Neebo, Inc. Rule 144(c) Current Public Information Data Sheet. and

Transcription

1 Neebo, Inc. Rule 144(c) Current Public Information Data Sheet and Unaudited Condensed Consolidated Financial Statements as of and for the Quarters Ended June 30, 2012 and 2011 (Internally prepared without auditor review and before fresh-start adjustments) THE CURRENT PUBLIC INFORMATION DATA SHEET AND UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS HAVE BEEN PREPARED TO FULFILL THE REQUIREMENTS OF (1) RULE 15C2-11(a) (5) UNDER THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED AND (2) THE COMPANY S BY-LAWS. IT IS INTENDED AS INFORMATION TO BE USED BY SECURITIES BROKERS AND DEALERS IN SUBMITTING OR PUBLISHING QUOTATIONS ON THE COMMON STOCK OF THE COMPANY AS CONTEMPLATED BY RULE 15C2-11. NO BROKER, DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED HEREIN IN CONNECTION WITH THE COMPANY. ANY REPRESENTATIONS NOT CONTAINED HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN MADE OR AUTHROIZED BY THE COMPANY. THIS STATEMENT HAS NOT BEEN FILED BY THE COMPANY WITH THE SECURITIES AND EXCHANGE COMMISSION ( SEC ) OR ANY OTHER REGULATORY AGENCY. 1

2 Table of Contents Page Rule 144(c) Current Public Information Data Sheet Introduction 3 Item (i): Item (ii): Item (iii): Item (iv): Item (v): Item (vi): The exact name of the issuer and its predecessor (if any) 3 The address of its principal executive offices 3 The state of incorporation, if it is a corporation 3 The exact title and class of each security 3 The par or stated value of the security 3 The number of shares or total amount of the securities outstanding for each class of securities as of the end of the issuer's most recent fiscal year 3 Item (vii): The name and address of the transfer agent 4 Item (viii): The nature of the issuer's business 4 Item (ix): Item (x): Item (xi): The nature of products or services offered 4 The nature and extent of the issuer's facilities 4 The name of the chief executive officer and members of the board of directors 5 Item (xii): The issuer's most recent balance sheet and profit and loss and retained earnings statements 5 Item (xiii): Similar financial information for such part of the two preceding fiscal years the issuer or its predecessor has been in existence 5 Selected Financial Data and Highlights 6 Unaudited Condensed Consolidated Financial Statements Balance Sheets 9 Statements of Operations 10 Statements of Stockholders' Equity 11 Statements of Cash Flows 12 Notes to Financial Statements 13 Management's Discussion and Analysis 29 Forward-Looking Statements 31 2

3 Introduction Neebo, Inc. (the Company or the issuer ) is a non-reporting issuer described in Rule 144(c)(2) promulgated under the Securities Exchange Act of 1934 (the Exchange Act ) and is providing the following current public information to comply with the current public information requirements set forth under said Rule 144(c). This information is further described in the applicable provisions of Rule 15c2-11 promulgated under the Exchange Act. Unless the context otherwise requires, the term Company, as used herein includes the Company and its subsidiaries, including Nebraska Book Company, Inc. ( Nebraska Book Company ). Unless otherwise indicated, the information set forth below is provided as of August 29, (i) The exact name of the issuer and its predecessor (if any): a. Name of the issuer: Neebo, Inc. b. Name of predecessor: NBC Acquisition Corp. Neebo, Inc. and its subsidiaries succeeded to the business and assets of NBC Acquisition Corp. and its subsidiaries on June 29, 2012, the effective date of the emergence of NBC Acquisition Corp. and its subsidiaries from Chapter 11 (the Effective Date ). The Company has adopted the consolidated historical financial information of NBC Acquisition Corp. as its own. c. The Senior Secured Notes Due 2016, referenced below, are guaranteed by each of the following direct and indirect subsidiaries of Neebo, Inc.: Neebo Holding Company, a Delaware corporation Nebraska Book Company, Inc., a Delaware corporation Specialty Books, Inc., a Delaware corporation NBC Textbooks LLC, a Delaware limited liability company College Bookstores of America, Inc., an Illinois corporation Campus Authentic LLC, a Delaware limited liability company Net Textstore LLC, a Delaware limited liability company The address of each subsidiary is: c/o Neebo, Inc., 4700 South 19 th Street, Lincoln, NE (ii) The address of its principal executive offices: 4700 South 19 th Street, Lincoln, NE (iii) (iv) (v) (vi) The state of incorporation, if it is a corporation: Delaware The exact title and class of each security: a. Common Stock b. Tranche A Warrants c. Tranche B Warrants d. Senior Secured Notes Due 2016 The par or stated value of the security: a. Common Stock $.001 Par Value b. Tranche A Warrants Exercisable for 1 share of Common Stock at a price of $14.88 c. Tranche B Warrants Exercisable for 1 share of Common Stock at a price of $22.32 d. Senior Secured Notes Due 2016 N/A The number of shares or total amount of the securities outstanding for each class of securities as of the end of the issuer's most recent fiscal year: As of March 31, 2012, none of the securities listed above were outstanding, as all such securities were issued on June 29, 2012, the Effective Date of the issuer s emergence from Chapter 11. The number of shares or total amount of securities issued and outstanding on June 29, 2012 were as follows: a. Common Stock 6,721,765 shares b. Tranche A Warrants 693,054 warrants c. Tranche B Warrants 1,485,135 warrants d. Senior Secured Notes Due 2016 $100,000,000 3

4 (vii) The name and address of the transfer agent: a. Common Stock Transfer Agent: i. American Stock Transfer & Trust Company LLC th Avenue, Brooklyn, NY PH: b. Tranche A Warrants Warrant Agent: i. American Stock Transfer & Trust Company LLC Attn: Relationship Management th Avenue, Brooklyn, NY PH: c. Tranche B Warrants Warrant Agent: i. American Stock Transfer & Trust Company LLC Attn: Relationship Management th Avenue, Brooklyn, NY PH: d. Senior Secured Notes Due 2016 Indenture Trustee, Registrar, Paying Agent & Collateral Agent: i. Wilmington Trust, National Association Attn: Joseph O Donnell 246 Goose Lane, Suite 105, Guilford, CT PH: (viii) (ix) (x) The nature of the issuer s business: Neebo, Inc. is a holding company and the beneficial owner of Nebraska Book Company. Nebraska Book Company participates in the college bookstore industry, offering the products and services described in item (ix) below. The nature of products or services offered: Nebraska Book Company participates in the college bookstore industry primarily by operating its own college bookstores, by providing used textbooks to college bookstore operators, by providing distance education products and service, and by providing proprietary college bookstore information and e-commerce systems, consulting and other services. Nebraska Book Company is also a provider of distance education materials to students in non-traditional courses, which include correspondence and corporate education courses. Furthermore, Nebraska Book Company provides the college bookstore industry with a variety of services including propriety information and e-commerce systems, in-store promotions, buying programs, and consulting services. The nature and extent of the issuer s facilities: Corporate Offices: 4700 South 19 th Street (owned) Lincoln, NE At August 29, 2012, Nebraska Book Company s Bookstore locations consisted of the following: (i) 6 owned offcampus bookstore locations, (ii) 86 leased off-campus bookstore locations, and (iii) 157 leased on-campus (contractmanaged) bookstore locations serving university and post-graduate educational institutions throughout the United States. Nebraska Book Company owns its two Textbook Division warehouses (totaling 253,000 square feet) in Lincoln, Nebraska (one of which is also the location of its headquarters). 4

5 (xi) (xii) (xiii) The name of the chief executive officer and members of the board of directors: a. Chief Executive Officer: Steven Clemente b. Board of Directors: Peter Reed Justin Bonner Adam Kleinman Matthew Rothfleisch Alison Abraham Benjamin Ng Steven Clemente The issuer s most recent balance sheet and profit and loss and retained earnings statements: See the unaudited condensed consolidated financial statements included herein and available at Similar financial information for such part of the two preceding fiscal years the issuer or its predecessor has been in existence: See the Company s most recent consolidated financial statements available at 5

6 Selected Financial Data and Highlights The following table presents selected financial data for continuing operations as of and for the quarters ended June 30, 2012 and All data is derived from and should be read in conjunction with the accompanying Unaudited Condensed Consolidated Financial Statements and Management s Discussion and Analysis. Quarter Ended June 30, Percent Change Total assets $ 406,079,470 $ 612,224,340 * Long-term obligations 187,985, ,676,280 * Revenues, net of returns 68,153,340 65,856, % Adjusted EBITDA 1 (4,085,289) (5,111,050) 20.1 % Adjusted EBITDA Margin (6.0)% (7.8)% Net cash flows used in operating activities (44,838,447) (45,212,654) (0.8)% Net cash flows used in investing activities (3,165,506) (3,479,448) * Net cash (used) provided by financing activities (15,833,710) 117,034,223 * Net income (loss) $ 255,638,934 $ (23,696,752) 1,178.8 % * Not Meaningful 1 See Reconciliation of Financial Measures Consolidated Operating Results Highlights For the quarter ended June 30, 2012, revenue was $68.2 million compared to $65.9 million for the same quarter last year, an increase of 3.5%. Revenue from acquired new stores was $2.0 million during the quarter ended June 30, The College Stores Division segment had revenue of $43.8 million for the quarter ended June 30, 2012, an increase of 3.2% over the same quarter last year. The increase in College Stores Division revenues was primarily attributable to the recognition of deferred rental revenue and to additional revenue from new bookstores, which were partially offset by a decrease in revenues as a result of certain store closings. The Textbook Division segment had revenue of $25.9 million for the quarter ended June 30, 2012, 0.3% lower than the same quarter last year. The Complementary Services Division segment had revenue of $5.3 million for the quarter ended June 30, 2012, a decrease of 23.7% from the quarter ended June 30, 2011, driven by a decrease in college store design projects, lower customer system upgrades and a decline in student enrollment at schools served by specialty books. Adjusted EBITDA for the quarter ended June 30, 2012 was $(4.1) million, or (6.0)% of revenue, compared to $($9.7) million, or (14.7)% of revenue, for the quarter ended June 30, A reconciliation of Adjusted EBITDA to net income (loss) is presented below. Net cash flows used in operating activities were $(44.8) million for the quarter ended June 30, 2012, 0.8% lower than the same quarter last year. 6

7 Reconciliation of Financial Measures The common definition of EBITDA is Earnings before Interest Expense, Taxes, Depreciation and Amortization. In evaluating financial performance, we use Adjusted EBITDA to evaluate, assess and benchmark our operational results. Our definition of Adjusted EBITDA is EBITDA plus adjustments to exclude the effects of mainly nonrecurring items of revenue or gain and expense or loss. Adjusted EBITDA is not a measure of financial performance under generally accepted accounting principles ( GAAP ). Adjusted EBITDA should not be considered in isolation or as a substitute for net income (loss) in accordance with GAAP. Adjusted EBITDA excludes components that are significant in understanding and assessing our results of operations and cash flows. In addition, our measure of Adjusted EBITDA, as presented, may not be comparable to similarly titled measures used by other companies. However, Adjusted EBITDA is presented as we believe the measure is relevant and useful information widely used by analysts, investors and other interested parties in our industry. We understand certain investors use it to measure our operating performance and our historical ability to meet financial obligations. Accordingly, we are disclosing this information to permit a more comprehensive analysis of our operating performance, to provide an additional measure of performance and to provide additional information with respect to our ability to meet future debt service, capital expenditure and working capital requirements. Adjusted EBITDA financial information is comparable to net income (loss). The table below reconciles Adjusted EBITDA to our GAAP disclosure of net income (loss): Quarter Ended June 30, Net income (loss) $ 255,638,934 $ (23,696,752) Interest expense 8,336,753 12,750,514 Income tax benefit - (9,956,937) Depreciation 1,641,852 1,874,153 Amortization 2,067,040 1,992,668 EBITDA $ 267,684,579 $ (17,036,354) Reorganization professional fees 13,381,917 11,110,242 Gain on settlement of liabilities subject to compromise (288,198,913) - Discontinued operations 940, ,062 Severance and voluntary retirement costs 184,164 - Site closures, settlements and other costs 533,444 - Other miscellaneous one-time costs 1,388,550 - Adjusted EBITDA $ (4,085,289) $ (5,111,050) The following table provides Adjusted EBITDA on a segment basis: Change Amount Percentage College Stores Division $ (3,318,625) $ (5,078,563) $ 1,759, % Textbook Division 4,082,640 4,853,273 (770,633) (15.9)% Complementary Services Division (48,773) 605,956 (654,729) (108.0)% Corporate Administration (4,800,531) (5,491,716) 691, % $ (4,085,289) $ (5,111,050) $ 1,025, % College Stores Division Adjusted EBITDA increased $1.8 million, or 34.7%, from the quarter ended June 30, Including one-time costs of $1.8 million, Adjusted EBITDA for the College Stores Division was comparable to prior year. The $0.8 million, or 15.9%, decrease in Textbook Division Adjusted EBITDA from the quarter ended June 30, 2011, was primarily due to decreased revenues and gross margin percentage and an increase in selling, general and administrative expenses. Complementary Services Division Adjusted EBITDA decreased $0.7 million, or 108.0%, from the quarter ended June 30, 2011 primarily due to decreased revenue and gross profit and an increase in selling, general and administrative expenses. Corporate Administration Adjusted EBITDA increased $0.7 million, or 12.6% from the quarter ended June 30, 2011, primarily due to a decrease in the interdivision profit elimination, which can fluctuate during interim periods but is typically relatively unchanged by fiscal year end. 7

8 Neebo, Inc. Unaudited Condensed Consolidated Financial Statements as of and for the Quarters Ended June 30, 2012 and 2011 (Internally prepared without auditor review and before fresh-start adjustments) 8

9 NEEBO, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED WHERE NOTED AND BEFORE FRESH START ACCOUNTING ADJUSTMENTS) June 30, March 31, June 30, Unaudited Unaudited ASSETS CURRENT ASSETS: Cash and cash equivalents $ 44,636,927 $ 110,025,784 $ 124,789,501 Receivables, less allowance for doubtful accounts of $2,232,895 at June 30, 2012, $1,002,512 at March 31, 2012, and $1,283,360 at June 30, ,258,446 83,662,366 33,705,379 Inventories 122,497,551 94,563, ,422,705 Recoverable income taxes 664, ,120 16,928,821 Deferred income taxes 10,371,170 6,347,492 5,717,819 Prepaid expenses and other assets 5,431,501 8,201,741 3,790,243 Total current assets 245,859, ,328, ,354,468 PROPERTY AND EQUIPMENT, net of depreciation & amortization 35,119,538 35,947,087 39,147,036 GOODWILL 7,599,064 7,599, ,436,730 CUSTOMER RELATIONSHIPS, net of amortization 66,984,400 68,419,780 72,725,920 TRADENAME 31,320,000 31,320,000 31,320,000 OTHER IDENTIFIABLE INTANGIBLES, net of amortization 6,728,127 6,291,584 6,452,021 DEBT ISSUE COSTS, net of amortization 9,000, ,405 2,749,712 OTHER ASSETS 3,468,008 2,239,852 8,038,453 Total assets $ 406,079,470 $ 455,400,897 $ 612,224,340 LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 14,809,278 $ 18,255,338 $ 5,075,536 Accrued employee compensation and benefits 7,239,443 8,370,545 7,114,792 Accrued interest 130,599 1,781,889 1,700,138 Accrued incentives 5,509,612 4,813,182 6,892,554 Accrued expenses 4,854,337 5,311,390 1,923,632 Deferred revenue 2,168,919 9,089, ,686 Reorganization obligations 6,356, Current maturities of long-term debt 169, , ,821,319 Current maturities of capital lease obligations 237, DIP term loan facility - 124,690, ,750,000 Bridge loan 31,800, Total current liabilities 73,275, ,430, ,857,657 LONG-TERM DEBT, net of current maturities 186,471,759 49, ,829 CAPITAL LEASE OBLIGATIONS, net of current maturities 1,236, OTHER LONG-TERM LIABILITIES 659,837 53,868 - LONG-TERM REORGANIZATION OBLIGATIONS 277, DEFERRED INCOME TAXES 22,287,592 18,263,914 41,587,157 Total liabilities not subject to compromise 284,208, ,798, ,551,643 LIABILITIES SUBJECT TO COMPROMISE - 474,109, ,748,132 Total liabilities 284,208, ,908, ,299,775 COMMITMENTS AND CONTINGENCIES REDEEMABLE PREFERRED STOCK Series A redeemable preferred stock, $0.01 par value, 20,000 shares authorized, 10,000 shares issued and outstanding, at redemption value 14,076,596 14,076,596 14,076,596 STOCKHOLDERS' EQUITY (DEFICIT): Common stock successor, $0.001 par value, 14,000,000 shares authorized, 6,721,765 issued and outstanding shares at June 30, , Common stock predecessor, voting, authorized 5,000,000 shares of $0.01 par value; issued and outstanding 554,094 shares 5,541 5,541 5,541 Additional paid-in-capital, successor 75,724, Additional paid-in capital, predecessor 111,323, ,315, ,290,019 Note receivable from stockholder - - (93,889) Accumulated deficit (79,266,347) (334,905,281) (188,353,702) Total stockholders' equity (deficit) 107,794,649 (223,583,996) (77,152,031) Total liabilities and stockholders' equity (deficit) $ 406,079,470 $ 455,400,897 $ 612,224,340 See notes to condensed consolidated financial statements. 9

10 NEEBO, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED AND BEFORE FRESH START ACCOUNTING ADJUSTMENTS) Quarter Ended June 30, REVENUES, net of returns $ 68,153,340 $ 65,856,599 COSTS OF SALES (exclusive of depreciation shown below) 43,026,667 39,093,569 Gross profit 25,126,673 26,763,030 OPERATING EXPENSES: Selling, general and administrative 31,318,120 36,466,381 Depreciation 1,641,852 1,874,153 Amortization 2,067,040 1,992,668 35,027,012 40,333,202 LOSS FROM OPERATIONS (9,900,339) (13,570,172) OTHER EXPENSES: Interest expense 8,336,753 12,764,990 Interest income - (14,476) 8,336,753 12,750,514 LOSS BEFORE REORGANIZATION ITEMS AND INCOME TAXES (18,237,092) (26,320,686) REORGANIZATION ITEMS (274,816,996) 6,517,941 INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 256,579,904 (32,838,627) INCOME TAX BENEFIT - (9,956,937) INCOME (LOSS) FROM CONTINUING OPERATIONS 256,579,904 (22,881,690) LOSS FROM DISCONTINUED OPERATIONS, net of tax (940,970) (815,062) NET INCOME (LOSS) $ 255,638,934 $ (23,696,752) See notes to condensed consolidated financial statements. 10

11 NEEBO, INC. CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED AND BEFORE FRESH START ACCOUNTING ADJUSTMENTS) Note Additional Receivable Common Stock Paid-in From Accumulated Shares Value Capital Stockholder Deficit Total BALANCE, March 31, ,094 $ 5,541 $ 111,281,289 $ (92,675) $ (164,181,722) $ (52,987,567) Contributed capital (1,214) - (1,214) Share-based compensation attributable to NBC Holdings Corp. stock options - - 8, ,730 Cumulative preferred dividend (475,228) (475,228) Net loss (23,696,752) (23,696,752) BALANCE, June 30, ,094 $ 5,541 $ 111,290,019 $ (93,889) $ (188,353,702) $ (77,152,031) BALANCE, March 31, ,094 $ 5,541 $ 111,315,744 $ - $ (334,905,281) $ (223,583,996) Share-based compensation attributable to NBC Holdings Corp. stock options - - 8, ,066 Net income ,638, ,638,934 BALANCE, June 29, ,094 $ 5,541 $ 111,323,810 $ - $ (79,266,347) $ 32,063,004 Issuance of Successor common stock 6,721,765 6,722 75,724, ,731,645 - BALANCE, June 30, 2012 Successor 7,275,859 $ 12,263 $ 187,048,733 $ - $ (79,266,347) $ 107,794,649 Under our Third Amended Plan of Reorganization ( The Plan ), we issued 6,721,765 shares of new common stock, par value $0.001 per share (the New Common Equity ), on June 29, 2012, the effective date of the Plan (the Effective Date ). Prior to the Effective Date, NBC Acquisition Corp. issued 554,094 shares of common stock, par value $0.01 per share, to Weston Presidio (Weston Presidio Capital III, L.P., Weston Presidio Capital IV, L.P., WPC Entrepreneur Fund, L.P., and WPC Entrepreneur Fund II, L.P.), certain individuals and our employees. All of the shares of NBC Acquisition Corp. outstanding prior to the Effective Date were cancelled pursuant to the Plan (See Note 2 for further discussion of the impact of the Plan on our ownership structure). See notes to condensed consolidated financial statements. 11

12 NEEBO, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED AND BEFORE FRESH START ACCOUNTING ADJUSTMENTS) Quarter Ended June 30, CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 255,638,934 $ (23,696,752) Adjustments to reconcile net loss to net cash flows from operating activities: Share-based compensation 8,065 8,730 Provision for losses on receivables 15,446 16,322 Depreciation 1,647,382 2,087,739 Amortization 2,073,291 2,019,982 Reorganization items (274,816,996) 6,517,941 Amortization of debt issue costs and bond discount 373,792 1,583,299 (Gain) Loss on disposal of assets (50,721) 14,000 Deferred income taxes - (1,030,000) Changes in operating assets and liabilities, net of effect of acquisitions: Receivables 22,939,668 21,243,390 Inventories (27,007,251) (47,122,039) Recoverable income taxes (137,157) (9,529,920) Prepaid expenses and other assets 2,770,240 3,410,229 Other assets (1,278,156) (5,525,288) Accounts payable (9,025,221) 5,709,234 Accrued employee compensation and benefits (1,131,102) (1,494,585) Accrued interest (1,651,290) 657,968 Accrued incentives 696,430 1,041,618 Accrued expenses (457,053) (196,289) Deferred revenue (6,920,241) (826,116) Other long-term liabilities (252,275) (102,117) Net cash flows from operating activities before reorganization items (36,564,215) (45,212,654) Reorganization items (8,274,232) - Net cash flows from operating activities (44,838,447) (45,212,654) CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (1,172,483) (2,057,248) Acquisitions, net of cash acquired (1,749,477) (870,326) Proceeds from sale of property and equipment 132,908 1,700 Software development costs (376,454) (553,574) Net cash flows from in investing activities (3,165,506) (3,479,448) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of debt 111,800, ,750,000 Repayments of debtor-in-posession financing (125,000,000) - Payment of financing costs (2,337,145) (6,517,941) Principal payments on long-term debt - (14,535) Principal payments on capital lease obligations (296,565) (183,301) Borrowings under revolving credit facility - 31,800,000 Payments under revolving credit facility - (31,800,000) Net cash flows from financing activities (15,833,710) 117,034,223 NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (63,837,663) 68,342,121 CASH AND CASH EQUIVALENTS, Beginning of period 108,474,590 56,447,380 CASH AND CASH EQUIVALENTS, End of period $ 44,636,927 $ 124,789,501 SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION: Cash paid during the period for: Interest $ 2,989,451 $ 10,523,723 Income taxes 137, ,788 Reorganization items 8,274,232 6,485,528 Noncash investing and financing activities: Debt issue costs $ 6,471,759 $ - Successor common stock issued 75,731,645 - Debt extinguishment per the Plan 352,000,000 - See notes to condensed consolidated financial statements. 12

13 NEEBO, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED, INTERNALLY PREPARED WITHOUT AUDITOR REVIEW AND BEFORE FRESH START ACCOUNTING ADJUSTMENTS) 1. Business Upon the effectiveness of the Third Amended Plan of Reorganization (the Plan ) on June 29, 2012 (the Effective Date ), all assets of Nebraska Book Company, Inc., a Kansas corporation ( Old NBC ) and its subsidiaries were transferred to Nebraska Book Company, Inc., a Delaware corporation (f/k/a New Nebraska Book Company, Inc.; NBC ) and a wholly owned subsidiary of Neebo Holding Company, which in turn is a wholly owned subsidiary of Neebo, Inc. (Neebo, Inc. being the Successor, we, us, our, ours, or the Company ). We thereby became the beneficial owner of the Nebraska Book Company business, and have adopted as our own the historical financial information of NBC Acquisition Corp. ( Predecessor ), the prior holding company of Old NBC. The Company does not conduct significant activities apart from its investment in Neebo Holding Company and NBC. Operational matters discussed in this report, including the acquisition of college stores and other related businesses, refer to the operations of NBC. NBC Acquisition Corp. intends to liquidate before the end of calendar year We participate in the college store industry primarily by operating our own college stores, by providing used textbooks to college store operators, by providing distance education products and service, and by providing proprietary college store information and e-commerce systems, consulting and other services. At June 30, 2012, we operated 249 college stores. We believe we are one of the largest wholesale distributors of used college textbooks in North America, offering over 170,000 textbook titles and selling over 6.0 million books annually, primarily to college stores serving campuses located in the United States. We are also a provider of distance education materials to students in non-traditional courses, which include correspondence and corporate education courses. Furthermore, we provide the college store industry with a variety of services including propriety information and e-commerce systems, in-store promotions, buying programs, and consulting services. With origins dating to 1915 as a single college store operation, we have built a consistent reputation for excellence in order fulfillment, shipping performance and customer service. Our wholesale and college store operations experience two distinct selling periods and our wholesale operations experience two distinct buying periods. The peak selling periods for the wholesale operations occur prior to the beginning of each school semester in July/August and November/December. The buying periods for the wholesale operations occur at the end of each school semester in May and December. The primary selling periods for the college store operations are in August/September and January. A significant portion of our annual net sales are recognized during the second and fourth fiscal quarters. In response to our inability to fully refinance our existing debt and vendors unwillingness to extend credit to us under normal terms due to refinancing uncertainties, we filed voluntary petitions for relief under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware (the Court ). The Plan was confirmed by the Court on May 30, 2012 and became effective on the Effective Date. See Note 3 for further discussion of the details of our bankruptcy cases, related costs, the terms and conditions of the Plan and the applicability of fresh start accounting. Liquidity Consumer spending patterns for our merchandise are difficult to predict and are sensitive to the general economic climate, enrollment in colleges and universities and financial aid and other sources of funding for education. Declines in consumer spending could reduce our revenues. If the demand for our merchandise is lower than expected we may be forced to discount more merchandise, which reduces our profit margins, earnings and liquidity. Our industry is highly competitive. A large number of actual and potential competitors exist, some of which are larger than us and have substantially greater resources than us. Revenue levels and profit margins could be adversely impacted if we experience increased competition in the markets in which we currently operate or in markets in which we will operate in the future. We experience a significant proportion of our annual sales for our wholesale and store operations during our peak selling periods. If our sales during these periods are below our expectations, there may be a significant effect on our revenues and expenses. Basis of Presentation The financial statements include the consolidated results of the Company. The financial statements for the period ended June 30, 2012 do not include the effect of any changes to the pre-effective Date equity structure nor do they include changes in the fair value of the assets and liabilities as a result of fresh start accounting (See Note 3). The condensed consolidated balance sheet of NBC Acquisition Corp. at March 31, 2012 was derived from the Company s audited consolidated balance sheet as of that date. All other condensed consolidated financial statements contained herein have been prepared in accordance with generally accepted accounting principles for interim financial information and therefore do not include all of the information and footnotes required by accounting principles accepted in the United States for comparable annual financial statements. These financial statements are unaudited and internally prepared without auditor review. In management s opinion, the condensed consolidated financial statements include typically recurring adjustments necessary to present fairly the financial position at the balance sheet dates and the results of operations. All intercompany balances and transactions are eliminated in consolidation. The debt extinguishment, estimation of the settlement of allowed claims and the issuance of the new stock and debt transactions to record the effects of the Plan upon emergence from Chapter 11 bankruptcy are 13

14 included in the financial statements for the period ended June 30, 2012 (See Note 3). The condensed consolidated balance sheet as of March 31, 2012, has been derived from our audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the Unites States of America. These unaudited condensed consolidated financial statements should be read in conjunction with the Company s audited consolidated financial statements for the fiscal year ended March 31, A description of our significant accounting policies is included in our fiscal year 2012 audited financial statements. The results of operations for the interim periods presented are not necessarily indicative of results to be expected for other interim periods in the fiscal year. In the second and fourth quarters of each fiscal year, we realize our highest sales for the fiscal year as such quarters include the beginning of school semesters that drive the largest portion of our sales. 2. Ownership and Capital Structure Under the Plan, we issued 6,721,765 shares of new common stock, par value $0.001 per share, on the Effective Date. Prior to the Effective Date, we had issued 554,094 shares of common stock, par value $0.01 per share, to Weston Presidio, individuals and the Company s employees and 10,000 shares of preferred stock, par value $0.01 per share to Weston Presidio. All of the NBC Acquisition Corp. shares outstanding prior to the Effective Date were cancelled pursuant to the Plan (See Note 3). 3. Chapter 11 Cases, Emergence from Reorganization Proceedings and Related Disclosures Background of Bankruptcy Proceedings We filed for bankruptcy protection under Chapter 11 of the U.S. Bankruptcy Code on June 27, While in Chapter 11, certain claims against us in existence before the filing of petitions for relief under federal bankruptcy laws were stayed. These claims are reflected on the balance sheets as of March 31, 2012 and June 30, 2011 as Liabilities Subject to Compromise ( LSTC ). We continued to operate the business and manage the properties as debtor-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with the applicable provisions of the Bankruptcy Code and the orders of the Bankruptcy Court prior to our emergence from bankruptcy under the Plan on June 29, As part of the first day and subsequent motions, we obtained Bankruptcy Court approval to pay or otherwise honor pre-petition obligations generally designed to stabilize our operations including employee obligations, tax matters, insurance programs and from limited available funds, pre-petition claims of certain critical vendors, certain customer programs, and certain other prepetition claims. Under the Bankruptcy Code, we had the right to assume, assume and assign, or reject certain executory contracts and unexpired leases, subject to the approval of the Bankruptcy Court and certain other conditions. Debtor-in-Possession Financing On June 29, 2011, we entered into a $200.0 million Superpriority Debtor-In-Possession Credit Agreement (the DIP Credit Agreement ), consisting of a $125.0 million debtor-in-possession term loan facility (the DIP Term Loan Facility ) and a $75.0 million debtor-in-possession revolving facility (the DIP Revolving Facility and, together with the DIP Term Loan Facility, the DIP Facilities ). The DIP Facilities allowed our business activities to continue to function during pendency of the Chapter 11 cases. Borrowings under the DIP Facilities were secured by a perfected first priority security interest on substantially all of our property and assets. The DIP Facilities bore interest at the Eurodollar rate or the base rate plus an applicable margin. The base interest rate was the greater of a) prime rate, b) federal funds rate plus 0.5%, or c) the one-month Eurodollar loan rate plus 1.0%. The applicable margin with respect to term loans was 6.5% in the case of base rate loans and 7.5% in the case of Eurodollar loans. In addition, the applicable margin with respect to revolving credit loans was 4.0% in the case of base rate loans and 5.0% in the case of Eurodollar loans. In the case of the term loans only, the minimum base rate was 2.25% and the minimum Eurodollar rate was 1.25%. We were subject to certain affirmative covenants, as well as negative covenants and were in compliance with such covenants at June 30, As a result of not meeting the November 2011 cumulative consolidated EBITDA test, the DIP Credit Agreement was amended, effective December 28, 2011, to waive the November 30, 2011 cumulative consolidated EBITDA test, to increase the minimum liquidity and to change the cumulative consolidated EBITDA test from that date forward. At March 31, 2012, we were not in compliance with the cumulative consolidated EBITDA test. A waiver was not obtained due to obligations outstanding under the DIP Credit Agreement being paid in full upon emergence from bankruptcy. At June 30, 2011 and March 31, 2012 we had no funds borrowed under the DIP ABL Facility and there was $3.7 million and $4.1 million, respectively in outstanding letters of credit, which were fully cash collateralized and included in accounts receivable on the balance sheet. 14

15 Chapter 11 Claims Assessment The Court established August 30, 2011, as the bar date for filing proofs of claim against us and December 27, 2011 as the bar date for filing governmental proofs of claim against us. The claims bar dates established by the Court for lease rejections were May 30, 2012, April 30, 2012 and March 31, 2012, based on the effective date of the rejection. Under certain limited circumstances, some creditors may be permitted to file claims after the applicable bar date. Accordingly, it is possible that not all potential claims were filed as of the Effective Date. The Bankruptcy Court will ultimately resolve any disputes regarding the amount and underlying validity of the claims. As claims are resolved, or where better information becomes available and is evaluated, we will make adjustments to the condensed consolidated financial statements as appropriate. Liabilities Subject to Compromise ( LSTC ) In connection with our bankruptcy filing on June 27, 2011, we reclassified a substantial portion of the outstanding pre-petition obligations to LSTC. These pre-petition obligations included Pre-Petition Senior Secured Notes, Pre-Petition Senior Subordinated Notes and Pre-Petition Senior Discount Notes, capital lease obligations, trade payables, calculated lease termination expenses and other accrued pre-petition liabilities. The following table summarizes the carrying value of the LSTC balance presented on the balance sheet at March 31, 2012 and June 30, 2011: March 31, June 30, Accounts payable $ 12,700,364 $ 20,427,788 Accrued interest 6,624,800 6,624,800 Accrued expense - 4,276,768 Capital lease obligations 1,770,454 2,113,882 Long-term debt 452,000, ,000,000 Other long-term liabilities 1,014,319 1,304,894 $ 474,109,937 $ 286,748,132 Except for lease termination expenses, the balances shown in the table above were generally based on the historical carrying amount of the obligation as of the date of our bankruptcy filing. Outstanding obligations as of June 30, 2011 that were not re-classified as of that date included Bankruptcy Court approved prepetition obligations associated with employee obligations, tax matters, insurance programs, and certain critical vendors, certain customer programs, and certain other pre-petition claims, which allowed us to continue to operate the existing business in the ordinary course. In addition, secured debt was not considered compromised and therefore not included in LSTC. Reorganization Items Reorganization items represent expense or income amounts that have been recognized as a direct result of the bankruptcy filing and are presented separately in the condensed consolidated statement of operations pursuant to ASC Reorganizations. We recorded a net reorganization gain of $274.8 million during the quarter ended June 30, 2012, which included a one-time net reorganization gain of $288.2 million from the discharge of LSTC under the Plan. We recorded net reorganization expenses of $6.5 million for the quarter ended June 30, June 30, June 30, Professional fees $ 13,381,917 $ 6,517,941 Gain on settlement of liabilities subject to compromise (288,198,913) - $ (274,816,996) $ 6,517,941 15

16 Plan of Reorganization On May 30, 2012 (the Confirmation Date ), the Bankruptcy Court issued an order (the Confirmation Order ) confirming the Plan. The Plan became effective on the Effective Date. Generally, the Plan provided for the satisfaction of certain claims through a combination of cash and New Common Equity in the reorganized Company as follows: i. Class 1, which consisted of holders of Pre-Petition Senior Secured Notes, received pro rata share of 100% of New Common Equity subject to dilution from a management equity incentive plan and new warrants, pro rata share of new senior secured notes and the right to participate in the new term loan on a pro rata basis, based on such holder s allowed Pre-Petition Senior Secured Notes claims. ii. Class 2, which consisted of holders of all other secured claims, received, at the option of the reorganized Company, either (a) payment in full in cash; (b) delivery of collateral securing any such claim and payment of any interest required under section 506(b) of the Bankruptcy Code; (c) reinstatement of such other secured claims; or (d) other treatment rendering such claim unimpaired. iii. Class 3, which consisted of holders of all other priority claims, received, at the option of the reorganized Company, either (a) payment in full in cash or (b) other treatment rendering such claim unimpaired. iv. Class 4, which consisted of holders of Pre-Petition Senior Subordinated Notes, received pro rata share of new warrants. v. Class 5, which consisted of general unsecured claims, will receive a cash distribution equal to four percent of the amount of their claims. vi. Class 6, which consisted of Pre-Petition Senior Discount Notes, were cancelled without any distribution. vii. Class 7, which consisted of intercompany claims, were, at the option of the reorganized Company, either (a) reinstated as of the Effective Date or (b) cancelled without any distribution. viii. Class 8, which consisted of intercompany interests, were, at the option of the reorganized Company, either (a) reinstated as of the Effective Date or (b) cancelled without any distribution. ix. Class 9, which consisted of holders of interest in NBC Holdings Corp., parent of Predecessor ( Predecessor Parent ), including equity securities issued by Predecessor Parent, and those interests in Predecessor held by Weston Presidio, were cancelled without any distribution. x. Class 10, which consisted of all subordinated securities, were cancelled without any distribution. Financing at Emergence On the Effective Date, we obtained access to $80.0 million in new capital in the form of a term loan (the Term Loan Facility ) and up to $62.4 million in the form of a bridge loan (the Bridge Loan Facility ), of which $31.8 million was outstanding as of June 30, The holders of Pre-Petition Senior Secured Notes received their pro rata share of: (a) $100.0 million 15% in new senior secured notes (the Senior Secured Notes ) and (b) their pro rata share of substantially all of the New Common Equity, subject to dilution from a management equity incentive plan to be implemented pursuant to the Plan and the warrants described below. Holders of the Pre-Petition Senior Subordinated Notes, received their pro rata share of warrants for up to 2,177,189 shares of New Common Equity in two tranches: (x) up to 693,054 shares of New Common Equity in the form of 7-year warrants with a strike price determined based on an equity value of $100.0 million; and (y) up to 1,485,135 shares of New Common Equity in the form of 7-year warrants with a strike price determined based on an equity value of $150.0 million. Management believes that the combination of cash on hand on the Effective Date and the cash flows from operations will provide us with sufficient cash to fund operations during the next twelve months, including to satisfy payment obligations with respect to general unsecured claims as provided in the Plan. 16

17 Common Stock Pursuant to the Plan, all of the issued and outstanding shares of Predecessor common stock, par value $0.01 per share, prior to the Effective Date, including all options, were cancelled. On the Effective Date, a total of 6,721,765 shares of New Common Equity, par value $0.001 per share, were issued pursuant to the Plan as detailed above. Redeemable Preferred Stock Pursuant to the Plan, all of the issued and outstanding shares of Predecessor preferred stock prior to the Effective Date were cancelled. Applicability of Fresh Start Accounting In connection with our emergence from Chapter 11, we are required under ASC Reorganizations to adopt fresh start accounting. Fresh start accounting requires the debtor to use current fair values in its balance sheet for both assets and liabilities and eliminate all prior earnings and deficits. The two requirements to fresh start accounting are: The reorganization value of the Company s assets immediately before the date of confirmation of a plan of reorganization is less than the total of all post-petition and allowed claims; and The holders of existing voting shares immediately before confirmation of a plan of reorganization receive less than 50% of the voting shares upon emergence. We refer to these requirements as the fresh start applicability test. For purposes of applying the fresh start applicability test, reorganization value is defined in the glossary of ASC as the value attributed to the reconstituted entity. Therefore, this value represents the fair value of the entity before considering liabilities and approximates the amount a willing buyer would pay for the assets of the entity immediately after the restructuring. Generally, the fresh start applicability test is applied in the period immediately preceding the confirmation date of a plan of reorganization unless there are material conditions precedent to emergence, in which case, it is applied in the period immediately preceding the date when all of the material conditions have been resolved. Although the Confirmation Order with respect to the Plan was entered on May 30, 2012, we concluded that pursuant to ASC , the Confirmation Order was not effective until all material conditions precedent as enumerated in the Plan were satisfied, in particular the closing and funding of our emergence financing. As a result, we determined that the fresh start applicability test should be applied in the period immediately preceding the Effective Date. In accordance with ASC , we incurred and recorded a one-time net reorganization gain of $288.2 million from the discharge of liabilities under the Plan, along with the issuance of the common stock, in the financial statements pursuant to the Plan. ASC provides, among other things, for a determination of the value to be assigned to the equity of the emerging company as of a date selected for financial reporting purposes. We estimate that our total enterprise value was approximately $220.0 million as of June 29, This value is the enterprise value of the Company and, after adjusting for certain excess working capital, liabilities and debt, is intended to approximate the amount a willing buyer would pay for the assets and liabilities of the Company immediately after restructuring. The financial statements do not yet include the effect of any changes to the pre-effective Date equity structure nor do they include changes in the fair value of assets and liabilities as a result of fresh start accounting. Under fresh start accounting, this total enterprise value is adjusted to reorganization value and is allocated to our assets based upon their respective fair values in conformity with the purchase method of accounting for business combinations under ASC 805 Business Combinations. The valuations required to determine the fair value of certain of our assets will represent the results of valuation procedures performed by valuation specialists. The effects of these changes could significantly impact our financial statements. We expect to complete these valuations in the second fiscal quarter of The valuations will be subject to auditor review. The adjustments presented below are to our June 30, 2012 balance sheet. The balance sheet reorganization adjustments presented below summarize the impact of the Plan as of the Effective Date. The financial statements, including the balance sheet reorganization adjustments set forth below, do not yet include any of the Company s fresh start adjustments for the effect of any changes in pre-effective Date capital structure or changes in the fair value of the assets and liabilities as a result of fresh-start accounting. 17

18 NEEBO, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED AND BEFORE FRESH START ACCOUNTING ADJUSTMENTS) June 30, 2012 Predecessor NBC Acquisition Reorganization Fresh Start Successor Corp. Adjustments (1) Adjustments Neebo, Inc. ASSETS CURRENT ASSETS: Cash and cash equivalents $ 72,514,537 $ (27,877,610) (2) $ - $ 44,636,927 Receivables, net 62,444,433 (185,987) (3) - 62,258,446 Inventories 122,497, ,497,550 Recoverable income taxes 664, ,277 Deferred income taxes 10,371, ,371,170 Prepaid expenses and other assets 5,431, ,431,502 Total current assets 273,923,469 (28,063,597) - 245,859,872 PROPERTY AND EQUIPMENT, net of depreciation & amortization 35,119, ,119,538 GOODWILL 7,599, ,599,064 CUSTOMER RELATIONSHIPS, net of amortization 66,984, ,984,400 TRADENAME 31,320, ,320,000 OTHER IDENTIFIABLE INTANGIBLES, net of amortization 6,728, ,728,127 DEBT ISSUE COSTS, net of amortization 191,557 8,808,904 (4) - 9,000,461 OTHER ASSETS 3,468, ,468,008 Total assets $ 425,334,163 $ (19,254,693) $ - $ 406,079,470 LIABILITIES, REDEEMABLE PREFERRED STOCK AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 12,890,061 $ 1,919,217 (5) $ - $ 14,809,278 Accrued employee compensation and benefits 7,239, ,239,443 Accrued interest 1,054,158 (923,559) (2) - 130,599 Accrued incentives 5,509, ,509,612 Accrued expenses 4,854, ,854,337 Deferred revenue 2,168, ,168,919 Reorganization obligations - 6,356,648 (6) - 6,356,648 Current maturities of long-term debt 169, ,018 Current maturities of capital lease obligations 237, ,489 DIP term loan facility 125,000,000 (125,000,000) (2) - - Bridge Loan - 31,800,000 (4) - 31,800,000 Total current liabilities 159,123,037 (85,847,694) - 73,275,343 LONG-TERM DEBT, net of current maturities - 186,471,759 (4) - 186,471,759 CAPITAL LEASE OBLIGATIONS, net of current maturities 1,236, ,236,400 OTHER LONG-TERM LIABILITIES 659, ,837 LONG-TERM REORGANIZATION OBLIGATIONS - 277,294 (6) - 277,294 DEFERRED INCOME TAXES 22,287, ,287,592 LIABILITIES SUBJECT TO COMPROMISE 470,704,693 (470,704,693) (3) - - COMMITMENTS AND CONTINGENCIES REDEEMABLE PREFERRED STOCK Series A redeemable preferred stock 14,076, ,076,596 STOCKHOLDERS' EQUITY (DEFICIT): Common stock successor - 6,722 (7) 6,722 Common stock predecessor 5, ,541 Additional paid-in-capital successor - 75,724,923 (7) 75,724,923 Additional paid-in capital predecessor 111,323, ,323,810 Accumulated deficit (354,083,343) 274,816,996 (8) - (79,266,347) Total stockholders' equity (deficit) (242,753,992) 350,548, ,794,649 Total liabilities and stockholders' equity (deficit) $ 425,334,163 $ (19,254,693) $ - $ 406,079,470 18