a
    limited selection of used video game products. As of
    February 1, 2003, we operated 538 mall stores in high
    traffic shopping malls in targeted locations throughout the
    United States, Puerto Rico and Guam.                                                                                                                                                                                                                                                                                                                               

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Site Selection and Locations

Site Selection.We
have a dedicated staff of real estate personnel experienced in
selecting store locations. Site selections for new stores are
made after an extensive review of demographic data and other
information relating to market potential, competitor access and
visibility, compatible nearby tenants, accessible parking,
location visibility, lease terms and the location of our other
stores. Most of our stores are located in highly visible
locations within malls and strip centers.

Locations.The table
below sets forth the number of our stores located in each state,
Puerto Rico and Guam as of February 1, 2003:

|               |  |           |     | 
|-------------- |  | --------- | --- | 
|               |  | Number   
|State          |  | of Stores
|               |  |          
|Alabama        |  |           | 11  | 
|Alaska         |  |           | 3   | 
|Arizona        |  |           | 22  | 
|Arkansas       |  |           | 4   | 
|California     |  |           | 137 | 
|Colorado       |  |           | 19  | 
|Connecticut    |  |           | 16  | 
|Delaware       |  |           | 6   | 
|Florida        |  |           | 54  | 
|Georgia        |  |           | 26  | 
|Guam           |  |           | 1   | 
|Hawaii         |  |           | 10  | 
|Idaho          |  |           | 2   | 
|Illinois       |  |           | 71  | 
|Indiana        |  |           | 18  | 
|Iowa           |  |           | 9   | 
|Kansas         |  |           | 5   | 
|Kentucky       |  |           | 15  | 
|Louisiana      |  |           | 11  | 
|Maine          |  |           | 2   | 
|Maryland       |  |           | 36  | 
|Massachusetts  |  |           | 28  | 
|Michigan       |  |           | 54  | 
|Minnesota      |  |           | 25  | 
|Mississippi    |  |           | 4   | 
|Missouri       |  |           | 28  | 
|Montana        |  |           | 4   | 
|Nebraska       |  |           | 3   | 
|Nevada         |  |           | 12  | 
|New Hampshire  |  |           | 6   | 
|New Jersey     |  |           | 62  | 
|New Mexico     |  |           | 5   | 
|New York       |  |           | 60  | 
|North Carolina |  |           | 20  | 
|North Dakota   |  |           | 4   | 

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|               |  |           |       | 
|-------------- |  | --------- | ----- | 
|               |  | Number   
|State          |  | of Stores
|               |  |          
|Ohio           |  |           | 53    | 
|Oklahoma       |  |           | 10    | 
|Oregon         |  |           | 8     | 
|Pennsylvania   |  |           | 69    | 
|Puerto Rico    |  |           | 11    | 
|Rhode Island   |  |           | 1     | 
|South Carolina |  |           | 12    | 
|South Dakota   |  |           | 2     | 
|Tennessee      |  |           | 18    | 
|Texas          |  |           | 136   | 
|Utah           |  |           | 16    | 
|Vermont        |  |           | 1     | 
|Virginia       |  |           | 38    | 
|Washington     |  |           | 34    | 
|West Virginia  |  |           | 9     | 
|Wisconsin      |  |           | 20    | 
|               |  |           |       | 
|               |  |           | 1,231 | 
|               |  |           |       | 

Game Informer

We publish Game Informer, a monthly video
game magazine featuring reviews of new title releases, tips and
secrets about existing games and news regarding current
developments in the electronic game industry. The magazine is
sold through subscription and through displays in our stores.
For its February 2003 issue, the magazine had more than
1,000,000 paid subscriptions. Game Informer revenues are
also generated through the sale of advertising space. In
addition, we offer the GameStop loyalty card as a bonus with
each paid subscription, providing our subscribers with a
discount on selected merchandise.

E-Commerce

We operate an electronic commerce web site at
www.gamestop.com that allows our customers to buy video game
products and other merchandise on-line. The site also offers
customers information and content about available games, release
dates for upcoming games, and access to store information, such
as location and product availability.

Information Management

Our operating strategy involves providing a broad
merchandise selection to our customers as quickly and as
cost-effectively as possible. We use our inventory management
systems to maximize the efficiency of the flow of products to
our stores, enhance store efficiency and optimize store in-stock
and overall investment in inventory.

Distribution.We
operate a 210,000 square foot state-of-the-art distribution
center in Grapevine, Texas. By operating with a centralized
distribution facility, we effectively control and minimize
inventory levels. A technologically-advanced conveyor system and
flow-through racks control costs and improve speed of
fulfillment. The technology used in the distribution center
allows for high-volume receiving, distributions to stores and
returns to vendors. Inventory is shipped to each store at least
twice a week, or daily, if necessary, in order to keep stores in
supply of products. In order to support our first-to-market
distribution network, we utilize the services of
10 off-site, third-party operated distribution centers that
pick up products from our suppliers, repackage the products for
each of our stores and ship those products to our stores by
package

14



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carriers. Our ability to rapidly process incoming
shipments of new release titles and deliver them to all of our
stores, either that day or by the next morning, enables us to
meet peak demand and replenish stores at least twice a week.


Management Information Systems.Our proprietary inventory management
system and point-of-sale technology show daily sales and
in-store stock by title by store. Systems in place use this data
to automatically generate replenishment shipments to each store
from our distribution center in Grapevine, Texas, enabling each
store to carry a merchandise assortment uniquely tailored to its
own sales mix and rate of sale. Our call lists and reservation
system also provide our centralized buying staff with
information to determine order size and inventory management for
store-by-store inventory allocation. We constantly review and
edit our merchandise categories with the objective of ensuring
that inventory is up-to-date and meets customer needs. We use a
centralized PC network-based information system based in our
corporate offices, in order to minimize initial outlay of
capital while allowing for flexibility and growth as operations
expand.

Our in-store point-of-sale system enables us to
efficiently manage in-store transactions. This proprietary
point-of-sale system has been enhanced to facilitate trade-in
transactions, including automatic look-up of trade-in prices and
printing of machine-readable bar codes to facilitate in-store
restocking of used video games. In addition, our central
database of all used video game products allows us to actively
manage the pricing and product availability of our used video
game products across our store base and re-allocate our used
video game products as necessary.

Advertising

Our stores are primarily located in high traffic,
high visibility areas of regional shopping malls and strip
centers. Given the high foot traffic drawn past the stores
themselves, we use in-store marketing efforts such as window
displays and coming soon signs to attract customers,
as well as to promote used video game products and subscriptions
to our Game Informer magazine. Inside the stores, we
feature selected products through the use of vendor displays,
coming soon or preview videos, signs, catalogs,
point-of-purchase materials and end-cap displays. These
advertising efforts are designed to increase the initial sales
of new titles upon their release. We receive cooperative
advertising and market development funds from manufacturers,
distributors, software publishers and accessory suppliers to
promote their respective products. Generally, a vendor agrees to
purchase advertising space in one of our advertising vehicles.
Once we run the advertising, the vendor pays to us an agreed
amount.

As part of our rebranding and targeted growth
strategy, in fiscal 2002, we expanded our newspaper advertising
in certain targeted markets at certain key times of the year. In
addition, we expanded our use of radio advertising in certain
markets to promote store openings. We plan to continue these
efforts in 2003.

Field Management and Staff

Our store operations are managed by a centrally
located vice president of stores, two regional vice presidents
and 11 regional store operations directors. The regions are
divided into 101 districts, each with a district manager
covering an average of 12 stores. Each store employs, on
average, one manager, one assistant manager and between two and
ten sales associates, many of whom are part-time employees. We
have cultivated a work environment that attracts employees who
are actively interested in electronic games. We seek to hire and
retain employees who know and enjoy working with our products so
that they are better able to assist customers. To encourage them
to sell the full range of our products, we provide our employees
with targeted incentive programs to drive sales. We also provide
our employees with the opportunity to take home and try new
video games, which enables them to better discuss those games
with our customers. In addition, employees are casually dressed
to encourage customer access and increase the
game-oriented focus of the stores. We also employ
11 regional loss prevention managers who assist the field
in implementing security to prevent theft of our products.

Stores communicate with our corporate offices via
daily e-mail. This e-mail allows for better tracking of trends
in upcoming titles, competitor strategies and in-stock inventory
positions. In addition, this communication allows title
selection in each store to be continuously updated and tailored
to reflect the tastes and buying

15



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patterns of the stores local market. These
communications also give field management access to relevant
inventory levels and loss prevention information. We also
sponsor an annual store managers conference, to which we
invite all video game software publishers to attend, and operate
an intense educational training program to provide our employees
with information about the video game products that will be
released by those publishers in the holiday season.


Customer Service

Our store personnel provide value-added services
to each customer, such as maintaining lists of regular
customers, notifying each customer by phone when new titles are
available, and reserving new releases for customers with a down
payment to ensure product availability. In addition, our store
personnel readily provide product reviews to ensure customers
are making informed purchasing decisions and offering help-line
numbers to increase a customers enjoyment of the product
upon purchase.

Vendors

We purchase substantially all of our new products
from approximately 85 manufacturers and software publishers
and approximately five distributors. Purchases from the top five
vendors accounted for approximately 55% of our new product
purchases in fiscal 2002. Only Sony and Electronic Arts (which
accounted for 18% and 12%, respectively) accounted for more than
10% of our new product purchases during fiscal 2002. We have
established price protections and return privileges with our
primary vendors in order to reduce the risk of inventory
obsolescence. In addition, we have no purchase contracts with
trade vendors and conduct business on an order-by-order basis, a
practice that is typical throughout the industry. We believe
that maintaining and strengthening our long-term relationships
with our vendors is essential to our operations and continued
expansion. We believe that we have very good relations with our
vendors.

Competition

The electronic game industry is intensely
competitive and subject to rapid changes in consumer preferences
and frequent new product introductions. We compete with mass
merchants and regional chains, including Wal-Mart, Target and
Kmart; other video game and PC software specialty stores
located in malls and other locations, including Electronics
Boutique; toy retail chains, including
Toys R Us and KB Toys; mail-order
businesses; catalogs; direct sales by software publishers;
online retailers; and computer product and consumer electronics
stores, including Best Buy and Circuit City. In addition, video
games are available for rental from many video stores, some of
whom, like Hollywood Entertainment Corp., have increased the
availability of video game products for sale. Video game
products may also be distributed through other methods which may
emerge in the future. We also compete with sellers of used video
game products. Additionally, we compete with other forms of
entertainment activities, including movies, television, theater,
sporting events and family entertainment centers.

Seasonality

Our business, like that of many specialty
retailers, is seasonal, with the major portion of our sales and
operating profit realized during the fourth fiscal quarter,
which includes the holiday selling season. During fiscal 2002,
we generated approximately 38% of our sales and approximately
60% of our operating earnings during the fourth quarter. In
addition, prior to fiscal 2002, we have historically experienced
net losses in each of our first three fiscal quarters. Any
adverse trend in sales during the holiday selling season could
lower our results of operations for the fourth quarter and the
entire year.

Trademarks

We have a number of trademarks and servicemarks,
including GameStop, Game Informer,
Babbages and FuncoLand, all of
which have been registered by us with the United States Patent
and Trademark Office. We maintain a policy of pursuing
registration of our principal marks and opposing any
infringement of our marks.

16



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##### Table of Contents



Employees

We have approximately 1,800 full-time
salaried, 1,700 full-time hourly and between 7,000 and
10,000 part-time hourly employees depending on the time of
year. Fluctuation in the number of part-time hourly employees is
due to the seasonality of the electronic game industry. We
believe that our relationship with our employees is excellent,
and none of our employees is represented by a labor union or is
a member of a collective bargaining unit.

Available Information

We make available on our website
(http://www.gamestop.com) under Investor
Relations  SEC Filings, free of charge, our
annual reports on Form 10-K, quarterly reports on
Form 10-Q, current reports on Form 8-K, and amendments
to those reports as soon as reasonably practicable after we
electronically file or furnish such material with the SEC.






|        |           
|------- | ----------
|Item 2. | Properties

All of our stores are leased. Store leases
typically provide for an initial lease term of three to ten
years, plus renewal options. This arrangement gives us the
flexibility to pursue extension or relocation opportunities that
arise from changing market conditions. We believe that, as
current leases expire, we will be able to obtain either renewals
at present locations or leases for equivalent locations in the
same area.

The terms of the store leases for the 1,231
leased stores open as of February 1, 2003 expire as follows:

|                                          |  |           |       | 
|----------------------------------------- |  | --------- | ----- | 
|                                          |  | Number   
|Lease Terms to Expire During              |  | of Stores
|                                          |  |          
|(12 Months Ending on or About January 31) |  |           |       | 
|Expired and in negotiations               |  |           | 138   | 
|2004                                      |  |           | 217   | 
|2005                                      |  |           | 191   | 
|2006                                      |  |           | 179   | 
|2007                                      |  |           | 102   | 
|2008 and later                            |  |           | 404   | 
|                                          |  |           |       | 
|                                          |  |           | 1,231 | 
|                                          |  |           |       | 

In addition to our stores, we lease a
250,000 square foot headquarters and distribution center in
Grapevine, Texas. This lease expires on January 31, 2006.
We have the right to renew the lease for an additional five
years. Management believes that this facility will support our
growth for at least the next few years.

We also lease a 7,300 square foot office
facility in Minneapolis, Minnesota which houses the operations
of Game Informer magazine. This lease expires in February
2007.






|        |                  
|------- | -----------------
|Item 3. | Legal Proceedings

In the ordinary course of our business, we are
from time to time subject to various legal proceedings. We do
not believe that any current legal proceedings, individually or
in the aggregate, will have a material adverse effect on our
operations or financial condition.






|        |                                                        
|------- | -------------------------------------------------------
|Item 4. | Submission of Matters to a Vote of Security
    Holders

There were no matters submitted to a vote of
security holders during the 13 weeks ended February 1,
2003.

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##### Table of Contents






PART II






|        |                                                                          
|------- | -------------------------------------------------------------------------
|Item 5. | Market For Registrants Common Equity
    and Related Stockholder Matters

Price Range of Common Stock

The Companys Class A common stock
began trading on the New York Stock Exchange
(NYSE) under the symbol GME on
February 13, 2002. As such, there was no public trading
market for the Companys Class A common stock prior to
that time. The Companys Class B common stock is not
publicly traded and is held entirely by Barnes & Noble.

The following table sets forth, for the periods
indicated, the high and low sales prices of the common stock on
the NYSE Composite Tape.

|               |  |             |       |     |  |   |       | 
|-------------- |  | ----------- | ----- | --- |  | - | ----- | 
|               |  |            
|               |  | Fiscal 2002
|               |  |            
|               |  | High        |       | Low
|               |  |             |       |    
|First Quarter  |  | $           | 21.20 |     |  | $ | 18.02 | 
|Second Quarter |  | $           | 24.21 |     |  | $ | 15.10 | 
|Third Quarter  |  | $           | 21.45 |     |  | $ | 14.90 | 
|Fourth Quarter |  | $           | 20.24 |     |  | $ | 8.50  | 

Use of Proceeds of Initial Public
Offering

Pursuant to a registration statement on
Form S-1 (the Registration Statement) filed
with the SEC (File No. 333-68294), on February 12,
2002, we registered and sold an aggregate of
20,763,888 shares of our Class A common stock at a
price of $18.00 per share. The aggregate price of the
offering amount registered and sold was approximately
$373.7 million. Salomon Smith Barney acted as the managing
underwriter for the offering.

Our net proceeds from our initial public
offering, after deduction of underwriting discounts and
commissions of $24.3 million and expenses of
$2.1 million, were $347.3 million. All of the expenses
were paid directly to persons other than our directors, officers
or affiliates, their associates or persons owning 10% or more of
any class of our equity securities. A portion of the proceeds
was used to repay $250.0 million of our indebtedness to
Barnes & Noble, with Barnes & Noble
contributing the remaining $150.0 million of indebtedness
to the Company as additional paid-in-capital. Of the balance of
the proceeds (approximately $97.3 million), approximately
$33.8 million was used for capital expenditures and the
remainder was used for working capital and general corporate
purposes. Other than the repayment of indebtedness to
Barnes & Noble and as otherwise described in the
Registration Statement, none of the proceeds has been paid
directly or indirectly to any of our directors, officers or
affiliates, their associates or persons owning 10% or more of
any class of our equity securities.

Approximate Number of Holders of Common
Equity

As of March 19, 2003, there were
approximately 5,150 record holders of the Companys
$.001 par value per share Class A common stock.
Barnes & Noble was the sole beneficial holder of the
Companys $.001 par value per share Class B
common stock.

Dividends

The Company has never declared or paid any
dividends on its common stock. We do not expect to pay dividends
on any of our common stock for the foreseeable future. Instead,
we anticipate that all of our earnings in the foreseeable future
will be used for working capital and other general corporate
purposes. Our payment of dividends is and will continue to be
restricted by or subject to, among other limitations, the terms
of the revolving credit facility we entered into on
February 13, 2002, applicable provisions of federal and
state laws, our earnings and various business considerations
including our financial condition, results of operations, cash
flow, the level of our capital expenditures, our future business
prospects, our status as a holding company and

18



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##### Table of Contents



such other matters that our board of directors
deems relevant. See Liquidity and Capital Resources
included in Managements Discussion and Analysis of
Financial Condition and Results of Operations.







|        |                                         
|------- | ----------------------------------------
|Item 6. | Selected Consolidated Financial
    Data

We completed our initial public offering on
February 12, 2002. Before that date, we were a wholly-owned
subsidiary of Barnes & Noble.

The following table sets forth our selected
consolidated financial and operating data for the periods and at
the dates indicated. Our fiscal year is composed of 52 or
53 weeks ending on the Saturday closest to January 31.
The fiscal years ended February 1, 2003, February 2,
2002, January 29, 2000 and January 30, 1999 consisted
of 52 weeks and the fiscal year ended February 3, 2001
consisted of 53 weeks. The Statement of Operations
Data for the fiscal years 2002, 2001 and 2000 and the
Balance Sheet Data as of February 1, 2003 and
February 2, 2002 are derived from, and are qualified by
reference to, our audited financial statements which are
included elsewhere in this Form 10-K. The Statement
of Operations Data for the 39 weeks ended
October 30, 1999, the 13 weeks ended January 29,
2000 and for the fiscal year ended January 30, 1999 and the
Balance Sheet Data as of February 3, 2001,
January 29, 2000 and January 30, 1999 are derived from
our audited financial statements which are not included
elsewhere in this Form 10-K.

Our wholly-owned subsidiary Babbages Etc.
LLC (Babbages), began operations in November
1996. In October 1999, Babbages was acquired by, and
became a wholly-owned subsidiary of, Barnes & Noble.
Because our financial statements subsequent to the acquisition
by Barnes & Noble are not directly comparable to those
prior to the acquisition, our audited financial statements, for
the periods ended January 29, 2000 and January 30,
1999, which are not included elsewhere in this Form 10-K,
and the following table make a distinction between the
predecessor company and the successor
company. In June 2000, Barnes & Noble acquired
Funco, Inc. (Funco) and thereafter, Babbages
became a wholly-owned subsidiary of Funco. The acquisition of
Funco has been accounted for under the purchase method of
accounting. In December 2000, Funco changed its name to
GameStop, Inc.

19



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##### Table of Contents



Our selected financial data set forth below
should be read in conjunction with Managements
Discussion and Analysis of Financial Condition and Results of
Operations and the consolidated financial statements and
notes thereto included elsewhere in this Form 10-K.

|                                                                                                       |  |                                                     |           |             |  |             |           |             |  |             |         |             |  |   |         |   |  |   |         |   |  |   |         |  
|------------------------------------------------------------------------------------------------------ |  | --------------------------------------------------- | --------- | ----------- |  | ----------- | --------- | ----------- |  | ----------- | ------- | ----------- |  | - | ------- | - |  | - | ------- | - |  | - | ------- | -
|                                                                                                       |  |                                                     |           |             |  |             |           |             |  |            
|                                                                                                       |  |                                                     |           |             |  |             |           |             |  | Predecessor
|                                                                                                       |  |                                                     |           |             |  |             |           |             |  |            
|                                                                                                       |  | Fiscal Year                                         |           | Fiscal Year |  | Fiscal Year |           | 13 Weeks    |  | 39 Weeks    |         | Fiscal Year
|                                                                                                       |  | Ended                                               |           | Ended       |  | Ended       |           | Ended       |  | Ended       |         | Ended      
|                                                                                                       |  | February 1,                                         |           | February 2, |  | February 3, |           | January 29, |  | October 30, |         | January 30,
|                                                                                                       |  | 2003                                                |           | 2002        |  | 2001        |           | 2000        |  | 1999        |         | 1999       
|                                                                                                       |  |                                                     |           |             |  |             |           |             |  |             |         |            
|                                                                                                       |  |                                                    
|                                                                                                       |  | (In thousands, except per share and operating data)
|Statement of Operations Data:                                                                          |  |                                                     |           |             |  |             |           |             |  |             |         |             |  |   |         |   |  |   |         |   |  |   |         |  
|Sales                                                                                                  |  | $                                                   | 1,352,791 |             |  | $           | 1,121,138 |             |  | $           | 756,697 |             |  | $ | 223,748 |   |  | $ | 329,392 |   |  | $ | 465,166 |  
|Cost of sales                                                                                          |  |                                                     | 1,009,491 |             |  |             | 854,035   |             |  |             | 570,995 |             |  |   | 174,808 |   |  |   | 246,865 |   |  |   | 350,475 |  
|                                                                                                       |  |                                                     |           |             |  |             |           |             |  |             |         |             |  |   |         |   |  |   |         |   |  |   |         |  
|Gross profit                                                                                           |  |                                                     | 343,300   |             |  |             | 267,103   |             |  |             | 185,702 |             |  |   | 48,940  |   |  |   | 82,527  |   |  |   | 114,691 |  
|Selling, general and administrative expenses                                                           |  |                                                     | 233,676   |             |  |             | 202,719   |             |  |             | 157,891 |             |  |   | 30,019  |   |  |   | 68,112  |   |  |   | 84,644  |  
|Acquisition incentive bonuses                                                                          |  |                                                     |          |             |  |             |          |             |  |             |        |             |  |   |        |   |  |   | 26,789  |   |  |   |        |  
|Depreciation and amortization                                                                          |  |                                                     | 22,553    |             |  |             | 19,172    |             |  |             | 12,974  |             |  |   | 1,926   |   |  |   | 4,475   |   |  |   | 4,805   |  
|Amortization of goodwill                                                                               |  |                                                     |          |             |  |             | 11,125    |             |  |             | 9,223   |             |  |   | 1,687   |   |  |   |        |   |  |   |        |  
|                                                                                                       |  |                                                     |           |             |  |             |           |             |  |             |         |             |  |   |         |   |  |   |         |   |  |   |         |  
|Operating earnings (loss)                                                                              |  |                                                     | 87,071    |             |  |             | 34,087    |             |  |             | 5,614   |             |  |   | 15,308  |   |  |   | (16,849 | ) |  |   | 25,242  |  
|Interest expense, net                                                                                  |  |                                                     | (630      | )           |  |             | 19,452    |             |  |             | 23,411  |             |  |   | 3,123   |   |  |   | 972     |   |  |   | 3,544   |  
|                                                                                                       |  |                                                     |           |             |  |             |           |             |  |             |         |             |  |   |         |   |  |   |         |   |  |   |         |  
|Earnings (loss) before income taxes                                                                    |  |                                                     | 87,701    |             |  |             | 14,635    |             |  |             | (17,797 | )           |  |   | 12,185  |   |  |   | (17,821 | ) |  |   | 21,698  |  
|Income tax expense (benefit)(1)                                                                        |  |                                                     | 35,297    |             |  |             | 7,675     |             |  |             | (5,836  | )           |  |   | 4,968   |   |  |   |        |   |  |   |        |  
|Pro forma income tax expense (benefit)(2)                                                              |  |                                                     |          |             |  |             |          |             |  |             |        |             |  |   |        |   |  |   | (7,142  | ) |  |   | 8,738   |  
|                                                                                                       |  |                                                     |           |             |  |             |           |             |  |             |         |             |  |   |         |   |  |   |         |   |  |   |         |  
|Net earnings (loss)(3)                                                                                 |  | $                                                   | 52,404    |             |  | $           | 6,960     |             |  | $           | (11,961 | )           |  | $ | 7,217   |   |  | $ | (10,679 | ) |  | $ | 12,960  |  
|                                                                                                       |  |                                                     |           |             |  |             |           |             |  |             |         |             |  |   |         |   |  |   |         |   |  |   |         |  
|Net earnings (loss) per share  basic(3)                                                               |  | $                                                   | 0.93      |             |  | $           | 0.19      |             |  | $           | (0.33   | )           |  | $ | 0.20    |   |  |   |         |   |  |   |         |  
|                                                                                                       |  |                                                     |           |             |  |             |           |             |  |             |         |             |  |   |         |   |  |   |         |   |  |   |         |  
|Weighted average shares outstanding 
    basic                                                        |  |                                                     | 56,289    |             |  |             | 36,009    |             |  |             | 36,009  |             |  |   | 36,009  |   |  |   |         |   |  |   |         |  
|                                                                                                       |  |                                                     |           |             |  |             |           |             |  |             |         |             |  |   |         |   |  |   |         |   |  |   |         |  
|Net earnings (loss) per share 
    diluted(3)                                                         |  | $                                                   | 0.87      |             |  | $           | 0.18      |             |  | $           | (0.33   | )           |  | $ | 0.20    |   |  |   |         |   |  |   |         |  
|                                                                                                       |  |                                                     |           |             |  |             |           |             |  |             |         |             |  |   |         |   |  |   |         |   |  |   |         |  
|Weighted average shares outstanding 
    diluted                                                      |  |                                                     | 60,419    |             |  |             | 39,397    |             |  |             | 36,009  |             |  |   | 36,009  |   |  |   |         |   |  |   |         |  
|                                                                                                       |  |                                                     |           |             |  |             |           |             |  |             |         |             |  |   |         |   |  |   |         |   |  |   |         |  
|Other Financial Data:                                                                                  |  |                                                     |           |             |  |             |           |             |  |             |         |             |  |   |         |   |  |   |         |   |  |   |         |  
|Net earnings (loss) excluding the after-tax
    effect of goodwill amortization(4)                     |  | $                                                   | 52,404    |             |  | $           | 15,373    |             |  | $           | (5,212  | )           |  | $ | 8,295   |   |  | $ | (10,679 | ) |  | $ | 12,960  |  
|Net earnings (loss) per share excluding the
    after-tax effect of goodwill amortization  diluted(4) |  | $                                                   | 0.87      |             |  | $           | 0.39      |             |  | $           | (0.14   | )           |  | $ | 0.23    |   |  |   |         |   |  |   |         |  
|Store Operating Data:                                                                                  |  |                                                     |           |             |  |             |           |             |  |             |         |             |  |   |         |   |  |   |         |   |  |   |         |  
|Stores open at the end of period                                                                       |  |                                                     | 1,231     |             |  |             | 1,038     |             |  |             | 978     |             |  |   | 526     |   |  |   |         |   |  |   | 473     |  
|Comparable store sales increase (decrease)(5)                                                          |  |                                                     | 11.4      | %           |  |             | 32.0      | %           |  |             | (6.7    | )%          |  |   |         |   |  |   |         |   |  |   | 22.4    | %
|Inventory turnover                                                                                     |  |                                                     | 4.9       |             |  |             | 5.2       |             |  |             | 4.6     |             |  |   |         |   |  |   |         |   |  |   | 4.7     |  
|Balance Sheet Data:                                                                                    |  |                                                     |           |             |  |             |           |             |  |             |         |             |  |   |         |   |  |   |         |   |  |   |         |  
|Working capital (deficit)                                                                              |  | $                                                   | 169,682   |             |  | $           | 31,107    |             |  | $           | (1,726  | )           |  | $ | (28,849 | ) |  | $ | (40,409 | ) |  | $ | 23,635  |  
|Total assets                                                                                           |  |                                                     | 803,909   |             |  |             | 606,843   |             |  |             | 509,757 |             |  |   | 307,922 |   |  |   | 124,413 |   |  |   | 121,023 |  
|Total debt                                                                                             |  |                                                     |          |             |  |             | 399,623   |             |  |             | 385,148 |             |  |   | 203,613 |   |  |   |        |   |  |   | 10,000  |  
|Total liabilities                                                                                      |  |                                                     | 255,234   |             |  |             | 610,828   |             |  |             | 530,367 |             |  |   | 316,571 |   |  |   | 140,279 |   |  |   | 91,218  |  
|Stockholders equity (deficit)                                                                         |  |                                                     | 548,675   |             |  |             | (3,985    | )           |  |             | (20,610 | )           |  |   | (8,649  | ) |  |   | (15,866 | ) |  |   | 29,805  |  

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---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Prior to October 30, 1999, when
    Babbages was acquired by Barnes & Noble,
    Babbages was not subject to federal and most state income
    taxes, and its earnings were taxed directly to its members. For
    the fiscal year ended January 30, 1999 and the
    39 weeks ended October 30, 1999, the financial
    statements include only a provision for state income taxes for
    those states in which Babbages was taxed as a
    C corporation. For ease of comparison,
    provisions for state income taxes are included in the pro forma
    income tax expense (benefit), which is described in
    footnote (2). For periods after October 30, 1999, the
    financial statements reflect income tax expense (benefit) as if
    we were taxed as a C corporation on a
    stand-alone basis.
|   
|(2) | For periods prior to October 30, 1999, the
    pro forma income tax expense (benefit) reflects taxes as if we
    had been a C corporation in all jurisdictions
    and includes certain state income taxes in the amount of $582
    and $100 for the year ended January 30, 1999 and the
    39 weeks ended October 30, 1999, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|(3) | Net earnings (loss) for the periods prior to
    October 30, 1999 reflect pro forma taxes as described in
    footnote (2) above.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   
|(4) | Net earnings (loss) excluding the after-tax
    effect of goodwill amortization is presented here to provide
    additional information about our operations. These items should
    be considered in addition to, but not as a substitute for or
    superior to, operating earnings, net earnings, cash flow and
    other measures of financial performance prepared in accordance
    with generally accepted accounting principles. Note 5 of
    Notes to Consolidated Financial Statements of the
    Company presents a reconciliation of net earnings to net
    earnings (loss) excluding the after-tax effect of goodwill
    amortization.                                                                                                                                                              
|   
|(5) | Stores are included in our comparable store sales
    base beginning in the 13th month of operation. Comparable
    store sales for the fiscal year ended February 3, 2001 were
    computed using the first 52 weeks of the 53 week
    fiscal year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 






|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis
    of Financial Condition and Results of Operations

The following discussion should be read in
conjunction with the information contained in our consolidated
financial statements, including the notes thereto. Statements
regarding future economic performance, managements plans
and objectives, and any statements concerning assumptions
related to the foregoing contained in Managements
Discussion and Analysis of Financial Condition and Results of
Operations constitute forward-looking statements. Certain
factors, which may cause actual results to vary materially from
these forward-looking statements, accompany such statements or
appear elsewhere in this Form 10-K, including the factors
disclosed under Business  Risk
Factors.

General

We are the largest specialty retailer of video
game products and PC entertainment software in the United
States. We sell new and used video game hardware, video game
software and accessories, as well as PC entertainment software
and related accessories and other merchandise. As of
February 1, 2003, we operated 1,231 stores, in
49 states, Puerto Rico and Guam, under the names GameStop,
Babbages, Software Etc. and FuncoLand. We also operate an
electronic commerce web site under the name gamestop.com and
publish Game Informer, the industrys largest
circulation multi-platform video game magazine in the United
States.

Our fiscal year is composed of 52 or
53 weeks ending on the Saturday closest to January 31.
The fiscal years ended February 1, 2003, or fiscal
2002, and February 2, 2002, or fiscal
2001, consisted of 52 weeks and the fiscal year ended
February 3, 2001, or fiscal 2000, consisted of
53 weeks.

Our wholly-owned subsidiary Babbages began
operations in November 1996. In October 1999, Babbages was
acquired by, and became a wholly-owned subsidiary of,
Barnes & Noble. In June 2000, Barnes & Noble
acquired Funco and thereafter, Babbages became a
wholly-owned subsidiary of Funco. In December 2000, Funco
changed its name to GameStop, Inc.

Growth in the video game industry is driven by
the introduction of new technology. In October 2000, Sony
introduced PlayStation 2 and in June 2001 Nintendo
introduced Game Boy Advance. Microsoft

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introduced Xbox and Nintendo introduced GameCube
in November 2001. As is typical following the introduction of
new video game platforms, sales of new video game hardware
generally increase as a percentage of sales in the first full
year following introduction. As video game platforms mature, the
sales mix attributable to complementary video game software and
accessories, which generate higher gross margins, generally
increases in the second and third years. The net effect is
generally a decline in gross margins in the first full year
following new platform releases and an increase in gross margins
in the second and third years. Unit sales of maturing video game
platforms are typically also driven by manufacturer-funded
retail price decreases, further driving sales of related
software and accessories. The retail prices for the PlayStation
2, the Xbox and the GameCube were reduced in May 2002, resulting
in an increase in unit sales and sales of the related software
and accessories from fiscal 2001 to fiscal 2002. We expect that
the sales of these platforms and related software and
accessories will increase in the future. In contrast, we expect
the sales of PlayStation, Nintendo 64 and Dreamcast products to
continue to decline as is typically the trend with older video
game platforms when new platforms are anticipated or introduced.


Critical Accounting Policies

The Company believes that the following are its
most significant accounting polices which are important in
determining the reporting of transactions and events.

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, the
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting period. In preparing these
financial statements, management has made its best estimates and
judgments of certain amounts included in the financial
statements, giving due consideration to materiality. Changes in
the estimates and assumptions used by management could have
significant impact on the Companys financial results.
Actual results could differ from those estimates.

Revenue Recognition.Revenue from the sales of the
Companys products is recognized at the time of sale. The
sales of used video game products are recorded at the retail
price charged to the customer. Sales returns (which are not
significant) are recognized at the time returns are made.
Subscription and advertising revenues are recorded upon release
of magazines for sale to consumers and are stated net of sales
discounts. Magazine subscription revenue is recognized on a
straight-line basis over the subscription period.

Merchandise Inventories.Our merchandise inventories are
carried at the lower of cost or market using the average cost
method. Used video game products traded in by customers are
recorded as inventory at the amount of the store credit given to
the customer. In valuing inventory, management is required to
make assumptions regarding the necessity of reserves required to
value potentially obsolete or over-valued items at the lower of
cost or market. Management considers quantities on hand, recent
sales, potential price protections and returns to vendors, among
other factors, when making these assumptions.

Property and Equipment.Property and equipment are carried at
cost less accumulated depreciation and amortization.
Depreciation is computed using the straight-line method over
estimated useful lives (ranging from two to eight years).
Maintenance and repairs are expensed as incurred, while
betterments and major remodeling costs are capitalized.
Leasehold improvements are capitalized and amortized over the
shorter of their estimated useful lives or the terms of the
respective leases (ranging from three to ten years). Capitalized
lease acquisition costs are being amortized over the average
lease terms of the underlying leases. Costs incurred in
purchasing management information systems are capitalized and
included in property and equipment. These costs are amortized
over their estimated useful lives from the date the systems
become operational. The Company periodically reviews its
property and equipment whenever events or changes in
circumstances indicate that their carrying amounts may not be
recoverable or their depreciation or amortization periods should
be accelerated. The Company assesses recoverability based on
several factors, including managements intention with
respect to its stores and those stores projected
undiscounted cash flows. An impairment loss would be recognized
for the amount by which the carrying amount of the assets

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exceeds the present value of their projected cash
flows. No write-downs have been necessary through
February 1, 2003.


Goodwill.Goodwill,
aggregating $339,991, was recorded in the acquisition of Funco
and through the application of push-down accounting
in accordance with SAB 54 in connection with the
acquisition of Babbages by a subsidiary of
Barnes & Noble. Goodwill represents the excess purchase
price over tangible net assets acquired. Effective
February 3, 2002, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 142,
Goodwill and Other Intangible Assets
(SFAS 142). SFAS 142 requires, among other
things, that companies no longer amortize goodwill, but instead
evaluate goodwill for impairment on at least an annual basis. In
accordance with the requirements of SFAS 142, the Company
completed the initial impairment test of the goodwill
attributable to its reporting unit as of February 3, 2002,
and concluded that none of its goodwill was impaired. As part of
this analysis, the Company determined that it has one reporting
unit based upon the similar economic characteristics of its
operations. Fair value of this reporting unit was estimated
using market capitalization methodologies. The Company also
evaluates the goodwill of its reporting unit for impairment at
least annually. The Company elected to perform its annual
impairment test during the fourth quarter of fiscal 2002 and
concluded that none of its goodwill was impaired. Note 5 of
Notes to Consolidated Financial Statements of the
Company provides additional information concerning goodwill.
Prior to the adoption of the provisions of SFAS 142, the
Companys goodwill was amortized on a straight-line basis
over a 30-year period. At February 2, 2002, accumulated
amortization was $22,034.

Results of Operations

The following table sets forth certain income
statement items as a percentage of sales for the periods
indicated:

|                                             |  |             |       |             |  |             |       |   |  |  |       |   
|-------------------------------------------- |  | ----------- | ----- | ----------- |  | ----------- | ----- | - |  |  | ----- | --
|                                             |  | Fiscal Year |       | Fiscal Year |  | Fiscal Year
|                                             |  | Ended       |       | Ended       |  | Ended      
|                                             |  | February 1, |       | February 2, |  | February 3,
|                                             |  | 2003        |       | 2002        |  | 2001       
|                                             |  |             |       |             |  |            
|Statement of Operations Data:                |  |             |       |             |  |             |       |   |  |  |       |   
|Sales                                        |  |             | 100.0 | %           |  |             | 100.0 | % |  |  | 100.0 | % 
|Cost of sales                                |  |             | 74.6  |             |  |             | 76.2  |   |  |  | 75.5  |   
|                                             |  |             |       |             |  |             |       |   |  |  |       |   
|Gross profit                                 |  |             | 25.4  |             |  |             | 23.8  |   |  |  | 24.5  |   
|Selling, general and administrative expenses |  |             | 17.3  |             |  |             | 18.1  |   |  |  | 20.9  |   
|Depreciation and amortization                |  |             | 1.7   |             |  |             | 1.7   |   |  |  | 1.7   |   
|Amortization of goodwill                     |  |             | 0.0   |             |  |             | 1.0   |   |  |  | 1.2   |   
|                                             |  |             |       |             |  |             |       |   |  |  |       |   
|Operating earnings                           |  |             | 6.4   |             |  |             | 3.0   |   |  |  | 0.7   |   
|Interest expense, net                        |  |             | (0.1  | )           |  |             | 1.7   |   |  |  | 3.1   |   
|                                             |  |             |       |             |  |             |       |   |  |  |       |   
|Earnings (loss) before income taxes          |  |             | 6.5   |             |  |             | 1.3   |   |  |  | (2.4  | ) 
|Income tax expense (benefit)                 |  |             | 2.6   |             |  |             | 0.7   |   |  |  | (0.8  | ) 
|                                             |  |             |       |             |  |             |       |   |  |  |       |   
|Net earnings (loss)                          |  |             | 3.9   | %           |  |             | 0.6   | % |  |  | (1.6  | )%
|                                             |  |             |       |             |  |             |       |   |  |  |       |   



| |                                        
| | ---------------------------------------
| | Fiscal 2002 Compared to Fiscal
    2001

Sales increased by $231.7 million, or 20.7%,
from $1,121.1 million in fiscal 2001 to
$1,352.8 million in fiscal 2002. The increase in sales was
primarily attributable to an 11.4% increase in comparable store
sales and the additional sales resulting from 210 new
stores opened since February 2, 2002. The comparable store
sales increase was primarily due to sales of PlayStation 2,
Xbox and GameCube hardware, software and accessories, following
the launch of these new video game platforms in October 2000 and
November 2001, respectively, and the increase in sales of used
video game products. The sales of these new hardware platforms
and related products were partially offset by sales declines in
PlayStation, Nintendo 64, Dreamcast and PC entertainment
software from the prior year.

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Cost of sales increased by $155.5 million,
or 18.2%, from $854.0 million in fiscal 2001 to
$1,009.5 million in fiscal 2002. Cost of sales as a
percentage of net sales decreased from 76.2% in fiscal 2001 to
74.6% in fiscal 2002. This decrease was the result of the shift
in sales mix from lower margin video game hardware to higher
margin PlayStation 2, Game Boy Advance, Xbox and GameCube
video game software and accessories and used video game
products. Sales of new video game hardware generally increase as
a percentage of sales in the first full year following the
introduction of next generation platforms. As video game
platforms mature, the sales mix attributable to complementary
video game software and accessories, which generate higher gross
margins, generally increases in the second and third years. The
net effect is generally a decline in gross margins in the first
full year following new platform releases and an increase in
gross margins in the second and third years.

Selling, general and administrative expenses
increased by $31.0 million, or 15.3%, from
$202.7 million in fiscal 2001 to $233.7 million in
fiscal 2002. The increase was primarily attributable to the
increase in the number of stores in operation and the related
increases in store, distribution, and corporate office operating
expenses. Selling, general and administrative expenses as a
percentage of sales decreased from 18.1% in fiscal 2001 to 17.3%
in fiscal 2002. The decrease in selling, general and
administrative expenses as a percentage of sales was due to the
economies achieved in distribution and corporate operating
expenses and the store operating efficiencies gained as a result
of the increase in comparable store sales and an intense focus
on expense controls.

Depreciation and amortization expense increased
from $19.2 million for fiscal 2001 to $22.6 million in
fiscal 2002. This increase of $3.4 million was due to the
capital expenditures for new stores, management information
systems and distribution center enhancements during the fiscal
year.

Amortization of goodwill was $11.1 million
in fiscal 2001. In accordance with SFAS No. 142, the
related goodwill was not amortized during fiscal 2002.

Interest expense, net of interest income,
decreased by $20.1 million from $19.5 million of net
interest expense in fiscal 2001 to net interest income of
$0.6 million in fiscal 2002. The decrease was attributable
to the repayment of $250.0 million in debt in February 2002
using a portion of the proceeds of the public offering and the
contribution of the remaining $150.0 million in debt to
additional paid-in-capital by Barnes & Noble. The
interest income resulted from the investment of excess cash
balances.

Income tax expense increased by
$27.6 million, from $7.7 million in fiscal 2001 to
$35.3 million in fiscal 2002. The Companys effective
tax rate decreased from 52.4% in fiscal 2001 to 40.2% in fiscal
2002 due to the elimination of the amortization of goodwill in
accordance with SFAS 142. The amortization of goodwill
associated with the Funco acquisition is not deductible for tax
purposes and led to an increase in our effective tax rate in
fiscal 2001 of 10.5% compared to fiscal 2002. See Note 10
of Notes to Consolidated Financial Statements of the
Company for additional information regarding income taxes.

The factors described above led to an increase in
operating earnings of $53.0 million, or 155.4%, from
$34.1 million in fiscal 2001 to $87.1 million in
fiscal 2002 and an increase in net earnings of
$45.4 million, or 648.6%, from $7.0 million in fiscal
2001 to $52.4 million in fiscal 2002.



| |                                        
| | ---------------------------------------
| | Fiscal 2001 Compared to Fiscal
    2000

Sales increased by $364.4 million, or 48.2%,
from $756.7 million in fiscal 2000 to $1,121.1 million
in fiscal 2001. The increase in sales was primarily attributable
to the acquisition of Funco in June 2000 and the related sales
for the full year in fiscal 2001, compared to Funco sales for
only 33 weeks included in fiscal 2000. Sales from the
acquired FuncoLand stores and related magazine and e-commerce
operations accounted for $189.3 million of the
$364.4 million increase in sales. Sales also increased due
to a $137.3 million increase in comparable store sales in
the stores operated by the Company at the time of the Funco
acquisition and opened by the Company in fiscal 2000 subsequent
to the acquisition of Funco, and the additional sales resulting
from 60 net new stores opened in fiscal 2001. Stores are
included in our comparable store sales base beginning in the
thirteenth month of operation. The comparable store sales
increase of 32.0% was primarily due to sales of PlayStation 2,
Game Boy Advance, Xbox and GameCube hardware, software and
accessories, following the

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launch of these new video game platforms in
October 2000, June 2001, and November 2001, respectively. The
sales of these new hardware platforms and related products were
partially offset by sales declines in PlayStation, Nintendo 64,
Dreamcast and PC entertainment software from fiscal 2000 to
fiscal 2001.


Cost of sales increased by $283.0 million,
or 49.6%, from $571.0 million in fiscal 2000 to
$854.0 million in fiscal 2001. Cost of sales as a
percentage of net sales increased from 75.5% in fiscal 2000 to
76.2% in fiscal 2001. The margin gains achieved from the sales
of higher margin used video game products, which resulted from
the acquisition of Funco, were offset by margin declines
associated with the increased sales of lower margin video game
hardware.

Selling, general and administrative expenses
increased by $44.8 million, or 28.4%, from
$157.9 million in fiscal 2000 to $202.7 million in
fiscal 2001. The increase was primarily attributable to the
increase in the number of stores in operation following the
Funco acquisition in June 2000 and the related increases in
store, distribution, and corporate office operating expenses.
Selling, general and administrative expenses as a percentage of
sales decreased from 20.9% in fiscal 2000 to 18.1% in fiscal
2001. The decrease in selling, general and administrative
expenses as a percentage of sales was due to the economies
achieved in distribution and corporate operating expenses after
the integration of the Funco acquisition and the store operating
efficiencies gained as a result of the increase in comparable
store sales.

Depreciation and amortization expense increased
from $13.0 million for fiscal 2000 to $19.2 million in
fiscal 2001. This increase of $6.2 million was due to the
acquisition of Funco and capital expenditures for new stores,
management information systems and distribution center
enhancements.

Amortization of goodwill increased from
$9.2 million in fiscal 2000 to $11.1 million in fiscal
2001 due to the Funco acquisition. The related goodwill was
amortized for the full year in fiscal 2001 compared to
33 weeks in 2000.

Interest expense, net of interest income,
decreased by $3.9 million, or 16.7%, from
$23.4 million in fiscal 2000 to $19.5 million in
fiscal 2001. The decrease was attributable to decreases in
average borrowing rates.

Income tax benefit of $5.8 million was
recorded during fiscal 2000 compared to income tax expense of
$7.7 million in fiscal 2001.

The factors described above led to an increase in
operating earnings of $28.5 million, or 508.9%, from
$5.6 million in fiscal 2000 to $34.1 million in fiscal
2001 and an increase in net earnings of $19.0 million from
a net loss of $12.0 million in fiscal 2000 to net earnings
of $7.0 million in fiscal 2001.

Liquidity and Capital Resources

Subsequent to our acquisition by
Barnes & Noble in October 1999, our operations were
funded by cash flows from operations and advances from
Barnes & Noble. Those advances were treated as an
intercompany loan owed to Barnes & Noble by us. As of
February 2, 2002, we were indebted to Barnes &
Noble in the amount of $399.6 million.

On February 12, 2002, we registered and sold
an aggregate of 20,763,888 shares of our Class A
common stock at a price of $18.00 per share. The aggregate
price of the offering amount registered and sold was
approximately $373.7 million. The net proceeds from the
initial public offering were $347.3 million. A portion of
the proceeds was used to repay $250.0 million of our
indebtedness to Barnes & Noble. Upon closing the
initial public offering, Barnes & Noble contributed the
difference between the aggregate amount of the intercompany
loans and $250.0 million as additional paid-in-capital. The
amount of the capital contribution was $150.0 million. Of
the balance of the proceeds (approximately $97.3 million),
approximately $33.8 million was used for capital
expenditures and the remainder was used for working capital and
general corporate purposes.

The combination of the net proceeds of the
initial public offering of $347.3 million, the contribution
of $150.0 million to additional paid-in-capital by
Barnes & Noble and net earnings of $52.4 million
in fiscal 2002 all led to an increase in stockholders
equity from a deficit of $4.0 million as of
February 2, 2002 to $548.7 million as of
February 1, 2003.

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During fiscal 2002, cash provided by operations
was $92.9 million, compared to cash provided by operations
of $78.1 million in fiscal 2001. In fiscal 2002, cash
provided by operations was primarily due to net income of
$52.4 million, depreciation and amortization of
$22.6 million and an increase in accounts payable of
$41.2 million, which were offset partially by an increase
in merchandise inventories of $23.0 million. In fiscal
2001, cash provided by operations was primarily due to net
income of $7.0 million, depreciation and amortization of
$19.2 million, amortization of goodwill of
$11.1 million and an increase in accounts payable of
$65.4 million, which were offset partially by an increase
in merchandise inventories of $29.5 million. The increases
in merchandise inventories and accounts payable experienced in
fiscal 2002 and fiscal 2001 were the result of the overall
growth of the Company.

Cash used in investing activities was
$40.3 million and $20.5 million during fiscal 2002 and
fiscal 2001, respectively. During fiscal 2002 and 2001, we had
capital expenditures of $39.5 million and
$20.5 million, respectively, to open new stores, remodel
existing stores, and invest in distribution and information
systems. Our future capital requirements will depend on the
number of new stores we open and the timing of those openings
within a given fiscal year. We opened 210 stores in fiscal 2002
and expect to open between 235 and 265 stores in fiscal 2003.
Projected capital expenditures for fiscal 2003 are
$45 million, to be used primarily to fund new store
openings.

In March 2003, the Board of Directors authorized
a common stock repurchase program for the purchase of up to
$50.0 million of the Companys Class A common
shares. The repurchased shares will be held in treasury.

On February 13, 2002, we entered into a
senior secured revolving credit facility with a syndicate of
banks, with Fleet National Bank as administrative agent. The
credit facility is a three-year revolving facility in an
aggregate principal amount of $75.0 million. Drawings under
the credit facility will be subject to satisfaction of customary
conditions precedent, including absence of a default and
continued accuracy of representations and warranties.

Loans incurred under the credit facility will be
maintained from time to time, at our option, as (1) base
rate loans which bear interest at the base rate (defined in the
credit facility as the higher of (a) the administrative
agents announced base rate or (b) 1/2 of 1% in excess
of the federal funds effective rate, each as in effect from time
to time) or (2) London Interbank Office Rate
(LIBOR) loans bearing interest at the LIBOR rate for
the applicable interest period, in each case plus an applicable
interest margin. The applicable interest margin will initially
be 0.25% for base rate loans and 1.75% for LIBOR rate loans, and
in each case will thereafter vary depending on our fixed charge
coverage ratio.

We are required to reduce any outstanding amounts
under the credit facility to zero for 30 consecutive days
each year during the three-month period of December through
February.

We are subject to certain affirmative and
negative covenants contained in the credit facility, including,
but not limited to, covenants that restrict, subject to
specified exceptions: the incurrence of additional indebtedness
and other obligations and the granting of additional liens,
mergers, acquisitions, investments and disposition of assets,
dividends, engaging in certain transactions with affiliates,
capital expenditures, and the use of proceeds of the credit
facility. There are also covenants relating to compliance with
certain laws, payment of taxes and rights and maintenance of
insurance and financial reporting. In addition, the credit
facility requires us to maintain compliance with certain
specified financial ratios, including covenants relating to
minimum fixed charge coverage and maximum leverage.

Events of default under the credit facility
include (subject to grace periods and notice provisions in
certain circumstances) non-payment of principal, interest or
fees, violation of covenants, inaccuracy of any representation
or warranty in any material respect, default under or
acceleration of certain other indebtedness, bankruptcy and
insolvency events, certain judgments and other liabilities,
certain environmental claims and a change of control. If an
event of default occurs, the lenders under the credit facility
will be entitled to take various actions, including the
acceleration of amounts due under the credit facility and
requiring that all such amounts be immediately paid in full.

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Our obligations under the credit facility are
secured by all assets owned by us and our subsidiaries. Based on
our current operating plans, we believe that our current cash
balances, cash generated from our operating activities and
available borrowings under our credit facility will be
sufficient to fund our operations, store expansion and
remodeling activities and corporate capital expenditure programs
for at least the next 12 months. There have been no
borrowings under the credit facility.

The following table sets forth our contractual
obligations as of February 1, 2003:

|                                                                                    |  |                        |       |           |  |           |      |           |  |         |      |  |  |   |      |  |  |   |      | 
|----------------------------------------------------------------------------------- |  | ---------------------- | ----- | --------- |  | --------- | ---- | --------- |  | ------- | ---- |  |  | - | ---- |  |  | - | ---- | 
|                                                                                    |  |                       
|                                                                                    |  | Payments Due by Period
|                                                                                    |  |                       
|                                                                                    |  |                        |       | Less Than |  |           |      | More Than
|Contractual Obligations                                                             |  | Total                  |       | 1 Year    |  | 1-3 Years |      | 3-5 Years |  | 5 Years
|                                                                                    |  |                        |       |           |  |           |      |           |  |        
|Long-Term Debt                                                                      |  | $                      |      |           |  | $         |     |           |  | $       |     |  |  | $ |     |  |  | $ |     | 
|Capital Lease Obligations                                                           |  | $                      |      |           |  | $         |     |           |  | $       |     |  |  | $ |     |  |  | $ |     | 
|Operating Leases                                                                    |  | $                      | 206.0 |           |  | $         | 51.0 |           |  | $       | 73.0 |  |  | $ | 48.0 |  |  | $ | 34.0 | 
|Purchase Obligations                                                                |  | $                      |      |           |  | $         |     |           |  | $       |     |  |  | $ |     |  |  | $ |     | 
|Other Long-Term Liabilities Reflected on the
    Companys Balance Sheet Under GAAP |  | $                      |      |           |  | $         |     |           |  | $       |     |  |  | $ |     |  |  | $ |     | 
|                                                                                    |  |                        |       |           |  |           |      |           |  |         |      |  |  |   |      |  |  |   |      | 
|Total                                                                               |  | $                      | 206.0 |           |  | $         | 51.0 |           |  | $       | 73.0 |  |  | $ | 48.0 |  |  | $ | 34.0 | 
|                                                                                    |  |                        |       |           |  |           |      |           |  |         |      |  |  |   |      |  |  |   |      | 

In addition to minimum rentals, the operating
leases generally require the Company to pay all insurance, taxes
and other maintenance costs and may provide for percentage
rentals. Percentage rentals are based on sales performance in
excess of specified minimums at various stores.

As of February 1, 2003, we had no other
commercial commitments such as standby letters of credit,
guarantees, or standby repurchase obligations outstanding.

Off Balance Sheet Arrangements

As of February 1, 2003, the Company had no
off balance sheet arrangements.

Impact of Inflation

We do not believe that inflation has had a
material effect on our net sales or results of operations.

Recent Accounting Pronouncements

In April 2002, the Financial Accounting Standards
Board (FASB) issued Statement No. 145,
Rescission of FASB Statements No. 4, 44, and 64,
Amendment of FASB Statement No. 13, and Technical
Corrections (SFAS 145). SFAS 145
eliminates the extraordinary accounting treatment for reporting
gains and losses from the extinguishment of debt, and formally
amends other existing authoritative pronouncements to make
various technical corrections, clarify meanings or describe
their applicability under changed conditions. The provisions of
SFAS 145 became effective for the Company during fiscal
year 2002. The Company does not believe the adoption of
SFAS 145 will have a material impact on its financial
position or results of operations.

In June 2002, the FASB issued
SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities. This standard requires
costs associated with exit or disposal activities to be
recognized when they are incurred and applies prospectively to
such activities that are initiated after December 31, 2002.
The provisions of this standard are not expected to have a
material effect on the Companys future results of
operations or financial condition.

In November 2002, the FASB issued Interpretation
No. 45, Guarantors Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others. Interpretation No. 45
requires the recognition of liabilities for guarantees that are
issued or modified subsequent to December 31, 2002. The
liabilities should reflect the fair value, at inception, of the
guarantors obligations to stand ready to perform, in the
event that the specified triggering events or conditions occur.
We are currently

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evaluating the provisions of this interpretation.
However, we do not believe they will have a material effect on
the Companys future results of operations or financial
condition. The Interpretation also requires disclosure of
accounting policies and methodologies with respect to warranty
accruals, as well as a reconciliation of the change in these
accruals for the reporting period. Product warranty accruals as
of February 1, 2003 and February 2, 2002, as well as
the related charges for 2002, were not material.


In November 2002, the Emerging Issues Task Force
(EITF) reached a consensus on Issue 02-16
Accounting by a Customer (Including a Reseller) for
Certain Consideration Received from a Vendor, addressing
the accounting of cash consideration received by a customer from
a vendor, including vendor rebates and refunds. The consensus
reached states that consideration received should be presumed to
be a reduction of the prices of the vendors products or
services and should therefore be shown as a reduction of cost of
sales in the income statement of the customer. The presumption
could be overcome if the vendor receives an identifiable benefit
in exchange for the consideration or the consideration
represents a reimbursement of a specific incremental
identifiable cost incurred by the customer in selling the
vendors product or service. If one of these conditions is
met, the cash consideration should be characterized as revenues
or a reduction of such costs, as applicable, in the income
statement of the customer. The consensus reached also concludes
that rebates or refunds based on the customer achieving a
specified level of purchases should be recognized as a reduction
of cost of sales based on a systematic and rational allocation
of the consideration to be received relative to the transactions
that mark the progress of the customer toward earning the rebate
or refund, provided the amounts are probable and reasonably
estimable. EITF Issue 02-16 is effective prospectively for
arrangements entered into after December 31, 2002.
Management believes that the impact of the implementation of
this new standard will decrease the Companys net earnings
for fiscal 2003 by approximately $0.03 per share, although
it will have no impact on our operating cash flows.

In December 2002, the FASB issued
SFAS No. 148 Accounting for Stock-Based
Compensation  Transition and Disclosure 
an Amendment of SFAS No. 123. This statement
amends SFAS No. 123, Accounting for Stock-Based
Compensation, to provide alternative methods of transition
for a voluntary change to the fair value-based method of
accounting for stock-based employee compensation. In addition,
this statement amends the disclosure requirements of
SFAS 123 to require prominent disclosures in both annual
and interim financial statements about the method of accounting
for stock-based employee compensation and the effect of the
method used on reported results. The disclosure provisions of
SFAS 148 are effective for fiscal years ending after
December 15, 2002. The Company has incorporated the
expanded disclosures into the Notes to Consolidated
Financial Statements of the Company.

In January 2003, the FASB issued Interpretation
No. 46, Consolidation of Variable Interest
Entities. Interpretation No. 46 requires
unconsolidated variable interest entities to be consolidated by
their primary beneficiaries if the entities do not effectively
disperse the risks and rewards of ownership among their owners
and other parties involved. The provisions of Interpretation
No. 46 are applicable immediately to all variable interest
entities created after January 31, 2003 and variable
interest entities in which an enterprise obtains an interest
after that date, and for variable interest entities created
before that date, the provisions are effective July 1,
2003. We are currently evaluating the provisions of this
interpretation. However, we do not believe they will have a
material impact on our accounting for existing investments.

Seasonality

Our business, like that of many retailers, is
seasonal, with the major portion of sales and operating profit
realized during the fourth quarter which includes the holiday
selling season. Results for any quarter are not necessarily
indicative of the results that may be achieved for a full fiscal
year. Quarterly results may fluctuate materially depending upon,
among other factors, the timing of new product introductions and
new store openings, sales contributed by new stores, increases
or decreases in comparable store sales, adverse weather
conditions, shifts in the timing of certain holidays or
promotions and changes in our merchandise mix.

28



---



##### Table of Contents








|         |                                                               
|-------- | --------------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures
    About Market Risk

We do not use derivative financial instruments to
hedge interest rate exposure. We limit our interest rate risks
by investing our excess cash balances in short-term,
highly-liquid instruments with an original maturity of three
months or less. We do not expect any material losses from our
invested cash balances and we believe that our interest rate
exposure is modest.

We do not have any foreign currency exposure as
all of our business is transacted in United States currency.






|        |                                                             
|------- | ------------------------------------------------------------
|Item 8. | Consolidated Financial Statements and
    Supplementary Data

See Item 15(a)(1) and (2) of this
Form 10-K.






|        |                                                                                         
|------- | ----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements with
    Accountants on Accounting and Financial Disclosure

None.




PART III






|         |                                                          
|-------- | ---------------------------------------------------------
|Item 10. | Directors and Executive Officers of the
    Registrant(*)






|         |                          
|-------- | -------------------------
|Item 11. | Executive Compensation(*)






|         |                                                                      
|-------- | ---------------------------------------------------------------------
|Item 12. | Security Ownership of Certain Beneficial
    Owners and Management(*)

Equity Compensation Plan Information

Information for our equity compensation plans in
effect as of February 1, 2003, is as follows:

|                                                               |  |                      |            |                      |  |                           |                |  |  |  |           | 
|-------------------------------------------------------------- |  | -------------------- | ---------- | -------------------- |  | ------------------------- | -------------- |  |  |  | --------- | 
|                                                               |  |                      |            |                      |  | Number of securities     
|                                                               |  | Number of securities |            |                      |  | remaining available for  
|                                                               |  | to be issued         |            | Weighted-average     |  | future issuance under    
|                                                               |  | upon exercise of     |            | exercise price of    |  | equity compensation plans
|                                                               |  | outstanding options, |            | outstanding options, |  | (excluding securities    
|Plan category                                                  |  | warrants and rights  |            | warrants and rights  |  | reflected in column (a)) 
|                                                               |  |                      |            |                      |  |                          
|                                                               |  | (a)                  |            | (b)                  |  | (c)                      
|Equity compensation plans approved by security
    holders     |  |                      | 12,760,000 |                      |  |                           | $8.83          |  |  |  | 1,954,000 | 
|Equity compensation plans not approved by
    security holders |  |                      | 0          |                      |  |                           | not applicable |  |  |  | 0         | 
|                                                               |  |                      |            |                      |  |                           |                |  |  |  |           | 
|Total                                                          |  |                      | 12,760,000 |                      |  |                           | $8.83          |  |  |  | 1,954,000 | 
|                                                               |  |                      |            |                      |  |                           |                |  |  |  |           | 

On March 26, 2003, an additional 919,350
options to purchase shares of our Class A common stock were
granted under the 2001 Incentive Plan at an exercise price of
$11.80 per share. These options vest in equal increments
over three years and expire on March 25, 2013.






|         |                                                      
|-------- | -----------------------------------------------------
|Item 13. | Certain Relationships and Related
    Transactions(*)





---

(*) The information not otherwise provided
herein that is required by Items 10, 11, 12 and 13
will be set forth in the definitive proxy statement relating to
the 2003 Annual Meeting of Stockholders of the Company, which is
to be filed with the SEC pursuant to Regulation 14A under
the Securities Exchange Act of 1934, as amended. This definitive
proxy statement relates to a meeting of stockholders involving
the election of directors and the portions therefrom required to
be set forth in this Form 10-K by Items 10, 11, 12 and
13 are incorporated herein by reference pursuant to General
Instruction G(3) to Form 10-K.


29



---



##### Table of Contents






PART IV






|         |                        
|-------- | -----------------------
|Item 14. | Controls and Procedures

(a) Evaluation of Disclosure Controls and
Procedures

Within the 90-day period prior to the date of
this report, the Company carried out an evaluation of the
effectiveness of the design and operation of its disclosure
controls and procedures pursuant to the requirements of the
Securities Exchange Act of 1934 (the Exchange Act),
under the supervision and with the participation of the
Companys Chief Executive Officer and Chief Financial
Officer. Based on that evaluation, the Companys Chief
Executive Officer and Chief Financial Officer concluded that the
Companys disclosure controls and procedures are effective.
Disclosure controls and procedures are controls and procedures
designed to ensure that information required to be disclosed in
the Companys reports filed or submitted pursuant to the
Exchange Act is recorded, processed, summarized and reported
within the appropriate time periods.

(b) Changes in Internal Controls

There have been no significant changes to the
Companys internal controls or in other factors that could
significantly affect these controls subsequent to the date of
the Companys last evaluation.






|         |                                                                     
|-------- | --------------------------------------------------------------------
|Item 15. | Exhibits, Financial Statement Schedules,
    and Reports on Form 8-K

(a) The following documents are filed as a
part of this Form 10-K



| |                                                                                   
| | ----------------------------------------------------------------------------------
| | (1) Index and Consolidated Financial
    Statements                               
|
| | (2) Financial Statement Schedules
    required to be filed by Item 8 of this form:



| |                                                                                                                                                                                                                                                                                                                                                         
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The following financial statement schedule for
    the 52 weeks ended February 1, 2003, the 52 weeks
    ended February 2, 2002 and the 53 weeks ended
    February 3, 2001 is filed as part of this report on
    Form 10-K and should be read in conjunction with our
    Consolidated Financial Statements appearing elsewhere in this
    Form 10-K:

Schedule II  Valuation and
Qualifying Accounts

For the 52 weeks ended February 1,
2003, the 52 weeks ended February 2, 2002 and the
53 weeks ended February 3, 2001

|                                                |  |                |        |            |  |                  |        |            |  |            |        |  |  |   |        |  |  |   |        | 
|----------------------------------------------- |  | -------------- | ------ | ---------- |  | ---------------- | ------ | ---------- |  | ---------- | ------ |  |  | - | ------ |  |  | - | ------ | 
|                                                |  | Balance at     |        | Charged to |  | Charged to Other |        | Write-offs |  | Balance at
|                                                |  | Beginning      |        | Costs and  |  | Accounts-        |        | Net of     |  | End of    
|                                                |  | of Period      |        | Expenses   |  | Accounts Payable |        | Recoveries |  | Period    
|                                                |  |                |        |            |  |                  |        |            |  |           
|                                                |  |               
|                                                |  | (In thousands)
|Inventory Reserve, deducted from asset accounts |  |                |        |            |  |                  |        |            |  |            |        |  |  |   |        |  |  |   |        | 
|52 Weeks Ended February 1, 2003                 |  | $              | 10,400 |            |  | $                | 14,071 |            |  | $          | 10,214 |  |  | $ | 22,888 |  |  | $ | 11,797 | 
|52 Weeks Ended February 2, 2002                 |  |                | 8,398  |            |  |                  | 16,578 |            |  |            | 7,878  |  |  |   | 22,454 |  |  |   | 10,400 | 
|53 Weeks Ended February 3, 2001                 |  |                | 7,494  |            |  |                  | 10,649 |            |  |            | 5,314  |  |  |   | 15,059 |  |  |   | 8,398  | 

All other schedules are omitted because they are
not applicable.

(b) Reports on Form 8-K



| |      
| | -----
| | None.

(c) Exhibits

30



---



##### Table of Contents





| |                                                                
| | ---------------------------------------------------------------
| | The following exhibits are filed as part of this
    Form 10-K:

|        |       |             |  |                                                                                                                                                                                                                            
|------- | ----- | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |            
|Number  |       | Description
|        |       |            
|        | 3.1   |             |  | Amended and Restated Certificate of
    Incorporation.(1)                                                                                                                                                                  
|        | 3.2   |             |  | Bylaws.(1)                                                                                                                                                                                                                 
|        | 10.1  |             |  | Separation Agreement, dated as of January 1,
    2002, between Barnes & Noble and GameStop Corp.(2)                                                                                                                        
|        | 10.2  |             |  | Tax Disaffiliation Agreement, dated as of
    January 1, 2002, between Barnes & Noble and
    GameStop Corp.(1)                                                                                                            
|        | 10.3  |             |  | Insurance Agreement, dated as of January 1,
    2002, between Barnes & Noble and GameStop Corp.(1)                                                                                                                         
|        | 10.4  |             |  | Operating Agreement, dated as of January 1,
    2002, between Barnes & Noble and GameStop Corp.(1)                                                                                                                         
|        | 10.5  |             |  | 2001 Incentive Plan.(2)                                                                                                                                                                                                    
|        | 10.6  |             |  | Lease, dated as of March 6, 1997, between
    RREEF Mid-Cities Industrial L.P. and Babbages Etc. LLC.(1)                                                                                                                  
|        | 10.7  |             |  | First Amendment to Lease, dated as of
    December 30, 1999, between RREEF Mid-Cities Industrial L.P.
    and Babbages Etc. LLC.(1)                                                                                       
|        | 10.8  |             |  | Registration Rights Agreement, dated as of
    January 1, 2002, between Barnes & Noble and
    GameStop Corp.(1)                                                                                                           
|        | 10.9  |             |  | Revolving Credit Agreement, dated as of
    February 19, 2002, among GameStop Corp., Fleet National
    Bank, as Administrative Agent, the Banks party thereto and Fleet
    Securities, Inc., as Arranger.(3)             
|        | 10.10 |             |  | Security Agreement, dated as of February 19,
    2002, by GameStop Corp. in favor of Fleet National Bank, as
    secured party and as Administrative Agent.(3)                                                             
|        | 10.11 |             |  | Subsidiary Guaranty, dated as of
    February 19, 2002, by and among GameStop, Inc.,
    Babbages Etc. LLC, Sunrise Publications, Inc. and
    GameStop.com, Inc. and Fleet National Bank, as Administrative
    Agent.(3)
|        | 10.12 |             |  | Securities Collateral Pledge Agreement, dated as
    of February 19, 2002, between GameStop Corp. and Fleet
    National Bank, as Administrative Agent.(3)                                                                 
|        | 10.13 |             |  | Patent and Trademark Securities Agreement, dated
    as of February 19, 2002, between GameStop Corp. and Fleet
    National Bank, as secured party and as Administrative Agent.(3)                                         
|        | 21.1  |             |  | Subsidiaries.(4)                                                                                                                                                                                                           
|        | 23.1  |             |  | Consent of BDO Seidman, LLP                                                                                                                                                                                                
|        | 99.1  |             |  | Certification of Chief Executive Officer pursuant
    to 18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.                                                                 
|        | 99.2  |             |  | Certification of Chief Financial Officer pursuant
    to 18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.                                                                 



---



|    |                                                                                                                                                                                 
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Incorporated by reference to the
    Registrants Amendment No. 3 to Form S-1 filed
    with the Securities and Exchange Commission on January 24,
    2002 (No. 333-68294).    
|   
|(2) | Incorporated by reference to the
    Registrants Amendment No. 4 to Form S-1 filed
    with the Securities and Exchange Commission on February 5,
    2002 (No. 333-68294).    
|   
|(3) | Incorporated by reference to the
    Registrants Form 10-Q for the fiscal quarter ended
    May 4, 2002 filed with the Securities and Exchange
    Commission on June 13, 2002.
|   
|(4) | Incorporated by reference to the
    Registrants Amendment No. 1 to Form S-1 filed
    with the Securities and Exchange Commission on October 15,
    2001 (No. 333-68294).    

31



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##### Table of Contents






SIGNATURES

Pursuant to the requirements of Section 13
or 15(d) of the Securities Exchange Act of 1934, the registrant
has duly caused this Form 10-K to be signed on its behalf
by the undersigned, thereunto duly authorized.



| |               
| | --------------
| | GAMESTOP CORP.



| |     |                        
| | --- | -----------------------
| | By: | /s/ R. RICHARD FONTAINE

| |                          
| | -------------------------
| |                          
| | R. Richard Fontaine      
| | Chairman of the Board and
| | Chief Executive Officer  

Date: May 2, 2003

Pursuant to the requirements of the Securities
Exchange Act of 1934, this Form 10-K has been signed below
by the following persons on behalf of the registrant and in the
capacities and on the date indicated.

|                                               |  |                                                                                                                                    |  |             |  | 
|---------------------------------------------- |  | ---------------------------------------------------------------------------------------------------------------------------------- |  | ----------- |  | 
|                                               |  |                                                                                                                                    |  |            
|Name                                           |  | Capacity                                                                                                                           |  | Date       
|                                               |  |                                                                                                                                    |  |            
|                                              
|/s/ R. RICHARD FONTAINER. Richard Fontaine     |  | Chairman of the Board, Chief Executive Officer
    and Director (Principal Executive Officer)                                      |  | May 2, 2003
|                                              
|/s/ DAVID W. CARLSONDavid W. Carlson           |  | Executive Vice President,
    Chief Financial Officer
    and Assistant Secretary (Principal
    Accounting and Financial Officer) |  | May 2, 2003
|                                              
|/s/ DANIEL A. DEMATTEODaniel A. DeMatteo       |  | President and Chief Operating
    Officer and Director                                                                             |  | May 2, 2003
|                                              
|/s/ MICHAEL N. ROSENMichael N. Rosen           |  | Secretary and Director                                                                                                             |  | May 2, 2003
|                                              
|/s/ LEONARD RIGGIOLeonard Riggio               |  | Director                                                                                                                           |  | May 2, 2003
|                                              
|/s/ STEPHANIE M. SHERNStephanie M. Shern       |  | Director                                                                                                                           |  | May 2, 2003
|                                              
|/s/ EDWARD A. VOLKWEINEdward A. Volkwein       |  | Director                                                                                                                           |  | May 2, 2003
|                                              
|/s/ GERALD R. SZCZEPANSKIGerald R. Szczepanski |  | Director                                                                                                                           |  | May 2, 2003

32



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##### Table of Contents






CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,


AS ADOPTED PURSUANT TO


SECTION 302 OF THE SARBANES-OXLEY ACT OF
2002


I, R. Richard Fontaine, certify that:

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

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

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

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



| |                                                                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) designed such disclosure controls and
    procedures to ensure that material information relating to the
    registrant, including its consolidated subsidiaries, is made
    known to us by others within those entities, particularly during
    the period in which this annual report is being prepared;
|
| | b) evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and                                                                                                      
|
| | c) presented in this annual report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our evaluation as of the Evaluation Date;                                                                                                                                

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



| |                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) all significant deficiencies in the
    design or operation of internal controls which could adversely
    affect the registrants ability to record, process,
    summarize and report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | b) any fraud, whether or not material, that
    involves management or other employees who have a significant
    role in the registrants internal controls; and                                                                                                                                                    

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



| |                          
| | -------------------------
| | /s/ R. RICHARD FONTAINE  
| |                          
| | R. Richard Fontaine      
| | Chairman of the Board and
| | Chief Executive Officer  

Date: May 2, 2003

33



---



##### Table of Contents



CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,


AS ADOPTED PURSUANT TO


SECTION 302 OF THE SARBANES-OXLEY ACT OF
2002


I, David W. Carlson, certify that:

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

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

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

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



| |                                                                                                                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) designed such disclosure controls and
    procedures to ensure that material information relating to the
    registrant, including its consolidated subsidiaries, is made
    known to us by others within those entities, particularly during
    the period in which this annual report is being prepared;
|
| | b) evaluated the effectiveness of the
    registrants disclosure controls and procedures as of a
    date within 90 days prior to the filing date of this annual
    report (the Evaluation Date); and                                                                                                      
|
| | c) presented in this annual report our
    conclusions about the effectiveness of the disclosure controls
    and procedures based on our evaluation as of the Evaluation Date;                                                                                                                                

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



| |                                                                                                                                                                                                                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) all significant deficiencies in the
    design or operation of internal controls which could adversely
    affect the registrants ability to record, process,
    summarize and report financial data and have identified for the
    registrants auditors any material weaknesses in internal
    controls; and
|
| | b) any fraud, whether or not material, that
    involves management or other employees who have a significant
    role in the registrants internal controls; and                                                                                                                                                    

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



| |                             
| | ----------------------------
| | /s/ DAVID W. CARLSON        
| |                             
| | David W. Carlson            
| | Executive Vice President and
| | Chief Financial Officer     

Date: May 2, 2003

34



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##### Table of Contents






INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS

|                                                      |                                              |      |     |     | 
|----------------------------------------------------- | -------------------------------------------- | ---- | --- | --- | 
|                                                      |                                              | Page
|                                                      |                                              |     
|GameStop Corp. Consolidated Financial
    Statements: |                                              |      |     |    
|Report of Independent Certified Public Accountants    |                                              |      | F-2 |    
|Consolidated Financial Statements:                    |                                              |      |     |    
|                                                      | Balance Sheets                               |      |     | F-3 | 
|                                                      | Statements of Operations                     |      |     | F-4 | 
|                                                      | Statements of Stockholders Equity (Deficit) |      |     | F-5 | 
|                                                      | Statements of Cash Flows                     |      |     | F-6 | 
|                                                      | Notes to Consolidated Financial Statements   |      |     | F-7 | 

F-1



---



##### Table of Contents



REPORT OF INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS

To the Board of Directors and the Stockholders of

GameStop Corp.


Grapevine, Texas


We have audited the accompanying consolidated
balance sheets of GameStop Corp. as of February 1, 2003 and
February 2, 2002 and the related consolidated statements of
operations, stockholders equity (deficit), and cash flows
for the 52 weeks ended February 1, 2003, 52 weeks
ended February 2, 2002, and 53 weeks ended
February 3, 2001. We have also audited the schedule listed
in Item 15(a)(2) of this Form 10-K. These financial
statements and the schedule are the responsibility of the
Companys management. Our responsibility is to express an
opinion on these financial statements and the schedule based on
our audits.

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

In our opinion, the consolidated financial
statements referred to above present fairly, in all material
respects, the financial position of GameStop Corp. as of
February 1, 2003 and February 2, 2002 and the results
of its operations and its cash flows for the 52 weeks ended
February 1, 2003, 52 weeks ended February 2,
2002, and 53 weeks ended February 3, 2001 in
conformity with accounting principles generally accepted in the
United States of America.

Also, in our opinion, the schedule presents
fairly, in all material respects, the information set forth
therein.

As discussed in Note 1 to the consolidated
financial statements, effective February 3, 2002, GameStop
Corp. changed its method of accounting for goodwill.



| |                     
| | --------------------
| | /s/ BDO SEIDMAN, LLP
| |                     
| | BDO Seidman, LLP    

Dallas, Texas

March 17, 2003


F-2



---



##### Table of Contents



GAMESTOP CORP.

CONSOLIDATED BALANCE SHEETS

|                                                   |                                                                                                                 |                                                          |         |             |         |  |         |         |         |  
|-------------------------------------------------- | --------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------- | ------- | ----------- | ------- |  | ------- | ------- | ------- | -
|                                                   |                                                                                                                 | February 1,                                              |         | February 2,
|                                                   |                                                                                                                 | 2003                                                     |         | 2002       
|                                                   |                                                                                                                 |                                                          |         |            
|                                                   |                                                                                                                 |                                                         
|                                                   |                                                                                                                 | (In thousands)                                          
|ASSETS                                            
|                                                  
|Current assets:                                    |                                                                                                                 |                                                          |         |             |         |  |         |        
|                                                   | Cash and cash equivalents                                                                                       |                                                          | $       | 232,030     |         |  | $       | 80,750  |        
|                                                   | Receivables, net                                                                                                |                                                          |         | 6,893       |         |  |         | 5,930   |        
|                                                   | Merchandise inventories                                                                                         |                                                          |         | 161,369     |         |  |         | 138,351 |        
|                                                   | Prepaid expenses and other current assets                                                                       |                                                          |         | 10,127      |         |  |         | 8,255   |        
|                                                   | Deferred taxes                                                                                                  |                                                          |         | 6,034       |         |  |         | 3,418   |        
|                                                   |                                                                                                                 |                                                          |         |             |         |  |         |        
|                                                   |                                                                                                                 | Total current assets                                     |         |             | 416,453 |  |         |         | 236,704 |  
|                                                   |                                                                                                                 |                                                          |         |             |         |  |         |        
|Property and equipment:                            |                                                                                                                 |                                                          |         |             |         |  |         |        
|                                                   | Leasehold improvements                                                                                          |                                                          |         | 39,927      |         |  |         | 27,898  |        
|                                                   | Fixtures and equipment                                                                                          |                                                          |         | 84,726      |         |  |         | 57,579  |        
|                                                   |                                                                                                                 |                                                          |         |             |         |  |         |        
|                                                   |                                                                                                                 |                                                          | 124,653 |             |         |  | 85,477  |        
|                                                   | Less accumulated depreciation and amortization                                                                  |                                                          |         | 56,259      |         |  |         | 33,854  |        
|                                                   |                                                                                                                 |                                                          |         |             |         |  |         |        
|                                                   |                                                                                                                 | Net property and equipment                               |         |             | 68,394  |  |         |         | 51,623  |  
|                                                   |                                                                                                                 |                                                          |         |             |         |  |         |        
|Goodwill, net                                      |                                                                                                                 |                                                          | 317,957 |             |         |  | 317,957 |        
|Other noncurrent assets                            |                                                                                                                 |                                                          | 1,105   |             |         |  | 559     |        
|                                                   |                                                                                                                 |                                                          |         |             |         |  |         |        
|                                                   |                                                                                                                 | Total other assets                                       |         |             | 319,062 |  |         |         | 318,516 |  
|                                                   |                                                                                                                 |                                                          |         |             |         |  |         |        
|                                                   |                                                                                                                 | Total assets                                             |         | $           | 803,909 |  |         | $       | 606,843 |  
|                                                   |                                                                                                                 |                                                          |         |             |         |  |         |        
|LIABILITIES AND STOCKHOLDERS EQUITY
    (DEFICIT)
|                                                  
|Current liabilities:                               |                                                                                                                 |                                                          |         |             |         |  |         |        
|                                                   | Accounts payable                                                                                                |                                                          | $       | 160,378     |         |  | $       | 148,597 |        
|                                                   | Accrued liabilities                                                                                             |                                                          |         | 65,779      |         |  |         | 55,610  |        
|                                                   | Accrued income taxes payable                                                                                    |                                                          |         | 20,614      |         |  |         | 1,390   |        
|                                                   |                                                                                                                 |                                                          |         |             |         |  |         |        
|                                                   |                                                                                                                 | Total current liabilities                                |         |             | 246,771 |  |         |         | 205,597 |  
|                                                   |                                                                                                                 |                                                          |         |             |         |  |         |        
|Payable to Barnes &
    Noble, Inc.                |                                                                                                                 |                                                          |        |             |         |  | 399,623 |        
|Deferred taxes                                     |                                                                                                                 |                                                          | 5,591   |             |         |  | 3,065   |        
|Other long-term liabilities                        |                                                                                                                 |                                                          | 2,872   |             |         |  | 2,543   |        
|                                                   |                                                                                                                 |                                                          |         |             |         |  |         |        
|                                                   |                                                                                                                 |                                                          | 8,463   |             |         |  | 405,231 |        
|                                                   |                                                                                                                 |                                                          |         |             |         |  |         |        
|                                                   |                                                                                                                 | Total liabilities                                        |         |             | 255,234 |  |         |         | 610,828 |  
|                                                   |                                                                                                                 |                                                          |         |             |         |  |         |        
|Stockholders equity (deficit):                    |                                                                                                                 |                                                          |         |             |         |  |         |        
|                                                   | Preferred stock  authorized
    5,000 shares; no shares issued or outstanding                                  |                                                          |         |            |         |  |         |        |        
|                                                   | Class A common stock 
    $.001 par value; authorized 300,000 shares;
    21,050 shares issued and outstanding |                                                          |         | 21          |         |  |         |        |        
|                                                   | Class B common stock 
    $.001 par value; authorized 100,000 shares;
    36,009 shares issued and outstanding |                                                          |         | 36          |         |  |         | 36      |        
|                                                   | Additional paid-in-capital                                                                                      |                                                          |         | 493,998     |         |  |         | (6,237  | )      
|                                                   | Retained earnings                                                                                               |                                                          |         | 54,620      |         |  |         | 2,216   |        
|                                                   |                                                                                                                 |                                                          |         |             |         |  |         |        
|                                                   |                                                                                                                 | Total stockholders equity (deficit)                     |         |             | 548,675 |  |         |         | (3,985  | )
|                                                   |                                                                                                                 |                                                          |         |             |         |  |         |        
|                                                   |                                                                                                                 | Total liabilities and stockholders equity
    (deficit) |         | $           | 803,909 |  |         | $       | 606,843 |  
|                                                   |                                                                                                                 |                                                          |         |             |         |  |         |        

See accompanying notes to consolidated financial
statements.

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##### Table of Contents



GAMESTOP CORP.

CONSOLIDATED STATEMENTS OF
OPERATIONS

|                                                      |                                                         |                                       |           |             |  |             |           |         |  |   |         |         |  
|----------------------------------------------------- | ------------------------------------------------------- | ------------------------------------- | --------- | ----------- |  | ----------- | --------- | ------- |  | - | ------- | ------- | -
|                                                      |                                                         | 52 Weeks                              |           | 52 Weeks    |  | 53 Weeks   
|                                                      |                                                         | Ended                                 |           | Ended       |  | Ended      
|                                                      |                                                         | February 1,                           |           | February 2, |  | February 3,
|                                                      |                                                         | 2003                                  |           | 2002        |  | 2001       
|                                                      |                                                         |                                       |           |             |  |            
|                                                      |                                                         |                                      
|                                                      |                                                         | (In thousands, except per share data)
|Sales                                                 |                                                         | $                                     | 1,352,791 |             |  | $           | 1,121,138 |         |  | $ | 756,697 |        
|Cost of sales                                         |                                                         |                                       | 1,009,491 |             |  |             | 854,035   |         |  |   | 570,995 |        
|                                                      |                                                         |                                       |           |             |  |             |           |         |  |   |         |        
|                                                      | Gross profit                                            |                                       |           | 343,300     |  |             |           | 267,103 |  |   |         | 185,702 |  
|Selling, general and administrative expenses          |                                                         |                                       | 233,676   |             |  |             | 202,719   |         |  |   | 157,891 |        
|Depreciation and amortization                         |                                                         |                                       | 22,553    |             |  |             | 19,172    |         |  |   | 12,974  |        
|Amortization of goodwill                              |                                                         |                                       |          |             |  |             | 11,125    |         |  |   | 9,223   |        
|                                                      |                                                         |                                       |           |             |  |             |           |         |  |   |         |        
|                                                      | Operating earnings                                      |                                       |           | 87,071      |  |             |           | 34,087  |  |   |         | 5,614   |  
|Interest income                                       |                                                         |                                       | (1,998    | )           |  |             | (123      | )       |  |   | (58     | )      
|Interest expense                                      |                                                         |                                       | 1,368     |             |  |             | 19,575    |         |  |   | 23,469  |        
|                                                      |                                                         |                                       |           |             |  |             |           |         |  |   |         |        
|                                                      | Earnings (loss) before income tax expense
    (benefit) |                                       |           | 87,701      |  |             |           | 14,635  |  |   |         | (17,797 | )
|Income tax expense (benefit)                          |                                                         |                                       | 35,297    |             |  |             | 7,675     |         |  |   | (5,836  | )      
|                                                      |                                                         |                                       |           |             |  |             |           |         |  |   |         |        
|                                                      | Net earnings (loss)                                     |                                       | $         | 52,404      |  |             | $         | 6,960   |  |   | $       | (11,961 | )
|                                                      |                                                         |                                       |           |             |  |             |           |         |  |   |         |        
|Net earnings (loss) per common share 
    basic      |                                                         | $                                     | 0.93      |             |  | $           | 0.19      |         |  | $ | (0.33   | )      
|                                                      |                                                         |                                       |           |             |  |             |           |         |  |   |         |        
|Weighted average shares of common
    stock  basic   |                                                         |                                       | 56,289    |             |  |             | 36,009    |         |  |   | 36,009  |        
|                                                      |                                                         |                                       |           |             |  |             |           |         |  |   |         |        
|Net earnings (loss) per common share 
    diluted    |                                                         | $                                     | 0.87      |             |  | $           | 0.18      |         |  | $ | (0.33   | )      
|                                                      |                                                         |                                       |           |             |  |             |           |         |  |   |         |        
|Weighted average shares of common
    stock  diluted |                                                         |                                       | 60,419    |             |  |             | 39,397    |         |  |   | 36,009  |        
|                                                      |                                                         |                                       |           |             |  |             |           |         |  |   |         |        

See accompanying notes to consolidated financial
statements.

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##### Table of Contents



GAMESTOP CORP.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS
EQUITY (DEFICIT)

|                                                                         |  |                |        |            |  |          |    |         |  |         |        |           |  |       |    |  |  |   |         |   |  |   |         |   |  |   |         |  
|------------------------------------------------------------------------ |  | -------------- | ------ | ---------- |  | -------- | -- | ------- |  | ------- | ------ | --------- |  | ----- | -- |  |  | - | ------- | - |  | - | ------- | - |  | - | ------- | -
|                                                                         |  |                |        |            |  |          |    |        
|                                                                         |  | Common Stock   |        | Additional |  | Retained |    |        
|                                                                         |  |                |        | Paid in    |  | Earnings |    |        
|                                                                         |  | Shares         |        | Class A    |  | Shares   |    | Class B |  | Capital |        | (Deficit) |  | Total
|                                                                         |  |                |        |            |  |          |    |         |  |         |        |           |  |      
|                                                                         |  |                |        |           
|                                                                         |  | (In thousands) |        |           
|Balance at January 29, 2000                                              |  |                |       |            |  | $        |   |         |  |         | 36,009 |           |  | $     | 36 |  |  | $ | (15,902 | ) |  | $ | 7,217   |   |  | $ | (8,649  | )
|Net loss for the 53 weeks ended
    February 3, 2001                     |  |                |       |            |  |          |   |         |  |         |       |           |  |       |   |  |  |   |        |   |  |   | (11,961 | ) |  |   | (11,961 | )
|                                                                         |  |                |        |            |  |          |    |         |  |         |        |           |  |       |    |  |  |   |         |   |  |   |         |   |  |   |         |  
|Balance at February 3, 2001                                              |  |                |       |            |  |          |   |         |  |         | 36,009 |           |  |       | 36 |  |  |   | (15,902 | ) |  |   | (4,744  | ) |  |   | (20,610 | )
|Additional acquisition payments due to former
    owners                 |  |                |       |            |  |          |   |         |  |         |       |           |  |       |   |  |  |   | 9,665   |   |  |   |        |   |  |   | 9,665   |  
|Net earnings for the 52 weeks ended
    February 2, 2002                 |  |                |       |            |  |          |   |         |  |         |       |           |  |       |   |  |  |   |        |   |  |   | 6,960   |   |  |   | 6,960   |  
|                                                                         |  |                |        |            |  |          |    |         |  |         |        |           |  |       |    |  |  |   |         |   |  |   |         |   |  |   |         |  
|Balance at February 2, 2002                                              |  |                |       |            |  |          |   |         |  |         | 36,009 |           |  |       | 36 |  |  |   | (6,237  | ) |  |   | 2,216   |   |  |   | (3,985  | )
|Shares issued in public offering                                         |  |                | 20,764 |            |  |          | 21 |         |  |         |       |           |  |       |   |  |  |   | 347,318 |   |  |   |        |   |  |   | 347,339 |  
|Exercise of employee stock options (including tax
    benefit of $1,906) |  |                | 286    |            |  |          |   |         |  |         |       |           |  |       |   |  |  |   | 2,917   |   |  |   |        |   |  |   | 2,917   |  
|Capital contribution from Barnes &
    Noble, Inc.                       |  |                |       |            |  |          |   |         |  |         |       |           |  |       |   |  |  |   | 150,000 |   |  |   |        |   |  |   | 150,000 |  
|Net earnings for the 52 weeks ended
    February 1, 2003                 |  |                |       |            |  |          |   |         |  |         |       |           |  |       |   |  |  |   |        |   |  |   | 52,404  |   |  |   | 52,404  |  
|                                                                         |  |                |        |            |  |          |    |         |  |         |        |           |  |       |    |  |  |   |         |   |  |   |         |   |  |   |         |  
|Balance at February 1, 2003                                              |  |                | 21,050 |            |  | $        | 21 |         |  |         | 36,009 |           |  | $     | 36 |  |  | $ | 493,998 |   |  | $ | 54,620  |   |  | $ | 548,675 |  
|                                                                         |  |                |        |            |  |          |    |         |  |         |        |           |  |       |    |  |  |   |         |   |  |   |         |   |  |   |         |  

See accompanying notes to consolidated financial
statements.

F-5



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##### Table of Contents



GAMESTOP CORP.

CONSOLIDATED STATEMENTS OF CASH
FLOWS

|                                                 |                                                                                                                |                                                                                              |                                                                            |             |        |             |        |         |        |         |       |          |        |         |  
|------------------------------------------------ | -------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------- | ----------- | ------ | ----------- | ------ | ------- | ------ | ------- | ----- | -------- | ------ | ------- | -
|                                                 |                                                                                                                | 52 Weeks                                                                                     |                                                                            | 52 Weeks    |        | 53 Weeks   
|                                                 |                                                                                                                | Ended                                                                                        |                                                                            | Ended       |        | Ended      
|                                                 |                                                                                                                | February 1,                                                                                  |                                                                            | February 2, |        | February 3,
|                                                 |                                                                                                                | 2003                                                                                         |                                                                            | 2002        |        | 2001       
|                                                 |                                                                                                                |                                                                                              |                                                                            |             |        |            
|                                                 |                                                                                                                |                                                                                             
|                                                 |                                                                                                                | (In thousands)                                                                              
|Cash flows from operating activities:            |                                                                                                                |                                                                                              |                                                                            |             |        |             |        |         |        |         |       |         
|                                                 | Net earnings (loss)                                                                                            |                                                                                              | $                                                                          | 52,404      |        |             | $      | 6,960   |        |         | $     | (11,961  | )     
|                                                 | Adjustments to reconcile net earnings (loss) to
    net cash flows provided by (used in) operating activities: |                                                                                              |                                                                            |             |        |             |        |         |        |         |       |          |       
|                                                 |                                                                                                                | Depreciation and amortization                                                                |                                                                            |             | 22,553 |             |        |         | 19,172 |         |       |          | 12,974 |        
|                                                 |                                                                                                                | Amortization of goodwill                                                                     |                                                                            |             |       |             |        |         | 11,125 |         |       |          | 9,223  |        
|                                                 |                                                                                                                | Amortization of loan cost                                                                    |                                                                            |             | 242    |             |        |         |       |         |       |          |       |        
|                                                 |                                                                                                                | Deferred taxes                                                                               |                                                                            |             | (90    | )           |        |         | 319    |         |       |          | 2,090  |        
|                                                 |                                                                                                                | Tax benefit realized from exercise of stock
    options by employees                         |                                                                            |             | 1,906  |             |        |         |       |         |       |          |       |        
|                                                 |                                                                                                                | Loss (gain) on disposal of property and
    equipment                                        |                                                                            |             | 205    |             |        |         | 1,035  |         |       |          | (112   | )      
|                                                 |                                                                                                                | Increase in other long-term liabilities for
    scheduled rent increases in long-term leases |                                                                            |             | 329    |             |        |         | 347    |         |       |          | 326    |        
|                                                 |                                                                                                                | Changes in operating assets and liabilities, net                                             |                                                                            |             |        |             |        |         |        |         |       |          |        |        
|                                                 |                                                                                                                |                                                                                              | Receivables, net                                                           |             |        | (963        | )      |         |        | (2,204  | )     |          |        | (769    | )
|                                                 |                                                                                                                |                                                                                              | Merchandise inventories                                                    |             |        | (23,018     | )      |         |        | (29,498 | )     |          |        | (10,800 | )
|                                                 |                                                                                                                |                                                                                              | Prepaid expenses and other current assets                                  |             |        | (1,872      | )      |         |        | 5,427   |       |          |        | (1,986  | )
|                                                 |                                                                                                                |                                                                                              | Accounts payable, accrued liabilities and accrued
    income taxes payable |             |        | 41,174      |        |         |        | 65,436  |       |          |        | 518     |  
|                                                 |                                                                                                                |                                                                                              |                                                                            |             |        |             |        |         |        |         |       |         
|                                                 |                                                                                                                |                                                                                              | Net cash flows provided by (used in) operating
    activities              |             |        | 92,870      |        |         |        | 78,119  |       |          |        | (497    | )
|                                                 |                                                                                                                |                                                                                              |                                                                            |             |        |             |        |         |        |         |       |         
|Cash flows from investing activities:            |                                                                                                                |                                                                                              |                                                                            |             |        |             |        |         |        |         |       |         
|                                                 | Purchase of property and equipment                                                                             |                                                                                              |                                                                            | (39,529     | )      |             |        | (20,462 | )      |         |       | (25,131  | )     
|                                                 | Acquisition of Funco, Inc., net of cash received                                                               |                                                                                              |                                                                            |            |        |             |        |        |        |         |       | (156,764 | )     
|                                                 | Net (increase) decrease in other noncurrent assets                                                             |                                                                                              |                                                                            | (788        | )      |             |        | (23     | )      |         |       | 1,227    |       
|                                                 |                                                                                                                |                                                                                              |                                                                            |             |        |             |        |         |        |         |       |         
|                                                 | Net cash flows used in investing activities                                                                    |                                                                                              |                                                                            | (40,317     | )      |             |        | (20,485 | )      |         |       | (180,668 | )     
|                                                 |                                                                                                                |                                                                                              |                                                                            |             |        |             |        |         |        |         |       |         
|Cash flows from financing activities:            |                                                                                                                |                                                                                              |                                                                            |             |        |             |        |         |        |         |       |         
|                                                 | Issuance of 20,764 shares relating to the
    public offering, net of the related expenses                     |                                                                                              |                                                                            | 347,339     |        |             |        |        |        |         |       |         |       
|                                                 | Issuance of shares relating to employee stock
    options                                                      |                                                                                              |                                                                            | 1,011       |        |             |        |        |        |         |       |         |       
|                                                 | Repayment of debt due to Barnes &
    Noble, Inc.                                                              |                                                                                              |                                                                            | (250,000    | )      |             |        |        |        |         |       |         |       
|                                                 | Increase in payable to Barnes & Noble,
    Inc. attributable to Funco, Inc. purchase                           |                                                                                              |                                                                            |            |        |             |        |        |        |         |       | 159,144  |       
|                                                 | Net increase in other payable to
    Barnes & Noble, Inc.                                                      |                                                                                              |                                                                            | 377         |        |             |        | 14,475  |        |         |       | 24,050   |       
|                                                 |                                                                                                                |                                                                                              |                                                                            |             |        |             |        |         |        |         |       |         
|                                                 | Net cash flows provided by financing activities                                                                |                                                                                              |                                                                            | 98,727      |        |             |        | 14,475  |        |         |       | 183,194  |       
|                                                 |                                                                                                                |                                                                                              |                                                                            |             |        |             |        |         |        |         |       |         
|                                                 | Net increase in cash and cash equivalents                                                                      |                                                                                              |                                                                            | 151,280     |        |             |        | 72,109  |        |         |       | 2,029    |       
|Cash and cash equivalents at beginning of period |                                                                                                                |                                                                                              | 80,750                                                                     |             |        |             | 8,641  |         |        |         | 6,612 |         
|                                                 |                                                                                                                |                                                                                              |                                                                            |             |        |             |        |         |        |         |       |         
|Cash and cash equivalents at end of period       |                                                                                                                | $                                                                                            | 232,030                                                                    |             |        | $           | 80,750 |         |        | $       | 8,641 |         
|                                                 |                                                                                                                |                                                                                              |                                                                            |             |        |             |        |         |        |         |       |         

See accompanying notes to consolidated financial
statements.

F-6



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##### Table of Contents



GAMESTOP CORP.

NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS



|   |                                               
|-- | ----------------------------------------------
|1. | Summary of Significant Accounting
    Policies



| |                                         
| | ----------------------------------------
| | Background and Basis of
    Presentation

GameStop Corp. (GameStop or the
Company) was incorporated under the laws of the
State of Delaware in August 2001 as a holding company for
GameStop, Inc. GameStop is a majority-owned subsidiary of
Barnes & Noble, Inc. (Barnes &
Noble).

GameStop, which began operations within its
wholly-owned subsidiary, Babbages Etc. LLC
(Babbages) in November 1996, is principally
engaged in the sale of video game systems and software, personal
computer entertainment software and related accessories through
its GameStop, Babbages, Software Etc., and FuncoLand trade
names, a web site (gamestop.com) and Game Informer
magazine. The Company operates its business as a single segment.
The Companys stores, which totaled 1,231 at
February 1, 2003, are located in major regional shopping
malls and strip centers in 49 states, Puerto Rico and Guam.

During June 2000, Barnes & Noble
acquired Funco, Inc. (Funco), a publicly traded
company on the NASDAQ National Market and, thereafter, through a
corporate restructuring, Babbages became a wholly-owned
subsidiary of Funco. In December 2000, the name of Funco was
changed to GameStop, Inc.

In February 2002, the Company completed a public
offering of 20,764 shares of Class A common stock at
$18.00 per share (the Offering). The net
proceeds of the Offering, after deducting applicable issuance
costs and expenses, were $347,339. A portion of the net proceeds
was used to repay $250,000 of intercompany debt owed to
Barnes & Noble. Additionally, upon the effective date
of the Offering, Barnes & Noble made a capital
contribution of $150,000 for the remaining balance of the
intercompany debt.

Upon the effective date of the Offering, the
Companys Board of Directors approved the authorization of
5,000 shares of preferred stock, 300,000 shares of
Class A common stock and 100,000 shares of
Class B common stock. At the same time, the Companys
common stock outstanding was converted to 36,009 shares of
Class B common stock. The consolidated financial statements
and related net earnings (loss) per common share reflect the
authorized number of shares as if the shares were authorized on
January 30, 2000.



| |              
| | -------------
| | Consolidation

The consolidated financial statements include the
accounts of GameStop and its wholly-owned subsidiaries. All
significant intercompany accounts and transactions have been
eliminated in consolidation. All dollar and share amounts in the
consolidated financial statements and notes to the consolidated
financial statements are stated in thousands unless otherwise
indicated.



| |         
| | --------
| | Year-End

The Companys fiscal year is composed of the
52 or 53 weeks ending on the Saturday closest to the last
day of January. Fiscal 2002 consisted of the 52 weeks ending on
February 1, 2003. Fiscal 2001 consisted of the
52 weeks ending on February 2, 2002. Fiscal 2000
consisted of the 53 weeks ending on February 3, 2001.



| |                          
| | -------------------------
| | Cash and Cash Equivalents

The Company considers all short-term,
highly-liquid instruments purchased with an original maturity of
three months or less to be cash equivalents. The Companys
cash and cash equivalents are carried at cost, which
approximates market value, and consist primarily of time
deposits and money market investment accounts.

F-7



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##### Table of Contents



GAMESTOP CORP.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)



| |                        
| | -----------------------
| | Merchandise Inventories

Our merchandise inventories are carried at the
lower of cost or market using the average cost method. Used
video game products traded in by customers are recorded as
inventory at the amount of the store credit given to the
customer. In valuing inventory, management is required to make
assumptions regarding the necessity of reserves required to
value potentially obsolete or over-valued items at the lower of
cost or market. Management considers quantities on hand, recent
sales, potential price protections and returns to vendors, among
other factors, when making these assumptions.



| |                       
| | ----------------------
| | Property and Equipment

Property and equipment are carried at cost less
accumulated depreciation and amortization. Depreciation is
computed using the straight-line method over estimated useful
lives (ranging from two to eight years). Maintenance and repairs
are expensed as incurred, while betterments and major remodeling
costs are capitalized. Leasehold improvements are capitalized
and amortized over the shorter of their estimated useful lives
or the terms of the respective leases (ranging from three to ten
years). Capitalized lease acquisition costs are being amortized
over the average lease terms of the underlying leases. Costs
incurred in purchasing management information systems are
capitalized and included in property and equipment; these costs
are amortized over their estimated useful lives from the date
the systems become operational.

The Company periodically reviews its property and
equipment whenever events or changes in circumstances indicate
that their carrying amounts may not be recoverable or their
depreciation or amortization periods should be accelerated. The
Company assesses recoverability based on several factors,
including managements intention with respect to its stores
and those stores projected undiscounted cash flows. An
impairment loss would be recognized for the amount by which the
carrying amount of the assets exceeds the present value of their
projected cash flows. No write-downs have been necessary through
February 1, 2003.



| |         
| | --------
| | Goodwill

Goodwill, aggregating $339,991, was recorded in
the acquisition of Funco and through the application of
push-down accounting in accordance with Securities
and Exchange Commission Staff Accounting Bulletin No. 54
(SAB 54) in connection with the acquisition of
Babbages by a subsidiary of Barnes & Noble.
Goodwill represents the excess purchase price over tangible net
assets acquired.

Effective February 3, 2002, the Company
adopted the provisions of Statement of Financial Accounting
Standards No. 142, Goodwill and Other Intangible
Assets (SFAS 142). SFAS 142
requires, among other things, that companies no longer amortize
goodwill, but instead evaluate goodwill for impairment on at
least an annual basis.

In accordance with the requirements of
SFAS 142, the Company completed the initial impairment test
of the goodwill attributable to its reporting unit as of
February 3, 2002, and concluded that none of its goodwill
was impaired. As part of this analysis, the Company determined
that it has one reporting unit based upon the similar economic
characteristics of its operations. Fair value of this reporting
unit was estimated using market capitalization methodologies.
The Company also evaluates the goodwill of its reporting unit
for impairment at least annually. The Company elected to perform
its annual impairment test during the fourth quarter of fiscal
2002 and concluded that none of its goodwill was impaired.
Note 5 provides additional information concerning goodwill.

Prior to the adoption of the provisions of
SFAS 142, the Companys goodwill was amortized on a
straight-line basis over a 30-year period. At February 2,
2002, accumulated amortization was $22,034.

F-8



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##### Table of Contents



GAMESTOP CORP.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)



| |                    
| | -------------------
| | Revenue Recognition

Revenue from the sales of the Companys
products is recognized at the time of sale. The sales of used
video game products are recorded at the retail price charged to
the customer. Sales returns (which are not significant) are
recognized at the time returns are made.

Subscription and advertising revenues are
recorded upon release of magazines for sale to consumers and are
stated net of sales discounts. Magazine subscription revenue is
recognized on a straight-line basis over the subscription period.



| |                     
| | --------------------
| | Pre-Opening Expenses

All costs associated with the opening of new
stores are expensed as incurred. Pre-opening expenses are
included in selling, general and administrative expenses in the
accompanying consolidated statements of operations.



| |                      
| | ---------------------
| | Closed Store Expenses

Upon a formal decision to close or relocate a
store, the Company charges unrecoverable costs to expense. Such
costs include the net book value of abandoned fixtures and
leasehold improvements and a provision for future lease
obligations, net of expected sublease recoveries. Costs
associated with store closings are included in selling, general
and administrative expenses in the accompanying consolidated
statements of operations.



| |                     
| | --------------------
| | Advertising Expenses

The Company expenses advertising for newspapers
and other media when the advertising takes place. Advertising
expenses for newspapers and other media during the 52 weeks
ended February 1, 2003, 52 weeks ended
February 2, 2002 and the 53 weeks ended
February 3, 2001, were $4,258, $838 and $228, respectively.



| |             
| | ------------
| | Income Taxes

Following the closing of the Offering,
Barnes & Noble owned less than 80% of GameStop and,
accordingly, is no longer permitted to consolidate
GameStops operations for income tax purposes. Accordingly,
the financial statements reflect income tax expense as if
GameStop had filed separate income tax returns as a
C corporation on a stand-alone basis. As a result,
the Company accounts for income taxes in accordance with the
provisions of SFAS 109 Accounting for Income
Taxes (SFAS 109). SFAS 109 utilizes
an asset and liability approach, and deferred taxes are
determined based on the estimated future tax effect of
differences between the financial reporting and tax bases of
assets and liabilities using enacted tax rates.

For the periods prior to the Offering, GameStop
was included in the consolidated federal tax return of
Barnes & Noble. The income tax provisions
(benefits) recorded in the financial statements for these
periods flowed through the payable to Barnes & Noble.



| |                                         
| | ----------------------------------------
| | Net Earnings (Loss) Per Common
    Share

Net earnings (loss) per common share is presented
in accordance with Statement of Financial Accounting Standards
No. 128, Earnings Per Share
(SFAS 128). Basic earnings (loss) per common
share is computed using the weighted average number of common
shares outstanding during the period and excludes any dilutive
effects of the Companys outstanding options.

Diluted earnings per common share is computed
using the weighted average number of common and dilutive common
shares outstanding during the period. Due to the Companys
net loss for the 53 weeks ended February 3, 2001,
potentially dilutive securities have been excluded from the
computation for that period, as

F-9



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##### Table of Contents



GAMESTOP CORP.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

their effect is anti-dilutive. Note 3
provides additional information regarding net earnings (loss)
per common share.



| |              
| | -------------
| | Stock Options

Statement of Financial Accounting Standards
No. 123, Accounting for Stock Based
Compensation, (SFAS 123) encourages but
does not require companies to record compensation cost for stock
based employee compensation plans at fair value. As permitted
under Statement of Financial Accounting Standards No. 148,
Accounting for Stock Based Compensation 
Transition and Disclosure, (SFAS 148)
which amended SFAS No. 123, the Company has elected to
continue to account for stock based compensation using the
intrinsic value method prescribed in Accounting Principles Board
Opinion No. 25, Accounting for Stock Issued to
Employees, and related interpretations. Accordingly,
compensation cost for stock options is measured as the excess,
if any, of the quoted market price of the Companys stock
at the date of the grant over the amount an employee must pay to
acquire the stock. Note 11 provides additional information
regarding the Companys stock option plan.

The following table illustrates the effect on net
earnings (loss) and net earnings (loss) per common share if the
Company had applied the fair value recognition provisions of
SFAS 123 to stock based employee compensation for the
options granted under its plans:

|                                                                                                                                                     |  |                                       |        |             |  |             |        |   |  |   |         |  
|---------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------- | ------ | ----------- |  | ----------- | ------ | - |  | - | ------- | -
|                                                                                                                                                     |  | 52 Weeks                              |        | 52 Weeks    |  | 53 Weeks   
|                                                                                                                                                     |  | Ended                                 |        | Ended       |  | Ended      
|                                                                                                                                                     |  | February 1,                           |        | February 2, |  | February 3,
|                                                                                                                                                     |  | 2003                                  |        | 2002        |  | 2001       
|                                                                                                                                                     |  |                                       |        |             |  |            
|                                                                                                                                                     |  |                                      
|                                                                                                                                                     |  | (In thousands, except per share data)
|Net earnings (loss), as reported                                                                                                                     |  | $                                     | 52,404 |             |  | $           | 6,960  |   |  | $ | (11,961 | )
|Deduct: Total stock based employee compensation
    expense determined under fair value based method for all awards,
    net of related tax effects* |  |                                       | 8,287  |             |  |             | 9,016  |   |  |   | 595     |  
|                                                                                                                                                     |  |                                       |        |             |  |             |        |   |  |   |         |  
|Pro forma net earnings (loss)                                                                                                                        |  | $                                     | 44,117 |             |  | $           | (2,056 | ) |  | $ | (12,556 | )
|                                                                                                                                                     |  |                                       |        |             |  |             |        |   |  |   |         |  
|Net earnings (loss) per common share 
    basic, as reported                                                                                        |  | $                                     | 0.93   |             |  | $           | 0.19   |   |  | $ | (0.33   | )
|                                                                                                                                                     |  |                                       |        |             |  |             |        |   |  |   |         |  
|Net earnings (loss) per common share 
    basic, pro forma                                                                                          |  | $                                     | 0.78   |             |  | $           | (0.06  | ) |  | $ | (0.35   | )
|                                                                                                                                                     |  |                                       |        |             |  |             |        |   |  |   |         |  
|Net earnings (loss) per common share 
    diluted, as reported                                                                                      |  | $                                     | 0.87   |             |  | $           | 0.18   |   |  | $ | (0.33   | )
|                                                                                                                                                     |  |                                       |        |             |  |             |        |   |  |   |         |  
|Net earnings (loss) per common share 
    diluted, pro forma                                                                                        |  | $                                     | 0.73   |             |  | $           | (0.06  | ) |  | $ | (0.35   | )
|                                                                                                                                                     |  |                                       |        |             |  |             |        |   |  |   |         |  



---



|  |                                                                                                                                                                                                                                             
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|* | Amounts include compensation expense associated
    with options to acquire approximately 350 shares of
    Barnes & Noble which were issued to GameStop employees
    in January 2000 pursuant to the Barnes & Noble stock
    option plan.

F-10



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##### Table of Contents



GAMESTOP CORP.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

The weighted-average fair value of the options
granted during the 52 weeks ended February 1, 2003,
the 52 weeks ended February 2, 2002, and the
53 weeks ended February 3, 2001 were estimated at
$8.08, $2.75 and $1.60, respectively, using the Black-Scholes
option pricing model with the following assumptions:

|                        |  |             |      |             |  |             |      |   |  |  |      |  
|----------------------- |  | ----------- | ---- | ----------- |  | ----------- | ---- | - |  |  | ---- | -
|                        |  | 52 Weeks    |      | 52 Weeks    |  | 53 Weeks   
|                        |  | Ended       |      | Ended       |  | Ended      
|                        |  | February 1, |      | February 2, |  | February 3,
|                        |  | 2003        |      | 2002        |  | 2001       
|                        |  |             |      |             |  |            
|Volatility              |  |             | 61.9 | %           |  |             | 61.1 | % |  |  | 61.1 | %
|Risk-free interest rate |  |             | 4.60 | %           |  |             | 4.97 | % |  |  | 5.56 | %
|Expected life (years)   |  |             | 6.0  |             |  |             | 6.0  |   |  |  | 6.0  |  
|Expected dividend yield |  |             | 0    | %           |  |             | 0    | % |  |  | 0    | %



| |                 
| | ----------------
| | 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, the
disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues
and expenses during the reporting period. In preparing these
financial statements, management has made its best estimates and
judgments of certain amounts included in the financial
statements, giving due consideration to materiality. Changes in
the estimates and assumptions used by management could have
significant impact on the Companys financial results.
Actual results could differ from those estimates.



| |                                         
| | ----------------------------------------
| | Fair Values of Financial
    Instruments

The carrying values of cash and cash equivalents
reported in the accompanying consolidated balance sheets
approximate fair value due to the short-term maturities of these
assets.



| |                                              
| | ---------------------------------------------
| | Recently Issued Accounting
    Pronouncements

In April 2002, the Financial Accounting Standards
Board (FASB) issued Statement No. 145,
Rescission of FASB Statements No. 4, 44, and 64,
Amendment of FASB Statement No. 13, and Technical
Corrections (SFAS 145). SFAS 145
eliminates the extraordinary accounting treatment for reporting
gains and losses from the extinguishment of debt, and formally
amends other existing authoritative pronouncements to make
various technical corrections, clarify meanings or describe
their applicability under changed conditions. The provisions of
SFAS 145 became effective for the Company during fiscal
year 2002. The Company does not believe the adoption of
SFAS 145 will have a material impact on its financial
position or results of operations.

In June 2002, the FASB issued
SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities. This standard requires
costs associated with exit or disposal activities to be
recognized when they are incurred and applies prospectively to
such activities that are initiated after December 31, 2002.
The provisions of this standard are not expected to have a
material effect on the Companys future results of
operations or financial condition.

In November 2002, the FASB issued
Interpretation No. 45, Guarantors Accounting
and Disclosure Requirements for Guarantees, Including Indirect
Guarantees of Indebtedness of Others. Interpretation
No. 45 requires the recognition of liabilities for
guarantees that are issued or modified subsequent to
December 31, 2002. The liabilities should reflect the fair
value, at inception, of the guarantors obligations to
stand ready to perform, in the event that the specified
triggering events or conditions occur. We are currently
evaluating the provisions of this interpretation. However, we do
not believe they will have a material effect on

F-11



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##### Table of Contents



GAMESTOP CORP.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

the Companys future results of operations
or financial condition. The Interpretation also requires
disclosure of accounting policies and methodologies with respect
to warranty accruals, as well as a reconciliation of the change
in these accruals for the reporting period. Product warranty
accruals as of February 1, 2003 and February 2, 2002,
as well as the related charges for 2002, were not material.

In November 2002, the FASB Emerging Issues Task
Force (Task Force) issued EITF Issue 02-16,
Accounting by a Customer (including a Reseller) for Cash
Consideration Received from a Vendor, (EITF
02-16). EITF 02-16 addresses the following two issues:
(i) the classification in a resellers financial
statements of cash consideration received from a vendor
(Issue 1); and (ii) the timing of
recognition by a reseller of a rebate or refund from a vendor
that is contingent upon achieving a specific cumulative level of
purchases or remaining a customer for a specified time period
(Issue 2). Issue 1 stipulates that cash
consideration received from a vendor is presumed to be a
reduction of the prices of the vendors products and
should, therefore, be recognized as a reduction of cost of
merchandise sold when recognized in the resellers
financial statements. However, that presumption is overcome when
the consideration is either (a) a payment for assets or
services delivered to the vendor, in which case the cash
consideration should be recognized as revenue (or other income,
as appropriate) when recognized in the resellers income
statement, or (b) a reimbursement of a specific,
incremental, identifiable cost incurred by the reseller in
selling the vendors products, in which case the cash
consideration should be characterized as a reduction of that
cost when recognized in the resellers income statement.
Issue 2 states that vendor rebates should be recognized on
a systematic and rational allocation of the cash consideration
offered to each of the underlying transactions that results in
progress by the reseller toward earning the rebate, provided the
amounts are probable and reasonably estimable. Issue 1 is
effective prospectively for all new arrangements, including
modifications of existing arrangements, entered into after
December 31, 2002. Issue 2 is effective prospectively for
all new arrangements initiated after November 21, 2002.

The Company and its vendors participate in
cooperative advertising programs and other vendor marketing
programs in which the vendors provide the Company with cash
consideration in exchange for marketing and advertising the
vendors products. Any change to our accounting for
cooperative advertising arrangements or other vendor marketing
programs could result in consideration received from our vendors
being used to lower product costs in inventory rather than as an
offset to our marketing and advertising costs. Such a change is
expected to impact the timing of recognition of cash
consideration received from our vendors and could increase our
gross profit and net advertising expenses. The Company believes
the implementation of EITF 02-16 will reduce net earnings by
approximately $0.03 per diluted share during fiscal year
2003, although it will have no impact on our operating cash
flows.

In December 2002, the FASB issued SFAS 148.
This statement amends SFAS 123, Accounting for
Stock-Based Compensation, to provide alternative methods
of transition for a voluntary change to the fair value-based
method of accounting for stock-based employee compensation. In
addition, this statement amends the disclosure requirements of
SFAS 123 to require prominent disclosures in both annual
and interim financial statements about the method of accounting
for stock-based employee compensation and the effect of the
method used on reported results. The disclosure provisions of
SFAS 148 are effective for fiscal years ending after
December 15, 2002. The Company has incorporated the
expanded disclosures into these footnotes.

In January 2003, the FASB issued Interpretation
No. 46, Consolidation of Variable Interest
Entities. Interpretation No. 46 requires
unconsolidated variable interest entities to be consolidated by
their primary beneficiaries if the entities do not effectively
disperse the risks and rewards of ownership among their owners
and other parties involved. The provisions of Interpretation
No. 46 are applicable immediately to all variable interest
entities created after January 31, 2003 and variable
interest entities in which an enterprise obtains an interest
after that date, and for variable interest entities created
before that date, the provisions are effective July 1,
2003. We are currently evaluating the provisions of this
interpretation. However, we do not believe they

F-12



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##### Table of Contents



GAMESTOP CORP.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

will have a material impact on our accounting for
existing investments. The Company holds no variable interest
entities.



|   |             
|-- | ------------
|2. | Acquisitions

On October 30, 1999, the net assets of
Babbages were purchased by Barnes & Noble. The
acquisition was accounted for by Barnes & Noble under
the purchase method of accounting and the $198,967 excess of the
$186,520 purchase price over the fair value of the net
liabilities assumed has been recorded as goodwill by the Company
through the application of push-down accounting in
accordance with SAB 54.

The purchase agreement between Babbages and
Barnes & Noble stipulated certain financial performance
targets, which if met, would provide additional payments to the
former owners of Babbages. GameStops results from
operations met the specified financial performance targets for
the fiscal year ended February 2, 2002. As a result,
Barnes & Noble made an additional payment in the amount
of $9,665 to the former owners of Babbages, and GameStop
recognized additional goodwill and paid in capital in the amount
of $9,665 at February 2, 2002.

On June 14, 2000, a wholly-owned subsidiary
of Barnes & Noble acquired all of the outstanding
shares of Funco, a Minneapolis-based electronic games retailer.
The acquisition was accounted for by Barnes & Noble
under the purchase method of accounting. The excess of the
$167,560 acquisition cost over the fair value of the net assets
acquired, in the amount of $131,360, has been recorded as
goodwill.

The Company has allocated the purchase price to
assets and liabilities based on managements best estimates
of the respective fair values with the excess cost over the net
assets acquired allocated to goodwill as follows:

|                                         |  |   |         |  
|---------------------------------------- |  | - | ------- | -
|Purchase price                           |  | $ | 159,162 |  
|Adjustment to accrued liabilities        |  |   | 145     |  
|Acquisition costs                        |  |   | 8,253   |  
|                                         |  |   |         |  
|Total Cost of Acquisition                |  | $ | 167,560 |  
|                                         |  |   |         |  
|Total Cost of Acquisition                |  | $ | 167,560 |  
|Less: cash received                      |  |   | (10,651 | )
|Adjustment to accrued liabilities        |  |   | (145    | )
|                                         |  |   |         |  
|Cash paid for Funco (investing activity) |  | $ | 156,764 |  
|                                         |  |   |         |  
|Cash                                     |  | $ | 10,651  |  
|Receivables, net                         |  |   | 535     |  
|Inventory                                |  |   | 28,662  |  
|Prepaids and other                       |  |   | 10,800  |  
|Fixed assets, net                        |  |   | 12,632  |  
|Other noncurrent assets                  |  |   | 1,806   |  
|Accounts payable                         |  |   | (11,864 | )
|Accrued liabilities                      |  |   | (16,515 | )
|Other long-term liabilities              |  |   | (507    | )
|Goodwill                                 |  |   | 131,360 |  
|                                         |  |   |         |  
|Total Cost of Acquisition                |  | $ | 167,560 |  
|                                         |  |   |         |  

F-13



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##### Table of Contents



GAMESTOP CORP.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

The unaudited pro forma consolidated statements
of operations data for the 53 weeks ended February 3,
2001, set forth below gives effect to the acquisition of Funco
as if it occurred on January 29, 2000. The unaudited pro
forma results include adjustments to reflect a full year of
amortization of goodwill recorded in conjunction with the
acquisition and interest on the acquisition debt.

|      |                                                       |                |         |         |  
|----- | ----------------------------------------------------- | -------------- | ------- | ------- | -
|      |                                                       | 53 Weeks Ended
|      |                                                       | February 3,   
|      |                                                       | 2001          
|      |                                                       |               
|      |                                                       | (In thousands)
|Sales |                                                       | $              | 828,000 |        
|      | Net earnings (loss)                                   |                | $       | (16,439 | )
|      | Net earnings (loss) per share  basic
    and diluted |                | $       | (0.46   | )



|   |                                                        
|-- | -------------------------------------------------------
|3. | Computation of net earnings (loss) per common
    share

A reconciliation of shares used in calculating
basic and diluted net earnings (loss) per common share follows:

|                                                             |  |                                       |        |             |  |             |        |  |  |   |         |  
|------------------------------------------------------------ |  | ------------------------------------- | ------ | ----------- |  | ----------- | ------ |  |  | - | ------- | -
|                                                             |  | 52 Weeks                              |        | 52 Weeks    |  | 53 Weeks   
|                                                             |  | Ended                                 |        | Ended       |  | Ended      
|                                                             |  | February 1,                           |        | February 2, |  | February 3,
|                                                             |  | 2003                                  |        | 2002        |  | 2001       
|                                                             |  |                                       |        |             |  |            
|                                                             |  |                                      
|                                                             |  | (In thousands, except per share data)
|Net earnings (loss)                                          |  | $                                     | 52,404 |             |  | $           | 6,960  |  |  | $ | (11,961 | )
|                                                             |  |                                       |        |             |  |             |        |  |  |   |         |  
|Weighted Common Shares Outstanding                           |  |                                       | 56,289 |             |  |             | 36,009 |  |  |   | 36,009  |  
|Common Share Equivalents Related to Options and
    Warrants |  |                                       | 4,130  |             |  |             | 3,388  |  |  |   |        |  
|                                                             |  |                                       |        |             |  |             |        |  |  |   |         |  
|Common Shares and Common Share Equivalents                   |  |                                       | 60,419 |             |  |             | 39,397 |  |  |   | 36,009  |  
|                                                             |  |                                       |        |             |  |             |        |  |  |   |         |  
|Net Earnings (Loss) per Common Share:                        |  |                                       |        |             |  |             |        |  |  |   |         |  
|Basic                                                        |  | $                                     | 0.93   |             |  | $           | 0.19   |  |  | $ | (0.33   | )
|                                                             |  |                                       |        |             |  |             |        |  |  |   |         |  
|Diluted                                                      |  | $                                     | 0.87   |             |  | $           | 0.18   |  |  | $ | (0.33   | )
|                                                             |  |                                       |        |             |  |             |        |  |  |   |         |  

Options to purchase approximately
4,372 shares of common stock at exercise prices ranging
from $16.48 to $21.25 per share were outstanding during a
portion of fiscal 2002, but were not included in the computation
of diluted earnings per share because they were anti-dilutive.
These options expire through 2012.



|   |                 
|-- | ----------------
|4. | Receivables, Net

Receivables represent primarily bankcard and
other receivables as follows:

|                                |  |                |       |             |  |   |       |  
|------------------------------- |  | -------------- | ----- | ----------- |  | - | ----- | -
|                                |  | February 1,    |       | February 2,
|                                |  | 2003           |       | 2002       
|                                |  |                |       |            
|                                |  |               
|                                |  | (In thousands)
|Bankcard receivables            |  | $              | 4,461 |             |  | $ | 4,090 |  
|Other receivables               |  |                | 2,673 |             |  |   | 1,973 |  
|Allowance for doubtful accounts |  |                | (241  | )           |  |   | (133  | )
|                                |  |                |       |             |  |   |       |  
|Total receivables, net          |  | $              | 6,893 |             |  | $ | 5,930 |  
|                                |  |                |       |             |  |   |       |  

F-14



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##### Table of Contents



GAMESTOP CORP.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)



|   |         
|-- | --------
|5. | Goodwill

The Company adopted the transitional disclosures
of SFAS 142 effective February 3, 2002 (see
Note 1). The changes in the carrying amount of goodwill for
the Companys business segment for the years ended
February 1, 2003 and February 2, 2002 were as follows:

|                                                         |  |                |         |  
|-------------------------------------------------------- |  | -------------- | ------- | -
|                                                         |  | Goodwill      
|                                                         |  |               
|                                                         |  | (In thousands)
|Balance at February 3, 2001                              |  | $              | 319,417 |  
|Additional acquisition payments due to former
    owners |  |                | 9,665   |  
|Amortization for the 52 weeks ended
    February 2, 2002 |  |                | (11,125 | )
|                                                         |  |                |         |  
|Balance at February 2, 2002                              |  |                | 317,957 |  
|Amortization for the 52 weeks ended
    February 1, 2003 |  |                |        |  
|                                                         |  |                |         |  
|Balance at February 1, 2003                              |  | $              | 317,957 |  
|                                                         |  |                |         |  

The effects of the adoption of SFAS 142 on
the reported net earnings (loss) and net earnings (loss) per
common share for the 52 weeks ended February 1, 2003,
the 52 weeks ended February 2, 2002 and the
53 weeks ended February 3, 2001 are as follows:

|                                              |  |                                       |        |             |  |             |        |  |  |   |         |  
|--------------------------------------------- |  | ------------------------------------- | ------ | ----------- |  | ----------- | ------ |  |  | - | ------- | -
|                                              |  | 52 Weeks                              |        | 52 Weeks    |  | 53 Weeks   
|                                              |  | Ended                                 |        | Ended       |  | Ended      
|                                              |  | February 1,                           |        | February 2, |  | February 3,
|                                              |  | 2003                                  |        | 2002        |  | 2001       
|                                              |  |                                       |        |             |  |            
|                                              |  |                                      
|                                              |  | (In thousands, except per share data)
|Reported net earnings (loss)                  |  | $                                     | 52,404 |             |  | $           | 6,960  |  |  | $ | (11,961 | )
|Add Back: Goodwill amortization, net of taxes |  |                                       |       |             |  |             | 8,413  |  |  |   | 6,749   |  
|                                              |  |                                       |        |             |  |             |        |  |  |   |         |  
|Net earnings (loss), as adjusted              |  | $                                     | 52,404 |             |  | $           | 15,373 |  |  | $ | (5,212  | )
|                                              |  |                                       |        |             |  |             |        |  |  |   |         |  
|Earnings per share  basic:                   |  |                                       |        |             |  |             |        |  |  |   |         |  
|Reported net earnings (loss)                  |  | $                                     | 0.93   |             |  | $           | 0.19   |  |  | $ | (0.33   | )
|Goodwill amortization, net of taxes           |  |                                       |       |             |  |             | 0.23   |  |  |   | 0.19    |  
|                                              |  |                                       |        |             |  |             |        |  |  |   |         |  
|Adjusted net earnings (loss)                  |  | $                                     | 0.93   |             |  | $           | 0.42   |  |  | $ | (0.14   | )
|                                              |  |                                       |        |             |  |             |        |  |  |   |         |  
|Earnings per share  diluted:                 |  |                                       |        |             |  |             |        |  |  |   |         |  
|Reported net earnings (loss)                  |  | $                                     | 0.87   |             |  | $           | 0.18   |  |  | $ | (0.33   | )
|Goodwill amortization, net of taxes           |  |                                       |       |             |  |             | 0.21   |  |  |   | 0.19    |  
|                                              |  |                                       |        |             |  |             |        |  |  |   |         |  
|Adjusted net earnings (loss)                  |  | $                                     | 0.87   |             |  | $           | 0.39   |  |  | $ | (0.14   | )
|                                              |  |                                       |        |             |  |             |        |  |  |   |         |  



|   |     
|-- | ----
|6. | Debt

Concurrent with the Offering, the Company entered
into a $75,000 senior secured revolving credit facility which
expires in February 2005. The revolving credit facility is
governed by an eligible inventory borrowing base agreement,
defined as 50% of non-defective inventory. Loans incurred under
the credit facility will be maintained from time to time, at the
Companys option, as (1) base rate loans which bear
interest at the base rate (defined in the credit facility as the
higher of (a) the administrative agents announced
base rate or (b) 1/2 of 1% in excess of the federal funds
effective rate, each as in effect from time to time) or
(2) London Interbank Office Rate (LIBOR) loans
bearing interest at the LIBOR rate for the applicable interest
period, in each case plus an applicable interest margin. The
applicable interest margin is initially 0.25% for base rate
loans and 1.75% for LIBOR rate loans, based on the
Companys current fixed charge coverage ratio of 2.00 to
1.00, and in each case will thereafter vary from 0.00% to 0.50%
for base rate loans and from 1.25% to 2.00% for

F-15



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##### Table of Contents



GAMESTOP CORP.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

LIBOR rate loans, depending on the Companys
fixed charge coverage ratio. The fixed charge coverage ratio is
calculated as the ratio of earnings before interest, taxes,
depreciation, amortization and rent expense less capital
expenditures to the sum of interest expense, debt amortization
and rent expense for the twelve-month period then ended. In
addition, the Company is required to pay a commitment fee of
0.375% for any unused amounts of the revolving credit facility.
Any borrowings under the revolving credit facility are secured
by the assets of the Company. The revolving credit facility
generally restricts our ability to pay dividends and requires
the Company to maintain certain financial ratios. There have
been no borrowings under the revolving credit facility.

7. Payable to Barnes &
Noble

On November 18, 1997, Barnes &
Noble obtained an $850,000, five-year senior revolving credit
facility (the Revolving Credit Facility) with a
syndicate led by the Chase Manhattan Bank. Amounts available
under the Revolving Credit Facility were used to fund the
acquisitions described in Note 2, and Barnes &
Noble has allocated such debt to the Company, as reflected in
the accompanying consolidated balance sheets. Barnes &
Noble charged the Company interest of $825, $19,575 and $23,462,
relating to this debt for the periods ended February 1,
2003, February 2, 2002 and February 3, 2001,
respectively. A portion of the net proceeds of the Offering was
used to repay $250,000 of intercompany debt owed to
Barnes & Noble. Additionally, upon the effective date
of the Offering, Barnes & Noble made a capital
contribution of the $150,000 remaining balance of the
intercompany debt.

In fiscal 2002, Barnes & Noble entered
into a $500.0 million three-year senior revolving credit
facility with a syndicate of banks led by Fleet National Bank as
administrative agent. This facility replaced the
$850.0 million facility led by Chase Manhattan Bank. The
Companys Class B common stock, which is owned
entirely by Barnes & Noble, is pledged as collateral on
the $500.0 million facility.



|   |       
|-- | ------
|8. | Leases

The Company leases retail stores, warehouse
facilities, office space and equipment. These are generally
leased under noncancelable agreements that expire at various
dates through 2013 with various renewal options for additional
periods. The agreements, which have been classified as operating
leases, generally provide for both minimum and percentage
rentals and require the Company to pay all insurance, taxes and
other maintenance costs. Percentage rentals are based on sales
performance in excess of specified minimums at various stores.

Approximate rental expenses under operating
leases are as follows:

|                   |  |                |        |             |  |             |        |  |  |   |        | 
|------------------ |  | -------------- | ------ | ----------- |  | ----------- | ------ |  |  | - | ------ | 
|                   |  | 52 Weeks       |        | 52 Weeks    |  | 53 Weeks   
|                   |  | Ended          |        | Ended       |  | Ended      
|                   |  | February 1,    |        | February 2, |  | February 3,
|                   |  | 2003           |        | 2002        |  | 2001       
|                   |  |                |        |             |  |            
|                   |  |               
|                   |  | (In thousands)
|Minimum            |  | $              | 47,000 |             |  | $           | 42,000 |  |  | $ | 35,000 | 
|Percentage rentals |  |                | 11,000 |             |  |             | 11,000 |  |  |   | 6,000  | 
|                   |  |                |        |             |  |             |        |  |  |   |        | 
|                   |  | $              | 58,000 |             |  | $           | 53,000 |  |  | $ | 41,000 | 
|                   |  |                |        |             |  |             |        |  |  |   |        | 

F-16



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##### Table of Contents



GAMESTOP CORP.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

Future minimum annual rentals, excluding
percentage rentals, required under leases that had initial,
noncancelable lease terms greater than one year, as of
February 1, 2003 are approximately:

|             |  |                |         | 
|------------ |  | -------------- | ------- | 
|Year Ended   |  | Amount        
|             |  |               
|             |  | (In thousands)
|January 2004 |  | $              | 51,000  | 
|January 2005 |  |                | 40,000  | 
|January 2006 |  |                | 33,000  | 
|January 2007 |  |                | 27,000  | 
|January 2008 |  |                | 21,000  | 
|Thereafter   |  |                | 34,000  | 
|             |  |                |         | 
|             |  | $              | 206,000 | 
|             |  |                |         | 



|   |           
|-- | ----------
|9. | Litigation

Various claims and lawsuits arising in the normal
course of business are pending against the Company. The subject
matter of these proceedings primarily includes commercial
disputes and employment issues. The results of these proceedings
are not expected to have a material adverse effect on the
Companys consolidated financial position or results of
operations.



|    |             
|--- | ------------
|10. | Income Taxes

The historical provision for income tax consisted
of the following:

|                                                                                             |         |                |        |             |   |             |       |       |  |   |        |        |  
|-------------------------------------------------------------------------------------------- | ------- | -------------- | ------ | ----------- | - | ----------- | ----- | ----- |  | - | ------ | ------ | -
|                                                                                             |         | 52 Weeks       |        | 52 Weeks    |   | 53 Weeks   
|                                                                                             |         | Ended          |        | Ended       |   | Ended      
|                                                                                             |         | February 1,    |        | February 2, |   | February 3,
|                                                                                             |         | 2003           |        | 2002        |   | 2001       
|                                                                                             |         |                |        |             |   |            
|                                                                                             |         |               
|                                                                                             |         | (In thousands)
|Current tax expense (benefit):                                                               |         |                |        |             |   |             |       |       |  |   |        |       
|                                                                                             | Federal |                | $      | 26,818      |   |             | $     | 5,892 |  |   | $      | (6,349 | )
|                                                                                             | State   |                |        | 6,663       |   |             |       | 1,464 |  |   |        | (1,577 | )
|                                                                                             |         |                |        |             |   |             |       |       |  |   |        |       
|                                                                                             |         |                | 33,481 |             |   |             | 7,356 |       |  |   | (7,926 | )     
|                                                                                             |         |                |        |             |   |             |       |       |  |   |        |       
|Deferred tax expense (benefit):                                                              |         |                |        |             |   |             |       |       |  |   |        |       
|                                                                                             | Federal |                |        | (72         | ) |             |       | 256   |  |   |        | 1,673  |  
|                                                                                             | State   |                |        | (18         | ) |             |       | 63    |  |   |        | 417    |  
|                                                                                             |         |                |        |             |   |             |       |       |  |   |        |       
|                                                                                             |         |                | (90    | )           |   |             | 319   |       |  |   | 2,090  |       
|                                                                                             |         |                |        |             |   |             |       |       |  |   |        |       
|Charge in lieu of income taxes, relating to the
    tax effect of stock option tax deduction |         |                | 1,906  |             |   |             |      |       |  |   |       |       
|                                                                                             |         |                |        |             |   |             |       |       |  |   |        |       
|Total income tax expense (benefit)                                                           |         | $              | 35,297 |             |   | $           | 7,675 |       |  | $ | (5,836 | )     
|                                                                                             |         |                |        |             |   |             |       |       |  |   |        |       

F-17



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##### Table of Contents



GAMESTOP CORP.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

The difference in income tax provided and the
amounts determined by applying the statutory rate to income
before income taxes result from the following:

|                                          |  |             |      |             |  |             |      |   |  |  |       |   
|----------------------------------------- |  | ----------- | ---- | ----------- |  | ----------- | ---- | - |  |  | ----- | --
|                                          |  | 52 Weeks    |      | 52 Weeks    |  | 53 Weeks   
|                                          |  | Ended       |      | Ended       |  | Ended      
|                                          |  | February 1, |      | February 2, |  | February 3,
|                                          |  | 2003        |      | 2002        |  | 2001       
|                                          |  |             |      |             |  |            
|Federal statutory tax rate                |  |             | 35.0 | %           |  |             | 35.0 | % |  |  | (35.0 | )%
|State income taxes, net of federal effect |  |             | 5.2  |             |  |             | 6.8  |   |  |  | (4.3  | ) 
|Non-deductible goodwill amortization      |  |             | 0.0  |             |  |             | 10.5 |   |  |  | 6.2   |   
|Other (including permanent differences)   |  |             | 0.0  |             |  |             | 0.1  |   |  |  | 0.3   |   
|                                          |  |             |      |             |  |             |      |   |  |  |       |   
|                                          |  |             | 40.2 | %           |  |             | 52.4 | % |  |  | (32.8 | )%
|                                          |  |             |      |             |  |             |      |   |  |  |       |   

Differences between financial accounting
principles and tax laws cause differences between the bases of
certain assets and liabilities for financial reporting purposes
and tax purposes. The tax effects of these differences, to the
extent they are temporary, are recorded as deferred tax assets
and liabilities under SFAS 109 and consisted of the
following components:

|                    |                                      |                                |   |             |         |   |   |        |        |  
|------------------- | ------------------------------------ | ------------------------------ | - | ----------- | ------- | - | - | ------ | ------ | -
|                    |                                      | February 1,                    |   | February 2,
|                    |                                      | 2003                           |   | 2002       
|                    |                                      |                                |   |            
|                    |                                      |                               
|                    |                                      | (In thousands)                
|Deferred tax asset: |                                      |                                |   |             |         |   |   |       
|                    | Allowance for doubtful accounts      |                                | $ | 104         |         |   | $ | 37     |       
|                    | Inventory capitalization costs       |                                |   | 1,490       |         |   |   | 940    |       
|                    | Inventory obsolescence reserve       |                                |   | 3,320       |         |   |   | 2,472  |       
|                    | Contribution carryover               |                                |   |            |         |   |   | 47     |       
|                    | Accrued liabilities                  |                                |   | 896         |         |   |   |       |       
|                    | Gift certificate liability           |                                |   | 643         |         |   |   | 161    |       
|                    | Fixed assets                         |                                |   | 3,312       |         |   |   | 1,408  |       
|                    | Deferred rents                       |                                |   | 1,191       |         |   |   | 666    |       
|                    |                                      |                                |   |             |         |   |   |       
|                    |                                      | Total deferred tax benefits    |   |             | 10,956  |   |   |        | 5,731  |  
|                    |                                      |                                |   |             |         |   |   |       
|                    | Deferred tax liabilities:            |                                |   |             |         |   |   |        |       
|                    | Goodwill                             |                                |   | (10,482     | )       |   |   | (5,353 | )     
|                    | Accrued state taxes                  |                                |   | (31         | )       |   |   | (25    | )     
|                    |                                      |                                |   |             |         |   |   |       
|                    |                                      | Total deferred tax liabilities |   |             | (10,513 | ) |   |        | (5,378 | )
|                    |                                      |                                |   |             |         |   |   |       
|                    |                                      | Net                            |   | $           | 443     |   |   | $      | 353    |  
|                    |                                      |                                |   |             |         |   |   |       
|                    | Financial statements:                |                                |   |             |         |   |   |        |       
|                    | Current deferred tax assets          |                                | $ | 6,034       |         |   | $ | 3,418  |       
|                    |                                      |                                |   |             |         |   |   |       
|                    | Non-current deferred tax liabilities |                                | $ | (5,591      | )       |   | $ | (3,065 | )     
|                    |                                      |                                |   |             |         |   |   |       



|    |                  
|--- | -----------------
|11. | Stock Option Plan

Effective August 2001, Barnes & Noble
approved the 2001 Incentive Plan of GameStop Corp. The 2001
Incentive Plan assumed (by the issuance of replacement options)
all stock options outstanding as of the effective date under the
2000 Incentive Plan of GameStop, Inc. under the same terms.

F-18



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##### Table of Contents



GAMESTOP CORP.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

Effective September 13, 2000,
Barnes & Noble approved the 2000 Incentive Plan of
GameStop, Inc. (the Option Plan). The Option Plan
provides a maximum aggregate amount of 15,000 shares of
common stock with respect to which options may be granted and
provides for the granting of incentive stock options,
non-qualified stock options, and restricted stock, which may
include, without limitation, restrictions on the right to vote
such shares and restrictions on the right to receive dividends
on such shares. The options to purchase common shares generally
are issued at fair market value on the date of grant. Generally,
the options vest and become exercisable ratably over a
three-year period, commencing one year after the grant date, and
expire ten years from issuance.



| |                   
| | ------------------
| | Option Plan Grants

On December 5, 2000, the Company granted
4,488 options to its employees based upon the fair value of the
shares at the date of grant ($3.53 per share) as determined
by an independent appraisal. On June 13, 2001, options to
acquire 4,500 shares were granted with immediate vesting at
an exercise price of $4.51 per share to Leonard Riggio
based on the fair value at the date of grant as determined by an
independent appraisal. On February 12, 2002, the Company
granted 4,500 options to its employees at an exercise price of
$18.00 per share (the per share offering price). On
May 23, 2002, the Company granted 30 options to
two members of the Board of Directors at an exercise price
of $21.25 per share. On July 17, 2002, the Company
granted 15 options to a member of the Board of Directors at an
exercise price of $16.48 per share.

A summary of the status of the Companys
stock options is presented below:

|                          |  |            |        |                  |  |   |       | 
|------------------------- |  | ---------- | ------ | ---------------- |  | - | ----- | 
|                          |  |            |        | Weighted-Average
|                          |  | Shares     |        | Exercise Price  
|                          |  |            |        |                 
|                          |  | (Thousands |        |                 
|                          |  | of shares) |        |                 
|Balance, January 29, 2000 |  |            |       |                  |  | $ |      | 
|Granted                   |  |            | 4,488  |                  |  | $ | 3.53  | 
|Exercised                 |  |            |       |                  |  | $ |      | 
|Forfeited                 |  |            | (18    | )                |  | $ | 3.53  | 
|                          |  |            |        |                  |  |   |       | 
|Balance, February 3, 2001 |  |            | 4,470  |                  |  | $ | 3.53  | 
|Granted                   |  |            | 4,500  |                  |  | $ | 4.51  | 
|Exercised                 |  |            |       |                  |  | $ |      | 
|Forfeited                 |  |            | (159   | )                |  | $ | 3.53  | 
|                          |  |            |        |                  |  |   |       | 
|Balance, February 2, 2002 |  |            | 8,811  |                  |  | $ | 4.03  | 
|Granted                   |  |            | 4,545  |                  |  | $ | 18.02 | 
|Exercised                 |  |            | (287   | )                |  | $ | 3.53  | 
|Forfeited                 |  |            | (309   | )                |  | $ | 12.10 | 
|                          |  |            |        |                  |  |   |       | 
|Balance, February 1, 2003 |  |            | 12,760 |                  |  | $ | 8.83  | 
|                          |  |            |        |                  |  |   |       | 

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##### Table of Contents



GAMESTOP CORP.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

The following table summarizes information as of
February 1, 2003 concerning outstanding and exercisable
options:

|                         |  |                     |        |                     |  |             |      |             |  |           |       |  |  |  |       |  |  |   |       | 
|------------------------ |  | ------------------- | ------ | ------------------- |  | ----------- | ---- | ----------- |  | --------- | ----- |  |  |  | ----- |  |  | - | ----- | 
|                         |  |                     |        |                    
|                         |  | Options Outstanding |        | Options Exercisable
|                         |  |                     |        |                    
|                         |  |                     |        | Weighted-           |  | Weighted-   |      |             |  | Weighted-
|                         |  | Number              |        | Average             |  | Average     |      | Number      |  | Average  
|                         |  | Outstanding         |        | Remaining           |  | Contractual |      | Exercisable |  | Exercise 
|Range of Exercise Prices |  | (000s)              |        | Life                |  | Price       |      | (000s)      |  | Price    
|                         |  |                     |        |                     |  |             |      |             |  |          
|$ 3.53                   |  |                     | 3,898  |                     |  |             | 7.84 |             |  | $         | 3.53  |  |  |  | 2,525 |  |  | $ | 3.53  | 
|$ 4.51                   |  |                     | 4,500  |                     |  |             | 8.36 |             |  | $         | 4.51  |  |  |  | 4,500 |  |  | $ | 4.51  | 
|$16.48                   |  |                     | 15     |                     |  |             | 9.43 |             |  | $         | 16.48 |  |  |  |      |  |  | $ | 16.48 | 
|$18.00                   |  |                     | 4,317  |                     |  |             | 9.06 |             |  | $         | 18.00 |  |  |  |      |  |  | $ | 18.00 | 
|$21.25                   |  |                     | 30     |                     |  |             | 9.31 |             |  | $         | 21.25 |  |  |  |      |  |  | $ | 21.25 | 
|                         |  |                     |        |                     |  |             |      |             |  |           |       |  |  |  |       |  |  |   |       | 
|$3.53-$21.25             |  |                     | 12,760 |                     |  |             | 8.44 |             |  | $         | 8.83  |  |  |  | 7,025 |  |  | $ | 4.16  | 
|                         |  |                     |        |                     |  |             |      |             |  |           |       |  |  |  |       |  |  |   |       | 

During the 13 weeks ended January 29,
2000, options to acquire approximately 350 shares of
Barnes & Noble were issued to GameStop employees
pursuant to the Barnes & Noble stock option plan. Such
grants were made at the fair market value of Barnes &
Noble common stock at the date of grant.



|    |                                         
|--- | ----------------------------------------
|12. | Employees Defined Contribution
    Plan

The Company sponsors a defined contribution plan
(the Savings Plan) for the benefit of substantially
all of its employees who meet certain eligibility requirements,
primarily age and length of service. The Savings Plan allows
employees to invest up to 15% of their current gross cash
compensation invested on a pre-tax basis, at their option. The
Companys optional contributions to the Savings Plan are
generally in amounts based upon a certain percentage of the
employees contributions. The Companys contributions
to the Savings Plan during the 52 weeks ended
February 1, 2003, the 52 weeks ended February 2,
2002 and the 53 weeks ended February 3, 2001, were
$715, $660 and $481, respectively.



|    |                                                   
|--- | --------------------------------------------------
|13. | Certain Relationships and Related
    Transactions

The Company operates departments within 11
bookstores operated by Barnes & Noble. The Company pays
a license fee to Barnes & Noble in amounts equal to
7.0% of the gross sales of such departments. Management deems
the license fee to be reasonable and based upon terms equivalent
to those that would prevail in an arms length transaction.
During the 52 weeks ended February 1, 2003, the
52 weeks ended February 2, 2002 and the 53 weeks
ended February 3, 2001 these charges amounted to $1,103,
$1,098 and $886, respectively.

The Company participates in Barnes &
Nobles workers compensation, property and general
liability insurance programs. The costs incurred by
Barnes & Noble under these programs are allocated to
the Company based upon the Companys total payroll expense,
property and equipment, and insurance claim history. Management
deems the allocation methodology to be reasonable. During the
52 weeks ended February 1, 2003, the 52 weeks
ended February 2, 2002 and the 53 weeks ended
February 3, 2001 these allocated charges amounted to
$1,726, $1,291 and $632, respectively.

On May 1, 2001, the Company entered into an
agreement with barnesandnoble.com llc, a company in which
Barnes & Noble owns an approximately 36% interest,
pursuant to which the Company sells video game products and
PC entertainment software through barnesandnoble.coms
web site. The Company pays barnesandnoble.com llc a
referral fee on its net sales from purchases made through
barnesandnoble.com llcs web site. For the
52 weeks ended February 1, 2003 and the 52 weeks
ended February 2, 2002, these referral fees amounted to $14
and $80, respectively.

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##### Table of Contents



GAMESTOP CORP.


NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)

Prior to the completion of the Offering, the
Company utilized the management and strategic advisory services
of Leonard Riggio, the Chairman of Barnes & Noble,
during the normal course of its operations. The annual
compensation paid by Barnes & Noble to Leonard Riggio
was allocated to the Company based upon the amount of time
Mr. Riggio devoted to the Company as well as his duties and
responsibilities. Management deemed the allocation methodology
to be reasonable. During the 52 weeks ended
February 2, 2002 and the 53 weeks ended
February 3, 2001, this allocated compensation amounted to
$325 and $400, respectively.



|    |                                   
|--- | ----------------------------------
|14. | Supplemental Cash Flow Information

|                                 |                                                                     |                |   |             |  |             |   |        |   |   |         |         |  
|-------------------------------- | ------------------------------------------------------------------- | -------------- | - | ----------- |  | ----------- | - | ------ | - | - | ------- | ------- | -
|                                 |                                                                     | 52 Weeks       |   | 52 Weeks    |  | 53 Weeks   
|                                 |                                                                     | Ended          |   | Ended       |  | Ended      
|                                 |                                                                     | February 1,    |   | February 2, |  | February 3,
|                                 |                                                                     | 2003           |   | 2002        |  | 2001       
|                                 |                                                                     |                |   |             |  |            
|                                 |                                                                     |               
|                                 |                                                                     | (In thousands)
|Cash paid during the period for: |                                                                     |                |   |             |  |             |   |        |   |   |         |        
|                                 | Interest                                                            |                | $ | 47,236      |  |             | $ |       |   |   | $       |        |  
|                                 |                                                                     |                |   |             |  |             |   |        |   |   |         |        
|                                 | Income taxes                                                        |                |   | 14,641      |  |             |   |       |   |   |         |        |  
|                                 |                                                                     |                |   |             |  |             |   |        |   |   |         |        
|Subsidiaries acquired:           |                                                                     |                |   |             |  |             |   |        |   |   |         |        
|                                 | Goodwill                                                            |                |   |            |  |             | $ | 9,665  |   |   | $       | 131,360 |  
|                                 | Accrual of additional acquisition payments due to
    former owners |                |   |            |  |             |   | (9,665 | ) |   |         |        |  
|                                 | Cash received in acquisition                                        |                |   |            |  |             |   |       |   |   |         | (10,641 | )
|                                 | Accrued acquisition costs                                           |                |   |            |  |             |   |       |   |   |         | (145    | )
|                                 | Net assets acquired (or liabilities assumed)                        |                |   |            |  |             |   |       |   |   |         | 36,200  |  
|                                 |                                                                     |                |   |             |  |             |   |        |   |   |         |        
|Cash paid                        |                                                                     | $              |  |             |  | $           |  |        |   | $ | 156,764 |        
|                                 |                                                                     |                |   |             |  |             |   |        |   |   |         |        
|Non-cash financing activity:     |                                                                     |                |   |             |  |             |   |        |   |   |         |        
|                                 | Barnes & Noble capital contribution                                 |                | $ | 150,000     |  |             | $ |       |   |   | $       |        |  
|                                 |                                                                     |                |   |             |  |             |   |        |   |   |         |        



|    |                  
|--- | -----------------
|15. | Subsequent Events

In March 2003 the Board of Directors approved a
program to repurchase up to $50 million of the
Companys outstanding Class A common stock.



|    |                                              
|--- | ---------------------------------------------
|16. | Unaudited Quarterly Financial
    Information

The following table sets forth certain unaudited
quarterly consolidated statement of operations information for
the fiscal years ended February 1, 2003 and
February 2, 2002. The unaudited quarterly information
includes all normal recurring adjustments that management
considers necessary for a fair presentation of the information
shown.

|                                                   |  |                                    |         |                                    |  |             |         |             |  |             |         |             |  |             |         |             |  |   |         |   |  |   |         |   |  |   |         |  |  |   |         | 
|-------------------------------------------------- |  | ---------------------------------- | ------- | ---------------------------------- |  | ----------- | ------- | ----------- |  | ----------- | ------- | ----------- |  | ----------- | ------- | ----------- |  | - | ------- | - |  | - | ------- | - |  | - | ------- |  |  | - | ------- | 
|                                                   |  |                                    |         |                                   
|                                                   |  | Fiscal Year Ended February 1, 2003 |         | Fiscal Year Ended February 2, 2002
|                                                   |  |                                    |         |                                   
|                                                   |  | 1st Quarter                        |         | 2nd Quarter                        |  | 3rd Quarter |         | 4th Quarter |  | 1st Quarter |         | 2nd Quarter |  | 3rd Quarter |         | 4th Quarter
|                                                   |  |                                    |         |                                    |  |             |         |             |  |             |         |             |  |             |         |            
|                                                   |  |                                   
|                                                   |  | (In thousands)                    
|Sales                                              |  | $                                  | 271,405 |                                    |  | $           | 274,262 |             |  | $           | 286,728 |             |  | $           | 520,396 |             |  | $ | 201,355 |   |  | $ | 206,806 |   |  | $ | 198,766 |  |  | $ | 514,211 | 
|Gross profit                                       |  |                                    | 69,091  |                                    |  |             | 73,445  |             |  |             | 73,845  |             |  |             | 126,919 |             |  |   | 48,008  |   |  |   | 53,711  |   |  |   | 54,578  |  |  |   | 110,806 | 
|Operating earnings (loss)                          |  |                                    | 8,714   |                                    |  |             | 9,863   |             |  |             | 15,982  |             |  |             | 52,512  |             |  |   | (5,422  | ) |  |   | (2,243  | ) |  |   | 5,609   |  |  |   | 36,143  | 
|Net earnings (loss)                                |  |                                    | 4,914   |                                    |  |             | 6,118   |             |  |             | 9,785   |             |  |             | 31,587  |             |  |   | (7,230  | ) |  |   | (4,849  | ) |  |   | 253     |  |  |   | 18,786  | 
|Net earnings (loss) per common share 
    basic   |  |                                    | 0.09    |                                    |  |             | 0.11    |             |  |             | 0.17    |             |  |             | 0.55    |             |  |   | (0.20   | ) |  |   | (0.13   | ) |  |   | 0.01    |  |  |   | 0.52    | 
|Net earnings (loss) per common share 
    diluted |  |                                    | 0.08    |                                    |  |             | 0.10    |             |  |             | 0.16    |             |  |             | 0.52    |             |  |   | (0.20   | ) |  |   | (0.13   | ) |  |   | 0.01    |  |  |   | 0.47    | 

F-21



---



##### Table of Contents






EXHIBIT INDEX

|        |       |             |  |                                                                                                                                                                                                                             
|------- | ----- | ----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |       |            
|Number  |       | Description
|        |       |            
|        | 3.1   |             |  | Amended and Restated Certificate of
    Incorporation.(1)                                                                                                                                                                   
|        | 3.2   |             |  | Bylaws.(1)                                                                                                                                                                                                                  
|        | 10.1  |             |  | Separation Agreement, dated as of January 1,
    2002, between Barnes & Noble and GameStop Corp.(2)                                                                                                                         
|        | 10.2  |             |  | Tax Disaffiliation Agreement, dated as of
    January 1, 2002, between Barnes & Noble and
    GameStop Corp.(1)                                                                                                             
|        | 10.3  |             |  | Insurance Agreement, dated as of January 1,
    2002, between Barnes & Noble and GameStop Corp.(1)                                                                                                                          
|        | 10.4  |             |  | Operating Agreement, dated as of January 1,
    2002, between Barnes & Noble and GameStop Corp.(1)                                                                                                                          
|        | 10.5  |             |  | 2001 Incentive Plan.(2)                                                                                                                                                                                                     
|        | 10.6  |             |  | Lease, dated as of March 6, 1997, between
    RREEF Mid-Cities Industrial L.P. and Babbages Etc. LLC. (1)                                                                                                                  
|        | 10.7  |             |  | First Amendment to Lease, dated as of
    December 30, 1999, between RREEF Mid-Cities Industrial L.P.
    and Babbages Etc. LLC. (1)                                                                                       
|        | 10.8  |             |  | Registration Rights Agreement, dated as of
    January 1, 2002, between Barnes & Noble and
    GameStop Corp. (1)                                                                                                           
|        | 10.9  |             |  | Revolving Credit Agreement, dated as of
    February 19, 2002, among GameStop Corp., Fleet National
    Bank, as Administrative Agent, the Banks party thereto and Fleet
    Securities, Inc., as Arranger. (3)             
|        | 10.10 |             |  | Security Agreement, dated as of February 19,
    2002, by GameStop Corp. in favor of Fleet National Bank, as
    secured party and as Administrative Agent. (3)                                                             
|        | 10.11 |             |  | Subsidiary Guaranty, dated as of
    February 19, 2002, by and among GameStop, Inc.,
    Babbages Etc. LLC, Sunrise Publications, Inc. and
    GameStop.com, Inc. and Fleet National Bank, as Administrative
    Agent. (3)
|        | 10.12 |             |  | Securities Collateral Pledge Agreement, dated as
    of February 19, 2002, between GameStop Corp. and Fleet
    National Bank, as Administrative Agent. (3)                                                                 
|        | 10.13 |             |  | Patent and Trademark Securities Agreement, dated
    as of February 19, 2002, between GameStop Corp. and Fleet
    National Bank, as secured party and as Administrative Agent.(3)                                          
|        | 21.1  |             |  | Subsidiaries. (4)                                                                                                                                                                                                           
|        | 23.1  |             |  | Consent of BDO Seidman, LLP                                                                                                                                                                                                 
|        | 99.1  |             |  | Certification of Chief Executive Officer pursuant
    to 18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.                                                                  
|        | 99.2  |             |  | Certification of Chief Financial Officer pursuant
    to 18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002.                                                                  



---



|    |                                                                                                                                                                                 
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Incorporated by reference to the
    Registrants Amendment No. 3 to Form S-1 filed
    with the Securities and Exchange Commission on January 24,
    2002 (No. 333-68294).    
|   
|(2) | Incorporated by reference to the
    Registrants Amendment No. 4 to Form S-1 filed
    with the Securities and Exchange Commission on February 5,
    2002 (No. 333-68294).    
|   
|(3) | Incorporated by reference to the
    Registrants Form 10-Q for the fiscal quarter ended
    May 4, 2002 filed with the Securities and Exchange
    Commission on June 13, 2002.
|   
|(4) | Incorporated by reference to the
    Registrants Amendment No. 1 to Form S-1 filed
    with the Securities and Exchange Commission on October 15,
    2001 (No. 333-68294).    

E-1