##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q/A
 (Amendment No. 1)
 þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For
the quarterly period ended March 31, 2006
 OR
 o
    
    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 incorporation or organization)
    
    (I.R.S. Employer Identification No.)2315 Broadway New York, New York
    
    10024(Address of principal executive offices)
    
    (Zip Code)
 Registrants telephone number, including area code: (212) 874-8282
  þ o
  o þ o
  o þ




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EXPLANATORY NOTE
 
  
      1




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TABLE OF CONTENTS
 PART I. FINANCIAL INFORMATION
    
    
    3Item 1. Condensed Consolidated Financial Statements
    
    
    3Condensed Consolidated Balance Sheets
    
    
    3Condensed Consolidated Statements of Operations
    
    
    4Condensed Consolidated Statements of Cash Flows
    
    
    5Notes to Condensed Consolidated Financial Statements
    
    
    6Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    15Item 3. Quantitative and Qualitative Disclosures about Market Risk
    
    
    19Item 4. Controls and Procedures
    
    
    20PART II. OTHER INFORMATION
    
    
    22Item 1. Legal Proceedings
    
    
    22Item 1A. Risk Factors
    
    
    22Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    22Item 3. Defaults Upon Senior Securities
    
    
    22Item 4. Submission of Matters to a Vote of Security Holders
    
    
    22Item 5. Other Information
    
    
    23Item 6. Exhibits
    
    
    25SIGNATURES
    
    
    26EX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATION
  2




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PART I. FINANCIAL INFORMATION
 
 Item 1. Condensed Consolidated Financial Statements
 THE PRINCETON REVIEW, INC. AND SUBSIDIARIES
 
 Condensed Consolidated Balance Sheets
 As Restated
 
 March 31,
    
    
    December 31,2006
    
    
    2005(unaudited)ASSETS:Current assets:Cash and cash equivalents
    
    $
    3,143
    
    
    $
    8,002Accounts receivable, net of allowance of $2,126 in 2006 and $1,601 in 2005
    
    
    24,518
    
    
    
    22,493Accounts receivable-related parties
    
    
    542
    
    
    
    1,591Other receivables, principally related parties
    
    
    728
    
    
    
    813Inventory
    
    
    2,828
    
    
    
    2,798Prepaid expenses
    
    
    2,467
    
    
    
    2,229Other current assets
    
    
    1,310
    
    
    
    1,307Total current assets
    
    
    35,536
    
    
    
    39,233Furniture, fixtures, equipment and software development, net
    
    
    16,074
    
    
    
    16,155Goodwill
    
    
    31,506
    
    
    
    31,506Investment in affiliates
    
    
    1,873
    
    
    
    1,938Other intangibles, net
    
    
    13,717
    
    
    
    13,371Other assets
    
    
    3,753
    
    
    
    3,168Total assets
    
    $
    102,459
    
    
    $
    105,371LIABILITIES & STOCKHOLDERS EQUITY:Current liabilities:Accounts payable
    
    $
    8,931
    
    
    $
    10,449Accrued expenses
    
    
    9,634
    
    
    
    10,826Current maturities of long-term debt
    
    
    1,469
    
    
    
    1,530Deferred income
    
    
    18,438
    
    
    
    16,548Total current liabilities
    
    
    38,472
    
    
    
    39,353Deferred rent
    
    
    2,408
    
    
    
    2,327Long-term debt
    
    
    2,681
    
    
    
    2,845Fair value of derivatives and warrant
    
    
    332
    
    
    
    393Series B-1 Preferred Stock, $0.01 par value; 10,000 shares authorized;
10,000 shares issued and outstanding at March 31, 2006 and
10,000 shares issued and outstanding at December 31, 2005
    
    
    10,000
    
    
    
    10,000Stockholders equityPreferred stock, $0.01 par value; 4,990,000 shares authorized, none issued and outstanding
    
    
    
    
    
    
    Common stock, $0.01 par value; 100,000,000 shares authorized; 27,572,172
issued and outstanding at March 31, 2006 and December 31, 2005, respectively
    
    
    276
    
    
    
    276Additional paid-in capital
    
    
    116,449
    
    
    
    116,279Accumulated deficit
    
    
    (67,887
    )
    
    
    (65,823
    )Accumulated other comprehensive loss
    
    
    (272
    )
    
    
    (279
    )Total stockholders equity
    
    
    48,566
    
    
    
    50,453Total liabilities and stockholders equity
    
    $
    102,459
    
    
    $
    105,371
 
  3




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THE PRINCETON REVIEW, INC. AND SUBSIDIARIES
 
 Condensed Consolidated Statements of Operations
 (unaudited)
 As Restated
 
 Three Months EndedMarch 31,2006
    
    
    2005RevenueTest Preparation Services
    
    $
    25,033
    
    
    $
    22,885K-12 Services
    
    
    6,873
    
    
    
    7,919Admissions Services
    
    
    3,174
    
    
    
    2,794Total revenue
    
    
    35,080
    
    
    
    33,598Cost of revenueTest Preparation Services
    
    
    7,845
    
    
    
    7,037K-12 Services
    
    
    4,726
    
    
    
    4,023Admissions Services
    
    
    1,290
    
    
    
    773Total cost of revenue
    
    
    13,861
    
    
    
    11,833Gross Profit
    
    
    21,219
    
    
    
    21,765Operating expenses
    
    
    23,089
    
    
    
    21,575Loss from operations
    
    
    (1,870
    )
    
    
    190Interest income (expense)
    
    
    (31
    )
    
    
    (271
    )Other income (expense)
    
    
    60
    
    
    
    510Equity in the income (loss) of affiliates
    
    
    (67
    )
    
    
    (67
    )Loss before income taxes
    
    
    (1,908
    )
    
    
    362(Provision) benefit for income taxes
    
    
    
    
    
    
    Net loss
    
    
    (1,908
    )
    
    
    362Dividends and accretion on Series B-1 Preferred Stock
    
    
    (157
    )
    
    
    (556
    )Loss attributed to common stockholders
    
    $
    (2,065
    )
    
    $
    (194
    )Basic and diluted loss per share
    
    $
    (0.07
    )
    
    $
    (0.01
    )Weighted average shares used in computing loss per share
    
    
    27,572
    
    
    
    27,570
 
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THE PRINCETON REVIEW, INC. AND SUBSIDIARIES
 
 Condensed Consolidated Statements of Cash Flows
 (unaudited)
 As Restated
 
 Three Months Ended March 31,2006
    
    
    2005(in thousands)Cash flows from operating activities:Net income (loss)
    
    $
    (1,908
    )
    
    $
    362Adjustments to reconcile net income (loss) to net cash provided by
operating activities:Depreciation
    
    
    451
    
    
    
    400Amortization
    
    
    1,661
    
    
    
    1,336Bad debt expense
    
    
    762
    
    
    
    165Write-off of inventory
    
    
    166
    
    
    
    Stock based compensation
    
    
    170
    
    
    
    Other, net
    
    
    41
    
    
    
    (692
    )Net change in operating assets and liabilities:Accounts receivable
    
    
    (1,654
    )
    
    
    (2,202
    )Inventory
    
    
    (196
    )
    
    
    131Prepaid expenses
    
    
    (238
    )
    
    
    342Deferred book and software development costs
    
    
    (846
    )
    
    
    515Other assets
    
    
    (74
    )
    
    
    326Accounts payable and accrued expenses
    
    
    (2,711
    )
    
    
    (659
    )Deferred income
    
    
    1,890
    
    
    
    (3,145
    )Net cash used by operating activities
    
    
    (2,486
    )
    
    
    (3,121
    )Cash flows from investing activities:Purchases of
furniture, fixtures, equipment and software development
    
    
    (1,366
    )
    
    
    (1,931
    )Payment of related party loan
    
    
    133
    
    
    
    Note receivable
    
    
    250
    
    
    
    250Additions to capitalized K-12 content, capitalized course costs
    
    
    (1,010
    )
    
    
    (587
    )Net cash used in investing activities
    
    
    (1,993
    )
    
    
    (2,268
    )Cash flows from financing activities:Proceeds (payments) from revolving credit facility
    
    
    
    
    
    
    (2,000
    )Capital lease payments
    
    
    (223
    )
    
    
    (168
    )Dividends on Series B-1 Preferred Stock
    
    
    (157
    )
    
    
    (125
    )Proceeds from exercise of options
    
    
    
    
    
    
    7Net cash used in financing activities
    
    
    (380
    )
    
    
    (2,286
    )Net decrease in cash and cash equivalents
    
    
    (4,859
    )
    
    
    (7,675
    )Cash and cash equivalents, beginning of period
    
    
    8,002
    
    
    
    19,197Cash and cash equivalents, end of period
    
    $
    3,143
    
    
    $
    11,522
 
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THE PRINCETON REVIEW, INC. AND SUBSIDIARIES
 
 Notes to Condensed
Consolidated Financial Statements (As Restated)
 (unaudited)
 1. Basis of Presentation
  
  
 Products and Services
  Three Months Ended March 31,2006
    
    
    2005(in thousands)RevenueServices
    
    $
    31,158
    
    
    $
    30,186Products
    
    
    1,837
    
    
    
    1,708Other
    
    
    2,085
    
    
    
    1,704Total Revenue
    
    $
    35,080
    
    
    $
    33,598Cost of RevenueServices
    
    $
    12,080
    
    
    $
    10,861Products
    
    
    1,646
    
    
    
    793Other
    
    
    135
    
    
    
    179Total Cost of Revenue
    
    $
    13,861
    
    
    $
    11,833
  Stock-Based Compensation
 Accounting
for Stock Issued to Employees Accounting for Stock-Based Compensation Share-Based Payment
 6




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Three MonthsEndedMarch 31, 2005(In thousands,except per shareamounts)As
restatedLoss attributed to common stockholders, as reported
    
    $
    (194
    )Total stock-based employee compensation expense determined
under fair-value based method for all award, net of related
tax effects
    
    
    (513
    )Pro forma net loss attributed to common stockholders
    
    $
    (707
    )Net loss per share:Basic and diluted, as reported
    
    $
    (0.01
    )Basic and diluted, pro forma
    
    $
    (0.03
    )
 Adoption of New Accounting Pronouncements
 Accounting Changes and Error Corrections  a
Replacement of APB Opinion No. 20 and FASB Statement No. 3
  
    
    Financial Accounting Standards Board (FASB) Staff Position FAS 13-1, Accounting for
Rental Costs Incurred during a Construction Period (October 2005);
    
    FASB Staff Position FAS 115-1, The Meaning of Other-Than-Temporary Impairment and Its
Application to Certain Investments (November 2005);
    
    FASB Staff Position FIN 45-3, Application of FASB Interpretation No. 45 to Minimum
Revenue Guarantees Granted to a Business or Its Owners (November 2005); and,
    
    FASB SFAS No. 155, Accounting for Certain Hybrid Financial Instruments  an amendment
of FASB Statements No. 133 and 140 (February 2006).
    
    The Company does not expect these pronouncements to have a significant impact on its
consolidated financial statements.
 Use of Estimates
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Reclassifications
  2. Restatement of Financial Statements
   
 
    
    Holder Conversion Option  The Preferred Stock
is convertible into the Companys common stock at the option of
the holder at any time. The initial conversion price was
$11.00 per common share, but was decreased to $8.0860 per common
share due to a delay in the effectiveness of the registration
statement relating to the Companys common stock issuable upon
conversion of the Preferred Stock and the subsequent failure to keep
the registration statement effective in accordance with the agreement
with the Holder. The Company may be required to further reduce the conversion
price upon certain events such as the issuance of common stock at a
price below the conversion price or if the Company fails to keep the
registration statement current.
 
 
    
    Make Whole Provision  In the event that the Company is party to
one of several transactions classified as a business
combination, upon consummation of the transaction, the Holder is
entitled to receive (at the Holders election)
 a)
    
    the consideration to which the Holder would have been entitled had it converted
the Preferred Stock into common stock immediately prior to consummation,b)
    
    the consideration to which the Holder would have been entitled had it redeemed
the Preferred Stock for common stock immediately prior to consummation, orc)
    
    cash, initially equal to 160% of the aggregate redemption amount of the
Preferred Stock less 5% of the redemption amount for each full year the Preferred Stock
was outstanding.
 
  
 Embedded Derivatives
 Accounting for Derivatives and
Hedging Activities
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Warrant
 
 Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity
 
  
  
 
  
  
  
  
 As PreviouslyThree
Months ended March 31, 2006(in thousands, except per share data)
    
    Reported
    
    As RestatedOther income (expense)
    
    $
    
    
    
    $
    60Net loss
    
    
    (1,968
    )
    
    
    (1,908
    )Net loss attributable to common stockholders
    
    
    (2,125
    )
    
    
    (2,065
    )Loss per
common share  basic and diluted
    
    $
    (0.08
    )
    
    $
    (0.07
    )
 
 As PreviouslyThree
Months ended March 31, 2005(in thousands, except per share data)
    
    Reported
    
    As RestatedOther income (expense)
    
    $
    41
    
    
    $
    510Net income
(loss)
    
    
    (145
    )
    
    
    362Dividends and accretion on Series B-1 Preferred Stock
    
    
    (195
    )
    
    
    (556
    )Net loss attributable to common stockholders
    
    
    (340
    )
    
    
    (194
    )
 As PreviouslyAs of March 31, 2006(in thousands)
    
    Reported
    
    As RestatedDerivative instruments  noncurrent liability
    
    $
    
    
    
    $
    332Total long-term liabilities
    
    
    5,089
    
    
    
    5,421Accumulated deficit
    
    
    (67,555
    )
    
    
    (67,887
    )Total stockholders equity
    
    
    48,898
    
    
    
    48,566
 9




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As PreviouslyAs of December 31, 2005(in thousands)
    
    Reported
    
    As RestatedDerivative instruments  noncurrent liability
    
    $
    
    
    
    $
    393Total long-term liabilities
    
    
    5,172
    
    
    
    5,565Accumulated deficit
    
    
    (65,430
    )
    
    
    (65,823
    )Total stockholders equity
    
    
    50,846
    
    
    
    50,453
 
 As PreviouslyThree Months ended March 31, 2006 (in thousands)
    
    Reported
    
    As RestatedCash flow from operating activities:Net loss
    
    $
    (1,968
    )
    
    $
    (1,908
    )Other, net
    
    
    101
    
    
    
    41
 
 
 As PreviouslyThree Months ended March 31, 2005(in thousands)
    
    Reported
    
    As RestatedCash flow from operating activities:Net income
(loss)
    
    $
    (145
    )
    
    $
    362Other, net
    
    
    (185
    )
    
    
    (692
    )
 
 
   
 3. Stock-Based Compensation
    Three Months Ended March 31,2006
    
    2005AssumptionsExpected volatility
    
    
    44
    %
    
    
    59Expected dividends
    
    
    0
    %
    
    
    0Expected term (in years)
    
    
    5.0
    
    
    
    5.0Risk-free rate
    
    
    5.00
    %
    
    
    4.25
    %
  10




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Weighted-Average
    
    
    AggregateWeighted-
    
    
    Remaining
    
    
    IntrinsicAverage
    
    
    Contractual
    
    
    ValueOptions
    
    
    Exercise Price
    
    
    Term
    
    
    ($000)Outstanding at January 1, 2006
    
    
    3,298,494
    
    
    $
    7.00Granted
    
    
    10,500
    
    
    $
    5.18Forfeited
    
    
    (47,774
    )
    
    $
    7.41Exercised
    
    
    
    
    
    $
    0.00Outstanding at March 31 2006
    
    
    3,261,220
    
    
    $
    6.99
    
    
    
    6.06
    
    
    $
    1,055Exercisable at March 31, 2006
    
    
    2,134,059
    
    
    $
    6.99
    
    
    
    4.53
    
    
    $
    870
   Weighted-AverageGrant-DateNonvested Options
    
    Options
    
    Fair ValueNonvested at January 1, 2006
    
    
    484,449
    
    
    $
    3.09Granted
    
    
    10,500
    
    
    $
    5.18Vested
    
    
    (41,165
    )
    
    $
    2.95Forfeited
    
    
    (12,565
    )
    
    $
    4.47Nonvested at March 31, 2006
    
    
    441,219
    
    
    $
    3.17
  4. Line of Credit
  5. Series B-1 Preferred Stock
   11




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a)
    
    the consideration to which the holder would have been entitled had it converted
the Series B-1 Preferred Stock into common stock immediately prior to consummation,b)
    
    the consideration to which the holder would have been entitled had it redeemed
the Series B-1 Preferred Stock for common stock immediately prior to consummation, orc)
    
    cash, initially equal to 160% of the aggregate redemption amount of the Series B-1 Preferred
Stock less 5% of the redemption amount for each full year the Series
B-1 Preferred Stock was
outstanding.
   6. Segment Information
    12




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Three Months Ended March 31, 2006(in thousands)TestPreparation
    
    
    K-12
    
    
    AdmissionsServices
    
    
    Services
    
    
    Services
    
    
    Corporate
    
    
    TotalRevenue
    
    $
    25,033
    
    
    $
    6,873
    
    
    $
    3,174
    
    
    $
    
    
    
    $
    35,080Operating expense (including depreciation
and amortization)
    
    
    12,454
    
    
    
    4,121
    
    
    
    2,250
    
    
    
    4,264
    
    
    
    23,089Operating income (loss)
    
    
    4,733
    
    
    
    (1,974
    )
    
    
    (365
    )
    
    
    (4,264
    )
    
    
    (1,870
    )Depreciation and amortization
    
    
    504
    
    
    
    812
    
    
    
    486
    
    
    
    310
    
    
    
    2,112Other income (expense) (as restated)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6
    )
    
    
    (6
    )Segment EBITDA
    
    $
    5,237
    
    
    $
    (1,162
    )
    
    $
    121
    
    
    $
    (3,960
    )
    
    $
    236Total segment assets
    
    $
    55,045
    
    
    $
    24,506
    
    
    $
    8,183
    
    
    $
    14,725
    
    
    $
    102,459Segment goodwill
    
    $
    31,006
    
    
    $
    
    
    
    $
    500
    
    
    $
    
    
    
    $
    31,506Expenditures for long lived assets
    
    $
    355
    
    
    $
    1,061
    
    
    $
    225
    
    
    $
    801
    
    
    $
    2,442
 
 
 Three Months Ended March 31, 2005(in thousands)TestPreparation
    
    
    K-12
    
    
    AdmissionsServices
    
    
    Services
    
    
    Services
    
    
    Corporate
    
    
    TotalRevenue
    
    $
    22,885
    
    
    $
    7,919
    
    
    $
    2,794
    
    
    $
    
    
    
    $
    33,598Operating expense (including depreciation
and amortization)
    
    
    9,785
    
    
    
    4,651
    
    
    
    2,827
    
    
    
    4,311
    
    
    
    21,574Operating income (loss)
    
    
    6,062
    
    
    
    (754
    )
    
    
    (807
    )
    
    
    (4,311
    )
    
    
    190Depreciation and amortization
    
    
    468
    
    
    
    585
    
    
    
    388
    
    
    
    295
    
    
    
    1,736Other
income (expense) (as restated)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    444
    
    
    
    444Segment EBITDA
    
    $
    6,530
    
    
    $
    (169
    )
    
    $
    (419
    )
    
    $
    (3,572
    )
    
    $
    2,370Total segment assets
    
    $
    45,370
    
    
    $
    22,772
    
    
    $
    15,413
    
    
    $
    17,839
    
    
    $
    101,394Segment goodwill
    
    $
    31,011
    
    
    $
    
    
    
    $
    500
    
    
    $
    
    
    
    $
    31,511Expenditures for long lived assets
    
    $
    43
    
    
    $
    3,426
    
    
    $
    436
    
    
    $
    529
    
    
    $
    4,434
 
 13




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Reconciliation of operating income (loss) to net income (loss) (in thousands):
 Three Months Ended March 31,2006
    
    
    2005As restatedTotal income (loss) from reportable segments
    
    $
    (1,870
    )
    
    $
    190Unallocated amounts:Interest income (expense)
    
    
    (31
    )
    
    
    (271
    )Other income (expense)
    
    
    60
    
    
    
    510Equity in loss of affiliate
    
    
    (67
    )
    
    
    (67
    )Net income (loss)
    
    $
    (1,908
    )
    
    $
    362
 7. Earnings (Loss) Per Share
 Earnings per Share
  8. Comprehensive Income (Loss)
  Three Months Ended March 31,2006
    
    
    2005As restatedNet income (loss) attributable to common stockholders
    
    $
    (2,065
    )
    
    $
    (194
    )Foreign currency translation adjustment
    
    
    7
    
    
    
    (5
    )Total comprehensive income (loss)
    
    $
    (2,058
    )
    
    $
    (199
    )
 9. Subsequent Events
 Credit Agreement
   14




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Notice of Partial Redemption of Preferred Stock
    Restructuring
  
 Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
  Overview
  15




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Share-Based Payment.
  Restatement of Financial Statements
  16




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Results of Operations
 Comparison of Three Months Ended March 31, 2006 and 2005
 Revenue
     Cost of Revenue
      17




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##### Table of Contents



Operating Expenses
  
    
    Test Preparation Services increased by $2.6 million, or 28.3%, from
$9.3 million in 2005 to $11.9 million in 2006. Significant drivers
relate to SES support costs, which were higher by $1.1 million. In
addition, legal and recruitment expense was higher by approximately
$200,000 and bad debt increased by approximately $400,000.
 
    
    Admissions Services decreased by $676,000, or 27.7%, from $2.4 million
in 2005 to $1.8 million in 2006. This reduction is driven by the
reclassification of technology operations and counseling costs to cost
of revenues (from operating expenses in 2005) totaling approximately
$700,000. These were partially offset by a $200,000 increase in bad
debt expense and $100,000 increase in corporate allocations and
decrease in rent and travel related costs at approximately $200,000.
 
    
    K-12 Services decreased by $558,000, or 12.8%, from $4.4 million in
2005 to $3.8 million in 2006. This decrease is driven by lower salaries
of approximately $300,000 and approximately $200,000 in additional
reclassifications to cost of revenue (due to higher labor
utilization).
 
    
    Corporate Services decreased by $100,000 or 1.5%, from $4.0 million in
2005 to $3.9 million in 2006. This decrease relates to a decrease of
approximately $700,000 in professional services, offset by increased
salaries of $500,000.
 Income Taxes
  Other Income (Expenses), net
  Dividends and Accretion on Series B-1 Preferred Stock
  Liquidity and Capital Resources
    18




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Impact of Inflation
  Seasonality in Results of Operations
  
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
  19




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Item 4. Controls and Procedures
  Scope of the Controls Evaluation
   Conclusions
  20




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Changes
in Internal Control over Financial Reporting
  21




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PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 1A. Risk Factors
  
 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  22




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Item 5. Other Information
 Approval of 2005 Annual Bonus Awards to Named Executive Officers
  2005 CashName and Principal Position
    
    Bonus AwardMark Chernis,
President and Chief Operating Officer
    
    $
    52,451Andrew J. Bonanni,
Chief Financial Officer and Treasurer
    
    
    20,913Stephen Quattrociocchi,
Executive Vice President, Test Preparation Services Division
    
    
    22,537Margot Lebenberg,
Executive Vice President, General Counsel and Secretary
    
    
    67,594Young Shin,
Executive Vice President, Admissions Services Division
    
    
    26,735Robert Cohen,
Senior Vice President, Special Projects
    
    
    47,200
        23




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Adoption of 2006 G-0 Employee Bonus Policy and Establishment of 2006 Targets
   Stock Option Grants and Deferred Stock Awards to Named Executive Officers
  Number of Stock
    
    Deferred StockName and Principal Position
    
    options Granted (1)
    
    Grant (shares) (2)Mark Chernis,
President and Chief Operating Officer
    
    
    34,900
    
    
    
    19,000Andrew J. Bonanni (3),
Chief Financial Officer and Treasurer
    
    
    20,050
    
    
    
    10,900Stephen Quattrociocchi,
Executive Vice President, Test Preparation Services Division
    
    
    15,000
    
    
    
    8,150Margot Lebenberg,
Executive Vice President, General Counsel and Secretary
    
    
    13,500
    
    
    
    7,350Young Shin,
Executive Vice President, Admissions Services Division
    
    
    11,100
    
    
    
    6,050
 
 (1)
    
    Exercise price of $6.20 per share.(2)
    
    The actual number of shares that could be awarded at the end of the performance period
will range between 50% and 200% of this target based upon the actual attainment by the company of
earnings per share and return on assets.(3)
    
    Mr. Bonanni has agreed to relinquish 40,000 options granted to him in 2005 in exchange for
the above grants. 24




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Item 6. Exhibits
 Exhibit Number
    
    Description10.39
    
    Credit Agreement, dated April 10, 2006, by and among The Princeton Review, Inc., Princeton Review Operations,
L.L.C., lenders who become signatory from time to time, and Golub Capital Incorporated (incorporated herein by
reference to Exhibit 10.1 to our Current Report on Form 8-K (File No. 000-32469), filed with the Securities
and Exchange Commission on April 14, 2006).10.40
    
    Security Agreement, dated April 10, 2006, by and among The Princeton Review, Inc., Princeton Review
Operations, L.L.C. and Golub Capital Incorporated (incorporated herein by reference to Exhibit 10.2 to our
Current Report on Form 8-K (File No. 000-32469), filed with the Securities and Exchange Commission on April
14, 2006).10.41
    
    Employment Agreement, dated
April 26, 2004, between The Princeton Review, Inc. and Margot
Lebenberg. (*)10.42
    
    Employment Agreement, dated February 18, 2003, between The Princeton Review, Inc. and Young Shin. (*)10.43
    
    Indemnification Agreement, dated December 14, 2004, between The Princeton Review, Inc. and Margot Lebenberg. (*)10.44
    
    The Princeton Review, Inc. Bonus Policy for G-0 Employees for Calendar Year 2006. (*)10.45
    
    Form of Restricted Stock Agreement pursuant to The Princeton Review, Inc. 2000 Stock Incentive Plan (as
amended and restated effective March 24, 2003). (*)10.46
    
    Form of Performance Based Deferred Stock Award Agreement pursuant to the Princeton Review, Inc. 2000 Stock
Incentive Plan (as amended and restated effective March 24, 2003). (*)31.1
    
    Certification Pursuant to
Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (**)31.2
    
    Certification Pursuant to
Rule 13a-14(a), as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (**)32.1
    
    Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002. (**)
 
 (*)
    
    Previously filed with original
Quarterly Report on SEC Form 10-Q.(**)
    
    Filed herewith.




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SIGNATURES
  THE PRINCETON REVIEW, INC.By:

/s/
STEPHEN MELVINStephen MelvinChief Financial Officer and Treasurer
(Duly Authorized Officer and Principal
Financial and Accounting Officer)  26