10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 31, 2010

OR

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

For the transition period from              to             

Commission File Number: 1-12302

BARNES & NOBLE, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware	06-1196501
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
122 Fifth Avenue, New York, NY	10011
(Address of Principal Executive Offices)	(Zip Code)

(212) 633-3300

(Registrant’s Telephone Number, Including Area Code)

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

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  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	x	Accelerated filer	¨
Non-accelerated filer	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

As of August 31, 2010, 59,984,418 shares of Common Stock, par value $.001 per share, were outstanding, which number includes 2,439,725 shares of unvested restricted stock that have voting rights and are held by members of the Board of Directors and the Company’s employees.

BARNES & NOBLE, INC. AND SUBSIDIARIES

Fiscal Quarter Ended July 31, 2010

Index to Form 10-Q

		Page No.
PART I -	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Consolidated Statements of Operations - For the 13 weeks ended July 31, 2010 and August 1, 2009	3
	Consolidated Balance Sheets – July 31, 2010, August 1, 2009 and May 1, 2010	4
	Consolidated Statement of Changes in Shareholders’ Equity – For the 13 weeks ended July 31, 2010	6
	Consolidated Statements of Cash Flows - For the 13 weeks ended July 31, 2010 and August 1, 2009	7
	Notes to Consolidated Financial Statements	8
	Report of Independent Registered Public Accounting Firm	28
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4.	Controls and Procedures	37
PART II -	OTHER INFORMATION
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 6.	Exhibits	43
	SIGNATURES	45
	Exhibit Index	46

PART I - FINANCIAL INFORMATION

Item 1: Financial Statements

BARNES & NOBLE, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(In thousands, except per share data)

(unaudited)

	13 weeks ended
	July 31, 2010			August 1, 2009
Sales	$	1,396,570		1,155,681
Cost of sales and occupancy		1,044,870		799,826
Gross profit		351,700		355,855
Selling and administrative expenses		382,381		288,651
Depreciation and amortization		56,905		44,854
Pre-opening expenses		27		1,698
Operating (loss) profit		(87,613	)	20,652
Interest expense, net and amortization of deferred financing fees		13,263		304
(Loss) income before taxes		(100,876	)	20,348
Income taxes		(38,333	)	8,110
Net (loss) income		(62,543	)	12,238
Net loss attributable to noncontrolling interest		25		29
Net (loss) income attributable to Barnes & Noble, Inc.	$	(62,518	)	12,267
Basic (loss) earnings per common share
Net (loss) income attributable to Barnes & Noble, Inc.	$	(1.12	)	0.22
Diluted (loss) earnings per common share
Net (loss) income attributable to Barnes & Noble, Inc.	$	(1.12	)	0.21
Weighted average common shares outstanding
Basic		55,770		55,186
Diluted		55,770		56,221
Dividends declared per common share	$	0.25		0.25

See accompanying notes to consolidated financial statements.

3

BARNES & NOBLE, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(In thousands, except per share data)

	July 31, 2010		August 1, 2009	May 1, 2010
	(unaudited)		(unaudited)	(audited)
ASSETS
Current assets:
Cash and cash equivalents	$	27,019	157,743	60,965
Receivables, net		111,087	93,693	106,576
Merchandise inventories		1,787,683	1,229,761	1,370,111
Prepaid expenses and other current assets		187,362	124,216	181,825
Total current assets		2,113,151	1,605,413	1,719,477
Property and equipment:
Land and land improvements		8,617	9,298	8,618
Buildings and leasehold improvements		1,206,255	1,105,660	1,212,567
Fixtures and equipment		1,613,754	1,338,289	1,594,048
		2,828,626	2,453,247	2,815,233
Less accumulated depreciation and amortization		2,048,760	1,675,461	2,003,199
Net property and equipment		779,866	777,786	812,034
Goodwill		527,434	255,845	528,541
Intangible assets, net		577,300	89,798	580,962
Other noncurrent assets		62,103	13,287	64,672
Total assets	$	4,059,854	2,742,129	3,705,686

(Continued)

4

BARNES & NOBLE, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(In thousands, except per share data)

	July 31, 2010			August 1, 2009		May 1, 2010
	(unaudited)			(unaudited)		(audited)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,267,786		760,467		868,976
Accrued liabilities		674,461		610,472		755,432
Short-term note payable		100,000		—		100,000
Total current liabilities		2,042,247		1,370,939		1,724,408
Long-term debt		380,000		—		260,400
Deferred taxes		311,158		78,960		311,607
Other long-term liabilities		496,329		379,319		505,903
Shareholders’ equity:
Common stock; $.001 par value; 300,000 shares authorized; 89,102, 88,380 and 88,993 shares issued, respectively		89		88		89
Additional paid-in capital		1,290,803		1,273,598		1,286,215
Accumulated other comprehensive loss		(13,212	)	(12,015	)	(13,212	)
Retained earnings		603,850		699,802		681,082
Treasury stock, at cost, 33,314, 33,181 and 33,285 shares, respectively		(1,052,935	)	(1,050,115	)	(1,052,356	)
Total Barnes & Noble, Inc. shareholders’ equity		828,595		911,358		901,818
Noncontrolling interest		1,525		1,553		1,550
Total shareholders’ equity		830,120		912,911		903,368
Commitments and contingencies		—		—		—
Total liabilities and shareholders’ equity	$	4,059,854		2,742,129		3,705,686

See accompanying notes to consolidated financial statements.

5

BARNES & NOBLE, INC. AND SUBSIDIARIES

Consolidated Statement of Changes in Shareholders’ Equity

For the 13 weeks ended July 31, 2010

(In thousands)

(unaudited)

				Barnes & Noble, Inc. Shareholders’ Equity
	Noncontrolling Interest			Common Stock	Additional Paid-In Capital		Accumulated Other Comprehensive Losses		Retained Earnings		Treasury Stock at Cost		Total
Balance at May 1, 2010	$	1,550		89	1,286,215		(13,212	)	681,082		(1,052,356	)	$	903,368
Comprehensive income:
Net loss		(25	)	—	—		—		(62,518	)	—
Total comprehensive loss														(62,543	)
Exercise of 4 common stock options		—		—	49		—		—		—			49
Stock options and restricted stock tax benefits		—		—	(609	)	—		—		—			(609	)
Stock-based compensation expense		—		—	5,148		—		—		—			5,148
Cash dividend paid to stockholders		—		—	—		—		(14,714	)	—			(14,714	)
Treasury stock acquired, 29 shares		—		—	—		—		—		(579	)		(579	)
Balance at July 31, 2010	$	1,525		89	1,290,803		(13,212	)	603,850		(1,052,935	)	$	830,120

See accompanying notes to consolidated financial statements.

6

BARNES & NOBLE, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

For the 13 weeks ended July 31, 2010 and August 1, 2009

(Thousands of dollars)

(unaudited)

	13 weeks ended
	July 31, 2010			August 1, 2009
Cash flows from operating activities:
Net (loss) income	$	(62,543	)	12,238
Adjustments to reconcile net income from continuing operations to net cash flows from operating activities:
Depreciation and amortization (including amortization of deferred financing fees)		59,281		44,899
Stock-based compensation expense		5,148		3,738
Deferred taxes		658		697
Loss on disposal of property and equipment		363		637
Decrease in other long-term liabilities		(9,574	)	(9,272	)
Changes in operating assets and liabilities, net		(111,084	)	55,010
Net cash flows from operating activities		(117,751	)	107,947
Cash flows from investing activities:
Purchases of property and equipment		(21,424	)	(23,281	)
Net decrease in other noncurrent assets		179		35
Net cash flows from investing activities		(21,245	)	(23,246	)
Cash flows from financing activities:
Net increase in credit facility		119,600		—
Proceeds from exercise of common stock options		49		578
Excess tax benefit from stock-based compensation		694		931
Purchase of treasury stock		(579	)	(787	)
Cash dividend paid to shareholders		(14,714	)	(14,274	)
Net cash flows from financing activities		105,050		(13,552	)
Net (decrease) increase in cash and cash equivalents		(33,946	)	71,149
Cash and cash equivalents at beginning of period		60,965		86,594
Cash and cash equivalents at end of period	$	27,019		157,743
Changes in operating assets and liabilities, net:
Receivables, net	$	(4,511	)	(21,699	)
Merchandise inventories		(417,572	)	3,995
Prepaid expenses and other current assets		(5,537	)	3,274
Accounts payable and accrued liabilities		316,536		69,440
Changes in operating assets and liabilities, net	$	(111,084	)	55,010
Supplemental cash flow information:
Cash paid during the period for:
Interest paid	$	16,761		149
Income taxes (net of refunds)	$	14,079		1,554

See accompanying notes to consolidated financial statements.

7

BARNES & NOBLE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

For the 13 weeks ended July 31, 2010 and August 1, 2009

(Thousands of dollars, except per share data)

(unaudited)

The unaudited consolidated financial statements include the accounts of Barnes & Noble, Inc. and its subsidiaries (collectively, Barnes & Noble or the Company).

In the opinion of the Company’s management, the accompanying unaudited consolidated financial statements of the Company contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly its consolidated financial position as of July 31, 2010 and the results of its operations and its cash flows for the 13 weeks then ended. These consolidated financial statements are condensed and therefore do not include all of the information and footnotes required by generally accepted accounting principles. The consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the 52 weeks ended May 1, 2010 (fiscal 2010).

On September 29, 2009, the Board of Directors of Barnes & Noble, Inc. authorized a change in the Company’s fiscal year end from the Saturday closest to the last day of January to the Saturday closest to the last day of April. The change in fiscal year, which became effective on September 30, 2009 upon the closing of the acquisition of Barnes & Noble College Booksellers, Inc. (B&N College) by Barnes & Noble, Inc. (the Acquisition), gives the Company and B&N College the same fiscal year (see Note 12). The change was intended to better align the Company’s fiscal year with the business cycles of both Barnes & Noble, Inc. and B&N College. As a result of the change in fiscal year, the Company’s 2010 fiscal year began on May 3, 2009 and ended on May 1, 2010 (fiscal 2010).

Due to the increased focus on the internet and digital businesses, the Company performed an evaluation on the effect of its impact on the identification of operating segments. The assessment considered the way the business is managed (focusing on the financial information distributed) and the manner in which the chief operating decision maker interacts with other members of management. As a result of this assessment, the Company has determined that it now has three operating segments: B&N Retail, B&N College and B&N.com(See Note 5).

Due to the seasonal nature of the business, the results of operations for the 13 weeks ended July 31, 2010 are not indicative of the results to be expected for the 52 weeks ending April 30, 2011 (fiscal 2011).

(1) Merchandise Inventories

Merchandise inventories are stated at the lower of cost or market. Cost is determined primarily by the retail inventory method under both the first-in, first-out (FIFO) basis and the last-in, first-out (LIFO) basis. The Company uses the retail inventory method for 98% of the Company’s merchandise inventories. As of July 31, 2010, August 1, 2009 and May 1, 2010, 68%, 100% and 87%, respectively, of the Company’s inventory on the retail inventory method was valued under the FIFO basis. B&N College’s textbook and trade book inventories are valued using the LIFO method, where the related reserve was not material to the recorded amount of the Company’s inventories or results of operations.

Market is determined based on the estimated net realizable value, which is generally the selling price. Reserves for non-returnable inventory are based on the Company’s history of liquidating non-returnable inventory.

8

BARNES & NOBLE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

For the 13 weeks ended July 31, 2010 and August 1, 2009

(Thousands of dollars, except per share data)

(unaudited)

The Company also estimates and accrues shortage for the period between the last physical count of inventory and the balance sheet date. Shortage rates are estimated and accrued based on historical rates and can be affected by changes in merchandise mix and changes in actual shortage trends.

(2) Reclassifications

Certain prior period amounts have been reclassified to conform to the current presentation.

(3) Revenue Recognition

Revenue from sales of the Company’s products is recognized at the time of sale, other than those with multiple elements. The Company accrues for estimated sales returns in the period in which the related revenue is recognized based on historical experience and industry standards. Sales taxes collected from retail customers are excluded from reported revenues. All of the Company’s sales are recognized as revenue on a “net” basis, including sales in connection with any periodic promotions offered to customers. The Company does not treat any promotional offers as expenses.

In accordance with ASC 605-25, Revenue Recognition, Multiple Element Arrangements and Accounting Standards Updates (ASU) 2009-13 and 2009-14, for multiple-element arrangements that involve tangible products that contain software that is essential to the tangible product’s functionality, undelivered software elements that relate to the tangible product’s essential software and other separable elements, the Company allocates revenue to all deliverables using the relative selling-price method. Under this method, revenue is allocated at the time of sale to all deliverables based on their relative selling price using a specific hierarchy. The hierarchy is as follows: vendor-specific objective evidence, third-party evidence of selling price, or best estimate of selling price. NOOK^TM eBook Reader revenue is recognized at the segment point of sale.

The Company includes post-service customer support (PCS) in the form of software updates and potential increased functionality on a when-and-if-available basis, as well as AT&T wireless access and wireless connectivity with the purchase of NOOK™ from the Company. Using the relative selling price described above, the Company allocates revenue based on the best estimate of selling price for the deliverables as no vendor-specific objective evidence or third-party evidence exists for any of the elements. Revenue allocated to NOOK™ and the software essential to its functionality is recognized at the time of sale, provided all other conditions for revenue recognition are met. Revenue allocated to the PCS and the AT&T wireless access is deferred and recognized on a straight-line basis over the 2-year estimated life of NOOK™.

9

BARNES & NOBLE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

For the 13 weeks ended July 31, 2010 and August 1, 2009

(Thousands of dollars, except per share data)

(unaudited)

The Company records revenue from sales of third-party extended warranties, service contracts and other products, for which the Company is not obligated to perform, and for which the Company does not meet the criteria for gross revenue recognition under ASC 605-45-45, Reporting Revenue Gross as a Principal versus Net as an Agent, on a net basis. All other revenue is recognized on a gross basis.

The Barnes & Noble Member Program entitles Members to receive the following benefits: 40% discount off the current hardcover Barnes & Noble store bestsellers, 20% discount off all adult hardcover books, 10% discount off Barnes & Noble sale price of other eligible items, unlimited free express shipping on orders made on Barnes & Noble.com, as well as periodic special promotions at Barnes & Noble stores and online at Barnes & Noble.com. The annual fee of $25.00 is non-refundable after the first 30 days. Revenue is recognized over the twelve-month period based upon historical spending patterns for Barnes & Noble Members.

(4) Earnings (Loss) per Share

In accordance with ASC 260-10-45, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities, the Company’s unvested restricted shares and shares issuable under the Company’s deferred compensation plan are considered participating securities. During periods of net income, the calculation of earnings per share for common stock are reclassified to exclude the income attributable to the unvested restricted shares and shares issuable under the Company’s deferred compensation plan from the numerator and exclude the dilutive impact of those shares from the denominator. During periods of net loss, no effect is given to the participating securities because they do not share in the losses of the Company. Due to the net loss during the 13 weeks ended July 31, 2010, participating securities in the amount of 2,407,964 were excluded in the calculation of earnings per share using the two-class method for the quarterly period because the effect would be antidilutive.

10

BARNES & NOBLE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

For the 13 weeks ended July 31, 2010 and August 1, 2009

(Thousands of dollars, except per share data)

(unaudited)

The following is a reconciliation of the Company’s basic and diluted earnings per share calculation:

	13 weeks ended
	July 31, 2010			August 1, 2009
Numerator for basic earnings per share:
(Loss) income attributable to Barnes & Noble, Inc.	$	(62,518	)	$	12,267
Less allocation of earnings and dividends to participating securities		—			(389	)
Net (loss) income available to common shareholders	$	(62,518	)	$	11,878
Numerator for diluted earnings per share:
Net (loss) income available to common shareholders	$	(62,518	)	$	11,878
Effect of dilutive options		—			(1	)
Net (loss) income available to common shareholders	$	(62,518	)	$	11,877
Denominator for basic and diluted earnings per share:
Basic weighted average common shares		55,770			55,186
Average dilutive options		—			1,035
Diluted weighted average common shares		55,770			56,221
Basic (loss) earnings per common share
Net (loss) income attributable to Barnes & Noble, Inc.	$	(1.12	)	$	0.22
Diluted (loss) earnings per common share
Net (loss) income attributable to Barnes & Noble, Inc.	$	(1.12	)	$	0.21

11

BARNES & NOBLE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

For the 13 weeks ended July 31, 2010 and August 1, 2009

(Thousands of dollars, except per share data)

(unaudited)

(5) Segment Reporting

The Company identifies its operating segments based on the way the business is managed (focusing on the financial information distributed) and the manner in which the chief operating decision maker interacts with other members of management. As a result of this assessment, the Company has determined that it has three operating segments: B&N Retail, B&N College and B&N.com.

B&N Retail

This segment includes 717 bookstores as of July 31, 2010, primarily under the Barnes & Noble Booksellers trade name. The 717 Barnes & Noble stores generally offer a comprehensive title base, a café, a children’s section, a music department, a magazine section and a calendar of ongoing events, including author appearances and children’s activities. The B&N Retail segment also includes the Company’s publishing operation, Sterling Publishing.

B&N College

This segment includes 633 stores as of July 31, 2010, that are primarily school-owned stores operated under contracts by B&N College. The 633 B&N College stores generally sell textbooks and course-related materials, emblematic apparel and gifts, trade books, school and dorm supplies, and convenience and café items.

B&N.com

This segment includes the Company’s online business, which includes the Company’s e-commerce site and features an eBookstore and digital newsstand. Additionally, this segment includes the development and support of the Company’s NOOK™ eReading product offering. These products enable customers to buy and read eBooks on the widest range of platforms, including NOOK™ eBook Readers, devices from partner companies, and hundreds of the most popular mobile and computing devices using free NOOK™ software.

12

BARNES & NOBLE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

For the 13 weeks ended July 31, 2010 and August 1, 2009

(Thousands of dollars, except per share data)

(unaudited)

Summarized financial information concerning the Company’s reportable segments is presented below:

Sales

	13 Weeks Ended
	July 31, 2010		August 1, 2009
B&N Retail	$	1,026,269	$	1,053,666
B&N College (a)		225,589		—
B&N.com		144,712		102,015
Total	$	1,396,570	$	1,155,681

Depreciation and Amortization

	13 Weeks Ended
	July 31, 2010		August 1, 2009
B&N Retail	$	39,403	$	39,578
B&N College (a)		10,568		—
B&N.com		6,934		5,276
Total	$	56,905	$	44,854

Operating Profit (Loss)

	13 Weeks Ended
	July 31, 2010			August 1, 2009
B&N Retail	$	(13,880	)	$	32,105
B&N College (a)		(20,102	)		—
B&N.com		(53,631	)		(11,453	)
Total	$	(87,613	)	$	20,652

Capital Expenditures

	13 Weeks Ended
	July 31, 2010		August 1, 2009
B&N Retail	$	9,864	$	18,157
B&N College (a)		7,177		—
B&N.com		4,383		5,124
Total	$	21,424	$	23,281

Total Assets

	July 31, 2010		August 1, 2009
B&N Retail	$	2,493,130	$	2,393,710
B&N College		1,300,344		—
B&N.com		266,380		348,419
Total	$	4,059,854	$	2,742,129

(a) Includes only the financial information of B&N College since the date of the Acquisition on September 30, 2009.

13

BARNES & NOBLE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

For the 13 weeks ended July 31, 2010 and August 1, 2009

(Thousands of dollars, except per share data)

(unaudited)

A reconciliation of operating profit from reportable segments to income from continuing operations before taxes in the consolidated financial statements is as follows:

	13 Weeks Ended
	July 31, 2010			August 1, 2009
Reportable segments operating (loss) profit	$	(87,613	)	$	20,652
Interest expense, net		13,263			304
Consolidated (loss) income before taxes	$	(100,876	)	$	20,348

(6) Changes in Intangible Assets and Goodwill

		As of July 31, 2010
	Useful Life	Gross Carrying Amount		Accumulated Amortization			Total
Amortizable intangible assets
Customer relationships	5-25	$	257,410	$	(9,866	)	$	247,544
Author contracts	10		18,461		(13,820	)		4,641
Technology	5-10		5,850		(1,022	)		4,828
Distribution contracts	10		8,325		(3,834	)		4,491
Other	3-10		4,533		(3,639	)		894
		$	294,579	$	(32,181	)	$	262,398
Unamortizable intangible assets
Trade name							$	293,400
Copyrights								166
Publishing contracts								21,336
							$	314,902

14

BARNES & NOBLE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

For the 13 weeks ended July 31, 2010 and August 1, 2009

(Thousands of dollars, except per share data)

(unaudited)

All amortizable intangible assets are being amortized over their useful life on a straight-line basis, except for the customer relationships related to the Fictionwise acquisition that are being amortized on an accelerated basis.

Aggregate Amortization Expense:
For the 13 weeks ended July 31, 2010	$	3,676
For the 13 weeks ended August 1, 2009	$	1,557
Estimated Amortization Expense:
(12 months ending on or about April 30)
2011	$	14,492
2012	$	14,111
2013	$	13,780
2014	$	13,063
2015	$	11,293

The changes in the carrying amount of goodwill by segment for the 13 weeks ended July 31, 2010 are as follows:

	B&N Retail and B&N.com (a)			B&N College		Total Company
Balance as of May 1, 2010	$	254,471		$	274,070	$	528,541
Benefit of excess tax amortization (b)		(1,107	)		—		(1,107	)
Balance as of July 31, 2010	$	253,364		$	274,070	$	527,434

(a) The Company is currently evaluating the allocation of goodwill between B&N Retail and B&N.com.

(b) The tax basis of goodwill arising from an acquisition during the 52 weeks ended January 29, 2005 exceeded the related basis for financial reporting purposes by approximately $96,576. In accordance with ASC 740-10-30, Accounting for Income Taxes, the Company is recognizing the tax benefits of amortizing such excess as a reduction of goodwill as it is realized on the Company’s income tax return.

(7) Gift Cards

The Company sells gift cards which can be used in its stores or on Barnes & Noble.com. The Company does not charge administrative or dormancy fees on gift cards, and gift cards have no expiration dates. Upon the purchase of a gift card, a liability is established for its cash value. Revenue associated with gift cards is deferred until redemption of the gift card. Over time, some portion of the gift cards issued is not redeemed. The Company estimates the portion of the gift card liability for which the likelihood of redemption is remote based upon the Company’s historical redemption patterns. The Company records this amount in income on a straight-line basis over a 12-month period beginning in the 13th month after the month the gift card was originally sold. If actual redemption patterns vary from the Company’s estimates, actual gift card breakage may differ from the amounts recorded. Through fiscal 2010, the Company also sold online gift certificates for use solely on Barnes & Noble.com, which were treated the same way as gift cards. The Company recognized gift card breakage of $4,984 and $5,465 during the 13 weeks ended July 31, 2010 and August 1, 2009, respectively. The Company had gift card liabilities of $284,843 and $263,785 as of July 31, 2010 and August 1, 2009, respectively, which amounts are included in accrued liabilities.

15

BARNES & NOBLE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

For the 13 weeks ended July 31, 2010 and August 1, 2009

(Thousands of dollars, except per share data)

(unaudited)

(8) Other Long-Term Liabilities

Other long-term liabilities consist primarily of deferred rent and obligations under the Junior Seller Note (see Note 12). The Company provides for minimum rent expense over the lease terms (including the build-out period) on a straight-line basis. The excess of such rent expense over actual lease payments (net of tenant allowances) is classified as deferred rent. Other long-term liabilities also include accrued pension liabilities and store closing expenses. The Company had the following long-term liabilities at July 31, 2010, August 1, 2009 and May 1, 2010:

	July 31, 2010		August 1, 2009	May 1, 2010
Deferred Rent	$	313,325	352,114	324,528
Junior Seller Note (see Note 12)		150,000	—	150,000
Other		33,004	27,205	31,375
Total long-term liabilities	$	496,329	379,319	505,903

(9) Income Taxes

As of July 31, 2010, the Company had $15,838 of unrecognized tax benefits, all of which, if recognized, would affect the Company’s effective tax rate. The Company’s continuing practice is to recognize interest and penalties related to income tax matters in income tax expense. The Company had $3,382 accrued for interest and penalties, which is included in the $15,838 of unrecognized tax benefits noted above.

The Company is subject to U.S. federal income tax as well as income tax in jurisdictions of each state having an income tax. The tax years that remain subject to examination are primarily 2006 and forward. Some earlier years remain open for a small minority of states.

16

BARNES & NOBLE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

For the 13 weeks ended July 31, 2010 and August 1, 2009

(Thousands of dollars, except per share data)

(unaudited)

(10) Fair Values of Financial Instruments

In accordance with ASC 820, Fair Value Measurements and Disclosures, the fair value of an asset is considered to be the price at which the asset could be sold in an orderly transaction between unrelated knowledgeable and willing parties. A liability’s fair value is defined as the amount that would be paid to transfer the liability to a new obligor, not the amount that would be paid to settle the liability with the creditor. Assets and liabilities recorded at fair value are measured using a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include:

Level 1 – Observable inputs that reflect quoted prices in active markets

Level 2 – Inputs other than quoted prices in active markets that are either directly or indirectly observable

Level 3 – Unobservable inputs in which little or no market data exists, therefore requiring the Company to develop its own                  assumptions

	Fair Value Measurement Using
Description	Quarter Ended July  31, 2010		Quoted Prices in Active Markets for Identical Assets (Level 1)	Significant Other Observable Inputs (Level 2)	Significant Unobservable Inputs (Level 3)	Total Gains (Losses)
Contingent consideration (See Note 14)	$	5,483	—	—	5,483	—

The following table presents the changes in Level 3 contingent consideration liability for the 13 weeks ended July 31, 2010:

	Acquisition  of Fictionwise
Beginning balance, May 1, 2010	$	8,165
Payments		2,682
Balance, July 31, 2010	$	5,483

Fair Value of Financial Instruments

The Company’s financial instruments, other than those presented in the disclosures above, include cash, receivables, other investments, accounts payable and accrued liabilities. The fair values of cash, receivables, accounts payable and accrued liabilities approximated carrying values because of the short-term nature of these instruments. The Company believes that its Credit Facility approximates fair value since interest rates are adjusted to reflect current rates. The Company believes that the terms and conditions of the Seller Notes are consistent with comparable market debt issues.

17

BARNES & NOBLE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

For the 13 weeks ended July 31, 2010 and August 1, 2009

(Thousands of dollars, except per share data)

(unaudited)

(11) Credit Facility

On September 30, 2009, the Company entered into a credit agreement (the Credit Agreement) with Bank of America, N.A., as administrative agent, collateral agent and swing line lender, and other lenders, under which the lenders committed to provide up to $1,000,000 in commitments under a four-year asset-backed revolving credit facility (the Credit Facility) and which is secured by eligible inventory and accounts receivable and related assets. Borrowings under the Credit Agreement are limited to a specified percentage of eligible inventories and accounts receivable and accrue interest, at the election of the Company, at Base Rate or LIBO Rate, plus, in each case, an Applicable Margin (each term as defined in the Credit Agreement). In addition, the Company has the option to request the increase in commitments under the Credit Agreement by up to $300,000, subject to certain restrictions.

The Credit Agreement includes a fixed charge coverage ratio requirement which would be triggered if Availability (as defined in the Credit Agreement) were to fall below (a) the greater of (i) 15% of the Loan Cap (as defined in the Credit Agreement) or (ii) $110,000. In addition, the Credit Facility contains covenants that limit, among other things, the Company’s ability to incur indebtedness, create liens, make investments, make restricted payments, merge or acquire assets, and contains default provisions that are typical for this type of financing, among other things.

The Company paid $37,207 for advisory and arrangement fees related to the Credit Facility, which are being amortized over the four-year life of the Credit Facility.

The Credit Facility replaces the Company’s prior $850,000 credit agreement which had a maturity date of January 30, 2010, as well as B&N College’s $400,000 credit agreement which had a maturity date of November 13, 2011. The remaining unamortized deferred costs of $807 relating to the Company’s prior credit facility were deferred and are being amortized over the four-year term of the Credit Facility.

(12) Acquisition of B&N College

On September 30, 2009, the Company completed the Acquisition of B&N College from Leonard Riggio and Louise Riggio (Sellers) pursuant a Stock Purchase Agreement dated as of August 7, 2009 among the Company and the Sellers (Purchase Agreement). Mr. Riggio is the Chairman of the Company’s Board of Directors and a significant stockholder. As part of the transaction, the Company acquired the Barnes & Noble trade name that had been owned by B&N College and licensed to the Company.

As a result of the Acquisition, the Company expects to capitalize on the revenue stream derived from the sale of textbooks and course-related materials, emblematic apparel and gifts, trade books, school and dorm supplies, and convenience and café items. Combining both businesses under a unified brand will enable the Company to benefit from the growing online college textbook and eBook markets.

On September 30, 2009, in connection with the closing of the Acquisition described above, the Company issued the Sellers (i) a senior subordinated note in the principal amount of $100,000, payable in full on December 15, 2010, with interest of 8% per annum payable on the unpaid principal amount (the Senior Seller Note), and (ii) a junior subordinated note in the principal amount of $150,000, payable in full on the fifth

18

BARNES & NOBLE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

For the 13 weeks ended July 31, 2010 and August 1, 2009

(Thousands of dollars, except per share data)

(unaudited)

anniversary of the closing of the Acquisition, with interest of 10% per annum payable on the unpaid principal amount (the Junior Seller Note; and together with the Senior Seller Note, the Seller Notes). On December 22, 2009, the Company consented to the pledge and assignment of the Senior Seller Note by the Sellers as collateral security.

The purchase price paid to the Sellers under the Purchase Agreement was $596,000, consisting of $346,000 in cash and $250,000 in Seller Notes. However, pursuant to the terms of the Purchase Agreement, the cash paid to the Sellers was reduced by $82,352 in cash bonuses paid by B&N College to 192 members of its management team and employees, not including Leonard Riggio. The Company financed the Acquisition through $250,000 of seller financing, $150,000 from the Credit Facility and the remainder from both the Company’s and B&N College’s cash on hand.

The Acquisition was accounted for as a business purchase pursuant to Accounting Standards Codification (ASC) 805, Business Combinations (ASC 805). As required by ASC 805-20, the Company allocated the purchase price to assets and liabilities based on their estimated fair value at the acquisition date.

The following unaudited pro forma condensed financial information assumes that the Acquisition was accounted for using the acquisition method of accounting for business combinations in accordance with ASC 805 and represents a pro forma presentation based upon available information of the combining companies giving effect to the Acquisition as if it had occurred on May 3, 2009, the first date of B&N College’s prior fiscal year, with adjustments for amortization expense of intangible assets, depreciation expense for the fair value of property and equipment above its book value, termination or changes in certain compensation arrangements, termination of textbook royalties, non-operating expenses not acquired in the Acquisition, interest expense and income tax expense:

	13 weeks ended
	July 31, 2010			August 1, 2009
Sales	$	1,396,570		$	1,371,006
Net (loss) income attributable to Barnes & Noble, Inc.	$	(62,518	)	$	(12,492	)
Basic	$	(1.12	)	$	(0.23	)
Diluted	$	(1.12	)	$	(0.23	)

The unaudited pro forma condensed financial information is based on the assumptions and adjustments which give effect to events that are: (i) directly attributable to the Acquisition; (ii) expected to have a continuing impact; and (iii) factually supportable. The unaudited pro forma condensed financial information is presented for informational purposes only and is not necessarily indicative of the operating results that would have been achieved had the Acquisition been consummated as of the dates indicated or of the results that may be obtained in the future.

19

BARNES & NOBLE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

For the 13 weeks ended July 31, 2010 and August 1, 2009

(Thousands of dollars, except per share data)

(unaudited)

(13) Tikatok Acquisition

On September 24, 2009, the Company acquired the assets of Tikatok Inc. (Tikatok) for $2,305 in cash. Tikatok is an online platform where parents and their children and others can write, illustrate, and publish stories into hardcover and paperback books. On its website, Tikatok makes available, among other things, its patent-pending StorySparks™ system, which helps to walk children through the process of creating and writing stories and expands the Company’s reach to additional parents, educators and librarians. In addition to the closing purchase price, the Company has made and may make bonus and/or earn out payments if certain performance targets are met over the next four years.

The Tikatok acquisition was accounted for as a business purchase pursuant to ASC 805. In accordance with ASC 805-20, the purchase price has been allocated to assets based on their estimated fair value at the acquisition date.

The results of operations for the period subsequent to the Tikatok acquisition are included in the consolidated financial statements. The pro forma effect assuming the acquisition of Tikatok at the beginning of the fiscal year period and prior fiscal year is not material.

(14) Acquisition of Fictionwise

On March 4, 2009, the Company acquired Fictionwise, Inc. (Fictionwise), a leader in the eBook marketplace, for $15,729 in cash. In addition to the closing purchase price, the Company has made and may make earn-out payments contingent upon the achievement of certain performance and technology related targets through 2011. The acquisition provided a core component to the Company’s overall digital strategy, enabling the launch of one of the world’s largest eBookstores on July 20, 2009. The eBookstore on Barnes & Noble.com enables customers to buy eBooks and read them on a wide range of platforms, including NOOK™, the Company’s eBook reader, iPhone^® and iPod touch^®, BlackBerry^®, Motorola™ smartphones, as well as most laptops or full-sized desktop computers.

The Fictionwise acquisition was accounted for as a business purchase pursuant to ASC 805, Business Combinations. In accordance with ASC 805-20, the purchase price has been allocated to assets and liabilities based on their estimated fair value at the acquisition date. The fair value of the contingent consideration at the Fictionwise acquisition date is included in the purchase price. The fair value of the contingent consideration arrangement is determined by estimating the expected (probability-weighted) earn-out payments discounted to present value. Changes to the fair value of the contingent consideration will be recorded in selling and administrative expenses. There was no material change in the fair value of contingent consideration at July 31, 2010 compared to the fair value estimated at October 31, 2009.

The Fictionwise results of operations for the period subsequent to the Fictionwise acquisition date are included in the consolidated financial statements. The pro forma effect assuming the acquisition of Fictionwise at the beginning of the fiscal year and prior fiscal year is not material.

20

BARNES & NOBLE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

For the 13 weeks ended July 31, 2010 and August 1, 2009

(Thousands of dollars, except per share data)

(unaudited)

(15) Stock-Based Compensation

The Company maintains three share-based incentive plans: the 1996 Incentive Plan, the 2004 Incentive Plan and the 2009 Incentive Plan. Prior to June 2, 2009, the Company issued restricted stock and stock options under the 1996 and 2004 Incentive Plans. On June 2, 2009, the Company’s shareholders approved the 2009 Incentive Plan. The maximum number of shares issuable under the 2009 Incentive Plan is 950,000, plus shares that remain available under the Company’s shareholder-approved 2004 Incentive Plan. At July 31, 2010, there were approximately 1,276,638 shares of common stock available for future grants under the 2009 Incentive Plan.

A restricted stock award is an award of common stock that is subject to certain restrictions during a specified period. Restricted stock awards are independent of option grants and are generally subject to forfeiture if employment terminates prior to the release of the restrictions. The grantee cannot transfer the shares before the restricted shares vest. Shares of unvested restricted stock have the same voting rights as common stock, are entitled to receive dividends and other distributions thereon and are considered to be currently issued and outstanding. The Company’s restricted stock awards vest over a period of one to five years. The Company expenses the cost of the restricted stock awards, which is determined to be the fair market value of the shares at the date of grant, straight-line over the period during which the restrictions lapse. For these purposes, the fair market value of the restricted stock is determined based on the closing price of the Company’s common stock on the grant date.

The Company uses the Black-Scholes option-pricing model to value the Company’s stock options for each stock option award. Using this option-pricing model, the fair value of each stock option award is estimated on the date of grant. The fair value of the Company’s stock option awards, which are generally subject to pro-rata vesting annually over four years, is expensed on a straight-line basis over the vesting period of the stock options. The expected volatility assumption is based on traded options volatility of the Company’s stock over a term equal to the expected term of the option granted. The expected term of stock option awards granted is derived from historical exercise experience under the Company’s stock option plans and represents the period of time that stock option awards granted are expected to be outstanding. The expected term assumption incorporates the contractual term of an option grant, which is ten years, as well as the vesting period of an award, which is generally pro-rata vesting annually over four years. The risk-free interest rate is based on the implied yield on a U.S. Treasury constant maturity with a remaining term equal to the expected term of the option granted.

No options were granted for the 13 weeks ended July 31, 2010 and for the 13 weeks ended August 1, 2009.

21

BARNES & NOBLE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

For the 13 weeks ended July 31, 2010 and August 1, 2009

(Thousands of dollars, except per share data)

(unaudited)

Stock-Based Compensation Activity

The following table presents a summary of the Company’s stock options activity for the 13 weeks ended July 31, 2010:

	Number of Shares (in thousands)		Weighted Average Exercise Price
Balance, May 1, 2010	5,498		$	20.19
Granted	—			—
Exercised	(4	)		12.74
Forfeited	(19	)		16.82
Balance, July 31, 2010	5,475			20.21
Exercisable at July 31, 2010	4,975		$	20.02

As of July 31, 2010, there was $2,542 of total unrecognized compensation expense related to unvested stock options granted under the Company’s share-based compensation plans. That expense is expected to be recognized over a weighted average period of 2.67 years.

The following table presents a summary of the Company’s restricted stock activity for the 13 weeks ended July 31, 2010:

	Number of Shares (in thousands)		Weighted Average Grant Date Fair Value
Balance, May 1, 2010	2,330		$	24.15
Granted	218			18.97
Vested	(88	)		37.05
Forfeited	(15	)		31.16
Balance, July 31, 2010	2,445		$	23.18

As of July 31, 2010, there was $48,643 of unrecognized stock-based compensation expense related to unvested restricted stock awards. That cost is expected to be recognized over a weighted average period of 2.64 years.

22

BARNES & NOBLE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

For the 13 weeks ended July 31, 2010 and August 1, 2009

(Thousands of dollars, except per share data)

(unaudited)

For the 13 weeks ended July 31, 2010 and August 1, 2009, the Company recognized stock-based compensation expense as follows:

	13 weeks ended
		July 31, 2010	August 1, 2009
Selling and administrative expenses	$	5,148	3,738

(16) Noncontrolling Interest

Sterling Publishing has a joint venture in Begin Smart LLC, owning a 50% interest to develop, sell, and distribute books for infants, toddlers, and children under the brand name BEGIN SMART™.

(17) Pension and Other Postretirement Benefit Plans

As of December 31, 1999, substantially all employees of the Company were covered under a noncontributory defined benefit pension plan (the Pension Plan). As of January 1, 2000, the Pension Plan was amended so that employees no longer earn benefits for subsequent service. Effective December 31, 2004, the barnesandnoble.com llc (Barnes & Noble.com) Employees’ Retirement Plan (the B&N.com Retirement Plan) was merged with the Pension Plan. Substantially all employees of Barnes & Noble.com were covered under the B&N.com Retirement Plan. As of July 1, 2000, the B&N.com Retirement Plan was amended so that employees no longer earn benefits for subsequent service. Subsequent service continues to be the basis for vesting of benefits not yet vested at December 31, 1999 and June 30, 2000 for the Pension Plan and the B&N.com Retirement Plan, respectively, and the Pension Plan will continue to hold assets and pay benefits. The actuarial assumptions used to calculate pension costs are reviewed annually. Pension expense for the 13 weeks ended July 31, 2010 and August 1, 2009 was $613 and $762, respectively.

The Company provides certain health care and life insurance benefits (the Postretirement Plan) to certain retired employees, limited to those receiving benefits or retired as of April 1, 1993. Total Company contributions charged to employee benefit expenses for the Postretirement Plan were $38 for the 13 weeks ended July 31, 2010 and August 1, 2009, respectively.

(18) Shareholders’ Equity

On November 17, 2009, the Board of Directors of the Company declared a dividend, payable to stockholders of record on November 27, 2009 of one right (a Right) per each share of outstanding Common Stock of the Company, par value $0.001 per share (Common Stock), to purchase 1/1000th of a share of Series I Preferred Stock, par value $0.001 per share, of the Company (the Preferred Stock), at a price of $100.00 per share (such amount, as may be adjusted from time to time as provided in the Rights Agreement described below, the Purchase Price). In connection therewith, on November 17, 2009, the Company entered into a Rights Agreement, dated November 17, 2009 (as amended February 17, 2010 and June 23, 2010, and as may be further

23

BARNES & NOBLE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

For the 13 weeks ended July 31, 2010 and August 1, 2009

(Thousands of dollars, except per share data)

(unaudited)

amended from time to time, the Rights Agreement) with Mellon Investor Services LLC, as Rights Agent. The Rights will be exercisable upon the earlier of (i) such date the Company learns that a person or group, without Board approval, acquires or obtains the right to acquire beneficial ownership of 20% or more of Barnes & Noble’s outstanding common stock or a person or group that already beneficially owns 20% or more of the Company’s outstanding common stock at the time the Rights Agreement was entered into, without Board approval, acquires any additional shares (other than pursuant to the Company’s compensation or benefit plans) (any person or group specified in this sentence, an Acquiring Person) and (ii) such date a person or group announces an intention to commence or following the commencement of (as designated by the Board) a tender or exchange offer which could result in the beneficial ownership of 20% or more of Barnes & Noble’s outstanding common stock. The Rights will expire on November 17, 2012, unless earlier redeemed or canceled by the Company. If a person or group becomes an Acquiring Person, each Rights holder (other than the Acquiring Person) will be entitled to receive, upon exercise of the Right and payment of the Purchase Price, that number of 1/1000ths of a share of Preferred Stock equal to the number of shares of Common Stock which at the time of the applicable triggering transaction would have a market value of twice the Purchase Price. In the event the Company is acquired in a merger or other business combination by an Acquiring Person, or 50% or more of the Company’s assets are sold to an Acquiring Person, each Right will entitle its holder (other than an Acquiring Person) to purchase common shares in the surviving entity at 50% of the market price. The Company intends to submit the Rights Agreement for stockholder ratification within 12 months of its adoption. See Note 19 for a description of certain legal proceedings with respect to the Rights Agreement.

(19) Legal Proceedings

The Company is involved in a variety of claims, suits, investigations and proceedings that arise from time to time in the ordinary course of its business, including actions with respect to contracts, intellectual property, taxation, employment, benefits, securities, personal injuries and other matters. The results of these proceedings in the ordinary course of business are not expected to have a material adverse effect on the Company’s consolidated financial position or results of operations.

The following is a discussion of the material legal matters involving the Company.

In re Initial Public Offering Securities Litigation

The class action lawsuit In re Initial Public Offering Securities Litigation filed in the United States District Court for the Southern District of New York in April 2002 (the Action) named over 1,000 individuals and 300 corporations, including Fatbrain.com, LLC, a former subsidiary of Barnes & Noble.com (Fatbrain), and its former officers and directors. The amended complaints in the Action all allege that the initial public offering registration statements filed by the defendant issuers with the SEC, including the one filed by Fatbrain, were false and misleading because they failed to disclose that the defendant underwriters were receiving excess compensation in the form of profit sharing with certain of its customers and that some of those customers agreed to buy additional shares of the defendant issuers’ common stock in the aftermarket at increasing prices. The amended complaints also allege that the foregoing constitute violations of: (i) Section 11 of the Securities Act of 1933, as amended (Securities Act), by the defendant issuers, the directors and officers signing the related

24

BARNES & NOBLE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

For the 13 weeks ended July 31, 2010 and August 1, 2009

(Thousands of dollars, except per share data)

(unaudited)

registration statements, and the related underwriters; (ii) Rule 10b-5 promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act), by the same parties; and (iii) the control person provisions of the Securities Act and Exchange Act by certain directors and officers of the defendant issuers. A motion to dismiss by the defendant issuers, including Fatbrain, was denied.

After extensive negotiations among representatives of plaintiffs and defendants, the parties entered into a memorandum of understanding (MOU), outlining a proposed settlement resolving the claims in the Action between plaintiffs and the defendant issuers. Subsequently a settlement agreement was executed between the defendants and plaintiffs in the Action, the terms of which are consistent with the MOU. The settlement agreement was submitted to the court for approval and on February 15, 2005, the judge granted preliminary approval of the settlement.

On December 5, 2006, the federal appeals court for the Second Circuit issued a decision reversing the District Court’s class certification decision in six focus cases. In light of that decision, the District Court stayed all proceedings, including consideration of the settlement. Plaintiffs then filed, in January 2007, a Petition for Rehearing En Banc before the Second Circuit, which was denied in April 2007. On May 30, 2007, plaintiffs moved, before the District Court, to certify a new class. On June 25, 2007, the District Court entered an order terminating the settlement agreement. On October 2, 2008, plaintiffs agreed to withdraw the class certification motion. On October 10, 2008, the District Court signed an order granting the request.

A settlement agreement in principle, subject to court approval, was negotiated among counsel for all of the issuers, plaintiffs, insurers and underwriters and executed by Barnes & Noble. Final court approval of the settlement was granted on October 5, 2009. The District Court has finished entering the judgments approving the settlement in all of the IPO cases, with the last judgment entered on January 22, 2010. Pursuant to the settlement, no settlement payment will be made by the Company. Since that time, various notices of appeal have been filed by certain objectors on an interlocutory basis. Should any of these appeals be successful and the approval of the settlement overturned, the Company intends to vigorously defend this lawsuit.

Hostetter v. Barnes & Noble Booksellers, Inc. et al.

On December 4, 2008, a purported class action complaint was filed against Barnes & Noble Booksellers, Inc. (B&N Booksellers) in the Superior Court for the State of California making the following allegations against defendants with respect to hourly managers and/or assistant managers at Barnes & Noble stores located in the State of California: (1) failure to pay wages and overtime; (2) failure to provide meal and/or rest breaks; (3) waiting time penalties; and (4) unfair competition. The complaint contains no allegations concerning the number of any such alleged violations or the amount of recovery sought on behalf the purported class. On March 4, 2009, B&N Booksellers filed an answer denying all claims. On March 5, 2009, B&N Booksellers removed this matter to federal court. Discovery concerning purported class member wages, hours worked, and other matters has commenced. The plaintiff moved for class certification on October 19, 2009. On January 25, 2010, the Court denied certification in its entirety, leaving only Hostetter’s individual claim. On February 3, 2010, the plaintiff filed a petition under Federal Rule of Civil Procedure 23(f) with the Ninth Circuit seeking permission to file an interlocutory appeal of the certification denial. The Ninth Circuit denied plaintiff’s petition

25

BARNES & NOBLE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

For the 13 weeks ended July 31, 2010 and August 1, 2009

(Thousands of dollars, except per share data)

(unaudited)

on April 15, 2010. In July 2010, B&N Booksellers settled the plaintiff’s individual claim, inclusive of attorneys’ fees and costs, for $18.5. In exchange, the plaintiff released all claims. The case has been dismissed with prejudice.

Minor v. Barnes & Noble Booksellers, Inc. et al.

On May 1, 2009, a purported class action complaint was filed against B&N Booksellers, Inc. in the Superior Court for the State of California alleging wage payments by instruments in a form that did not comply with the requirements of the California Labor Code, allegedly resulting in impermissible wage payment reductions and calling for imposition of statutory penalties. The complaint also alleges a violation of the California Labor Code’s Private Attorneys General Act and seeks restitution of such allegedly unpaid wages under California’s unfair competition law, and an injunction compelling compliance with the California Labor Code. The complaint alleges two subclasses of 500 and 200 employees, respectively (there may be overlap among the subclasses), but contains no allegations concerning the number of alleged violations or the amount of recovery sought on behalf of the purported class. On June 3, 2009, B&N Booksellers filed an answer denying all claims. Discovery concerning purported class member payroll checks and related information is ongoing. On August 19, 2010, B&N Booksellers filed a motion to dismiss the case for lack of a class representative when the name plaintiff advised she did not wish to continue to serve in that role.

In re Barnes & Noble Stockholder Derivative Litigation (Consolidated Cases Formerly Captioned Separately as: Louisiana Municipal Police Employees Retirement System v. Riggio et al.; Southeastern Pennsylvania Transportation Authority v. Riggio et al.; City of Ann Arbor Employees’ Retirement System v. Riggio et al.; Louise Schuman v. Riggio et al.; Virgin Islands Government Employees’ Retirement System v. Riggio et al.; Electrical Workers Pension Fund, Local 103, I.B.E.W. v. Riggio et al.)

Between August 17, 2009 and August 31, 2009, five putative shareholder derivative complaints were filed in Delaware Chancery Court against the Company’s directors. The complaints generally allege breach of fiduciary duty, waste of corporate assets and unjust enrichment in connection with the Company’s entry into a definitive agreement to purchase Barnes & Noble College Booksellers, which was announced on August 10, 2009 (the Transaction). The complaints generally seek damages in favor of the Company in an unspecified amount; costs, fees and interest; disgorgement; restitution; and equitable relief, including injunctive relief. On September 1, 2009, the Delaware Chancery Court issued an Order of Consolidation consolidating the five lawsuits (the Consolidated Cases) and directing plaintiffs to file a consolidated amended complaint. In a related development, on August 27, 2009, the Company received a demand pursuant to Delaware General Corporation Law, Section 220, on behalf of the Electrical Workers Pension Fund, Local 103, I.B.E.W., a shareholder, seeking to inspect certain books and records related to the Transaction. The Company provided this shareholder with certain documents, on a confidential basis, in response to its demand. On September 18, 2009, this shareholder filed a shareholder derivative complaint in Delaware Chancery Court against certain of the Company’s directors alleging breach of fiduciary duty and unjust enrichment and seeking to enjoin the consummation of the Transaction. At that time, this shareholder also filed a motion for expedited proceedings. At a hearing held on September 21, 2009, the court denied plaintiff’s request for expedited proceedings. On October 6, 2009, the plaintiffs in the Consolidated Cases filed a motion seeking to consolidate the later-filed sixth case with the Consolidated Cases. Also on October 6, 2009, the plaintiff in the sixth case filed a separate motion

26

BARNES & NOBLE, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements—(Continued)

For the 13 weeks ended July 31, 2010 and August 1, 2009

(Thousands of dollars, except per share data)

(unaudited)

seeking to consolidate its case with the Consolidated Cases and appoint it as co-lead plaintiff and to appoint its counsel as co-lead counsel. On November 3, 2009, a Consolidated Complaint was filed in the Consolidated Cases. The Company and defendants sought an extension of their time to answer or otherwise respond to the complaints while the plaintiffs’ respective consolidation motions were pending. On December 11, 2009, the court entered an order consolidating all actions and appointing co-lead counsel for plaintiffs. Plaintiffs designated the Consolidated Complaint filed on November 3, 2009 to be the operative Complaint. The Company and defendants filed motions to dismiss the Consolidated Complaint on January 12, 2010. On January 29, 2010, plaintiffs informed defendants that they would amend their Complaint rather than respond to defendants’ motions to dismiss. Plaintiffs filed an Amended Consolidated Complaint on March 16, 2010. The Company and defendants filed motions to dismiss the Amended Consolidated Complaint on April 30, 2010. Plaintiffs filed their response to the motion to dismiss on June 2, 2010. Oral argument on the motions to dismiss has been scheduled for October 21, 2010.

Spring Design Inc. v. Barnesandnoble.com LLC

On November 2, 2009, plaintiff filed a complaint against Barnes & Noble.com in the United States District Court for the Northern District of California alleging breach of nondisclosure agreement, misappropriation of trade secrets and unfair competition in connection with Barnes & Noble.com’s development of its NOOK™ eReader. On November 11, 2009, plaintiff filed its first amended complaint and a motion for a preliminary injunction seeking to enjoin shipments of NOOK™. A hearing on plaintiff’s preliminary injunction motion took place on November 30, 2009. On December 1, 2009, the Court issued an order denying plaintiff’s motion for a preliminary injunction, in which it stated, among other things, that plaintiff had not presented sufficient evidence to show that it is likely to succeed on the merits. On January 12, 2010, plaintiff filed a second amended complaint, and on April 22, 2010, after Barnes & Noble.com’s motion to dismiss certain issues on the face of the pleadings was denied, Barnes & Noble.com filed an answer denying all claims. The case is presently in the discovery process.

Yucaipa American Alliance Fund II, L.P. v. Leonard Riggio, et al.

On May 5, 2010, a complaint was filed in Delaware Chancery Court by two of the Company’s shareholders against the Company and its directors. The complaint generally alleges breaches of fiduciary duties by the Company’s directors in connection with the adoption of a Shareholders Rights Plan on November 17, 2009, and the amendment of that plan on February 17, 2010. The complaints generally seek damages in an unspecified amount; costs and fees; and equitable relief, including injunctive relief. On May 5, 2010, the plaintiffs also filed a motion for expedited proceedings. The Court granted that motion on May 25, 2010 and set a trial on the matter to begin on July 8, 2010. Trial concluded on July 13, and post-trial argument was held on July 22. On August 12, the Court ruled in favor of defendants and dismissed plaintiffs’ claims. On August 20, plaintiffs filed a post-trial motion for relief from the August 12 judgment, requesting that the Chancery Court reverse its ruling. Defendants filed an opposition to plaintiffs’ post-trial motion on August 24, 2010, and the motion was denied on September 2, 2010. On September 2, 2010, plaintiffs filed a notice of appeal from the Chancery Court’s August 12 judgment and the denial of plaintiffs’ post-trial motion.

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Report of Independent Registered Public Accounting Firm

The Board of Directors

Barnes & Noble, Inc.

New York, New York

We have reviewed the condensed consolidated balance sheets of Barnes & Noble, Inc. and Subsidiaries as of July 31, 2010 and August 1, 2009, and the related consolidated statements of operations for the 13 week periods ended July 31, 2010 and August 1, 2009, changes in shareholders’ equity for the 13 week period ended July 31, 2010, and cash flows for the 13 week periods ended July 31, 2010 and August 1, 2009 included in the accompanying Securities and Exchange Commission Form 10-Q for the period ended July 31, 2010. These financial statements are the responsibility of the Company’s management.

We conducted our reviews in accordance with standards of the Public Company Accounting Oversight Board (United States). A review of interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the Public Company Accounting Oversight Board, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

Based on our reviews, we are not aware of any material modifications that should be made to the condensed consolidated financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States of America.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board, the consolidated balance sheet of Barnes & Noble, Inc. and Subsidiaries as of May 1, 2010, and the related consolidated statements of operations, changes in shareholders’ equity and cash flows for the year then ended (not presented herein); and in our report dated June 30, 2010, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of May 1, 2010 is fairly stated in all material respects in relation to the consolidated balance sheet from which it has been derived.

/s/ BDO USA, LLP

BDO USA, LLP

New York, New York

September 9, 2010

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Item 2: Management’s Discussion and Analysis of Financial Condition and Results of Operations

Liquidity and Capital Resources

The primary sources of Barnes & Noble, Inc.’s (Barnes & Noble or the Company) cash are net cash flows from operating activities, funds available under its senior credit facility and short-term vendor financing.

The Company’s cash and cash equivalents were $27.0 million as of July 31, 2010, compared with $157.7 million as of August 1, 2009.

Merchandise inventories increased $557.9 million, or 45.4%, to $1.788 billion as of July 31, 2010, compared with $1.230 billion as of August 1, 2009. Excluding Barnes & Noble College Booksellers, LLC. (B&N College) inventories of $620.1 million, merchandise inventories decreased $62.2 million, or 5.1% compared to the same period one year ago.

The Company’s investing activities consist principally of capital expenditures for the Company’s website and digital initiatives, new store construction, the maintenance of existing stores and system enhancements for the Company’s stores. Capital expenditures totaled $21.4 million and $23.3 million during the 13 weeks ended July 31, 2010 and August 1, 2009, respectively. This decrease was due to the timing of expenditures.

On September 30, 2009, the Company completed the acquisition (the Acquisition) of B&N College from Leonard Riggio and Louise Riggio (the Sellers) pursuant to a Stock Purchase Agreement dated as of August 7, 2009 among the Company and the Sellers (the Purchase Agreement). Mr. Riggio is the Chairman of the Company’s Board of Directors and a significant stockholder.

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The purchase price paid to the Sellers under the Purchase Agreement was $596 million, consisting of $346 million in cash and $250 million in aggregate principal amount of the Seller Notes described in Note 12 to the Consolidated Financial Statements contained herein. However, pursuant to the terms of the Purchase Agreement, the cash paid to the Sellers was reduced by approximately $82 million in cash bonuses paid by B&N College to 192 members of its management team and employees, not including Leonard Riggio.

On September 30, 2009, the Company entered into a credit agreement (the Credit Agreement) with Bank of America, N.A., as administrative agent, collateral agent and swing line lender, and other lenders, under which the lenders committed to provide up to $1.0 billion in commitments under a four-year asset-backed revolving credit facility (the Credit Facility) and which is secured by eligible inventory and accounts receivable and related assets. Borrowings under the Credit Agreement are limited to a specified percentage of eligible inventories and accounts receivable and accrue interest, at the election of the Company, at Base Rate or LIBO Rate, plus, in each case, an Applicable Margin (each term as defined in the Credit Agreement). In addition, the Company has the option to request the increase in commitments under the Credit Agreement by up to $300 million subject to certain restrictions.

The Credit Agreement includes a fixed charge coverage ratio requirement which would be triggered if Availability (as defined in the Credit Agreement) were to fall below (a) the greater of (i) 15% of the Loan Cap (as defined in the Credit Agreement) or (ii) $110 million. In addition, the Credit Facility contains covenants that limit, among other things, the Company’s ability to incur indebtedness, create liens, make investments, make restricted payments, merge or acquire assets, and contains default provisions that are typical for this type of financing, among other things.

The Credit Facility replaces the Company’s prior $850 million credit agreement which had a maturity date of July 31, 2011, as well as B&N College’s $400 million credit agreement which had a maturity date of November 13, 2011. The remaining unamortized deferred costs of $0.8 million relating to the Company’s prior credit facility was deferred and will be amortized over the four-year term of the Credit Facility.

The Company had $380.0 million of outstanding debt under its Credit Facility as of July 31, 2010 compared with no outstanding debt as of August 1, 2009.

Based upon the Company’s current operating levels, management believes cash and cash equivalents on hand, net cash flows from operating activities and the capacity under the Credit Facility will be sufficient to meet the Company’s normal working capital and debt service requirements for at least the next twelve months. The Company regularly evaluates its capital structure and conditions in the financing markets to ensure it maintains adequate flexibility to successfully execute its business plan.

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The Company paid a dividend of $0.25 per share on June 30, 2010 to stockholders of record at the close of business on June 11, 2010. On August 24, 2010, the Company announced that its Board of Directors had authorized a quarterly cash dividend of $0.25 per share for stockholders of record at the close of business on September 9, 2010, payable on September 30, 2010.

Due to the increased focus on the internet digital businesses, the Company performed an evaluation on the effect of its impact on the identification of operating segments. The assessment considered the way the business is managed (focusing on the financial information distributed) and the manner in which the chief operating decision maker interacts with other members of management. As a result of this assessment, the Company has determined that it now has three operating segments: B&N Retail, B&N College and barnesandnoble.com llc. (B&N.com). B&N Retail refers to Barnes & Noble excluding B&N College and B&N.com. B&N.com encompasses one of the Web’s largest multichannel retail eCommerce sites, Barnes & Noble eBookstore, Barnes & Noble eReader software, and the Company’s devices and other hardware support.

Seasonality

The B&N Retail and B&N.com business, like that of many retailers, is seasonal, with the major portion of sales and operating profit realized during the third fiscal quarter, which includes the holiday selling season. The B&N College business is also seasonal, with the major portion of sales and operating profit realized during the second and third fiscal quarters, when college students generally purchase textbooks for the upcoming semesters.

Business Overview

Over the past two years, the Company’s financial performance has been adversely impacted by a number of factors, including the economic downturn, increased competition and the expanding digital market.

The Company’s core business is the operation of B&N Retail and B&N College stores, from which it derives the majority of its sales and net income. B&N Retail comparable store sales have declined in recent years due to lower consumer traffic as a result of the factors noted above. Even as the economy improves, the Company expects these trends to continue as consumer spending patterns shift toward internet retailers and digital content. The Company faces increasing competition from the expanding market for electronic books, or “eBooks”, eBook readers and digital distribution of content.

Despite these challenges, the Company believes it has attractive opportunities for future development.

The Company plans to leverage its unique assets, iconic brands and reach to become a leader in the distribution of digital content, as well as increase the online distribution of physical books. In 2009, the Company entered the eBook market with its acquisition of Fictionwise, a leader in the eBook marketplace, and the popularity of its eBook site continues to grow. In addition, the Company launched the NOOK™ eReader, which has become its single best-selling product.

As digital and electronic sales become a larger part of its business, the Company believes its footprint of more than 1,300 stores will continue to be a major competitive asset. The Company is integrating its traditional retail, trade book and college bookstores businesses with its electronic and internet offerings, using retail stores in attractive geographic markets to promote and sell digital devices and content. Customers can see, feel and experiment with the NOOK™ in the Company’s stores.

Although the stores will be just a part of the offering, they will remain a key driver of sales and cash flow as the Company expands its multi-channel relationships with its customers. The Company does not expect to open retail stores in new geographic markets or expand the total number of retail stores in the near future. B&N College provides direct access to a large and well educated demographic group, enabling the Company to build relationships with students throughout their college years and beyond. The Company also expects to be the beneficiary of market consolidation as more schools outsource their bookstore management. The Company is in a unique market position to benefit from this trend given its full suite of services: bookstore management, textbook rental and digital delivery. As the market consolidates, the Company expects to negotiate more favorable terms in its contract renewals and for new contracts.

Although the Company believes cash on hand, cash flows from operating activities, funds available from its senior credit facility and short term vendor financing provide the Company with adequate liquidity and capital resources for seasonal working capital requirements, the Company may raise additional capital to support the growth of online and digital businesses.

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Results of Operations

13 weeks ended July 31, 2010 compared with the 13 weeks ended August 1, 2009

Sales

The following table summarizes the Company’s sales for the 13 weeks ended July 31, 2010 and August 1, 2009:

	13 weeks ended
Dollars in thousands	July 31, 2010		% Total		August 1, 2009		% Total
B&N Retail	$	1,026,269	73.5	%	$	1,053,666	91.2	%
B&N College		225,589	16.2	%		—	0.0	%
B&N.com		144,712	10.4	%		102,015	8.8	%
Total Sales	$	1,396,570	100.0	%	$	1,155,681	100.0	%

During the 13 weeks ended July 31, 2010, the Company’s sales increased $240.9 million, or 20.8%, to $1.40 billion from $1.16 billion during the 13 weeks ended August 1, 2009. This increase was primarily attributable to the following:

• B&N Retail sales for the 13 weeks ended July 31, 2010 decreased $27.4 million, or 2.6%, to $1.03 billion from $1.05 billion during the same period a year ago, and accounted for 73.5% of total Company sales. This decrease was primarily attributable to Barnes & Noble store sales for the 13 weeks ended July 31, 2010 decreasing $18.7 million, or 1.8%, to $1.02 billion from $1.03 billion during the same period a year ago. The 1.8% decrease in Barnes & Noble store sales was primarily attributable to a 0.9% decrease in comparable store sales, which decreased sales by $9.0 million, and by closed stores that decreased sales by $17.5 million, offset by new Barnes & Noble stores that contributed to an increase in sales of $13.6 million. B&N Retail also includes third-party sales of Sterling Publishing Co., Inc., a wholly-owned subsidiary of the Company, and B. Dalton store sales.

• Barnes & Noble.com sales increased $42.7 million, or 41.9%, to $144.7 million during the 13 weeks ended July 31, 2010 from $102.0 million during the 13 weeks ended August 1, 2009. This increase to sales was primarily due to the launch of NOOK™, the Company’s proprietary eReader and other digital product sales, as well as higher sales of physical products.

• B&N College contributed $225.6 million in sales during the 13 weeks ended July 31, 2010. The inclusion of these sales was due to the Acquisition of B&N College on September 30, 2009. Comparable sales for B&N College increased 2.9% for the 13 weeks ended July 31, 2010.

During the 13 weeks ended July 31, 2010, the Company opened one Barnes & Noble store and closed four, bringing its total number of Barnes & Noble stores to 717 with 18.6 million square feet. During the 13 weeks ended July 31, 2010, the Company added three B&N College stores and closed seven, ending the period with 633 B&N College stores. As of July 31, 2010, the Company operated 1,350 stores in the fifty states and the District of Columbia.

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Cost of Sales and Occupancy

	13 weeks ended
Dollars in thousands	July 31, 2010		% of Sales		August 1, 2009		% of Sales
B&N Retail	$	730,598	71.2	%	$	718,911	68.2	%
B&N College		174,892	77.5	%		—	0.0	%
B&N.com		139,380	96.3	%		80,915	79.3	%
Total Cost of Sales and Occupancy	$	1,044,870	74.8	%	$	799,826	69.2	%

The Company’s cost of sales and occupancy includes costs such as merchandise costs, distribution center costs (including payroll, freight, supplies, depreciation and other operating expenses), rental expense, common area maintenance and real estate taxes, partially offset by landlord tenant allowances amortized over the life of the lease.

During the 13 weeks ended July 31, 2010, cost of sales and occupancy increased $245.0 million, or 30.6%, to $1.0 billion from $799.8 million during the 13 weeks ended August 1, 2009. Cost of sales and occupancy increased as a percentage of sales to 74.8% from 69.2% during the same period one year ago. This increase was primarily attributable to the following:

• B&N Retail cost of sales and occupancy increased as a percentage of sales to 71.2% from 68.2% during the same period one year ago. This increase was primarily attributable to the inclusion of NOOK™ sales, which has lower margins.

• The inclusion of the B&N College cost of sales and occupancy during the 13 weeks ended July 31, 2010, which is a lower margin business.

• B&N.com cost of sales and occupancy increased as a percentage of sales to 96.3% from 68.2% during the same period one year ago. This increase was primarily attributable to the inclusion of NOOK™ sales online, the launch of “everyday low pricing” (EDLP) last fall and the price adjustment taken for the NOOK™ during the 13 weeks ended July 31, 2010.

Selling and Administrative Expenses

	13 weeks ended
Dollars in thousands	July 31, 2010		% of Sales		August 1, 2009		% of Sales
B&N Retail	$	270,167	26.3	%	$	261,374	24.8	%
B&N College		60,184	26.7	%		—	0.0	%
B&N.com		52,030	36.0	%		27,277	26.7	%
Total Selling and Administrative Expenses	$	382,381	27.4	%	$	288,651	25.0	%

Selling and administrative expenses increased $93.7 million, or 32.5%, to $382.4 million during the 13 weeks ended July 31, 2010 from $288.7 million during the 13 weeks ended August 1, 2009. Selling and administrative expenses increased as a percentage of sales to 27.4% from 25.0% during the same period one year ago. This increase was primarily attributable to the following:

• B&N Retail selling and administrative expenses increased as a percentage of sales to 26.3% from 24.8% during the same period one year ago. This increase was attributable to $9.5 million in legal costs, primarily related to the shareholder rights plan litigation and the deleveraging against the comparable sale decline.

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• The inclusion of the B&N College selling and administrative expenses during the 13 weeks ended July 31, 2010, which has lower selling and administrative expenses as a percentage of sales.

• B&N.com selling and administrative expenses increased as a percentage of sales to 36.0% from 26.7% during the same period one year ago. This increase was primarily due to increased resources allocated to the Company’s digital strategies.

Depreciation and Amortization

	13 weeks ended
Dollars in thousands	July 31, 2010		% of Sales		August 1, 2009		% of Sales
B&N Retail	$	39,403	3.8	%	$	39,578	3.8	%
B&N College		10,568	4.7	%		—	0.0	%
B&N.com		6,934	4.8	%		5,276	5.2	%
Total Depreciation and Amortization	$	56,905	4.1	%	$	44,854	3.9	%

• During the 13 weeks ended July 31, 2010, depreciation and amortization increased $12.1 million, or 26.9%, to $56.9 million from $44.9 million during the same period one year ago. This increase was primarily attributable to the inclusion of the B&N College depreciation and amortization of $10.6 million during the 13 weeks ended July 31, 2010.

Pre-opening Expenses

	13 weeks ended
Dollars in thousands	July 31, 2010			% of Sales		August 1, 2009		% of Sales
B&N Retail	$	(20	)	0.0	%	$	1,698	0.2	%
B&N College		47		0.0	%		—	0.0	%
B&N.com		—		0.0	%		—	0.0	%
Total Pre-opening Expenses	$	27		0.0	%	$	1,698	0.1	%

Pre-opening expenses decreased $1.7 million, or 98.4%, to $0.03 million during the 13 weeks ended July 31, 2010 from $1.7 million for the 13 weeks ended August 1, 2009. This decrease was primarily the result of the lower volume of Barnes & Noble new store openings.

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Operating Profit (Loss)

	13 weeks ended
Dollars in thousands	July 31, 2010			% of Sales		August 1, 2009			% of Sales
B&N Retail	$	(13,880	)	-1.4	%	$	32,105		3.0	%
B&N College		(20,102	)	-8.9	%		—		0.0	%
B&N.com		(53,631	)	-37.1	%		(11,453	)	-11.2	%
Total Operating Profit	$	(87,613	)	-6.3	%	$	20,652		1.8	%

The Company’s consolidated operating loss increased $108.3 million, or 524.2%, to an operating loss of $87.6 million during the 13 weeks ended July 31, 2010 from an operating profit of $20.7 million during the 13 weeks ended August 1, 2009. This increase was due to the matters discussed above.

Interest Expense, Net and Amortization of Deferred Financing Fees

	13 weeks ended
Dollars in thousands	July 31, 2010		August 1, 2009		% of Change
Interest Expense, Net and Amortization of Deferred Financing Fees	$	13,263	$	304	4,262.8	%

Net interest expense and amortization of deferred financing fees increased $13.0 million, to $13.3 million during the 13 weeks ended July 31, 2010 from $0.3 million during the 13 weeks ended August 1, 2009. This increase in interest expense was primarily due to the interest expense related to the debt from the Acquisition of B&N College.

Income Taxes

	13 weeks ended
Dollars in thousands	July 31, 2010			Effective Rate		August 1, 2009		Effective Rate
Income Taxes	$	(38,333	)	38.0	%	$	8,110	39.9	%

Income tax benefit during the 13 weeks ended July 31, 2010 was $38.3 million compared with income tax expense of $8.1 million during the 13 weeks ended August 1, 2009. The Company’s effective tax rate was 38.0% and 39.9% for the 13 weeks ended July 31, 2010 and August 1, 2009, respectively.

Net Loss Attributable to Noncontrolling Interests

Net loss attributable to noncontrolling interests was $0.03 million during the 13 weeks ended July 31, 2010 and August 1, 2009 and relates to the 50% outside interest in Begin Smart LLC.

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Net Income (Loss) Attributable to Barnes & Noble, Inc.

	13 weeks ended
Dollars in thousands	July 31, 2010			Diluted EPS			August 1, 2009		Diluted EPS
Net Income (Loss) Attributable to Barnes & Noble, Inc.	$	(62,518	)	$	(1.12	)	$	12,267	$	0.21

As a result of the factors discussed above, the Company reported consolidated net loss attributable to Barnes & Noble, Inc. of $62.5 million or $1.12 per diluted share during the 13 weeks ended July 31, 2010, compared with a consolidated net income attributable to Barnes & Noble, Inc. of $12.3 million or $0.21 per diluted share during the 13 weeks ended August 1, 2009.

Critical Accounting Policies

During the first quarter of fiscal 2010, there were no changes in the Company’s policies regarding the use of estimates and other critical accounting policies. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” found in the Company’s Annual Report on Form 10-K for the fiscal year ended May 1, 2010 for additional information relating to the Company’s use of estimates and other critical accounting policies.

Disclosure Regarding Forward-Looking Statements

This quarterly report on Form 10-Q may contain certain 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, as amended (the Exchange Act)) and information relating to the Company that are based on the beliefs of the management of the Company as well as assumptions made by and information currently available to the management of the Company. When used in this report, the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan” and similar expressions, as they relate to the Company or the management of the Company, identify forward-looking statements. Such statements reflect the current views of the Company with respect to future events, the outcome of which is subject to certain risks, including, among others, the general economic environment and consumer spending patterns, decreased consumer demand for the Company’s products, low growth or declining sales and net income due to various factors, possible disruptions in the Company’s computer systems, telephone systems or supply chain, possible risks associated with data privacy, information security and intellectual property, possible work stoppages or increases in labor costs, possible increases in shipping rates or interruptions in shipping service, effects of competition, higher-than-anticipated store closing or relocation costs, higher interest rates, the performance of the Company’s online, digital and other initiatives, the performance and successful integration of acquired businesses, the success of the Company’s strategic investments, unanticipated increases in merchandise, component or occupancy costs, unanticipated adverse litigation results or effects, the results or effects of any governmental review of the Company’s stock option practices, product and component shortages, the outcome of Barnes & Noble’s evaluation of strategic alternatives, including a possible sale of Barnes & Noble, as announced on August 3, 2010, the effect on Barnes

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& Noble of the outcome of the election of directors at Barnes & Noble’s 2010 Annual Meeting, and other factors which may be outside of the Company’s control, including those factors discussed in detail in Item 1A, “Risk Factors,” in the Company’s Form 10-K for the fiscal year ended May 1, 2010, and in the Company’s other filings made hereafter from time to time with the SEC. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results or outcomes may vary materially from those described as anticipated, believed, estimated, expected, intended or planned. Subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the cautionary statements in this paragraph. The Company undertakes 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-Q.

Item 3: Quantitative and Qualitative Disclosures About Market Risk

The Company limits its interest rate risks by investing certain of its excess cash balances in short-term, highly-liquid instruments with an original maturity of one year or less. The Company does not expect any material losses from its invested cash balances and the Company believes that its interest rate exposure is modest. As of July 31, 2010, the Company’s cash and cash equivalents totaled approximately $27.0 million.

Additionally, the Company may from time to time borrow money under its credit facility at various interest rate options based on the Base Rate or LIBO Rate (each term as defined in the Credit Agreement described in the Quarterly Report under the section titled “Notes to Consolidated Financial Statements”) depending upon certain financial tests. Accordingly, the Company may be exposed to interest rate risk on borrowings under its credit facility. The Company had $380.0 million in borrowings under its credit facility at July 31, 2010. The Company had $260.4 million in borrowing under its credit facility at May 1, 2010. The Company did not have any amounts outstanding under its prior credit facility at August 1, 2009.

The Company does not have any material foreign currency exposure as nearly all of its business is transacted in United States currency.

Item 4: Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, the Company’s management conducted an evaluation (as required under Rules 13a-15(b) and 15d-15(b) under the Exchange Act), under the supervision and with the participation of the principal executive officer and principal financial officer, of the Company’s “disclosure controls and procedures” (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that it will detect or uncover failures within the Company to disclose material information otherwise required to be set forth in the Company’s period reports. Based on management’s evaluation, the principal executive officer and principal financial officer concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures are effective at the reasonable assurance level.

(b) Changes in Internal Control Over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

The Company is involved in a variety of claims, suits, investigations and proceedings that arise from time to time in the ordinary course of its business, including actions with respect to contracts, intellectual property, taxation, employment, benefits, securities, personal injuries and other matters. The results of these proceedings in the ordinary course of business are not expected to have a material adverse effect on the Company’s consolidated financial position or results of operations.

The following is a discussion of the material legal matters involving the Company.

In re Initial Public Offering Securities Litigation

The class action lawsuit In re Initial Public Offering Securities Litigation filed in the United States District Court for the Southern District of New York in April 2002 (the Action) named over 1,000 individuals and 300 corporations, including Fatbrain.com, LLC, a former subsidiary of Barnes & Noble.com (Fatbrain), and its former officers and directors. The amended complaints in the Action all allege that the initial public offering registration statements filed by the defendant issuers with the SEC, including the one filed by Fatbrain, were false and misleading because they failed to disclose that the defendant underwriters were receiving excess compensation in the form of profit sharing with certain of its customers and that some of those customers agreed to buy additional shares of the defendant issuers’ common stock in the aftermarket at increasing prices. The amended complaints also allege that the foregoing constitute violations of: (i) Section 11 of the Securities Act of 1933, as amended (Securities Act), by the defendant issuers, the directors and officers signing the related registration statements, and the related underwriters; (ii) Rule 10b-5 promulgated under the Securities Exchange Act of 1934, as amended (Exchange Act), by the same parties; and (iii) the control person provisions of the Securities Act and Exchange Act by certain directors and officers of the defendant issuers. A motion to dismiss by the defendant issuers, including Fatbrain, was denied.

After extensive negotiations among representatives of plaintiffs and defendants, the parties entered into a memorandum of understanding (MOU), outlining a proposed settlement resolving the claims in the Action between plaintiffs and the defendant issuers. Subsequently a settlement agreement was executed between the defendants and plaintiffs in the Action, the terms of which are consistent with the MOU. The settlement agreement was submitted to the court for approval and on February 15, 2005, the judge granted preliminary approval of the settlement.

On December 5, 2006, the federal appeals court for the Second Circuit issued a decision reversing the District Court’s class certification decision in six focus cases. In light of that decision, the District Court stayed all proceedings, including consideration of the settlement. Plaintiffs then filed, in January 2007, a Petition for Rehearing En Banc before the Second Circuit, which was denied in April 2007. On May 30, 2007, plaintiffs moved, before the District Court, to certify a new class. On June 25, 2007, the District Court entered an order terminating the settlement agreement. On October 2, 2008, plaintiffs agreed to withdraw the class certification motion. On October 10, 2008, the District Court signed an order granting the request.

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A settlement agreement in principle, subject to court approval, was negotiated among counsel for all of the issuers, plaintiffs, insurers and underwriters and executed by Barnes & Noble. Final court approval of the settlement was granted on October 5, 2009. The District Court has finished entering the judgments approving the settlement in all of the IPO cases, with the last judgment entered on January 22, 2010. Pursuant to the settlement, no settlement payment will be made by the Company. Since that time, various notices of appeal have been filed by certain objectors on an interlocutory basis. Should any of these appeals be successful and the approval of the settlement overturned, the Company intends to vigorously defend this lawsuit.

Hostetter v. Barnes & Noble Booksellers, Inc. et al.

On December 4, 2008, a purported class action complaint was filed against Barnes & Noble Booksellers, Inc. (B&N Booksellers) in the Superior Court for the State of California making the following allegations against defendants with respect to hourly managers and/or assistant managers at Barnes & Noble stores located in the State of California: (1) failure to pay wages and overtime; (2) failure to provide meal and/or rest breaks; (3) waiting time penalties; and (4) unfair competition. The complaint contains no allegations concerning the number of any such alleged violations or the amount of recovery sought on behalf the purported class. On March 4, 2009, B&N Booksellers filed an answer denying all claims. On March 5, 2009, B&N Booksellers removed this matter to federal court. Discovery concerning purported class member wages, hours worked, and other matters has commenced. The plaintiff moved for class certification on October 19, 2009. On January 25, 2010, the Court denied certification in its entirety, leaving only Hostetter’s individual claim. On February 3, 2010, the plaintiff filed a petition under Federal Rule of Civil Procedure 23(f) with the Ninth Circuit seeking permission to file an interlocutory appeal of the certification denial. The Ninth Circuit denied plaintiff’s petition on April 15, 2010. In July 2010, B&N Booksellers settled the plaintiff’s individual claim, inclusive of attorneys’ fees and costs, for $18,500. In exchange, the plaintiff released all claims. The case has been dismissed with prejudice.

Minor v. Barnes & Noble Booksellers, Inc. et al.

On May 1, 2009, a purported class action complaint was filed against B&N Booksellers, Inc. in the Superior Court for the State of California alleging wage payments by instruments in a form that did not comply with the requirements of the California Labor Code, allegedly resulting in impermissible wage payment reductions and calling for imposition of statutory penalties. The complaint also alleges a violation of the California Labor Code’s Private Attorneys General Act and seeks restitution of such allegedly unpaid wages under California’s unfair competition law, and an injunction compelling compliance with the California Labor Code. The complaint alleges two subclasses of 500 and 200 employees, respectively (there may be overlap among the subclasses), but contains no allegations concerning the number of alleged violations or the amount of recovery sought on behalf of the purported class. On June 3, 2009, B&N Booksellers filed an answer denying all claims. Discovery concerning purported class member payroll checks and related information is ongoing. On August 19, 2010, B&N Booksellers filed a motion to dismiss the case for lack of a class representative when the name plaintiff advised she did not wish to continue to serve in that role.

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In re Barnes & Noble Stockholder Derivative Litigation (Consolidated Cases Formerly Captioned Separately as: Louisiana Municipal Police Employees Retirement System v. Riggio et al.; Southeastern Pennsylvania Transportation Authority v. Riggio et al.; City of Ann Arbor Employees’ Retirement System v. Riggio et al.; Louise Schuman v. Riggio et al.; Virgin Islands Government Employees’ Retirement System v. Riggio et al.; Electrical Workers Pension Fund, Local 103, I.B.E.W. v. Riggio et al.)

Between August 17, 2009 and August 31, 2009, five putative shareholder derivative complaints were filed in Delaware Chancery Court against the Company’s directors. The complaints generally allege breach of fiduciary duty, waste of corporate assets and unjust enrichment in connection with the Company’s entry into a definitive agreement to purchase Barnes & Noble College Booksellers, which was announced on August 10, 2009 (the Transaction). The complaints generally seek damages in favor of the Company in an unspecified amount; costs, fees and interest; disgorgement; restitution; and equitable relief, including injunctive relief. On September 1, 2009, the Delaware Chancery Court issued an Order of Consolidation consolidating the five lawsuits (the Consolidated Cases) and directing plaintiffs to file a consolidated amended complaint. In a related development, on August 27, 2009, the Company received a demand pursuant to Delaware General Corporation Law, Section 220, on behalf of the Electrical Workers Pension Fund, Local 103, I.B.E.W., a shareholder, seeking to inspect certain books and records related to the Transaction. The Company provided this shareholder with certain documents, on a confidential basis, in response to its demand. On September 18, 2009, this shareholder filed a shareholder derivative complaint in Delaware Chancery Court against certain of the Company’s directors alleging breach of fiduciary duty and unjust enrichment and seeking to enjoin the consummation of the Transaction. At that time, this shareholder also filed a motion for expedited proceedings. At a hearing held on September 21, 2009, the court denied plaintiff’s request for expedited proceedings. On October 6, 2009, the plaintiffs in the Consolidated Cases filed a motion seeking to consolidate the later-filed sixth case with the Consolidated Cases. Also on October 6, 2009, the plaintiff in the sixth case filed a separate motion seeking to consolidate its case with the Consolidated Cases and appoint it as co-lead plaintiff and to appoint its counsel as co-lead counsel. On November 3, 2009, a Consolidated Complaint was filed in the Consolidated Cases. The Company and defendants sought an extension of their time to answer or otherwise respond to the complaints while the plaintiffs’ respective consolidation motions were pending. On December 11, 2009, the court entered an order consolidating all actions and appointing co-lead counsel for plaintiffs. Plaintiffs designated the Consolidated Complaint filed on November 3, 2009 to be the operative Complaint. The Company and defendants filed motions to dismiss the Consolidated Complaint on January 12, 2010. On January 29, 2010, plaintiffs informed defendants that they would amend their Complaint rather than respond to defendants’ motions to dismiss. Plaintiffs filed an Amended Consolidated Complaint on March 16, 2010. The Company and defendants filed motions to dismiss the Amended Consolidated Complaint on April 30, 2010. Plaintiffs filed their response to the motion to dismiss on June 2, 2010. Oral argument on the motions to dismiss has been scheduled for October 21, 2010.

Spring Design Inc. v. Barnesandnoble.com LLC

On November 2, 2009, plaintiff filed a complaint against Barnes & Noble.com in the United States District Court for the Northern District of California alleging breach of nondisclosure agreement, misappropriation of trade secrets and unfair competition in connection with Barnes & Noble.com’s development of its NOOK™ eReader. On November 11, 2009, plaintiff filed its first amended complaint and a motion for a preliminary injunction seeking to enjoin shipments of NOOK™. A hearing on plaintiff’s preliminary injunction motion took place on November 30, 2009. On December 1, 2009, the Court issued an order denying plaintiff’s motion for a preliminary injunction, in which it stated, among other things, that plaintiff had not presented

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sufficient evidence to show that it is likely to succeed on the merits. On January 12, 2010, plaintiff filed a second amended complaint, and on April 22, 2010, after Barnes & Noble.com’s motion to dismiss certain issues on the face of the pleadings was denied, Barnes & Noble.com filed an answer denying all claims. The case is presently in the discovery process.

Yucaipa American Alliance Fund II, L.P. v. Leonard Riggio, et al.

On May 5, 2010, a complaint was filed in Delaware Chancery Court by two of the Company’s shareholders against the Company and its directors. The complaint generally alleges breaches of fiduciary duties by the Company’s directors in connection with the adoption of a Shareholders Rights Plan on November 17, 2009, and the amendment of that plan on February 17, 2010. The complaints generally seek damages in an unspecified amount; costs and fees; and equitable relief, including injunctive relief. On May 5, 2010, the plaintiffs also filed a motion for expedited proceedings. The Court granted that motion on May 25, 2010 and set a trial on the matter to begin on July 8, 2010. Trial concluded on July 13, and post-trial argument was held on July 22. On August 12, the Court ruled in favor of defendants and dismissed plaintiffs’ claims. On August 20, plaintiffs filed a post-trial motion for relief from the August 12 judgment, requesting that the Chancery Court reverse its ruling. Defendants filed an opposition to plaintiffs’ post-trial motion on August 24, 2010, and the motion was denied on September 2, 2010. On September 2, 2010, plaintiffs filed a notice of appeal from the Chancery Court’s August 12 judgment and the denial of plaintiffs’ post-trial motion.

Item 1A. Risk Factors

There have been no material changes to the risk factors disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended May 1, 2010.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

Period	Total Number  of Shares Purchased (a)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value  of Shares That May Yet Be Purchased Under the Plans or Programs
May 2, 2010 – May 31, 2010	27,314	$	20.00	—	$	2,470,561
June 1, 2010 – June 30, 2010	1,705	$	18.44	—	$	2,470,561
July 1, 2010 – July 31, 2010	63	$	13.28	—	$	2,470,561
Total	29,082	$	19.90	—

(a) All of the shares on this table above were originally granted to employees as restricted stock pursuant to the Company’s 2004 Incentive Plan. The 2004 Incentive Plan provides for the withholding of shares to satisfy tax obligations due upon the vesting of restricted stock, and pursuant to the 2004 Incentive Plan, the shares reflected above were relinquished by employees in exchange for the Company’s agreement to pay federal and state withholding obligations resulting from the vesting of the Company’s restricted stock.

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On May 15, 2007, the Company announced its Board of Directors authorized a stock repurchase program for the purchase of up to $400.0 million of the Company’s common stock. The maximum dollar value of common stock that may yet be purchased under this program is approximately $2.5 million as of July 31, 2010.

Stock repurchases under this program may be made through open market and privately negotiated transactions from time to time and in such amounts as management deems appropriate. As of July 31, 2010, the Company has repurchased 33,313,692 shares at a cost of approximately $1,052.9 million. The repurchased shares are held in treasury.

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Item 6. Exhibits

(a) Exhibits filed with this Form 10-Q:

4.1	Second Amendment dated as of June 23, 2010, to the Rights Agreement dated as of November 17, 2009, between Barnes & Noble, Inc. and Mellon Investor Services LLC, as rights agent, incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed June 23, 2010.
10.1	Employment Agreement dated May 12, 2010 between Barnes & Noble, Inc. and Leonard Riggio, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed May 13, 2010.
10.2	Employment Agreement dated May 12, 2010 between Barnes & Noble, Inc. and Stephen Riggio, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed May 13, 2010.
10.31	Form of Restricted Stock Award Agreement pursuant to the Barnes & Noble 2009 Incentive Plan.
10.41	Form of Option Award Agreement pursuant to the Barnes & Noble 2009 Incentive Plan.
10.51	Form of Performance Unit Award Agreement pursuant to the Barnes & Noble 2009 Incentive Plan.
15.11	Letter from BDO USA, LLP regarding unaudited interim financial information.
31.11	Certification by the Chief Executive Officer pursuant to Rule 13a-14(a)/15(d)-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.21	Certification by the Chief Financial Officer pursuant to Rule 13a-14(a)/15(d)-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.11	Certification of Chief Executive Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.21	Certification of Chief Financial Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document 2
101.SCH	XBRL Taxonomy Extension Schema Document2
101.CAL	XBRL Taxonomy Calculation Linkbase Document2
101.DEF	XBRL Taxonomy Definition Linkbase Document2
101.LAB	XBRL Taxonomy Label Linkbase Document2
101.PRE	XBRL Taxonomy Presentation Linkbase Document2

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¹ Filed herewith.

² Attached as Exhibits 101 to this report are the following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2010 formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Statements of Operations, (ii) the Consolidated Balance Sheets, (iii) the Consolidated Statement of Changes in Shareholders’ Equity, (iv) the Consolidated Statements of Cash Flows, and (v) related notes to these financial statements tagged as blocks of text.

The XBRL related information in Exhibits 101 to this Quarterly Report on Form 10-Q shall not be deemed “filed” or a part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, and is not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of those sections.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

BARNES & NOBLE, INC.
(Registrant)
By:	/S/    JOSEPH J. LOMBARDI
	Joseph J. Lombardi
	Chief Financial Officer
	(principal financial officer)

By:	/S/    ALLEN W. LINDSTROM
	Allen W. Lindstrom
	Vice President, Corporate Controller
	(principal accounting officer)

September 9, 2010

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EXHIBIT INDEX

4.1	Second Amendment dated as of June 23, 2010, to the Rights Agreement dated as of November 17, 2009, between Barnes & Noble, Inc. and Mellon Investor Services LLC, as rights agent, incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed June 23, 2010.
10.1	Employment Agreement dated May 12, 2010 between Barnes & Noble, Inc. and Leonard Riggio, incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed May 13, 2010.
10.2	Employment Agreement dated May 12, 2010 between Barnes & Noble, Inc. and Stephen Riggio, incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed May 13, 2010.
10.31	Form of Restricted Stock Award Agreement pursuant to the Barnes & Noble 2009 Incentive Plan.
10.41	Form of Option Award Agreement pursuant to the Barnes & Noble 2009 Incentive Plan.
10.51	Form of Performance Unit Award Agreement pursuant to the Barnes & Noble 2009 Incentive Plan.
15.11	Letter from BDO USA, LLP regarding unaudited interim financial information.
31.11	Certification by the Chief Executive Officer pursuant to Rule 13a-14(a)/15(d)-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.21	Certification by the Chief Financial Officer pursuant to Rule 13a-14(a)/15(d)-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.11	Certification of Chief Executive Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.21	Certification of Chief Financial Officer pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document2
101.SCH	XBRL Taxonomy Extension Schema Document2
101.CAL	XBRL Taxonomy Calculation Linkbase Document2
101.DEF	XBRL Taxonomy Definition Linkbase Document2
101.LAB	XBRL Taxonomy Label Linkbase Document2
101.PRE	XBRL Taxonomy Presentation Linkbase Document2

¹ Filed herewith.

² Attached as Exhibits 101 to this report are the following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended July 31, 2010 formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Statements of Operations, (ii) the Consolidated Balance Sheets, (iii) the Consolidated Statement of Changes in Shareholders’ Equity, (iv) the Consolidated Statements of Cash Flows, and (v) related notes to these financial statements tagged as blocks of text.

The XBRL related information in Exhibits 101 to this Quarterly Report on Form 10-Q shall not be deemed “filed” or a part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, and is not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of those sections.

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EX-10.3

Exhibit 10.3

RESTRICTED STOCK AWARD AGREEMENT

Issued Pursuant to the

2009 Incentive Plan

of Barnes & Noble, Inc.

THIS RESTRICTED STOCK AWARD AGREEMENT (“Agreement”), effective as of the grant date (“Grant Date”) set forth in the attached Restricted Stock Award Certificate (the “Certificate”), represents the grant of such number of Shares of Restricted Stock set forth in the Certificate by Barnes & Noble, Inc. (the “Company”), to the person named in the Certificate (the “Participant”), subject to the terms and conditions set forth below and the provisions of the Barnes & Noble, Inc. 2009 Incentive Plan adopted by the Company’s Board of Directors on April 14, 2009 and approved by the Company’s stockholders on June 2, 2009 (the “Plan”).

All capitalized terms shall have the meanings ascribed to them in the Plan, unless specifically set forth otherwise herein. The parties hereto agree as follows:

1. Grant of Restricted Stock. The Company hereby grants to the Participant the number of Shares of Restricted Stock set forth in the Certificate, subject to the terms and conditions of the Plan and this Agreement.

2. Vesting Period: (a) In General. Except as set forth in Section 5 below, if the Participant’s employment terminates before the last vesting date set forth in the Certificate, all Shares of Restricted Stock granted hereby that are unvested as of the date of termination of employment shall be forfeited. Subject to the terms of this Agreement and the Plan, Shares of Restricted Stock granted hereby shall vest as indicated in the Certificate. For the specified vesting to occur on any vesting date set forth therein, the Participant must be continuously employed by the Company or any of its Affiliates from the Grant Date through such vesting date.

(b) Vesting. Except as set forth in Section 15 hereof, in no event shall a Participant have any rights to the Shares of Restricted Stock granted hereunder: (i) prior to the date such Shares vest pursuant to the vesting schedule set forth in the Certificate; or (ii) with respect to any partial Share.

3. Voting Rights. All Shares of Restricted Stock issued hereunder, whether vested or unvested, shall have full voting rights accorded to outstanding Shares.

4. Dividend Rights. (a) Cash Dividends. The Participant shall be entitled to receive any cash dividends paid with respect to Shares of Restricted Stock granted hereunder. Any such cash dividends shall be distributed to the Participant at the same time cash dividends are paid to holders of Shares.

(b) Non-Cash Dividends. Any stock dividends or other distributions or dividends of property other than cash with respect to Shares of Restricted Stock granted hereunder shall be subject to the same forfeiture restrictions and restrictions on transferability as apply to the Restricted Stock with respect to which such property was paid.

5. Nontransferability. (a) In General. Except as may be provided in Section 5(b) below, the Shares of Restricted Stock granted hereby may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution, until such Shares have vested in accordance with Section 2 hereof and except as provided in the Plan. No assignment or transfer of any Shares of Restricted Stock in violation of this Section 5, whether voluntary or involuntary, by operation of law or otherwise, except by will or the laws of descent and distribution or as otherwise required by applicable law, shall vest in the assignee or transferee any interest whatsoever.

(b) Transfers With The Consent of the Committee. With the prior written consent of the Committee, a Participant may assign or transfer unvested Shares of Restricted Stock to the Participant’s spouse and/or children (and/or trusts and/or partnerships established for the benefit of the Participant’s spouse and/or children) (each transferee thereof, a “Permitted Assignee”); provided, however, that such Permitted Assignee(s) shall be bound by and subject to all of the terms and conditions of the Plan and this Agreement relating to the transferred Shares and shall execute an agreement satisfactory to the Company evidencing such obligations; and provided further that such Participant shall remain bound by the terms and conditions of the Plan. The Company shall cooperate with any Permitted Assignee and the Company’s transfer agent in effectuating any transfer permitted under this Section 5(b).

6. Termination : (a) Death. In the event a Participant dies while employed by the Company or any of its Affiliates, all restrictions set forth herein shall lapse and any unvested Shares of Restricted Stock held by such Participant (or his or her Permitted Assignee) shall vest in the estate of such Participant or in any person who acquired such Shares of Restricted Stock by bequest or inheritance, or by the Permitted Assignee. References in this Agreement to a Participant shall include any person who acquired Shares of Restricted Stock from such Participant by bequest or inheritance.

(b) Disability. In the event a Participant ceases to perform services of any kind (whether as an employee or Director) for the Company or any of its Affiliates due to permanent and total disability, all restrictions set forth herein shall lapse and all unvested Shares of Restricted Stock shall immediately vest in the Participant, or his guardian or legal representative, or a Permitted Assignee, as of the first date of permanent and total disability (as determined in the sole discretion of the Committee). For purposes of this Agreement, the term “permanent and total disability” means the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months, and the permanence and degree of which shall be supported by medical evidence satisfactory to the Committee. Notwithstanding anything to the contrary set forth herein, the Committee shall determine, in its sole and absolute discretion, (1) whether a Participant has ceased to perform services of any kind due to a permanent and total disability and, if so, (2) the first date of such permanent and total disability.

7. Issuance of Restricted Stock. As soon as practicable after the Grant Date, the Company shall cause to be transferred on the books of the Company, Shares registered in the name of the Company, as nominee for the Participant, evidencing the Restricted Stock covered by this Agreement, but subject to forfeiture to the Company retroactive to the date of grant, if the Certificate is not duly executed by the Participant and timely returned to the Company. Until the lapse or release of all restrictions applicable to a grant of Restricted Stock, the share certificates representing such Restricted Stock shall be held in custody by the Company or its designee.

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8. Administration. This Agreement and the rights of the Participant hereunder and under the Certificate are subject to all the terms and conditions of the Plan, as the same may be amended from time to time, as well as to such rules and regulations as the Committee may adopt for administration of the Plan. It is expressly understood that the Committee is authorized to administer, construe, and make all determinations necessary or appropriate to the administration of the Plan, this Agreement and the Certificate, all of which shall be binding upon the Participant and Permitted Assignees. Any inconsistency between the Agreement or the Certificate (on the one hand) and the Plan (on the other hand) shall be resolved in favor of the Plan.

9. Adjustments. The number of Shares of Restricted Stock granted hereby shall be subject to adjustment in accordance with Section 12.2 of the Plan.

10. Exclusion from Pension Computations. By acceptance of the Shares of Restricted Stock granted hereunder, the Participant hereby agrees that any income or gain realized upon the receipt or disposition of the Shares is special incentive compensation and shall not be taken into account, to the extent permissible under applicable law, as “wages”, “salary” or “compensation” in determining the amount of any payment under any pension, retirement, incentive, profit sharing, bonus or deferred compensation plan of the Company or any of its Affiliates.

11. Amendment. The Committee may, with the consent of the Participant, at any time or from time to time amend the terms and conditions of this grant of Shares of Restricted Stock. In addition, the Committee may at any time or from time to time amend the terms and conditions of this grant of Shares of Restricted Stock in accordance with the Plan.

12. Notices. Any notice which either party hereto may be required or permitted to give to the other shall be in writing, and may be delivered personally or by mail, postage prepaid, or overnight courier, addressed as follows: if to the Company, at its office at 122 Fifth Avenue, New York, NY 10011, Attn: Human Resources, or at such other address as the Company by notice to the Participant may designate in writing from time to time; and if to the Participant, at the address shown below his or her signature on the Certificate, or at such other address as the Participant by notice to the Company may designate in writing from time to time. Notices shall be effective upon receipt.

13. Withholding Taxes. The Company shall have the right to withhold from wages or other amounts otherwise payable to the Participant (or a Permitted Assignee thereof), or otherwise require the Participant or Permitted Assignee to pay, any federal, state, local or foreign income taxes, withholding taxes, or employment taxes required to be withheld by law or regulations (“Withholding Taxes”) arising as a result of the grant or vesting of Shares of Restricted Stock, the transfer of any Shares of Restricted Stock, the making of an election under Section 83(b) (or any similar provision) of the Internal Revenue Code of 1986 (the “Code”), or any other taxable event occurring pursuant to the Plan (including, without limitation, the payment of dividends on unvested Shares of Restricted Stock), this Agreement or the Certificate. If, notwithstanding the foregoing, the Participant (or Permitted Assignee) shall fail to actually or constructively make such tax payments as are required, the Company (or its Affiliates) shall, to the extent permitted by law, have the right to deduct any such Withholding Taxes from any payment of any kind otherwise

3

due to such Participant or Permitted Assignee or to take such other action as may be necessary to satisfy such Withholding Taxes. In satisfaction of the requirement to pay Withholding Taxes (but only if the Section 83(b) Election defined below has not been made with respect to the Restricted Stock granted hereunder), the Company, in its sole discretion, may elect to satisfy the obligation for Withholding Taxes by retaining a sufficient number of Restricted Stock that it would otherwise deliver on a particular vesting date equal to the amount of any Withholding Taxes due on such vesting date. Notwithstanding the foregoing discretion, the Company shall satisfy the obligation for Withholding Taxes by retaining a sufficient number of Shares of Restricted Stock that it would otherwise deliver on a particular vesting date equal to the amount of any Withholding Taxes due on such vesting date, unless the Participant has either (a) made the Section 83(b) Election defined below or (b) provided the Company with written notice at least 30 days (or such lesser period as may be permitted by the Company in its sole discretion) in advance of such vesting date that the Participant will pay the Withholding Taxes in cash. For purposes of the preceding two sentences, where the Company is to retain Shares to satisfy the obligation for Withholding Taxes, the net amount of Shares to be delivered to the Participant on a vesting date shall equal the total number of Shares otherwise deliverable to the Participant on such vesting date (pursuant to Section 7 hereof and the Certificate), less such number of Shares having an aggregate Fair Market Value equal to the amount of such Withholding Taxes (as determined in the Committee’s sole discretion).

14. Registration; Legend. The Company may postpone the issuance and delivery of the Shares of Restricted Stock granted hereby until (a) the admission of such Shares to listing on any stock exchange or exchanges on which Shares of the Company of the same class are then listed and (b) the completion of such registration or other qualification of such Shares under any state or federal law, rule or regulation as the Company shall determine to be necessary or advisable. The Participant shall make such representations and furnish such information as may, in the opinion of counsel for the Company, be appropriate to permit the Company, in light of the then existence or non-existence with respect to such Shares of an effective Registration Statement under the Securities Act of 1933, as amended, to issue the Shares in compliance with the provisions of that or any comparable act.

The Company may cause the following or a similar legend to be set forth on each certificate representing Shares of Restricted Stock granted hereby unless counsel for the Company is of the opinion as to any such certificate that such legend is unnecessary:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE SUBJECT TO FORFEITURE AND OTHER LIMITATIONS AND RESTRICTIONS AS SET FORTH IN A RESTRICTED STOCK AWARD AGREEMENT ON FILE WITH THE COMPANY. IN ADDITION, THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT, THE AVAILABILITY OF WHICH IS ESTABLISHED BY AN OPINION FROM COUNSEL TO THE COMPANY.

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15. Change in Control: (a) In the event of the occurrence of a change in control of the Company (a “Change in Control”), any unvested Shares of Restricted Stock granted hereunder shall immediately vest. For purposes of this Agreement, “Change in Control” shall mean an event which shall occur if there is: (i) a change in the ownership of the Company as defined in Treasury Regulations 1.409A-2(i)(5)(v); (ii) a change in the effective control of the Company as defined in Treasury Regulations 1.409A-2(i)(5)(vi); or (iii) a change in the ownership of a substantial portion of the Company’s assets as defined in Treasury Regulations 1.409A-2(i)(5)(vii). The determination as to the occurrence of a Change in Control shall be based on objective facts and in accordance with the requirements of Code Section 409A and the regulations promulgated thereunder.

(b) Notwithstanding the foregoing, if in the event of a Change in Control, the successor company assumes or substitutes for the Shares of Restricted Stock granted hereunder, then the vesting of such Restricted Stock shall not be accelerated as described in Section 15(a) hereof. Subject to the terms and conditions of the Plan, Shares of Restricted Stock granted hereunder shall be considered assumed or substituted for if following the Change in Control, each Share of Restricted Stock or any award substituted therefor (“Substitute Award”) represents the same consideration that would have been received in exchange for one vested Share in the transaction constituting the Change in Control. Notwithstanding the foregoing, in the event of a termination of the Participant’s employment by the successor company within twenty-four (24) months following such Change in Control, the Shares of Restricted Stock granted hereunder or the Substitute Award held by such Participant at the time of the Change in Control shall vest as of the day preceding the date of termination unless the termination was made by the successor company for cause. For purposes of this Agreement, “cause” shall mean either (i) material failure by the Participant to perform his or her duties (other than as a result of incapacity due to physical or mental illness) during his or her employment with the Company after written notice of such breach or failure and the Participant failed to cure such breach or failure to the Company’s reasonable satisfaction within five days after receiving such written notice; or (ii) any act of fraud, misappropriation, misuse, embezzlement or any other material act of dishonesty in respect of the Company or its funds, properties, assets or other employees.

16. Section 83(b) Election. If the Participant makes the election contemplated by Section 83(b) of the Code (a “Section 83(b) Election”) (or any similar provision of federal, state or local law) with respect to the Restricted Stock granted hereunder, the Participant shall provide the Company with a copy of such election within 30 days after the Grant Date (or such earlier date required by law) and otherwise comply with the provisions of this Section 16. The Participant hereby agrees, as a condition precedent to any issuance of Restricted Stock under this Agreement, that on or prior to the date of filing of any Section 83(b) Election with respect to such Restricted Stock, Participant shall satisfy the Company’s Withholding Tax obligations with respect to such Section 83(b) Election by tendering payment to the Company, in readily available funds, of an amount equal to such Withholding Tax obligation (or enter into such other arrangement as shall be acceptable to the Company to satisfy such Withholding Tax obligation).

17. No Tax Advice. Participant hereby acknowledges that the Company has not provided any specific tax advice to Participant in connection with his or her participation in the Plan. Participant understands and acknowledges that the Section 83(b) Election is valid only if made within 30 days after the Grant Date. Participant will consult with his or her own tax advisors with respect to any tax consequences relating to a grant of Restricted Stock, participation in the Plan, and the decision of whether or not to make a Section 83(b) Election.

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18. Miscellaneous.

(a) Neither this Agreement nor the Certificate shall confer upon the Participant any right to continuation of employment by the Company, nor shall this Agreement or the Certificate interfere in any way with the Company’s right to terminate the Participant’s employment at any time.

(b) Except as expressly set forth herein, the Participant shall have no rights as a stockholder of the Company with respect to the Shares of Restricted Stock subject to this Agreement until such time as such Shares of Restricted Stock vest in accordance with Section 2 hereof.

(c) This Agreement and the Certificate shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.

(d) To the extent not preempted by federal law, this Agreement and the Certificate shall be governed by, and construed in accordance with the laws of the State of Delaware.

(e) All obligations of the Company under the Plan, this Agreement and the Certificate, with respect to the Shares of Restricted Stock granted hereunder, shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.

(f) The provisions of this Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.

(g) By accepting this grant of Shares of Restricted Stock, the Participant and each person claiming under or through the Participant shall be conclusively deemed to have indicated their acceptance and ratification of, and consent to, any action taken under the Plan by the Company, the Board or the Committee.

(h) The Participant, every person claiming under or through the Participant, and the Company hereby waives to the fullest extent permitted by applicable law any right to a trial by jury with respect to any litigation directly or indirectly arising out of, under, or in connection with the Plan, this Agreement or the Certificate.

(i) The order of precedence as between the Plan, this Agreement or the Certificate, and any written employment agreement between Participant and the Company shall be as follows: If there is any inconsistency between (a) the terms of this Agreement or the Certificate (on the one hand) and the terms of the Plan (on the other hand); or (b) any such written employment agreement (on the one hand) and the terms of the Plan (on the other hand), the Plan’s terms shall completely supersede and replace the conflicting terms of this Agreement, the Certificate or the written employment agreement (as the case may be). If there is any inconsistency between the terms of this Agreement or the Certificate (on the one hand) and the terms of Participant’s written employment agreement, if any (on the other hand), the terms of this Agreement or the Certificate (as the case may be) shall completely supersede and replace the conflicting terms of the written employment agreement unless such written employment agreement was approved by the Committee, in which event such written employment agreement shall completely supersede and replace the conflicting terms of this Agreement or the Certificate (as the case may be).

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19. Exculpation. The Shares of Restricted Stock granted hereunder and all documents, agreements, understandings and arrangements relating hereto have been issued on behalf of the Company by officers acting on its behalf and not by any person individually. None of the officers, Directors or stockholders of the Company nor the Directors, officers or stockholders of any Affiliate of the Company shall have any personal liability hereunder or thereunder. The Participant shall look solely to the assets of the Company for satisfaction of any liability of the Company in respect of the Shares of Restricted Stock granted hereunder and all documents, agreements, understanding and arrangements relating hereto and will not seek recourse or commence any action against any of the Directors, officers or stockholders of the Company or any of the Directors, officers or stockholders of any Affiliate, or any of their personal assets, for the performance or payment of any obligation hereunder or thereunder. The foregoing shall also apply to any future documents, agreements, understandings, arrangements and transactions between the parties hereto with respect to the Shares of Restricted Stock granted hereunder.

20. Captions. The captions in this Agreement are for convenience of reference only, and are not intended to narrow, limit or affect the substance or interpretation of the provisions contained herein.

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Tax Consequences of a Grant of Restricted Stock

Pursuant to the Barnes & Noble, Inc. 2009 Incentive Plan (the “Plan”), you have been granted shares of restricted stock of Barnes & Noble, Inc. (“Barnes & Noble”), subject to the terms and conditions set forth in your Restricted Stock Award Agreement, the accompanying Certificate to such Restricted Stock Award Agreement, and the terms of the Plan itself.

As a result of the receipt of shares of restricted stock of Barnes & Noble, you should have the following tax consequences, based on current law (which could change, possibly with retroactive effect):

If You Do Not Make a Section 83(b) Election

If you do not make a Section 83(b) election, then you will recognize compensation income equal to the fair market value of the shares of restricted stock at the time such shares become vested. Such compensation income (reported on IRS Form W-2) will be subject to federal and state income and employment tax withholding on the vesting date(s).

To satisfy your tax withholding obligations on any vesting date, Barnes & Noble will retain an amount of your shares from those that would otherwise vest on such date having a fair market value equal to the amount of your tax withholding obligations, unless you made the Section 83(b) election described below or furnish written notice to Barnes & Noble at least 30 days in advance of your vesting date that you will pay your tax withholding obligations in cash.

After the date of vesting, if you sell the vested stock, you generally will have capital gain or loss equal to the difference between the fair market value of the stock on the date of sale and your basis in the stock, which should equal the amount of compensation income you recognized at vesting. Any such capital gain or loss will be long-term capital gain or loss if the stock has been held for more than one year.

If You Make a Section 83(b) Election

If you make a Section 83(b) election, you will have Form W-2 compensation income equal to the fair market value of the shares of restricted stock at the time the shares are granted. Such compensation income will be subject to federal and state income and employment tax withholding at the time the restricted stock is granted. TO BE VALID THE ELECTION MUST BE FILED WITH THE IRS SERVICE CENTER WHERE YOU NORMALLY FILE YOUR FORM 1040 NO LATER THAN 30 DAYS AFTER THE DATE THE RESTRICTED STOCK WAS GRANTED TO YOU. Failure to file within the 30-day period will invalidate your Section 83(b) election. In addition, the Section 83(b) election, once made, is irrevocable unless the IRS consents to the revocation. The IRS requires you to provide the Company with a copy of the election so that we may properly withhold taxes and report the income, and you must file a copy of the election with your tax return for the year in which such election is effective.

After the date of vesting, if you sell the vested stock, you will have capital gain or loss equal to the difference between the fair market value of the stock on the date of sale and your basis in the stock, which should equal the amount of compensation income you recognized on the date of grant pursuant to the Section 83(b) election. Any such capital gain or loss will be long-term capital gain or loss if the stock has been held for more than one year.

Thus, by making the Section 83(b) election, all future appreciation from the date of grant of the restricted stock is taxed as capital gain. If no Section 83(b) election is made, all future appreciation from the date of grant of the restricted stock until the date the restricted stock becomes vested is taxed as ordinary income.

Please contact us at 800-799-5335 if you would like a sample Section 83(b) Election Form. If you determine that a Section 83(b) Election is appropriate for you, your Section 83(b) Election Form must be filed with the IRS Service Center where you normally file your Form 1040 within 30 days of the date the restricted stock was granted to you, and a copy must be promptly provided to the Company. In addition, you must attach a copy of your Section 83(b) election with your federal income tax return for the year of grant.

However, if you make the Section 83(b) election, then in the event you forfeit the shares upon termination of employment before the vesting period expires, you will not be entitled to a tax deduction for the amount that was reported as compensation income when the the shares were granted.

This is a general summary of the tax consequences of the receipt of Barnes & Noble restricted stock. We strongly recommend that you consult your tax advisor before making a Section 83(b) election to review the possible benefits and detriments of such election given your specific situation.

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EX-10.4

Exhibit 10.4

OPTION AWARD AGREEMENT

Issued Pursuant to the

2009 Incentive Plan

of Barnes & Noble, Inc.

THIS OPTION AWARD AGREEMENT (“Agreement”), effective as of the grant date (the “Grant Date”) set forth in the attached Certificate (the “Certificate”), represents the grant of a nonqualified option (“Option”) by Barnes & Noble, Inc. (the “Company”), to the person named in the Certificate (the “Participant”) pursuant to the provisions of the Barnes & Noble, Inc. 2009 Incentive Plan adopted by the Company’s Board of Directors on April 14, 2009 and approved by the Company’s stockholders on June 2, 2009 (the “Plan”). The Option granted hereby is not intended to be an “incentive stock option” as such term is described in Section 5.7 of the Plan.

All capitalized terms shall have the meanings ascribed to them in the Plan, unless specifically set forth otherwise herein. The parties hereto agree as follows:

1. General Option Grant Information. The individual named above has been selected to be a Participant in the Plan and receive a nonqualified option grant, as specified in the Certificate.

2. Grant of Option. The Company hereby grants to the Participant an Option to purchase the number of Shares set forth in the Certificate, at the stated Option Price per Share, which is one hundred percent (100%) of the Fair Market Value of a Share on the Date of Grant, in the manner and subject to the terms and conditions of the Plan and this Agreement.

3. Option Term. The term of this Option begins as of the Grant Date and continues through the Date of Expiration as specified in the Certificate (the “Expiration Date”), unless sooner terminated or extended in accordance with the terms of this Agreement.

4. Vesting Period: (a) In General. Subject to the terms of this Agreement and the Plan, this Option shall vest and be exercisable as indicated in the Certificate. For the specified vesting to occur on any vesting date set forth therein, the Participant must be continuously employed by or serving as a Director of the Company or any of its Affiliates from the Grant Date through such vesting date.

(b) Vesting. Except as set forth in Section 17 hereof, in no event shall a Participant have any rights to exercise any portion of the Option granted hereunder: (i) prior to the date such portion vests pursuant to the Vesting Schedule set forth in the Certificate; or (ii) with respect to any partial Share.

5. Exercise: The Participant, or the Participant’s Permitted Assignee (as defined below) or, in the case of the Participant’s death, the Participant’s estate, or in the case of the Participant’s disability, the Participant’s guardian or legal representative, may exercise this Option to the extent vested (as provided in Sections 4 and 8 hereof) at any time prior to the termination of the Option as provided in Sections 3 and 8 hereof and Section 13.4 of the Plan.

6. How to Exercise: Once vested, the Options hereby granted shall be exercised by written notice to the Committee or such other administrator appointed by the Committee, specifying the number of Shares subject to this Option that Participant desires to exercise. Payment for the Shares purchased pursuant to the exercise of the Options hereby granted shall be made in the manner set forth in Section 5.5 of the Plan, subject to any consents or approvals required thereunder.

7. Nontransferability. (a) In General. Except as may be provided in clause (b), below, this Option may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution, except as provided in the Plan. No assignment or transfer of the Option in violation of this Section 7, whether voluntary or involuntary, by operation of law or otherwise, except by will or the laws of descent and distribution or as otherwise required by applicable law, shall vest in the assignee or transferee any interest whatsoever.

(b) Transfers With The Consent of the Committee. With the prior written consent of the Committee, the Options granted hereby may be transferred by the Participant to the Participant’s spouse and/or children (and/or trusts and/or partnerships established for the benefit of the Participant’s spouse and/or children) (each transferee thereof, a “Permitted Assignee”); provided, however, that such Permitted Assignee(s) shall be bound by and subject to all of the terms and conditions of the Plan and this Agreement relating to the transferred Options and shall execute an agreement satisfactory to the Company evidencing such obligations; and provided further that such Participant shall remain bound by the terms and conditions of the Plan. The Company shall cooperate with any Permitted Assignee and the Company’s transfer agent in effectuating any transfer permitted under this Section 7(b).

8. Termination of Option: (a) Termination for Cause. In the event of the termination of the Participant’s employment or Directorship for cause, this Option and all rights granted hereunder shall be forfeited and deemed cancelled and no longer exercisable on the date of such termination, unless the Committee determines otherwise. For purposes of this Agreement, the term “cause” shall be defined as actions by the Participant that constitute malfeasance. Malfeasance includes, but is not limited to, the Participant engaging in fraud, dishonest conduct or other criminal conduct. A determination of cause shall be made in the sole discretion of the Company’s management, subject to review by the Chairman of the Board. The Board shall, upon request of the Participant, review the decision of whether the Participant has been discharged, released or terminated for cause and the Board shall confirm, modify or reverse such determination in its sole discretion.

(b) Termination Without Cause. Unless otherwise determined by the Committee, in the event of the termination of the Participant’s employment or Directorship other than for cause or other than as a result of the Participant’s death or disability, this Option and all rights granted hereunder shall be forfeited and deemed cancelled and no longer exercisable on the 90^th day after the date of such termination; provided, however, that (i) in no instance may the term of this Option, as so extended, exceed the Expiration Date, and (ii) only Options not previously expired or exercised, to the extent vested and exercisable on the date of termination, shall be exercisable (i.e., no vesting shall occur during the aforementioned 90-day post-termination period).

(c) Death. In the event the Participant dies while employed by or serving as a Director of the Company or any of its Affiliates, any Options held by the Participant (or his or her Permitted Assignee) and not previously expired or exercised shall, to the extent vested and exercisable on the date of death, be exercisable by the estate of the Participant or by any person who acquired such Option by bequest or inheritance, or by the Permitted Assignee, at any time within one year after the death of the Participant, whether such one-year anniversary is before or after the Expiration Date, unless earlier terminated pursuant to its terms. References in this Agreement to a Participant shall include any person who acquired Options from such Participant by bequest or inheritance.

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(d) Disability. In the event the Participant ceases to perform services of any kind (whether as an employee or Director) for the Company or any of its Affiliates due to permanent and total disability, the Participant, or his guardian or legal representative, or a Permitted Assignee, shall have the unqualified right to exercise any Options that have not been previously exercised or expired and which the Participant was eligible to exercise as of the first date of permanent and total disability (as determined in the sole discretion of the Committee), at any time within one year after the first date of permanent and total disability, whether such one-year anniversary is before or after the Expiration Date, unless earlier terminated pursuant to its terms. For purposes of this Agreement, the term “permanent and total disability” means the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months, and the permanence and degree of which shall be supported by medical evidence satisfactory to the Committee. Notwithstanding anything to the contrary set forth herein, the Committee shall determine, in its sole and absolute discretion, (1) whether the Participant has ceased to perform services of any kind due to a permanent and total disability and, if so, (2) the first date of such permanent and total disability.

9. Administration. This Agreement and the rights of the Participant hereunder and under the Certificate are subject to all the terms and conditions of the Plan, as the same may be amended from time to time, as well as to such rules and regulations as the Committee may adopt for administration of the Plan. It is expressly understood that the Committee is authorized to administer, construe and make all determinations necessary or appropriate to the administration of the Plan, this Agreement and the Certificate, all of which shall be binding upon the Participant and Permitted Assignees. Any inconsistency between the Agreement or the Certificate (on the one hand) and the Plan (on the other hand) shall be resolved in favor of the Plan.

10. Reservation of Shares. The Company hereby agrees that at all times there shall be reserved for issuance and/or delivery upon exercise of the Option such number of Shares as shall be required for issuance or delivery upon exercise hereof.

11. Adjustments. The number of Shares subject to this Option, and the Option Price, shall be subject to adjustment in accordance with Section 12.2 of the Plan.

12. Exclusion from Pension Computations. By acceptance of the grant of this Option, the Participant hereby agrees that any income or gain realized upon the receipt or exercise hereof, or upon the disposition of the Shares received upon its exercise, is special incentive compensation and shall not be taken into account, to the extent permissible under applicable law, as “wages”, “salary” or “compensation” in determining the amount of any payment under any pension, retirement, incentive, profit sharing, bonus or deferred compensation plan of the Company or any of its Affiliates.

13. Amendment. The Committee may, with the consent of the Participant, at any time or from time to time amend the terms and conditions of this Option. In addition, the Committee may at any time or from time to time amend the terms and conditions of this Option in accordance with the Plan.

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14. Notices. Any notice that either party hereto may be required or permitted to give to the other shall be in writing, and may be delivered personally or by mail, postage prepaid, or overnight courier, addressed as follows: if to the Company, at its office at 122 Fifth Avenue, New York 10011, Attn: Human Resources, or at such other address as the Company by notice to the Participant may designate in writing from time to time; and if to the Participant, at the address shown below his or her signature on the Certificate, or at such other address as the Participant by notice to the Company may designate in writing from time to time. Notices shall be effective upon receipt.

15. Withholding Taxes. The Company shall have the right to withhold from wages or other amounts otherwise payable to the Participant (or a Permitted Assignee), or otherwise require the Participant (or Permitted Assignee) to pay, any Federal, state, local or foreign income taxes, withholding taxes or employment taxes required to be withheld by law or regulations (“Withholding Taxes”) arising as a result of the grant of any Award, exercise of an Option, or any other taxable event occurring pursuant to the Plan, this Agreement or the Certificate. In satisfaction of the requirement to pay Withholding Taxes, unless the Participant (or Permitted Assignee) elects in writing otherwise, the Company may withhold a portion of any Shares then issuable to the Participant (or Permitted Assignee) pursuant to this Option. If, notwithstanding the foregoing, the Participant (or Permitted Assignee) shall fail to actually or constructively make such tax payments as are required, the Company (or its Affiliates) shall, to the extent permitted by law, have the right to deduct any such Withholding Taxes from any payment of any kind otherwise due to such Participant (or Permitted Assignee) or to take such other action as may be necessary to satisfy such Withholding Taxes. In satisfaction of the requirement to pay Withholding Taxes, the Participant (or Permitted Assignee) may make a written election, which may be accepted or rejected in the discretion of the Committee, to tender other Shares to the Company having an aggregate Fair Market Value equal to the amount of such Withholding Taxes, either by actual delivery or attestation, in the sole discretion of the Committee, provided that, except as otherwise determined by the Committee, the Shares that are tendered must have been held by the Participant (or Permitted Assignee) for at least six (6) months prior to their tender (or such lesser period as may be required to avoid adverse accounting consequences) to satisfy the Option Price or have been purchased on the open market.

16. Registration; Legend. The Company may postpone the issuance and delivery of Shares upon any exercise of this Option until (a) the admission of such Shares to listing on any stock exchange or exchanges on which Shares of the same class are then listed and (b) the completion of such registration or other qualification of such Shares under any Federal or state law, rule or regulation as the Company shall determine to be necessary or advisable. The Participant shall make such representations and furnish such information as may, in the opinion of counsel for the Company, be appropriate to permit the Company, in light of the then existence or non-existence with respect to such Shares of an effective Registration Statement under the Securities Act of 1933, as amended, to issue the Shares in compliance with the provisions of that or any comparable act.

The Company may cause the following or a similar legend to be set forth on each certificate representing Shares or any other security issued or issuable upon exercise of this Option unless counsel for the Company is of the opinion as to any such certificate that such legend is unnecessary:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE ACT, THE AVAILABILITY OF WHICH IS ESTABLISHED BY AN OPINION FROM COUNSEL TO THE COMPANY.

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17. Change in Control. (a) In the event of the occurrence of a change in control of the Company (a “Change in Control”), this Option and all rights granted hereunder shall immediately vest and be exercisable in accordance with its terms with respect to those Shares not already vested and exercisable pursuant to the terms of this Option. For purposes of this Option, a “Change in Control” shall mean an event which shall occur if there is: (i) a change in the ownership of the Company as defined in Treasury Regulations 1.409A-2(i)(5)(v); (ii) a change in the effective control of the Company as defined in Treasury Regulations 1.409A-2(i)(5)(vi); or (iii) a change in the ownership of a substantial portion of the Company’s assets as defined in Treasury Regulations 1.409A-2(i)(5)(vii). The determination as to the occurrence of a Change in Control shall be based on objective facts and in accordance with the requirements of Internal Revenue Code Section 409A and the regulations promulgated thereunder.

(b) Notwithstanding the foregoing, if in the event of a Change in Control, the successor company assumes or substitutes for this Option, then this Option shall not be accelerated as described in Section 17(a) hereof. Subject to the terms and conditions of the Plan, this Option shall be considered assumed or substituted for if following the Change in Control, each Share subject to this Option or any award substituted therefor (“Substitute Award”) represents the same consideration that would have been received in exchange for one vested Share in the transaction constituting the Change in Control. Notwithstanding the foregoing, in the event of a termination of the Participant’s employment or Directorship in such successor company within twenty-four (24) months following such Change in Control, this Option or the Substitute Award held by such Participant at the time of the Change in Control shall be accelerated as described in Section 17(a) hereof.

18. Miscellaneous.

(a) Neither this Agreement nor the Certificate shall confer upon the Participant any right to continuation of employment by or Directorship with the Company, nor shall this Agreement or the Certificate interfere in any way with the Company’s right to terminate the Participant’s employment or Directorship at any time.

(b) The Participant shall have no rights as a stockholder of the Company with respect to the Shares subject to this Option Agreement until such time as the Option Price has been paid, and the Shares have been issued and delivered to the Participant.

(c) This Agreement and the Certificate shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.

(d) To the extent not preempted by Federal law, this Agreement and the Certificate shall be governed by, and construed in accordance with the laws of the State of Delaware.

(e) All obligations of the Company under the Plan, this Agreement and the Certificate, with respect to the Option, shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.

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(f) The provisions of this Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.

(g) By accepting this Option under the Plan, the Participant and each person claiming under or through the Participant shall be conclusively deemed to have indicated his or her acceptance and ratification of, and consent to, any action taken under the Plan by the Company, the Board or the Committee.

(h) The Participant, every person claiming under or through the Participant, and the Company hereby waives, to the fullest extent permitted by applicable law, any right to a trial by jury with respect to any litigation, directly or indirectly, arising out of, under, or in connection with the Plan, this Agreement or the Certificate.

(i) The order of precedence as between the Plan, this Agreement or the Certificate, and any written employment agreement between Participant and the Company shall be as follows: If there is any inconsistency between (a) the terms of this Agreement or the Certificate (on the one hand) and the terms of the Plan (on the other hand); or (b) any such written employment agreement (on the one hand) and the terms of the Plan (on the other hand), the Plan’s terms shall completely supersede and replace the conflicting terms of this Agreement, the Certificate or the written employment agreement (as the case may be). If there is any inconsistency between the terms of this Agreement or the Certificate (on the one hand) and the terms of Participant’s written employment agreement, if any (on the other hand), the terms of this Agreement or the Certificate (as the case may be) shall completely supersede and replace the conflicting terms of the written employment agreement unless such written employment agreement was approved by the Committee, in which event such written employment agreement shall completely supersede and replace the conflicting terms of this Agreement or the Certificate (as the case may be).

19. Exculpation. This Option and all documents, agreements, understandings and arrangements relating hereto have been issued on behalf of the Company by officers acting on its behalf and not by any person individually. None of the officers, Directors or stockholders of the Company nor the Directors, officers or stockholders of any Affiliate of the Company shall have any personal liability hereunder or thereunder. The Participant shall look solely to the assets of the Company for satisfaction of any liability of the Company in respect of this Option and all documents, agreements, understanding and arrangements relating hereto and will not seek recourse or commence any action against any of the Directors, officers or stockholders of the Company or any of the Directors, officers or stockholders of any Affiliate, or any of their personal assets, for the performance or payment of any obligation hereunder or thereunder. The foregoing shall also apply to any future documents, agreements, understandings, arrangements and transactions between the parties hereto with respect to this Option.

20. Captions. The captions in this Agreement are for convenience of reference only, and are not intended to narrow, limit or affect the substance or interpretation of the provisions contained herein.

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EX-10.5

Exhibit 10.5

PERFORMANCE UNIT AWARD AGREEMENT

Issued Pursuant to the

2009 Incentive Plan

of Barnes & Noble, Inc.

THIS PERFORMANCE UNIT AWARD AGREEMENT (this “Agreement”), effective as of the grant date (the “Grant Date”) set forth in the attached Performance Unit Award Certificate (the “Certificate”), represents the grant of such number of Performance Units set forth in the Certificate by Barnes & Noble, Inc. (the “Company”), to the person named in the Certificate (the “Participant”), subject to the terms and conditions set forth below and the provisions of the Barnes & Noble, Inc. 2009 Incentive Plan adopted by the Company’s Board of Directors on April 14, 2009 and approved by the Company’s stockholders on June 2, 2009 (the “Plan”).

All capitalized terms shall have the meanings ascribed to them in the Plan, unless specifically set forth otherwise herein. The parties hereto agree as follows:

1. Valuation of Performance Units. Each Performance Unit shall represent the right to receive an amount in cash based upon the attainment of certain financial goals (“Performance Criteria”) during a specified period of time (the “Performance Period”) under a specified payment formula (the “Payment Formula”), each of which shall be specified in the Certificate. Following the end of the Performance Period, the Committee shall certify the level of attainment of the Performance Criteria and the amount payable under the Payment Formula as a result thereof, provided that the Committee shall have discretion to reduce (but not increase) the amount otherwise payable under the Performance Units (the amount so payable (after the application of such discretion, if any), the “Payment Value”).

2. Payment. (a) General. As soon as administratively practicable following the end of the Performance Period, the Company shall pay to the Participant an amount in cash equal to the Payment Value (such payment date, the “Payment Date”); provided, however, subject to Section 2(b), if the Participant’s employment terminates before the Payment Date, all Performance Units granted hereunder shall be forfeited. In order to receive payment for the Performance Units, the Participant must be continuously employed by the Company or any of its Affiliates from the Grant Date through the Payment Date.

(b) Change in Control. Notwithstanding anything in Section 2(a) to the contrary, in the event of the occurrence of a Change in Control (as defined below), each Performance Unit granted hereunder shall become immediately payable in an amount equal to the Initial Grant Value (as specified in the Certificate). For purposes of this Agreement, “Change in Control” shall mean: (i) a change in the ownership of the Company as defined in Treasury Regulations 1.409A-2(i)(5)(v); (ii) a change in the effective control of the Company as defined in Treasury Regulations 1.409A-2(i)(5)(vi); or (iii) a change in the ownership of a substantial portion of the Company’s assets as defined in Treasury Regulations 1.409A-2(i)(5)(vii). The determination as to the occurrence of a Change in Control shall be based on objective facts and in accordance with the requirements of Section 409A of the Internal Revenue Code of 1986 and the regulations promulgated thereunder (“Section 409A”).

3. Nontransferability. The Performance Units granted hereunder may not be sold, transferred, pledged, assigned or otherwise alienated or hypothecated. No assignment or transfer of any Performance Units in violation of this Section 3, whether voluntary or involuntary, by operation of law or otherwise, except as required by applicable law, shall vest in the assignee or transferee any interest whatsoever.

4. Withholding Taxes. The Company shall have the right to withhold from wages or other amounts otherwise payable to the Participant, or otherwise require the Participant to pay, any federal, state, local or foreign income taxes, withholding taxes or employment taxes required to be withheld by law or regulations (“Withholding Taxes”) arising as a result of the grant of Performance Units, the payment of the Payment Value, or any other taxable event occurring pursuant to the Plan, this Agreement or the Certificate. In satisfaction of the requirement to pay Withholding Taxes, the Company, in its discretion, may elect to satisfy the obligation for Withholding Taxes by retaining a portion of the Payment Value equal to the amount of any Withholding Taxes due on the Payment Date.

5. Recoupment. Subject to the clawback provisions of the Sarbanes-Oxley Act of 2002, the Committee may, in its discretion, direct that the Company recoup, and upon demand by the Company, the Participant agrees to return to the Company, all or a portion of any amount paid to the Participant hereunder computed using financial information or Performance Criteria later found to be materially inaccurate as a result of fraud or other misconduct by the Participant. The amount to be recouped shall be determined by the Committee in its discretion but shall not exceed the Payment Value. If after a demand for recoupment under this Section 5, the Participant fails to return any amount paid by the Company, the Participant acknowledges that the Company has the right to effect the recovery of the amount paid and the amount of its court costs, attorneys’ fees and other costs and expenses incurred in connection with enforcing this Agreement.

6. Administration. This Agreement and the rights of the Participant hereunder and under the Certificate are subject to all the terms and conditions of the Plan, as the same may be amended from time to time, as well as to such rules and regulations as the Committee may adopt for administration of the Plan. It is expressly understood that the Committee is authorized to administer, construe and make all determinations necessary or appropriate to the administration of the Plan, this Agreement and the Certificate, all of which shall be binding upon the Participant. Any inconsistency between the Agreement or the Certificate (on the one hand) and the Plan (on the other hand) shall be resolved in favor of the Plan.

7. Exclusion from Pension Computations. By acceptance of the Performance Units granted hereunder, the Participant hereby agrees that any income or gain realized upon the receipt or disposition of the Performance Units is special incentive compensation and shall not be taken into account, to the extent permissible under applicable law, as “wages”, “salary” or “compensation” in determining the amount of any payment under any pension, retirement, incentive, profit sharing, bonus or deferred compensation plan of the Company or any of its Affiliates.

8. Miscellaneous.

(a) Annual Bonus. With respect to Participants who are party to employment agreements that provide for annual bonus compensation, the Payment Value shall constitute annual bonus compensation.

(b) No Right to Employment. Neither this Agreement nor the Certificate shall confer upon the Participant any right to continuation of employment by the Company, nor shall this Agreement or the Certificate interfere in any way with the Company’s right to terminate the Participant’s employment at any time.

(c) Successors. All obligations of the Company under the Plan, this Agreement and the Certificate, with respect to the Performance Units granted hereunder, shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation or otherwise, of all or substantially all of the business and/or assets of the Company.

(d) Severability. The provisions of this Agreement are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.

(e) Consent to Board or Committee Action. By accepting this grant of Performance Units, the Participant and each person claiming under or through the Participant shall be conclusively deemed to have indicated their acceptance and ratification of, and consent to, any action taken under the Plan by the Company, the Board or the Committee.

(f) Amendment. The Committee may, with the consent of the Participant, at any time or from time to time amend the terms and conditions of this grant of Performance Units. In addition, the Committee may at any time or from time to time amend the terms and conditions of this grant of Performance Units in accordance with the Plan.

(g) Governmental Approvals. This Agreement and the Certificate shall be subject to all applicable laws, rules and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.

(h) Governing Law. To the extent not preempted by federal law, this Agreement and the Certificate shall be governed by, and construed in accordance with, the laws of the State of Delaware.

(i) Compliance with Section 409A. The payment of the Payment Value under this Agreement is intended to comply with Section 409A, and this Agreement shall be interpreted, operated and administered consistent with this intent. Notwithstanding the preceding, the Company makes no representations concerning the tax consequences of this Agreement under Section 409A or any other federal, state, local, foreign or other taxes. Tax consequences will depend, in part, upon the application of the relevant tax law to the relevant facts and circumstances. The Participant should consult a competent and independent tax advisor regarding the tax consequences of this Agreement.

(j) Waiver of Trial by Jury. The Participant, every person claiming under or through the Participant, and the Company hereby waives to the fullest extent permitted by applicable law any right to a trial by jury with respect to any litigation directly or indirectly arising out of, under or in connection with the Plan, this Agreement or the Certificate.

(k) Conflicts. The order of precedence as between the Plan, this Agreement or the Certificate, and any written employment agreement between Participant and the Company shall be as follows: If there is any inconsistency between (a) the terms of this Agreement or the Certificate (on the one hand) and the terms of the Plan (on the other hand); or (b) any such written employment agreement (on the one hand) and the terms of the Plan (on the other hand), the Plan’s terms shall completely supersede and replace the conflicting terms of this Agreement, the Certificate or the written employment agreement (as the case may be). If there is any inconsistency between the terms of this Agreement or the Certificate (on the one hand) and the terms of Participant’s written employment agreement, if any (on the other hand), the terms of this Agreement or the Certificate (as the case may be) shall completely supersede and replace the conflicting terms of the written employment agreement unless such written employment agreement was approved by the Committee, in which event such written employment agreement shall completely supersede and replace the conflicting terms of this Agreement or the Certificate (as the case may be).

(l) Exculpation. The Performance Units granted hereunder and all documents, agreements, understandings and arrangements relating hereto have been issued on behalf of the Company by officers acting on its behalf and not by any person individually. None of the officers, Directors or stockholders of the Company nor the Directors, officers or stockholders of any Affiliate of the Company shall have any personal liability hereunder or thereunder. The Participant shall look solely to the assets of the Company for satisfaction of any liability of the Company in respect of the Performance Units granted hereunder and all documents, agreements, understanding and arrangements relating hereto and will not seek recourse or commence any action against any of the Directors, officers or stockholders of the Company or any of the Directors, officers or stockholders of any Affiliate, or any of their personal assets, for the performance or payment of any obligation hereunder or thereunder. The foregoing shall also apply to any future documents, agreements, understandings, arrangements and transactions between the parties hereto with respect to the Performance Units granted hereunder.

(m) Captions. The captions in this Agreement are for convenience of reference only, and are not intended to narrow, limit or affect the substance or interpretation of the provisions contained herein.

(n) Notices. Any notice that either party hereto may be required or permitted to give to the other shall be in writing, and may be delivered personally or by mail, postage prepaid or overnight courier, addressed as follows: if to the Company, at its office at 122 Fifth Avenue, New York, NY 10011, Attn: Human Resources, or at such other address as the Company by notice to the Participant may designate in writing from time to time; and if to the Participant, at the address shown below his or her signature on the Certificate, or at such other address as the Participant by notice to the Company may designate in writing from time to time. Notices shall be effective upon receipt.

EX-15.1

Exhibit 15.1

September 9, 2010

Securities and Exchange Commission

450 Fifth Street N.W.

Washington, D.C. 20549

We are aware that Barnes & Noble, Inc. has incorporated by reference in its Registration Statements on Form S-3 (No. 333-23855, No. 333-69731, No. 333-62210, No. 33-84826 and No. 33-89258) and Form S-8 (No. 333-27033, No. 33-89260, No. 333-90538, No. 333-116382, No. 333-59111 and No. 333-160560) our report dated September 9, 2010, relating to the Company’s unaudited interim consolidated financial statements appearing in its quarterly report on Form 10-Q for the quarter ended July 31, 2010. Pursuant to Regulation C under the Securities Act of 1933 (the “Act”), that report is not considered a part of the registration statement prepared or certified by our firm or a report prepared or certified by our firm within the meaning of Sections 7 and 11 of the Act. It should be noted that we have not performed any procedures subsequent to September 9, 2010.

/s/ BDO USA, LLP

BDO USA, LLP

New York, New York

EX-31.1

Exhibit 31.1

CERTIFICATION BY THE

CHIEF EXECUTIVE OFFICER PURSUANT TO

17 CFR 240.13a-14(a)/15(d)-14(a),

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, William J. Lynch, Jr., certify that:

1. I have reviewed this report on Form 10-Q for the quarterly period ended July 31, 2010 of Barnes & Noble, Inc.;

2. Based on my knowledge, this 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 report;

3. Based on my knowledge, the financial statements, and other financial information included in this 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 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-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

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

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: September 9, 2010

By:	/s/ William J. Lynch, Jr.
	William J. Lynch, Jr. Chief Executive Officer Barnes & Noble, Inc.

EX-31.2

Exhibit 31.2

CERTIFICATION BY THE

CHIEF FINANCIAL OFFICER PURSUANT TO

17 CFR 240.13a-14(a)/15(d)-14(a),

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Joseph J. Lombardi, certify that:

1. I have reviewed this report on Form 10-Q for the quarterly period ended July 31, 2010 of Barnes & Noble, Inc.;

2. Based on my knowledge, this 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 report;

3. Based on my knowledge, the financial statements, and other financial information included in this 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 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-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, 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 report is being prepared;

b. designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

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

a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: September 9, 2010

By:	/s/ Joseph J. Lombardi
	Joseph J. Lombardi Chief Financial Officer Barnes & Noble, Inc.

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

RULE 13a-14(b) UNDER THE SECURITIES EXCHANGE ACT OF 1934

AND 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Barnes & Noble, Inc. (the “Company”) on Form 10-Q for the period ended July 31, 2010, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, William J. Lynch, Jr., Chief Executive Officer of the Company, certify, to the best of my knowledge, pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ William J. Lynch, Jr.

William J. Lynch, Jr.

Chief Executive Officer

Barnes & Noble, Inc.

September 9, 2010

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

RULE 13a-14(b) UNDER THE SECURITIES EXCHANGE ACT OF 1934

AND 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report of Barnes & Noble, Inc. (the “Company”) on Form 10-Q for the period ended July 31, 2010, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Joseph J. Lombardi, Chief Financial Officer of the Company, certify, to the best of my knowledge, pursuant to Rule 13a-14(b) under the Securities Exchange Act of 1934 and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Joseph J. Lombardi

Joseph J. Lombardi

Chief Financial Officer

Barnes & Noble, Inc.

September 9, 2010

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.