UNITED STATES SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549


                                   FORM 10-QSB

                   QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2007


                        Commission File Number 001-32300


                                 SMARTPROS LTD.
        (Exact name of small business issuer as specified in its charter)

         DELAWARE                                       13-4100476
         ---------                                      ----------

                  (State or other jurisdiction (I.R.S. Employer
              of incorporation or organization) Identification No.)

                   12 SKYLINE DRIVE, HAWTHORNE, NEW YORK 10532
                   -------------------------------------------
                     (Address of principal executive office)

                                 (914) 345-2620
                (Issuer's telephone number, including area code)



Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the issuer 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 is a shell company (as defined in
Rule 12b-2 of the Exchange Act).

                                 Yes | | No |x|


Number of shares outstanding of each of the issuer's classes of common equity,
as of the latest practicable date: As of August 1, 2007, there were 4,974,718
shares of common stock outstanding.


Transitional Small Business Disclosure Format.

                                 Yes | | No |x|




<PAGE>


                                 SMARTPROS LTD.
                               FORM 10-QSB REPORT

                                  JUNE 30, 2007

                                TABLE OF CONTENTS
                                                                           PAGE
PART I - FINANCIAL INFORMATION

       Item 1.  Condensed Consolidated Financial Statements (Unaudited)

                Balance Sheets - June 30, 2007 and
                December 31, 2006 (Audited)                                  3

                Statements of Operations for the six-months
                and three-month periods ended June 30, 2007
                and 2006                                                     4

                Statements of Cash Flows for the six-month
                periods ended June 30, 2007 and 2006                         5

                Notes to Condensed Consolidated Financial Statements         6

       Item 2.  Management's Discussion and Analysis or
                Plan of Operation                                            9

       Item 3.  Controls and Procedures                                     20

PART II - OTHER INFORMATION

       Item 1.  Legal Proceedings                                           20

       Item 2.  Unregistered Sales of Equity Securities
                and Use of Proceeds                                         20

       Item 3.  Defaults Upon Senior Securities                             21

       Item 4.  Submission of Matters to a Vote of Security Holders         21

       Item 5.  Other Information                                           21

       Item 6.  Exhibits                                                    21

SIGNATURES                                                                  22

                           FORWARD-LOOKING STATEMENTS

         Certain statements made in this Quarterly Report on Form 10-QSB are
"forward-looking statements" within the meaning of Section 21E of the Securities
and Exchange Act of 1934. These statements relate to the plans and objectives of
management for future operations as well as to market trends and expectations.
Such statements involve known and unknown risks, uncertainties and other factors
that may cause our actual results, performance or achievements to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. The forward-looking statements
included herein are based on current expectations, plans and assumptions
relating to the future operation of our business. These expectations, plans and
assumptions involve judgments with respect to, among other things, future
economic, competitive and market conditions and future business decisions, all
of which are difficult or impossible to predict accurately and many of which are
beyond our control. Although we believe that our expectations, plans and
assumptions underlying the forward-looking statements are reasonable, they could
prove inaccurate and, therefore, there can be no assurance that the
forward-looking statements included in this report will prove to be accurate. In
light of the significant uncertainties inherent in the forward-looking
statements included herein, the inclusion of such information should not be
regarded as a representation by us or any other person that our objectives and
plans will be achieved. We undertake no obligation to revise or update publicly
any forward-looking statements for any reason.

         The terms "we", "our", "us", or any derivative thereof, as used herein
refer to SmartPros Ltd., a Delaware corporation, its subsidiaries and its
predecessors.


                                       2
<PAGE>

                                     PART I
                              FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

SMARTPROS LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                                        JUNE 30,              DECEMBER 31,
                                                                                          2007                   2006
                                                                                      (UNAUDITED)              (AUDITED)
-----------------------------------------------------------------------------------------------------------------------------
<S>                                                                                  <C>    <C>
ASSETS
Current Assets:
   Cash and cash equivalents                                                          $ 8,761,056             $ 7,393,789
   Accounts receivable, net of allowance for doubtful accounts
     of $39,842                                                                         1,879,385               1,960,939
   Prepaid expenses and other current assets                                              267,986                 277,393
                                                                                 --------------------------------------------
Total Current Assets                                                                   10,908,427               9,632,121
                                                                                 --------------------------------------------

Property and equipment, net                                                               438,418                 438,260
Goodwill                                                                                  145,684                 130,684
Other intangibles, net                                                                  2,679,420               2,651,132
Other assets, including restricted cash of $150,000                                       154,673                 154,673
Deferred tax asset                                                                        628,000                 378,000
                                                                                 --------------------------------------------
                                                                                        4,046,195               3,752,749
                                                                                 --------------------------------------------
Total Assets                                                                          $14,954,622             $13,384,870
                                                                                 ============================================

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
   Accounts payable                                                                   $   288,972             $   552,630
   Accrued expenses                                                                       349,000                 380,464
   Current portion of capital lease and equipment financing obligations                    14,119                  25,991
   Deferred revenue                                                                     4,650,904               4,007,074
                                                                                 --------------------------------------------
Total Current Liabilities                                                               5,302,995               4,966,159
                                                                                 --------------------------------------------

Long-Term Liabilities:
   Other liabilities                                                                      100,109                 120,137
                                                                                 --------------------------------------------
Total Long-Term Liabilities                                                               100,109                 120,137
                                                                                 --------------------------------------------

COMMITMENTS AND CONTINGENCIES
Stockholders' Equity:
   Convertible preferred stock, $.001 par value, authorized 1,000,000                          --                     --
     shares, 0 shares issued and outstanding
   Common stock, $.0001 par value, authorized 30,000,000 shares,                              520                     519
     5,208,594 issued and 4,897,863 outstanding at June 30, 2007; and
     5,186,505 issued and 4,875,774 outstanding at December 31, 2006
   Additional paid-in capital                                                          16,690,514              16,572,944
   Accumulated (deficit)                                                               (6,177,118)             (7,274,824)
                                                                                 --------------------------------------------
                                                                                       10,513,916               9,298,639
   Common stock in treasury, at cost - 310,731 shares                                    (922,625)              (922,625)
   Deferred compensation                                                                  (39,773)               (77,440)
                                                                                 --------------------------------------------
Total Stockholders' Equity                                                              9,551,518               8,298,574
                                                                                 --------------------------------------------
Total Liabilities and Stockholders' Equity                                            $14,954,622             $13,384,870
                                                                                 ===================== ======================
</TABLE>



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SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)



                                       3
<PAGE>

SMARTPROS LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

<TABLE>
<CAPTION>
                                                        SIX MONTHS ENDED                             THREE MONTHS ENDED
                                                            JUNE 30,                                      JUNE 30,
                                             ---------------------------------------     -------------------------------------------
                                                    2007                2006                      2007                  2006
------------------------------------------------------------------------------------     -------------------------------------------

<S>                                            <C>                  <C>                    <C>                     <C>
Net Revenues                                   $  7,210,161         $ 5,455,472            $    3,486,530          $  2,921,893
Cost of Revenues                                  2,684,317           2,205,096                 1,215,404             1,218,409
                                             ---------------------------------------     -------------------------------------------
   Gross Profit                                   4,525,844           3,250,376                 2,271,126             1,703,484
                                             ---------------------------------------     -------------------------------------------

Operating Expenses:
   Selling, general and administrative            3,540,640           2,834,392                 1,814,459             1,466,713
   Depreciation and amortization                    327,264             316,580                   161,795               168,509
                                             ---------------------------------------     -------------------------------------------
                                                  3,867,904           3,150,972                 1,976,254             1,635,222
                                             ---------------------------------------     -------------------------------------------
   Operating Income                                 657,940              99,404                  294, 872                68,262
                                             ---------------------------------------     -------------------------------------------

Other Income (Expense):
   Interest income                                  190,586             154,667                   101,273                81,207
   Interest expense                                    (819)             (2,992)                     (218)               (1,405)
                                             ---------------------------------------     -------------------------------------------
                                                    189,767             151,675                   101,055                79,802
                                             ---------------------------------------     -------------------------------------------

Income before benefit for income taxes              847,707             251,079                   395,927               148,064

Add: income tax benefit                             250,000              87,085                   115,000                40,085
                                             ---------------------------------------     -------------------------------------------
Net Income                                     $  1,097,707         $   338,164            $      510,927          $    188,149
                                             =======================================     ===========================================

Net Income Per Common Share:
   Basic net income per common share           $        .23         $       .07            $          .10         $         .04
                                             =======================================     ===========================================

   Diluted net income per common share         $        .22         $       .07            $          .10         $         .04
                                             =======================================     ===========================================

Weighted Average Number of Shares
   Outstanding Basic                              4,876,384           5,050,641                 4,876,988             5,060,274
                                             =======================================     ===========================================

   Diluted                                        4,934,757           5,067,775                 4,949,568             5,077,526
                                             =======================================     ===========================================
</TABLE>






-------------------------------------------------------------------------------
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)



                                       4
<PAGE>

SMARTPROS LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
                                                                                                   SIX MONTHS ENDED
                                                                                                       JUNE 30,
                                                                                   -------------------------------------------------
                                                                                            2007                     2006
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                  <C>                     <C>
Cash Flows from Operating Activities:
Net income                                                                           $    1,097,707          $     338,164
                                                                                   -------------------------------------------------
   Adjustments to reconcile net income to net cash
      provided by operating activities:
      Depreciation and amortization                                                         327,264                316,580
      Reduction in deferred compensation                                                     37,667                 21,000
      Stock compensation expense                                                             18,000                 15,526
      Deferred income tax benefit                                                          (250,000)               (85,000)
   Changes in operating assets and liabilities:
      (Increase) decrease in operating assets:
         Accounts receivable                                                                 81,554               (359,878)
         Prepaid expenses and other current assets                                            9,407                 51,852
      (Decrease) increase in operating liabilities:
         Accounts payable and accrued expenses                                             (295,122)               (27,352)
         Deferred revenue                                                                   643,830                353,425
         Other liabilities                                                                  (20,028)               (20,028)
                                                                                   -------------------------------------------------
   Total adjustments                                                                        552,572                266,125
                                                                                   -------------------------------------------------
Net Cash Provided by Operating Activities                                                 1,650,279                604,289
                                                                                   -------------------------------------------------

Cash Flows from Investing Activities:
   Acquisition of property and equipment                                                    (92,156)               (40,985)
   Capitalized course costs                                                                 (44,581)               (29,505)
   Capitalized  software development                                                        (70,958)                    --
   Property and equipment acquired from acquisitions                                         (2,201)                    --
   Intangible assets acquired from acquisitions                                            (154,099)                    --
   Cash paid for acquisitions                                                                (6,715)              (719,530)
                                                                                   -------------------------------------------------
Net Cash (Used in) Investing Activities                                                    (370,710)              (790,020)
                                                                                   -------------------------------------------------

Cash Flows from Financing Activities:
   Exercise of stock options, warrants and other                                             99,570                 52,799
   Payments under capital lease obligations                                                 (11,872)               (21,021)
                                                                                   -------------------------------------------------
Net Cash Provided by Financing Activities                                                    87,698                 31,778
                                                                                   -------------------------------------------------

Net Increase (Decrease) in Cash and Cash equivalents                                      1,367,267               (153,953)
Cash and Cash Equivalents, beginning of period                                            7,393,789              7,505,691
                                                                                   -------------------------------------------------
Cash and Cash equivalents, end of period                                             $    8,761,056          $   7,351,738
                                                                                   =================================================

Supplemental Disclosure:
Cash paid for interest                                                               $          819          $       2,992
                                                                                   =================================================
</TABLE>




-------------------------------------------------------------------------------
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)


                                       5
<PAGE>

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1.  BASIS OF PRESENTATION

         The accompanying unaudited condensed consolidated financial statements
of SmartPros Ltd. ("SmartPros" or the "Company") included herein have been
prepared by the Company in accordance with generally accepted accounting
principles for interim financial information and with instructions to Form
10-QSB. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. However, in the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. The accompanying unaudited condensed consolidated financial
statements should be read in conjunction with the Company's audited consolidated
financial statements for the year ended December 31, 2006, and the notes thereto
included in the Company's Annual Report on Form 10-KSB filed with the United
States Securities and Exchange Commission on March 26, 2007. Results of
consolidated operations for the interim periods are not necessarily indicative
of a full year's operating results. The unaudited condensed consolidated
financial statements herein include the accounts of the Company and its wholly
owned subsidiaries, Working Values, Ltd. and Skye Multimedia Ltd. (Skye). All
material inter-company accounts and transactions have been eliminated.

NOTE 2.  DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         The Company, a Delaware corporation, was organized in 1981 as Center
for Video Education, Inc. for the purpose of producing educational videos
primarily directed to the accounting profession. SmartPros' primary products
today are periodic video and Internet subscription services directed to
corporate accountants, financial managers and accountants in public practice. In
addition, the Company produces a series of continuing education courses directed
to the engineering profession, as well as a series of courses designed for
candidates for the professional engineering exam. Through its Working Values
subsidiary, the Company develops programs on governance, compliance and ethics
for corporations. As a result of acquisitions made during 2006 and 2007, the
Company now also offers educational products for the banking, legal, financial
services, insurance and pharmaceutical industries. SmartPros also produces
custom videos and rents out its studios.

         SmartPros is located in Hawthorne, New York, where it maintains its
corporate offices, new media lab, video production studios and tape duplication
facilities. While the Company's management monitors the revenue streams of the
various products and services, operations are managed and financial performance
is evaluated on a company-wide basis. Accordingly, all of the Company's
operations are considered by management to be aggregated in one reportable
segment.

         USE OF ESTIMATES

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

         REVENUE RECOGNITION

         The Company recognizes revenues from its subscription services as
earned. Video and online subscriptions are generally billed on an annual basis,
while individual online subscriptions predominately are paid by credit card at
point of sale. Both of these types of sales are deferred at the time of billing
or payment and amortized into revenue on a monthly basis over the term of the
subscription, generally one year. Engineering products are non-subscription
based and revenue is recognized upon shipment or, in the case of individual
online sales, payment. Revenues from non-subscription services provided to
customers, such as website design, video production, consulting services and
custom projects are generally recognized on a proportional performance basis
where sufficient information relating to project status and other supporting
documentation is available. Contracts may have different billing arrangements
resulting in either unbilled or deferred revenue. The Company obtains either
signed agreements or purchase orders from its non-subscription customers
outlining the terms and conditions of the sale or service to be provided.


                                       6
<PAGE>

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 2.  DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNT POLICIES
(CONT'D)

Otherwise, such services are recognized as revenues after completion and
delivery to the customer. Duplication and related services are generally
recognized upon shipment or, if later, when the Company's obligations are
complete and realization of receivable amounts is assured.

         CAPITALIZED COURSE COSTS

         Capitalized course costs include the direct cost of internally
developing proprietary educational products and materials that have extended
useful lives. Amortization of these capitalized course costs commences when the
courses are available for sale from the Company's catalog. The amortization
period is five years, except for the Sarbanes-Oxley courses, which have a
three-year amortization period. Other course costs incurred in connection with
any of the Company's monthly subscription products or custom work is charged to
expense as incurred. As a result of recent acquisitions, the Company acquired
$500,000 of course costs that are being amortized over a five-year period.
Included in other intangible assets at June 30, 2007, are capitalized course
costs of $580,000 (exclusive of Sarbanes-Oxley courses), net of accumulated
amortization of $126,000.

         DEFERRED REVENUE

         Deferred revenue related to subscription services represents the
portion of unearned subscription revenue amortized on a straight-line basis as
earned. Deferred revenue related to website design, video production or
technology services represents that portion of amounts billed by the Company, or
cash collected by the Company for which services have not yet been provided or
earned in accordance with the Company's revenue recognition policy. Working
Values' Cognistar legal division recognizes revenue either from the direct sale
of courses or on a deferred basis as earned, from the sale of prepaid courses.

         EARNINGS PER SHARE

         Basic earnings or loss per common share is net income or loss, as the
case may be, divided by the weighted average number of outstanding shares
outstanding of the Company's common stock, par value $.0001 per share (the
"Common Stock") during the period. Basic earnings or loss per share exclude any
dilutive effects of options, warrants and convertible securities. Diluted
earnings per common share include the dilutive effect of shares of Common Stock
issuable under stock options and warrants. Diluted earnings per share are
computed using the weighted average number of Common Stock and Common Stock
equivalent shares outstanding during the period. Common Stock equivalent shares
of 58,373 and 17,134 for the six month periods and 72,580 and 17,252 for the
three months period ended June 30, 2007, and 2006, respectively, include the
Company's stock options and warrants that are dilutive.

         STOCK-BASED COMPENSATION

         The Company's 1999 Stock Option Plan (the "Plan") permits the grant of
options and restricted stock to employees, directors and consultants. The total
number of shares reserved for grants under the Plan is 882,319, provided that
restricted stock grants may not exceed 200,000 shares. As of June 30, 2007,
there were 386,972 options outstanding, of which 323,903 are currently
exercisable, and 449,387 options are available for future grants. All stock
options and grants under the Plan are granted at the fair market value of the
Common Stock at the grant date. Employee stock options vest ratably over a
four-year period and generally expire 10 years from the grant date. Stock
options granted to non-employee directors vest in the same manner. Restricted
stock awards are subject to forfeiture unless certain time and/or performance
requirements are satisfied.

         Effective January 1, 2006, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 123 (revised 2004), SHARE-BASED PAYMENT ("SFAS
No.123R"), which addresses the accounting for stock-based payment transactions
in which an enterprise receives director and employee services in exchange for
(a) equity instruments of the enterprise or (b) liabilities that are based on
the fair value of the enterprise's equity instruments or that may be settled by
the issuance of such equity instruments. In March 2005, the SEC issued Staff
Accounting Bulletin ("SAB") No. 107, which provides supplemental implementation
guidance for SFAS No. 123R. SFAS No. 123R eliminates the ability to


                                       7
<PAGE>


NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 2.  DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNT POLICIES
(CONT'D)

account for stock-based compensation transactions using the intrinsic value
method under Accounting Principles Board ("APB") Opinion No. 25, ACCOUNTING FOR
STOCK ISSUED TO EMPLOYEES, and instead generally requires that such transactions
be accounted for using a fair-value-based method. The Company uses the
Black-Scholes-Merton ("BSM") option-pricing model to determine the fair value of
stock-based awards under SFAS No. 123R, consistent with that used for pro forma
disclosures under SFAS No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION ("SFAS
No. 123"). The Company has elected the modified prospective transition method
permitted by SFAS No. 123R and, accordingly, prior periods have not been
restated to reflect the impact of SFAS No. 123R. The modified prospective
transition method requires that stock-based compensation expense be recorded for
all new and unvested stock options that are ultimately expected to vest as the
requisite service is rendered beginning on January 1, 2006. Stock-based
compensation expense for awards granted prior to January 1, 2006, is based on
the grant date fair value as determined under the pro forma provisions of SFAS
No.123. The Company has recorded an incremental stock-based compensation expense
of $18,000 and $15,226 for the six months periods ending June 30, 2007 and 2006,
respectively, as a result of the adoption of SFAS No. 123R.

         SFAS No. 123R requires the use of a valuation model to calculate the
fair value of stock-based awards. The Company has elected to use the BSM
option-pricing model, which incorporates various assumptions including
volatility, expected life, interest rates and dividend yields. The expected
volatility is based on the historic volatility of the Company's Common Stock
over the most recent period commensurate with the estimated expected life of the
Company's stock options, adjusted for the impact of unusual fluctuations not
reasonably expected to recur. The expected life of an award is based on
historical experience and on the terms and conditions of the stock awards
granted to employees and directors.

         The assumptions used for the six-month periods ended June 30, 2007, and
2006, and the resulting estimates of weighted-average fair value of options
granted during those periods are as follows:

                                          SIX MONTHS ENDED JUNE 30,
                                         2007                  2006
                                 --------------------  --------------------
Expected life (years)                     5.5                   5.5
Risk-free interest rate                   4.51%                 4.75%
Volatility                               35.0 %                33.0 %
Dividend yields                          --                    --
Weighted-average fair value
   of options during the period    $     1.91           $     1.20


         The Company granted 6,500 options under the Plan during the six months
ended June 30, 2007 at exercise prices ranging from $4.49 per share to $5.50 per
share and 5,137 shares were forfeited.

         The following table represents our stock options granted, exercised and
forfeited for the six months ended June 30, 2007:

<TABLE>
<CAPTION>
                                                                     WEIGHTED AVERAGE              WEIGHTED AVERAGE
                                                                    EXERCISE PRICE PER          REMAINING CONTRACTUAL
           STOCK OPTIONS                   NUMBER OF SHARES                SHARE                         TERM
-------------------------------------     -------------------     ------------------------     -------------------------

<S>                                       <C>                     <C>                          <C>
Outstanding at January 1,
  2007                                         385,609                     $4.57                         5.5
Granted                                          6,500                     $4.72
Exercised                                         -                        $0.00
Forfeited/expired                              (5,137)                     $4.21
                                          -------------------
Outstanding at June 30, 2007                   386,972                     $4.58                         6.4
                                          ===================     ========================     =========================
Exercisable at June 30, 2007                   323,903                     $4.81                         5.4
                                          ===================     ========================     =========================
</TABLE>


                                       8
<PAGE>

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 2.  DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNT POLICIES
(CONT'D)

         INCOME TAX BENEFIT

         Since January 1, 2006, the Company recognizes the benefit of its
deferred income tax asset available from its net operating loss carryforwards,
which expire in 2023. This benefit is offset by any corporate alternative
minimum income tax. This resulted in a net income tax benefit of $250,000 for
the six months ended June 30, 2007. The Company does not believe that it takes
any aggressive income tax positions that would require disclosure under
Financial Interpretation No. 48, "Accounting for Uncertainty in Income Taxes."

NOTE 3.  SUBSEQUENT EVENT

         On August 2, 2007, the Company acquired substantially all of the assets
and assumed certain liabilities of Bright Ideas Group d/b/a Watch It (BIG) for
$175,000, subject to certain adjustments. BIG develops information technology
education and training programs for business and information technology
professionals. The Company will operate these assets under the name SmartPros
Technology Training Group (STG). BIG's annual sales on a cash basis for the last
three years averaged approximately $1,400,000.

         The seller is entitled to an additional $200,000 incentive payment if
STG achieves revenues in excess of $1,000,000 between August 1, 2007 and January
31, 2008. If STG's revenues for this period are between $875,000 and $1,000,000,
the seller will receive a pro-rated amount of the $200,000. If revenues are less
than $875,000, no incentive payment is due.

         The seller is also entitled to an additional earn-out equal to the
average annual earnings before taxes, after accounting for all inter-company
charges and an amount for the use of capital provided by the Company, for the 36
months period commencing August 1, 2007 and ending July 31, 2010, and
multiplying the result by three. In no event, may the additional earn-out exceed
$3,000,000. Any payment under this provision will be reduced by $115,000 and any
incentive payments made with respect to the six month period ending January 31,
2008. The additional earn-out may be paid at the Company's discretion either in
cash or 50% in cash and 50% in shares of Common Stock provided that at that time
payment is due (i) the Common Stock is traded on the New York Stock Exchange,
the American Stock Exchange or the NASDAQ National Market and (ii) the Company
has filed all periodic reports it is required to file under the Securities Act
of 1934. Any payment in shares of Common Stock will be valued based on the
average closing price of the Common Stock for the 20 business days after July
31, 2010.

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

         THE FOLLOWING DISCUSSION OF OUR FINANCIAL CONDITION AND RESULTS OF
OPERATIONS SHOULD BE READ IN CONJUNCTION WITH THE CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS AND RELATED NOTES INCLUDED ELSEWHERE IN THIS REPORT.
CERTAIN STATEMENTS IN THIS DISCUSSION AND ELSEWHERE IN THIS REPORT CONSTITUTE
FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 21E OF THE SECURITIES
AND EXCHANGE ACT OF 1934. SEE THE "FORWARD LOOKING STATEMENT" IMMEDIATELY
FOLLOWING THE TABLE OF CONTENTS. BECAUSE THIS DISCUSSION INVOLVES RISK AND
UNCERTAINTIES, OUR ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE ANTICIPATED
IN THESE FORWARD-LOOKING STATEMENTS. WE UNDERTAKE NO OBLIGATION TO REVISE OR
UPDATE PUBLICLY ANY FORWARD-LOOKING STATEMENTS FOR ANY REASON.

         We provide learning solutions and/or training materials for (a)
accounting and finance professionals; (b) engineering professionals; (c) legal
professionals; (d) banking; (e) pharmaceutical industry employees and (f) ethics
and compliance training for the general corporate community. Our learning
solutions for the accounting, engineering and legal professions are designed to
meet the continuing professional education requirements of the various state
licensing agencies and professional associations. In addition, we provide
value-added services through our learning management system, marketed under the
name SmartPros' Professional Education Center(TM), which we believe is key to
our revenue growth and future success.

         Our learning and training solutions are delivered in multiple formats
including videotape, CD-ROM, DVD and other formats available for distribution
over the Internet and corporate intranets. Online subscription sales and
delivery are the fastest growing part of our business.


                                       9
<PAGE>

         Over the last 18 months, we have made a number of acquisitions that
have enabled us to expand into new markets and enhance our offerings to the
markets we historically served.

         In February 2006, we acquired substantially all of the operating assets
and assumed certain liabilities of Skye Multimedia Inc. We contributed those
assets to a newly formed, wholly owned subsidiary, Skye Multimedia Ltd. (Skye).
The purchase price for the assets was $520,000. In addition, the selling
shareholders are entitled to an additional payment based on the average earnings
of Skye between March 1, 2006, and December 31, 2008, less adjustments for use
of capital and other costs. In no event will the total additional payment exceed
$1.2 million. The additional payment may be paid 50% in cash and 50% in shares
of our common stock at our discretion. If the additional payment is paid partly
in stock, the price of the stock will be determined by the average price for the
20 business days subsequent to December 31, 2008. Skye develops custom
interactive marketing and training applications for CD, DVD, Internet and
learning management systems. Skye offers a broad range of services including
content design, animation, and audio/video production and application
development. Skye's clients are a diverse group of companies from
pharmaceutical, financial, technology and other industries.

         Also in February 2006, we acquired substantially all of the operating
assets and assumed certain liabilities from Sage International Group, Inc.
(Sage). The assets acquired included a library of 58 nationally certified online
training solutions for the banking, securities and insurance industries. Sage's
"off-the-shelf" courses and custom designed programs employ delivery methods
suited to the specific needs of its clients, which include professional firms
and companies of all sizes including Fortune 500 companies.

         In October 2006, we acquired substantially all of the operating assets
and assumed certain liabilities of MGI Management Institute Inc.(MGI) for
$100,000. MGI provided training courses for the engineering profession. The
acquisition expanded our offerings and enhances our ability to service this
market.

         In November 2006, through our Working Values subsidiary, we acquired
substantially all of the operating assets and assumed certain liabilities of
Cognistar Interactive Corporation (Cognistar) for $320,000. Cognistar produces
online and customized training courses for the legal profession.

         In March 2007, we acquired substantially all of the assets and assumed
certain liabilities of The Selbst Group Inc. (Selbst) for approximately
$154,000. Selbst is a specialized consulting firm providing various training
programs for the financial services industry. We have combined Sage and Selbst
into our newly named Financial Services Training division.

         In August 2007, we acquired substantially all of the assets and assumed
certain liabilities of Bright Ideas Group (BIG), d/b/a Watch It for $175,000
subject to various adjustments. BIG develops information technology and training
programs for business and information technology professionals. We will operate
the BIG assets under the name of SmartPros Technology Training Group (STG).

         We measure our operations using both financial and other metrics. The
financial metrics include revenues, gross margins, operating expenses and income
from continuing operations. Other key metrics include (i) revenues by sales
source, (ii) online sales, (iii) cash flows and (iv) EBITDA.

         Some of the most significant trends affecting our business are the
following:

   o  The increasing recognition by professionals and corporations that they
      must continually improve their skills and those of their employees in
      order to remain competitive.

   o  New laws and regulations affecting the conduct of business and the
      relationship between a corporation and its employees.

   o  The increased competition in today's economy for skilled employees and
      the recognition that effective training can be used to recruit and
      train employees.


                                       10
<PAGE>

   o  The development and acceptance of the Internet as a delivery channel for
      the types of products and services we offer.

         In 2004, we raised approximately $6 million of net proceeds in an
initial public offering. Through June 30, 2007, we have used approximately $1.8
million of those proceeds; $500,000 to repay debt and $1.3 million in connection
with the acquisitions made in 2006 and 2007 described above. We intend to use
the remaining $4.2 million net proceeds from the offering, cash flow from
operations and our publicly-traded common stock to execute our growth strategy,
which contemplates acquiring other companies that provide learning solutions or
their assets. We intend to focus on acquisitions that will allow us to increase
the breadth and depth of our current product offerings. We will also consider
acquisitions that will give us access to new markets. We prefer acquisitions
that are accretive, as opposed to those that are dilutive, but ultimately the
decision will be based on maximizing stockholder value rather than short-term
profits. The size of the acquisitions will be determined, in part, by our size,
the capital available to us and the liquidity and price of our stock. We may use
debt to enhance or augment our ability to consummate larger transactions.

         There are many risks involved with acquisitions. These risks include
integrating the acquired business into our existing operations and corporate
structure, retaining key employees and minimizing disruptions to our existing
business. We cannot assure you that we will be able to identify appropriate
acquisitions opportunities or negotiate reasonable terms or that any acquired
business or assets will deliver the stockholder value that we anticipated at the
outset.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

         The discussion and analysis of our financial condition and results of
operations is based on our consolidated financial statements that have been
prepared according to accounting principles generally accepted in the United
States. In preparing these financial statements, we are required to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses and related disclosures of contingent assets and
liabilities. We evaluate these estimates on an ongoing basis. We base these
estimates on historical experience and on various other assumptions that we
believe are reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities.
Actual results may differ from these estimates under different assumptions or
conditions. We consider the following accounting policies to be the most
important to the portrayal of our financial condition.

      REVENUES

         Most of our revenue is in the form of subscription fees for our monthly
accounting update programs or our course library. Other sources of revenue
include direct sales of programs on a non-subscription basis, fees for various
services, including website design, software development, tape duplication,
video production, video conversion, course design and development, ongoing
maintenance of our clients' online learning content management system and
licensing fees. Subscriptions are billed on an annual basis, payable in advance
and deferred at the time of billing. Individual sales made over the Internet are
by credit card only. Renewals are usually sent out 60 days before the
subscription period ends. We usually obtain either a signed agreement or
purchase orders from our non-subscription customers outlining the terms and
conditions of the sale or service to be provided. Larger transactions are
usually dealt with by contract, the financial terms of which depend on the
services being provided. The contracts may have different billing arrangements
resulting in either unbilled or deferred revenue. Contracts for development and
production services typically provide for a significant upfront payment and a
series of payments based on deliverables specifically identified in the
contract.

         Revenues from subscription services are recognized as earned, deferred
at the time of billing or payment and amortized into revenue on a monthly basis
over the term of the subscription. Engineering products are non-subscription
based and revenue is recognized upon shipment of the product or, in the case of
online sales, payment. Revenues from the sale of legal courses, through Working
Values' Cognistar legal division are either through direct sales, which are
recognized immediately, or through prepaid course usage, in which case revenue
is recognized as courses are taken. Unused course usage is treated as deferred
revenue. Revenues from non-subscription services provided to customers, such as
website design, video production, consulting services and custom projects, are
generally recognized on a proportional performance basis where sufficient
information relating to project status and other supporting documentation is
available. Otherwise, these services are recognized as revenues after completion
and


                                       11
<PAGE>

delivery to the customer. Duplication and related services are generally
recognized upon shipment or, if later, when our obligations are complete and
realization of receivable amounts is assured. Both Working Values and Skye
recognize revenue on a proportional performance basis. The cost of fulfilling
our monthly subscription obligation does not exceed this revenue and is booked
to expense as incurred. For of our most of our subscriptions products, there are
no significant additional costs, other than shipping costs, required to complete
our obligations, as the material already exists. We use the term "revenue" to be
differentiated from sales because a majority of our sales are recognized on a
deferred basis.

     EQUIPMENT, INTANGIBLE ASSETS AND LEASEHOLD IMPROVEMENTS

         Fixed and intangible assets are carried at cost less their respective
accumulated depreciation/amortization and are depreciated/amortized using the
straight-line method over their estimated useful lives, which range from three
to ten years. Leasehold improvements are amortized over the lesser of their
estimated lives or the life of the lease. Major expenditures for renewals and
improvements are capitalized and amortized over their useful lives.

     IMPAIRMENT OF LONG-LIVED ASSETS

         We review long-lived assets and certain intangible assets annually for
impairment whenever circumstances and situations change such that there is an
indication that the carrying amounts may not be recovered.

     STOCK-BASED COMPENSATION

         Effective January 1, 2006, we adopted SFAS No. 123R. As a result,
compensation expense includes the cost of compensatory stock option grants and
stock awards, restricted and unrestricted, granted to employees, directors and
consultants. Options and warrants granted to employees and non-employees are
recorded as an expense at the date of grant based on the then estimated fair
value of the security in question.

         SFAS No. 123R requires the use of a valuation model to calculate the
fair value of stock-based awards. We use the Black-Scholes-Merton ("BSM")
option-pricing model, which incorporates various assumptions including
volatility, expected life, interest rates and dividend yields, to determine the
fair value of stock-based awards under SFAS No. 123R, consistent with that used
for pro forma disclosures under SFAS No. 123, ACCOUNTING FOR STOCK-BASED
COMPENSATION ("SFAS No. 123"). We have elected the modified prospective
transition method permitted by SFAS No. 123R and, accordingly, we have not
restated prior periods to reflect the impact of SFAS No. 123R. The modified
prospective transition method requires that stock-based compensation expense be
recorded for all new and unvested stock options that are ultimately expected to
vest as the requisite service is rendered beginning on January 1, 2006.

RESULTS OF OPERATIONS

COMPARISON OF THREE MONTHS ENDED JUNE 30, 2007 AND 2006

         The second quarter of 2007 was our 13th consecutive quarter of
profitability, 11th since we became a reporting company. The following table
compares our statement of operations data for the three months ended June 30,
2007, and 2006. The trends suggested by this table may not he indicative of
future operating results, which will depend on various factors including the
relative mix of products sold (accounting/finance, law, engineering, banking,
and insurance, securities or corporate training) and the method of sale (video
or online) as well as the timing of custom project work, which can vary from
quarter to quarter. In addition, our operating results in future periods may
also be affected by acquisitions.


                                       12
<PAGE>

<TABLE>
<CAPTION>
                                                                     THREE MONTHS ENDED JUNE 30,
                                ----------------------------------------------------------------------------------------------------
                                                 2006                                     2007
                                -------------------------------------    -------------------------------------
                                     AMOUNT            PERCENTAGE             AMOUNT            PERCENTAGE              CHANGE
                                -----------------    ---------------    -------------------   ----------------      ----------------

<S>                               <C>                    <C>              <C>                     <C>                   <C>
Net revenues                      $ 2,921,893            100.0%           $  3,486,530            100.0%                19.3%
Cost of revenues                    1,218,409             41.7%              1,215,404             34.9%                -0.2%
                                -----------------    ---------------    -------------------   ----------------
Gross profit                        1,703,484             58.3%              2,271,126             65.1%                33.3%
                                -----------------    ---------------    -------------------   ----------------
Selling, general and
   administrative                   1,466,713             50.2%              1,814,459             52.0%                23.7%
Depreciation and amortization         168,509              5.8%                161,795              4.6%                -4.0%
                                -----------------    ---------------    -------------------   ----------------
Total operating expenses            1.635,222             56.0%              1,976,254             56.7%                20.9%
                                -----------------    ---------------    -------------------   ----------------
Operating income                       68,262              2.3%                294,872              8.5%               332.0%
Other income, net                      79,802              2.7%                101,055              2.9%                26.6%
                                -----------------    ---------------    -------------------   ----------------
Net income before income
   tax benefit                        148,064              5.0%                395,927             11.4%               167.4%
Income tax benefit                     40,085              1.4%                115,000              3.3%               186.9%
                                -----------------    ---------------    -------------------   ----------------
Net income                        $   188,149              6.4%           $    510,927             14.7%               171.6%
                                =================    ===============    ===================   ================
</TABLE>

     NET REVENUES

         Net revenues for the three months ended June 30, 2007, increased
approximately $565,000, or 19%, compared to net revenues for the three months
ended June 30, 2006. This increase was primarily due to: (i) Accounting/Finance
division, whose net revenues increased $191,000; (ii) Skye, whose net revenues
increased $111,000; (iii) the Financial Services Training division, whose net
revenues increased $133,000; (iv) the Cognistar legal division, acquired in
November 2006, which had net revenues of $96,000 in the second quarter of 2007;
(v) the Ethics and Compliance division, whose net revenues increased $65,000;
(vi) the Engineering division, whose net revenues increased $114,000; and (vii)
the consulting services group, whose net revenues increased $31,000. These
increases were offset by a $177,000 reduction in net revenues from video
production and duplication group. Under our long-standing policy, revenue is
credited to the originating department regardless of the type of service that is
performed. For example, a contract to convert videotapes to digital format is
credited to the accounting education department if that is where the sale
originated, even if the project has nothing to do with accounting.

         In the second quarter of 2007, net revenues from our Accounting/Finance
division were $2.3 million, or 65% of revenue, compared to $2.1 million, or 71%
of revenue, in the comparable 2006 period. Revenues from our subscription-based
products which include both subscription-based revenue and direct sales of
course material on a non-subscription basis increased from $1.82 million in 2006
to $2.03 million in 2007. This increase is due to our continued marketing
efforts. Revenues derived from other projects in our Accounting/Finance division
that are not subscription based decreased from $258,000 in 2006 to $242,000 in
2007. These revenues fluctuate from period to period, and are not indicative of
any trends. Online revenues, which are primarily accounting/finance products,
continue to be an important factor contributing to our overall revenue growth.
In the 2007 period, net revenues from online sales accounted for approximately
$912,000, or 26% of net revenues, compared to $718,000, or 25% of net revenues
in the comparable 2006 period. This represents a 27% increase in absolute
dollars.

         For the three months ended June 30, 2007, Skye generated net revenues
of $481,000 compared to $370,000 in the second quarter of 2006.

         Our Financial Services Training division, which includes Sage and
Selbst, generated $143,000 of net revenues in the quarter ended June 30, 2007.
For the quarter ended June 30, 2006, this division generated only $10,000 of net
revenues. The increase is due to the fact that we acquired the Sage assets at
the end of February 2006 and the Selbst assets in March 2007.

         In the quarter ended June 30, 2007, Working Values had net revenues of
$307,000 compared to net revenues of $147,000 for the quarter ended June 30,
2006. For the 2007 period, $211,000 of Working Values' net revenues was
generated by the Ethics and Compliance division and $96,000 was generated by our
Cognistar legal division, acquired in November 2006. Net revenues generated by
the Ethics and Compliance division are derived primarily from custom consulting
work. Custom work is non-repetitive and subject to market conditions and can
vary from quarter to quarter. The Cognistar legal division derives its revenue
primarily from prepaid usage and direct sales of its courses.

         Our Engineering division generated $185,000 of net revenues in the
second quarter of 2007 compared to $71,000 in the second quarter of 2006. This
increase is not necessarily indicative of any trends, but is a result of timing
differences, in the placement of orders from customers and greater


                                       13
<PAGE>

marketing efforts. Also, we acquired the assets of MGI in October 2006, which
contributed additional net revenues in the 2007 period. Sales of our engineering
products are not subscription based.

         Net revenues from video production and duplication services were
$43,000 and from consulting services were $60,000 for the second quarter of 2007
compared to $220,000 and $29,000 respectively for the second quarter of 2006. We
believe the decline in video production and duplication net revenues reflects an
overall trend in the business. We continue to seek to hire sales personnel that
will generate more revenue for this department.

     COST OF REVENUES

         Cost of revenues includes (i) production costs - I.E., the salaries,
benefits and other costs related to personnel, whether our employees or
independent contractors, who are used directly in production, including
producing our educational programs and/or upgrading our technology; (ii)
royalties paid to third parties; (iii) the cost of materials, such as videotape
and packaging supplies; and (iv) shipping and other costs. There are many
different types of expenses that are characterized as production costs and many
of them vary from period to period depending on many factors. Generally,
subscription based products have higher profit margins than non-subscription
based products and online sales, which includes electronic delivery of the
product, have higher profit margins than sales involving physically delivery of
tapes, disks and written materials.

         Our gross profit margin increased for the three months ended June 30,
2007 was 65.1% compared to 58.3% for the three months ended June 30, 2006. This
increase is attributable, in part, to the fact that we capitalized approximately
$115,000 of internal costs relating to course development and the redesign of
our new learning management system, and received credits from vendors for
services performed. These adjustments added approximately 4% to our gross profit
margin in the 2007 period. On the other hand, we have devoted a significant
amount of internal resources in developing new products, re-tooling existing
products and technology and integrating our recently acquired subsidiaries into
our various platforms. These costs have not been capitalized and are therefore
included in our cost of revenues. Cost of revenues decreased by $3,000 in the
current quarter from the comparable period last year. This slight decrease is
comprised of a number of factors, including increased salaries and related costs
as a result of acquisitions, offset by reductions in personnel in our technology
and video production areas. We have reduced our labor costs by the outsourcing
of technology projects to a firm in India at lower labor rates than those in the
United States. This has been necessitated by increased business generated from
Skye and internal projects. This increase has been offset by the capitalization
of $115,000 in costs for course development and the redesign of our learning
management system. We have determined that it is cheaper to outsource certain
projects to India rather than hire additional personnel, in the event that the
number of such projects may decrease. In addition, royalty expense increased by
$31,000.

   o     OUTSIDE LABOR AND DIRECT PRODUCTION COSTS. Outside labor includes the
         cost of hiring actors and production personnel such as directors,
         producers and cameramen and the outsourcing of non-video technology.
         The cost of such outside labor, which is primarily video production and
         technology personnel, increased $50,000, after capitalizing a portion
         of these costs and receiving credits from our vendors. This increase is
         directly related to the outsourcing of technology personnel. Direct
         production costs, which are costs related to producing videos or
         courses other than labor costs, such as the cost of renting equipment
         and locations, and the use of outsourced labor in the technology area,
         decreased $45,000. The variation in direct production costs are related
         to the type of production and other projects and do not reflect any
         trends in our business. As our business grows we may be required to
         hire additional production personnel, increasing our cost of revenues.

   o     ROYALTIES. Royalty expense increased in the three months ended June 30,
         2007, compared to the comparable 2006 period by $31,000. This is a
         result of royalties from our Cognistar legal division, which we
         acquired in November 2006, and to our organizational partners in the
         accounting education area for which we often have to make estimates, as
         the information may not be available.

   o     SALARIES. Overall, payroll and related costs attributable to production
         personnel decreased by $30,000, after capitalizing a portion of these
         costs during the current quarter. We have reduced salaries and related
         costs in our video production department as a result of decreased
         business. This is offset by increased salaries and related costs as a
         result of our recent acquisitions.


                                       14
<PAGE>

   o     OTHER PRODUCTION RELATED COSTS. These are other costs directly related
         to the production of our products such as purchases of materials,
         travel, shipping and other. These costs decreased by $9,000 from 2006
         to 2007. This is primarily a direct result of decreased business in our
         video production.


     GENERAL AND ADMINISTRATIVE EXPENSES

         General and administrative expenses include corporate overhead such as
compensation and benefits for administrative, sales and marketing and finance
personnel, rent, insurance, professional fees, travel and entertainment and
office expenses. General and administrative expenses for the three months ended
June 30, 2007 increased $348,000, or 24%, compared to the three months ended
June 30, 2006. The increase in general and administrative expenses is primarily
attributable to the acquisitions of Cognistar, MGI and Selbst, all of which
occurred after the second quarter of 2006. Compensation expense in the 2007
period increased $229,000 over compensation expense for the 2006 period. Our
total number of full time general and administrative employees at June 30, 2007
was 50 compared to 42 at June 30, 2006. Compensation expense includes stock
based compensation expense of $9,000 for the 2007 period and $6,300 for the 2006
period. In January 2007, the Company granted 16,500 shares in restricted stock
to its management team, of which one-third vested immediately and the remaining
shares will vest pro-ratably in each of January 2008 and 2009. The closing price
of the stock on the date of the grant was $4.04 per share. In addition, in March
2007, we granted 6,500 options to employees at exercise prices ranging from
$4.49 to $5.50 per share. The options vest over a three-year period commencing
one year from grant date and expire 10 years from the date of grant. Using the
BSM model, we determined that the options have a fair value of $12,445, which is
being expensed over a three-year period. The value of the options was determined
by applying a volatility factor of 35%, a risk-free interest rate of 4.51%, and
an expected life of 5.5 years.

         In the latter part of 2006 we began to outsource our customer service
operations at a quarterly expense of approximately $30,000. This function was
formally performed internally. Our other operating costs increased by
approximately $118,000. These costs consist of increased professional fees for
Sarbanes-Oxley compliance of approximately $20,000, customer service expense of
$30,000 which was previously done internally and a general increase in operating
overhead of $68,000. We continue to look for other opportunities to reduce our
overhead. The Working Values office located in Sharon, Massachusetts was on a
month-to-month lease and commencing July 1, 2007 we consolidated that office
into Cognistar's office in Westborough, Mass. Although, we make every effort to
control our costs, we anticipate that general and administrative expenses will
continue to increase as a result of acquisitions and a general increase in such
costs as health insurance and travel.

     DEPRECIATION and AMORTIZATION

         Depreciation and amortization expenses decreased by $7,000 in the
second quarter of 2007 compared to the second quarter of 2006 as a result of
decreased amortization expense from our previously capitalized course costs. We
expect our depreciation and amortization expenses on our fixed and intangible
assets to continue to increase as we replace computer equipment, capitalize
internal costs for new course development, and the re-design of our learning
management system. Although many of our older assets are either fully or almost
fully depreciated and we do not anticipate replacing them at the same rate, this
is offset by the amortization of the intangibles acquired through acquisitions.

     OPERATING INCOME

         For the three months ended June 30, 2007, net income from operations
was $295,000 compared to $68,000 in the comparable period of 2006.

     OTHER INCOME, NET

         Other income and expense items consist of interest paid on indebtedness
and interest earned on deposits. We have not yet used all of the net proceeds
from our initial public offering. We have no debt and, with larger cash balances
and higher interest rates, this has resulted in increased interest income. As a
result, for the second quarter of 2007 we had net interest income of $101,000
compared to net interest income of $80,000 in the second quarter of 2006.


                                       15
<PAGE>

     INCOME TAX BENEFIT

         We account for deferred tax benefits available from our net operating
loss carryforward pursuant to SFAS No. 109. We anticipate that we will recognize
a total of approximately $540,000 in such benefits from recognizing the net
operating loss this year by annualizing the current quarter's income, offset by
charges for the corporate alternative minimum tax, which we estimate to be
approximately $40,000 for the year. This results in a estimated net annual tax
benefit of $500,000. The net benefit for the three month period ended June 30,
2007 is $115,000 as compared to $40,000 for the comparable period of 2006. This
amount is subject to change based on earnings during the year.

     NET INCOME

         For the three months ended June 30, 2007, we recorded net income of
$511,000, or $0.10 per share, basic and diluted, compared to net income of
$188,000 or $0.04 per share, basic and diluted, for the three months ended June
30, 2006. Earnings per share before the benefit of the deferred tax asset would
have been $.08 per share.

COMPARISON OF SIX MONTHS ENDED JUNE 30, 2007 AND 2006

         The following table compares our statement of operations data for the
six months ended June 30, 2007, and 2006. The trends suggested by this table may
not he indicative of future operating results, which will depend on various
factors including the relative mix of products sold and the method of sale as
well as the timing of custom project work, which can vary from quarter to
quarter. In addition, our operating results in future periods may also be
affected by acquisitions.

<TABLE>
<CAPTION>
                                                                   SIX MONTHS ENDED JUNE 30,
                             ------------------------------------------------------------------------------------------------------
                                               2006                                      2007
                             -------------------------------------     ---------------------------------------
                                  AMOUNT             PERCENTAGE              AMOUNT             PERCENTAGE             CHANGE
                             -----------------     ---------------     -------------------    ----------------     ----------------

<S>                            <C>                     <C>               <C>                        <C>                 <C>
Net revenues                   $ 5,455,472             100.0%            $  7,210,161               100.0%              32.2%
Cost of revenues                 2,205,096              40.4%               2,684,317                37.2%              21.7%
                             -----------------     ---------------     -------------------    ----------------
Gross profit                     3,250,376              59.6%               4,525,844               62.8%               39.2%
                             -----------------     ---------------     -------------------    ----------------
Selling, general
   and administrative            2,834,392              52.0%               3,540,640               49.1%               24.9%
Depreciation and
   amortization                    316,580               5.8%                 327,264                4.5%                3.4%
                             -----------------     ---------------     -------------------    ----------------
Total operating expenses         3,150,972              57.8%               3,867,904               53.6%               22.8%
                             -----------------     ---------------     -------------------    ----------------
Operating income                    99,404               1.8%                 657,940                9.1%              561.9%
Other income, net                  151,675               2.8%                 189,767                2.6%               25.1%
                             -----------------     ---------------     -------------------    ----------------
Net income before income
   tax benefit                     251,079               4.6%                 847,707               11.8%              237.6%
Income tax benefit                  87,085               1.6%                 250,000                3.5%              187.1%
                             -----------------     ---------------     -------------------    ----------------
Net income                     $   338,164               6.2%            $  1,097,707               15.2%              224.6%
                             =================     ===============     ===================    ================
</TABLE>

     NET REVENUES

         Net revenues for the six months ended June 30, 2007 increased
approximately $1,755,000, or 32%, compared to net revenues for the six months
ended June 30, 2006. This increase was primarily due to: (i) our
Accounting/Finance division, whose net revenues increased $405,000; (ii) Skye
whose net revenues increased $819,000; (iii) our Financial Services Training
division, whose net revenues increased $205,000; (iv) our Cognistar legal
division, which had net revenues of $305,000; (v) our Ethics and Compliance
division, whose revenues increased $101,000; (vi) and our Engineering division
whose revenues increased $129,000. These increases were offset by a net
reduction in net revenues from video production and duplication of $233,000 and
an increase in net revenues from consulting services in the amount of $24,000.

         In the first six months of 2007, our Accounting/Finance division
generated net revenues of $4.4 million, representing 61.6% of total net revenues
for the period compared to net revenues of $4.0 million for the first six months
of 2006, representing 74% of total net revenues. Net revenues attributable to
sales of our subscription-based products, which include both subscription-based
revenue, and direct sales of course material on a non-subscription basis,
increased to $4.05 million for the 2007 period compared to $3.56 million for the
2006 period. This increase is due to our continued marketing efforts. Net
revenues from non-subscription-based accounting/finance products decreased from
$465,000 in the 2006 period to $389,000 in the 2007 period. These revenues
fluctuate from period to period, and are not indicative of any trends. Net
revenues from online sales, which are primarily accounting/finance products,
continue to be an important factor contributing to our overall revenue growth.
In the 2007 period, net revenues from online


                                       16
<PAGE>

sales accounted for approximately $1.8 million, or 25% of net revenues, compared
to $1.4 million, or 26% of net revenues in the comparable 2006 period. This
represents a 29% increase in absolute dollars even though as a percentage of net
revenues online sales declined because most of the sales attributable to our
newly acquired divisions are not Internet based subscription sales.

         For the first half of 2007 Skye generated net revenues of $1.25 million
compared to $430,000 in the first half of 2006. For 2006 Skye only had four
months of operation.

         Net revenue generated by our Financial Services Training division,
which includes Sage and Selbst, was $224,000 in the first six months of 2007.
For the comparable 2006 period, the Financial Services Training division
generated net revenues of $19,000. We acquired Sage in March 2006 and Selbst in
March 2007.

         For the first six months of 2007, Working Values contributed a total of
$710,000 to net revenues compared to $305,000 in the first six months of 2006.
For the 2007 period, $405,000 of Working Values' net revenues were generated by
the Ethics and Compliance division compared to $305,000 of revenues in the
comparable 2006 period, and $305,000 was generated by the Cognistar legal
division, acquired in November 2006. Revenue generated by our ethics and
compliance division is derived primarily from custom consulting work. Custom
work is non-repetitive and subject to market conditions and can vary from
quarter to quarter. The Cognistar legal division derives its revenues primarily
from prepaid course usage and direct sales of its courses.

         For the first six months of 2007, our Engineering division generated
net revenues of $416,000 compared to net revenues of $287,000 in the first half
of 2006. This increase is not necessarily indicative of any trends, but is a
result of timing differences in the placement of orders from customers and
greater marketing efforts. Also, we acquired the assets of MGI in October 2006,
whose revenues are included in the 2007 period.

         Net revenues from video production, duplication and consulting services
for the first half of 2007 were $171,000 compared to $379,000 for the comparable
2006 period.

     COST OF REVENUES

         Our gross profit margin for the six month period ended June 30, 2007
was 62.8% compared to 59.6% for the six month period ended June 30, 2006. The
increase is due, in part, to the capitalization of costs and credits received
from vendors as previously discussed. In addition, we have devoted a significant
amount of internal resources in developing new products; re-tooling existing
products and technology, and integrating our recently acquired subsidiaries into
our various platforms. These costs have not been capitalized and are therefore
included in our cost of revenues.

         Cost of revenues for the six month period ended June 30, 2007 was $2.7
million compared to $2.2 million for the six month period ended June 30, 2006,
an increase of $500,000, or 22.7%. The increase was primarily attributable to
payroll and related costs from our newly acquired subsidiaries and other
production related costs including the expenditure of approximately $90,000 to
convert Cognistar courses to our platform.

   o  OUTSIDE LABOR AND DIRECT PRODUCTION COSTS. Outside labor costs increased
      $357,000, including the $90,000 spent on converting Cognistar courses to
      our platform. This increase is directly related to the outsourcing of
      technology personnel. Direct production costs, which are costs related to
      producing videos or courses other than labor costs, such as the cost of
      renting equipment and locations, increased $15,000. The variation in
      direct production costs are related to the type of production and other
      projects and do not reflect any trends in our business. As our business
      grows we may be required to hire additional production personnel,
      increasing our cost of revenues.

   o  ROYALTIES. Royalty expense increased in the six months ended June 30,
      2007, compared to the comparable 2006 period by $20,000. This is a result
      of royalties from our Cognistar legal division, which we acquired in
      November 2006.

   o  SALARIES. Overall, payroll and related costs attributable to production
      personnel increased by $77,000. We have reduced salaries and related costs
      in our video production department as a


                                       17
<PAGE>

      result of decreased business. This is offset by increased salaries and
      related costs as a result of our recent acquisitions. In addition, 2006
      does not include the additional salaries relating to MGI, Cognistar and
      Selbst personnel and only includes salaries of Sage and Skye personnel for
      four months.

   o  OTHER PRODUCTION RELATED COSTS. Other production costs increased by $9,000
      from 2006 to 2007. This is a direct result of increased business from
      Skye.


     GENERAL AND ADMINISTRATIVE EXPENSES

         General and administrative expenses for the six month period ended June
30, 2007 were $3.54 million compared to $2.83 million for the six month period
ended June 30, 2006, an increase of $710,000, or 25.1%. This increase is
primarily attributable to the inclusion of operating expenses from our recent
acquisitions.

         General and administrative costs consist of a number of different types
of expenses, including salaries and related costs. Compensation expense for the
2007 period increased $505,000 over the compensation expense for the 2006
period. Compensation expense includes stock based compensation expense of
$18,000 for the 2007 period and $15,500 for the 2006 period. In January 2007,
the Company granted 16,500 shares in restricted stock to its management team, of
which one-third vested immediately and the remaining shares will vest
pro-ratably in each of January 2008 and 2009. The closing price of the stock on
the date of the grant was $4.04 per share. In addition, in March 2007, we
granted 6,500 options to employees at exercise prices ranging from $4.49 to
$5.50 per share. The options vest over a three-year period commencing one-year
from grant date and expire 10 years from the date of grant. Using the BSM model,
we determined that the options have a fair value of $12,445, which amount is
being expensed over a three-year period. Certain operating costs have increased
as a result of our acquisitions, such as rent, telephone and insurance for
approximately $75,000. We are now outsourcing our customer service function
which resulted in a six month expense of approximately $60,000, where this
function was previously performed internally. Our other operating expenses
increased by approximately $70,000, including increased professional fees as we
begin our Sarbanes-Oxley compliance, a reduction in investor relation expense
and fluctuations in our other costs. We continue to look for other opportunities
to reduce our overhead.

     DEPRECIATION and AMORTIZATION

         Depreciation and amortization expenses increased by $11,000 in the
first half of 2007 compared to the first half of 2006 as a result of increased
amortization expense from our recent acquisitions and capitalized course costs,
offset by a decline in amortization from previously capitalized course costs. We
expect our depreciation and amortization expenses on our fixed assets to
continue to increase. Although many of our older assets are either fully or
almost fully depreciated and we do not anticipate replacing them at the same
rate, this is offset by the amortization of the intangibles acquired in these
acquisitions.

     OPERATING INCOME

         For the six months ended June 30, 2007, net income from operations was
$658,000 compared to $99,000 in the comparable period of 2006.

     OTHER INCOME, NET

         For the first six months of 2007, we had net interest income of
$190,000 compared to net interest income of $152,000 in the first six months of
2006. This increase is attributable to higher interest rates and larger cash
balances attributable to operations.

     INCOME TAX BENEFIT

         The income tax benefit from the six-month period ended June 30, 2007 is
$250,000 as compared to $87,000 in the 2006 period. This amount is subject to
change based on earnings during the year.


                                       18
<PAGE>

     NET INCOME

         For the six months ended June 30, 2007, we recorded a net profit of
$1.1 million, or $0.23 per share, basic and $0.22 per share diluted, compared to
a net income of $338,000 or $0.07 per share, basic and diluted, for the six
months ended June 30, 2006. Earnings per share before the benefit of the
deferred tax asset would have been $0.17 per share basic and diluted.

LIQUIDITY AND CAPITAL RESOURCES

         Since becoming a public reporting company in October 2004, we have
financed our working capital requirements through internally generated funds. In
addition, our initial public offering yielded net proceeds of approximately $6
million. To date we have used approximately $1.5 million of the net proceeds
from the offering to make acquisitions and $500,000 to repay debt.

         Our working capital as of June 30, 2007 was approximately $5.61 million
compared to $4.67 million at December 31, 2006. Our current ratio at June 30,
2007 was 2.05 to 1 compared to 1.94 to 1 at December 31, 2006. The current ratio
is derived by dividing current assets by current liabilities and is a measure
used by lending sources to assess our ability to repay short-term liabilities.
The largest component of our current liabilities is deferred revenue, which was
$4.65 million at June 30, 2007 compared to $4.0 million at December 31, 2006.
Most of this revenue is in the form of subscription fees and will be earned over
the next 12 months.

         At June 30, 2007, we had cash and cash equivalents of $8.8 million. For
the six months ended June 30, 2007, we reported a net increase in cash of $1.37
million, which includes $1.65 million of cash provided by operating activities
and $88,000 of cash provided by financing activities offset by $371,000 of cash
used in investing activities.

         The primary components of our operating cash flows are net income
adjusted for non-cash expenses, such as depreciation and amortization
stock-based compensation and deferred compensation, and the changes in our
operating assets and liabilities, such as accounts receivable, accounts payable
and deferred revenues.

         For the 2007 period, cash used in investing activities included capital
expenditures of $92,000, which consisted primarily of computer equipment
purchases, capitalized course and software development costs relating to our
learning management system, aggregating $116,000 and $154,000 relating to the
acquisition of the Selbst assets. Although, we continually upgrade our
technology hardware, we do not anticipate any significant capital expenditures
relating to equipment purchases over the next 12 months.

         For the 2007 period, cash provided by financing activities included
$68,000 from the exercise of stock options and warrants and $32,000 of short
swing profits (after deducting legal expenses) that we recovered from a
stockholder pursuant to Rule 16b promulgated under the Securities Exchange Act
of 1934. This amount was offset by $12,000 of payments under capital leases.

CONTRACTUAL OBLIGATIONS, COMMITMENTS AND CONTINGENCIES

         At June 30, 2007, our only indebtedness consisted of an auto loan. In
August 2004, we financed the purchase of a van. The loan is for a term of 36
months, bears interest at 4.99% per annum and requires 35 monthly payments of
$358 and a final payment of approximately $13,800 due in August 2007. The lender
has agreed to repurchase the vehicle at our option for the amount of the final
payment less any applicable expenses, at the end of the term. At June 30, 2007,
the balance on the loan was $14,000.

         As of June 30, 2007, we had commitments under three operating leases:
(i) the leases for our executive offices in Hawthorne, New York,; (ii) a lease
in Westborough, Massachusetts, where our Working Values subsidiary and its
Cognistar legal division is based; and (iii) a lease in Bridgewater, New Jersey
where Skye is based. Our financial commitment under all three leases aggregates
approximately $1.0 million through February 2010.

         We believe that our current cash balances together with cash flow from
operations will be sufficient to meet our working capital and capital
expenditure requirements from the next 12 months.


                                       19
<PAGE>

         In the future, we may issue additional debt or equity securities to
satisfy our cash needs. Any debt incurred or issued may be secured or unsecured,
at a fixed or variable interest rate and may contain other terms and conditions
that our board of directors deems prudent. Any sales of equity securities may be
at or below current market prices. We cannot assure you that we will be
successful in generating sufficient capital to adequately fund our liquidity
needs.

ITEM 3.  CONTROLS AND PROCEDURES

         EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. Management, with the
participation of our chief executive officer and chief financial officer,
carried out an evaluation of the effectiveness of our "disclosure controls and
procedures" (as defined in the Securities Exchange Act of 1934, as amended (the
"Exchange Act") Rules 13a-15(e) and 15-d-15(e)) as of the end of the period
covered by this quarterly report (the "Evaluation Date"). Based upon that
evaluation, our chief executive officer and chief financial officer concluded
that, as of the Evaluation Date, our disclosure controls and procedures are
effective to ensure that information required to be disclosed by us in the
reports that we file or submit under the Exchange Act (i) is recorded,
processed, summarized and reported, within the time periods specified in the
SEC's rules and forms and (ii) is accumulated and communicated to our
management, including our chief executive and chief financial officers, as
appropriate to allow timely decisions regarding required disclosure.

         CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING. There were no
changes in our internal controls over financial reporting that occurred during
the period covered by this report that has materially affected, or is reasonably
likely to materially affect, our internal control over financial reporting.


                                     PART II
                                OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

         We are not a party to any material legal proceeding not in the ordinary
course of business at this time.

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

RECENT SALES OF UNREGISTERED SECURITIES

         Except as otherwise set forth in this Item 2, there were no sales of
unregistered securities during the period covered by this Report.

         During the period covered by this report, we issued an aggregate of
22,089 shares of common stock and 11,044 warrants to seven persons pursuant to
the exercise of the warrants that we issued in October 2004 to the underwriters
of our initial public offering, discussed in greater detail below under "Use of
Proceeds" in this Item. The stock and warrants issued had been included in the
Registration Statement (defined below), although at the time of exercise the
Registration Statement was not current. Nevertheless, the issuances were exempt
from the registration requirements of the Securities Act pursuant to Section
4(2) of the Securities Act.

USE OF PROCEEDS

         On October 19, 2004, our registration statement on Form SB-2,
commission file number 333-115454 (the "Registration Statement") registering the
offer and sale of units (each a "Unit" and collectively the "Units"), each Unit
consisting of three shares of our common stock, par value $.0001 per share, and
one and one-half common stock purchase warrants, was declared effective by the
U.S. Securities and Exchange Commission. The warrants included in the Units have
a term of five years and an exercise price of $7.125 per share. We sold all
600,000 Units covered by the Registration Statement. Paulson Investment Company,
Inc. was the representative of the underwriters of the offering. The gross
proceeds to us from the offering were $7.65 million and the net proceeds were
$6.0 million. As of the date hereof, we used approximately $0.5 million of the
net proceeds to repay indebtedness and approximately $1.5 million for
acquisitions. The remaining $4.0 million will be used for working capital and
general corporate purposes, including acquisitions.


                                       20
<PAGE>

COMPANY PURCHASES OF ITS EQUITY SECURITIES

         On November 7, 2006, the Board of Directors approved a stock buy back
program under which $750,000 of our funds was allocated to purchase shares of
our common stock on the American Stock Exchange. To date no share repurchases
were made.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.

         None.

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

         None.

ITEM 5.  OTHER INFORMATION.

         On August 2, 2007, we acquired substantially all of the assets and
assumed certain liabilities of Bright Ideas Group d/b/a Watch It (BIG). BIG
develops information technology education and training programs for business and
information technology professionals. The assets we acquired included
approximately 300 courses and customer contracts. We will operate these assets
under the name SmartPros Technology Training Group (STG). James Graham, BIG's
founder and president, as well as other key employees of BIG have become our
employees. BIG's annual sales on a cash basis for the last three years averaged
approximately $1,400,000.

         The purchase price for the assets was $175,000 plus the assumption of
BIG's obligations under certain customer agreements. In addition, BIG is
entitled to an incentive payment of $200,000 if STG's revenues for the six month
period beginning August 1, 2007 and ending January 31, 2008 exceed $1,000,000.
If STG's revenues for this period are between $875,000 and $1,000,000, the
incentive payment will be a pro-rated portion of the $200,000. If revenues are
less than $875,000, no incentive payment is due.

         Finally, BIG is also entitled to an "earn-out" equal to the product of
(i) the excess of STG's average annual earnings before taxes over all
inter-company charges and an amount for the use of capital we provide STG, for
the 36 month period commencing August 1, 2007 and ending July 31, 2010 and (ii)
three. In no event may the "earn-out" exceed $3,000,000. Any payment under the
"earn-out" will be reduced by (i) $115,000 and (ii) any incentive payments made
with respect to the six month period ending January 31, 2008. The "earn-out"
amount may be paid at our discretion either in entirely in cash or 50% in cash
and 50% in shares of our common stock provided that at that time payment is due
(i) our common stock is traded on the New York Stock Exchange, the American
Stock Exchange or the NASDAQ National Market and (ii) we have filed all periodic
reports we were required to file under the Securities Act of 1934. Any payment
in shares of common stock will be valued based on the average closing price of
the common stock for the 20 business days after July 31, 2010.

         Attached hereto as Exhibit 99.1 is a copy of the press release issued
on August 2, 2007 in connection with the acquisition of the BIG assets.

ITEM 6. EXHIBITS.

        Exhibits:

EXHIBIT NO.                               DESCRIPTION

31.1           Certification of Chief Executive Officer pursuant to Section 302
               of the Sarbanes-Oxley Act of 2002.

31.2           Certification of Chief Financial Officer pursuant to Section 302
               of the Sarbanes-Oxley Act of 2002.

32.1           Certification of Chief Executive Officer and Chief Financial
               Officer pursuant to Section 906 of the Sarbanes-Oxley Act of
               2002.

99.1           Press Release issued in connection with the acquisition of assets
               from Bright Ideas Group.


                                       21
<PAGE>

                                   SIGNATURES

         In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.


                                                  SMARTPROS LTD.
                                                  (Registrant)

Date:   August 7, 2007                            /s/ Allen S. Greene
                                                  ------------------------------
                                                  Chief Executive Officer


Date:   August 7, 2007                            /s/ Stanley P. Wirtheim
                                                  ------------------------------
                                                  Chief Financial Officer
                                                  (Principal Financial Officer)