##### Table of Contents



UNITED
    STATES SECURITIES AND EXCHANGE COMMISSIONWashington, 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 1934For the quarterly period ended
    March 31, 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




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##### Table of Contents



EXPLANATORY
    NOTE
  Form 10-Q/A Form 10-Q Form 10-Q/A
  Form 10-Q/A




---



##### 



TABLE OF
    CONTENTS
  PART I.
    FINANCIAL INFORMATION


1Item 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


14Item 3.
    Quantitative and Qualitative Disclosures about Market
    Risk


17Item 4.
    Controls and Procedures


18PART II. OTHER
    INFORMATION


19Item 1. Legal
    Proceedings


19Item 1A. Risk
    Factors


19Item 2.
    Unregistered Sales of Equity Securities and Use of
    Proceeds


20Item 3.
    Defaults Upon Senior Securities


20Item 4.
    Submission of Matters to a Vote of Security Holders


20Item 5. Other
    Information


20Item 6.
    Exhibits


20SIGNATURES


21EX-31.1: CERTIFICATIONEX-31.2: CERTIFICATIONEX-32.1: CERTIFICATION   i




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##### Table of Contents



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)
  March 31,


December 31,2007


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

$
14,519


$
10,822Accounts receivable, net of
    allowance of $3,602 in 2007 and $2,848 in 2006


31,651



31,531Accounts receivable-related parties


15



124Other receivables, principally
    related parties


1,014



1,999Inventory


2,678



2,950Prepaid expenses


1,463



1,653Other current assets


1,106



2,612Other current assets related to
    discontinued operations






181Total current assets


52,446



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


14,931



16,071Goodwill


31,006



31,006Investment in affiliates


1,639



1,639Other intangibles, net


10,933



11,527Other assets


5,196



4,013Other assets related to
    discontinued operations






1,980Total assets

$
116,151


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

$



$
3,000Accounts payable


13,539



15,220Accrued expenses


9,048



11,277Current maturities of long-term
    debt


1,231



1,369Deferred income


20,670



20,672Liabilities related to
    discontinued operations






2,541Total current liabilities


44,488



54,079Deferred rent


2,529



2,558Long-term debt


16,889



14,127Fair value of derivatives and
    warrant


320



181Series B-1
    Preferred Stock, $0.01 par value; 10,000 shares
    authorized; 6,000 shares issued and outstanding at
    March 31, 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; 27,601,268 and
    27,572,172 issued and outstanding at March 31, 2007 and
    December 31, 2006, respectively


276



276Additional paid-in capital


117,251



117,082Accumulated deficit


(71,276
)


(75,871
)Accumulated other comprehensive
    loss


(326
)


(324
)Total stockholders equity


45,925



41,163Total liabilities and
    stockholders equity

$
116,151


$
118,108    1




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##### Table of Contents



THE
    PRINCETON REVIEW, INC. AND SUBSIDIARIES



Condensed
    Consolidated Statements of Operations

(In
    thousands, except per share data) Three Months EndedMarch 31,2007


2006(Unaudited)RevenueTest Preparation Services

$
26,462


$
25,061K-12 Services


13,082



7,631Admissions Services


626



920Total revenue


40,170



33,612Cost of revenueTest Preparation Services


10,969



7,870K-12 Services


6,928



5,195Admissions Services


243



314Total cost of revenue


18,140



13,379Gross Profit


22,030



20,233Operating expenses


22,652



22,227Loss from operations


(622
)


(1,994
)Interest income (expense), net


(344
)


(30
)Other income (expense), net


(75
)


60Equity in the income (loss) of
    affiliates






(66
)Income (loss) before income
    taxes


(1,041
)


(2,030
)(Provision) benefit for income
    taxes






Net income (loss) from
    continuing operations


(1,041
)


(2,030
)Discontinued
    operationsIncome (loss) from discontinued
    operations


1,198



122Gain from disposal of discontinued
    operations


4,539



Net income (loss)


4,696



(1,908
)Dividends and accretion on
    Series B-1
    Preferred Stock


(103
)


(157
)Income (loss) attributed to
    common stockholders

$
4,593


$
(2,065
)Earnings (loss) per
    shareBasic and dilutedIncome (loss) from continuing
    operations

$
(0.04
)

$
(0.08
)Income (loss) from discontinued
    operations


0.21



Net income (loss)

$
0.17


$
(0.08
)Weighted average shares used in
    computing income (loss) per shareBasic


27,576



27,572Diluted


27,576



27,572    2




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##### Table of Contents



THE
    PRINCETON REVIEW, INC. AND SUBSIDIARIES
    Consolidated Statements of Cash Flows
    (In thousands) For the Three MonthsEnded March 31,2007


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

$
(1,041
)

$
(2,030
)Adjustments to reconcile net income
    (loss) to net cash provided by operating activities:Depreciation


728



414Amortization


1,464



1,438Bad debt expense


838



674Deferred income taxes


(416
)


(812
)Valuation allowance for deferred
    tax assets


416



812Deferred rent


(30
)


80Stock based compensation


151



170Other, net


152



100Net change in operating assets and
    liabilities:Accounts receivable


137



(1,566
)Inventory


272



(30
)Prepaid expenses


190



(302
)Other assets


308



(572
)Accounts payable and accrued
    expenses


(3,907
)


(2,705
)Deferred income


(1
)


3,327Net cash provided by (used for)
    operating activities


(740
)


(1,002
)Cash provided by (used for)
    investing activities:Purchases of furniture, fixtures,
    equipment and software development


(506
)


(1,366
)Additions to capitalized K-12
    content, capitalized course costs


(4
)


(1,010
)Net cash provided by (used for)
    investing activities


(510
)


(2,375
)Cash flows provided by (used
    for) financing activities:Proceeds from revolving credit
    facility


3,000



Payments of borrowings under
    revolving credit facility


(3,000
)


Capital lease payments


(376
)


(227
)Dividends on
    Series B-1
    Preferred Stock


(103
)


(157
)Proceeds from exercise of options


18



Net cash provided by (used for)
    financing activities


(461
)


(384
)Total cash flows used in
    continuing operations


(1,711
)


(3,762
)Cash Flows from Discontinued
    OperationsIncome from discontinued operations


1,198



123Gain on disposal of discontinued
    operations


(4,539
)


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


1,748



(1,379
)Net cash provided by (used for)
    operating activities


(1,592
)


(1,256
)Cash received from disposal of
    discontinued operations


7,000



Other cash provided by investing
    activities






158Net cash provided by (used for)
    investing activities


7,000



158Net cash provided by (used for)
    discontinued operations


5,408



(1,098
)Increase (decrease) in cash and
    cash equivalents


3,697



(4,859
)Cash and cash equivalents,
    beginning of period


10,822



8,002Cash and cash equivalents, end
    of period

$
14,519


$
3,143  3




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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 March 31,2007


2006(In thousands)(unaudited)RevenueServices

$
36,897


$
29,933Products


1,593



1,526Other


1,680



2,153Total revenue

$
40,170



33,612Cost of RevenueServices

$
17,557


$
12,378Products


547



865Other


36



136Total cost of revenue

$
18,140


$
13,379     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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##### Table of Contents



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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##### Table of Contents



THE
    PRINCETON REVIEW, INC. AND SUBSIDIARIES
  Notes to
    Condensed Consolidated Financial
    Statements  (Continued)
     3.
    Line of
    Credit  Credit
    Agreement
        and/or
        4.
    Series B-1
    Preferred Stock  Series B-1 Series B-1
 6




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##### Table of Contents



THE
    PRINCETON REVIEW, INC. AND SUBSIDIARIES
  Notes to
    Condensed Consolidated Financial
    Statements  (Continued)
  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 24-month Series B-1
  Series B-1
 7




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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
  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
  Series B-1 Series B-1
   8




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##### Table of Contents



THE
    PRINCETON REVIEW, INC. AND SUBSIDIARIES
  Notes to
    Condensed Consolidated Financial
    Statements  (Continued)
  Series B-1
    Series B-1
  Dividends
  Series B-1
  5.
    Segment
    Information        K-12
   9




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##### Table of Contents



THE
    PRINCETON REVIEW, INC. AND SUBSIDIARIES
  Notes to
    Condensed Consolidated Financial
    Statements  (Continued)
    Three Months Ended March 31, 2007TestPreparation


K-12


AdmissionServices


Services


Services


Corporate


Total(In thousands)Revenue

$
26,462


$
13,082


$
626


$



$
40,170Operating expense (including
    depreciation and amortization)

$
11,757


$
4,372


$
619


$
5,904


$
22,652Operating income (loss)


3,736



1,782



(236
)


(5,904
)


(622
)Depreciation and amortization


377



1,112



148



555



2,192Other income (expense)










0



(75
)


(75
)Segment EBITDA

$
4,113


$
2,894


$
(88
)

$
(5,424
)

$
1,495Total segment assets

$
50,959


$
30,600


$
5,387


$
29,205


$
116,151Segment goodwill

$
31,006


$



$



$



$
31,006Expenditures for long lived assets

$
139


$
63


$
13


$
287


$
502   Three Months Ended March 31, 2006TestPreparation


K-12


AdmissionServices


Services


Services


Corporate


Total(In thousands)Revenue

$
25,061


$
7,631


$
920


$



$
33,612Operating expense (including
    depreciation and amortization)

$
12,524


$
4,123


$
1,316


$
4,264


$
22,227Operating income (loss)


4,667



(1,687
)


(710
)


(4,264
)


(1,994
)Depreciation and amortization


510



814



218



310



1,852Other income (expense)














(6
)


(6
)Segment EBITDA

$
5,177


$
(873
)

$
(492
)

$
(3,960
)

$
(148
)Total segment assets

$
41,906


$
20,556


$
12,155


$
27,842


$
102,459Segment goodwill

$
31,006


$



$



$



$
31,006Expenditures for long lived assets

$
303


$
1,061


$
211


$
801


$
2,376  10




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##### Table of Contents



THE
    PRINCETON REVIEW, INC. AND SUBSIDIARIES
  Notes to
    Condensed Consolidated Financial
    Statements  (Continued)
  Reconciliation
    of operating income (loss) to net income (loss) (in
    thousands):
  Three Months Ended March 31,2007


2006Total income (loss) from
    reportable segments

$
(622
)

$
(1,994
)Unallocated amounts:Interest income (expense)


(344
)


(30
)Other income (expense)


(75
)


60Equity in loss of affiliate






(66
)(Provision) benefit for income
    taxes






Income (loss) from continuing
    operations


(1,041
)


(2,030
)Discontinued operations


5,737



122Net income (loss)

$
4,696


$
(1,908
)   6.
    Income
    (loss) Per Share  Earnings per Share.
    Three Months EndedMarch 31,2007


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

$
(1,041
)

$
(2,030
)Income (loss) from discontinued
    operations


5,737



122Less preferred dividends


(103
)


(157
)Net income (loss) attributed to
    common stockholders

$
4,593


$
(2,065
)Weighted average common shares
    outstanding for the period


27,576



27,572Basic and diluted earnings per
    share:Income (loss) from continuing
    operations

$
(0.04
)

$
(0.08
)Income (loss) from discontinued
    operations


0.21



Net income (loss)

$
0.17


$
(0.08
)  11




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THE
    PRINCETON REVIEW, INC. AND SUBSIDIARIES
  Notes to
    Condensed Consolidated Financial
    Statements  (Continued)
    Three Months EndedMarch 31,2007


2006(In thousands)Net effect of dilutive stock
    options-based on the treasury stock method


156



161Effect of convertible preferred
    stock-based on the if converted method


1,093



1,8391,249



2,000   7.
    Comprehensive
    Income (Loss)    Three Months Ended March 31,2007


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

$
4,593


$
(2,065
)Foreign currency translation
    adjustment


(2
)


7Total comprehensive income (loss)

$
4,591


$
(2,058
)   8.
    Restructuring    9.
    Disposal
    of Assets   12




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##### Table of Contents



THE
    PRINCETON REVIEW, INC. AND SUBSIDIARIES
  Notes to
    Condensed Consolidated Financial
    Statements  (Continued)
     Three Months EndedMarch 31,2007


2006(In thousands)Revenue

$
2,454


$
1,498Cost of revenue


337



483Gross margin


2,117



1,015Operating expenses(1)


919



893Interest expense






Other income (expense), net






Income (loss) before income taxes


1,198



122(Provision) benefit for income
    taxes






Income (loss) from discontinued
    operations

$
1,198


$
122     (1)
    
    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
    $69,800 and $380,400 for the three months ended March 31,
    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   10.
    Subsequent
    Events     13




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##### Table of Contents



THE
    PRINCETON REVIEW, INC. AND SUBSIDIARIES
  Notes to
    Condensed Consolidated Financial
    Statements  (Continued)
     14




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##### Table of Contents



Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  Form 10-Q Form 10-K
  Overview
           15




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##### Table of Contents



K-12
  Results
    of Operations
  Comparison
    of Three Months Ended March 31, 2007 and 2006
  Revenue
          Cost of
    Revenue
          Operating
    Expenses
    
    Test Preparation Services operating expenses decreased by
    $767,000, or 6.1%, from $12.5 million in 2006 to
    $11.8 million in 2007. This decrease is primarily related
    to reduced salary expense and lower SES training costs.
    K-12 Services expenses increased by $249,000, or 6.0%, from
    $4.1 million in 2006 to $4.4 million in 2007. This
    increase is primarily related to increased depreciation expense
    on capitalized development projects.
    Admissions Services expenses decreased by $697,000, or 53.0%,
    from $1.3 million in 2006 to $619,000 primarily due to
    headcount reductions in anticipation of the sale of the Higher
    Education Technology Service business and the outsourcing of the
    marketing services business. 16




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##### Table of Contents




    Corporate operating expense increased by $1.6 million, or
    38.5%, from $4.3 million in 2006 to $5.9 million in
    2007 due to higher professional fees of approximately $547,000,
    greater software maintenance costs of approximately $283,000 and
    increased depreciation expense of approximately $245,000
    primarily due to the Oracle ERP system implemented during the
    second quarter of 2006.  Interest
    Expense
    Discontinued
    Operations
    Liquidity
    and Capital Resources
          Series B-1
  Form 10-Q Series B-1 Series B-1
 17




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##### Table of Contents



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
   18




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##### Table of Contents



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 hire 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 are in the process of establishing 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. 19




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##### Table of Contents




    We are initiating a formal 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            Item 1A.
    Risk
    Factors  Form 10-K
  Item 2.
    Unregistered
    Sales of Equity Securities and Use of Proceeds   20




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##### Table of Contents



Item 3.
    Defaults
    Upon Senior Securities    Item 4.
    Submission
    of Matters to a Vote of Security Holders    Item 5.
    Other
    Information    Item 6.
    Exhibits  ExhibitNumber



Description2
.16*



Asset Purchase Agreement, dated
    February 16, 2007, among MRU Holdings, Inc., Embark Corp.,
    and The Princeton Review, Inc., (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
    February 16, 2007).10
.51*



Employment Agreement, dated
    January 19, 2007, between Stephen Melvin and The Princeton
    Review, Inc. (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
    January 16, 2007).10
.52*



Letter Agreement, dated
    February 1, 2007, among The Princeton Review, Inc.,
    Princeton Review Operations, L.L.C., the lenders party thereto
    and Golub Capital Incorporated as administrative agent to the
    lenders (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
    February 1, 2007).10
.53*



Limited Waiver, Consent and Third
    Amendment to Credit Agreement, dated as of February 16,
    2007, among The Princeton Review, Inc., the lenders party
    thereto and Golub Capital Incorporated as administrative agent
    to the lenders (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
    February 16, 2007).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.      21




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##### Table of Contents



SIGNATURES      By:
    /s/  STEPHEN
    MELVIN        22