Fatbrain.com Online Revenue Increases 2.8 times to $8.2 Million; Total Revenues Hit $10 Million Mark; The Company Reports 42.6% Sequential Quarterly Growth in Online Sales.

SANTA CLARA, Calif.--(BUSINESS WIRE)--Nov. 23, 1999--

Fatbrain.com(TM), Inc. (Nasdaq:FATB), the Internet's most comprehensive bookstore for professionals, today announced financial results for the third quarter and nine month period of fiscal 2000, ended October 31, 1999. The Company announced record online sales of $8.2 million for the quarter, an increase of more than 2.8 times online sales of $2.9 million for the prior year period. This represents sequential growth in online sales of 42.6 percent. Total Company sales (which also include sales generated by physical retail stores, trade shows and book fairs) for the quarter were $10.0 million, a 91 percent increase over total sales of $5.2 million for the same period last year.

The Company reported a third quarter net loss of $9.1 million compared to a net loss of $2.9 million in the prior year period, which is in line with analysts' expectations. Net loss per share for the third quarter of fiscal 2000 was $0.80 compared to pro forma net loss per share of $0.38 for the same period last year. Per share calculations for the current quarter are based on weighted average shares outstanding at October 31, 1999 of approximately 11,365,000. Pro forma per share calculations for the quarter ended October 31, 1998 are based on pro forma weighted average shares outstanding of approximately 7,650,000, which assumes conversion of all outstanding shares of preferred stock immediately upon issuance.

For the nine month period of fiscal 2000, online sales totaled $18.5 million, an increase of more than 2.5 times online sales of $7.2 million for the same period of fiscal 1999. Total sales for the nine months were $23.5 million, an increase of 63 percent from total sales of $14.4 million for the same nine month period of fiscal 1999. The Company reported a net loss of $20.3 million, or $1.79 per share, for the nine month period ended October 31, 1999. This compares to a net loss of $6.5 million, or a pro forma net loss per share of $0.90, for the same period of last year.

The Company added more than 50,000 new customers during the third quarter, and Fatbrain.com's customer base now totals over 188,000. Online customer accounts increased 36.2 percent sequentially, and repeat customer orders represented more than 58.2 percent of orders placed.

"The past quarter marked a pivotal point in our strategic evolution with the launch of eMatter, the Internet's first secure digital publishing platform, " stated Chris MacAskill, president and chief executive officer. "This innovative initiative attracted substantial investments from Vulcan Ventures and Highland Capital Partners and, notably, was Internet visionary Keith Benjamin's first investment in his venture debut at Highland. We are extremely pleased to be able to draw upon the support of these respected organizations as we focus on expanding our first mover advantage to address this tremendous market opportunity, which we estimate to be greater than $100 billion."

"We also continued to make significant advances in our business-to-business model, adding more than 1,100 new corporate accounts during the third quarter, improving the functionality and efficiency of the FINDitNOW program and expanding the accessibility of this program to customers of Ariba's business-to-business e-commerce solution. Additionally, we added several new customers to our growing list of print-on-demand partnerships and strengthened the management team of our print-on-demand business, now referred to as "Online Business Services" to channel the rapid growth we have been experiencing in this segment of our business," concluded Mr. MacAskill.

Operating Highlights

Vulcan Ventures and Highland Capital Partners Support New

E-Commerce Initiative

Fatbrain.com announced a recent $30 million round of financing which includes $20 million from Vulcan Ventures, the investment organization of Paul G. Allen, and $10 million from Highland Capital Partners. The funding will be used primarily to support its e-commerce initiatives, including eMatter, the Company's new digital publishing platform. Additionally, Diane Daggatt of Vulcan Ventures and Keith Benjamin of Highland Capital will take seats on Fatbrain.com's Board of Directors.

Fatbrain.com Makes History with eMatter Digital Publishing

On August 31, 1999 Fatbrain.com made history and rocked the traditional publishing paradigm by inventing secure digital publishing for the masses. eMatter is the first secure digital publishing solution that allows authors and publishers to sell their works online, earning royalties of at least 50 percent on every copy sold. eMatter provides a new global distribution channel for works of all kinds, including books and magazines and unique content such as short stories, speeches and essays. The eMatter initiative combines Fatbrain.com's new patent-pending digital rights technology with Fatbrain.com's established community of customers to provide a rich channel for the exchange of timely, valuable information between writers and readers everywhere.

To date, 19 publishing firms have committed to providing content for purchase through the eMatter platform. These include nolo.com, the leading provider of self-help legal information; Macmillan USA, a leading publisher of computer information; McGraw-Hill Professional Books Club, the leading publisher of business, computer and reference books; Red Herring, the leading technology business magazine; and The Industry Standard, the news magazine of the Internet economy.

Additionally, more than 5,400 writers have signed up to self-publish eMatter content, including Catherine Lanigan, best-selling author of Romancing the Stone and Jewel of the Nile, Geoffrey Moore, best-selling author of Crossing the Chasm and The Gorilla Game, and Alan and Stephen Cohn, authors of The Sage Guides to Mutual Funds. Original eMatter content available today covers a broad range of professional topics including technology, business, finance, medicine and science, plus a variety of creative subjects such as fiction, poetry, self-help and how-to guides.

Fatbrain.com has appointed Judy Kirkpatrick to spearhead the new eMatter initiative in the newly created role of vice president and general manager, eMatter. Kirkpatrick brings to Fatbrain.com extensive experience in the digital publishing market, serving previously as director of marketing at Adobe Systems, where she launched the Adobe Acrobat product, and as director of marketing for Adobe's Internet products division.

Print-On-Demand Continues to Gain Momentum

During the third quarter 6 new corporate customers began using Fatbrain.com's print-on-demand services (Online Business Services), including Sun Microsystems (Nasdaq: SUNW), who signed an agreement with the Company to produce, distribute and sell documentation covering Sun's hardware and the Solaris(TM) Operating Environment. This agreement augments Online Business Services' growing list of established business-to-business partnerships with companies including IBM (NYSE: IBM), Novell (Nasdaq: NOVL), 3Com (Nasdaq: COMS) and Cisco Systems (Nasdaq: CSCO).

To direct its efforts in the rapidly growing print-on-demand segment of its business, Fatbrain.com appointed Cindy Tyler, a 17-year veteran of Xerox Corporation, as Director of Online Business Services. The Online Business Services group provides corporations with print-on-demand publishing and distribution of hard-copy documentation for their products, including software developer kits, reference and user guides, training materials and custom marketing literature. Previously these materials were primarily available in electronic format.

New and Expanded Business-to-Business Partnerships

Fatbrain.com continued to expand the magnitude of its business-to-business partnerships during the third quarter, adding more than 1,100 corporate accounts. Based on customer feedback, Fatbrain.com recently introduced a new enhanced version of its popular FINDitNOW program. GTE, (NYSE: GTE), QUALCOMM (Nasdaq: QCOM) and SAP Labs are already taking advantage of the enhanced FINDitNOW product, which allows employees to shop faster and more efficiently with new dynamic custom content tools, powerful integrated business controls, and enhanced custom reporting tools. The Company's custom designed online bookstores now reach a potential audience in excess of 1.75 million individuals at customer organizations.

Fatbrain.com also expanded its partnership with Ariba (Nasdaq: ARBA), becoming one of the key suppliers to use the Ariba Network(TM) business-to-business eCommerce service. With the completion of its Commerce XML (cXML) interface to the Ariba Network service, Fatbrain.com has integrated its FINDitNOW online bookstore program for corporations into the Ariba solution, providing Ariba customers all the benefits and expert selection of Fatbrain.com's FINDitNOW program with the added cost savings of Ariba's fully-integrated eCommerce solution. Hewlett-Packard Company (NYSE: HWP) was the first Ariba customer to take advantage of the new offering. H-P employees using the Ariba ORMS(TM) application now have direct access to Fatbrain.com's world-class selection of professional books through HP's custom bookstore site.

Significant new Internet bookstore launches during the third

quarter included:

Intraware (Nasdaq: ITRA), the leading IT e-Marketplace for web-based software and services. The custom online bookstore will provide Intraware's qualified membership base of over 150,000 IT professionals with instant access to more than 1,200 subject categories of business and technical books. Fatbrain.com will also provide specialized content for the Intraware IT Knowledge Center, including sample chapters and bestseller lists.

Microsoft Reseller Community, available through Microsoft Direct Access (MSDA), at www.microsoft.com/directaccess/ and establishing Microsoft's (Nasdaq: MSFT) fourth custom online bookstore through Fatbrain.com. The co-branded bookstore is custom-designed to meet the needs of more than 160,000 value-added providers (VAPs), value-added resellers (VARs) and small business owners who visit the site each month.

About Fatbrain.com

Fatbrain.com(TM), the Internet's most comprehensive bookstore for professionals, is the first e-commerce provider to deliver secure digital publishing through its eMatter initiative. Recently named the number two fastest-growing public company in Silicon Valley (second only to e-Bay), Fatbrain.com offers a world-class selection of books, training materials and documentation for professionals in business and finance, technology, other industries and now the general interest category. Through its corporate intranet bookstore program, Fatbrain.com is accessible from the desktops of more than 1.75 million employees at customer sites. Fatbrain.com offers discounts of up to 40 percent, and all in-stock orders placed by 4 PM PT ship the same business day. Visit Fatbrain.com on the Web at http://www.fatbrain.com.

This announcement may contain forward-looking statements that involve risks and uncertainties including, among others, Fatbrain.com's limited operating history, anticipated losses, the unpredictability of its future revenues, competition, risks associated with system development and operation risks, management of potential growth, and risks of new business areas, international expansion, business combinations, and strategic alliances. Actual results could differ materially from those discussed. More information about factors that potentially could affect Fatbrain.com's financial results is included in the Company's filings with the Securities and Exchange Commission, including its Registration Statement filed under its original name, Computer Literacy, Inc., on Form SB-2 on November 19, 1998, as amended. All forward looking statements are based on information available to the Company on the date hereof, and the Company assumes no obligation to update such statements.

Fatbrain.com and eMatter are trademarks of Fatbrain.com, Inc. All company and product names may be trademarks of the respective companies with which they are associated. -0-

                          Fatbrain.com, Inc.
                       Statements of Operations
                 (in thousands, except per share data)

                                   Quarter ended    Nine months ended
                                    October 31,        October 31,
                                  1999      1998     1999       1998
                                    (unaudited)        (unaudited)
Revenues:
  Online                       $  8,248  $  2,934  $ 18,524  $  7,159
  Retail and other                1,731     2,296     4,960     7,280
    Total revenues                9,979     5,230    23,484    14,439
Cost of revenues:
  Online                          6,795     2,347    14,967     5,638
  Retail and other                1,124     1,501     3,228     4,727
    Total cost of revenues        7,919     3,848    18,195    10,365
Gross profit                      2,060     1,382     5,289     4,074
Operating expenses:
  Sales and marketing             7,505     2,759    17,441     6,815
  Development and engineering     1,830       763     4,249     1,911
  General and administrative      1,959       799     4,477     2,023
    Total operating expenses     11,294     4,321    26,167    10,749
Loss from operations             (9,234)   (2,939)  (20,878)   (6,675)
Interest, net                        89        45       595       144
Net loss                       $ (9,145) $ (2,894) $(20,283) $ (6,531)
Actual and pro forma basic and
 diluted net loss per share(1) $  (0.80) $  (0.38) $  (1.79) $  (0.90)
Shares used in calculating pro
 forma basic and diluted net
 loss per share                  11,378     7,650    11,301     7,280
Basic and diluted net loss per
 share                         $  (0.80) $  (1.84) $  (1.79) $  (4.22)
Shares used in calculating
 basic and diluted net
 loss per share                  11,378     1,571    11,301     1,546

(1)  1999, actual; 1998 pro forma net loss per share assuming
     conversion of all outstanding shares of preferred stock
     immediately upon issuance.



                          Fatbrain.com, Inc.
                            Balance Sheets
                 (in thousands, except per share data)

                                   October 31,   January 31,
                                       1999          1999
Assets                             (unaudited)
Current assets:
  Cash and equivalents              $  1,117      $  9,341
  Short-term investments                --           5,344
  Accounts receivable, net
   of allowance of $354 and $161       2,813         1,268
  Inventories                          6,777         3,204
  Prepaid expenses and other
   current assets                      1,544         1,068
    Total current assets              12,251        20,225

Property and equipment, net            9,301         2,097
Investments                            5,608        14,181
Goodwill, net                          2,597         2,751
Other assets                             320           360
    Total assets                    $ 30,077      $ 39,614

Liabilities and Stockholders'
 equity
Current liabilities:
  Accounts payable                  $  8,826      $  1,896
  Accrued expenses                     2,439         1,169
  Current portion of capital
   lease obligations                      18            18
    Total current liabilities         11,283         3,083
Line of credit                         2,000
Capital lease obligations                 21            35
    Total liabilities                 13,304         3,118
Stockholders' equity:
  Preferred stock, $0.001 par
   value, 5,000 authorized,
   none issued and outstanding          --            --
Common stock, $0.001 par value,
 50,000 and 50,000 shares
 authorized, 11,415 and 11,172
 shares issued and outstanding
 at October 31, 1999 and
 January 31, 1999, respectively           11            11
Additional paid-in capital            50,704        50,270
Warrants                                 127            12
Unrealized loss on investments           (36)          (47)
Accumulated deficit                  (34,033)      (13,750)
  Total stockholders' equity          16,773        36,496
  Total liabilities and
   stockholders' equity             $ 30,077      $ 39,614