##### 



UNITED
    STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
    20549
  Form 10-Q
   þ

Quarterly Report Pursuant to Section 13 or 15(d) of the
    Securities Exchange Act of 1934For the quarterly period ended
    June 30, 2007ORo

Transition Report Pursuant to Section 13 or 15(d) of the
    Securities Exchange Act of 1934For 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
  Rule 12b-2 o þ o
  Rule 12b-2 o þ




---



##### 



TABLE OF
    CONTENTS
  PART I. FINANCIAL INFORMATIONItem 1. Condensed
    Consolidated Financial Statements


1Condensed Consolidated Balance
    Sheets


1Condensed Consolidated Statements
    of Operations


2Condensed Consolidated Statements
    of Cash Flows


3Notes to Condensed Consolidated
    Financial Statements


4Item 2. Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations


17Item 3. Quantitative and
    Qualitative Disclosures about Market Risk


21Item 4. Controls and
    Procedures


22PART II. OTHER INFORMATION


23Item 1. Legal Proceedings


23Item 1A. Risk Factors


24Item 2. Unregistered Sales of
    Equity Securities and Use of Proceeds


24Item 3. Defaults Upon Senior
    Securities


24Item 4. Submission of Matters
    to a Vote of Security Holders


24Item 5. Other Information


24Item 6. Exhibits


24SIGNATURES


25EX-10.1: MICHAEL PERIK EMPLOYMENT
    AGREEMENTEX-10.2: MARK CHERNIS EMPLOYMENT
    AGREEMENT AMENDMENTEX-10-3: MICHAEL PERIK OPTION
    AGREEMENTEX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATION  i




---



##### 



PART I.
    FINANCIAL INFORMATION  Item 1.
    Condensed
    Consolidated Financial Statements  THE
    PRINCETON REVIEW, INC. AND SUBSIDIARIES
  Condensed
    Consolidated Balance Sheets(in thousands, except share data) June 30,


December 31,2007


2006(unaudited)ASSETS:Current assets:Cash and cash equivalents

$
11,179


$
10,822Accounts receivable, net of
    allowance of $4,331 in 2007 and $2,848 in 2006


25,040



31,531Accounts receivable-related parties


104



124Other receivables, related parties


2,425



1,999Inventory


2,409



2,950Prepaid expenses


1,068



1,653Other current assets


1,200



2,612Other current assets related to
    discontinued operations






181Total current assets


43,425



51,872Furniture, fixtures, equipment and
    software development, net


14,204



16,071Goodwill


31,006



31,006Investment in affiliates


1,639



1,639Other intangibles, net


10,217



11,527Other assets


7,661



4,013Other assets related to
    discontinued operations






1,980Total assets

$
108,152


$
118,108LIABILITIES &
    STOCKHOLDERS EQUITY:Current liabilities:Line of credit

$
15,000


$
3,000Accounts payable


4,457



15,220Accrued expenses


10,381



11,277Current maturities of long-term
    debt


1,127



1,369Deferred income


19,328



20,672Liabilities related to
    discontinued operations






2,541Total current liabilities


50,293



54,079Deferred rent


2,520



2,558Long-term debt


1,665



14,127Fair value of derivatives and
    warrant


4,007



181Series B-1
    Preferred Stock, $0.01 par value; 10,000 shares
    authorized; 6,000 shares issued and outstanding at
    June 30, 2007 and December 31, 2006, respectively


6,000



6,000Stockholders
    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; 28,105,005 and
    27,601,268 issued and outstanding at June 30, 2007 and
    December 31, 2006, respectively


281



276Additional paid-in capital


119,361



117,082Accumulated deficit


(75,666
)


(75,871
)Accumulated other comprehensive
    loss


(309
)


(324
)Total stockholders equity


43,667



41,163Total liabilities and
    stockholders equity

$
108,152


$
118,108    1




---



##### 



THE
    PRINCETON REVIEW, INC. AND SUBSIDIARIES
  Condensed Consolidated Statements of Operations
 (In
    thousands, except per share data)
  Three Months Ended


Six Months EndedJune 30,


June 30,2007


2006


2007


2006(Unaudited)RevenueTest Preparation Services

$
27,531


$
22,540


$
54,621


$
48,433K-12 Services


8,854



10,695



21,935



18,413Total revenue


36,385



33,235



76,556



66,846Cost of revenueTest Preparation Services


8,920



8,013



20,132



16,196K-12 Services


5,514



5,369



12,443



10,564Total cost of revenue


14,434



13,382



32,575



26,760Gross Profit


21,951



19,853



43,981



40,086Operating expenses


21,713



20,191



44,364



42,418Income (loss) from operations


238



(338
)


(383
)


(2,332
)Interest income (expense)


(497
)


(192
)


(841
)


(220
)Other income (expense)


(3,687
)


(156
)


(3,763
)


(96
)Equity in the income (loss) of
    affiliates






17







(50
)Income (loss) before income
    taxes


(3,946
)


(669
)


(4,987
)


(2,698
)(Provision) benefit for income
    taxes


300







478



Net income (loss) from
    continuing operations


(3,646
)


(669
)


(4,509
)


(2,698
)Discontinued
    operationsNet income (loss) from
    discontinued operations


(246
)


(428
)


952



(306
)Gain from disposal of discontinued
    operations










4,539



(Provision) benefit for income
    taxes


(394
)






(572
)


Net income (loss) from
    discontinued operations


(640
)


(428
)


4,919



(306
)Net income (loss)


(4,286
)


(1,097
)


410



(3,004
)Dividends and accretion on
    Series B-1
    Preferred Stock


(104
)


(147
)


(207
)


(305
)Income (loss) attributed to
    common stockholders

$
(4,390
)

$
(1,244
)

$
203


$
(3,309
)Earnings (loss) per
    shareBasic and dilutedIncome (loss) from continuing
    operations

$
(0.13
)

$
(0.03
)

$
(0.17
)

$
(0.11
)Income (loss) from discontinued
    operations


(0.02
)


(0.02
)


0.18



(0.01
)Net income (loss)

$
(0.15
)

$
(0.05
)

$
0.01


$
(0.12
)Weighted average shares used in
    computing income (loss)
    per share


27,890



27,574



27,837



27,574    2




---



##### 



THE
    PRINCETON REVIEW, INC. AND SUBSIDIARIES
  Condensed Consolidated Statements of Cash Flows
 (In
    thousands)
  For the Six MonthsEnded June 30,2007


2006(Unaudited)Cash flows provided by (used
    for) operating activities:Net income (loss) from continuing
    operations

$
(4,509
)

$
(2,698
)Adjustments to reconcile net income
    (loss) to net cash provided by operating activities:Depreciation


1,464



1,116Amortization


2,766



3,041Bad debt expense


1,151



484Write-off of deferred financing
    costs


33



Write-off of inventory






265Change in fair value of derivatives


3,826



(281
)Deferred rent


(38
)


146Stock based compensation


2,005



300Other, net


(28
)


(89
)Net change in operating assets and
    liabilities:Accounts receivable


4,934



(2,918
)Inventory


541



(561
)Prepaid expenses


585



333Other assets


(2,421
)


(2,138
)Accounts payable and accrued
    expenses


(11,656
)


(5,147
)Deferred income


(1,344
)


5,280Net cash provided by (used for)
    operating activities


(2,691
)


(2,867
)Cash provided by (used for)
    investing activities:Purchases of furniture, fixtures,
    equipment and software development


(1,074
)


(2,022
)Additions to capitalized K-12
    content, capitalized course costs


(42
)


(1,010
)Payment of related party loan


120



345Payment of note receivable


86



266Payment of loan receivable






250Net cash provided by (used for)
    investing activities


(910
)


(2,171
)Cash flows provided by (used
    for) financing activities:Redemption of
    Series B-1
    Preferred Stock






(4,377
)Proceeds from revolving credit
    facility






10,000Payment of credit facility deferred
    financing costs






(168
)Capital lease payments


(392
)


(403
)Dividends on
    Series B-1
    P referred Stock


(207
)


(305
)Notes payable related to
    acquisitions


(313
)


(318
)Proceeds from exercise of options


279



11Net cash provided by (used for)
    financing activities


(633
)


4,440Total cash flows used in
    continuing operations


(4,234
)


(598
)Cash Flows from Discontinued
    OperationsIncome from discontinued operations


953



(305
)Gain on disposal of discontinued
    operations


(4,538
)


Other adjustments to reconcile net
    income to net cash provided by operating activities


1,176



(2,182
)Net cash provided by (used for)
    operating activities


(2,409
)


(2,487
)Cash received from disposal of
    discontinued operations


7,000



Other cash provided by investing
    activities






2,410Net cash provided by (used for)
    investing activities


7,000



2,410Net cash provided by (used for)
    discontinued operations


4,591



(77
)Increase (decrease) in cash and
    cash equivalents


357



(675
)Cash and cash equivalents,
    beginning of period


10,822



8,002Cash and cash equivalents, end
    of period

$
11,179


$
7,327    3




---



##### 



THE
    PRINCETON REVIEW, INC. AND SUBSIDIARIES
  Notes to Condensed Consolidated Financial
    Statements
  1.
    Basis of
    Presentation    Form 10-K,
    Products
    and Services
   Three Months Ended June 30,


Six Months Ended June 30,2007


2006


2007


2006(In thousands)RevenueServices

$
31,182


$
25,625


$
68,078


$
55,558Products


1,989



5,563



3,582



7,089Other


3,214



2,047



4,896



4,199Total revenue

$
36,385


$
33,235


$
76,556


$
66,846Cost of RevenueServices

$
13,647


$
11,064


$
31,204


$
23,442Products


487



2,131



1,035



2,997Other


300



187



336



321Total cost of revenue

$
14,434


$
13,382


$
32,575


$
26,760     New
    Accounting Pronouncements
  The Fair Value Option for Financial Assets and
    Financial Liabilities  Including an amendment of FASB
    Statement No. 115
 4




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##### 



THE
    PRINCETON REVIEW, INC. AND SUBSIDIARIES
  Notes to
    Condensed Consolidated Financial
    Statements  (Continued)
      Fair Value Measurements
  Accounting for Uncertainty in Income Taxes, an
    interpretation of FASB Statement No. 109
  Accounting for Certain Hybrid Financial
    Instruments  an Amendment of FASB Statements
    No. 133 and 140
  Use of
    Estimates
    Reclassifications
    2.
    Stock-Based
    Compensation   5




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##### 



THE
    PRINCETON REVIEW, INC. AND SUBSIDIARIES
  Notes to
    Condensed Consolidated Financial
    Statements  (Continued)
          3.
    Line of
    Credit  Credit
    Agreement
        and/or
     6




---



##### 



THE
    PRINCETON REVIEW, INC. AND SUBSIDIARIES
  Notes to
    Condensed Consolidated Financial
    Statements  (Continued)
    4.
    Series B-1
    Preferred Stock  Series B-1 Series B-1 90-day Series B-1 Series B-1 Series B-1 Series B-1
  Series B-1 Series B-1 Series B-1 Series B-1 Series B-1 Series B-1 Series B-1
  Series B-1 Series B-1 Series B-1 Series B-1
 7




---



##### 



THE
    PRINCETON REVIEW, INC. AND SUBSIDIARIES
  Notes to
    Condensed Consolidated Financial
    Statements  (Continued)
  24-month Series B-1
  Series B-1
  Series B-1
  Series B-1
  Series B-1 Series B-1
    Embedded
    derivatives and warrant
  Accounting for Derivatives and Hedging Activities
  Series B-1
  Series B-1 Series B-1 Series B-1
  Series B-1
  Series B-1
  Accounting for Certain Financial Instruments with
    Characteristics of both Liabilities and Equity
 8




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##### 



THE
    PRINCETON REVIEW, INC. AND SUBSIDIARIES
  Notes to
    Condensed Consolidated Financial
    Statements  (Continued)
  Series B-1 Series B-1
  Series B-1
    Series B-1
  Dividends
  Series B-1 Series B-1
  5.
    Income
    Taxes    6.
    Segment
    Information   9




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##### 



THE
    PRINCETON REVIEW, INC. AND SUBSIDIARIES
  Notes to
    Condensed Consolidated Financial
    Statements  (Continued)
            Three Months Ended June 30, 2007TestPreparation


K-12Services


Services


Corporate


Total(In thousands)Revenue

$
27,531


$
8,854


$



$
36,385Operating expense (including
    depreciation and amortization)


13,223



3,817



4,673



21,713Operating income (loss)


5,388



(477
)


(4,673
)


238Depreciation and amortization


574



921



543



2,038Other income (expense)










(3,688
)


(3,688
)Segment EBITDA


5,962



444



(7,818
)


(1,412
)Total segment assets

$
53,434


$
29,413


$
25,305


$
108,152Segment goodwill

$
31,006


$



$



$
31,006Expenditures for long lived assets

$
139


$
164


$
288


$
591   10




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##### 



THE
    PRINCETON REVIEW, INC. AND SUBSIDIARIES
  Notes to
    Condensed Consolidated Financial
    Statements  (Continued)
  Three Months Ended June 30, 2006TestPreparation


K-12Services


Services


Corporate


Total(In thousands)Revenue

$
22,540


$
10,695


$



$
33,235Operating expense (including
    depreciation and amortization)


11,795



4,672



3,724



20,191Operating income (loss)


2,731



655



(3,724
)


(338
)Depreciation and amortization


850



927



529



2,306Other income (expense)










(140
)


(140
)Segment EBITDA


3,581



1,582



(3,335
)


1,828Total segment assets

$
57,860


$
28,049


$
21,611


$
107,520Segment goodwill

$
31,506


$



$



$
31,506Expenditures for long lived assets

$
50


$
10


$
630


$
690   Six Month Ended June 30, 2007TestPreparation


K-12Services


Services


Corporate


Total(In thousands)Revenue

$
54,621


$
21,935


$



$
76,556Operating expense (including
    depreciation and amortization)


25,600



8,188



10,576



44,364Operating income (loss)


8,888



1,305



(10,576
)


(383
)Depreciation and amortization


1,100



2,033



1,097



4,230Other income (expense)


0







(3,763
)


(3,763
)Segment EBITDA


9,988



3,338



(13,242
)


84Total segment assets

$
53,434


$
29,413


$
25,305


$
108,152Segment goodwill

$
31,006


$



$



$
31,006Expenditures for long lived assets

$
314


$
227


$
575


$
1,116   11




---



##### 



THE
    PRINCETON REVIEW, INC. AND SUBSIDIARIES
  Notes to
    Condensed Consolidated Financial
    Statements  (Continued)
  Six Months Ended June 30, 2006TestPreparation


K-12Services


Services


Corporate


Total(In thousands)Revenue

$
48,433


$
18,413


$



$
66,846Operating expense (including
    depreciation and amortization)


25,635



8,795



7,988



42,418Operating income (loss)


6,602



(946
)


(7,988
)


(2,332
)Depreciation and amortization


1,576



1,742



839



4,157Other income (expense)










(146
)


(146
)Segment EBITDA


8,178



796



(7,295
)


1,679Total segment assets

$
57,860


$
28,049


$
21,611


$
107,520Segment goodwill

$
31,506


$



$



$
31,506Expenditures for long lived assets

$
630


$
1,070


$
1,431


$
3,131   Reconciliation
    of operating income (loss) to net income (loss) (in
    thousands):
  Three Months Ended June 30,


Six Months Ended June 30,2007


2006


2007


2006Total income (loss) from
    reportable segments

$
238


$
(338
)

$
(383
)

$
(2,332
)Unallocated amounts:Interest income (expense)


(497
)


(192
)


(841
)


(220
)Other income (expense)


(3,687
)


(156
)


(3,763
)


(96
)Equity in loss of affiliate






17







(50
)(Provision) benefit for income
    taxes


300







478



Income (loss) from continuing
    operations


(3,646
)


(669
)


(4,509
)


(2,698
)Discontinued operations


(246
)


(428
)


5,491



(306
)Provision for income taxes


(394
)






(572
)


Net income (loss) from
    discontinued operations


(640
)


(428
)


4,919



(306
)Net income (loss)

$
(4,286
)

$
(1,097
)

$
410


$
(3,004
)   7.
    Income
    (loss) Per Share  Earnings per Share.
    12




---



##### 



THE
    PRINCETON REVIEW, INC. AND SUBSIDIARIES
  Notes to
    Condensed Consolidated Financial
    Statements  (Continued)
  Three Months Ended


Six Months EndedJune 30,


June 30,2007


2006


2007


2006(In thousands)Income (loss) from continuing
    operations

$
(3,646
)

$
(669
)

$
(4,509
)

$
(2,698
)Income (loss) from discontinued
    operations


(640
)


(428
)


4,919



(306
)Less preferred dividends


(104
)


(147
)


(207
)


(305
)Net income (loss) attributed to
    common stockholders

$
(4,390
)

$
(1,244
)

$
203


$
(3,309
)Weighted average common shares
    outstanding for the period


27,890



27,574



27,837



27,574Basic earnings per share:Income (loss) from continuing
    operations

$
(0.13
)

$
(0.03
)

$
(0.17
)

$
(0.11
)Income (loss) from discontinued
    operations


(0.02
)


(0.02
)


0.18



(0.01
)Net income (loss)

$
(0.15
)

$
(0.05
)

$
0.01


$
(0.12
)     Three Months Ended


Six Months EndedJune 30,


June 30,2007


2006


2007


2006Net effect of dilutive stock
    options-based on the treasury stock method


171



176



160



167Effect of convertible preferred
    stock-based on the if-converted method


1,117



1,069



1,116



1,4481,288



1,245



1,276



1,615   8.
    Comprehensive
    Income (Loss)    Three Months Ended June 30,


Six Months Ended June 30,2007


2006


2007


2006(In thousands)Net income (loss) attributable to
    common stockholders

$
(4,390
)

$
(1,244
)

$
203


$
(3,309
)Foreign currency translation
    adjustment


17



(5
)


14



(25
)Total comprehensive income (loss)

$
(4,373
)

$
(1,249
)

$
217


$
(3,334
)   9.
    Restructuring   13




---



##### 



THE
    PRINCETON REVIEW, INC. AND SUBSIDIARIES
  Notes to
    Condensed Consolidated Financial
    Statements  (Continued)
    10.
    Legal
    Matters        ex parte ex parte 21-29, 31-39, 21-29, 31-39,
      Ex Parte 45-53 th No. 03-129-BR), 18-22,
  11.
    Disposal
    of Assets  Admissions
    Tech Business
   14




---



##### 



THE
    PRINCETON REVIEW, INC. AND SUBSIDIARIES
  Notes to
    Condensed Consolidated Financial
    Statements  (Continued)
      Three Months Ended


Six Months EndedJune 30,


June 30,2007


2006


2007


2006(In thousands)Revenues

$
(48
)

$
791


$
2,406


$
2,289Cost of revenues


55



392



392



875Gross margin


(103
)


399



2,014



1,414Operating expenses(a)


143



827



1,062



1,720Income (loss) from discontinued
    operations

$
(246
)

$
(428
)

$
952


$
(306
)     (a)
    
    Excludes corporate overhead expense previously allocated to the
    Admissions Tech Business in accordance with Emerging Issues Task
    Force Issue
    No. 87-24,
    Allocation of Interest Expense to Discontinued
    Operations. The amount of corporate overhead expense
    added back to the Companys continuing operations totaled
    $350,000 for the three months ended June 30, 2006 and
    $69,800, $730,800 for the six months ended June 30, 2007
    and 2006, respectively.    December 31,2006(In thousands)Current assets

$
181Furniture, fixtures, equipment and
    software development, net


138Goodwill


500Other intangibles, net


1,283Other assets


59Non-current assets


1,980Total assets related to
    discontinued operations

$
2,161Current liabilities

$
2,541Total liabilities related to
    discontinued operations

$
2,541   Services
    and License Agreement
   15




---



##### 



THE
    PRINCETON REVIEW, INC. AND SUBSIDIARIES
  Notes to
    Condensed Consolidated Financial
    Statements  (Continued)
      12.
    Subsequent
    Events        Series B-1 Series B-1 Series B-1 Series B-1
   16




---



##### 



Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Form 10-Q Form 10-K Form 10-Q,
  Overview
    Test
    Preparations Services Division
     17




---



##### 



K12
    Services Division
    Results
    of Operations
  Comparison
    of Three Months Ended June 30, 2007 and 2006
  Revenue
        Cost of
    Revenue
        Operating
    Expenses
    
    Test Preparation Services operating expenses increased by
    $1.4 million, or 12.1%, from $11.8 million in 2006 to
    $13.2 million in 2007. Software development and maintenance
    expenses increased by $880,000 as a result of new projects and
    legal fees increased $343,000 primarily due to our litigation
    with the former Tennessee franchisee
    K-12 Services decreased by $856,000, or 18.3%, from
    $4.7 million in 2006 to $3.8 million in 2007. Salaries
    and related expense decreased $1.1 million primarily as a
    result of headcount reductions, lower commissions and bonuses
    and increased operational efficiencies whereby a larger
    percentage of salaries are charged to 18




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contract costs which flow through cost of revenue. These savings
    were partially offset by increased software development and
    maintenance expenses.  
    Corporate increased by $949,000 or 25.5%, from $3.7 million
    in 2006 to $4.7 million in 2007 primarily due to increased
    salaries and related expenses of $938,000 and professional fees
    of 770,000, offset by savings in miscellaneous other general and
    administrative expenses.  Other
    income (expense)
  Series B-1
  Comparison
    of Six Months Ended June 30, 2007 and 2006
  Revenue
        Cost of
    Revenue
        Operating
    Expenses
    
    Test Preparation Services remained the same at approximately
    $25.6 million in both periods.. Professional services fees
    increased by $509,000 primarily due to legal expenses related to
    franchise matters. These increases were offset by decreases
    associated with the sale
    and/or
    downsizing of the Admissions Services businesses during the
    first half of the 2007.
    K-12 Services decreased by $606,000, or 6.9%, from
    $8.8 million in 2006 to $8.2 million in 2007. Salaries
    and related costs decreased by approximately $1.7 million
    primarily as a result of headcount reductions, lower
    commissions/bonuses and increased operational efficiencies
    whereby a larger percentage of salaries are charged to contract
    costs which flow through cost of revenue. These savings were
    partially offset by increased software development and
    maintenance expenses ($534,000) and increased amortization
    expense ($212,000). 19




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
    Corporate increased by $2.6 million or 32.4%, from
    $8.0 million in 2006 to $10.6 million in 2007.
    Professional service fees including legal, accounting and web
    hosting expenses increased by approximately $1.3 million,
    salaries and related expenses increased by $554,000 and
    depreciations and amortization expense increased by $258,000
    primarily due to the Oracle software implements in the second
    quarter of 2006.  Other
    income (expense)
  Series B-1
  Income
    Taxes
    Liquidity
    and Capital Resources
  Series B-1
  and/or
      Series B-1
 20




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Series B-1
  Series B-1
    Seasonality
    in Results of Operations
    Item 3.
    Quantitative
    and Qualitative Disclosures about Market Risk  Series B-1 90-day Series B-1
    Series B-1
   21




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##### 



Item 4.
    Controls
    and Procedures  Rule 13a-15(e) Rule 15d-15(e)
  Scope of
    the Controls Evaluation
  Form 10-Q Form 10-K.
  Conclusions
  Form 10-K, (Form 10-K) Series B-1
  Changes
    in Internal Control over Financial Reporting
  Form 10-Q Form 10-K.
  
    We have hired and continue to seek more qualified and
    experienced accounting personnel to perform the month end review
    and closing processes as well as provide additional oversight
    and supervision within the accounting department.
    We have established more rigorous review procedures to ensure
    that account reconciliations and amounts recorded are
    substantiated by detailed and contemporaneous documentary
    support and that reconciling items are investigated, resolved
    and recorded in a timely manner. 22




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
    We are continuing to formalize a contract review process to
    establish and document the revenue recognition events and
    methodology at the time the contract is signed which will be
    reviewed and signed off by both the finance personnel and the
    project managers so that there is a clear understanding of what
    events will trigger revenue recognition and establish the
    amounts to be recognized for each event.
    We are initiating programs providing ongoing training and
    professional education and development plans for the accounting
    department and improving internal communications procedures
    throughout the company.   PART II.
    OTHER INFORMATION  Item 1.
    Legal
    Proceedings        ex parte ex parte 21-29, 31-39, 21-29, 31-39,
      Ex Parte 45-53 th No. 03-129-BR), 18-22,
 23




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##### 



Item 1A.
    Risk
    Factors  Form 10-K
   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          For


WithheldRichard Sarnoff


22,664,631



3,771,105Clyde E. Williams, Jr.


24,284,211



2,151,525        Item 5.
    Other
    Information       Item 6.
    Exhibits  ExhibitNumber

Description10
.1

Michael Perik Employment Agreement10
.2

Mark Chernis Employment Agreement,
    Amendment10
.3

Michael Perik Option Agreement31
.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  24




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SIGNATURES      By:
    /s/  STEPHEN
    MELVIN        25