<PAGE>
                                UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION

                            Washington, D.C. 20549

                                  FORM 10-Q

           [X]     Quarterly Report Pursuant to Section 13 or 15(d)
                    of the Securities Exchange Act of 1934

              For the quarterly period ended September 30, 2001

                                      OR

          [_]     Transition Report Pursuant to Section 13 or 15(d)
                    of the Securities Exchange Act of 1934

                   For the transition period from          to

                       Commission File Number 000-32469

                          THE PRINCETON REVIEW, INC.

            (Exact name of registrant as specified in its charter)

                  Delaware                                      22-3727603
       (State or other jurisdiction of                       (I.R.S. Employer
       incorporation or organization)                       Identification No.)

                2315 Broadway                                      10024
             New York, New York                                 (Zip Code)
  (Address of principal executive offices)


      Registrant's telephone number, including area code (212) 874-8282

             (Former name, former address and former fiscal year,
                        if changed since last report)


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

        The Company had 27,168,316 shares of $0.01 par value common stock
outstanding at November 12, 2001.


<PAGE>


                              TABLE OF CONTENTS

<TABLE>
<S>                                                                                              <C>
PART I.  FINANCIAL INFORMATION
        Item 1. Consolidated Financial Statements (unaudited)......................................2
                Consolidated Balance Sheets as of September 30, 2001 and December 31, 2000.........2
                Consolidated Statements of Operations for the Three and Nine Month Periods ended
                September 30, 2001 and 2000........................................................3
                Consolidated Statements of Cash Flows for the Nine Months ended September 30,
                2001 and 2000......................................................................4
                Notes to Unaudited Consolidated Financial Statements...............................5
        Item 2. Management's Discussion and Analysis of Financial Condition and Results of
                Operations........................................................................10
        Item 3. Quantitative and Qualitative Disclosures about Market Risk........................15
PART II.  OTHER INFORMATION
        Item 1. Legal Proceedings.................................................................15
        Item 2. Changes in Securities and Use of Proceeds.........................................16
        Item 3. Defaults Upon Senior Securities...................................................16
        Item 4. Submission of Matters to a Vote of Security Holders...............................16
        Item 5. Other Information.................................................................16
        Item 6. Exhibits and Reports on Form 8-K..................................................17
SIGNATURES........................................................................................18
</TABLE>




<PAGE>


PART I.  FINANCIAL INFORMATION
ITEM 1.  CONSOLIDATED FINANCIAL STATEMENTS

                 THE PRINCETON REVIEW, INC. AND SUBSIDIARIES
                         CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                               September 30,   December 31
                                                               -------------   -----------
                                                                   2001           2000
                                                                   ----           ----
                           ASSETS                              (Unaudited )
<S>                                                         <C>                <C>
Current assets:
Cash and cash equivalents                                         $25,951,191    $4,873,814
Accounts receivable, net                                            6,945,025     8,779,171
Other receivables                                                     542,475       695,840
Prepaid expenses                                                      561,024       493,894
Securities, available for sale                                        827,158     3,378,976
Other assets                                                        2,255,913     5,144,523
                                                              ------------------------------
Total current assets                                               37,082,786    23,366,218

Furniture, fixtures, equipment and software development, net        8,122,672     7,811,234
Franchise costs, net                                                  302,793       209,164
Territorial marketing rights, net                                   1,509,065     1,591,882
Publishing rights, net                                              1,314,350     1,369,100
Goodwill, net                                                      29,106,898     8,300,461
Deferred income taxes                                              15,950,588     9,919,879
Investments in affiliates                                             452,968       419,458
Other assets                                                        5,542,442     5,587,677
                                                              ------------------------------
Total assets                                                      $99,384,562   $58,575,073
                                                              ==============================

       LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable                                                     $902,029    $3,086,968
Accrued expenses and taxes payable                                  6,590,704     8,058,283
Line of credit                                                              -     4,500,000
Current maturities of long-term debt                                  539,104       494,385
Deferred income                                                     7,733,418     4,187,296
Book advances                                                         598,477     2,136,745
Deferred income taxes                                                       -       614,000
                                                              ------------------------------
Total current liabilities                                          16,363,732    23,077,677

Long-term debt                                                      5,514,232       560,316
Series A redeemable convertible preferred stock, $.01 par value;
none authorized, issued and outstanding at September 30, 2001;
5,000,000 shares authorized and 3,748,548 shares issued and
outstanding at December 31, 2000, liquidation preference of $0
at September 30, 2001 and $30,758,000 at December 31, 2000                  -    29,201,589

Class B redeemable nonvoting common stock, $.01par value; none
authorized, issued and outstanding at September 30, 2001;
10,000,000 shares authorized and 2,737,229 shares issued and
outstanding at December 31, 2000                                            -    20,571,559

Class A common stock, $.01 par value; none authorized, issued
and outstanding at September 30, 2001; 25,000,000 shares
authorized and 12,561,986 shares issued and outstanding at
December 31, 2000                                                           -       125,920

Common stock, $.01 par value; 100,000,000 shares authorized;
26,293,316 issued and outstanding at September 30, 2001; none
authorized, issued and outstanding at December 31, 2000               262,933             -


Additional paid-in capital                                        107,889,049     1,907,525

Accumulated deficit                                               (31,330,633)  (18,881,418)

Accumulated other comprehensive income                                757,391     2,112,805

Deferred compensation                                                 (72,142)  (100,600.00)
                                                              ------------------------------
Total stockholders' equity (deficit)                               77,506,598   (14,836,068)
                                                              ------------------------------
Total liabilities and stockholders' equity (deficit)              $99,384,562   $58,575,073
                                                              ==============================

                                    See accompanying notes

</TABLE>

                                     -2-


<PAGE>

                    THE PRINCETON REVIEW, INC. AND SUBSIDIARIES
                    CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                                        THREE MONTHS ENDED             NINE MONTHS ENDED
                                                                           SEPTEMBER 30,                  SEPTEMBER 30,
                                                                   ------------------------------------------------------------
                                                                       2001           2000           2001           2000
                                                                   ------------------------------------------------------------
                                                                            (UNAUDITED)                   (UNAUDITED)
<S>                                                                <C>              <C>           <C>             <C>
REVENUE
  Test Preparation Services                                         $ 19,724,349    $ 10,889,448  $ 42,348,567    $ 27,282,698
  Admissions Services                                                  1,773,911       1,806,016     5,041,484       3,756,393
  K-12 Services                                                        1,635,288       1,225,494     4,306,904       3,114,840
                                                                   ------------------------------------------------------------
    Total revenue                                                     23,133,548      13,920,958    51,696,955      34,153,931
                                                                   ------------------------------------------------------------
COST OF REVENUE
  Test Preparation Services                                            5,404,271       3,266,432    12,983,703       8,922,321
  Admissions Services                                                    362,649         399,697     1,329,100         799,420
  K-12 Services                                                          581,194         306,050     1,551,153         620,336
                                                                   ------------------------------------------------------------
    Total cost of revenue                                              6,348,114       3,972,179    15,863,956      10,342,077
                                                                   ------------------------------------------------------------
    GROSS PROFIT                                                      16,785,434       9,948,779    35,832,999      23,811,854
                                                                   ------------------------------------------------------------
OPERATING EXPENSES
  Selling, general and administrative                                 18,189,993      10,673,756    44,474,385      40,529,008
  Research and development                                                69,676         204,057       337,549         345,939
                                                                   ------------------------------------------------------------
    Total operating expenses                                          18,259,669      10,877,813    44,811,934      40,874,947
                                                                   ------------------------------------------------------------
Operating loss                                                        (1,474,235)       (929,034)   (8,978,935)    (17,063,093)
Gain on distribution/sale of securities and other assets                       -               -             -       7,597,226
Interest expense                                                        (227,822)        (34,951)   (1,886,285)       (104,623)
Other income                                                             197,381         202,262       341,541         473,199
                                                                   ------------------------------------------------------------
Loss before minority interest, equity interest in
operations of affiliates, benefit for income taxes
and extraordinary item                                                (1,504,676)       (761,723)  (10,523,679)     (9,097,291)
Minority interests' share of income in subsidiaries                            -               -             -         (50,129)
Equity interest in operations of affiliates                               10,390        (541,214)       33,510        (412,845)
                                                                   ------------------------------------------------------------
Loss before benefit for income taxes
and extraordinary item                                                (1,494,286)     (1,302,937)  (10,490,169)     (9,560,265)
Benefit for income taxes                                                 602,340         584,629     4,129,959       6,531,794
                                                                   ------------------------------------------------------------
Loss before extraordinary item                                          (891,946)       (718,308)   (6,360,210)     (3,028,471)
Extraordinary item - early extinguishment
of debt, net of taxes                                                          -               -    (1,824,456)              -
                                                                   ------------------------------------------------------------
Net loss                                                                (891,946)       (718,308)   (8,184,666)     (3,028,471)
Accreted dividends on Series A redeemable preferred stock                      -      (1,236,760)   (2,308,620)     (2,267,394)
Accreted dividends on Class B non-voting common stock                          -      (1,136,396)   (1,955,929)     (2,272,790)
                                                                   ------------------------------------------------------------
Net loss attributed to common stockholders                            $ (891,946)   $ (3,091,464)$ (12,449,215)   $ (7,568,655)
                                                                   ============================================================

NET LOSS PER SHARE -  BASIC AND DILUTED:

Loss attibuted to common shareholders before extraordinary item          $ (0.03)        $ (0.20)      $ (0.55)        $ (0.55)
Extraordinary item - early extinguishment of debt                              -               -         (0.09)              -
                                                                   ------------------------------------------------------------
Net loss per share -  basic and diluted                                  $ (0.03)        $ (0.20)      $ (0.64)        $ (0.55)
                                                                   ============================================================
Weighted average basic and diluted shares used in
computing net loss per share                                          26,292,957      15,299,215    19,453,761      13,667,455
                                                                   ============================================================
</TABLE>

                            See accompanying notes

                                     -3-


<PAGE>

                 THE PRINCETON REVIEW, INC. AND SUBSIDIARIES
                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (UNAUDITED)
<TABLE>
<CAPTION>
                                                                            NINE MONTHS ENDED SEPTEMBER 30,
                                                                                 2001           2000
                                                                            ------------------------------
<S>                                                                        <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss                                                                      $ (8,184,666)  $ (3,028,471)
Adjustments to reconcile net loss to net cash
used in operating activities:
  Depreciation                                                                     731,386        379,794
  Amortization                                                                   3,638,738      1,339,512
  Noncash Interest expense                                                         581,749              -
  Loss on early extinquishment of debt                                           1,824,456              -
  Bad debt expense                                                                (283,283)       332,902
  Gain on sale of assets                                                            68,179              -
  Gain on sale/distribution of securities                                                -     (7,427,556)
  Compensation expense on PSU conversion                                                 -      6,614,330
  Deferred income taxes                                                         (4,272,234)    (6,664,469)
  Deferred rent                                                                    190,264        264,906
  Minority interests' share of income in subsidiaries                                    -         50,129
  Amortization of deferred compensation                                             87,683          5,859
  Equity interest in operations of affiliates                                      (33,510)       412,845
  Net change in operating assets and liabilities:
    Accounts receivable                                                          3,206,713       (770,981)
    Other receivables                                                              153,365         76,666
    Prepaid expenses                                                               546,726       (569,005)
    Other assets                                                                  (386,316)    (1,343,239)
    Accounts payable                                                            (2,187,194)      (888,800)
    Accrued expenses                                                            (1,343,601)       576,184
    Deferred income                                                               (612,524)     3,037,943
    Book advances                                                               (1,537,855)    (1,673,466)
                                                                            ------------------------------
Net cash used in operating activities                                           (7,811,924)    (9,274,917)
                                                                            ------------------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of furniture, fixtures, equipment and software development             (3,278,987)    (4,354,332)
Investment in subsidiaries / acquisition of franchises                         (19,445,732)    (1,320,000)
Repayments of stockholder loan                                                    (500,000)       (79,346)
Increase in other assets                                                        (2,936,739)    (1,915,114)
                                                                            ------------------------------
Net cash used in investing activities                                          (26,161,458)    (7,668,792)
                                                                            ------------------------------

CASH FLOWS FROM FINANCING ACTIVITES:
Borrowings under line of credit                                                 24,691,000             --
Repayment of lines of credit                                                   (29,191,000)      (700,000)
Proceeds (repayment) term loan, net                                                 54,891        (27,447)
Proceeds from capital leases, net of repayments                                   (156,257)       267,042
Distributions to stockholders                                                           --       (338,991)
Notes payable related to franchises purchased                                    5,100,000             --
Proceeds from investment in Series A redeemable convertible preferred
stock, net of offering
costs                                                                                   --     25,409,488
Proceeds from sale of common stock during initial public offering, net          54,552,125             --
Proceeds fom sale of Class B redeemable non-voting common stock                         --        161,097
Issuance of Princeton Review Publishing, LLC units                                      --      1,100,932
                                                                            ------------------------------
Net cash provided by financing activities                                       55,050,759     25,872,121
                                                                            ------------------------------
Net increase in cash and cash equivalents                                       21,077,377      8,928,412
Cash and cash equivalents, beginning of period                                   4,873,814      2,658,081
                                                                            ------------------------------
Cash and cash equivalents, end of period                                      $ 25,951,191   $ 11,586,493
                                                                            ==============================
</TABLE>


                            See accompanying notes

                                     -4-
<PAGE>





                 THE PRINCETON REVIEW, INC. AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                 (UNAUDITED)
                              SEPTEMBER 30, 2001

1. BASIS OF PRESENTATION

The accompanying unaudited interim consolidated financial statements of The
Princeton Review, Inc. (the "Company") include the accounts of the Company and
its wholly-owned subsidiaries, Princeton Review Products, LLC, Princeton
Review Management, LLC, Princeton Review Publishing, LLC, Princeton Review
Operations, LLC, and The Princeton Review Canada Inc. This financial
information has been prepared in accordance with generally accepted accounting
principles for interim financial information and reflects all adjustments,
consisting only of normal recurring accruals, that are, in the opinion of
management, necessary for a fair presentation of the interim financial
statements. The interim consolidated financial statements should be read in
conjunction with the consolidated financial statements and related notes for
the year ended December 31, 2000 included in the Company's Registration
Statement on Form S-1 (File No. 333-43874) as filed with the Securities and
Exchange Commission. The results of operations for the three-month and
nine-month periods ended September 30, 2001 are not necessarily indicative of
the results to be expected for the entire fiscal year or any future period.

2. SEGMENT INFORMATION

The Company's operations are aggregated into three reportable segments. The
operating segments reported below are the segments of the Company for which
separate financial information is available and for which operating income is
evaluated regularly by executive management in deciding how to allocate
resources and in assessing performance.

The following segment results include the allocation of certain information
technology costs, accounting services, executive management costs, office
facilities expenses, human resources expenses and other shared services which
are allocated based on consumption. Corporate consists of unallocated
administrative support functions. The Company operates its business through
three divisions. The majority of the Company's revenue is earned by the Test
Preparation Services division, which sells a range of services including test
preparation, tutoring and academic counseling. Test Preparation Services
derives its revenue from company operated locations and from royalties from
and product sales to independently-owned franchises. The Admissions Services
division earns revenue from developing content for books, software and other
publications for third-party publishers, sells advertising and sponsorships
and earns marketing fees from higher education institutions. The K-12 Services
division earns fees from its content development work and operates
Homeroom.com, an Internet-based subscription service for K-12 schools and
parents.


                                     -5-
<PAGE>


BUSINESS SEGMENTS

<TABLE>
<CAPTION>
                                                           THREE MONTHS ENDED SEPTEMBER 30,      NINE MONTHS ENDED SEPTEMBER 30,
                                                               2001          2000                    2001           2000
                                                               ----          ----                    ----           ----
REVENUE                                                     (UNAUDITED)   (UNAUDITED)             (UNAUDITED)   (UNAUDITED)
-------
<S>                                                       <C>            <C>                    <C>            <C>
    Test Preparation Services                               $ 19,724,349  $ 10,889,448            $ 42,348,567   $ 27,282,698
    Admissions Services                                        1,773,911     1,806,016               5,041,484      3,756,393
    K-12 Services                                              1,635,288     1,225,494               4,306,904      3,114,840
                                                            ------------------------------------------------------------------
       TOTAL CONSOLIDATED REVENUE                             23,133,548    13,920,958              51,696,955     34,153,931
                                                            ------------------------------------------------------------------

COST OF REVENUE
---------------
    Test Preparation Services                                  5,404,271     3,266,432              12,983,703      8,922,321
    Admissions Services                                          362,649       399,697               1,329,100        799,420
    K-12 Services - excluding content amortization               452,117       269,673               1,194,434        583,959
    K-12 Services - content amortization                         129,077        36,377                 356,719         36,377
                                                            ------------------------------------------------------------------
       TOTAL CONSOLIDATED COST OF REVENUE                      6,348,114     3,972,179              15,863,956     10,342,077
                                                            ------------------------------------------------------------------

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
--------------------------------------------
    Test Preparation Services                                 10,451,683     5,234,374              23,532,745     18,411,867
    Admissions Services                                        3,021,137     2,282,314               8,183,735      7,889,890
    K-12 Services                                              2,790,099     2,437,082               8,114,026      6,360,728
    Other Corporate                                              517,616             -                 630,474      6,131,570
    Depreciation & amortization expense                        1,409,458       719,986               4,013,405      1,734,953
                                                            ------------------------------------------------------------------
       TOTAL SELLING, GENERAL AND ADMINISTRATIVE EXPENSES     18,189,993    10,673,756              44,474,385     40,529,008
    Test Preparation Services - research and development          69,676       204,057                 337,549        345,939
       Total operating expenses                               18,259,669    10,877,813              44,811,934     40,874,947
                                                            ------------------------------------------------------------------
OPERATING LOSS                                              $ (1,474,235)   $ (929,034)           $ (8,978,935) $ (17,063,093)
--------------                                              ==================================================================

EBITDA                                                          $ 64,300    $ (172,671)           $ (4,608,811) $ (15,291,763)
------                                                      ==================================================================

                                                                                                 SEPTEMBER 30,  DECEMBER 31,
                                                                                                     2001           2000
                                                                                                     ----           ----
SEGMENT ASSETS                                                                                    (UNAUDITED)

    Test Preparation Services                                                                     $ 22,812,012    $ 6,187,841
    Admissions Services                                                                              9,449,465     11,681,696
    K-12 Services                                                                                    8,347,792      9,900,436
    Other Corporate                                                                                 58,775,293     30,805,100
                                                                                                  ---------------------------
    Total Consolidated Assets                                                                     $ 99,384,562   $ 58,575,073
                                                                                                  ===========================
</TABLE>



3. INCOME (LOSS) PER SHARE

Basic and diluted net income (loss) per share information for all periods is
presented under the requirements of SFAS No. 128, Earnings per Share. Basic
net income (loss) per share is computed by dividing net income (loss)
applicable to common stockholders by the weighted average number of common
shares outstanding during the period. Diluted net income (loss) per share is
determined in the same manner as basic net income (loss) per share except that
the number of shares is increased assuming exercise of dilutive stock options,
warrants and convertible securities. The calculation of diluted net income
(loss) per share excludes potential common shares if the effect is
antidilutive. During the periods presented, certain shares of Series A
preferred stock, warrants and stock options were outstanding that would be
dilutive, but were excluded because to include them would have been
antidilutive.


                                     -6-
<PAGE>




4. COMPREHENSIVE INCOME (LOSS)

The components of comprehensive loss for the three and nine-month periods
ended September 30, 2001 and 2000 are as follows:

<TABLE>
<CAPTION>
                                         THREE MONTHS ENDED         NINE MONTHS ENDED
                                           SEPTEMBER 30,              SEPTEMBER 30,
                                         2001         2000         2001          2000
                                      ----------------------------------------------------
                                            (UNAUDITED)                (UNAUDITED)
<S>                                   <C>           <C>         <C>          <C>
Net loss                                $(891,946)  $(718,308)  $(8,184,666)  $(3,028,471)

Foreign currency translation
adjustment                                  71,326    (27,988)       129,439             -
Unrealized loss on
available-for-sale securities, net
of tax benefits                          (362,689)    (69,329)   (1,484,853)  (29,988,127)
                                         ---------    --------   -----------  ------------
Total comprehensive loss              $(1,183,309)  $(815,825)  $(9,540,080) $(33,016,598)
                                      ============  ==========  ============ =============
</TABLE>

5. ACQUISITIONS OF FRANCHISEES

On June 18, 2001, the Company acquired the assets comprising the business of
T.S.T.S., Inc., which offered test preparation courses in several states under
franchise agreements with the Company, for a purchase price of approximately
$6.3 million. The Company financed approximately $4.8 million under a line of
credit and issued a subordinated promissory note to the seller for
approximately $1.5 million. In March 2001, the Company acquired the assets
comprising the businesses of two other franchisees, Princeton Review of
Boston, Inc. and Princeton Review of New Jersey, Inc., at a combined purchase
price of $13.8 million. The Company financed approximately $10.2 million of
the purchase price under a line of credit and issued two subordinated
promissory notes for the remaining approximately $3.6 million. In early March
2001, the Company purchased the assets of another franchisee, Princeton Review
Peninsula, Inc., for a purchase price of approximately $2.7 million, which was
financed through borrowings under a line of credit.

The following pro forma unaudited consolidated results of operations of the
Company for the nine months ended September 30, 2001 and 2000, assume the
consummation of the acquisitions of Princeton Review of Boston and Princeton
Review of New Jersey as of the beginning of each period presented (in
thousands, except per share data):


<TABLE>
<CAPTION>
                                                  NINE MONTHS ENDED SEPTEMBER 30,
                                                      2001               2000
                                                -------------------------------------
                                                            (UNAUDITED)
<S>                                              <C>                 <C>
Revenue                                             $  53,773           $ 42,693
Net loss                                            $ ( 7,839)          $ (1,164)
Net loss attributed to common stockholders          $ (12,104)          $ (5,704)
Basic and diluted net loss per share                $  ( 0.62)          $  (0.42)
</TABLE>




6. LINE OF CREDIT AND LONG-TERM DEBT



                                     -7-
<PAGE>

On June 22, 2001, the Company terminated its loan agreement with Reservoir
Capital Partners, L.P., Reservoir Capital Master Fund, L.P., Reservoir Capital
Associates, L.P., SGC Partners II, LLC, Olympus Growth Fund III, L.P., and
Olympus Executive Fund, L.P., and repaid the $24.6 million outstanding balance
thereunder, plus accrued interest.  The loan agreement provided for a line of
credit of up to $25.0 million.  The interest rate under this loan agreement
was 13% per year.

On June 28, 2001 the Company terminated its Line of Credit Agreement with
Excel Bank, N.A. and repaid the $4,500,000 outstanding balance thereunder,
plus accrued interest. The line of credit bore interest at a variable rate of
prime plus 1% per year.

In connection with these debt repayments, the Company wrote-off the remaining
deferred financing costs and the unamortized cost of the warrants issued to
the lenders resulting in an after-tax loss of approximately $1.8 million.


7. STOCKHOLDERS' EQUITY

SALES OF COMMON STOCK

On June 22, 2001, the Company completed its Initial Public Offering in which
it sold 5,400,000 shares of common stock at $11.00 per share. As a result of
this offering, the Company's Class A common stock, Class B non-voting common
stock and Series A preferred stock automatically converted into shares of
common stock.



8. SUBSEQUENT EVENTS

On October 1, 2001, the Company completed its purchase of substantially all of
the operating assets of Embark.com, Inc. ("Embark"), a developer of online
products and services for the college admissions market. Pursuant to an Asset
Purchase Agreement, dated as of October 1, 2001, the Company, through its
subsidiary Princeton Review Publishing, L.L.C., acquired Embark's college
admissions business, which consists primarily of Embark's customer contracts
with academic institutions and its technological platform for submitting
electronic applications and related services.

The purchase price paid at closing for the Embark assets consisted of 875,000
newly issued shares of the Company's common stock valued at approximately $5.2
million, approximately $3.4 million in assumed indebtedness and approximately
$2.1 million in other assumed liabilities of Embark, consisting primarily of
deferred revenue relating to customer contracts assumed by the Company, net of
acquired receivables of approximately $1 million. Embark may also receive
additional cash payments and up to an additional 125,000 shares of the
Company's common stock based on the future revenue performance of the acquired
business. In connection with the transaction, the Company made a $1.8 million
loan to Embark from working capital, which loan is secured by 300,000 of the
shares of the Company's common stock that Embark received as consideration for
the acquisition.




                                     -8-
<PAGE>


As part of the assumed liabilities, the Company renegotiated and assumed $3.4
million in indebtedness that Embark owed to Comdisco, Inc. ("Comdisco"). The
Company entered into an Amended and Restated Loan and Security Agreement, by
and among the Company, Comdisco and Embark under which the assumed $3.4
million of subordinated debt is secured by all of the Company's assets and
guaranteed by all of the Company's subsidiaries.

For the year ended December 31, 2000 and the nine months ended September 30,
2001, Embark had approximately $7.1 million and $5.6 million in revenue,
respectively, and approximately $24.6 million and $10.9 million in net losses,
respectively.


                                     -9-



<PAGE>




ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

        All statements in this Form 10-Q that are not historical facts are
forward-looking statements within the meaning of Section 21E of the Securities
Exchange Act of 1934. Such forward-looking statements may be identified by
words such as "believe," "intend," "expect," "may," "could," "would," "will,"
"should," "plan," "project," "contemplate," "anticipate" or similar
statements. Because these statements reflect our current views concerning
future events, these forward-looking statements are subject to risks and
uncertainties. Our actual results could differ materially from those
anticipated in these forward-looking statements as a result of many factors,
including, but not limited to, demand for our products and services, our
ability to compete effectively and the other factors described under the
caption "Risk Factors" in our Registration Statement on Form S-1 filed with
the Securities and Exchange Commission, file No. 333-43874, (the "Registration
Statement"). We undertake no obligation to update publicly any forward-looking
statements for any reason, even if new information becomes available or other
events occur in the future.

        The following information should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the consolidated financial statements and related notes for
the year ended December 31, 2000 included in our Registration Statement, as
well as in conjunction with the consolidated financial statements and related
notes appearing elsewhere in this Form 10-Q.


RESULTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED WITH THREE MONTHS ENDED
SEPTEMBER 30, 2000

    REVENUE

        Our total revenue increased from $13.9 million in 2000 to $23.1
million in 2001, representing a 66% increase.

        Test Preparation Services revenue increased from $10.9 million in 2000
to $19.7 million in 2001, representing an 81% increase, comprised primarily of
an increase of approximately $9.7 million in revenue from our company-owned
operations. The increased revenue from company-owned operations resulted from
the inclusion of approximately $7.6 million in revenue attributable to the
operations acquired from our former franchisees, Princeton Review of Boston,
Inc., Princeton Review of New Jersey, Inc., Princeton Review Peninsula Inc.,
and T.S.T.S., Inc., and an increase of approximately $2.1 million at our other
locations. Of the $2.1 million increase at our other locations, approximately
$400,000 is attributable to enrollment increases and approximately $1.7
million is attributable to average price increases. These increases were
partially offset by a decrease of approximately $600,000 in royalties from
independently owned franchises and a decrease of approximately $280,000 in the
sale of materials to the independent franchises. These decreased royalties and
sales of materials resulted from our acquisitions of the operations of our
franchisees referred to above.



                                     -10-
<PAGE>


        Admissions Services revenue was $1.8 million in both 2000 and 2001.
College marketing fees increased by approximately $200,000 and book and
publication revenues increased by approximately $300,000. These increases were
offset by a decrease in Internet-based advertising revenue.

        K-12 Services revenue increased from $1.2 million in 2000 to $1.6
million in 2001 representing a 33% increase. This increase was caused by the
addition of revenue from subscription fees for the Homeroom.com subscription
service and related consulting fees, which totaled approximately $430,000 in
the third quarter of 2001. There was no revenue related to these services in
the third quarter of 2000.

    COST OF REVENUE

        Our total cost of revenue increased from $4.0 million in 2000 to $6.3
million in 2001, representing a 60% increase.

        Test Preparation Services cost of revenue increased from $3.3 million
in 2000 to $5.4 million in 2001, representing a 65% increase. This increase
resulted primarily from the inclusion of approximately $1.9 million in costs
associated with the operation of the businesses acquired from Princeton Review
of Boston, Princeton Review of New Jersey, Princeton Review Peninsula and
T.S.T.S.

        Admissions Services cost of revenue decreased from $400,000 in 2000 to
$363,000 in 2001, representing a 9% decrease.

        K-12 Services cost of revenue increased from $306,000 in 2000 to
$581,000 in 2001, representing a 90% increase. This increase is attributable
to an increase in costs incurred to service the Homeroom.com subscription
service and consulting contracts.

    OPERATING EXPENSES

        Selling, general and administrative expenses increased from $10.7
million in 2000 to $18.2 million in 2001, representing a 70% increase,
primarily due to the following:

-   an increase of approximately $2.9 million in salaries and payroll taxes,
    approximately $1.1 million of which is due to the acquisitions of
    Princeton Review of Boston, Princeton Review of New Jersey, Princeton
    Review Peninsula and T.S.T.S., and the balance of which is due to
    headcount and salary increases throughout the company;

-   an increase of approximately $2.3 million in advertising and marketing
    expenses;

-   an increase of approximately $700,000 in amortization and depreciation
    primarily attributable to amortization of goodwill related to franchise
    acquisitions and amortization of software development costs; and

-   an increase of approximately $230,000 in professional fees including
    primarily legal and accounting fees.



    INTEREST EXPENSE


                                     -11-
<PAGE>


        Interest expense increased from $35,000 in 2000 to $228,000 in 2001.
This increase resulted primarily from interest expense incurred in connection
with the seller notes issued in connection with our acquisitions of Princeton
Review of Boston, Princeton Review of New Jersey and TSTS, Inc.

    NET LOSS

        Net loss increased from $718,000 in 2000 to $892,000 in 2001,
representing a 24% increase. This increase resulted from higher operating
expenses and interest expense which were partially offset by increased gross
profits.





NINE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED WITH NINE MONTHS ENDED SEPTEMBER
30, 2000

    REVENUE

        Our total revenue increased from $34.2 million in 2000 to $51.7
million in 2001, representing a 51% increase.

        Test Preparation Services revenue increased from $27.3 million in 2000
to $42.3 million in 2001, representing a 55% increase, comprised primarily of
an increase of approximately $16.9 million in revenue from our company-owned
operations. The increased revenue from company-owned operations resulted from
the inclusion of approximately $12.4 million in revenue attributable to the
operations acquired from Princeton Review of Boston, Princeton Review of New
Jersey, Princeton Review Peninsula and T.S.T.S., and an increase of
approximately $4.4 million at our other locations. Of the $4.4 million
increase at our other locations, approximately $1.9 million is attributable to
enrollment increases and approximately $2.5 million is attributable to average
price increases. These increases were partially offset by a decrease of
approximately $820,000 in royalties from independently owned franchises and a
decrease of approximately $770,000 in the sale of materials to the independent
franchises. These decreased royalties and sales of materials resulted from our
acquisitions of our franchises referred to above.

        Admissions Services revenue increased from $3.8 million in 2000 to
$5.0 million in 2001, representing a 34% increase. This increase resulted
primarily from increased college marketing fees of approximately $1.0 million
and Internet-based advertising and services revenue of approximately $200,000.

        K-12 Services revenue increased from $3.1 million in 2000 to $4.3
million in 2001, representing a 38% increase. This increase resulted from
increases of approximately $600,000 in McGraw-Hill development fees and
royalties and from approximately $560,000 in new revenue from subscription
fees to Homeroom.com and related consulting fees in 2001.

    COST OF REVENUE

        Our total cost of revenue increased from $10.3 million in 2000 to
$15.9 million in 2001, representing a 53% increase.


                                     -12-
<PAGE>



        Test Preparation Services cost of revenue increased from $8.9 million
in 2000 to $13.0 million in 2001, representing a 46% increase. This increase
resulted from the inclusion of approximately $3.7 million in costs associated
with the operation of the businesses acquired from Princeton Review of Boston,
Princeton Review of New Jersey, Princeton Review Peninsula and T.S.T.S. and an
increase of approximately $300,000 in the cost to deliver courses in other
company owned locations, due in part to increased enrollment.

        Admissions Services cost of revenue increased from $799,000 in 2000 to
$1.3 million in 2001, representing a 66% increase. Approximately $330,000 of
this increase resulted from costs associated with the increased college
marketing and advertising revenue and approximately $200,000 was due to costs
of producing book manuscripts delivered to Random House.

        K-12 Services cost of revenue increased from $620,000 in 2000 to $1.6
million in 2001, representing a 150% increase. Approximately $550,000 of this
increase is attributable to increased sales to McGraw-Hill during 2001 and
approximately $320,000 is due to amortization of the Homeroom.com question
pool costs, which we began to amortize in the third quarter of 2000. The
remaining increase is due to the cost of revenue associated with sales of
Homeroom.com to schools, which did not begin until the fourth quarter of 2000.

    OPERATING EXPENSES

        Selling, general and administrative expenses increased from $40.5
million in 2000 to $44.5 million in 2001, representing a 10% increase. The
increase resulted from:

-   an increase of approximately $7.3 million in salaries and payroll taxes,
    approximately $1.9 million of which is due to the acquisitions of
    Princeton Review of Boston, Princeton Review of New Jersey, Princeton
    Review Peninsula and T.S.T.S., with the remaining increases primarily
    related to added personnel, primarily in product development, sales and
    marketing and information technology positions, as well as annual salary
    increases;

-   an increase of approximately $3.6 million in advertising and marketing
    expenses;

-   an increase of approximately $2.3 million in amortization and depreciation
    primarily attributable to amortization of goodwill related to franchise
    acquisitions and amortization of software development costs;

-   an increase of approximately $1.7 million attributable primarily to
    personnel related costs, including office rent and expenses, travel and
    entertainment, employee benefits and recruiting fees; and

-   an increase of approximately $585,000 in teacher recruiting and training
    due to the acquisition of Princeton Review of Boston, Princeton Review of
    New Jersey, Princeton Review Peninsula and T.S.T.S.

These increases were partially offset by the absence in 2001 of non-recurring
charges incurred in 2000, consisting of a charge of approximately $10.6
million representing the cost associated with the termination of our PSU and
SAR plans and the related distribution of stock to our employees, as well as a
decrease of approximately $1.0 million in professional services largely from
settlement costs and legal fees associated with a lawsuit settled in 2000.


    GAIN ON DISTRIBUTION/SALE OF SECURITIES AND OTHER ASSETS


                                     -13-
<PAGE>



        In 2000, we recorded a gain of $7.6 million related to the
distribution of stock of Student Advantage, Inc. to our stockholders and
employees in connection with our restructuring. There have been no
distributions of Student Advantage stock in 2001.

    INTEREST EXPENSE

        Interest expense increased from approximately $0.1 million in 2000 to
$1.9 million in 2001, representing a 1703% increase. This increase resulted
from increases in equipment lease balances, balances outstanding under our
credit facilities and interest expense associated with the amortization of the
cost of warrants issued in connection with a loan agreement entered into in
December 2000.

    OTHER INCOME

        Other income decreased from $473,000 in 2000 to $342,000 in 2001,
representing a 28% decrease. This represents interest income earned on the
company's cash balances which increased substantially in 2000 primarily as a
result of the proceeds received from the sale of our Series A preferred stock.
The interest income declined in the latter part of 2000 and the first half of
2001 as the funds were used to finance development and expansion.


    NET LOSS

        Net loss increased from $3.0 million in 2000 to $8.2 million in 2001,
representing a 170% increase. This increase resulted primarily from the
write-off associated with the early extinguishment of debt and the fact that
we did not record any gain on the distribution of stock in 2001.






LIQUIDITY AND CAPITAL RESOURCES

        Net cash used in operating activities during the nine months ended
September 30, 2001 was $7.8 million, resulting primarily from the net loss
from operations. Net cash used in investing activities during the nine months
ended September 30, 2001 was $26.2 million, resulting primarily from our
acquisitions of the operations of Princeton Review of Boston, Princeton Review
of New Jersey, Princeton Review Peninsula and T.S.T.S. Net cash provided by
financing activities during the nine months ended September 30, 2001 was $55.1
million, resulting primarily from our receipt of the net proceeds from our
initial public offering and the proceeds from the seller financing related to
the acquisition of certain franchise operations. These financing sources of
funds were partially offset by our repayment of borrowings under our lines of
credit.

        At September 30, 2001, we had approximately $26.0 million of cash and
cash equivalents. We anticipate that our cash balances, together with cash
generated from operations, will be sufficient to meet our normal operating
requirements for at least the next 12 months. We may also



                                     -14-
<PAGE>

seek to obtain a new credit facility as a source of additional liquidity and
to fund a portion of the purchase price of any future acquisitions of the
businesses of our franchisees.

        On October 1, 2001, we completed our purchase of substantially all of
the operating assets of Embark.com, Inc., a developer of online products and
services for the college admissions market. The purchase price paid at closing
for the Embark assets consisted of 875,000 newly issued shares of our common
stock valued at approximately $5.2 million, approximately $3.4 million in
assumed indebtedness and approximately $2.1 million in other assumed
liabilities of Embark, consisting primarily of deferred revenue relating to
customer contracts assumed by us, net of acquired receivables of approximately
$1 million. Embark may also receive additional cash payments and up to an
additional 125,000 shares of our common stock based on the future revenue
performance of the acquired business. In connection with the transaction, we
also made a $1.8 million loan to Embark from working capital, which loan is
secured by 300,000 of the shares of our common stock that Embark received as
consideration for the acquisition.


RECENT ACCOUNTING PRONOUNCEMENTS

        In June 2001, the Financial Accounting Standards Board issued Statement
No. 141, "Business Combinations" and Statement No. 142, "Goodwill and Other
Intangible Assets", effective for fiscal years beginning after December 15,
2001. Under the new rules, goodwill and intangible assets deemed to have
infinite lives will no longer be amortized but will be subject to annual
impairment tests. Other intangible assets will continue to be amortized over
their useful lives. We are currently reviewing the impact of these Statements
and will be performing a fair value analysis at a later date in connection with
the adoption of Statement No. 142 on January 1, 2002.


IMPACT OF INFLATION

Inflation has not had a significant impact on our historical operations.

SEASONALITY IN RESULTS OF OPERATIONS

        We experience seasonal fluctuations in our revenue because the markets
in which we operate are subject to seasonal fluctuations based on the
scheduled dates for standardized admissions tests and the typical school year.
We typically generate the largest portion of our Test Preparation Services
revenue in the third quarter. Since our Homeroom.com subscription service has
only recently begun to generate revenue, it is difficult for us to predict the
impact of seasonal factors on this business.

ITEM 3.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


                                     -15-
<PAGE>


Our portfolio of marketable securities includes primarily short-term money
market funds. The fair value of our portfolio of marketable securities would
not be significantly impacted by either a 100 basis point increase or decrease
in interest rates due primarily to the short-term nature of the portfolio. Our
outstanding long-term debt bears interest at fixed rates. We do not currently
hold or issue derivative financial instruments.

Royalty payments from our international franchisees constitute an
insignificant percentage of our revenue. Accordingly, our exposure to exchange
rate fluctuations is minimal.


PART II.  OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS

        From time to time, we are involved in legal proceedings incidental to
the conduct of our business. We are not currently a party to any legal
proceeding which, in the opinion of our management, is likely to have a
material adverse effect on us.

ITEM 2.  CHANGES IN SECURITIES AND USE OF PROCEEDS

        INITIAL PUBLIC OFFERING AND USE OF PROCEEDS FROM SALES OF REGISTERED
        SECURITIES

        Our Registration Statement on Form S-1 (File No. 333-43874) related to
our initial public offering was declared effective by the Securities and
Exchange Commission on June 18, 2001. Through the end of the reporting period
covered by this report on Form 10-Q, we have used approximately $2.0 million
of the net proceeds from the initial public offering for working capital and
other general corporate purposes and $29.9 million of the net proceeds to
repay outstanding indebtedness, including accrued interest, under our credit
facilities. Of the proceeds used to repay outstanding indebtedness under our
credit facilities $5.1 million was paid to SGC Partners II, LLC in it's
capacity as one of the lenders thereunder. SGC Partners II, LLC holds more
than 10% of our common stock. In addition, V. Frank Pottow, one of our
directors, is a Managing Director of SG Capital Partners, the general partner
of SG Merchant Banking Fund L.P., which is the parent of SGC Partners II, LLC.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

        Not applicable.

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

        Not applicable.

ITEM 5.  OTHER INFORMATION

        Not applicable.


                                     -16-
<PAGE>


ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)     Exhibits:

    Exhibit Number    Description

    10.1              Non-Recourse Promissory Note, dated August 15, 2001,
                      made by Bruce  Task in favor of The Princeton Review,
                      Inc.

    10.2              Pledge and Security Agreement, dated as of August 15,
                      2001, by and between Bruce Task and The Princeton
                      Review, Inc.



(b)     Reports on Form 8-K

There were no reports on Form 8-K filed by The Princeton Review, Inc. during
the period covered by this report on Form 10-Q.


                                     -17-

<PAGE>



                                   SIGNATURES

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



                           The Princeton Review, Inc.



                           By:      /s/ Stephen Melvin
                               ----------------------------------------------
                                    Stephen Melvin
                                    Chief Financial Officer and
                                    Treasurer
                                    (Duly Authorized Officer and
                                    Principal Financial and
                                    Accounting Officer)

November 13, 2001


                                     -18-