<Page>
________________________________________________________________________________
                                 UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                              -------------------

                                   FORM 10-K

             [x]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934

                  FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002

                                       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)

                              -------------------

<Table>
<S>                                            <C>
                   DELAWARE                                      22-3727603
       (STATE OR OTHER JURISDICTION OF                        (I.R.S. EMPLOYER
        INCORPORATION OR ORGANIZATION)                      IDENTIFICATION NO.)

                2315 BROADWAY
              NEW YORK, NEW YORK                                   10024
   (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)                      (ZIP CODE)
</Table>

       REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (212) 874-8282
                              -------------------

          SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

<Table>
<Caption>
             TITLE OF EACH CLASS                 NAME OF EACH EXCHANGE ON WHICH REGISTERED
             -------------------                 -----------------------------------------
<S>                                            <C>
                                            None
</Table>

          SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                         Common stock, $0.01 par value

    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 [ ]

    Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [ ]

    Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes [x]  No [ ]

    The aggregate market value of registrant's common stock held by
non-affiliates, based upon the closing price of the common stock on June 28,
2002, as reported by the Nasdaq National Market, was approximately $80 million.
Shares of common stock held by each executive officer and director and by each
person who owns 5% or more of the outstanding common stock, based on Schedule
13G filings, have been excluded since such persons may be deemed affiliates.
This determination of affiliate status is not necessarily a conclusive
determination for other purposes.

    The registrant had 27,274,210 shares of $0.01 par value common stock
outstanding at March 25, 2003.

                        DOCUMENTS INCORPORATED BY REFERENCE

    Certain information required in Part III of this Form 10-K is incorporated
by reference to the Proxy Statement for the registrant's 2003 Meeting of
Stockholders to be held on June 11, 2003.

________________________________________________________________________________

<Page>
                               TABLE OF CONTENTS

<Table>
<S>         <C>                                                           <C>
                                   PART I

Item 1.     Business....................................................    2
Item 2.     Properties..................................................   27
Item 3.     Legal Proceedings...........................................   27
Item 4.     Submission of Matters to a Vote of Security Holders.........   27

                                   PART II

Item 5.     Market for Registrant's Common Stock and Related Stockholder
              Matters...................................................   27
Item 6.     Selected Financial Data.....................................   28
Item 7.     Management's Discussion and Analysis of Financial Condition
              and Results of Operations.................................   30
Item 7A.    Quantitative and Qualitative Disclosures about Market
              Risk......................................................   42
Item 8.     Financial Statements and Supplementary Data.................   42
Item 9.     Changes in and Disagreements With Accountants on Accounting
              and Financial Disclosure..................................   76

                                  PART III

Item 10.    Directors and Executive Officers of the Registrant..........   76
Item 11.    Executive Compensation......................................   76
Item 12.    Security Ownership of Certain Beneficial Owners and
              Management................................................   76
Item 13.    Certain Relationships and Related Transactions..............   76
Item 14.    Controls and Procedures.....................................   76

                                   PART IV

Item 15.    Exhibits, Financial Statement Schedules and Reports on Form
              8-K.......................................................   76
Signatures  ............................................................   81
</Table>

<Page>
                                     PART I

    All statements in this Annual Report on Form 10-K 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, the factors described under the caption 'Risk
Factors' and elsewhere in this Annual Report on Form 10-K. 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.

ITEM 1. BUSINESS

OVERVIEW

    We provide integrated classroom-based, print and online products and
services that address the needs of students, parents, educators and educational
institutions. We were founded in 1981 by our Chairman and Chief Executive
Officer, John Katzman, as an SAT preparation course. Today, based on our
experience in the test preparation industry, we believe we offer the leading SAT
preparation course and are among the leading providers of test preparation
courses for most of the other major post-secondary and graduate admissions
tests. In 2002, we and our franchisees provided test preparation courses and
tutoring services for the SAT, GMAT, MCAT, LSAT, GRE and other standardized
admissions tests to more than 112,000 students in over 500 locations in the
United States and abroad, from which we derived the majority of our revenue.

    In the last three years, we have complemented our core products with a range
of online services. During 2000, we significantly enhanced the content and
functionality of our Review.com (now Princetonreview.com) Web site, which
provides students, parents and counselors free access to a comprehensive source
of academic admissions information and tools. In July 2000, we introduced
Princeton Review Online, our Internet-based test preparation courses, which can
function as stand-alone alternatives to our classroom-based courses or can be
combined with our classroom-based courses to provide the optimal test
preparation mix for each student. In August 2000, we began selling our
Homeroom.com Internet-based subscription service to K-12 schools. This service
is designed to provide academic assessment and remediation tools for children in
grades three through 12 to help them and their teachers prepare for the
state-mandated assessments that have become a mainstay in K-12 education.
Finally, in October 2001, we acquired the assets of Embark.com, Inc., a leading
provider of online college and graduate school information and application
services to students and academic institutions. The acquisition of Embark's
business, which was integrated into our Admissions Services division in 2002,
provided us with a new line of Web-based application and admissions management
products that we offer to post-secondary academic institutions and positioned us
as the leading online provider of college and graduate school information and
application services.

    We also receive royalties and other fees from more than 190 book and
software titles authored by us and published primarily by Random House, Inc. and
from Princeton Review branded test preparation content for kindergarten through
twelfth grade, or K-12, textbooks and workbooks published by The McGraw-Hill
Companies, Inc.

    We operate our businesses through the following three divisions, each of
which combines our traditional and online products and services:

   o The Test Preparation Services division, founded in 1981, provides
     classroom-based and Princeton Review Online test preparation courses and
     tutoring and admissions counseling services and receives royalties from our
     independent franchisees who provide classroom-based courses under the
     Princeton Review brand.

                                       2

<Page>
   o The Admissions Services division, founded in 1986 as our publishing
     division, sells our Web-based applications and admissions management
     products to educational institutions and operates our Princetonreview.com
     Web site, which brings together potential applicants and their families,
     guidance counselors and colleges and graduate schools to exchange
     information and facilitate the recruitment, application and admissions
     process. This division also authors more than 190 print and software titles
     on test preparation, college selection and related topics published
     primarily by Random House.

   o The K-12 Services division, founded in 1998, sells our Homeroom.com online
     subscription service, print-based test preparation materials and
     face-to-face instruction services to K-12 schools and school districts to
     help primary and secondary school students and teachers meet state
     standards and prepare for state-mandated assessments. This division also
     authors workbooks and creates Princeton Review branded content for
     textbooks published by McGraw-Hill.

    We were incorporated in Delaware in March 2000 and are the successor to a
number of affiliated entities operating under the Princeton Review name, the
first of which was formed in 1981. Our Internet address is
www.princetonreview.com. On our Investors web site, located at
www.princetonreview.com, we post the following filings as soon as reasonably
practicable after they are electronically filed with or furnished to the
Securities and Exchange Commission: our annual report on Form 10-K, our
quarterly reports on Form 10-Q, our current reports on Form 8-K and any
amendments to those reports filed or furnished pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934. All such filings on our Investors
web site are available free of charge.

OUR PRODUCTS AND SERVICES

Test Preparation Services Division

    In 2002, we and our franchisees provided test preparation courses and
tutoring services to more than 112,000 students in over 500 course locations in
42 states and 14 countries. We provide test preparation courses to students
taking the following major U.S. standardized tests:

<Table>
<S>                                                  <C>
SAT                                                  LSAT (Law School Admissions Test)
GMAT (Graduate Management Admissions Test)           MCAT (Medical College Admissions Test)
GRE (Graduate Record Examination)                    ACT (American College Test)
TOEFL (Test of English as a Foreign Language)        PSAT
USMLE (United States Medical Licensing Examination)  SAT II
</Table>

    In addition to offering our standardized test preparation courses to
individual students, we also offer our SAT, SAT II and ACT test preparation
services to the institutional educational market by entering into contracts with
high schools and school districts to provide test preparation services to their
students.

    Through Princeton Review 121, a one-to-one, high-end admissions counseling
and tutoring service, we also provide individual customers specific and
concentrated assistance with test preparation and the college admissions
process.

    Our Classroom-Based Course Offerings

    Our test preparation courses focus on customer service and quality
instruction. Our experienced teachers and tutors work with groups of no more
than 12 students in our SAT classes and eight students in most of our graduate
school classes. Our courses are intensive and typically run five to 10 weeks in
length. Every course consists of classes, workshops and practice tests. We teach
students basic skills and test-taking strategies during class and reinforce
concepts taught in class and review homework during workshops. We offer practice
tests, taken under actual testing conditions, which we use to chart students'
progress as they begin to apply our techniques.

                                       3

<Page>
    We believe that an important part of our test preparation courses is the
high quality study materials and the advanced diagnostic analysis that our
students receive. We spend significant resources on research and development to
enhance the supplemental materials used in our courses. As a result, each of our
students receives in-depth analytical materials, sample questions, testing
drills, model exams and diagnostic analysis of their progress as they take the
course.

    Our Online Course Offerings

    We have developed the following online products to supplement our
classroom-based courses and to serve as fully functional stand-alone online test
preparation courses:

   o Tester. Tester is a computer adaptive testing engine we developed for
     offering online testing and diagnostic services. Students taking our
     courses can log on to Princetonreview.com to review sample questions and
     take full-length preparatory exams that simulate actual exams. Tester also
     analyzes the students' results and tracks their progress.

   o Online tools integrated into classroom-based courses. Our traditional test
     preparation courses offer students the option to complete drills and answer
     sample questions online as well as take model exams over the Internet
     through the Tester service. Students can also communicate with us directly
     online.

   o Princeton Review Online courses. In July 2000, we launched Princeton Review
     Online to provide an alternative to our classroom-based courses. Princeton
     Review Online courses follow the classroom-based course syllabus and
     include asynchronous and on-demand synchronous interactive 'classes,'
     scheduled small-class real time workshops with our instructors, live
     customer service available 24 hours per day, seven days per week and our
     Tester service. Princeton Review Online courses are currently available for
     the SAT, GMAT, LSAT, GRE, ACT and USMLE.

Admissions Services Division

    Our Web-Based Products and Services

    We sell a wide range of Web-based products and services to higher education
institutions to help them automate and manage many phases of the student
recruitment and admissions process. We also sell our ECOS product, a
customizable Web-based guidance tool, to high schools.

    On our Princetonreview.com Web site we provide a comprehensive source of
information about colleges and graduate schools, the school selection,
admissions, and financial aid process and information about choosing a major and
career path. Our interactive tools are designed to assist students in
researching, selecting, discussing, financing and applying for their higher
education.

    The following are some of the major products, services and tools available
to the higher education institutions and high schools that purchase our
Web-based products and the students, parents and educators who use our free
online resources:

    For Post Secondary Institutions. We sell academic institutions a broad range
of Web-based products on a subscription basis.

   o Online Admissions and Recruiting Forms. We provide several online
     application packages to assist colleges and graduate schools in making
     their application and recruiting processes more effective and efficient by
     developing, customizing and hosting online applications and recruiting
     forms. We develop and then post application forms on our Web site and on
     colleges' and graduate schools' Web sites. We facilitate the electronic
     submission of applications by prospective students and manage the
     application process by sending confirmation notices and processing online
     payment of application fees and facilitating the posting of admissions
     decisions online.

   o Application Management Solutions. Our application management solutions
     offer admissions offices effective tools for monitoring and communicating
     with prospects and applicants throughout the application process. Our
     products enable admissions officers to evaluate their

                                       4

<Page>
     applicant pool as applications are submitted so that immediate adjustments
     in recruiting efforts may be made. Our application management solutions
     also permit admissions officers to communicate with prospects and
     applicants by sending personalized e-mails about the status of
     applications, upcoming events and pending deadlines.

   o Interview and Event Management Tools. We assist admissions offices in the
     scheduling and management of interviews and recruiting events. Our
     interview and event management products enable admissions offices to post
     interview and event schedules on the Internet, to facilitate online
     registration, and to send automated reminders, confirmations, invitations
     and other communications about interviews and events.

   o Data Integration Systems. We assist colleges and graduate schools in
     transferring the data generated from our online application products to
     their student information systems so that they can maximize the use of the
     data provided during the application process. We provide custom data files
     of prospect and applicant data so that admissions officers may download
     applicant data directly into their schools' own student information
     systems. This service helps colleges and graduate schools reduce the time,
     effort and error associated with manual entry of data from paper
     applications.

   o Marketing Products and Services. We offer various marketing products and
     services that assist colleges and graduate schools in recruiting students.
     Colleges and graduate schools may include a customized profile, newsletters
     and banner ads on our Web site and in our newsletters and books, and also
     may sponsor content on our Web site and in our newsletters. We work with
     colleges and graduate schools to send highly targeted mail and e-mails to
     student users who have asked to receive information from colleges and
     graduate schools. Our electronic inquiry management system automates
     responses to inquiries about the schools, such as electronically sending
     requests for applications to a fulfillment company. Through several
     strategic partnerships, we offer colleges and graduate schools focused
     options to recruit minority students.

    For Secondary Schools and Community Organizations. We sell high schools our
Education and Career Opportunities System, or ECOS, product, on a subscription
basis. ECOS is a Web-based program that solicits information from high school
students about their career plans and choices. The product enables counselors to
be actively involved in career guidance and application management by giving
them access to their students' career information and educational interests.
With ECOS, counselors can review students' interests and career plans, as well
as monitor their progress on completion of applications. Counselors may also use
ECOS to send targeted messages to individuals or groups with particular
interests and to provide customized lists of suggested colleges. ECOS enables
district and state administrators to track their entire student populations and
compare the success of each class to prior classes. With ECOS, students and
parents have access to current information about, and a search engine for
researching, careers, colleges, majors, financial aid and life skills.

    For Our Web Site Visitors. The following is a list of some of the tools
available for free to our Web site visitors.

   o Favorite Schools. Our search engine allows students to evaluate colleges
     and graduate schools based on a wide range of criteria, from average
     admissions test scores to quality-of-life ratings. We have online tools
     that assist users in creating a list of schools that match their interests.
     These tools provide detailed information about schools, including, in many
     cases, students' opinions of that school's faculty, workload, social life,
     sports and more. Users can then save these schools to a personalized home
     page that allows users to track the colleges or graduate schools they are
     interested in and the numerous deadlines associated with the admissions
     process. An e-mail reminder feature is available to notify students of
     significant events. Students can also allow counselors, advisers and
     parents access to their personalized accounts. Each college or graduate
     school's profile includes links to its Web site.

                                       5

<Page>
   o Counselor-O-Matic. This tool helps students narrow down their college list.
     Users provide answers to questions about their academic history, geographic
     preferences and areas of interest, and Counselor-o-Matic recommends five
     'safety schools,' five 'good matches,' and five 'reach schools.'

   o Student Match. Students can choose to be contacted by colleges and graduate
     schools. Students complete a survey of their preferences and create a
     profile of their ideal college or graduate school. Students then give
     permission to allow those schools that match their ideal profile to send
     them information about the school and its programs.

   o Majors Search. This tool helps students collect information about specific
     majors they might be interested in pursuing in college. Students enter a
     major and our Web site provides them with information about the major, the
     colleges that offer the major, any preparation necessary for that major and
     post graduate careers associated with the major.

   o Career Quiz. This 24-question quiz asks users about their potential career
     preferences, and then analyzes their answers to determine their interests
     and work style. Based on this information, we identify corresponding
     careers that would be most suitable. The list of careers then links to
     profiles that explain a day in the life of the particular career,
     statistics about it, and what people in this career can expect in 5 years,
     10 years, and 15 years. Each career links to corresponding college majors
     and colleges that offer that major.

   o Electronic Applications. We host several hundred electronic applications on
     our Web site for admission into two-year and four-year undergraduate
     programs, graduate schools, business schools, law schools, medical schools,
     career and technical schools, and fellowship or scholarship programs.
     Online applications are fast, easy, and secure. Once a user enters and
     saves his or her personal information on an electronic application, that
     information pre-populates all subsequent applications, saving the user
     significant time.

   o Financial Center. Financial Center helps college and graduate school
     applicants and parents secure the financing to pay for school. They can
     obtain expert advice, get help in filling out the required forms and
     perform necessary calculations with customized tools. We also have
     electronic alternative loan applications available from our preferred
     partner banks and resources to help students open an online bank account,
     find insurance that they may need in school and apply for credit cards.

   o College and graduate school admissions discussion boards. We provide a
     forum for students to discuss college and graduate school admissions
     experiences and obtain advice from Princeton Review moderators.

    Our Publications and Software

    Our Admissions Services division also authors more than 190 print and
software titles under the Princeton Review brand. Our books are sold primarily
through Random House, from which we collect fees from advances, royalties, and
editing and marketing arrangements. We also provide content for use in software
and collect royalties on sales. Examples of the books, magazines and educational
software products developed by the Admissions Services division include the
following:

<Table>
<Caption>
TOPIC                                                TITLES
-----                                                ------
<S>                                                  <C>
Test Preparation Books                               Cracking the SAT
                                                     Cracking the GMAT
                                                     Cracking the GRE
College and Graduate School Guides                   The Best 345 Colleges
                                                     The Complete Guide to Business Schools
General Reference Publications                       WordSmart
                                                     WordSmart, Jr.
                                                     MathSmart
                                                     The Anatomy Coloring Workbook
Test Preparation and Educational Software            The Princeton Review: Inside the SAT
                                                     and ACT 2003 Edition
</Table>

                                       6

<Page>
K-12 Services Division

    Services for Schools

    Our K-12 Services division provides a number of services to schools to help
them help their students meet state standards and improve outcomes on
state-mandated assessments. These services include Homeroom.com, our online
subscription service, face-to-face instruction and print products. We offer
schools the flexibility to purchase any combination of these services that they
choose.

    Homeroom.com enables teachers and parents to quickly assess students'
academic strengths and weaknesses and provides immediate feedback and tailored
educational resources for improving performance. Homeroom.com is aligned to
state standards and works with existing curricula and lesson plans, thereby
allowing teachers to focus more on curriculum and less on specific test
preparation. This service offers a large and growing library of practice test
questions written to correspond to the requirements of applicable state
proficiency exams. The questions are also designed to correspond to the
student's grade level, the curriculum being taught and the primary textbook
being used.

    Homeroom.com is currently focused on math, reading and language arts in
grades three through 12. It is available nationally and can be customized for
use in all fifty states.

    In addition to a large pool of test questions and drills, the Homeroom.com
subscription service offers its users various educational resources that can be
used for both general enrichment and targeted remediation. These resources
include:

   o links directly to relevant, targeted content on other educational Web
     sites; and

   o original Homeroom.com lessons designed specifically to address areas of
     weakness identified in the testing and assessment phase and to reinforce
     curriculum objectives.

    The Homeroom.com subscription service offers the following services to four
distinct groups of users:

    Homeroom.com allows students to:

   o practice skills being covered by their curriculum through individualized
     assignments created by their teachers or existing drills designed to
     correspond to state-mandated assessments;

   o assess their understanding of the material and areas of weakness; and

   o focus on areas that need improvement by doing more drills or accessing
     Homeroom.com's database of skill-based exercises, including proprietary
     Homeroom.com lessons, and direct links to Web-based resources specific to
     the problems identified.

    Homeroom.com allows parents to:

   o see what their child is learning in school by viewing recent assignments;

   o explore suggested resources and other learning materials that they and
     their child can investigate together; and

   o access a database of teaching tips designed for parents when they and their
     child identify a skill that needs improvement.

    Homeroom.com allows teachers to:

   o create assignments and tests online, assign projects on a group or an
     individualized basis and keep track of the status of their assignments;

   o assess how their students are progressing as a class or individually; and

   o access a variety of resources for teaching their material, including Web
     links, books, software, and proprietary Homeroom.com lessons for teachers,
     students and parents that reinforce their curriculum objectives.

    Homeroom.com allows administrators to:

   o create benchmark tests for schools or districts online, and keep track of
     the status of their assignments; and

   o assess the performance of students on a teacher, school, or district basis.

                                       7

<Page>
    Our face-to-face instruction is offered to teachers to improve their
knowledge of state assessments, data-driven instruction and test-taking
strategies geared to help student performance. Teacher instruction also guides
teachers in the successful integration of our products, such as Homeroom.com,
workbooks and printed tests. Instruction offered directly to students focuses on
improving the skills mandated by state standards and measured by state
assessments as well as general test-taking skills.

    Our print products include simulated state tests that are designed to allow
students to practice the test taking experience of their state-mandated exam.
Diagnostic reports provide teachers and administrators the ability to benchmark
student performance. The data provided allows instructors to focus on those
areas diagnosed as weak before the state-mandated exam is given. Test
preparation books are available for a number of state exams and can be sold to
schools or through retail channels. Custom workbooks can be created to support
districts' after school and summer school programs.

    Our Agreement with McGraw-Hill

    Under our agreement with McGraw-Hill, our K-12 Services division develops
content and provides editorial services to McGraw-Hill educational publishing
units. Through this exclusive relationship, we author workbooks and textbook
questions for McGraw-Hill that are designed to correspond to the material
covered by various state-mandated assessments. We also provide editorial review
of McGraw-Hill educational materials to ensure that sample test questions and
other testing information are accurate and aligned with state or national
standards. Our contract with McGraw-Hill expires in September 2003.

OUR FRANCHISED OPERATIONS

    Our classroom-based courses and tutoring services are provided through
company-operated locations and through our independent franchisees. Our
franchisees provide these test preparation courses and tutoring services under
the Princeton Review brand within a specified territory, in accordance with
franchise agreements with us. The royalties paid to us by our franchisees are
comprised of a general royalty of 8% of their cash receipts collected under the
Princeton Review name, an additional royalty of 2% of their cash receipts, which
is allocated to an advertising fund that we also contribute to, and a per
student fee for use by their students of our online supplemental course tools.
Our franchisees also purchase our course and marketing materials, which they use
in conducting and promoting their classes. Royalties collected from our
independent franchisees and revenue from their purchases of materials together
accounted for approximately 6% of our total 2002 revenue.

    Our franchisees do not provide our Princeton Review Online courses. However,
to the extent we provide our Princeton Review Online courses to customers
residing within the exclusive jurisdictions of our franchisees, we pay those
franchisees a royalty of 15% of all of our revenue derived from selling
Princeton Review Online courses to students residing in their territories, net
of certain administrative expenses. We have not entered into any such royalty
arrangements with our franchisees for our other Internet-based products and
services.

    As of December 31, 2002, we had 9 franchisees operating 19 offices under the
Princeton Review name in the United States and 19 offices operated by
franchisees in 12 additional countries.

    Our domestic franchisees currently provide test preparation courses and
tutoring services in the following jurisdictions:

<Table>
<Caption>
                          NUMBER OF                                 NUMBER OF
    STATE                 COUNTIES              STATE               COUNTIES
    -----                 --------              -----               --------
    <S>                   <C>                   <S>                 <C>
    California                8                 Nevada                       1
    Colorado                  7                 New York                     5
    Connecticut               5                 North Carolina               5
    Florida                  57                 Ohio                         2
    Illinois                  5                 Pennsylvania                 4
    Massachusetts             4                 Puerto Rico                 78
    Michigan                  3                 Rhode Island                 5
                                                Tennessee                   95
</Table>

                                       8



<Page>
    Our international franchises are located in China, India, Israel, Japan,
Mexico, Pakistan, Singapore, South Korea, Taiwan, Thailand, Turkey and The
United Arab Emirates. In 2002, we sold new franchises in China, Israel, Pakistan
and The United Arab Emirates. We intend to continue to expand our international
presence through the sale, in the next several years, of additional franchises,
primarily in Asian and Middle Eastern markets.

    We are not currently offering any new domestic franchises. Over the last
several years, we completed a number of acquisitions of businesses operated by
our former domestic franchisees, as more fully described below under
'Acquisitions and Strategic Investments.'

ACQUISITIONS AND STRATEGIC INVESTMENTS

Recent Acquisitions

    Embark

    In October 2001, we acquired substantially all of the operating assets of
Embark.com, Inc., a developer of online products and services for the college
and graduate school admissions market. The acquired business consisted primarily
of Embark's customer contracts with academic institutions and its technological
platform for submitting electronic applications and related services. The
purchase price paid by us at closing consisted of 875,000 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 $1.0
million. In accordance with the earn-out provisions entitling Embark to
additional consideration based on the performance of the acquired business,
Embark earned a payment of 9,128 shares of our common stock and approximately
$1.2 million in cash, based on the revenue performance of the acquired business
through 2002, and will receive additional cash consideration based on revenue
performance for the first half of 2003. In addition to the purchase price, in
connection with the transaction, we made a $1.8 million loan to Embark, which is
secured by 300,000 of the shares of our common stock that Embark received as
part of the purchase price. The approximate $1.2 million earn-out was applied
against the loan balance. All future cash payments to Embark based on the future
revenue performance of the acquired business are contractually required to be
used by Embark to repay the outstanding loan, until such time as the loan is
repaid in full.

    Franchise Acquisitions

    In the last three years, we also completed acquisitions of the businesses of
a number of our former domestic franchisees. In October 2002, we completed a
small acquisition involving the assets of Princeton Review of St. Louis, one of
our franchisees that provided test preparation courses in Missouri, for a
purchase price of approximately $850,000, of which approximately $470,000 was
financed with a note to the sellers. In June 2001, we acquired the assets
comprising the business of T.S.T.S., Inc., which offered test preparation
courses in Texas, Arizona, Oklahoma, Louisiana and New Mexico under franchise
agreements with us, for a purchase price of approximately $6.3 million. We
financed approximately $4.8 million of the purchase price under our then
existing line of credit and issued a subordinated promissory note to the seller
for the remaining approximately $1.5 million. In early March 2001, we acquired
the assets comprising the businesses of Princeton Review of Boston, Inc. and
Princeton Review of New Jersey, Inc., at a combined purchase price of $13.8
million. We financed approximately $10.2 million of the purchase price under our
then existing line of credit and issued two subordinated promissory notes for
the remaining approximately $3.6 million. In early March 2001, we also 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 our then existing line of credit. Princeton Review Peninsula
provided test preparation courses in several counties in California. Finally, in
the third quarter of 2000, we acquired the assets of two other franchisees,
Princeton Review of

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Hawaii, Inc. and Princeton Review of Quebec, Inc., for a
combined cash purchase price of $320,000.

Strategic Investments

    We have made a number of strategic investments that we hope will facilitate
the growth of our business and expand our presence on the Internet, including
ownership interests in the following companies:

   o Student Advantage, Inc. We invested in Student Advantage, now a publicly
     owned college marketing company, in 1995, and owned approximately 1.5% of
     its outstanding stock as of November 1, 2002. As of March 25, 2003, the
     aggregate public market value of our stock of Student Advantage was
     approximately $4,770. In addition, we maintain a strategic relationship
     with Student Advantage, which gives us the right to use some of its content
     on our Web site and to serve as its exclusive test preparation provider.

   o Student Monitor, L.L.C. We currently own approximately 20% of Student
     Monitor, a privately held company that is a surveyor of college students'
     lifestyles and attitudes. We also participate in joint surveys with Student
     Monitor and use its survey information for product development and
     marketing efforts.

   o Tutor.com, Inc. Tutor.com, a privately held company we co-founded in 1998,
     matches students with tutors, both online and offline, through its database
     of tutor backgrounds and references. We currently own approximately 20% of
     Tutor.com and engage in various joint marketing arrangements, including
     banner advertisements and mutual graphical links between our Web sites. We
     use our relationship with Tutor.com to facilitate our own online admissions
     counseling and tutoring services. In addition, Tutor.com has agreed not to
     enter into an agreement or transact business with any entity that is
     involved in our principal lines of business.

   o Schoolnet Inc. We currently own approximately 5% of SchoolNet, a privately
     held education technology solutions company. We maintain a strategic
     marketing relationship with SchoolNet, through which SchoolNet markets and
     distributes a version of our Homeroom.com product called 'Homeroom Inside.'
     We have also contracted with SchoolNet to provide Enterprise Resource
     Planning software that monitors the use of Homeroom.com.

    We intend to continue to pursue strategic acquisitions that will help us
further expand our product offerings or grow geographically. We expect our
acquisition focus to be on companies with complementary products or services,
including those businesses operated by our remaining domestic franchisees that
we can acquire on favorable terms. From time to time, we may also seek to make
additional investments in businesses with which we want to build strategic
relationships. We anticipate that future acquisitions or strategic investments,
if consummated, would involve some combination of cash, debt and the issuance
of our stock. Currently, we do not have any agreements or commitments to
consummate additional acquisitions or investments.

SALES AND MARKETING

    The majority of our students and their parents choose our test preparation
programs based on the recommendations of other students, parents, teachers and
counselors. We also build awareness of our brand and promote our products
through relationships with other companies that publish and distribute our
products, including Random House, which publishes and distributes our test
preparation books and trade books, and McGraw-Hill, which publishes K-12
textbooks and workbooks that contain our branded materials. We also maintain an
institutional sales force and engage in some national and local advertising.

    In the last several years, we have substantially increased our sales and
marketing efforts in order to market and support our newer products and
services, such as our Web-based application and admissions management products,
our Homeroom.com subscription service and other K-12

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products and our online test preparation offerings. Our sales and marketing
activities by division are as follows:

    Test Preparation Services Division. Nationally, we use mass print media,
conferences, direct mail and electronic media to market our products and
services to students, parents and educators. Locally, we and our franchisees
primarily advertise in local and school newspapers, distribute posters and
sponsor school activities. We also conduct extensive free information sessions
and practice tests to expose our products to our markets. Virtually everyone in
our regional offices is part of the sales force. They and our regional phone
centers counsel students and parents regarding specific courses. Our Princeton
Review 121 admissions counseling and tutoring initiative is marketed to high-end
customers utilizing a distinctive message and dedicated marketing resources. Our
Princeton Review Online products are marketed through electronic media and e-
commerce partnerships, as well as through our classroom course marketing
efforts. We recently increased our sales force to conduct sales of our test
preparation services to schools and other educational institutions. We expect
that marketing to educational institutions will continue to constitute a major
focus of the marketing activities of the Test Preparation Services division.

    Admissions Services Division. Admissions Services has a dedicated sales and
marketing force that actively solicits secondary schools and post-secondary
institutions to subscribe to our Web-based products and services. Historically,
we have built our user base and volume through branding efforts with other media
and word-of-mouth. To attract users to our Web site, we market to students,
parents, counselors and admissions officers through attendance at educational
trade shows and conferences, offline and online direct mail, sponsorships,
keyword buys and syndicated licensing of content. Additionally, we will seek to
maintain and expand our current strategic relationships with Yahoo, MSN,
Community Connect and Vault.com.

    K-12 Services Division. We are marketing our K-12 services to schools and
school districts through a number of channels, including national conferences,
direct mail, electronic media and telemarketing. Our K-12 Services division has
a sales and marketing force of approximately 30 people, including two
independent sales representatives. Homeroom.com is also integrated in the
offerings of, and sold by, our business partners such as Plato Learning,
SchoolNet and bigchalk.com.

PRODUCT DESIGN AND DEVELOPMENT

    We believe that successful product design, development and enhancement has
been, and will continue to be, essential to the success of our business. We
believe that the strength of our reputation and brand name is directly
attributable to the quality of our products, and expect to continue to devote
significant resources to enhancing our current products and offering additional
high-quality products and services that are responsive to our customers' needs.

    Test Preparation Services Division. We rely on our development staff,
teachers and other education experts to create and refine the materials used in
our Test Preparation Services division. Our goal is to design and improve our
products in such a way as to offer our students the best and most productive
overall experience, while addressing their preferences and fitting within their
lifestyles. We seek to accomplish this by:

   o continually updating and enhancing our test preparation materials and our
     teaching methods;

   o ensuring that our designated personnel take virtually every major
     standardized test for which we offer courses, so that our techniques and
     materials remain current;

   o performing quantitative and qualitative research into the preferences and
     needs of our customers;

   o regularly soliciting and reviewing feedback from students taking our
     courses; and

   o enhancing the services and functionality of our online test preparation
     tools and content.

    Overall, we seek to provide a complementary mix of online and offline
offerings that students can choose from to best fit their needs and achieve
their goals.

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    Admissions Services Division. Since launching our Review.com (now
Princetonreview.com) Web site in 1994, we have continually expanded the material
available and made improvements to its content and functionality. The online
informational materials and tools are developed and enhanced by our authors and
design engineers, through strategic partnerships with third parties and through
feedback from guidance and admissions counselors. We regularly modify and
enhance our Web site to provide students, parents and guidance counselors with
additional information and interactive tools designed to assist them with the
school selection, admissions and financial aid processes. We also continually
strive to provide our educational institution subscribers with more effective
ways to reach potential applicants, and streamline and manage the various facets
of the admissions process. To this end, we periodically refine our Web-based
admissions and application management solutions to provide our higher education
institution customers with the most technologically advanced and flexible
products possible. Finally, our publications are frequently updated by our staff
and freelance authors and editors to ensure that new editions are up to date and
include the most current information available on standardized test preparation,
college and graduate school information and various other related subjects
covered by our publications.

    K-12 Services Division. We rely on a team of teachers, educational experts
and developers to research, design and enhance our K-12 educational products,
which include workbooks, live courses, practice tests, professional development
seminars and Homeroom.com. Our workbooks, live courses, and professional
development seminars are designed to provide customized and highly focused,
targeted instruction to improve student performance. We believe that the
following product design traits differentiate Homeroom.com from products offered
by our competitors:

   o unique combination of assessment tools and in-depth individualized
     remediation resources provides students and teachers with an efficient
     means of identifying specific weaknesses and then correcting them;

   o a large question pool aligned with the skills tested on state-mandated
     assessments based on the state in which the user resides, and tools to
     further build and refine the question pool; and

   o Homeroom is designed to work with the existing curriculum rather than alter
     or supplant it.

    Our focus in the K-12 Services division is to continue to increase both the
depth and breadth of Homeroom's question pool and remediation library and to
continue to expand and refine our print-based materials, training and after
school programs. We seek to design our K-12 offerings to afford schools and
school districts the highest degree of flexibility possible in the mix of
products they choose to purchase from us.

SIGNIFICANT CUSTOMERS

    Royalties, advances and other fees from services rendered by us to
McGraw-Hill represented approximately 4% of our revenue in 2002 and 7% of our
revenue in 2001. Revenue from McGraw-Hill represented approximately 36% of the
revenue reported in our K-12 Services division in 2002 and 82% of the revenue
reported in that division in 2001. Royalties, advances and other fees from books
authored by us and published and distributed by Random House represented
approximately 4% of our revenue in each of 2002 and 2001. Revenue from Random
House represented approximately 25% of the revenue reported in our Admissions
Services division in 2002 and 28% of the revenue reported in that division in
2001. Additionally, one of our customers in the K-12 services division accounted
for approximately 14% of the revenue of that division in 2002.

COMPETITION

    The markets for our educational products and services are fragmented and
highly competitive. Companies in our offline educational markets are well
established, and we believe they will expand their offerings into our online
markets, if they have not already done so. As a result, we expect competition
from both new and established companies to intensify in the future across all of
our target markets. We compete directly and indirectly with the following types
of companies:
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        Test preparation companies. Our Test Preparation Services division faces
    competition on a national level primarily from one other established
    company, Kaplan, Inc. We also face competition from many local and regional
    companies that provide test preparation, career counseling and application
    assistance to students.

        Companies offering Internet-based college information services and
    products. Our Admissions Services division faces competition from several
    companies that currently provide Internet-based products and services
    similar to ours for the higher education market.

        Companies offering products and services focused on the K-12 education
    market. Our K-12 Services division faces competition from many companies
    that provide student assessment, tutoring and remediation services,
    including Internet and software based services, to schools and students in
    the increasingly competitive K-12 education market.

        Print media companies. We face competition from traditional print media
    companies that publish standardized test preparation materials, college and
    education guidebooks and K-12 assessment and remediation materials, and that
    offer admissions information and services to students and schools. Several
    of these companies have their own Web sites or have established partnerships
    with Internet companies with the intention of providing their products and
    services over the Internet. We expect that all of our primary competitors in
    this area will expand into Internet delivery if they have not already done
    so. In addition, it is possible that some of our customers in this area
    could expand into Internet delivery and become our competitors.

        Non-profit and membership organizations. We also face competition from
    several non-profit and other organizations that offer both face-to-face and
    Internet-based products and services to assist individuals and educational
    organizations with counseling, marketing and applications. These
    organizations also provide online information and advice to students.

    We believe that the principal competitive factors in our markets include the
following:

   o brand recognition;

   o ability to demonstrate measurable results;

   o availability of integrated online and offline solutions;

   o ability to achieve a critical mass of students, parents and educational
     institutions online;

   o overall quality of user experience;

   o speed in the introduction of new services;

   o quality of materials and teachers;

   o alignment of offerings with specific needs of students, parents and
     educators; and

   o value and availability of products and services.

    We believe that our primary competitive advantages are our well-known and
trusted Princeton Review brand, our extensive experience in test preparation and
admissions and our innovative, high-quality educational products and services.
We also believe that our ability to attract students, parents and educators to
our highly trafficked Princetonreview.com Web site offers higher education
institutions access to a large body of potential applicants and offers sponsors
and merchandisers an attractive source of potential consumers. However, some of
our competitors may have more resources than we do, and they may be able to
devote greater resources than we can to the development, production and sale of
their services and respond more quickly than we can to new technologies or
changes in the education market. As a result, we may not be able to maintain our
competitive advantages or otherwise compete effectively with current or future
competitors.

INTELLECTUAL PROPERTY AND PROPERTY RIGHTS

    Our copyrights, trademarks, service marks, trade secrets, proprietary
technology and other intellectual property rights distinguish our products and
services from those of our competitors, and

                                       13

<Page>
contribute to our competitive advantage in our target markets. To protect
our brand, products and services and the systems that deliver those products
and services to our customers we rely on a combination of copyright, trademark
and trade secret laws as well as confidentiality agreements and licensing
arrangements with our employees, customers, independent contractors, sponsors
and others.

    We strategically pursue the registration of our intellectual property
rights. However, effective patent, trademark, service mark, copyright and trade
secret protection may not always be available. Existing laws do not provide
complete protection, and monitoring the unauthorized use of our intellectual
property requires significant resources. We cannot be sure that our efforts to
protect our intellectual property rights will be adequate or that third parties
will not infringe or misappropriate these rights. In addition, there can be no
assurance that competitors will not independently develop similar intellectual
property. If others are able to copy and use our products and delivery systems,
we may not be able to maintain our competitive position. If litigation is
necessary to enforce our intellectual property rights or determine the scope of
the proprietary rights of others, we may have to incur substantial costs or
divert other resources, which could harm our business.

    In addition, competitors and others may claim that we have infringed their
intellectual property rights. Defending any such lawsuit, whether with or
without merit, could be time-consuming, result in costly litigation or prevent
us from offering our products and services, which could harm our business. If a
lawsuit against us is successful, we may lose the rights to use our products or
be required to modify them, or we may have to pay financial damages. We have
been subject to infringement claims in the past and expect to be subject to
legal proceedings and claims from time to time in the ordinary course of
business, including claims of alleged infringement of the trademarks and other
intellectual property rights of third parties.

    In order to develop, improve, market and deliver new products and services,
we may be required to obtain licenses from others. There can be no assurance
that we will be able to obtain licenses on commercially reasonable terms or at
all or that rights granted under any licenses will be valid and enforceable.

GOVERNMENT REGULATION

    We must comply with regulations adopted by the Federal Trade Commission and
with several state laws that regulate the offer and sale of franchises. The
FTC's Trade Regulation Rule on Franchising, or the FTC Rule, and various state
laws require that we furnish prospective franchisees with a franchise offering
circular containing information prescribed by the FTC Rule and applicable state
laws and regulations.

    We also must comply with a number of state laws that regulate substantive
aspects of the franchisor-franchisee relationship, including:

       o those governing the termination or non-renewal of a
         franchise without good cause;

       o requirements that a franchisor deal with its franchisees in
         good faith;

       o prohibitions against interference with the right of free
         association among franchisees; and

       o those regulating discrimination among franchisees in
         charges, royalties or fees.

    Some foreign countries also have laws affecting the offer and sale of
franchises within their borders and to their citizens and U.S. federal and state
franchise regulation may be applicable to our efforts to establish franchises
abroad. Failure to comply with these laws could limit or preclude our ability to
expand internationally through franchising.

    To date, these laws have not precluded us from seeking franchisees in any
given area and have not had a material adverse effect on our operations.
However, compliance with federal, state and international franchise laws can be
costly and time consuming, and we cannot be certain that we will not encounter
delays, expenses or other difficulties in this area.

                                       14

<Page>

EMPLOYEES

    As of December 31, 2002, we had 470 full-time employees, including 87 in
content and editorial, 43 in administration, finance and human resources, 59 in
information systems, 37 in marketing, 43 in sales and sales support and 201 in
our regional offices performing multiple tasks, including sales, administrative,
and teaching functions. In addition, we had approximately 2,700 part-time
employees, comprised mainly of teachers.

    None of our employees is covered by a collective bargaining agreement. We
consider our employee relations to be good.

OUR RESTRUCTURING

    Until March 31, 2000, we operated as an S corporation with four majority
owned limited liability company subsidiaries. On April 1, 2000, we completed a
corporate restructuring in order to eliminate minority interests in our
subsidiaries, provide all equity holders with a common interest in our company
and otherwise facilitate our initial public offering. As part of our
restructuring, all stockholders of the S corporation and all the minority equity
interest holders in our subsidiaries, contributed their interests to a newly
formed holding company in exchange for shares of common stock of the holding
company. As a result of this restructuring, our status as an S corporation
terminated. Our current structure is that of a holding company with six wholly
owned subsidiaries. For additional information about our restructuring, see
Note 7 to our consolidated financial statements included elsewhere in this
Annual Report on Form 10-K.

SEGMENT INFORMATION

    For financial information relating to our operating divisions by business
segment, see Note 13 to our consolidated financial statements included elsewhere
in this Annual Report on Form 10-K.

RISK FACTORS

    You should carefully consider the following risk factors together with all
of the other information contained in this Annual Report on Form 10-K before
making an investment decision with respect to our common stock. Any of the
following risks, as well as other risks and uncertainties described in this
Annual Report on Form 10-K, could harm our business, financial condition and
results of operations and could adversely affect the value of our common stock.

RISKS RELATED TO OUR BUSINESS

WE HAVE A HISTORY OF SIGNIFICANT OPERATING LOSSES AND MAY NOT BE ABLE TO SUSTAIN
OR INCREASE PROFITABILITY IF WE ARE UNABLE TO SUBSTANTIALLY INCREASE REVENUE
FROM OUR NEWER PRODUCTS, IN WHICH CASE THE MARKET PRICE OF OUR COMMON STOCK
COULD BE ADVERSELY AFFECTED.

    We have significantly increased our operating expenses over the last several
years in order to grow our existing Internet operations, introduce and expand
new Internet-based products and expand into new lines of business. As a result,
we have incurred significant losses in these periods. As of December 31, 2002,
we had an accumulated deficit of approximately $34.6 million. We incurred net
losses of approximately $1.1 million for the year ended December 31, 2002 and
$10.3 million for the year ended December 31, 2001.

    We returned to profitability on a quarterly basis only in the third and
fourth quarters of 2002. In order to grow as currently contemplated and sustain
and increase profitability, we will need to derive an increasing portion of our
revenue from our newer businesses, consisting of our K-12 services and our
Web-based Admissions Services products, while at the same time effectively
controlling costs. If we are unable to do this, we will be unable to execute our
current business plan and our operating results may be adversely affected. In
order to increase revenue from these newer businesses we must, among other
things, successfully:
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       o continue to increase market acceptance by educators,
         students and parents of our K-12 services, including
         continuing to grow the subscriber base of Homeroom.com while
         increasing subscription fees and renewal rates;

       o continue to grow our revenue from higher education
         institutions that purchase our Web-based products and
         services; and

       o increase the number of students, parents and educators
         visiting our Web site.

    If we are unable to achieve these objectives, we may fail to sustain or
increase profitability in subsequent periods, in which case the market price of
our common stock may be adversely affected.

IF COLLEGES AND UNIVERSITIES REDUCE THEIR RELIANCE ON STANDARDIZED ADMISSIONS
TESTS OR STATES REDUCE THEIR USE OF MANDATED ASSESSMENTS, OUR BUSINESS WILL BE
MATERIALLY ADVERSELY AFFECTED.

    The success of our test preparation and K-12 services businesses depends on
the continued use of standardized tests. If the use of standardized tests
declines or falls out of favor with educational institutions or state and local
governments, the markets for many of our products and services will deteriorate
and our business will be materially adversely affected.

OUR BUSINESS MAY BE DIFFICULT TO EVALUATE BECAUSE WE HAVE LIMITED EXPERIENCE
GENERATING REVENUE FROM SOME OF OUR NEWER PRODUCTS.

    We have a limited operating history with some of our newer products. Our
Princeton Review Online test preparation courses and our K-12 products were
first introduced in 2000. The business we acquired from Embark in October 2001
also represents a new form of revenue stream for us. Because of our limited
operating history with these businesses, our overall business may be difficult
to evaluate.

WE FACE INTENSE COMPETITION THAT COULD ADVERSELY AFFECT OUR REVENUE,
PROFITABILITY AND MARKET SHARE.

    The markets for our products and services are highly competitive, and we
expect increased competition in the future that could adversely affect our
revenue, profitability and market share. Our current competitors include but are
not limited to:

       o providers of online and offline test preparation, admissions
         assistance and career counseling to prospective higher
         education students, with our primary national competitor in
         this area being Kaplan, Inc.;

       o companies that provide prospective students with
         Internet-based information about higher education
         institutions as well as companies that provide these
         institutions with access to the student market;

       o companies that provide K-12 software, Internet-based and
         other educational assessment and remediation products and
         services to students, parents, educators and educational
         institutions;

       o traditional print media companies that publish books and
         magazines about standardized test preparation and college
         and graduate schools and offer admissions information and
         services to students and educational institutions; and

       o non-profit and membership educational organizations that
         offer both face-to-face and Internet-based products and
         services to assist individuals and educational organizations
         with counseling, marketing and student applications.

    Some of our competitors may have more resources than we do. These
competitors may be able to devote greater resources than we can to the
development, promotion and sale of their services and respond more quickly than
we can to new technologies or changes in customer preferences. We may not be
able to maintain our competitive position or otherwise compete effectively with
current or future competitors, especially those with significantly greater
resources.

                                       16

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    Some of our competitors that provide K-12 online education products may have
more experience, larger customer bases and greater brand recognition in that
market. Further, established companies with high brand recognition and extensive
experience providing various educational products to the K-12 market may develop
online products and services that are competitive with our Homeroom.com
subscription service.

NEGATIVE DEVELOPMENTS IN SCHOOL FUNDING COULD REDUCE OUR INSTITUTIONAL REVENUE.

    We expect to derive a growing portion of our revenue from sales of our
products and services to educational institutions, including our K-12 and ECOS
products. Our ability to generate revenue from these sources may be adversely
affected by decreased government funding of education. Public school funding is
heavily dependent on support from federal, state and local governments and is
sensitive to government budgets. In addition, the government appropriations
process is often slow and unpredictable. Funding difficulties also could cause
schools to be more resistant to price increases in our products, compared to
other businesses that might be better able to pass on price increases to their
customers.

OUR BUSINESS IS SUBJECT TO SEASONAL FLUCTUATIONS, WHICH MAY CAUSE OUR OPERATING
RESULTS TO FLUCTUATE FROM QUARTER TO QUARTER. THIS MAY RESULT IN VOLATILITY OR
ADVERSELY AFFECT OUR STOCK PRICE.

    We experience, and we expect to continue to 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. These fluctuations could result in
volatility or adversely affect our stock price. In addition, as our revenue
grows, these seasonal fluctuations may become more evident. We typically
generate the largest portion of our test preparation revenue in the third
quarter. The electronic application revenue from the business we acquired from
Embark is highest in the first and fourth quarters, corresponding with the
busiest times of year for submission of applications to academic institutions.
Our K-12 services division may also experience seasonal fluctuations in revenue,
but we are not yet able to predict the impact of seasonal factors on this
business with any degree of accuracy.

OUR QUARTERLY REVENUE AND OPERATING RESULTS ARE NOT INDICATIVE OF FUTURE
PERFORMANCE AND ARE DIFFICULT TO FORECAST.

    Our quarterly operating results may not meet expectations of public market
analysts or investors, which could cause our stock price to decline. In addition
to the seasonal fluctuations described above, our operating results may vary
from quarter to quarter in response to a variety of other factors beyond our
control, including:

       o our customers' spending patterns, which, in some cases, are
         difficult to predict;

       o the timing of school districts' funding sources and budget
         cycles;

       o the timing of expirations and renewals of educational
         institution subscriptions;

       o variations in product mix;

       o the timing of corporate sponsorships and advertising; and

       o non-recurring charges incurred in connection with
         acquisitions or other extraordinary transactions.

    Due to these factors, we believe that quarter-to-quarter comparisons of our
operating results may not be indicative of our future performance and you should
not rely on them to predict the future performance of our stock price. In
addition, our past results may not be indicative of future performance because
several of our businesses were introduced or acquired relatively recently.

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TERMINATION OR INTERRUPTION OF OUR RELATIONSHIPS WITH MCGRAW-HILL OR RANDOM
HOUSE COULD SIGNIFICANTLY REDUCE OUR REVENUE.

    Any termination of, or difficulties with, our relationships with McGraw-Hill
or Random House could significantly reduce our revenue. We derive significant
revenue from our services rendered to McGraw-Hill. These services consist of
developing content for their K-12 textbooks and workbooks and other ancillary
services. Revenue from McGraw-Hill represented approximately 4% of our revenue
in 2002 and 7% of our revenue in 2001. Revenue from McGraw-Hill represented
approximately 36% of the revenue reported in our K-12 Services division in 2002
and 82% of the revenue reported in that division in 2001. Our contract with
McGraw-Hill is scheduled to expire in September 2003. While we expect to
continue to provide certain services to McGraw-Hill following the expiration of
this existing agreement, we can not predict at this time the extent of such
services or the revenue we may derive from them. We rely on Random House as the
publisher and distributor of all of the books we write. Royalties and other fees
from books authored by us and published and distributed by Random House
represented approximately 4% of our revenue in each of 2002 and 2001. Revenue
from Random House represented approximately 25% of the revenue reported in our
Admissions Services division in 2002 and 28% of the revenue reported in that
division in 2001.

THE TERMS OF AN EXISTING CREDIT AGREEMENT RESTRICT US FROM ENGAGING IN MANY
ACTIVITIES AND REQUIRE US TO SATISFY VARIOUS FINANCIAL TESTS, AND WE EXPECT THAT
ANY SIGNIFICANT CREDIT ARRANGEMENTS OR FACILITIES WE OBTAIN IN THE FUTURE WILL
CONTAIN SIMILAR RESTRICTIONS AND REQUIREMENTS.

    The credit agreement governing the indebtedness that we assumed as part of
our acquisition of Embark's business contains covenants that restrict, among
other things, our ability to incur additional debt, pay cash dividends, create
liens, change our fundamental organization or lines of business, make
investments, engage in transactions with affiliates, and engage in certain
significant corporate transactions. This credit agreement also requires us to
maintain specific financial ratios. Events beyond our control could affect our
ability to meet those financial ratios, and we cannot be certain that we will
meet them. A breach of any of the covenants contained in the credit agreement
could allow our lender to declare all amounts outstanding under the credit
agreement to be immediately due and payable. We have pledged substantially all
of our assets to our lender to secure the debt, and the debt is guaranteed by
all of our subsidiaries.

    We may seek to obtain one or more additional credit facilities in the near
future. We expect that any credit facilities we obtain will contain restrictions
and requirements as or more restrictive than those described above.

IF WE ARE NOT ABLE TO CONTINUALLY ENHANCE OUR INTERNET-BASED PRODUCTS AND
SERVICES AND ADAPT THEM TO CHANGES IN TECHNOLOGY, OUR FUTURE REVENUE GROWTH
COULD BE ADVERSELY AFFECTED.

    If our improvement and adaptation of our Internet-based products and
services is delayed, results in systems interruptions or is not aligned with
market expectations or preferences, our revenue growth could be adversely
affected. The Internet is a rapidly evolving environment, and the technology
used in Internet-related products changes rapidly. As Internet-based industries
continue to experience rapid technological changes, we must quickly modify our
solutions to adapt to emerging Internet standards and practices, technological
advances, and changing user and sponsor preferences. Ongoing enhancement of our
Web site and related technology will entail significant expense and technical
risk. We may use new technologies ineffectively or fail to adapt our Web site
and related technology on a timely and cost-effective basis.

IF WE ARE UNABLE TO RENEW OUR AGREEMENTS WITH OUR FRANCHISEES, OR IF OUR
FRANCHISEES CONTEST OUR INTERPRETATION OF THOSE AGREEMENTS, OUR ABILITY TO OFFER
OUR PRODUCTS IN OUR FRANCHISEES' TERRITORIES COULD BE ADVERSELY AFFECTED, WHICH
COULD ADVERSELY AFFECT OUR REVENUE.

    If we are unable to renew our agreements on favorable terms with our
franchisees, or if any of those franchisees contest our interpretation of our
rights and obligations under these

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<Page>
agreements, then our ability to deliver our products and services within their
franchise territories could be hindered, and our revenue could be adversely
affected. Through a series of franchise agreements and other agreements, our
independent franchisees have various rights to provide test preparation products
and services under the Princeton Review brand within specified territories, and
to use our trademarks and other intellectual property in connection with
providing these services. Similarly, we have various rights to market and sell
our products and services in the franchisees' territories. Our agreements have
been reviewed and renegotiated to accommodate our business goals and the goals
of our franchisees as they have both developed over the years. The majority of
our franchise agreements expire on December 31, 2005. Our agreements governing
the royalty payment terms applicable when we offer our Princeton Review Online
products to customers in franchisee territories expired on December 31, 2002.
While we and our franchisees continue to operate in accordance with the
framework of our prior agreements with respect to these royalties and we
anticipate entering into renewals of these agreements shortly with all of our
domestic franchisees through 2005, we currently do not have such written
agreements in place.

WE RELY ON OUR RELATIONSHIPS WITH THIRD PARTIES TO ATTRACT VISITORS TO OUR WEB
SITE. THESE RELATIONSHIPS MAY TERMINATE OR MAY NOT PRODUCE A SIGNIFICANT NUMBER
OF VISITORS, WHICH COULD ADVERSELY AFFECT OUR BUSINESS AND OUR ABILITY TO
INCREASE OUR REVENUE.

    As we expanded our Internet-based businesses, we have expanded our
contractual relationships with third party Web sites to attract a portion of the
user traffic on our Web site. These relationships may terminate or may not
produce a significant number of visitors, which could adversely affect our
business and our ability to increase our revenue. We have entered into
agreements with, MSN, Yahoo and the providers of other third party Web
sites to either redirect their users to our Web site or to display our branded
content and tools in order to drive co-registration on our Web site. There can
be no assurance that we will be able to maintain these existing agreements. Our
failure to maintain and fully capitalize on these existing relationships could
reduce, or prevent us from increasing, the number of visitors to our Web site,
which could make it more difficult for us to generate subscription revenue,
market our products and attract corporate sponsors.

IF WE DO NOT ADEQUATELY PROTECT THE INTELLECTUAL PROPERTY RIGHTS TO OUR PRODUCTS
AND SERVICES, WE MAY LOSE THESE RIGHTS AND OUR BUSINESS MAY SUFFER MATERIALLY.

    Failure to protect our intellectual property could materially adversely
affect our business. We depend on our ability to protect our brand, our products
and services and the systems that deliver those products and services to our
customers. We rely on a combination of copyright, trademark and trade secret
laws, as well as confidentiality agreements and licensing arrangements, to
protect these products. These intellectual property rights distinguish our
products and services from those of our competitors. If others are able to copy,
use and market these products and delivery systems, then we may not be able to
maintain our competitive position. Despite our best efforts, we cannot assure
you that our intellectual property rights will not be infringed, violated or
legally imitated. Existing laws do not provide complete protection and policing
the unauthorized use of our products and services requires significant
resources.

THE ABSENCE OF A FEDERAL REGISTRATION OF OUR 'THE PRINCETON REVIEW' SERVICE MARK
AND TRADEMARK MAY MAKE IT MORE DIFFICULT AND EXPENSIVE FOR US TO PREVENT OTHERS
FROM USING THE MARK AND COULD OTHERWISE SIGNIFICANTLY HARM OUR BUSINESS.

    We have used 'The Princeton Review' as our principal service mark since
1982. Although we applied to register the mark, our application for registration
was opposed by Princeton University, and has since been abandoned. No one,
including Princeton University, has objected to our use, as distinguished from
federal registration, of 'The Princeton Review' as a service mark during the
many years we have used it. The absence of a federal registration of our mark,
however, may make the enforcement of our exclusive right to use the mark against
possible future infringers more difficult and costly. In addition, if we are
unable to prevent a competitor or another business

                                       19

<Page>
from using 'The Princeton Review' or similar marks, then we could lose customers
or suffer a dilution of the prominence of our principal mark. It is also
possible that Princeton University could object to our continued use of the
mark. Litigation involving our rights to 'The Princeton Review' marks could be
costly, and we cannot predict with any certainty its outcome. Moreover, if we
were prevented from using 'The Princeton Review' as our service mark or
trademark and licensing the mark to our franchisees, our business would be
significantly harmed.

IF OUR PRODUCTS AND SERVICES INFRINGE THE INTELLECTUAL PROPERTY RIGHTS OF
OTHERS, THIS MAY RESULT IN COSTLY LITIGATION OR THE LOSS OF OUR OWN INTELLECTUAL
PROPERTY RIGHTS, WHICH COULD MATERIALLY ADVERSELY AFFECT OUR BUSINESS.

    Competitors and others may claim that we have infringed their current or
future intellectual property rights. The defense of any lawsuit, whether with or
without merit, could be time-consuming and costly. If a lawsuit against us is
successful, we may lose, or be limited in, the rights to offer our products and
services. Any proceedings or claims of this type could materially adversely
affect our business.

WE MAY BE HELD LIABLE FOR THE CONTENT OF MATERIALS THAT WE AUTHOR, CONTENT
AVAILABLE ON OUR WEB SITE OR PRODUCTS SOLD THROUGH OUR WEB SITE.

    We may be subject to claims for defamation, negligence, copyright or
trademark infringement or other legal theories based on the content of materials
that we author, and content that is published on or downloaded from our Web
sites, accessible from our Web sites through links to other Web sites or posted
by our users in chat rooms or bulletin boards. These types of claims have been
brought, sometimes successfully, against online services as well as print
publications in the past. Although we carry general liability insurance, our
insurance may not cover potential claims of this type, such as trademark
infringement or defamation, or may not be adequate to cover all costs incurred
in defense of potential claims or to indemnify us for all liability that may be
imposed. In addition, these claims, with or without merit, would result in
diversion of our management personnel and financial resources. Further, if print
publications that we author contain material that customers find objectionable,
these publications may have to be recalled, which could result in lost revenue
and adverse publicity.

THE LOSS OF OUR SENIOR MANAGEMENT COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR
BUSINESS.

    We depend on the continued service of our senior management. The loss of any
of our Chief Executive Officer, John Katzman, our President and Chief Operating
Officer, Mark Chernis, or our Chief Financial Officer, Stephen Melvin, could
materially adversely affect our business.

OUR BUSINESS MAY BE HARMED BY ACTIONS TAKEN BY OUR FRANCHISEES THAT ARE OUTSIDE
OUR CONTROL.

    Approximately 6% of our 2002 revenue was derived from royalties paid to us
by our franchisees and from sales of our course and marketing materials to these
franchisees. The quality of franchised test preparation operations may be
diminished if our franchisees do not successfully provide test preparation
services in a manner consistent with our standards and requirements, or do not
hire and train qualified managers or instructors. As a result, our image and
reputation may suffer and our revenue could decline.

FRANCHISE REGULATIONS COULD LIMIT OUR ABILITY TO TERMINATE OR REPLACE
UNPRODUCTIVE FRANCHISES, WHICH COULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS,
AND COULD LIMIT OUR ABILITY TO EXPAND INTERNATIONALLY THROUGH FRANCHISING.

    Applicable laws may delay or prevent us from terminating an unproductive
franchise or withholding consent to renewal or transfer of a franchise, which
could have an adverse effect on franchise royalties. We are subject to both
federal and state laws regulating the offer and sale of franchises. These laws
also frequently apply substantive standards to the relationship between

                                       20

<Page>
franchisor and franchisee and limit the ability of a franchisor to terminate or
refuse to renew a franchise. Some foreign countries also have laws affecting the
offer and sale of franchises within their borders and to their citizens and U.S.
federal and state franchise regulation may be applicable to our efforts to
establish franchises abroad. Failure to comply with these laws could limit or
preclude our ability to expand internationally through franchising.

    Compliance with federal, state and international franchise laws can be
costly and time consuming, and we cannot be certain that we will not encounter
delays, expenses or other difficulties in this area. Further, the nature and
effect of any future legislation or regulation of our franchise operations
cannot be predicted.

IF WE NEED BUT ARE UNABLE TO OBTAIN ADDITIONAL CAPITAL TO EXPAND OUR OPERATIONS
AND INVEST IN NEW PRODUCTS AND SERVICES, OUR BUSINESS MAY BE ADVERSELY AFFECTED.

    In the future we may require substantial additional capital to finance
ongoing operations or the growth of our business. To the extent that our
existing sources of liquidity and cash flow from operations are insufficient to
fund our activities, we may need to raise additional funds. We cannot be certain
that we will be able to obtain additional financing on favorable terms. If we
fail to raise additional funds, we may need to sell debt or additional equity
securities or to reduce our growth to a level that can be supported by our cash
flow. Without additional capital, we may not be able to:

       o further develop or enhance our services and products;

       o acquire necessary technologies, products or businesses;

       o expand operations in the United States or internationally;

       o hire, train and retain employees;

       o market our services and products; or

       o respond to competitive pressures or unanticipated capital
         requirements.

INTEREST EXPENSE AND OTHER CHARGES RELATED TO OUR RECENT ACQUISITIONS COULD
NEGATIVELY AFFECT OUR RESULTS OF OPERATIONS.

    In connection with our acquisitions of the businesses of Embark and several
of our franchisees over the last three years, we incurred indebtedness in an
aggregate amount of approximately $33.6 million, a portion of which was repaid
from the proceeds of our initial public offering. As of December 31, 2002,
approximately $7.0 million of this indebtedness remained outstanding, bearing
interest at a weighted average interest rate of approximately 7.6% per year.
Interest expense associated with this indebtedness will increase our net loss or
reduce our earnings.

    Additionally, in connection with these acquisitions, we recorded a total of
approximately $31.2 million of goodwill. In July 2001, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 142
(SFAS 142), Goodwill and Other Intangible Assets. SFAS 142 requires goodwill and
other intangible assets that have an indefinite useful life to no longer be
amortized; however, these assets must be reviewed at least annually for
impairment. To the extent these assets are deemed to be impaired, they must be
written down. Any such write down would adversely affect our operating results.
We adopted SFAS 142 as of January 1, 2002. As of December 31, 2002, we had
unamortized goodwill of $30.0 million related to these acquisitions.

WE MAY ENGAGE IN FUTURE ACQUISITIONS THAT COULD DILUTE THE EQUITY INTEREST OF
OUR STOCKHOLDERS, INCREASE OUR DEBT OR CAUSE US TO ASSUME CONTINGENT
LIABILITIES, ALL OF WHICH MAY HAVE A DETRIMENTAL EFFECT ON THE PRICE OF OUR
COMMON STOCK. IF ANY ACQUISITIONS ARE NOT SUCCESSFULLY INTEGRATED WITH OUR
BUSINESS, OUR ONGOING OPERATIONS COULD BE NEGATIVELY AFFECTED.

    We may acquire the businesses of our remaining domestic franchisees or other
businesses, products or technologies in the future. To facilitate future
acquisitions, we may take actions that

                                       21

<Page>
could have a detrimental effect on our financial condition, results of
operations or the price of our common stock, including:

       o issuing equity securities or convertible debt securities,
         which would dilute current stockholders' percentage
         ownership;

       o incurring substantial debt; or

       o assuming contingent liabilities.

  Acquisitions also entail numerous business risks, including:

       o difficulties in assimilating acquired operations,
         technologies or products;

       o unanticipated costs that could materially adversely affect
         our results of operations;

       o negative effects on our reported results of operations from
         acquisition related charges and amortization of acquired
         technology and other intangibles;

       o diversion of management's attention from other business
         concerns;

       o adverse effects on existing business relationships with
         suppliers and customers;

       o risks of entering markets in which we have no or limited
         prior experience; and

       o the potential inability to retain and motivate key employees
         of acquired businesses.

IF WE FAIL TO MANAGE OUR GROWTH EFFECTIVELY, OUR BUSINESS MAY BE HARMED.

    In recent periods we have significantly increased our work force, introduced
a number of new products, made substantial enhancements to our existing products
and consummated several acquisitions. At December 31, 2002, we had 470 full time
employees, as compared with 335 full time employees at December 31, 2000. This
recent growth has placed, and our anticipated growth in future operations will
continue to place, significant demands on our management, and strain our
operational, financial and technological resources. We expect that further
expansion of our operations will be required to successfully implement our
business strategy, including the continued enhancement of our product and
service offerings and the potential consummation of additional
strategic acquisitions. In order to manage our growth effectively, we must
continue to improve our operational, management and financial systems,
procedures, and controls on a timely basis. If we fail to manage our growth
effectively, our business could be materially and adversely affected.

WE COULD BE LIABLE FOR EVENTS THAT OCCUR AT OUR TEST PREPARATION FACILITIES, AND
A LIABILITY CLAIM AGAINST US COULD AVERSELY AFFECT OUR REPUTATION AND OUR
FINANCIAL RESULTS.

    We could become liable for the actions of instructors and other personnel at
the facilities we use to provide our classroom-based test preparation courses.
In the event of on-site accidents, injuries or other harm to students, we could
face claims alleging that we were negligent, provided inadequate supervision or
were otherwise liable for the injuries. Although we maintain liability
insurance, this insurance coverage may not be adequate to protect us fully from
these claims. In addition, we may not be able to obtain liability insurance in
the future at reasonable prices or at all. A successful liability claim could
adversely affect our reputation and our financial results. Even if unsuccessful,
such a claim could cause unfavorable publicity, entail substantial expense and
divert the time and attention of key management personnel.

IF THE USE OF THE INTERNET DOES NOT GROW AS ANTICIPATED, OUR REVENUE COULD
DECLINE AND OUR BUSINESS WOULD BE HARMED.

    We depend, in part, on the increased acceptance and use of the Internet by
consumers and educational institutions, particularly students, parents,
colleges, universities and elementary and secondary schools. Rapid growth in the
use of the Internet is a relatively recent occurrence, and if the use of the
Internet does not grow as anticipated, our revenue could decline and our
business would be harmed. The market for Internet-based products and services is
characterized by rapid technological change and product innovation,
unpredictable product life cycles and unpredictable

                                       22

<Page>

user preferences. Acceptance and use of the Internet may not continue to develop
at historical rates and a sufficiently broad base of customers may not adopt or
continue to use the Internet as a medium of commerce. Demand and market
acceptance for recently introduced products and services over the Internet are
subject to a high level of uncertainty, and we, therefore, cannot predict
whether the market for Internet-based educational products will continue to
grow.

IF WE EXPERIENCE SYSTEM FAILURES, OUR REPUTATION MAY BE HARMED AND USERS MAY
SEEK ALTERNATE SERVICE PROVIDERS CAUSING US TO LOSE REVENUE.

    If our primary and backup computer systems were to fail or be disrupted, our
services could be interrupted and we may lose revenue and future business. We
depend on the efficient and uninterrupted operation of our computer and
communications hardware and software systems. These systems and operations are
vulnerable to damage or interruption from floods, fires and power loss and
similar events, as well as computer viruses, break-ins, sabotage, intentional
acts of terrorism, vandalism and other misconduct and disruptions or delays
occurring throughout the Internet network infrastructure. Although all of our
material systems are redundant, short-term service interruptions may take place
if our primary systems were to fail or be disrupted and we are forced to
transition to backup systems. Substantially all of the computer hardware for
operating our Web site is currently located at our headquarters in New York, New
York. Accordingly, our Internet operations are dependent on our ability to
maintain our systems in effective working order and to protect them from
disruptive events. We do not have a formal disaster recovery plan, and our
insurance policies may not adequately compensate us for any losses that may
occur due to failures of or interruptions in our systems.

    In addition, the system failures of third party Internet service providers,
online service providers and other Web site operators could produce
interruptions in our service for those users who access our services through
these third party providers. Service interruptions could reduce our revenue and
our future revenue will be harmed if our users believe that our system is
unreliable.

IF OUR COMPUTER SYSTEMS ARE UNABLE TO ACCOMMODATE A HIGH VOLUME OF TRAFFIC ON
OUR WEB SITE, THE GROWTH OF OUR REVENUE COULD BE REDUCED OR LIMITED.

    If the volume of traffic on our Web site increases beyond our capacity,
customers may experience delays and interruptions in service. As a result, they
may seek the products and services of our competitors and the growth of our
revenue could be reduced or limited. Because we seek to generate a high volume
of traffic and accommodate a large number of customers on our Web site, the
satisfactory performance, reliability and availability of our Web site,
processing systems and network infrastructure are critical to our reputation and
our ability to serve our customers. If the volume of traffic on our Web site
continues to increase, we will need to expand and upgrade our technology,
transaction processing systems and network infrastructure. While slower response
times have not had a material effect on our results of operations to date, our
Web sites have in the past and may in the future experience slower response
times due to increased traffic.

FUTURE REGULATIONS OR THE INTERPRETATION OF EXISTING LAWS PERTAINING TO THE
INTERNET COULD DECREASE THE DEMAND FOR OUR PRODUCTS OR INCREASE THE COST OF
DOING BUSINESS.

    Any new law or regulation pertaining to the Internet, or the application or
interpretation of existing laws, could increase our cost of doing business,
decrease the demand for our products and services, or otherwise harm our
business. We must comply with a variety of federal and state laws affecting the
content of materials distributed over the Internet, as well as regulations and
other laws restricting the collection, use and disclosure of personal
information that we may obtain in the course of providing our online services.
In particular, we must comply with the Children's Online Privacy Protection Act,
which, as implemented, mandates that we obtain verifiable, informed parental
consent before we collect, use or disclose personal information from children
under the age of 13. Future laws or regulations may relate to information
retrieved from or
                                       23

<Page>
transmitted over the Internet, consumer protection, online
content, user privacy, taxation and the quality of products and services.
Compliance with future laws and regulations, or existing laws as they may be
interpreted in the future, could be expensive, time consuming, impractical or
impossible.

WE MAY BE LIABLE FOR INVASION OF PRIVACY OR MISAPPROPRIATION BY OTHERS OF OUR
USERS' INFORMATION, WHICH COULD ADVERSELY AFFECT OUR REPUTATION AND FINANCIAL
RESULTS.

    Some of our services require the disclosure of sensitive information by the
user. We rely on a number of security systems for our services to protect this
information from unauthorized use or access. We cannot predict whether new
technological developments could circumvent these security measures. If the
security measures that we use to protect personal information or credit card
information are ineffective, we may be subject to liability, including claims
for invasion of privacy, impersonation, unauthorized purchases with credit card
information or other similar claims. In addition, the Federal Trade Commission
and several states have investigated the use of personal information by certain
Internet companies. We could incur significant expenses if new regulations
regarding the use of personal information are introduced or if our privacy
practices are investigated.

RISKS RELATED TO THE SECURITIES MARKETS AND OWNERSHIP OF OUR COMMON STOCK

OUR STOCK PRICE HAS BEEN AND MAY CONTINUE TO BE VOLATILE, WHICH COULD ADVERSELY
AFFECT OUR STOCKHOLDERS.

    Our common stock has been publicly traded only since June, 2001. Since our
initial public offering, the market price of our common stock has been volatile,
and it may continue to be volatile as a result of one or more of the following
factors, most of which are beyond our control:

       o variations in our quarterly operating results;

       o changes in securities analysts' estimates of our financial
         performance;

       o loss of a major customer or failure to complete significant
         transactions;

       o announcements by us or our competitors of significant
         contracts, acquisitions, strategic partnerships, joint
         ventures or capital commitments;

       o changes in market valuations of similar companies;

       o the discussion of our company or stock price in online
         investor communities such as chat rooms;

       o additions or departures of key personnel; and

       o fluctuations in stock market price and volume.

    In addition, the market prices of the securities of Internet-related
companies have been volatile, and have experienced fluctuations that often have
been unrelated to or disproportionate to the operating performance of these
companies. These broad market fluctuations could adversely affect the market
price of our stock. In the past, securities class action lawsuits alleging fraud
have often been filed against a company following periods of volatility in the
market price of its securities. In the future, we may be the target of similar
lawsuits. If a lawsuit were to be filed against us, it could result in
substantial costs and the diversion of our management's attention and resources,
which could seriously harm our financial results or result in a decline in the
market price of our common stock. Declines in the market price of our common
stock could also harm employee morale and retention, our ability to attract
qualified employees and our access to capital.

WE HAVE ANTI-TAKEOVER PROTECTIONS, WHICH MAY DISCOURAGE OR PREVENT A TAKEOVER OF
US, EVEN IF AN ACQUISITION WOULD BE BENEFICIAL TO OUR STOCKHOLDERS.

    Certain provisions of our certificate of incorporation and bylaws, as well
as provisions of Delaware law, could make it more difficult for another company
to acquire us, even if a takeover would benefit our stockholders. The provisions
in our corporate documents:

                                       24

<Page>

   o authorize the issuance of 'blank check' preferred stock that could be
     issued by our board of directors to increase the number of outstanding
     shares, making a takeover more difficult and expensive;

   o establish a staggered board of directors, so that it would take three
     successive annual meetings to replace all directors;

   o prohibit cumulative voting in the election of directors, which would
     otherwise allow less than a majority of stockholders to elect director
     candidates;

   o prohibit stockholders from calling special meetings of stockholders;

   o prohibit stockholder action by written consent, thereby requiring all
     stockholder actions to be taken at a meeting of our stockholders; and

   o establish advance notice requirements for nominations for election to the
     board of directors or for proposing matters that can be acted upon by
     stockholders at stockholder meetings.

In addition, Section 203 of the Delaware General Corporation Law and the terms
of our stock option plans may discourage, delay or prevent a change in our
control, which may depress the market price of our common stock.

CONCENTRATION OF OWNERSHIP AMONG OUR EXISTING EXECUTIVE OFFICERS AND DIRECTORS
MAY MAKE IT MORE DIFFICULT FOR OTHER STOCKHOLDERS TO INFLUENCE SIGNIFICANT
CORPORATE DECISIONS AND MAY HINDER A CHANGE OF CONTROL.

    As of March 25, 2003, our present directors and executive officers and their
affiliates beneficially owned approximately 39% of our outstanding common stock.
In particular, John S. Katzman, our Chief Executive Officer, beneficially owned
approximately 35% of our outstanding common stock. This concentration of
ownership may make it more difficult for other stockholders to influence matters
requiring stockholder approval and may have the effect of delaying, preventing
or deterring a change in control of our company, thereby possibly depriving our
stockholders of an opportunity to receive a premium for their common stock as
part of any sale or acquisition.

EXECUTIVE OFFICERS

    The following table sets forth information with respect to our executive
officers as of March 27, 2003.

<Table>
<Caption>
             NAME                AGE                           POSITION
             ----                ---                           --------
<S>                              <C>   <C>
John S. Katzman................  43    Chairman and Chief Executive Officer
Mark Chernis...................  36    President, Chief Operating Officer and Secretary
Stephen Melvin.................  51    Chief Financial Officer and Treasurer
Stephen Quattrociocchi.........  40    Executive Vice President, Test Preparation Services
                                       Division
Linda Nessim-Rubin.............  35    Executive Vice President, Communications
Bruce Task.....................  52    Executive Vice President, Princeton Review Ventures
Steven Hodas...................  43    Executive Vice President, Strategic Development
Robert L. Cohen................  37    Executive Vice President, General Manager K-12 Services
                                       Division
Young J. Shin..................  36    Executive Vice President, General Manager Admissions
                                       Services Division
Curtis Brown...................  39    Senior Vice President, Chief Technical Officer
</Table>

    John S. Katzman, Chairman and Chief Executive Officer, founded our company
in 1981. Mr. Katzman has served as our Chief Executive Officer and director
since our formation. Mr. Katzman served as our President from 1981 until August
2000. Mr. Katzman is the brother of Richard Katzman, one of the other members of
the board of directors. Mr. Katzman received a BA from Princeton University.

                                       25

<Page>

    Mark Chernis, President, Chief Operating Officer and Secretary, joined us in
1984. Mr. Chernis has served as Chief Operating Officer and Secretary since 1995
and became President in August 2000. From 1989 to 1995, Mr. Chernis served as
our Vice President, Operations. From 1984 to 1989, Mr. Chernis served as a
systems analyst. Mr. Chernis received a BA from Vassar College.

    Stephen Melvin, Chief Financial Officer and Treasurer, joined us in 1998.
From 1996 to 1998, he served as Vice President of Solow Realty Company where he
was responsible for overseeing the property management business. From 1987 to
1996, Mr. Melvin was Chief Financial Officer of Western Heritable Investment
Corporation, a real estate investment and management company. From 1983 to 1987,
Mr. Melvin served as Controller of Private Satellite Network, Inc. From 1978 to
1983, Mr. Melvin was Assistant Corporate Controller of Paramount Pictures Corp.
From 1974 to 1978, Mr. Melvin was a Certified Public Accountant at Deloitte &
Touche LLP. Mr. Melvin received a BA from the University of Virginia and an MS
from New York University.

    Stephen Quattrociocchi, Executive Vice President, Test Preparation Services
division, joined us in 1988. Since 1997, he has served as Executive Vice
President of our Test Preparation Services division. From 1991 to 1997, Mr.
Quattrociocchi served as Vice President of Course Operations.
Mr. Quattrociocchi received a BS from the Massachusetts Institute of Technology
and an MBA from the Wharton School.

    Linda Nessim-Rubin, Executive Vice President, Communications, joined us in
1990. Ms. Nessim-Rubin has served in her current capacity since 1998. She
manages the Princeton Review brand and oversees communications and marketing, as
well as human resources. From 1995 to 1998, she was Vice President, Marketing
Operations. Prior to joining us, Ms. Nessim-Rubin worked as an Account Executive
for Hakahudo Advertising. Ms. Nessim-Rubin received a BFA from Parsons School of
Design.

    Bruce Task, Executive Vice President, Princeton Review Ventures, joined us
in 1987. From 1997 to early 2000, he served as Executive Vice President of
Strategic Planning. From 1996 to 1997, he served as Vice President of Research
and Development, and from 1988 to 1995 he served as our Chief Financial Officer.
From 1987 to 1988, Mr. Task was director of our Washington, D.C. office.
Mr. Task received a BS from C.W. Post College.

    Steven Hodas, Executive Vice President, Strategic Development, joined us in
1995. From 1995 to 1999, Mr. Hodas served as our Vice President, Online
Services. From 1993 to 1995, Mr. Hodas served as Project Manager for the NASA
K-12 Internet Initiative where he was responsible for advising the White House
and federal and state agencies on school technology policy. Mr. Hodas received a
BA from Sarah Lawrence College.

    Robert L. Cohen, Executive Vice President, General Manager K-12 Services
division, joined us in March 2001. From 1985 to March 2001, Mr. Cohen was
President of Princeton Review of New Jersey. Since 1986, Mr. Cohen has also
co-owned and operated a number of other Princeton Review franchises. Mr. Cohen
became an executive officer in connection with our acquisition of the businesses
of Princeton Review of Boston and Princeton Review of New Jersey. Mr. Cohen
attended Princeton University.

    Young J. Shin, Executive Vice-President, General Manager Admissions Services
division, joined us in February 2003. From October 2002 to February 2003,
Mr. Shin served as the Chief Executive Officer of eduAdvisors, LLC, an education
marketing company. In 1995, Mr. Shin co-founded Embark.com, Inc., a provider of
online college and graduate school information and application services, the
assets of which we acquired in October 2001. Mr. Shin served as Embark's
Chairman of the Board from 1995 until February 2003, as Embark's Chief
Technology Officer from 2000 to 2001 and its President and Chief Executive
Officer from 1995 to 2000. From 1991 to 1994, Mr. Shin was a Technical
Specialist and Consulting Practice Manager at Seer Technologies, Inc. a computer
aided software company. Mr. Shin received a BS from Massachusetts Institute of
Technology and a BS from Massachusetts Institute of Technology's Sloan School of
Management.

    Curtis Brown, Senior Vice-President, Chief Technology Officer, joined us in
July 2002. From 2000 to 2002, Mr. Brown served as Chief Technology Officer of
Oxygen Media, Inc., a cable television, Internet and media company. From 1999 to
2000, Mr. Brown served as Chief
                                       26

<Page>
Technology Officer of SkyMall, Inc., a specialty retailer that sells products
via in-flight catalogues and an e-commerce Web site. From 1994 to 1999,
Mr. Brown served as Senior Technical Director of N2K/CDnow, Inc., a company
that promotes, markets and sells music on the Internet. Mr. Brown received a
BA from New York University.

ITEM 2. PROPERTIES

    Our headquarters are located in New York, New York, where we lease
approximately 30,000 square feet of office space under a lease that expires on
August 31, 2010. As of December 31, 2002, we also leased an aggregate of
approximately 217,000 square feet of office space for additional operations in
New York, New York and our 39 regional offices located in Alabama, Arizona,
California, Georgia, Hawaii, Illinois, Kansas, Louisiana, Maryland,
Massachusetts, Minnesota, Missouri, New Jersey, New York, Ohio, Oregon,
Pennsylvania, Texas, Washington, Washington D.C. and Canada.

ITEM 3. 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

    No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this Annual Report on Form 10-K.

                                    PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

    Price Range of Common Stock

    Our common stock has traded on the Nasdaq National Market under the symbol
'REVU' since our initial public offering on June 19, 2001. The following table
sets forth, for the periods indicated, the high and low sales prices per share
of our common stock as reported on the Nasdaq National Market.

<Table>
<Caption>

FISCAL YEAR 2001:                                              HIGH     LOW
-----------------                                              ----     ---
<S>                                                           <C>      <C>
Second Quarter (beginning June 19, 2001)....................  $11.10   $7.50
Third Quarter...............................................   11.10    5.88
Fourth Quarter..............................................    8.15    4.16

<Caption>
                                                               HIGH     LOW
FISCAL YEAR 2002:                                              ----     ---
<S>                                                           <C>      <C>
First Quarter...............................................  $ 9.41   $6.70
Second Quarter..............................................   10.15    6.81
Third Quarter...............................................    9.00    4.75
Fourth Quarter..............................................    6.54    4.80
</Table>

    As of March 25, 2003, the last reported sale price of our common stock on
the Nasdaq National Market was $4.30 per share. As of March 25, 2003, there were
99 stockholders of record of our common stock. This does not include the number
of persons whose stock is in nominee or 'street name' accounts through brokers.

                                       27

<Page>
    Dividend Policy

    We have never declared or paid any cash dividends on our common stock or
other securities and we do not intend to pay any cash dividends with respect to
our common stock in the foreseeable future. We currently intend to retain any
earnings for use in the operation of our business and to fund future growth. Any
future determination to pay cash dividends will be at the discretion of our
board of directors and will depend upon our financial condition, operating
results, capital requirements and such other factors as the board of directors
deems relevant.

    Securities Authorized for Issuance Under Equity Compensation Plans

    As of December 31, 2002, the following securities were authorized for
issuance under our 2000 Stock Incentive Plan:

<Table>
<Caption>
                                       NUMBER OF
                                   SECURITIES TO BE
                                      ISSUED UPON                             NUMBER OF SECURITIES
                                      EXERCISE OF        WEIGHTED-AVERAGE      REMAINING AVAILABLE
                                      OUTSTANDING       EXERCISE PRICE OF      FOR FUTURE ISSUANCE
                                   OPTIONS, WARRANTS   OUTSTANDING OPTIONS,       UNDER EQUITY
PLAN CATEGORY                         AND RIGHTS       WARRANTS AND RIGHTS     COMPENSATION PLANS
-------------                         ----------       -------------------     ------------------
<S>                                <C>                 <C>                    <C>
Stock incentive plan.............      2,413,362              $7.32                  124,638
</Table>

    Recent Sales of Unregistered Securities

    On April 19, 2002, pursuant to the exercise of a call option in a limited
liability company agreement, we issued 45,803 shares of our common stock to
Educational Directions, Inc. in exchange for Educational Directions' 51%
ownership interest in Princeton Review Carolinas, LLC. We issued these shares in
reliance on the exemption from registration provided by Regulation D promulgated
under the Securities Act of 1933 as a transaction not involving a public
offering.

    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 Annual Report on Form 10-K, we have used approximately $19.6 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 previously
existing credit facilities.

ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

    The consolidated statement of operations data for each of the years ended
December 31, 2002, 2001 and 2000, and the consolidated balance sheet data as of
December 31, 2002 and 2001 has been derived from our audited consolidated
financial statements appearing elsewhere in this Annual Report on Form 10-K. The
consolidated statement of operations data for the years ended December 31, 1999
and 1998 and the consolidated balance sheet data as of December 31, 2000, 1999
and 1998 has been derived from our audited consolidated financial statements
which are not included in this Annual Report on Form 10-K. The information shown
below is qualified by reference to and should be read together with our
consolidated financial statements and their notes and 'Management's Discussion
and Analysis of Financial Condition and Results of Operations' included
elsewhere in this Annual Report on Form 10-K. We have calculated the weighted
average shares used in computing net income (loss) per share as described in
Note 1 to our consolidated financial statements.

                                      28

<Page>

<Table>
<Caption>
                                                            YEARS ENDED DECEMBER 31,
                                               --------------------------------------------------
                                                 2002       2001       2000      1999      1998
                                                 ----       ----       ----      ----      ----
                                                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                            <C>        <C>        <C>        <C>       <C>
STATEMENT OF OPERATIONS DATA:
Revenue
    Test Preparation Services................  $ 65,935   $ 53,936   $ 34,048   $30,126   $28,323
    Admissions Services......................    13,964      8,924      4,480     5,064     4,464
    K-12 Services............................     9,337      6,255      5,351     5,113       959
                                               --------   --------   --------   -------   -------
        Total revenue........................    89,236     69,115     43,879    40,303    33,746
                                               --------   --------   --------   -------   -------
Cost of revenue
    Test Preparation Services................    18,680     17,019     11,532     9,759     9,844
    Admissions Services......................     4,059      2,526        965     1,469     1,672
    K-12 Services............................     3,327      2,198        967     1,942       384
                                               --------   --------   --------   -------   -------
        Total cost of revenue................    26,066     21,743     13,464    13,170    11,900
                                               --------   --------   --------   -------   -------
        Gross profit.........................    63,170     47,372     30,415    27,133    21,846
Operating expenses
    Selling, general and administrative......    64,353     60,993     55,634    29,693    23,204
    Loss on extinguishment of debt...........        --      3,130         --        --        --
    Impairment of investment.................       344         --         --        --        --
                                               --------   --------   --------   -------   -------
        Total operating expenses.............    64,697     64,123     55,634    29,693    23,204
Loss from continuing operations..............    (1,527)   (16,751)   (25,219)   (2,560)   (1,358)
Gain on distribution/sale of securities and
  other assets...............................        --         --      7,597     1,049       732
Income from discontinued operations..........        --         --         --        --     3,524
Net (loss) income............................    (1,090)   (10,334)    (8,172)   (2,044)    2,109
                                               --------   --------   --------   -------   -------
Net (loss) income attributed to common
  stockholders...............................  $ (1,090)  $(14,599)  $(15,085)  $(7,711)  $ 1,575
                                               --------   --------   --------   -------   -------
                                               --------   --------   --------   -------   -------
Net (loss) income per share -- basic and
  diluted:
    Loss from continuing operations..........  $  (0.04)  $  (0.68)  $  (1.07)  $ (0.74)  $ (0.19)
    Income from discontinued operations......        --         --         --        --      0.34
                                               --------   --------   --------   -------   -------
Net (loss) income per share -- basic and
  diluted....................................  $  (0.04)  $  (0.68)  $  (1.07)  $ (0.74)  $  0.15
                                               --------   --------   --------   -------   -------
                                               --------   --------   --------   -------   -------
Weighted average basic and diluted shares
  used in computing net (loss) income per
  share......................................    27,239     21,383     14,075    10,404    10,404
                                               --------   --------   --------   -------   -------
                                               --------   --------   --------   -------   -------
</Table>

<Table>
<Caption>
                                                              AS OF DECEMBER 31,
                                               -------------------------------------------------
                                                 2002       2001      2000      1999      1998
                                                 ----       ----      ----      ----      ----
                                                                (IN THOUSANDS)
<S>                                            <C>        <C>        <C>       <C>       <C>
BALANCE SHEET DATA:
Cash and cash equivalents....................  $ 11,963   $ 21,935   $ 4,874   $ 2,658   $ 1,519
Total assets.................................   112,116    111,833    58,575    53,698    13,459
Long-term debt, net of current portion.......     5,656      6,830       560       538       264
Series A redeemable convertible preferred
  stock......................................        --         --    29,202        --        --
Class B redeemable non-voting common stock...        --         --    20,572    10,376     4,709
Stockholders' equity (deficit)...............    79,298     80,233   (14,836)   23,405    (1,643)
</Table>

                                       29

<Page>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
        OF OPERATIONS

    The following discussion and analysis of our financial condition and results
of operations should be read in conjunction with our consolidated financial
statements and the related notes included elsewhere in this Annual Report on
Form 10-K. This discussion and analysis contains forward-looking statements that
involve risks and uncertainties. Our actual results may differ materially from
those anticipated in these forward-looking statements as a result of many
factors, including, but not limited to, those described under 'Risk Factors' and
elsewhere in this Annual Report on Form 10-K.

OVERVIEW

    We develop, market and sell integrated classroom-based, print and online
products and services to students, parents, educators and educational
institutions. We operate our businesses through three divisions, each of which
combines our traditional and online products and services. Our Test Preparation
Services division provides classroom-based and Princeton Review Online test
preparation courses and tutoring and admissions counseling services and receives
royalties from our independent franchisees who provide classroom-based courses
under the Princeton Review brand. Our Admissions Services division sells our
Web-based admissions and application management products to educational
institutions, operates our Princetonreview.com Web site and authors our print
and software titles published primarily by Random House. Finally, our K-12
Services division provides a number of services to K-12 schools and school
districts and authors workbooks and creates Princeton Review branded content for
textbooks published by McGraw-Hill.

    Historically, we have derived the majority of our revenue from the services
provided by our Test Preparation Services division, which accounted for
approximately 74% of our revenue in 2002. Our Internet-based products and
services were introduced or substantially expanded over the last three years in
order to complement our core products, create online revenue streams and enter
new lines of business. In October 2001, we acquired the business of Embark,
which further augmented our online offerings by significantly expanding the
Web-based products we offer to academic institutions. Primarily as a result of
our heavy investment in these newer businesses, we have incurred losses from
continuing operations and net losses in the last several years. However, in 2001
and 2002, as revenue from our newer businesses has grown, we have narrowed our
operating losses significantly, and returned to profitability on a quarterly
basis in each of the last two fiscal quarters of 2002. During this period, the
percentage of our revenue derived from our newer businesses has also increased.
In order to sustain and increase profitability we will need to continue to grow
the percentage of revenue we derive from these newer businesses, while
effectively controlling costs.

Revenue

    Test Preparation Services. The Test Preparation Services division derives
revenue primarily from:

   o classroom-based and online test preparation courses and tutoring services,
     which consists of tuition and fees paid to our company-operated sites. We
     recognize revenue from tuition paid for our courses over the life of the
     course, which is usually from five to 10 weeks depending on the course
     type. Tutoring revenue is based on an hourly fee and is recognized as the
     services are delivered. Course and tutoring revenue represented
     approximately 66% of our total revenue in 2002.

   o royalty fees paid to us by our independent franchisees. These royalties are
     8% of all cash receipts collected by our franchisees for all test
     preparation and tutoring services performed by them under the Princeton
     Review name. Our franchise contracts have an average term of 10 years and
     automatically renew with the payment of a renewal fee and satisfaction by
     the franchisees of requirements for renewal. Royalties received from
     franchisees also include a per student fee paid by our franchisees for use
     by their students of our online supplemental course tools. Starting in July
     2001, we began consolidating in our financial results the

                                       30

<Page>
     advertising fund contributed to by us and our franchisees, and, therefore,
     royalties now also include a fee of 2% of the franchisees' cash receipts
     for contribution to the advertising fund. For a description of the
     advertising fund, see Note 8 to our consolidated financial statements. We
     recognize revenue from franchise royalties on a monthly basis. This revenue
     represented approximately 5% of our total revenue in 2002.

   o sales of course and marketing materials and other products to our
     independent franchisees. This revenue is recognized upon the transfer of
     title to our customers, which occurs on the shipment dates of these
     materials. This revenue represented approximately 2% of our total revenue
     in 2002.

Admissions Services. The Admissions Services division derives revenue from:

   o Web-based subscription, application and marketing fees. These fees consist
     of annual subscription fees, application processing fees and setup fees
     paid to us by academic institutions for our online application and
     management products, annual subscription fees paid to us by secondary
     schools for our ECOS product, and annual marketing fees paid to us by
     academic institutions to promote their programs on our Web site and in our
     publications. We began earning annual subscription, application processing
     and set up fees when we acquired the business of Embark. We recognize the
     subscription and marketing fees over the contract period, which is
     typically one year. We recognize the application processing fees in the
     month that the relevant applications are submitted. Setup fees are
     recognized over a two year period. This revenue represented approximately
     9% of our total revenue in 2002.

   o authoring books published by Random House and providing content for
     software. This revenue consists of performance-based fees, including
     royalties and marketing fees from sales of books and software. We recognize
     these fees based on sales of the books and software when reported to us by
     the publishers. Additionally, we earn delivery-based fees from Random House
     in the form of advances and copy editing fees for books written by us. We
     recognize these fees as the products are delivered. This revenue
     represented approximately 4% of our total revenue in 2002.

   o sales of advertising and sponsorships to businesses and schools wishing to
     promote their products, services and programs on our Web site. Advertising
     and sponsorship revenue is recognized each month based on contractual
     terms. This revenue represented approximately 2% of our total revenue in
     2002.

K-12 Services. The K-12 Services division derives revenue from the services we
provide to primary and secondary schools and school districts and from our
agreement with McGraw-Hill.

    Revenue from the services we provide to Schools and school districts is
derived from:

   o annual subscription fees for the Homeroom.com subscription service,
     recognized by us ratably over the life of the subscription period, which is
     typically one or two years;

   o fees for training and professional development for schoolteachers and
     administrators, which we recognize in the period that the services are
     provided;

   o fees for classroom instruction, principally during after school K-12
     programs, which we recognize over the period the courses are delivered; and

   o sales of printed materials, which we recognize when the materials are
     delivered.

    Total revenue we earned from the above services we provided to schools and
school districts represented approximately 6% of our total revenue in 2002.

    Revenue from our agreement with McGraw-Hill is derived from:

   o royalties for Princeton Review branded content that we provide for their
     textbooks, which we recognize based on sales reported by McGraw-Hill;

   o an annual fee for the use of the Princeton Review trademark on materials
     published by McGraw-Hill, which we recognize pro rata over the entire year;
     and

                                       31

<Page>
   o development fees for the production of workbook manuscripts, which we
     recognize as the products are delivered.

    These fees are based on rates and other terms specified in our agreement
with McGraw-Hill, which expires in 2003. Under the agreement, the maximum amount
of royalties that we can earn in any one year is approximately $1.6 million. Our
agreement with McGraw-Hill also contains a non-competition provision that
restricts us from entering into a similar agreement during the term of the
agreement with anyone engaged in the development, publication and distribution
of proprietary educational materials to the pre-K-12 educational market. It also
restricts our use, after the expiration of the agreement, of the materials we
develop under the agreement by not permitting us to use or publish more than 40%
of those materials in competing textbooks or other educational programs. Revenue
from our contract with McGraw-Hill represented approximately 4% of our total
revenue in 2002. While we expect to continue to provide certain services to
McGraw-Hill following the expiration of this existing agreement in 2003, we can
not predict at this time the extent of such services or the revenue we may
derive from them.

Cost of Revenue

    Test Preparation Services. Cost of revenue consists of course expenses of
our company-owned operations and cost of materials sold. Course expenses consist
of costs incurred to deliver test preparation courses, tutoring and admissions
counseling services, including rent of classroom space, teacher salaries, credit
card fees, costs of course materials purchased from third party vendors and,
during 2000 and part of 2001, a fee of 2% of our cash receipts paid to a
national advertising fund contributed to by us and our franchisees. Costs of
materials sold are comprised of the costs to manufacture and distribute the
course and marketing materials and other products. The largest components of
cost of revenue in our Test Preparation Services division are rent of classroom
space and teacher salaries, which together accounted for approximately 67% of
the cost of revenue of this division in 2002. In the third quarter of 2000, we
began paying a royalty to our franchisees in exchange for allowing us to offer
our Princeton Review Online courses within their territories. This royalty is
calculated as 15% of our revenue from Princeton Review Online courses provided
to students residing within our franchisee's territories, net of certain
administrative expenses.

    Admissions Services. Cost of revenue consists primarily of the costs to
author, develop, edit and produce the content for books, software and the
admissions services section of our Web site. To the extent these costs relate to
revenue which is not recognized until products are delivered, the corresponding
costs are also deferred until delivery of the products. Since our acquisition of
Embark's business, our cost of revenue also includes the costs to build and
maintain our Web based products, which are recognized over the contract period,
and credit card fees incurred in connection with processing student
applications, which are recognized in the month the applications are processed.

    K-12 Services. Cost of revenue consists of costs to author and produce the
workbooks, provide training, professional development and after school programs,
develop content for textbooks and our Homeroom.com subscription service and
develop our question pool. To the extent these costs relate to revenue which is
not recognized until products are delivered, the corresponding costs are also
deferred until delivery of the products. Beginning with the third quarter of
2000, we began amortizing Web site related content development costs, which are
being amortized over seven years.

Selling, General and Administrative Expenses

    Selling, general and administrative expenses include payroll and payroll
related expenses, advertising expenses and office facility expenses, including
rent, utilities, telephone and miscellaneous expenditures, which collectively
represented approximately 69% of our total selling, general and administrative
expenses in 2002. During 2001 and 2002, as a result of consolidating the
advertising fund, selling, general and administrative expenses also include
costs associated with national advertising campaigns that benefit our
company-owned locations as well as our

                                       32

<Page>
independent franchisees. In 2000, selling, general and administrative expenses
also include compensation expenses associated with the Phantom Stock Unit (PSU)
and Stock Appreciation Rights (SAR) plans formerly maintained by us, as well as
the one time compensation expense incurred by us in the second quarter of 2000
as a result of the termination of those plans as part of our restructuring.
Compensation expenses in connection with awards under our 2000 Stock Incentive
Plan are also recorded in selling, general and administrative expenses in 2000.
Finally, the remaining major components of selling, general and administrative
expenses include professional fees, travel and entertainment and depreciation
and amortization.

(Provision) Benefit for Income Taxes

    Until March 31, 2000, we operated as an S corporation with ownership
interests in limited liability company subsidiaries. Prior to that time, our
earnings were included in the taxable income of our stockholders for federal and
some state income tax purposes. We were not subject to income tax on our
earnings, other than with respect to state and local jurisdictions that do not
recognize the S corporation or LLC structure. State and local taxes were accrued
for those jurisdictions that do not recognize the S corporation or LLC
structure, at rates reflective of those state and local jurisdictions. As a
result of our restructuring from an S corporation to a C corporation, we have
become subject to federal, state and local taxes. Accordingly, we now record
future tax benefits and deferred tax liabilities and a corresponding tax benefit
or tax expense in our statements of operations.

RESULTS OF OPERATIONS

COMPARISON OF YEARS ENDED DECEMBER 31, 2002 AND 2001

Revenue

    Our total revenue increased from $69.1 million in 2001 to $89.2 million in
2002, representing a 29% increase.

    Test Preparation Services revenue increased from $53.9 million in 2001 to
$65.9 million in 2002, representing a 22% increase, comprised primarily of an
increase of approximately $11.2 million in revenue from our company-owned
operations and an increase of approximately $1.0 million in royalties from
independent franchises. The increased revenue from company-owned operations
resulted from an increase of approximately $6.8 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. in 2001, and an increase of approximately $4.4 million
at our other locations. Of the $4.4 million increase at our other locations,
approximately $3.7 million is attributable to enrollment increases and
approximately $700,000 is attributable to average price increases.

    Admissions Services revenue increased from $8.9 million in 2001 to $14.0
million in 2002, representing a 56% increase. This increase resulted primarily
from an increase of approximately $4.0 million in web-based subscription,
application and marketing fees, principally attributable to our acquisition of
the business of Embark, and an increase of approximately $1.0 million in book
and publication related revenue.

    K-12 Services revenue increased from $6.3 million in 2001 to $9.3 million in
2002 representing a 49% increase. This increase resulted primarily from an
increase of approximately $3.1 million in revenue from schools for Homeroom.com
subscriptions, printed materials, professional development and after school
supplemental programs.

Cost of Revenue

    Our total cost of revenue increased from $21.7 million in 2001 to $26.1
million in 2002, representing a 20% increase.

                                       33

<Page>
    Test Preparation Services cost of revenue increased from $17.0 million in
2001 to $18.7 million in 2002, representing a 10% increase. This increase
resulted primarily from an increase of approximately $1.6 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. during 2001, as well as increased costs to service the higher revenue
base on the previously owned operations. The increased costs to service the
higher revenue base of the company-owned operations was offset by a decrease of
approximately $400,000 in royalty expenses due to the consolidation of our
advertising fund in July 2001.

    Admissions Services cost of revenue increased from $2.5 million in 2001 to
$4.1 million in 2002, representing a 61% increase. Approximately $1.1 million of
this increase is attributable to the cost of providing web-based subscription
and application services relating to products acquired from Embark and
approximately $440,000 is attributable to the cost of producing book
manuscripts.

    K-12 Services cost of revenue increased from $2.2 million in 2001 to $3.3
million in 2002, representing a 51% increase. This increase is primarily
attributable to an increase in costs of approximately $500,000 incurred to
service the school contracts for the Homeroom.com subscription service,
consulting and other services. This increase was partially offset by a decrease
of approximately $625,000 in costs associated with our content sales to McGraw
Hill and other non-school customers.

Operating Expenses

    Selling, General and Administrative. Selling, general and administrative
expenses increased from $61.0 million in 2001 to $64.4 million in 2002,
representing a 6% increase. This increase resulted primarily from an increase of
approximately $2.4 million incurred as a result of our acquisitions of the
businesses of our former franchisees, an increase of approximately $1.5 million
incurred as a result of our acquisition of the business of Embark and the
following, which exclude expenses relating to the foregoing acquired businesses:

   o an increase of approximately $1.2 million attributable primarily to
     personnel related costs, including office rent and expenses, travel and
     entertainment, employee benefits and recruiting fees;

   o an increase of approximately $750,000 in reserves for bad debt related to
     certain K-12 and Admissions Services customers;

   o an increase of approximately $570,000 in Web site technology and
     development expenses; and

   o an increase of approximately $530,000 in professional fees.

    These increases were partially offset by the following:

   o a decrease of approximately $1.3 million in advertising and marketing
     expenses; and

   o a decrease of approximately $710,000 in salaries and payroll tax expenses,
     primarily resulting from smaller cash bonuses in 2002, due in part to the
     fact that a greater percentage of bonuses for 2002 was paid in stock
     options than for 2001.

    Impairment of Investment. In 2002 we recorded a $344,000 impairment charge
related to the write-down of our investment in SchoolNet, Inc., a privately held
education technology company.

Interest Expense

    Interest expense decreased from approximately $2.0 million in 2001 to
$624,000 in 2002, representing a decrease of 69%. This decrease resulted
primarily from the absence in 2002 of interest expense incurred in 2001 under
our former lines of credit with Excel Bank, N.A. and Reservoir Capital Partners,
L.P., which we obtained in the fourth quarter of 2000 and repaid in full in June
2001, and from the absence in 2002 of interest expense associated with the
amortization of the cost of warrants issued in December 2000.

                                       34

<Page>
COMPARISON OF YEARS ENDED DECEMBER 31, 2001 AND 2000

Revenue

    Our total revenue increased from $43.9 million in 2000 to $69.1 million in
2001, representing a 58% increase.

    Test Preparation Services revenue increased from $34.0 million in 2000 to
$53.9 million in 2001, representing a 58% increase, comprised primarily of an
increase of approximately $21.2 million in revenue from our company-owned
operations. The increased revenue from company-owned operations resulted from
the inclusion of approximately $16.0 million in revenue attributable to the
operations acquired from our former franchisees in 2001, an increase of
approximately $2.5 million attributable to increased enrollment at our other
locations and an increase of approximately $2.7 million attributable to average
price increases at our other locations. These increases were partially offset by
a decrease of approximately $900,000 in royalties from independent franchisees
as a result of our acquisition of some of these businesses.

    Admissions Services revenue increased from $4.5 million in 2000 to $8.9
million in 2001, representing a 99% increase. This increase resulted primarily
from an increase of approximately $4.0 million in Web-based subscription,
application and marketing fees, primarily attributable to our acquisition of
Embark, and an increase of approximately $260,000 in Internet-based advertising
revenue.

    K-12 Services revenue increased from $5.4 million in 2000 to $6.3 million in
2001 representing a 17% increase. This increase resulted primarily from an
increase of approximately $800,000 in revenue from schools for Homeroom.com
subscriptions and training and professional development fees.

Cost of Revenue

    Our total cost of revenue increased from $13.5 million in 2000 to $21.7
million in 2001, representing a 61% increase.

    Test Preparation Services cost of revenue increased from $11.5 million in
2000 to $17.0 million in 2001, representing a 48% increase. This increase
resulted from the inclusion of approximately $4.7 million in costs associated
with the operation of the businesses acquired from our former franchisees, and
an increase of approximately $700,000 in the cost of delivering our courses, due
in part to increased enrollment.

    Admissions Services cost of revenue increased from $1.0 million in 2000 to
$2.5 million in 2001, representing a 162% increase. This increase resulted
primarily from increases of approximately $550,000 related to servicing the
business acquired from Embark, $450,000 associated with servicing and
maintaining the admissions services section of our Web site, $320,000 of costs
associated with marketing fees deferred in 2000 and recognized in 2001 and an
increase of approximately $240,000 in costs associated with our book publication
business. The increase in cost of revenue related to the book publication
business relates to a new policy we adopted in 2001 of allocating staff salaries
to the cost of producing specific books, which resulted in the inclusion of
these costs in cost of revenue rather than in selling, general and
administrative expenses, as was previously the case.

    K-12 Services cost of revenue increased from $1.0 million in 2000 to $2.2
million in 2001, representing a 127% increase. This increase is primarily
attributable to approximately $400,000 of expense related to the amortization of
capitalized costs associated with the development of our Homeroom.com question
pool, an increase of approximately $125,000 related to providing services to
schools and an increase of approximately $700,000 related to servicing the
McGraw-Hill contract. The increase in cost of revenue related to the McGraw Hill
contract relates primarily to a new policy we adopted in 2001 of allocating
staff salaries to the cost of producing specific workbooks under the contract,
which resulted in the inclusion of these costs in cost of revenue rather than in
selling, general and administrative expenses, as was previously the case.

                                       35

<Page>
Operating Expenses

    Selling, General and Administrative. Selling, general and administrative
expenses increased from $55.6 million in 2000 to $61.0 million in 2001,
representing a 10% increase. This increase resulted primarily from an increase
of approximately $7.5 million incurred as a result of our acquisitions of the
businesses of our former franchisees, an increase of approximately $1.6 million
incurred as a result of our acquisition of the businesses of Embark and the
following, which exclude expenses relating to the foregoing acquired businesses:

   o an increase of approximately $5.1 million in salaries and payroll taxes
     primarily due to increased headcount;

   o an increase of approximately $1.6 million attributable primarily to
     personnel related costs, including office rent and expenses, travel and
     entertainment, employee benefits and recruiting fees;

   o an increase of approximately $500,000 in Web site technology and
     development expenses resulting primarily from the development of
     Homeroom.com, Princetonreview.com and our Princeton Review Online products;

   o an increase of approximately $800,000 in advertising and marketing expenses
     primarily due to the inclusion of the advertising fund expenditures in
     2001; and

   o an increase of approximately $400,000 in professional fees incurred
     primarily as a result of being a public company.

    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 $1.6 million in professional services largely from
settlement costs and legal fees associated with a lawsuit settled in 2000.

    Loss on Early Extinguishment of Debt. In 2001, we incurred a $3.1 million
expense for the extinguishment of debt when the unamortized cost of the warrants
we issued in connection with our previous line of credit with Reservoir Capital
Partners, L.P. was written off when the loan balance was repaid.

Gain on Distribution/Sale of Securities and Other Assets

    We recorded a gain of $7.6 million in 2000 related to the distribution of
Student Advantage stock to our stockholders and employees in connection with our
restructuring.

Interest Expense

    Interest expense increased from approximately $237,000 in 2000 to $2.0
million in 2001, representing an increase of 762%. This increase resulted
primarily from interest expense incurred under our former lines of credit with
Excel Bank, N.A. and Reservoir Capital Partners, L.P., which we obtained in the
fourth quarter of 2000 and repaid in full in June 2001, and from interest
expense associated with the amortization of the cost of warrants issued in
December 2000.

Equity Interest in Operations of Affiliates

    Equity interest decreased from a loss of $881,000 in 2000 to a loss of
$34,000 in 2001, representing a 96% decrease, primarily due to our share of the
loss in Tutor.com. During 2000 our investment in this affiliate was written down
to $0 and no additional losses were recorded against this investment in 2001.

LIQUIDITY AND CAPITAL RESOURCES

    Our current primary sources of liquidity are cash and cash equivalents and
cash flow from operations. At December 31, 2002, we had approximately $12.0
million of cash and cash

                                       36

<Page>
equivalents. Prior to 1995, our primary source of funding had been cash flow
from operations. In 1995, we sold a minority interest in our subsidiaries to
Random House for approximately $8.0 million. We have also supplemented cash flow
from operations by generating cash from periodic sales of stock of Student
Advantage owned by us. Cash from these sales totaled approximately $625,000 in
1998 and $1.1 million in 1999. In 1998, we received approximately $5.1 million
from the sale of our software division. In April 2000, we received approximately
$27.3 million in gross proceeds from the sale of our Series A preferred stock.
In June 2001, we completed our initial public offering, selling 5,400,000 shares
of common stock at $11.00 per share. The initial public offering resulted in
proceeds to the company of approximately $51.9 million, net of underwriters'
commissions and other expenses associated with the offering. A large portion of
the proceeds from our sale of Series A preferred stock and initial public
offering was used to fund the launch and expansion of our newer, primarily
Internet-based, businesses. Primarily as a result of our investment in these
newer businesses, we have incurred significant operating losses over the last
several years. However, in each of 2001 and 2002 we have significantly narrowed
our operating losses and returned to profitability on a quarterly basis for the
last two quarters of 2002. While we expect to incur a small operating loss in
the first quarter of 2003, we expect to be profitable during the remainder of
the year and for the year as a whole. Accordingly, we believe that current cash
and cash equivalents and cash generated from operations, will be sufficient to
fund our operations for at least the next 12 months.

    Net cash provided by operating activities during 2002 was $567,000,
resulting primarily from a smaller loss from operations and after adjusting for
depreciation, amortization and other working capital items. Net cash used in
investing activities during 2002 was $8.9 million, resulting primarily from
capital expenditures for equipment, leasehold improvements and software
development costs. Net cash used in financing activities during 2002 was $1.6
million, resulting primarily from payments made under our outstanding loan with
Comdisco, Inc.

    Net cash used in operating activities during 2001 was $6.9 million,
resulting primarily from the net loss from operations. Net cash used in
investing activities during 2001 was $24.0 million, resulting primarily from our
acquisition of the operations of our former franchisees. Net cash provided by
financing activities during 2001 was $48.0 million, resulting primarily from the
proceeds from our initial public offering in June 2001.

    Net cash used in operating activities during 2000 was $16.2 million,
resulting primarily from the net loss from operations. Net cash used in
investing activities during 2000 was $13.4 million resulting primarily from the
purchase of equipment and software and investment in affiliates. Net cash
provided by financing activities during 2000 was $31.8 million resulting
primarily from proceeds received from the sale of Series A preferred stock and
borrowings under a line of credit.

    In October 2000, we entered into a loan agreement with Excel Bank, N.A.,
providing for a $4,500,000 line of credit for short term loans for the
acquisition of our independent franchises and for working capital purposes.
Amounts borrowed under the credit facility bore interest at a variable annual
interest rate equal to the prime rate plus 1%. The $4.5 million borrowed under
this line of credit, plus all accrued interest, was repaid in June 2001, using a
portion of the proceeds from our initial public offering, and the facility was
terminated at that time.

    On December 14, 2000, we entered into a 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., providing for a line of credit of up to $25.0
million under which we could borrow up to $18,750,000 for the acquisition of our
independent franchises and up to $6,250,000 for general corporate purposes.
Amounts borrowed under the credit facility initially bore interest at an annual
interest rate of 13%. As part of the loan transaction, the lenders received
warrants exercisable for a total of 250,000 shares of our common stock at an
exercise price of $0.01 per share, which were automatically exercised upon our
initial public offering. In June 2001, the entire outstanding loan balance of
approximately $24.7 million, plus all accrued interest, was repaid using a
portion of the proceeds from our initial public offering, and the facility was
terminated at that time.

                                       37

<Page>
    On March 2, 2001, as part of the purchase price paid by us for the
businesses of Princeton Review of Boston and Princeton Review of New Jersey, we
issued two subordinated promissory notes to the sellers totaling $3,625,000. The
first promissory note is in a principal amount of $3,125,000, is payable as to
principal in 20 equal quarterly installments beginning with the 17th calendar
quarter following the closing date of the acquisition and bears interest at the
rate of 8.25% per year, payable quarterly. This promissory note was convertible
into our common stock at the price per share at which shares of our common stock
were sold in our initial public offering for a period of 60 days, beginning on
the first anniversary date of the completion of our initial public offering.
During this period, the holder of the note had the right to convert 100% or any
percentage between 0% and 33% of the unpaid principal amount due under the note
into common stock. The second promissory note is in a principal amount of
$500,000, bears interest at the rate of 8.25% per year, payable on a quarterly
basis, and is payable as to the entire principal amount four years from its date
of issuance. This note is not convertible.

    On June 18, 2001, as part of the purchase price paid by us for the business
of T.S.T.S., we issued a subordinated promissory note to the sellers for
approximately $1,475,000. This promissory note is payable as to principal in 10
quarterly installments beginning on January 1, 2004, and bears interest at 8.25%
per year, payable quarterly.

    On October 1, 2001, we entered into a loan agreement with Comdisco, Inc.,
under which we assumed $3,400,000 of debt as part of our acquisition of Embark's
business. Amounts outstanding under the loan agreement bear interest at an
annual rate of 6.25%. The loan is secured by substantially all of our current
and future business assets, including membership interests in our subsidiaries,
and is guaranteed by our subsidiaries. Under the terms of the loan agreement, we
are required to provide the lender with periodic financial statements. In
addition, the loan agreement contains covenants typical to a secured loan
agreement, including covenants requiring us to maintain financial ratios
relating to total indebtedness to net worth, and covenants that restrict, among
other things, our ability to incur additional debt, pay cash dividends, create
liens, change our fundamental organization or lines of business, make
investments, engage in transactions with affiliates, and engage in certain
significant corporate transactions. We are required to repay all amounts
outstanding under our loan agreement with Comdisco, Inc. by October 1, 2003. As
of December 31, 2002, $1.4 million of the loan remained outstanding.

    On October 18, 2002, we issued a note for approximately $470,000 to the
sellers of the business of The Princeton Review of St. Louis, Inc. as part of
the purchase price we paid for these assets. This note is payable in two annual
installments of approximately $250,000 each, including interest which is imputed
at the rate of 4.8% per year.

    We may also seek to obtain one or more credit facilities to provide an added
source of liquidity and possibly finance a portion of the purchase price of any
future acquisitions that we may make.

    As of December 31, 2002 our principal capital commitments consisted of
obligations outstanding under our long-term office and classroom leases,
obligations under the credit agreement and promissory notes described above and
several capital leases of computer equipment. As of December 31, 2002, we
operated from leased premises in New York, Alabama, Arizona, California,
Georgia, Hawaii, Illinois, Kansas, Louisiana, Maryland, Massachusetts,
Minnesota, Missouri, New Jersey, Ohio, Oregon, Pennsylvania, Texas, Washington,
Washington D.C., and Canada. As of December 31, 2002, our aggregate minimum
annual rental obligations under these leases were approximately $3.1 million for
2003, $2.8 million for 2004 and $2.4 million for 2005. As of December 31, 2002,
the annual maturities of our credit agreement and notes payable were
approximately $1.6 million in 2003, $0.9 million in 2004 and $1.6 million in
2005. As of December 31, 2002, our future minimum capital lease obligation
payments were approximately $260,000 for 2003, $212,000 for 2004 and $77,000 for
2005.

    Our future capital requirements will depend on a number of factors,
including market acceptance of our products and services and the resources we
devote to developing, marketing, selling and supporting these products and
services. We expect to continue to devote substantial capital resources to
product development and support and advertising, marketing and promotional

                                       38

<Page>
activities. We also expect to continue to evaluate possible acquisition and
strategic relationship opportunities, including possible acquisitions of
businesses operated by our domestic franchisees, and may devote capital
resources to consummating such transactions.

ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS

    In July 2001, the Financial Accounting Standards Board ('FASB') issued
Statements of Financial Accounting Standards ('SFAS') No. 141, Business
Combinations, and 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 indefinite lives are no longer amortized,
but are subject to annual impairment tests in accordance with the statements.
Other intangible assets continue to be amortized over their useful lives. We
applied the new rules on accounting for goodwill and other intangible assets
beginning in the first quarter of 2002. We have performed the required tests of
goodwill and indefinite lived intangible assets and, based on the results, have
not recorded any charges related to the adoption of and subsequent conformity
with SFAS No. 142. Acquisitions consummated after June 30, 2001 are required to
be accounted for in accordance with SFAS 141. Our 2001 and 2000 results do not
reflect the provisions of SFAS No. 142. Had we adopted SFAS No. 142 on
January 1, 2000 and ceased to amortize goodwill at such date, our historical net
loss and basic and diluted net loss per share would have been as follows:

<Table>
<Caption>
                                                                   YEARS ENDED
                                                                  DECEMBER 31,
                                                              ---------------------
                                                                2001        2000
                                                                ----        ----
                                                              (IN THOUSANDS, EXCEPT
                                                                 PER SHARE DATA)
<S>                                                           <C>         <C>
Reported net loss...........................................  $(14,599)   $(15,085)
Goodwill amortization.......................................     1,343         177
                                                              --------    --------
Adjusted net loss...........................................  $(13,256)   $(14,908)
                                                              --------    --------
                                                              --------    --------
Reported basic and diluted net loss per share...............  $  (0.68)   $  (1.07)
Goodwill amortization.......................................      0.06        0.01
                                                              --------    --------
Adjusted basic and diluted net loss per share...............  $  (0.62)   $  (1.06)
                                                              --------    --------
                                                              --------    --------
</Table>

    In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets, effective for fiscal years beginning after
December 15, 2001. This standard superseded SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of, and
provided a single accounting model for long-lived assets to be disposed of. The
new standard also superseded the provisions of APB Opinion No. 30 with regard to
reporting the effects of a disposal of a segment of a business and required
expected future operating losses from discontinued operations to be displayed in
discontinued operations in the period(s) in which the losses are incurred. SFAS
No. 144 was effective for us beginning with the first quarter of 2002 and its
adoption did not have a material impact on our results of operations or
financial position.

    In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements
No. 4, 44, and 62, Amendment of FASB Statement No. 13, and Technical
Corrections. In most instances, SFAS No. 145 will require gains and losses on
extinguishments of debt to be classified as income or loss from continuing
operations rather than as extraordinary items as previously required under FASB
Statement No. 4, Reporting Gains and Losses from Extinguishment of Debt. This
provision of SFAS No. 145 is effective for fiscal years beginning after May 15,
2002. We adopted SFAS No. 145 as of January 1, 2003. Accordingly, we
reclassified the $3.1 million loss on extinguishment of debt previously
classified as an extraordinary item in 2001 to conform to the provisions of SFAS
No. 145.

    In July 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities. SFAS No. 146 provides guidance on the timing
of the recognition of costs associated with exit or disposal activities. The new
guidance requires costs associated with exit or disposal activities to be
recognized when incurred. Previous guidance required recognition of costs

                                       39

<Page>
at the date of commitment to an exit or disposal plan. The provisions of the
statement are to be adopted prospectively for exit activities after
December 31, 2002. Although SFAS No. 146 may impact the accounting for costs
related to exit or disposal activities we may enter into in the future,
particularly the timing of recognition of these costs, the adoption of the
statement will not have an impact on our present financial condition or results
of operations.

    In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation -- Transition and Disclosure. SFAS No. 148 amends SFAS No. 123,
Accounting for Stock-Based Compensation, to provide alternative methods of
transition for a voluntary change to the fair value based methods of accounting
for stock-based employee compensation. In addition, SFAS No. 148 amends the
disclosure requirements of SFAS No. 123 to require more prominent disclosures in
both annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results. The additional disclosure requirements of SFAS No. 148 are effective
for fiscal years ending after December 15, 2002. As provided for in SFAS
No. 148, we have elected to continue to follow the intrinsic value method of
accounting as prescribed by APB Opinion No. 25, Accounting for Stock Issued to
Employees, to account for stock options.

CRITICAL ACCOUNTING POLICIES

    The estimates, methods and judgments we use in applying our accounting
policies significantly impact the results we report in our financial statements.
Some of our accounting policies require us to make subjective and difficult
judgments, often as a result of the need to make estimates of matters that are
inherently uncertain. Our most critical accounting estimates include the
assessment of the collectability of our accounts receivable balances, which
impacts bad debt write-offs; recoverability of goodwill, which impacts
write-offs of goodwill; valuation of non-marketable equity securities, which
impacts gains (losses) on equity securities when we record impairments;
assessment of recoverability of long-lived assets, which primarily impacts
operating margin when we impair assets or accelerate their depreciation; and
recognition and measurement of current and deferred income tax assets and
liabilities, which impacts our tax provision. Below, we discuss these policies
further, as well as the estimates and judgments involved.

    We also have other policies that we consider to be key accounting policies,
such as our policies for revenue recognition, including the deferral of revenues
on certain contracts. However, these policies do not meet the definition of
critical accounting estimates because they do not generally require us to make
estimates or judgments that are difficult or subjective.

    Accounts Receivable. We maintain allowances for doubtful accounts for losses
resulting from the inability of our customers to make required payments. If the
financial condition of our customers were to deteriorate, resulting in an
impairment of their ability to make payments, additional allowances may be
required. We review our aged receivables monthly. This review includes
discussions with our customers and their account representatives, the customers'
payment history and other factors. Based on these reviews we may increase or
decrease our allowance for bad debt if we determine there is a change in the
collectability of our accounts receivable.

    Goodwill. In conjunction with the implementation of the new accounting rules
for goodwill as of the beginning of 2002, we completed a goodwill impairment
review for the reporting units that have substantially all of our recognized
goodwill. According to our accounting policy, we also performed an annual review
during the fourth quarter of 2002, and in both reviews we found no impairment.
We will perform a similar review in the fourth quarter of each year, or more
frequently if indicators of potential impairment exist. Our impairment review
process is based on a discounted future cash flow approach that uses our
estimates of revenue for the reporting units, driven by assumed market growth
rates as well as appropriate discount rates. These estimates are consistent with
the plans and estimates that we use to manage the underlying businesses. We may
incur charges for impairment of goodwill in the future if our Admissions
Services division's products fail to gain expected market acceptance or if we
fail to achieve our assumed revenue growth.

                                       40

<Page>
    Non-Marketable Equity Securities. Our ability to recover our investments in
private, non-marketable equity securities and to earn a return on these
investments is primarily dependent on how successfully these companies are able
to execute their business plans and how well their products are accepted, as
well as their ability to obtain funding to continue operations and to grow. In
the current equity market environment, their ability to obtain additional
funding as well as to take advantage of liquidity events, such as initial public
offerings, mergers and private sales, is significantly constrained.

    Under our accounting policy, the carrying value of a non-marketable
investment is the amount paid for the investment unless it has been determined
to be other than temporarily impaired, in which case we write the investment
down to its impaired value. The impairment analysis for non-marketable
securities requires significant judgment. This analysis includes assessment of
each investee's financial condition, its projected results and cash flows, the
business outlook for its products and technology, the likelihood of obtaining
subsequent rounds of financing and the impact of any relevant contractual equity
preferences held by us or other parties. If an investee obtains additional
funding at a valuation lower than our carrying amount, we presume that the
investment is other than temporarily impaired. During 2002, we recorded
impairments of non-marketable equity investments of $344,000.

    Long-Lived Assets. We assess the impairment of long-lived assets when events
or changes in circumstances indicate that the carrying value of the assets or
the asset grouping may not be recoverable. Factors we consider in deciding when
to perform an impairment review include significant under-performance of a
business or product line in relation to expectations, significant negative
industry or economic trends and significant changes or planned changes in our
use of the assets. Recoverability of assets that will continue to be used in our
operations is measured by comparing the carrying amount of the asset grouping to
the related total future net cash flows. If an asset grouping's carrying value
is not recoverable through those cash flows, the asset grouping is considered to
be impaired. The impairment is measured by the difference between the assets'
carrying amount and their fair value, based on the best information available,
including market prices or discounted cash flow analysis.

    Income Taxes. In determining income for financial statement purposes, we
must make certain estimates and judgments. These estimates and judgments occur
in the calculation of certain tax liabilities and in the determination of the
recoverability of certain of the deferred tax assets, which arise from temporary
differences between the tax and financial statement recognition of revenue and
expense.

    We must assess the likelihood that we will be able to recover our deferred
tax assets. If recovery is not likely, we must increase our provision for taxes
by recording a reserve, in the form of a valuation allowance, for the deferred
tax assets that we estimate will not ultimately be recoverable. As of
December 31, 2002, we believe that all of our recorded deferred tax assets will
ultimately be recovered. However, should there be a change in our ability to
recover our deferred tax assets, our tax provision would increase in the period
in which we determine that the recovery is not probable.

SEASONALITY IN RESULTS OF OPERATIONS

    We experience, and we expect to continue to 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. These fluctuations could result in
volatility or adversely affect our stock price. In addition, as our revenue
grows, these seasonal fluctuations may become more evident. We typically
generate the largest portion of our test preparation revenue in the third
quarter. The electronic application revenue from the business we acquired from
Embark is highest in the first and fourth quarters, corresponding with the
busiest times of year for submission of applications to academic institutions.
Our K-12 services division may also experience seasonal fluctuations in revenue,
but we are not yet able to predict the impact of seasonal factors on this
business with any degree of accuracy.

                                       41

<Page>
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

    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.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE

<Table>
<Caption>
                                                              PAGE
                                                              ----
<S>                                                           <C>
Consolidated Financial Statements:
    Report of Independent Auditors..........................   43
    Consolidated Balance Sheets.............................   44
    Consolidated Statements of Operations...................   45
    Consolidated Statements of Stockholders' Equity
      (Deficit) and Redeemable Stock........................   46
    Consolidated Statements of Cash Flows...................   47
    Notes to Consolidated Financial Statements..............   48
Financial Statement Schedule:
    Schedule II -- Valuation And Qualifying Accounts........   75
</Table>

                                       42

<Page>
                         REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Stockholders of
The Princeton Review, Inc. and Subsidiaries

    We have audited the accompanying consolidated balance sheets of The
Princeton Review, Inc. and Subsidiaries (the 'Company') as of December 31, 2002
and 2001, and the related consolidated statements of operations, stockholders'
equity (deficit) and redeemable stock and cash flows for each of the three years
in the period ended December 31, 2002. Our audits also included the financial
statement schedule listed in the Index at Item 15(a). These financial statements
and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.

    We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

    In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
The Princeton Review, Inc. and Subsidiaries as of December 31, 2002 and 2001 and
the consolidated results of their operations and their cash flows for each of
the three years in the period ended December 31, 2002 in conformity with
accounting principles generally accepted in the United States. Also, in our
opinion the related financial statement schedule, when considered in relation to
the basic financial statements taken as a whole, presents fairly, in all
material respects, the information set forth herein.

    As discussed in Note 1 to the Consolidated Financial Statements, on
January 1, 2002, the Company adopted Statement of Financial Accounting Standards
No 142, 'Goodwill and Other Intangible Assets'.

                                          /s/ ERNST & YOUNG LLP

New York, New York
March 3, 2003

                                       43

<Page>
                  THE PRINCETON REVIEW, INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS

<Table>
<Caption>
                                                                  DECEMBER 31,
                                                              ---------------------
                                                                2002        2001
                                                                ----        ----
                                                              (IN THOUSANDS, EXCEPT
                                                                   SHARE DATA)
<S>                                                           <C>         <C>
                           ASSETS
Current assets:
    Cash and cash equivalents...............................  $ 11,963    $ 21,935
    Accounts receivable, net of allowance of $527 in 2002
      and $890 in 2001......................................    11,301       5,424
    Accounts receivable-related parties.....................     2,304       1,400
    Notes receivable........................................       717       1,841
    Other receivables ($1,255 (2002) and $661 (2001) from
      related parties)......................................     1,273         792
    Prepaid expenses........................................     1,238       1,156
    Securities, available for sale..........................        31       1,002
    Other assets............................................     1,954       1,977
                                                              --------    --------
        Total current assets................................    30,781      35,527
Furniture, fixtures, equipment and software development,
  net.......................................................    11,353      10,161
Franchise costs, net of accumulated amortization of $139 in
  2002 and $142 in 2001.....................................       144         291
Publishing rights, net of accumulated amortization of $538
  in 2002 and $465 in 2001..................................     1,223       1,296
Deferred income taxes.......................................    18,599      17,755
Investment in affiliates....................................       420         516
Territorial marketing rights................................     1,481       1,481
Goodwill....................................................    38,157      35,887
Other assets ($1,117 (2002) and $615 (2001) of loans to
  officers).................................................     9,958       8,919
                                                              --------    --------
        Total assets........................................  $112,116    $111,833
                                                              --------    --------
                                                              --------    --------
            LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
    Accounts payable........................................  $  6,284    $  7,502
    Accrued expenses ($156 (2002) and $135 (2001) for
      related parties)......................................     4,857       5,330
    Current maturities of long-term debt....................     1,866       2,132
    Deferred income.........................................    13,545       9,005
    Book advances ($34 (2002) and $113 (2001) from related
      parties)..............................................       610         801
                                                              --------    --------
        Total current liabilities...........................    27,162      24,770
Long-term debt..............................................     5,656       6,830
Stockholders' equity:
    Preferred stock, $.01 par value; 5,000,000 shares
      authorized; none issued and outstanding at
      December 31, 2002 and 2001............................        --          --
    Common stock, $.01 par value; 100,000,000 shares
      authorized; 27,261,085 and 27,175,011 issued and
      outstanding at December 31, 2002 and 2001,
      respectively..........................................       273         272
    Additional paid-in capital..............................   113,972     113,091
    Accumulated deficit.....................................   (34,570)    (33,480)
    Accumulated other comprehensive (loss) income...........      (377)        350
                                                              --------    --------
        Total stockholders' equity..........................    79,298      80,233
                                                              --------    --------
        Total liabilities and stockholders' equity..........  $112,116    $111,833
                                                              --------    --------
                                                              --------    --------
</Table>

                            See accompanying notes.

                                       44

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

<Table>
<Caption>
                                                                         YEARS ENDED DECEMBER 31,
                                                                  ---------------------------------------
                                                                    2002           2001           2000
                                                                    ----           ----           ----
                                                                   (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                                                               <C>            <C>            <C>
Revenue
    Test Preparation Services...............................      $ 65,935       $ 53,936       $ 34,048
    Admissions Services.....................................        13,964          8,924          4,480
    K-12 Services...........................................         9,337          6,255          5,351
                                                                  --------       --------       --------
        Total revenue.......................................        89,236         69,115         43,879
                                                                  --------       --------       --------
Cost of revenue
    Test Preparation Services...............................        18,680         17,019         11,532
    Admissions Services.....................................         4,059          2,526            965
    K-12 Services...........................................         3,327          2,198            967
                                                                  --------       --------       --------
        Total cost of revenue...............................        26,066         21,743         13,464
                                                                  --------       --------       --------
        Gross profit........................................        63,170         47,372         30,415
Operating expenses
    Selling, general and administrative expenses............        64,353         60,993         55,634
    Loss on early extinguishment of debt....................            --          3,130             --
    Impairment of investment................................           344             --             --
                                                                  --------       --------       --------
        Total operating expenses............................        64,697         64,123         55,634
                                                                  --------       --------       --------
Loss from operations........................................        (1,527)       (16,751)       (25,219)
Gain on distribution/sale of securities and other assets....            --             --          7,597
Interest expense............................................          (624)        (2,043)          (237)
Equity interest in operations of affiliates.................            --            (34)          (881)
Other income................................................           325            570            576
                                                                  --------       --------       --------
Loss before benefit for income taxes........................        (1,826)       (18,258)       (18,164)
Benefit for income taxes....................................           736          7,924          9,992
                                                                  --------       --------       --------
Net loss....................................................        (1,090)       (10,334)        (8,172)
Accreted dividends on Series A redeemable preferred stock...            --         (2,309)        (3,504)
Accreted dividends on Class B non-voting common stock.......            --         (1,956)        (3,409)
                                                                  --------       --------       --------
Net loss attributed to common stockholders..................      $ (1,090)      $(14,599)      $(15,085)
                                                                  --------       --------       --------
                                                                  --------       --------       --------
Net loss per share -- basic and diluted.....................      $  (0.04)      $  (0.68)      $  (1.07)
                                                                  --------       --------       --------
                                                                  --------       --------       --------

Weighted average shares used in computing net loss per
  share.....................................................        27,239         21,383         14,075
                                                                  --------       --------       --------
                                                                  --------       --------       --------
Proforma income tax benefit assuming C-Corp status
  (unaudited)...............................................                                    $  9,004
                                                                                                --------
                                                                                                --------
Proforma net loss from operations (unaudited)...............                                    $ (9,160)
                                                                                                --------
                                                                                                --------
Proforma net loss per share attributed to common
  stockholders -- basic and diluted (unaudited).............                                     $(1.14)
                                                                                                --------
                                                                                                --------
</Table>

                            See accompanying notes.

                                       45

<Page>
                  THE PRINCETON REVIEW, INC. AND SUBSIDIARIES
 CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) AND REDEEMABLE STOCK
<Table>
<Caption>

                                                       REDEEMABLE STOCK
                                     -----------------------------------------------------
                                         SERIES A REDEEMABLE         CLASS B REDEEMABLE
                                     CONVERTIBLE PREFERRED STOCK   NON-VOTING COMMON STOCK
                                     ---------------------------   -----------------------
                                        SHARES        AMOUNT         SHARES       AMOUNT
                                        ------        ------         ------       ------
      <S>                            <C>           <C>             <C>          <C>
Balance at December 31,
 1999.........................     --            --               842      $10,376
Distributions to
 stockholders.................     --            --             --           --
Distributions of securities,
 available for sale...........     --            --             --           --
Issuance of Princeton Review
 Publishing, LLC Units........     --            --             --           --
Minority interest.............     --            --             --           --
Acquisition of minority
 interest of franchisees......     --            --             1,117           11
Effect of termination of
 S-Corp.......................     --            --             --           --
Issuance of employee
 options......................     --            --             --           --
Issuance of Series A
 redeemable convertible
 preferred stock, net of
 issuance costs...............      3,749       $ 25,697        --           --
Issuance of Class B redeemable
 non-voting common stock......     --            --               778        6,775
Deferred compensation related
 to issuance of options.......     --            --             --           --
Amortization of deferred
 compensation.................     --            --             --           --
Issuance of Class A common
 stock........................     --            --             --           --
Retirement of treasury
 stock........................     --            --             --           --
Comprehensive income
  Net income prior to S-Corp.
   termination................     --            --             --           --
  Net loss subsequent to
   S-Corp. termination........     --            --             --           --
  Foreign currency
   gain/loss..................     --            --             --           --
  Unrealized gain on
   securities, net of
   applicable income tax of
   $1,408.....................     --            --             --           --
Comprehensive loss............
Accreted dividends on Series A
 redeemable preferred stock...     --              3,504        --           --
Accreted dividends on Class B
 non-voting common stock......     --            --             --           3,409
Issuance of warrants
 convertible to Class A common
 stock........................     --            --             --           --
                                   ------       --------       ------      -------
Balance at December 31,
 2000.........................      3,749         29,201        2,737       20,571
Accretion of issuance costs
 related to Series A
 redeemable preferred stock...     --                160        --           --
Accreted dividends on Series A
 redeemable preferred stock...     --              2,309        --           --
Conversion of Class A common
 to common stock resulting
 from initial public
 offering.....................     --            --             --           --
Conversion of Series A
 redeemable preferred to
 common stock resulting from
 initial public offering......     (3,749)       (31,670)       --           --
Accreted dividends on Class B
 non-voting common stock......     --            --             --           1,956
Deferred compensation.........     --            --             --              59
Conversion of Class B common
 to common stock resulting
 from initial public
 offering.....................     --            --            (2,737)     (22,586)
Net proceeds from sale of
 common stock resulting from
 initial public offering......     --            --             --           --
Adjustment to warrants value
 resulting from Initial Public
 Offering.....................     --            --             --           --
Warrants issued in connection
 with legal settlement........     --            --             --           --
Issuance of shares related to
 exercise of warrants.........     --            --             --           --
Exercise of stock options.....     --            --             --           --
Shares issued in connection
 with acquisition.............     --            --             --           --
Comprehensive loss
  Net loss....................     --            --             --           --
  Foreign currency
   gain/loss..................     --            --             --           --
  Unrealized gain on
   securities, net of
   applicable income tax
   expense of $418............     --            --             --           --
Comprehensive loss............
                                   ------       --------       ------      -------
Balance at December 31,
 2001.........................     --            --             --           --
Exercise of stock options.....     --            --             --           --
Stock based compensation......     --            --             --           --
Shares issued in connection
 with acquisition.............     --            --             --           --
Comprehensive loss............     --            --             --           --
  Net loss....................     --            --             --           --
  Foreign Currency
   gain/loss..................     --            --             --           --
  Unrealized gain on
   securities, net of
   applicable income tax
   expense of $420............     --            --             --           --
Comprehensive loss............     --            --             --           --
                                   ------       --------       ------      -------
Balance at December 31,
 2002.........................     --            --             --           --
                                   ------       --------       ------      -------
                                   ------       --------       ------      -------


<Caption>
                                 STOCKHOLDERS' EQUITY (DEFICIT)
                                ---------------------------------
                                          CAPITAL STOCK
                                ---------------------------------
                                    CLASS A
                                 COMMON STOCK      COMMON STOCK
                                ---------------   ---------------
                                SHARES   AMOUNT   SHARES   AMOUNT
                                ------   ------   ------   ------
<S>                             <C>      <C>      <C>      <C>
Balance at December 31,
 1999.........................  9,562     $ 96      --      --
Distributions to
 stockholders.................   --       --        --      --
Distributions of securities,
 available for sale...........   --       --        --      --
Issuance of Princeton Review
 Publishing, LLC Units........   --       --        --      --
Minority interest.............   --       --        --      --
Acquisition of minority
 interest of franchisees......   --       --        --      --
Effect of termination of
 S-Corp.......................   --       --        --      --
Issuance of employee
 options......................   --       --        --      --
Issuance of Series A
 redeemable convertible
 preferred stock, net of
 issuance costs...............   --       --        --
Issuance of Class B redeemable
 non-voting common stock......   --       --        --      --
Deferred compensation related
 to issuance of options.......   --       --        --      --
Amortization of deferred
 compensation.................   --       --        --      --
Issuance of Class A common
 stock........................  3,000       30      --      --
Retirement of treasury
 stock........................   --       --        --      --
Comprehensive income
  Net income prior to S-Corp.
   termination................   --       --        --      --
  Net loss subsequent to
   S-Corp. termination........   --       --        --      --
  Foreign currency
   gain/loss..................   --       --        --      --
  Unrealized gain on
   securities, net of
   applicable income tax of
   $1,408.....................   --       --        --      --

Comprehensive loss............
Accreted dividends on Series A
 redeemable preferred stock...   --       --        --      --
Accreted dividends on Class B
 non-voting common stock......   --       --        --      --
Issuance of warrants
 convertible to Class A common
 stock........................   --       --        --      --
                                 ----     ----    ------    ----
Balance at December 31,
 2000.........................  12,562     126      --      --
Accretion of issuance costs
 related to Series A
 redeemable preferred stock...   --       --        --      --
Accreted dividends on Series A
 redeemable preferred stock...   --       --        --      --
Conversion of Class A common
 to common stock resulting
 from initial public
 offering.....................  (12,562)  (126)   12,562    $126
Conversion of Series A
 redeemable preferred to
 common stock resulting from
 initial public offering......   --       --       5,342      53
Accreted dividends on Class B
 non-voting common stock......   --       --        --      --
Deferred compensation.........   --       --        --      --
Conversion of Class B common
 to common stock resulting
 from initial public
 offering.....................   --       --       2,737      27
Net proceeds from sale of
 common stock resulting from
 initial public offering......   --       --       5,400      54
Adjustment to warrants value
 resulting from Initial Public
 Offering.....................   --       --        --      --
Warrants issued in connection
 with legal settlement........   --       --        --      --
Issuance of shares related to
 exercise of warrants.........   --       --         250       3
Exercise of stock options.....   --       --           9    --
Shares issued in connection
 with acquisition.............   --       --         875       9
Comprehensive loss
  Net loss....................   --       --        --      --
  Foreign currency
   gain/loss..................   --       --        --      --
  Unrealized gain on
   securities, net of
   applicable income tax
   expense of $418............   --       --        --      --

  Comprehensive loss............
                                 ----     ----    ------    ----
Balance at December 31,
 2001.........................   --       --      27,175     272
Exercise of stock options.....   --       --          40    --
Stock based compensation......   --       --        --      --
Shares issued in connection
 with acquisition.............   --       --          46       1
Comprehensive loss............   --       --        --      --
  Net loss....................   --       --        --      --
  Foreign Currency
   gain/loss..................   --       --        --      --
  Unrealized gain on
   securities, net of
   applicable income tax
   expense of $420............   --       --        --      --

Comprehensive loss............   --       --        --      --
                                 ----     ----    ------    ----
Balance at December 31,
 2002.........................   --       --      27,261    $273
                                 ----     ----    ------    ----
                                 ----     ----    ------    ----


<Caption>
                                            STOCKHOLDERS' EQUITY (DEFICIT)
                                -------------------------------------------------------
                                                              ACCUMULATED
                                ADDITIONAL                     OTHER
                                 PAID-IN     ACCUMULATED   COMPREHENSIVE     DEFERRED
                                 CAPITAL       DEFICIT     INCOME (LOSS)   COMPENSATION
                                 -------       -------     -------------   ------------
<S>                             <C>          <C>           <C>             <C>
Balance at December 31,
 1999.........................     --         $ (9,786)      $ 33,298         --
Distributions to
 stockholders.................     --             (339)        --             --
Distributions of securities,
 available for sale...........     --           (7,596)        --             --
Issuance of Princeton Review
 Publishing, LLC Units........   $  1,101       --             --             --
Minority interest.............      3,162       --             --             --
Acquisition of minority
 interest of franchisees......      8,240       --             --             --
Effect of termination of
 S-Corp.......................    (14,129)      14,129         --             --
Issuance of employee
 options......................        738       --             --             --
Issuance of Series A
 redeemable convertible
 preferred stock, net of
 issuance costs...............       (288)      --             --             --
Issuance of Class B redeemable
 non-voting common stock......     --           --             --             --
Deferred compensation related
 to issuance of options.......        115       --                            $(115)
Amortization of deferred
 compensation.................     --           --             --                14
Issuance of Class A common
 stock........................        (30)      --             --
Retirement of treasury
 stock........................                    (203)        --             --
Comprehensive income
  Net income prior to S-Corp.
   termination................     --            4,342         --             --
  Net loss subsequent to
   S-Corp. termination........     --          (12,515)        --             --
  Foreign currency
   gain/loss..................     --           --                 11         --
  Unrealized gain on
   securities, net of
   applicable income tax of
   $1,408.....................     --           --            (31,196)        --

Comprehensive loss............
Accreted dividends on Series A
 redeemable preferred stock...     --           (3,504)        --             --
Accreted dividends on Class B
 non-voting common stock......     --           (3,409)        --             --
Issuance of warrants
 convertible to Class A common
 stock........................      2,998       --             --             --
                                 --------     --------       --------         -----
Balance at December 31,
 2000.........................      1,907      (18,881)         2,113          (101)
Accretion of issuance costs
 related to Series A
 redeemable preferred stock...       (160)      --             --             --
Accreted dividends on Series A
 redeemable preferred stock...     --           (2,309)        --             --
Conversion of Class A common
 to common stock resulting
 from initial public
 offering.....................     --           --             --             --
Conversion of Series A
 redeemable preferred to
 common stock resulting from
 initial public offering......     31,617       --             --             --
Accreted dividends on Class B
 non-voting common stock......     --           (1,956)        --             --
Deferred compensation.........         81       --             --               101
Conversion of Class B common
 to common stock resulting
 from initial public
 offering.....................     22,559       --             --             --
Net proceeds from sale of
 common stock resulting from
 initial public offering......     51,806       --             --             --
Adjustment to warrants value
 resulting from Initial Public
 Offering.....................       (250)      --             --             --
Warrants issued in connection
 with legal settlement........        300       --             --             --
Issuance of shares related to
 exercise of warrants.........     --           --             --             --
Exercise of stock options.....         25       --             --             --
Shares issued in connection
 with acquisition.............      5,206       --             --             --
Comprehensive loss
  Net loss....................     --          (10,334)        --             --
  Foreign currency
   gain/loss..................     --           --               (208)        --
  Unrealized gain on
   securities, net of
   applicable income tax
   expense of $418............     --           --             (1,555)        --

Comprehensive loss............
                                 --------     --------       --------         -----
Balance at December 31,
 2001.........................    113,091      (33,480)           350         --
Exercise of stock options.....        266       --             --             --
Stock based compensation......        256       --             --             --
Shares issued in connection
 with acquisition.............        359       --             --             --
Comprehensive loss............     --           --             --             --
  Net loss....................     --           (1,090)        --             --
  Foreign Currency
   gain/loss..................     --           --               (176)        --
  Unrealized gain on
   securities, net of
   applicable income tax
   expense of $420............     --           --               (551)        --

Comprehensive loss............     --           --             --             --
                                 --------     --------       --------         -----
Balance at December 31,
 2002.........................   $113,972     $(34,570)      $   (377)        --
                                 --------     --------       --------         -----
                                 --------     --------       --------         -----


<Caption>
                                   STOCKHOLDERS' EQUITY (DEFICIT)
                                ------------------------------------
                                   TREASURY STOCK          TOTAL
                                -----------------    STOCKHOLDERS'
                                SHARES    AMOUNT    EQUITY (DEFICIT)
                                ------    ------    ----------------
<S>                             <C>      <C>        <C>
Balance at December 31,
 1999.........................     73    $   (203)      $ 23,405
Distributions to
 stockholders.................   --         --              (339)
Distributions of securities,
 available for sale...........   --         --            (7,596)
Issuance of Princeton Review
 Publishing, LLC Units........   --         --             1,101
Minority interest.............   --         --             3,162
Acquisition of minority
 interest of franchisees......   --         --             8,240
Effect of termination of
 S-Corp.......................   --         --           --
Issuance of employee
 options......................   --         --               738
Issuance of Series A
 redeemable convertible
 preferred stock, net of
 issuance costs...............   --         --              (288)
Issuance of Class B redeemable
 non-voting common stock......   --         --           --
Deferred compensation related
 to issuance of options.......   --         --           --
Amortization of deferred
 compensation.................   --         --                14
Issuance of Class A common
 stock........................              --           --
Retirement of treasury
 stock........................    (73)        203        --
Comprehensive income
  Net income prior to S-Corp.
   termination................   --         --             4,342
  Net loss subsequent to
   S-Corp. termination........   --         --           (12,515)
  Foreign currency
   gain/loss..................   --         --                11
  Unrealized gain on
   securities, net of
   applicable income tax of
   $1,408.....................   --         --           (31,196)
                                                        --------
Comprehensive loss............                           (39,358)
Accreted dividends on Series A
 redeemable preferred stock...   --         --            (3,504)
Accreted dividends on Class B
 non-voting common stock......   --         --            (3,409)
Issuance of warrants
 convertible to Class A common
 stock........................   --            --          2,998
                                  ---    --------       --------
Balance at December 31,
 2000.........................   --         --           (14,836)
Accretion of issuance costs
 related to Series A
 redeemable preferred stock...   --         --              (160)
Accreted dividends on Series A
 redeemable preferred stock...   --         --            (2,309)
Conversion of Class A common
 to common stock resulting
 from initial public
 offering.....................   --         --           --
Conversion of Series A
 redeemable preferred to
 common stock resulting from
 initial public offering......   --         --            31,670
Accreted dividends on Class B
 non-voting common stock......   --         --            (1,956)
Deferred compensation.........   --         --               182
Conversion of Class B common
 to common stock resulting
 from initial public
 offering.....................   --         --            22,586
Net proceeds from sale of
 common stock resulting from
 initial public offering......   --         --            51,860
Adjustment to warrants value
 resulting from Initial Public
 Offering.....................   --         --              (250)
Warrants issued in connection
 with legal settlement........   --                          300
Issuance of shares related to
 exercise of warrants.........   --         --                 3
Exercise of stock options.....   --         --                25
Shares issued in connection
 with acquisition.............   --         --             5,215
Comprehensive loss
  Net loss....................   --         --           (10,334)
  Foreign currency
   gain/loss..................   --         --              (208)
  Unrealized gain on
   securities, net of
   applicable income tax
   expense of $418............   --         --            (1,555)
                                                        --------
Comprehensive loss............                           (12,097)
                                  ---    --------       --------
Balance at December 31,
 2001.........................   --         --            80,233
Exercise of stock options.....   --         --               266
Stock based compensation......   --         --               256
Shares issued in connection
 with acquisition.............   --         --               360
Comprehensive loss............   --         --           --
  Net loss....................   --         --            (1,090)
  Foreign Currency
   gain/loss..................   --         --              (176)
  Unrealized gain on
   securities, net of
   applicable income tax
   expense of $420............   --         --              (551)
                                                        --------
Comprehensive loss............   --         --            (1,817)
                                  ---    --------       --------
Balance at December 31,
 2002.........................   --         --          $ 79,298
                                  ---    --------       --------
                                  ---    --------       --------
</Table>

                            See accompanying notes.

                                       46

<Page>
                  THE PRINCETON REVIEW, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<Table>
<Caption>
                                                                YEARS ENDED DECEMBER 31,
                                                              -----------------------------
                                                               2002       2001       2000
                                                               ----       ----       ----
                                                                     (IN THOUSANDS)
<S>                                                           <C>       <C>        <C>
Cash flows from operating activities:
Net loss....................................................  $(1,090)  $(10,334)  $ (8,172)
Adjustments to reconcile net loss to net cash provided by
 (used in) operating activities:
   Depreciation.............................................    1,801      1,233      1,343
   Amortization.............................................    4,468      5,246      1,489
   Impairment of investment.................................      344         --         --
   Noncash interest expense.................................       --        602         --
   Loss on early extinquishment of debt.....................       --      3,130         --
   Bad debt expense.........................................      655        (82)       515
   Provision for uncollectable advertising fees.............       --         --        200
   Loss on disposal of fixed assets.........................      126         --         --
   Gain on sale/distribution of securities..................       --         --     (7,428)
   Compensation expense on PSU conversion...................       --         --      6,614
   Deferred income taxes....................................     (736)    (8,221)   (10,117)
   Deferred rent............................................      101        381        351
   Minority interests' share of income in subsidiaries......       --         --         50
   Stock based compensation.................................      256        241         14
   Equity interest in operations of affiliates..............       --         34        881
   Net change in operating assets and liabilities:
      Accounts receivable...................................   (6,349)     2,634     (2,358)
      Accounts receivable -- related parties................     (998)     1,139       (494)
      Other receivables.....................................      107        100       (204)
      Other receivables -- related parties..................     (594)      (196)       (67)
      Inventories...........................................      101         --        197
      Prepaid expenses......................................      (43)       (46)      (180)
      Other assets..........................................      155        262     (2,865)
      Accounts payable......................................   (1,220)     4,422        936
      Accrued expenses and taxes payable....................     (659)    (3,676)     2,419
      Accrued expenses -- related parties...................       22         --        (89)
      Deferred income.......................................    4,312     (2,475)     1,310
      Book advances.........................................     (113)    (1,127)      (147)
      Book advances -- related parties......................      (79)      (209)      (354)
                                                              -------   --------   --------
Net cash provided by (used in) operating activities.........      567     (6,942)   (16,156)
                                                              -------   --------   --------
Cash flows from investing activities:
   Purchase of furniture, fixtures, equipment and software
    development.............................................   (6,107)    (3,695)    (6,742)
   Investment in affiliates.................................     (270)      (130)    (1,300)
   Purchase of franchises and other businesses, net of cash
    acquired................................................   (1,393)   (16,697)      (320)
   Stockholder loan.........................................     (400)      (615)       (79)
   Notes receivable.........................................    1,123     (1,840)        --
   Investment in other assets...............................   (1,851)    (1,036)    (5,002)
                                                              -------   --------   --------
Net cash used in investing activities.......................   (8,898)   (24,013)   (13,443)
                                                              -------   --------   --------
Cash flows from financing activites:
   Borrowings under line of credit..........................       --     24,691      5,200
   Repayment of line of credit..............................       --    (29,464)    (1,400)
   Repayment of term loan, net..............................      (50)       (10)       (37)
   Capital leases payments..................................     (204)      (546)       163
   Distributions to stockholders............................       --         --       (339)
   Proceeds from Investment in Series A redeemable
    convertible preferred stock, net of offering costs......       --         --     25,409
   Notes payable related to franchises purchased............   (1,653)        --         --
   Proceeds from sale of common stock in initial public
    offering, net...........................................       --     53,320         --
   Initial public offering costs............................       --         --     (1,460)
   Proceeds from exercise of options........................      266         25         --
   Proceeds fom sale of Class B redeemable non-voting common
    stock...................................................       --         --        180
   Issuance of warrants.....................................       --         --      2,998
   Issuance of Princeton Review Publishing, LLC units.......       --         --      1,101
                                                              -------   --------   --------
Net cash (used in) provided by financing activities.........   (1,641)    48,016     31,815
                                                              -------   --------   --------
Net (decrease) increase in cash and cash equivalents........   (9,972)    17,061      2,216
Cash and cash equivalents, beginning of period..............   21,935      4,874      2,658
                                                              -------   --------   --------
Cash and cash equivalents, end of period....................  $11,963   $ 21,935   $  4,874
                                                              -------   --------   --------
                                                              -------   --------   --------
Supplemental disclosures of cash flow information
 Cash paid during the year for:
   Interest.................................................  $   629   $  1,909   $    159
                                                              -------   --------   --------
                                                              -------   --------   --------
   State and local income taxes.............................  $   237   $    136   $    177
                                                              -------   --------   --------
                                                              -------   --------   --------
</Table>

                            See accompanying notes.

                                       47

<Page>
                  THE PRINCETON REVIEW, INC. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

Business

    The Princeton Review, Inc. and its wholly owned subsidiaries, Princeton
Review Management, LLC, Princeton Review Publishing, LLC, Princeton Review
Products, LLC, Princeton Review Operations, LLC, Princeton Review Carolinas, LLC
and The Princeton Review of Canada Inc., as well as the Company's national
advertising fund (together, the 'Company'), are engaged in the business of
providing courses that prepare students for college, graduate school and other
admissions tests. The Company, through Princeton Review Operations, LLC,
provides these courses in various locations throughout the United States and
Canada and over the Internet. As of December 31, 2002, the Company had 9
franchisees operating approximately 19 offices under the Princeton Review name
in the United States and approximately 19 offices abroad operated by franchisees
in 12 countries. The Company also sells support materials and equipment to its
franchisees, authors content for various books and software products published
by third parties, sells Web-based products to higher education institutions,
operates a Web site providing education-related content and provides a number of
services to K-12 schools and school districts to help them deal with
state-mandated assessments.

    Effective March 31, 2000, the Company terminated its S corporation status in
preparation for a restructuring (see Note 7).

Principles of Consolidation

    The accompanying consolidated financial statements include the accounts of
The Princeton Review, Inc. and its wholly owned subsidiaries. Prior to April 1,
2000, these subsidiaries were majority owned. On July 1, 2001 the Company began
consolidating its national advertising fund (see Note 8). All significant
intercompany transactions and balances are eliminated in consolidation.

Cash and Cash Equivalents

    As of December 31, 2002 and 2001, cash and cash equivalents consist of
investments in securities issued or guaranteed by the U.S. government, its
agencies or instrumentalities, which have average maturities of 90 days or less
at the date of purchase. Approximately 83% and 93% of the Company's cash and
cash equivalents at December 31, 2002 and 2001, respectively, were on deposit at
one financial institution.

Inventories

    Inventories consist of program support equipment, course materials and
supplies. All inventories are valued at the lower of cost (first-in, first-out
basis) or market.

Furniture, Fixtures and Equipment

    Furniture, fixtures and equipment are stated at cost less accumulated
depreciation and amortization. Depreciation is computed using straight-line and
accelerated methods over the estimated useful lives of the assets principally
ranging from three to seven years. Leasehold improvements are amortized using
the straight-line method over the lesser of the lease term or its estimated
economic useful life.

                                       48

<Page>
                  THE PRINCETON REVIEW, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Software and Website Development

    The Company accounts for internal use software development in accordance
with the provisions of the American Institute of Certified Public Accountants
Statement of Position ('SOP') 98-1, Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use. Effective July 1, 2000, the
Company adopted Emerging Issues Task Force ('EITF') 00-2, Accounting for Website
Development Costs. The adoption of this EITF has not had a material effect on
the Company's financial condition or results of operations.

    For the years ended December 31, 2002, 2001 and 2000, the Company expensed
approximately $3.6 million, $1.3 million and $1.9 million, respectively, of
product development costs that were incurred in the preliminary project stage
under SOP 98-1. For the years ended December 31, 2002 and 2001, the Company
capitalized approximately $2.2 million and $4.1 million, respectively, in
product and website development costs under SOP 98-1 and EITF 00-2. For the
years ended December 31, 2002, 2001 and 2000, the Company recorded related
amortization expense of approximately $2.6 million, $2.4 million and $1.1
million, respectively. As of December 31, 2002 and 2001, the net book value of
these capitalized product and website development costs were $4.5 million, and
$5.1 million, respectively. These capitalized costs are amortized using the
straight-line method over the estimated useful life of the assets ranging from
12 to 24 months.

Franchise Costs

    The cost of franchise rights purchased by the Company from third parties is
amortized using the straight-line method over the remaining useful life of the
franchise agreement.

Publishing Rights

    Publishing rights consist of amounts paid in 1995 to certain co-authors to
buy out their rights to future royalties on certain books. Such amounts are
being amortized on a straight-line basis over 25 years.

Capitalized Course Costs

    Capitalized course costs, which include courses and questions developed for
Homeroom.com, consist of amounts paid to consultants or employees specifically
hired for the development or substantial revision of courses and their related
materials. Amortization of these capitalized course costs commences with the
realization of course revenues. The amortization periods range from one to seven
years.

Goodwill and Territorial Marketing Rights

    Goodwill represents the excess purchase price of acquired businesses over
the estimated fair value of net assets acquired. Territorial marketing rights
represent rights contributed by our independent franchisees to Princeton Review
Publishing, LLC in 1995 in exchange for membership units of Princeton Review
Publishing LLC to allow the marketing of the Company's products on a
contractually agreed-upon basis within the franchisee territories. Without these
rights, the Company would be prohibited from selling its products in these
territories due to the exclusivity granted to the franchisees within their
territories.

    In conjunction with the adoption of Statements of Financial Accounting
Standards No. 142, as of January 1, 2002, the Company's goodwill and intangible
assets including territorial marketing rights that are deemed to have indefinite
lives are no longer amortized but are subject to annual impairment tests. Other
intangible assets are amortized over their useful lives and are evaluated for
impairment whenever events or circumstances indicate that carrying amounts may
not be

                                       49

<Page>
                  THE PRINCETON REVIEW, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

recoverable through future undiscounted cash flows, excluding interest costs. If
tests or circumstances suggest that the Company's intangible assets are
impaired, the Company assesses the fair value of the intangible assets and
reduces them to an amount that results in book value approximating fair value.

Investments in Affiliates

    The Company values its investments in affiliate companies in which it has a
less than 50% ownership interest and can exercise significant influence using
the equity method of accounting. Ownership interests in such investments are
approximately 20%. Investments in affiliate companies in which the Company has a
less than 20% ownership interest and does not have the ability to exercise
significant influence are accounted for using the cost method of accounting.

Deferred Income

    Deferred income represents tuition and customer deposits (which are
refundable prior to the commencement of the program), college marketing fees and
subscription services, professional development fees and fees for printed
materials. Tuition is applied to income ratably over the periods in which it is
earned, generally the term of the program. College marketing fees and
subscription fees are applied to income ratably over the life of the agreements,
which range from 12 to 36 months. Fees for professional development and printed
materials are recognized as the services and products are delivered.

Minority Interests

    In accounting for minority interests prior to April 1, 2000, the Company had
recognized 100% of the losses in those subsidiaries where minority interests had
been exhausted. In certain subsidiaries which were profitable, the minority
interests' share of such profits had been credited to the minority interests.

    On April 1, 2000, as part of a corporate restructuring, all of the minority
stockholders contributed their interests in the subsidiaries to the newly formed
holding company for common stock. The minority interest liability on March 31,
2000 was reversed against additional paid-in capital (see Note 7).

Revenue Recognition

    The Company recognizes revenue from the sale of products and services as
follows:

    Course and Tutoring Income

    Tuition and tutoring fees are paid to the Company and recognized over the
life of the course.

    Book, Software and Publication Income and Expenses

    The Company recognizes revenue from both performance-based fees such as
marketing fees and royalties and delivery-based fees such as advances and copy
editing fees. Performance-based fees, which represent royalties on books and
software sold, are recognized when sales reports are received from the
publishers. Delivery-based fees are recognized upon the completion and
acceptance of the product by the publishers. Until such time, all costs and
revenues related to such delivery-based fees are deferred. Book advances are
recorded as liabilities and deferred book expenses are included in other current
assets.

                                       50

<Page>
                  THE PRINCETON REVIEW, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

    Royalty Service Fees

    As consideration of the rights and entitlements granted under franchise
agreements, which entitle the franchisees to provide test preparation services
utilizing the Princeton Review method in their licensed territories, the
franchisees are required to pay to the Company a monthly royalty service fee
equal to 8% of the franchise's gross receipts collected during the preceding
month. In addition, these fees include a per student fee charged to the
Company's franchisees for use by their students of the Company's supplemental
online course tools. The Company's franchisees' contributions to the advertising
fund are also recognized by the Company as royalty revenue (See Note 8). Under
the terms of the franchise agreements, the Company has the right to perform
audits of royalty service fees reported by the franchisees. Any differences
resulting from an audit, including related interest and penalties, if any, are
recorded upon the completion of the audit when such amounts are determinable.

    Course Materials and Other Products

    The Company recognizes revenue from the sale of course materials and other
products to the independently owned franchises upon shipment.

    Initial Franchise Fees

    Revenue from the initial sales of franchises is recognized when
substantially all significant services to be provided by the Company, pursuant
to the franchise agreement, have been performed and the franchise has commenced
operations. These services consist of approximately two weeks of training the
franchisees' teachers to use the Princeton Review method and the franchisees'
staff on how to operate an office. The initial franchise fee gives the
franchisee a license to conduct, operate and market a test preparation business
utilizing the Princeton Review method in a specific territory for an initial
period of typically 10 years, with a right to renew for an additional 10 years.

    College Marketing and Subscription Fees

    The Company recognizes revenue from subscription fees for Web-based services
over the life of the contract, which is typically one year in duration.

    Transaction Processing Fees

    The Company recognizes revenue from transaction processing fees, such as
Web-based application fees, as the transactions are completed.

    Other Income

    Other income consists of miscellaneous fees for other services provided to
third parties primarily for authoring questions, advertising, test booklets,
training and professional development fees and fees for teaching after school
programs which are recognized as the products or services are delivered. Also
included in Other Income are college marketing fees which are recognized ratably
over the period in which the marketing services are provided, which is typically
one year.

                                       51

<Page>
                  THE PRINCETON REVIEW, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

    The following table summarizes the Company's revenue and cost of revenue for
the years ended December 31, 2002, 2001 and 2000:

<Table>
<Caption>
                                                                BOOK, SOFTWARE     INITIAL       WEB BASED
                                       COURSE      ROYALTY      AND PUBLICATION   FRANCHISE   SUBSCRIPTION AND  OTHER
                                      REVENUES   SERVICE FEES       INCOME          FEES      PROCESSING FEES   INCOME  TOTAL
                                      --------   ------------       ------          ----      ---------------   ------  -----
                                                                            (IN THOUSANDS)
<S>                                   <C>        <C>            <C>               <C>         <C>               <C>     <C>
YEAR ENDED DECEMBER 31, 2002
   Revenue
      Test Preparation Services.....  $60,262      $4,256             --          $205             --        $1,212   $65,935
      Admissions Services...........       --          --         $3,570            --        $ 8,665         1,729    13,964
      K-12 Services.................       --          --          4,114            --          1,486         3,737     9,337
                                      -------      ------         ------          ----        -------        ------   -------
         Total......................  $60,262      $4,256         $7,684          $205        $10,151        $6,678   $89,236
                                      -------      ------         ------          ----        -------        ------   -------
                                      -------      ------         ------          ----        -------        ------   -------
   Cost of Revenue
      Test Preparation Services.....  $18,665          --             --            --             --         $  15   $18,680
      Admissions Services...........       --          --         $1,656            --        $ 2,403            --     4,059
      K-12 Services.................       --          --            570            --            774         1,983     3,327
                                      -------      ------         ------          ----        -------        ------   -------
         Total......................  $18,665          --         $2,226            --        $ 3,177        $1,998   $26,066
                                      -------      ------         ------          ----        -------        ------   -------
                                      -------      ------         ------          ----        -------        ------   -------
YEAR ENDED DECEMBER 31, 2001
   Revenue
      Test Preparation Services.....  $49,853      $3,262             --            --             --         $ 821   $53,936
      Admissions Services...........       --          --         $2,720            --        $ 4,622         1,582     8,924
      K-12 Services.................       --          --          5,205            --            480           570     6,255
                                      -------      ------         ------          ----        -------        ------   -------
         Total......................  $49,853      $3,262         $7,925            --        $ 5,102        $2,973   $69,115
                                      -------      ------         ------          ----        -------        ------   -------
                                      -------      ------         ------          ----        -------        ------   -------
   Cost of Revenue
      Test Preparation Services.....  $17,019          --             --            --             --           --    $17,019
      Admissions Services...........       --          --         $1,017            --        $ 1,007         $ 502     2,526
      K-12 Services.................       --          --          1,514            --            498           186     2,198
                                      -------      ------         ------          ----        -------        ------   -------
         Total......................  $17,019          --         $2,531            --        $ 1,505         $ 688   $21,743
                                      -------      ------         ------          ----        -------        ------   -------
                                      -------      ------         ------          ----        -------        ------   -------
YEAR ENDED DECEMBER 31, 2000
   Revenue
      Test Preparation Services.....  $29,550      $4,166             --          $ 25             --         $ 307   $34,048
      Admissions Services...........       --          --         $2,523            --        $   645         1,312     4,480
      K-12 Services.................       --          --          5,335            --             16            --     5,351
                                      -------      ------         ------          ----        -------        ------   -------
         Total......................  $29,550      $4,166         $7,858          $ 25        $   661        $1,619   $43,879
                                      -------      ------         ------          ----        -------        ------   -------
                                      -------      ------         ------          ----        -------        ------   -------
   Cost of Revenue
      Test Preparation Services.....  $11,532          --             --            --             --            --   $11,532
      Admissions Services...........       --          --         $  780            --             --         $ 185       965
      K-12 Services.................       --          --            815            --        $    91            61       967
                                      -------      ------         ------          ----        -------        ------   -------
         Total......................  $11,532          --         $1,595            --        $    91         $ 246   $13,464
                                      -------      ------         ------          ----        -------        ------   -------
                                      -------      ------         ------          ----        -------        ------   -------
</Table>

Foreign Currency Translation

    Balance sheet accounts of the Company's Canadian subsidiary are translated
using year-end exchange rates. Statement of operations accounts are translated
at monthly average exchange rates. The resulting translation adjustment is
recorded as a separate component of stockholders' equity. Foreign exchange gains
and losses for all the years presented were not significant.

Advertising and Promotion

    The majority of costs associated with advertising and promotion are expensed
in the year incurred. Costs related to producing mailers and other pamphlets are
expensed when mailed. Due to the seasonal nature of the business, most
advertising costs related to mailers and pamphlets had been expensed by December
31, 2002, 2001, and 2000, respectively. Total advertising and promotion expense
was approximately $7.9 million, $9.4 million, and $7.6 million for the years
ended December 31, 2002, 2001 and 2000, respectively.

                                       52

<Page>
                  THE PRINCETON REVIEW, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Use of Estimates

    The preparation of the financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenue and expenses during the reporting period. Significant accounting
estimates used include estimates for uncollectible accounts receivable,
impairment write downs and amortization lives assigned to intangible assets.
Actual results could differ from those estimates.

Fair Value of Financial Instruments

    For financial instruments including cash and cash equivalents, accounts
receivable, other receivables and accounts payable, the carrying amount
approximated fair value because of their short maturity. The carrying value of
the Company's debt approximated fair value as the interest rates for the debt
approximated market rates of interest available to the Company for similar
instruments. Securities, available for sale, are publicly traded and are stated
at the last reported sales price on the day of the valuation.

Concentration of Credit Risk

    Financial instruments that potentially subject the Company to concentration
of credit risk include cash and cash equivalents and accounts receivable arising
from its normal business activities. The Company places its cash and cash
equivalents with high credit quality financial institutions.

    Concentrations of credit risks with respect to accounts receivable are
limited due to the large number of entities comprising the payor base, and their
dispersion across different states. The Company does not require collateral. One
customer, whose revenues are reported in the Admissions Services division,
accounted for approximately 19% and 18% of gross accounts receivable at December
31, 2002 and 2001, respectively. In addition, a second customer, whose revenues
are reported in the K-12 Services division, accounted for approximately 5% and
30% of gross accounts receivable at December 31, 2002 and 2001, respectively.
Another customer, whose revenues are reported in the K-12 Services division,
accounted for approximately 16% of gross accounts receivable at December 31,
2002.

Income Taxes

    The Company accounts for income taxes based upon the provisions of SFAS No.
109, Accounting for Income Taxes. Under SFAS 109, the liability method is used
for accounting for income taxes, and deferred tax assets and liabilities are
determined based on differences between financial reporting and tax basis of
assets and liabilities.

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 diluted net income (loss) per share amount prior to April 1,
2000 equals basic net income (loss) per share because the Company had no common
stock equivalents. The calculation of diluted net income (loss) per share
excludes potential common shares if the effect is antidilutive.

                                       53

<Page>
                  THE PRINCETON REVIEW, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

    Prior to 2000, there were no common stock equivalents excluded from the net
income (loss) per share calculation. During 2002, 2001 and 2000, 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.

Investment in Marketable Equity Securities

    The Company has classified its investment in Student Advantage, Inc. common
stock (see Note 3) as available for sale. Investments classified as available
for sale are carried at fair value, with the unrealized gains and losses, net of
tax, reported as a separate component of stockholder's equity. The fair value of
investments is based on quoted market prices at the end of each accounting
period. The cost of securities sold is based on the specific identification
method.

Stock options

    The Company accounts for the issuance of stock options using the intrinsic
value method in accordance with Accounting Principles Board ('APB') No. 25,
Accounting for Stock Issued to Employees, and related interpretations. Generally
for the Company's stock option plans, no compensation cost is recognized in the
Consolidated Statements of Operations because the exercise price of the
Company's stock options equals the market price of the underlying stock on the
date of grant. Under the Company's 2000 Stock Incentive Plan, however, the
Company did recognize a one-time charge of compensation cost in 2001 because
stockholder approval of the plan was required subsequent to the grant date (see
Note 12).

    Had the Company accounted for its employee stock options under the
fair-value method of that statement, the Company's net loss per share would have
been increased to the pro forma amounts indicated:

<Table>
<Caption>
                                                                    YEARS ENDED
                                                                    DECEMBER 31,
                                                          --------------------------------
                                                            2002       2001        2000
                                                            ----       ----        ----
                                                          (IN THOUSANDS, EXCEPT PER SHARE
                                                                       DATA)
<S>                                                       <C>        <C>         <C>
Pro forma net loss available for common stockholders....  $(1,867)   $(15,014)   $(15,549)
Pro forma loss per share:
    Basic and Diluted...................................  $ (0.07)   $  (0.70)   $  (1.10)
</Table>

    Prior to the Company's initial public offering, the fair value for these
options was estimated at the date of grant using the minimum-value method, which
utilizes a near-zero volatility factor. After the Company's initial public
offering, these options were valued using a Black-Scholes option pricing model.
The following weighted-average assumptions were used under these methods:

<Table>
<Caption>
                                                              YEARS ENDED
                                                              DECEMBER 31,
                                                             --------------
                                                              2002    2001
                                                             ------   -----
                                                             BLACK-SCHOLES     MINIMUM
                                                                 OPTION       FAIR VALUE
                        ASSUMPTIONS                          PRICING MODEL      METHOD
                        -----------                          -------------      ------
<S>                                                          <C>      <C>     <C>
Expected life (years)......................................       5       5         5
Risk-free interest rate....................................     4.5%    5.5%      5.5%
Dividend yield.............................................       0%      0%        0%
Volatility factor..........................................  0.7611    1.13       n/a
</Table>

    These option-valuation methods require input of highly subjective
assumptions. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because change in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing methods do not necessarily provide a reliable
single

                                       54

<Page>
                  THE PRINCETON REVIEW, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

measure of the fair value of its employee stock options. The effects of applying
SFAS 123 in this pro forma disclosure are not indicative of future amounts and
additional awards in future years are anticipated. For purposes of pro forma
disclosure, the estimated fair value of the equity awards is amortized to
expense over the options' vesting period. The weighted average fair value of
options granted during the years ended December 31, 2002 and 2001 was $4.74 and
$5.73, respectively. As of December 31, 2002, there were 1,238,493 options
exercisable with a weighted average remaining contractual life of 8.1 years.

Adoption of New Accounting Pronouncements

    In July 2001, the Financial Accounting Standards Board ('FASB') issued
Statements of Financial Accounting Standards ('SFAS') No. 141, Business
Combinations, and 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 indefinite lives are no longer amortized,
but are subject to annual impairment tests in accordance with the statements.
Other intangible assets continue to be amortized over their useful lives. The
Company applied the new rules on accounting for goodwill and other intangible
assets beginning in the first quarter of 2002. The Company has performed the
required tests of goodwill and indefinite lived intangible assets and, based on
the results, has not recorded any charges related to the adoption of and
subsequent conformity with SFAS No. 142 (see Note 12). Acquisitions consummated
after June 30, 2001 are required to be accounted for in accordance with SFAS
141. (See Note 12 as it relates to acquisitions.) The Company's 2001 and 2000
results do not reflect the provisions of SFAS No. 142. Had the Company adopted
SFAS No. 142 on January 1, 2000 and ceased to amortize goodwill at such date,
the Company's historical net loss and basic and diluted net loss per share would
have been as follows:

<Table>
<Caption>
                                                                   YEARS ENDED
                                                                  DECEMBER 31,
                                                              ---------------------
                                                                2001        2000
                                                                ----        ----
                                                              (IN THOUSANDS, EXCEPT
                                                                 PER SHARE DATA)
<S>                                                           <C>         <C>
Reported net loss...........................................  $(14,599)   $(15,085)
Goodwill amortization.......................................     1,343         177
                                                              --------    --------
Adjusted net loss...........................................  $(13,256)   $(14,908)
                                                              --------    --------
                                                              --------    --------
Reported basic and diluted net loss per share...............  $  (0.68)   $  (1.07)
Goodwill amortization.......................................      0.06        0.01
                                                              --------    --------
Adjusted basic and diluted net loss per share...............  $  (0.62)   $  (1.06)
                                                              --------    --------
                                                              --------    --------
</Table>

    In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment
or Disposal of Long-Lived Assets, effective for fiscal years beginning after
December 15, 2001. This standard superseded SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed of, and
provided a single accounting model for long-lived assets to be disposed of. The
new standard also superseded the provisions of APB Opinion No. 30 with regard to
reporting the effects of a disposal of a segment of a business and required
expected future operating losses from discontinued operations to be displayed in
discontinued operations in the period(s) in which the losses are incurred. SFAS
No. 144 was effective for the Company beginning with the first quarter of 2002
and its adoption did not have a material impact on the Company's results of
operations or financial position.

    In April 2002, the FASB issued SFAS No. 145, Rescission of FASB Statements
No. 4, 44, and 62, Amendment of FASB Statement No. 13, and Technical
Corrections. In most instances, SFAS No. 145 will require gains and losses on
extinguishments of debt to be classified as income or loss from continuing
operations rather than as extraordinary items as previously required under FASB

                                       55

<Page>
                  THE PRINCETON REVIEW, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Statement No. 4, Reporting Gains and Losses from Extinguishment of Debt. This
provision of SFAS No. 145 is effective for fiscal years beginning after May 15,
2002. The Company adopted SFAS No. 145 as of January 1, 2003. Accordingly, the
Company reclassified the $3.1 million loss on extinguishment of debt previously
classified as an extraordinary item in 2001 to conform to the provisions of SFAS
No. 145.

    In July 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated
with Exit or Disposal Activities. SFAS No. 146 provides guidance on the timing
of the recognition of costs associated with exit or disposal activities. The new
guidance requires costs associated with exit or disposal activities to be
recognized when incurred. Previous guidance required recognition of costs at the
date of commitment to an exit or disposal plan. The provisions of the statement
are to be adopted prospectively for exit activities after December 31, 2002.
Although SFAS No. 146 may impact the accounting for costs related to exit or
disposal activities the Company may enter into in the future, particularly the
timing of recognition of these costs, the adoption of the statement will not
have an impact on the Company's present financial condition or results of
operations.

    In December 2002, the FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation -- Transition and Disclosure. SFAS No. 148 amends SFAS No. 123,
Accounting for Stock-Based Compensation, to provide alternative methods of
transition for a voluntary change to the fair value based methods of accounting
for stock-based employee compensation. In addition, SFAS No. 148 amends the
disclosure requirements of SFAS No. 123 to require more prominent disclosures in
both annual and interim financial statements about the method of accounting for
stock-based employee compensation and the effect of the method used on reported
results. The additional disclosure requirements of SFAS No. 148 are effective
for fiscal years ending after December 15, 2002. As provided for in SFAS No.
148, the Company has elected to continue to follow the intrinsic value method of
accounting as prescribed by APB Opinion No. 25, Accounting for Stock Issued to
Employees, to account for stock options.

Reclassification

    Certain balances have been reclassified to conform with the current year
presentation.

2. OTHER ASSETS

    Other assets (current) consist of the following at:

<Table>
<Caption>
                                                               DECEMBER 31,
                                                              ---------------
                                                               2002     2001
                                                               ----     ----
                                                              (IN THOUSANDS)
<S>                                                           <C>      <C>
Deferred book costs.........................................  $   42   $  161
Inventories.................................................     639      719
Deferred income tax.........................................     907      593
Deferred cost of franchise acquisitions.....................      29       --
Other.......................................................     337      504
                                                              ------   ------
                                                              $1,954   $1,977
                                                              ------   ------
                                                              ------   ------
</Table>

                                       56

<Page>
                  THE PRINCETON REVIEW, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

    Other assets (noncurrent) consist of the following at:

<Table>
<Caption>
                                                               DECEMBER 31,
                                                              ---------------
                                                               2002     2001
                                                               ----     ----
                                                              (IN THOUSANDS)
<S>                                                           <C>      <C>
Capitalized course costs, net of accumulated amortization of
  $1,693 in 2002 and $1,585 in 2001.........................  $4,700   $4,042
Non-compete agreement costs, net of accumulated amortization
  of $450 in 2002 and $377 in 2001..........................     584      812
Construction in progress....................................     312       --
Security deposits...........................................     555      499
Loans to officers...........................................   1,117      615
Customer lists, net of accumulated amortization of $338 in
  2002 and $68 in 2001......................................   2,363    2,633
Trademark, net of accumulated amortization of $11 in 2002
  and $68 in 2001...........................................     327      318
                                                              ------   ------
                                                              $9,958   $8,919
                                                              ------   ------
                                                              ------   ------
</Table>

3. INVESTMENT IN STUDENT ADVANTAGE, INC.

    As of January 1, 2000, the company owned 1,570,003 shares of common stock of
Student Advantage, Inc. Effective March 31, 2000, in connection with the
Company's restructuring and sale of Series A preferred stock, the Company's
board of directors approved the distribution of 742,876 shares of Student
Advantage, Inc. stock to its stockholders and 32,168 shares to its employees. On
March 31, 2000, the Company distributed the stock to the stockholders and
realized a gain of approximately $7.4 million. On April 18, 2000, the Company
distributed 32,168 shares to the employees and realized a gain of approximately
$169,000.

    During 2002 Student Advantage, Inc. declared a 10:1 reverse stock split.
After giving affect to this stock split, at December 31, 2002 and 2001, the
Company held 79,496 shares of Student Advantage, Inc. common stock valued at
approximately $31,000 ($.39 per share) and $1,002,000 ($12.60 per share),
respectively, and recorded as available for sale securities.

4. FURNITURE, FIXTURES, EQUIPMENT AND SOFTWARE DEVELOPMENT

    Furniture, fixtures, equipment and software development consist of the
following at:

<Table>
<Caption>
                                                                DECEMBER 31,
                                                              -----------------
                                                               2002      2001
                                                               ----      ----
                                                               (IN THOUSANDS)
<S>                                                           <C>       <C>
Computer equipment..........................................  $ 5,474   $ 4,242
Furniture, fixtures and equipment...........................    1,645     1,351
Computer and phone equipment under capital leases...........    2,120     1,891
Automobiles.................................................       22        22
Software -- third party.....................................    3,490     1,879
Software -- internally developed............................    6,506     7,158
Leasehold improvements......................................    3,988     2,244
                                                              -------   -------
                                                               23,245    18,787
Less accumulated depreciation and amortization, including
  $1,456 in 2002 and $1,060 in 2001 of accumulated
  depreciation for assets under capital leases..............   11,892     8,626
                                                              -------   -------
                                                              $11,353   $10,161
                                                              -------   -------
                                                              -------   -------
</Table>

                                       57

<Page>
                  THE PRINCETON REVIEW, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

5. INVESTMENT IN AFFILIATES

    The Company has an ownership interest of approximately 20% in Student
Monitor, LLC, a privately held company. At December 31, 2002 and 2001, the
Company's investment in this company was approximately $63,000 and $86,000,
respectively.

    In February 1999, the Company invested $5,000 for an ownership interest of
approximately 48% in Tutor.com, Inc., a privately held startup company.
Effective December 31, 1999, as a result of additional third party investments
in Tutor.com, Inc., the Company's interest was reduced to approximately 30%. In
May 2000, after further third party investments and an additional $1 million
investment by the Company, the Company's ownership interest was reduced to
approximately 20%. At December 31, 2002 and 2001, the Company's net investment
in Tutor.com was $0. The investment agreement includes various marketing
arrangements including the license by the Company to use various trademarks to
co-brand the Tutor.com service, the sharing of lists of prospective and current
customers and promotion of each other's Web sites. These marketing arrangements
are mutually provided free of charge.

    In 2002, 2001 and 2000, the Company invested $130,000, $270,000 and
$300,000, respectively, in SchoolNet, Inc, a privately held education technology
solutions company. The Company currently owns approximately 5% of SchoolNet. The
Company maintains a strategic marketing relationship with SchoolNet, through
which SchoolNet markets and distributes a version of the Company's Homeroom.com
product called 'Homeroom Inside.' As of December 31, 2002 the value of the
Company's investment in SchoolNet was approximately $356,000, net of an
impairment writedown of approximately $344,000. The Company has also contracted
with SchoolNet to provide Enterprise Resource Planning software that monitors
the use of the Homeroom.com Web site.

6. LINES OF CREDIT AND LONG-TERM DEBT

Lines of Credit

    On October 27, 2000, the Company entered into a Line of Credit Agreement
with Excel Bank, N.A. for $4.5 million and borrowed the full amount thereunder.
The line of credit was due on the earlier of October 31, 2001 or 10 days after
the Company's initial public offering and bore interest at a variable rate of
prime plus 1% per year. As of December 31, 2000, $4.5 million was outstanding
under this line of credit. The Excel Bank line of credit was fully paid off in
June 2001 with a portion of the Company's proceeds from its initial public
offering.

    On December 14, 2000, the Company entered into a 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., providing for a line of credit of up to
$25,000,000 under which the Company could borrow up to $18,750,000 for the
acquisition of its independent franchises and up to $6,250,000 for general
corporate purposes. The Company incurred approximately $1,103,000 of transaction
costs in connection with this loan agreement. Amounts borrowed under the credit
facility initially bore interest at an annual interest rate of 13%. Until the
termination of the facility, the applicable annual interest rate was to increase
by 1% on each anniversary of the agreement. The loan was secured by
substantially all of the Company's current and future business assets. In
connection with this line of credit, the Company issued warrants for the
purchase of Class A common stock to the lenders (see Note 7). As of December 31,
2000, there were no borrowings under this line of credit. During 2001 the
Company borrowed $24,691,000, which was fully paid off including all accrued
interest on June 22, 2001 with a portion of the Company's proceeds from its
initial public offering and the facility was terminated as of that date. In
connection with the retirement of this loan, the Company wrote off the remaining
deferred financing costs and the unamortized cost of the warrants issued to the
lenders resulting in a loss on early extinguishment of debt of approximately
$3.1 million.

                                       58

<Page>
                  THE PRINCETON REVIEW, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

    On March 2, 2001, the Company completed its acquisition of Princeton Review
of New Jersey, Inc. and Princeton Review of Boston, Inc. (see Note 12). The
Company financed part of this acquisition with notes from the sellers totaling
$3,625,000, which was outstanding as of December 31, 2002 and 2001. This balance
is comprised of two notes. The first promissory note of $3,125,000 is payable as
to principal in 20 equal quarterly installments beginning with the 17th calendar
quarter following the closing date of the acquisition and bears interest at the
rate of 8.25% per year, payable quarterly. This promissory note was convertible
into common stock at the price per share at which shares of the Company's common
stock are sold in its initial public offering for a period of 60 days, beginning
on the first anniversary date of the completion of the offering. During this
period, the holder of the note had the right to convert 100% or any percentage
between 0% and 33% of the unpaid principal amount due under the note into common
stock. The second promissory note of $500,000, bears interest at the rate of
8.25% per year, payable on a quarterly basis, and is payable as to the entire
principal amount four years from its date of issuance.

    On June 18, 2001, the Company acquired the assets comprising the business of
T.S.T.S., Inc. (see Note 12). The Company financed part of this acquisition with
a note from the sellers in the amount of $1,475,000, which was outstanding as of
December 31, 2002 and 2001. This note is payable as to principal in 10 equal
quarterly installments beginning on January 1, 2004 and bears interest at the
rate of 8.25% per year, payable quarterly.

    On October 1, 2001, the Company completed its purchase of substantially all
of the operating assets of Embark.com, Inc. ('Embark') (see Note 12). As part of
the assumed liabilities, the Company renegotiated and assumed $3.4 million in
indebtedness that Embark owed to Comdisco, Inc. ('Comdisco'). Amounts
outstanding under the loan agreement bear interest at an annual rate of 6.25%.
The loan is secured by substantially all of the Company's current and future
business assets, including membership interests in its subsidiaries, and is
guaranteed by the Company's subsidiaries. The loan agreement contains covenants
typical to a secured loan agreement, including covenants requiring the Company
to maintain financial ratios relating to total indebtedness to net worth, and
covenants that restrict, among other things, the Company's ability to incur
additional debt, pay cash dividends, create liens, change its fundamental
organization or lines of business, make investments, engage in transactions with
affiliates, and engage in certain significant corporate transactions. The
Company is required to repay all amounts outstanding under its loan agreement
with Comdisco by October 1, 2003. As of December 31, 2002, approximately $1.4
million of the loan remained outstanding.

    On October 18, 2002, the Company acquired the assets comprising the business
of The Princeton Review of St. Louis, Inc. (see Note 12). The Company financed
part of this acquisition with a note from the sellers in the amount of $466,500,
which was outstanding as of December 31, 2002. This note is payable in two
annual installments of $250,000, including interest which is imputed at the rate
of 4.8% per year.

Capital Lease Obligations

    At December 31, 2002, the Company has leased approximately $2.1 million of
computer and phone equipment under capital leases, all of which are included in
fixed assets (see Note 4).

                                       59

<Page>
                  THE PRINCETON REVIEW, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

    The following is a schedule of the future minimum capital lease obligation
payments together with the present value of the minimum lease payments at
December 31, 2002:

<Table>
<Caption>
YEAR ENDING DECEMBER 31,                                 (IN THOUSANDS)
------------------------                                 --------------
<S>                                                      <C>
    2003...............................................       $260
    2004...............................................        212
    2005...............................................         77
    2006...............................................         64
    2007...............................................         28
                                                              ----
Total..................................................        641
Less amounts representing interest (effective rate
  ranges from 6% to 22%)...............................        110
                                                              ----
Present value of the minimum lease payments............        531
Less current portion of capital lease obligations......        215
                                                              ----
Long-term portion of capital lease obligations.........       $316
                                                              ----
                                                              ----
</Table>

Long-Term Debt

    Long-term debt consists of the following at:

<Table>
<Caption>
                                                               DECEMBER 31,
                                                              ---------------
                                                               2002     2001
                                                               ----     ----
                                                              (IN THOUSANDS)
<S>                                                           <C>      <C>
Notes payable...............................................  $6,980   $8,217
Capital lease obligations...................................     531      733
Auto loan...................................................      11       12
                                                              ------   ------
                                                               7,522    8,962
    Less current portion....................................   1,866    2,132
                                                              ------   ------
                                                              $5,656   $6,830
                                                              ------   ------
                                                              ------   ------
</Table>

    The annual maturities of notes payable as of December 31, 2002 are
approximately as follows:

<Table>
<Caption>
                                                             AMOUNT
AS OF DECEMBER 31,                                          MATURING
------------------                                          --------
                                                         (IN THOUSANDS)
<S>                                                      <C>
    2003...............................................      $1,651
    2004...............................................         885
    2005...............................................       1,624
    2006...............................................         789
    2007...............................................         625
    Thereafter.........................................       1,406
                                                             ------
                                                             $6,980
                                                             ------
                                                             ------
</Table>

7. STOCKHOLDERS' EQUITY

Corporate Restructuring

    Until March 31, 2000, the Company was an S corporation with four majority
owned limited liability company subsidiaries, Princeton Review Management, LLC,
Princeton Review Products, LLC, Princeton Review Publishing, LLC and Princeton
Review Operations, LLC (collectively, the 'Subsidiaries'). The stockholders of
the S corporation held Class A voting and Class B non-voting

                                       60

<Page>
                  THE PRINCETON REVIEW, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

common stock. Effective March 31, 2000, a new holding company, TPR Holdings,
Inc., a Delaware corporation, was formed.

    On April 1, 2000, the Class A common stock and Class B non-voting common
stock of the S corporation were exchanged for a proportionate number of shares
of either Class A common stock or Class B non-voting common stock of TPR
Holdings, Inc. All of the members' interests held by minority interest holders
in the Subsidiaries were exchanged for an agreed upon number of shares of either
Class A common stock or Class B non-voting common stock of TPR Holdings, Inc. In
this transaction, the shareholders of the S corporation received 9,703,675
shares of Class A common stock and 700,259 shares of Class B non-voting common
stock of TPR Holdings, Inc. The minority interest holders in the Subsidiaries
received 2,858,311 shares of Class A common stock and 1,119,766 shares of Class
B non-voting common stock of TPR Holdings, Inc. The acquisition of the minority
interest, other than the one minority interest holder that held a 20% interest
in each of our operating subsidiaries, was accounted for as a purchase business
combination. These transactions resulted in the Company recording goodwill of
approximately $8.2 million. The fair value of the Company's common stock, in the
opinion of management, at the time of this restructuring was $7.39 per share.
This per share value was used to calculate the amount of goodwill recorded. The
minority interest holder of a 20% interest in each of our operating subsidiaries
received an equivalent interest in TPR Holdings, Inc. This transaction was
accounted for as an exchange of equivalent interests. Accordingly, no goodwill
was recorded in connection therewith. Concurrently, the Company authorized an
additional 2,538,000 shares of common stock to be used for grants of stock
and/or options to employees.

    As a result of the foregoing transactions, the Company's status as an S
corporation terminated as of March 31, 2000 (see Note 9). Shortly after the
completion of the foregoing transactions, TPR Holdings, Inc. was renamed The
Princeton Review, Inc. and the former S corporation was merged into The
Princeton Review, Inc.

    Persons who participated in various aspects of these restructuring
transactions include a number of the Company's executive officers and directors
and Random House TPR, Inc.

Sales of Series A Preferred Stock

    On April 18, 2000, the Company sold 3,713,540 shares of Series A convertible
preferred stock for $27 million. Prior to the conversion of their shares into
common stock, the holders of the convertible preferred stock were entitled to,
among other substantial rights: (1) voting rights equivalent to the voting
rights they would hold as if their holdings were converted to common stock at
the then applicable conversion rate, other than the right to elect directors;
(2) the right to designate one member of the Company's board of directors; (3)
distribution and liquidation preferences; (4) the option to convert to common
stock at any time on a .961-for-one basis, subject to anti-dilution adjustments;
(5) automatic conversion upon the effective date of a qualified initial public
offering on a .961-for-one basis, subject to anti-dilution adjustments and the
special provision described below; (6) anti-dilution protection; (7) covenants
requiring authorization of enumerated transactions; and (8) a mandatory
redemption provision whereby any holder of convertible preferred stock could
give a redemption notice at any time after March 31, 2005 and cause the Company
to redeem all or a portion of their shares within 90 days of receipt of the
redemption notice, with the redemption price defined as the original purchase
price multiplied by 1.9, which multiple was to be increased if the Company
breached certain covenants contained in the Investor Rights Agreement among the
Company and the purchasers of the convertible preferred stock.

    In addition to the rights described above, in the event that the initial
public offering price of the shares offered by the Company in its initial public
offering was less than $12.99 per share,

                                       61

<Page>
                  THE PRINCETON REVIEW, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

then, instead of converting on a .961-for-one basis upon the completion of the
Company's initial public offering, the holders of Series A preferred stock would
receive upon the completion of the offering, in exchange for their shares of
Series A preferred stock:

       o first, to reflect their pre-offering ownership percentage,
         such number of shares of the Company's common stock that
         could be purchased at the per share initial public offering
         price for a dollar amount equal to (a) 15.66% multiplied by
         (b) the Company's total valuation immediately prior to its
         initial public offering, minus $27.0 million; and

       o second, $27.0 million in common stock at the initial public
         offering price.

    In the preceding formula, 'the Company's total valuation immediately prior
to its initial public offering' means (1) the total number of shares of the
Company's common stock outstanding immediately following its initial public
offering multiplied by the per share initial public offering price of the shares
sold in its initial public offering, minus (2) the number of shares sold in its
initial public offering multiplied by the per share initial public offering
price of the shares sold in its initial public offering.

    The holders of convertible preferred stock and the Company are parties to an
Investor Rights Agreement which provides them with certain rights, including but
not limited to, demand and incidental registration rights.

    In May 2000, the Company sold an additional 35,008 shares of Series A
preferred stock for approximately $254,000 to third parties.

    The Series A preferred stock is net of offering costs of approximately
$1,919,000. These costs are being accreted to the value of the Series A
preferred stock to the redemption date.

    Simultaneously with the Company's initial public offering in June 2001, all
outstanding Series A Preferred stock was converted into 5,341,980 shares of
common stock.

Stock Split

    On October 23, 2000, the Company's Board of Directors approved an
..846-for-one reverse stock split of its common stock effective November 16,
2000. All share and per share amounts have been adjusted to reflect the
Company's restructuring and stock split.

Initial Public Offering of the Company's Common Stock

    In June 2001, the Company completed its Initial Public Offering in which it
sold 5,400,000 shares of common stock at $11.00 per share resulting in net
proceeds of approximately $51.9 million. Concurrently, all outstanding shares of
Class A common stock and Class B non voting common stock were converted on a
one-for-one basis into newly issued common stock.

Issuance of Warrants

    On December 14, 2000, the Company entered into a 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., providing for a line of credit of up to
$25,000,000 (see note 6). As part of the loan transaction, the lenders received
warrants initially exercisable for a total of 250,000 shares of common stock at
an exercise price of $0.01 per share. The fair value of the 250,000 warrants
issued at closing was valued at $2,997,500 using the Black-Scholes option
pricing model with the following assumptions: an expected life of three years,
an exercise price of $0.01, a common stock price of $12.00 per share, an
expected dividend yield of 0%, an expected stock price volatility factor of 0.5
and a risk free interest rate of 6.8%. This amount was recognized as interest
expense over the life of the loan.

                                       62

<Page>
                  THE PRINCETON REVIEW, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Such amount was adjusted based upon the initial public offering price resulting
in the decrease in the value of the warrants by approximately $250,000.

    Simultaneously with the Company's initial public offering in June 2001,
these warrants were converted into 249,774 common shares and the unamortized
balance was written off when the loan was paid off on June 22, 2001. This
resulted in a loss on early extinguishment of debt (see Note 6).

8. COMMITMENTS AND CONTINGENCIES

Advertising Fund

    All domestic franchisees are required to pay a monthly advertising fee to
the Company, for contribution to an advertising fund, equal to 2% of their
franchises' gross receipts, as defined, for the preceding month. In accordance
with the terms of the franchise agreements, the Company is required to use all
advertising fees it receives for the development, placement and distribution of
regional and national consumer advertising, designed at its discretion to
promote consumer demand for services and products available from the franchises.

    The Company is required to keep separate advertising fund accounting records
and to maintain the advertising funds collected from the franchisees in a
separate bank account. Prior to July 2001, the account balances of the
advertising fund are not included in the accompanying consolidated financial
statements. During 2001, with the acquisition of several franchises (see Note
12), the Company attained majority control over the advertising fund and began
to consolidate the advertising fund in the Company's financial statements.
Accordingly, since July 2001, franchisee payments to the Company in respect of
the advertising fund are recorded in the Company's revenue and the expenses of
the advertising fund are recorded in the Company's Selling, General and
Administrative Expenses.

Office and Classroom Leases

    The Company has entered into various operating leases for its office and
classroom site locations. Minimum rental commitments under these leases, which
are in excess of one year, as of December 31, 2002, are approximately as
follows:

<Table>
<S>                                                      <C>
YEAR ENDING DECEMBER 31,                                 (IN THOUSANDS)
------------------------
    2003...............................................     $ 3,094
    2004...............................................       2,834
    2005...............................................       2,371
    2006...............................................       1,919
    2007...............................................       2,085
    Thereafter.........................................       3,606
                                                            -------
                                                            $15,909
                                                            -------
                                                            -------
</Table>

    Rent expense for the years ended December 31, 2002, 2001 and 2000 was
approximately $6.9, $6.5 and $3.7 million, respectively. These amounts include
rent expense for the rental of space on a month-to-month basis, as well as those
amounts incurred under operating leases for longer periods. Certain leases
provide for early termination without penalty.

    The Company has been released from a portion of its rent obligation on
certain premises which it is subleasing through 2004; however, in the event of
default by the sublessee, it would remain liable for the balance of the rent
obligation, which, at December 31, 2002 aggregated approximately $201,000.

                                       63

<Page>
                  THE PRINCETON REVIEW, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Legal Matters

    The Company is party to various litigation matters in the ordinary course of
its business which, in the opinion of management, will not result in a material
loss to the Company.

    In June 1996, an author filed a lawsuit against the Company. On May 10,
2000, the lawsuit was settled and the Company paid the author $900,000 cash and
issued warrants providing for the purchase of such number of shares of the
Company's common stock as is obtained by dividing $1,200,000 by the initial
public offering price of the Company's common stock. These warrants were
exercisable for an 18-month period, beginning with the date of the completion of
an initial public offering by the Company, at an exercise price equal to the
initial public offering price of the Company's stock. At December 31, 2000, the
Company recorded a $300,000 expense for the fair value of the warrants. The fair
value of the warrants was determined using the Black-Scholes option pricing
model with the following assumptions: an expected life of 18 months, an exercise
price of $12.00 per share, an expected dividend yield of 0%, an expected stock
price volatility factor of 0.5 and a risk-free interest rate of 6.8%. In
December 2002, the warrants expired unexercised. In addition, as part of the
settlement, the Company's royalty agreement with the author was amended. Under
the amended royalty agreement, the publisher pays royalties directly to the
author. Should royalties paid under the agreement be less than $200,000 per year
through December 31, 2004, the Company is required to pay the difference. During
2000 the Company paid the author approximately $30,000 to achieve this minimum.
None was paid in 2002 and 2001.

Co-authorship Agreements

    In connection with its publishing agreements, the Company has entered into
various co-authorship agreements for the preparation of manuscripts. These
agreements require payment of nonrecourse advances for services rendered at
various established milestones. The Company's future contractual commitments
under the co-authorship agreements for manuscripts not yet delivered as of
December 31, 2002 and 2001 are approximately $29,000 and $49,000, respectively.
In addition, the co-authors are entitled to a percentage of the future royalties
earned by the Company, which are first to be offset against such advances. The
total costs incurred under these co-authorship agreements by the Company for
advances and royalties were approximately $367,000, $284,000, and $226,000 for
the years ended December 31, 2002, 2001 and 2000, respectively.

    The expense related to co-author payments is accrued monthly. This expense
is adjusted based upon actual expenditures paid to the co-authors. These
expenditures are a percentage of the royalties paid to the Company by the
publisher. Royalties from the publisher are recorded as revenue with the
co-author expenditures recorded as expense.

9. INCOME TAXES

    Prior to April 1, 2000, the Company was an S corporation under the
provisions of the Internal Revenue Code ('IRC'), which provides that in lieu of
corporate income taxes, each stockholder is taxed on their proportionate share
of the taxable income. The Company's operating subsidiaries were organized as
limited liability companies, therefore, income taxes were the responsibility of
the members and not the limited liability companies. Certain state and local
jurisdictions in which the Company operates do not recognize S corporation or
limited liability company status. Therefore, for periods prior to April 1, 2000,
provision for certain state and local income taxes was made, as applicable.

    Effective April 1, 2000, in connection with its restructuring, the Company
converted to a C corporation and is now subject to federal, state and local
income taxes. In connection with this conversion, the Company recorded a one
time nonrecurring benefit of approximately $899,000.

                                       64

<Page>
                  THE PRINCETON REVIEW, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Such benefit relates to the deferred tax assets and liabilities associated with
the difference between the financial statements and tax basis of the assets and
liabilities of the Company.

    The (provision) benefit for income taxes consists of the following:

<Table>
<Caption>
                                                               YEARS ENDED DECEMBER 31,
                                                              --------------------------
                                                              2002     2001       2000
                                                              ----     ----       ----
                                                                    (IN THOUSANDS)
<S>                                                           <C>     <C>       <C>
Current.....................................................  $ --    $ (128)   $  (125)
Deferred....................................................   736     6,747     10,117
                                                              ----    ------    -------
                                                              $736    $6,619    $ 9,992
                                                              ----    ------    -------
                                                              ----    ------    -------
</Table>

    Significant components of the Company's deferred tax assets and liabilities
are as follows at:

<Table>
<Caption>
                                                                DECEMBER 31,
                                                              -----------------
                                                               2002      2001
                                                               ----      ----
                                                               (IN THOUSANDS)
<S>                                                           <C>       <C>
Deferred tax assets:
Net operating loss carryforward.............................  $19,641   $18,034
    Advertising fund allowance..............................       --        83
    Allowance for doubtful accounts.........................      219       370
    Stock appreciation rights...............................      198       210
    Capitalized inventory costs.............................       33         9
    Deferred rent...........................................      404       311
    Accumulated depreciation................................       --        13
Accumulated amortization....................................       --       283
    Unrealized losses.......................................      147        --
    Other...................................................      360       257
                                                              -------   -------
        Total deferred tax assets...........................   21,002    19,570
                                                              -------   -------
Deferred tax liabilities:
    Unrealized gains........................................       --      (418)
    Software development costs..............................     (703)     (801)
    Accumulated amortization................................     (537)       --
    Accumulated depreciation................................     (256)       --
Stock appreciation rights...................................       --        (2)
                                                              -------   -------
        Total deferred tax liabilities......................   (1,496)   (1,221)
                                                              -------   -------
        Net deferred tax asset..............................  $19,506   $18,349
                                                              -------   -------
                                                              -------   -------
</Table>

    The net deferred tax asset at December 31, 2002 and 2001 is classified in
the Company's consolidated balance sheet as current deferred tax assets of
approximately $907,000 and $593,000 respectively and noncurrent deferred tax
assets of approximately $18.6 million and $17.8 million, respectively. As of
December 31, 2002, the Company has a net operating loss carryforward totaling
approximately $47.2 million which expires in the years 2020 through 2022, and
other timing differences which will be available to offset regular taxable
income during the carryforward period. The Company believes that the related
deferred tax benefit amount will more likely than not be recognized during these
periods and, accordingly, no valuation allowance was deemed necessary.

                                       65

<Page>
                  THE PRINCETON REVIEW, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

    A reconciliation setting forth the differences between the effective tax
rate of the Company for the years ended December 31, 2002 and 2001 and the U.S.
federal statutory tax rate is as follows:

<Table>
<Caption>
                                                          YEARS ENDED DECEMBER 31,
                                                      ---------------------------------
                                                           2002               2001
                                                           ----               ----
                                                               (IN THOUSANDS)
<S>                                                   <C>      <C>       <C>        <C>
Pre-tax net loss....................................  $621        34%    $5,141      34%
Effect of minority interest and other permanent
  differences.......................................    45       2.5%      (155)    (1)%
Effect of state taxes...............................   129       7.1%     1,117       7%
Effect of minimum capital taxes.....................    --        --        (84)    (1)%
Other...............................................   (59)    (3.2)%       600       4%
                                                      ----     -----     ------     ---
                                                      $736      40.4%    $6,619      43%
                                                      ----     -----     ------     ---
                                                      ----     -----     ------     ---
</Table>

10. EMPLOYEE BENEFITS AND CONTRACTS

Fully Insured Partial Funding Medical Plan

    Prior to December 31, 2002, the Company provided a fully insured partial
funding medical plan for its employees. The Company is liable for medical claims
submitted (after the deductible and any co-payment by the employee) up to the
amount of $40,000 per employee. Any claims in excess of this amount are covered
by the insurance carrier. At December 31, 2002 and 2001, the Company had no
significant unfunded claims. As of December 31, 2002 and 2001, and based on the
number of covered employees at those times, the maximum annual liability for
medical claims for 2002 and for 2001 would be $1.6 million and $1.1 million,
respectively. Beginning January 1, 2003 the company contracted with an insurance
provider to provide medical insurance for its employees and under this new
contract the Company is not liable for medical claims.

Retirement Plan

    The Company has a defined contribution plan (the 'Plan') under
Section 401(k) of the IRC, which provides that eligible employees may make
contributions subject to IRC limitations. Employees become eligible to
participate in the Plan after one year of continuous full-time employment. Under
the provisions of the Plan, contributions made by the Company are discretionary
and are determined annually by the trustees of the Plan. The Company's
contributions to the Plan for the years ended December 31, 2002, 2001 and 2000
were $199,000 $159,000, and $98,000, respectively.

Stock Appreciation Rights Plan

    Until April 2000, the Company maintained a Stock Appreciation Rights Plan
(the 'SAR Plan'). There were no issuances of Stock Appreciation Rights units
('SARs') under the SAR Plan since 1996, as the SAR Plan was augmented with a
Phantom Stock Plan in June 1997 (see the Phantom Stock Plan note below). Vesting
rights of awarded SARs were at the discretion of the Company's management at the
time of the award. The vesting periods varied from immediate to three years
based on the circumstances of each award.

Phantom Stock Plan

    Effective June 1997, the Company augmented its SAR Plan with a Phantom Stock
Plan (the 'PSU Plan'). Under this plan, Phantom Stock Units ('PSUs') could be
purchased by eligible employees or awarded by management. Employee purchases of
PSUs were made through bi-weekly payroll deductions based on annual elections
made in December of the prior year.

                                       66

<Page>
                  THE PRINCETON REVIEW, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Awarded PSUs were at the discretion of management. Vesting rights of awarded
PSUs were at the discretion of the Company's management at the time of the
award. PSUs that were purchased by employees were fully vested when purchased.

    The Company recorded compensation expense of $1,082,087 for the year ended
December 31, 2000, based on the actual issue prices of the vested PSUs, the
annual appreciation of the fair value and the change in the number of vested
PSUs. The vesting periods for awarded PSUs were based on the circumstances of
each award. Some were awarded with vesting periods based on the passage of time
and some were awarded with vesting based on performance.

Termination of SAR and PSU Plans

    In April 2000, the Company's SAR and PSU Plans were terminated and replaced
by a new stock incentive plan adopted by the Company. Under the Company's 2000
Stock Incentive Plan, 3,595,500 shares of Class B non-voting common stock are
authorized for issuance. As a result of the conversion of the SAR and PSU Plans,
holders of vested PSUs received stock in the Company and/or cash, while holders
of SARs and unvested PSUs received stock options to purchase common stock under
the new stock incentive plan. Participants in the PSU and SAR Plans also
received, on April 18, 2000, a total of 32,168 shares of common stock of Student
Advantage, Inc. with a total public market value of approximately $168,000 on
the date of distribution.

    At the time of the Company's restructuring (see Note 7), the valuation
committee of the PSU Plan determined the per share price of the Company's common
stock to be $7.39 per share. This determination was based on a number of
factors, including the $7.27 per share (adjusted to $8.59 per share for a
subsequent .846-for-one reverse stock split of the Company's common stock) price
paid by the Series A preferred shareholders that were then investing in the
Company. Applying a discount of approximately 14% to the preferred share price,
the per share value for common stock was estimated to be $7.39 per share. This
per share value of $7.39 was used to value the PSUs and SARs, the exercise price
of newly issued options and the stock used to replace the vested PSUs.

    In connection with the termination of the PSU Plan in April 2000, the
Company issued 890,767 shares of Class B non-voting common stock with a value of
$6,580,519 to the holders of PSUs in exchange for all vested and unvested PSUs
and paid related payroll withholding taxes, for a total compensation expense of
approximately $11,962,000. The Company recorded this expense in April 2000,
while simultaneously reversing the previously recorded liability for all then
vested PSUs of approximately $3,498,000, which liability represents all accrued
PSU expenses for all periods prior to April 1, 2000. This resulted in a net
expense of $8,464,000 recorded in 2000. In addition, certain employees purchased
a total of 26,437 additional shares of the Company's Class B common stock, at
$7.39 per share, for a total of 917,204 shares issued during the conversion. In
addition to the shares of Class B non-voting common stock, 1,182,507 stock
options were awarded as a result of the termination of the PSU Plan. These
options were unvested at the time of grant, have a $7.39 exercise price, which
was the estimated fair value at the time of grant, and vest quarterly over
periods ranging from three to four years.

    The outstanding SARs, which were all fully vested, were converted into
133,445 stock options on a one for one basis with exercise prices between $1.73
and $2.29, which equal the initial SAR value at the time of the award adjusted
for the increased number of underlying shares of common stock of the Company.
Since these exercise prices were below the estimated fair value of $7.39 per
share at the time of grant, the compensation expense recorded in prior periods
to record the expense up to the $7.39 per share fair value was not reversed at
the time of the conversion from SARs to stock options.

    The following is a summary of the Company's SAR and PSU activity and related
information for the years ended December 31, 2000 and 1999. The number of shares
and per share prices have

                                       67

<Page>
                  THE PRINCETON REVIEW, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

been adjusted to reflect the Company's April 1, 2000 restructuring and the
reverse stock split (see Note 7).

<Table>
<Caption>
                                                        SARs                        PSUs
                                               ----------------------   -----------------------------
                                                           AVG. VALUE
                                               ADJUSTED    AT TIME OF    ADJUSTED    VALUE AT TIME OF
                                                 # OF        GRANT         # OF       GRANT/PURCHASE
                                                 SARs      (ADJUSTED)      PSUs         (ADJUSTED)
                                                 ----      ----------      ----         ----------
<S>                                            <C>         <C>          <C>          <C>
YEAR ENDED DECEMBER 31, 1999
Outstanding at beginning of year.............    174,555                   145,275
    Granted..................................         --                 1,513,460        $2.96
    Purchased................................         --                    14,754         2.96
    Purchased................................         --                    12,622         5.32
    Exercised................................    (32,930)    $1.88          (7,512)        5.32
    Cancelled................................         --                    (3,841)        5.32
                                               ---------                ----------
Outstanding at end of year...................    141,625                 1,674,758
YEAR ENDED DECEMBER 31, 2000
    Granted..................................         --                    27,664         5.32
    Purchased................................         --                    31,971         5.32
    Exercised................................     (8,180)     1.88         (38,157)        7.39
    Cancelled................................   (133,445)     1.88      (1,696,236)        7.39
                                               ---------                ----------
Outstanding at end of period.................         --                        --
                                               ---------                ----------
                                               ---------                ----------
</Table>

Stock Incentive Plan

    On April 1, 2000, the Company adopted its 2000 Stock Incentive Plan (the
'Stock Incentive Plan') providing for the authorization and issuance of up to
2,538,000 shares of common stock, as adjusted. In June 2000 and June 2001, an
additional 211,500 and 846,000 shares, respectively, were authorized. The Stock
Incentive Plan provides for the granting of incentive stock options,
non-qualified stock options, restricted stock and deferred stock to eligible
participants. Options granted under the Stock Incentive Plan are for periods not
to exceed ten years. Other than for options to purchase 133,445 shares granted
in 2000 to certain employees which were vested immediately, options outstanding
under the Stock Incentive Plan generally vest quarterly over two to four years.

                                       68

<Page>
                  THE PRINCETON REVIEW, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

    A summary of the activity of the Stock Incentive Plan is as follows:

<Table>
<Caption>
                                                                     WEIGHTED-AVERAGE
                                                          OPTIONS     EXERCISE PRICE
                                                          -------     --------------
<S>                                                      <C>         <C>
Outstanding at December 31, 1999.......................         --           --
Granted below market...................................    133,445        $1.87
Granted at market......................................  1,386,228         7.46
Forfeited..............................................    (58,377)        7.39
                                                         ---------
Outstanding at December 31, 2000.......................  1,461,296         6.95
Granted below market...................................     91,500         9.04
Granted at market......................................    385,301         6.68
Forfeited..............................................    (71,791)        7.82
Exercised..............................................     (9,402)        2.65
                                                         ---------
Outstanding at December 31, 2001.......................  1,856,904         6.98
Granted below market...................................         --           --
Granted at market......................................    769,050         7.94
Forfeited..............................................   (172,321)        6.75
Exercised..............................................    (40,271)        6.59
                                                         ---------
Outstanding at December 31, 2002.......................  2,413,362         7.32
                                                         ---------
                                                         ---------
Exercisable at December 31, 2000.......................    402,295
Exercisable at December 31, 2001.......................    742,293
Exercisable at December 31, 2002.......................  1,238,493
</Table>

    Stock options outstanding at December 31, 2002 are summarized as follows:

<Table>
<Caption>
                        OPTIONS OUTSTANDING                                OPTIONS EXERCISABLE
-------------------------------------------------------------------   ------------------------------
                                   WEIGHTED-
                                    AVERAGE
    EXERCISE        OPTIONS        REMAINING       WEIGHTED-AVERAGE     OPTIONS     WEIGHTED-AVERAGE
     PRICE        OUTSTANDING   CONTRACTUAL LIFE    EXERCISE PRICE    EXERCISABLE    EXERCISE PRICE
     -----        -----------   ----------------    --------------    -----------    --------------
<S>               <C>           <C>                <C>                <C>           <C>
 $1.73 -- 7.29       347,207          8.33              $4.35            184,043         $3.11
      7.39         1,135,443          7.28               7.39            846,607          7.39
  7.55 -- 8.30       692,676          9.20               7.96            104,876          7.99
 8.53 -- 11.00       238,036          8.34               9.44            102,967          9.63
                   ---------                                           ---------
                   2,413,362          8.08               7.32          1,238,493          6.99
                   ---------                                           ---------
                   ---------                                           ---------
</Table>

    During 2000, the Company granted 133,445 stock options to employees at
exercise prices ranging from $1.73-$2.29 per share. Compensation expense, in
accordance with the provisions of APB 25, of approximately $739,000 was recorded
by the Company for the year ended December 31, 2000. During 2001 the Company
granted 116,500 stock options to non-employee advisors and, using the fair value
method, recorded compensation expense of approximately $256,000 and $241,000 for
the years ended December 31, 2002 and 2001, respectively.

11. RELATED PARTIES

Publisher

    Random House, Inc., a holder of 2,221,631 shares of the Company's common
stock at December 31, 2002, is also the publisher and distributor of certain of
the Company's products. The contracts signed with Random House, Inc. typically
contain an advance upon signing with the balance due upon delivery of the
completed manuscript. During 2002 and 2001 the Company signed contracts with
Random House, Inc. for fifty-five and six new books, respectively. The total

                                       69

<Page>
                  THE PRINCETON REVIEW, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

advances received at the time of the contracts for these books was $224,000 and
$115,000 for the years ended December 31, 2002 and 2001, respectively.

    For the years ended December 31, 2002, 2001 and 2000, the Company earned
$3.5, $2.5 and $2.2 million respectively, of book and publication income from
Random House, Inc. Total receivables at December 31, 2002 and 2001 include $2.8
and $1.6 million, respectively, due from Random House, Inc. for royalties, book
advances, copy editing and marketing fees. In addition, Random House, Inc. has
paid advances of $34,000 and $113,000, respectively, to the Company for books
that have not yet been completed as of December 31, 2002 and 2001, which are
deferred as book advances. At December 31, 2002 and 2001, the Company had a
liability to Random House, Inc. of $141,000 for advances previously received on
uncompleted books that were cancelled in 1999.

Franchisees

    As of May 31, 1995, the Company sold approximately 18% of Princeton Review
Publishing, LLC to certain franchisees (which was reduced to approximately 14%
pursuant to subsequent transactions and eliminated entirely on April 1, 2000
(see Note 7)).

    For the years ended December 31, 2002, 2001 and 2000, the Company earned
revenues from these franchises for management services through royalties of
approximately $4.3, $2.9 and $3.4 million, respectively, and earned revenues of
$1.6, $2.3 and $3.0 million, respectively, through the sale of course materials.
Included in accounts receivable at December 31, 2002 and 2001 was $745,000 and
$1.3 million, respectively, due from these franchises.

    In conjunction with the Company's restructuring (see Note 7), certain
franchisees exercised their preemptive rights to buy more membership units in
Princeton Review Publishing, LLC. These franchisees purchased an additional
280.25 units for $1,100,932.

Loans to Officers

    As of December 31, 2002 and 2001 the Company had loan balances to executive
officers of approximately $1.0 million and $600,000, respectively. No loans were
made to executive officers after February 2002. Such amounts and accrued
interest is included in other assets at December 31, 2002. These loans are
payable in four consecutive, equal annual installments with the first payment to
be made on the earlier of the fourth anniversary of the loan or 60 days after
termination of employment, accrue interest at 7.3% per year and as of
December 31, 2002, are secured by the 299,066 shares of the Company's common
stock owned by these officers.

12. ACQUISITIONS

Princeton Review of Boston and Princeton Review of New Jersey

    On March 2, 2001, the Company acquired the assets comprising the businesses
of Princeton Review of Boston and Princeton Review of New Jersey for a total
purchase price of approximately $13.8 million. The purchase price exceeded the
fair value of the net assets acquired resulting in goodwill of approximately
$12,918,000. Each of these entities provided test preparation courses under the
Princeton Review name through one or more franchise agreements with the Company.

    Approximately $10,175,000 of the purchase price was paid in cash at the time
of closing and was financed through borrowings under the Company's credit
facilities. The remaining $3,625,000 of the purchase price was paid by delivery
to the sellers of two subordinated promissory notes (see Note 6).

                                       70

<Page>
                  THE PRINCETON REVIEW, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Princeton Review Peninsula

    On March 2, 2001, the Company acquired the assets of Princeton Review
Peninsula, which provided test preparation courses in several counties in
California under the Princeton Review name through a franchise agreement with
us. The Company acquired the operations of Princeton Review Peninsula for a
total cash purchase price of approximately $2.7 million, which it financed
through borrowings under its credit facilities. The purchase price exceeded the
fair value of the net assets acquired resulting in goodwill of approximately
$2,599,000.

T.S.T.S.

    On June 18, 2001, the Company acquired the assets of T.S.T.S. for a total
purchase price of approximately $6.3 million. The purchase price exceeded the
fair value of the net assets acquired resulting in goodwill of approximately
$6,201,000. T.S.T.S. provided test preparation courses in Texas, Arizona,
Oklahoma, Louisiana and New Mexico under the Princeton Review name through four
franchise agreements with the Company.

    Approximately $4.8 million of the purchase price was paid in cash at the
time of closing and was financed through borrowings under the Company's credit
facilities. The remaining approximately $1,475,000 of the purchase price was
paid by delivery to the sellers of a subordinated promissory note (see Note 6).

    The aforementioned acquisitions have been accounted for as purchases and
have been included in the Company's operations from the date of the respective
purchases.

Embark

    On October 1, 2001, the Company completed its purchase of substantially all
of the operating assets of 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
(see Note 6) 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.
The purchase price, including acquisition costs of approximately $1,130,000, and
earnout for 2001 of approximately $476,000, exceeded the fair value of net
assets acquired, resulting in goodwill of approximately $7.2 million. The
acquisition was recorded in accordance with FASB 141 and accordingly no
amortization expense for goodwill related to this acquisition was recorded for
2001. In accordance with the earn-out provisions entitling Embark to additional
consideration based on the performance of the acquired business, Embark earned a
payment of 9,128 shares of our common stock and approximately $1.2 million in
cash, based on the revenue performance of the acquired business through 2002,
and will receive additional cash consideration based on revenue performance for
the first half of 2003. In addition to the purchase price, in connection with
the transaction, the Company made a $1.8 million loan to Embark, which is
secured by 300,000 of the shares of the Company's common stock that Embark
received as part of the purchase price. The approximate $1.2 million earn-out
was applied against the loan balance. All future cash payments to Embark based
on the future revenue performance of the acquired business are contractually
required to be used by Embark to repay the outstanding loan, until such time as
the loan is repaid in full.

                                       71

<Page>
                  THE PRINCETON REVIEW, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Princeton Review of St. Louis, Inc.

    On October 18, 2002, the Company acquired the assets of The Princeton Review
of St. Louis, Inc. for a total purchase price of approximately $850,000. The
purchase price exceeded the fair value of the net assets acquired resulting in
goodwill of approximately $750,000. The Princeton Review of St. Louis, Inc.
provided test preparation courses in Missouri under the Princeton Review name
through a franchise agreement with the Company. This acquisition has been
accounted for as a purchase and has been included in the Company's operations
from the date of the purchase.

    Approximately $384,000 of the purchase price was paid in cash at the time of
closing. The remaining approximately $466,000 of the purchase price was paid by
delivery to the sellers of a subordinated promissory note (see Note 6).

    The pro forma consolidated results of operations, assuming the consummation
of the Princeton Review of Boston, Princeton Review of New Jersey, T.S.T.S. and
Embark acquisitions as of January 1, 2000, are as follows (in thousands, except
per share data):

<Table>
<Caption>
                                                               YEARS ENDED
                                                               DECEMBER 31,
                                                          ----------------------
                                                            2001          2000
                                                            ----          ----
                                                          (in thousands, except
                                                             per share data)
<S>                                                       <C>           <C>
Revenues................................................  $ 81,037      $ 67,734
Net loss................................................   (13,204)      (24,047)
Net loss attributed to common stockholders..............   (14,468)      (30,968)
Basic and diluted net loss per share....................  $   (.82)     $  (2.07)
</Table>

    The pro forma effects of the Princeton Review Peninsula and The Princeton
Review of St. Louis, Inc. are not presented above because their results are not
significant.

13. SEGMENT REPORTING

    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 accounting policies of the business
segments are the same as those described in the summary of significant
accounting policies (see Note 1).

    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
subscription, transaction and marketing fees from higher education institutions.
The K-12 Services division earns fees from its content development work, an
Internet-based subscription service for K-12 schools, professional training and
development services and K-12 print-based products.

                                       72

<Page>
                  THE PRINCETON REVIEW, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
                                                         YEAR ENDED DECEMBER 31, 2002
                                     --------------------------------------------------------------------
                                                                (IN THOUSANDS)
                                     TEST PREPARATION   ADMISSIONS
                                         SERVICES        SERVICES    K-12 SERVICES   CORPORATE    TOTAL
                                         --------        --------    -------------   ---------    -----
<S>                                  <C>                <C>          <C>             <C>         <C>
Revenue............................      $65,935         $13,964        $ 9,337            --    $ 89,236
Depreciation & Amortization........        2,014           2,137          1,262       $   856       6,269
Segment operating income (loss)....       11,857          (6,249)        (5,643)       (1,492)     (1,527)
Segment EBITDA.....................       13,871          (4,234)        (4,380)         (637)      4,620
Segment Assets.....................       31,242          28,503         12,171        40,200     112,116
Expenditures for long lived
  assets...........................        2,921           1,301          2,873         2,828       9,923
</Table>

<Table>
<Caption>
                                                         YEAR ENDED DECEMBER 31, 2001
                                     --------------------------------------------------------------------
                                                                (IN THOUSANDS)
                                     TEST PREPARATION   ADMISSIONS
                                         SERVICES        SERVICES    K-12 SERVICES   CORPORATE    TOTAL
                                         --------        --------    -------------   ---------    -----
<S>                                  <C>                <C>          <C>             <C>         <C>
Revenue............................      $53,936         $ 8,924        $ 6,255            --    $ 69,115
Depreciation & Amortization........        2,851           1,481          1,172       $   975       6,479
Segment operating income (loss)....        2,371          (7,063)       (10,454)       (1,605)    (16,751)
Segment EBITDA.....................        5,234          (5,628)        (9,281)         (630)    (10,305)
Segment Assets.....................       27,502          25,926          6,459        51,946     111,833
Expenditures for long lived
  assets...........................       24,650          13,846          2,185           784      41,465
</Table>

<Table>
<Caption>
                                                         YEAR ENDED DECEMBER 31, 2000
                                     --------------------------------------------------------------------
                                                                (IN THOUSANDS)
                                     TEST PREPARATION   ADMISSIONS
                                         SERVICES        SERVICES    K-12 SERVICES   CORPORATE    TOTAL
                                         --------        --------    -------------   ---------    -----
<S>                                  <C>                <C>          <C>             <C>         <C>
Revenue............................      $34,048         $ 4,480        $ 5,351            --    $ 43,879
Depreciation & Amortization........          861             554            648       $   769       2,832
Segment operating loss.............       (2,902)         (8,840)        (6,262)       (7,215)    (25,219)
Segment EBITDA.....................       (2,081)         (1,010)        (5,613)       (7,017)    (15,721)
Segment Assets.....................        6,200          12,964          5,022        34,389      58,575
Expenditures for long lived
  assets...........................        2,591           4,025          1,739         9,056      17,411
</Table>

<Table>
<Caption>
                                                                YEARS ENDED DECEMBER 31,
                                                              -----------------------------
                                                               2002       2001       2000
                                                               ----       ----       ----
                                                                     (IN THOUSANDS)

<S>                                                           <C>       <C>        <C>
RECONCILIATION TO NET LOSS
Total loss for reportable segments..........................  $(1,527)  $(16,751)  $(25,219)
Unallocated amounts:
    Gain on distribution/sale of securities and other
      assets................................................       --         --      7,597
    Interest expense........................................     (624)    (2,043)      (237)
    Equity interest in operations of affiliates.............       --        (34)      (881)
    Other income............................................      325        570        576
    Benefit for income taxes................................      736      7,924      9,992
                                                              -------   --------   --------
Net loss....................................................  $(1,090)  $(10,334)  $ (8,172)
                                                              -------   --------   --------
                                                              -------   --------   --------
</Table>

14. QUARTERLY RESULTS OF OPERATIONS (Unaudited)

    The following table presents unaudited statement of operations data for each
of the eight quarters in the two year period ended December 31, 2002. This
information has been derived from the Company's historical consolidated
financial statements and should be read in conjunction with the Company's
historical consolidated financial statements and related notes appearing in this
Annual Report on Form 10-K.

                                       73

<Page>
                  THE PRINCETON REVIEW, INC. AND SUBSIDIARIES
           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

<Table>
<Caption>
                                                                    QUARTER ENDED
                               ---------------------------------------------------------------------------------------
                               MAR. 31,   JUNE 30,   SEPT. 30,   DEC. 31,   MAR. 31,   JUNE 30,   SEPT. 30,   DEC. 31,
                                 2001       2001       2001        2001       2002       2002       2002        2002
                                 ----       ----       ----        ----       ----       ----       ----        ----
                                                        (IN THOUSANDS, EXCEPT PER SHARE DATA)
<S>                            <C>        <C>        <C>         <C>        <C>        <C>        <C>         <C>
Revenue
   Test Preparation
     Services................  $10,245    $12,379     $19,725    $11,587    $14,221    $15,350     $22,888    $13,476
   Admissions Services.......    1,679      1,589       1,774      3,882      3,916      2,917       2,698      4,433
   K-12 Services.............    1,195      1,476       1,635      1,949      1,260      2,782       2,133      3,162
                               -------    -------     -------    -------    -------    -------     -------    -------
       Total revenue.........   13,119     15,444      23,134     17,418     19,397     21,049      27,719     21,071
                               -------    -------     -------    -------    -------    -------     -------    -------
Cost of revenue
   Test Preparation
     Services................    3,577      4,002       5,404      4,036      4,360      4,259       5,982      4,079
   Admissions Services.......      331        635         363      1,197        923        921         964      1,251
   K-12 Services.............      322        649         581        646        351        830         889      1,257
                               -------    -------     -------    -------    -------    -------     -------    -------
       Total cost of
         revenue.............    4,230      5,286       6,348      5,879      5,634      6,010       7,835      6,587
                               -------    -------     -------    -------    -------    -------     -------    -------
       Gross profit..........    8,889     10,158      16,786     11,539     13,763     15,039      19,884     14,484
Operating expenses
   Selling, general and
     administrative..........   12,892     13,660      18,260     16,181     17,616     15,773      17,431     13,533
   Loss on extinguishment of
     debt....................       --      3,130          --         --         --         --          --         --
   Impairment of investment..       --         --          --         --         --         --          --        344
                               -------    -------     -------    -------    -------    -------     -------    -------
       Total operating
         expenses............   12,892     16,790      18,260     16,181     17,616     15,773      17,431     13,877
                               -------    -------     -------    -------    -------    -------     -------    -------
(Loss) income from
 operations..................   (4,003)    (6,632)     (1,474)    (4,642)    (3,853)      (734)      2,453        607
                               -------    -------     -------    -------    -------    -------     -------    -------
Net (loss) income............  $(2,887)   $(4,406)    $  (892)   $(2,149)   $(2,254)   $  (434)    $ 1,316    $   282
                               -------    -------     -------    -------    -------    -------     -------    -------
                               -------    -------     -------    -------    -------    -------     -------    -------
Net (loss) income attributed
 to common stockholders......  $(5,261)   $(6,297)    $  (892)   $(2,149)   $(2,254)   $  (434)    $ 1,316    $   282
                               -------    -------     -------    -------    -------    -------     -------    -------
                               -------    -------     -------    -------    -------    -------     -------    -------
Net income (loss) per share
 attributed to common
 stockholders -- basic and
 diluted.....................  $ (0.34)   $ (0.38)    $ (0.03)   $ (0.08)   $ (0.08)   $ (0.02)    $  0.05    $  0.01
                               -------    -------     -------    -------    -------    -------     -------    -------
                               -------    -------     -------    -------    -------    -------     -------    -------
Weighted average shares used
 in computing net (loss)
 income per share............
   Basic.....................   15,299     16,767      26,293     27,171     27,187     27,248      27,259     27,262
                               -------    -------     -------    -------    -------    -------     -------    -------
                               -------    -------     -------    -------    -------    -------     -------    -------
   Diluted...................   15,299     16,767      26,293     27,171     27,187     27,248      27,381     27,349
                               -------    -------     -------    -------    -------    -------     -------    -------
                               -------    -------     -------    -------    -------    -------     -------    -------
</Table>

                                       74

<Page>
                  THE PRINCETON REVIEW, INC. AND SUBSIDIARIES
                                  SCHEDULE II
                       VALUATION AND QUALIFYING ACCOUNTS
              FOR THE YEARS ENDED DECEMBER 31, 2002, 2001 AND 2000

<Table>
<Caption>
                                                    BALANCE AT    ADDITIONS    DEDUCTIONS   BALANCE AT
                                                    BEGINNING     CHARGED TO      FROM        END OF
                                                    OF PERIOD      EXPENSE     ALLOWANCE      PERIOD
                                                    ---------      -------     ---------      ------
                                                                     (IN THOUSANDS)
<S>                                                <C>            <C>          <C>          <C>
ALLOWANCE FOR DOUBTFUL ACCOUNTS
Year Ended December 31, 2002.....................      $890          $655       $(1,018)       $527
Year Ended December 31, 2001.....................      $765          $(82)      $   207        $890
Year Ended December 31, 2000.....................      $720          $515       $  (470)       $765
</Table>

                                       75

<Page>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

    None.

                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

    The information required by this Item 10 with respect to identification of
directors and compliance with Section 16(a) of the Exchange Act is incorporated
by reference from our definitive proxy statement for our 2003 annual meeting of
stockholders, scheduled to be held on June 11, 2003. For information with
respect to our executive officers, see 'Executive Officers' at the end of Part 1
of this Annual Report on Form 10-K.

ITEM 11. EXECUTIVE COMPENSATION

    The information required by this Item 11 is incorporated by reference from
our definitive proxy statement for our 2003 annual meeting of stockholders,
scheduled to be held on June 11, 2003.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

    The information required by this Item 12 is incorporated by reference from
our definitive proxy statement for our 2003 annual meeting of stockholders,
scheduled to be held on June 11, 2003.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

    The information required by this Item 13 is incorporated by reference from
our definitive proxy statement for our 2003 annual meeting of stockholders,
scheduled to be held on June 11, 2003.

ITEM 14. CONTROLS AND PROCEDURES

    As of March 24, 2003, we performed an evaluation under the supervision and
with the participation of our management, including our Chief Executive Officer
and Chief Financial Officer, of the effectiveness of the design and operation of
our disclosure controls and procedures. Based on that evaluation, our Chief
Executive Officer and Chief Financial Officer concluded that our disclosure
controls and procedures were effective as of March 24, 2003.

    There have been no significant changes in our internal controls or in other
factors that could significantly affect internal controls subsequent to
March 24, 2003, including any corrective actions with regard to significant
deficiencies and material weaknesses.

                                    PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

    (a) The following documents are filed as part of this Report:

    1. Financial Statements -- See Index to Consolidated Financial Statements
and Financial Statement Schedule at Item 8 on page 42 of this Annual Report on
Form 10-K:

    2. Financial Statement Schedules -- See Index to Consolidated Financial
Statements and Financial Statement Schedule at Item 8 on page 42 of this Annual
Report on Form 10-K:

    3. Exhibits -- The following exhibits are filed as part of, or incorporated
by reference into, this Annual Report on Form 10-K:

                                       76

<Page>

<Table>
<Caption>
EXHIBIT
NUMBER                          DESCRIPTION
------                          -----------
<S>     <C>
  2.1  -- Conversion and Contribution Agreement, dated as of
          March 31, 2000, by and among The Princeton Review, Inc.,
          the Non-Voting Members of Princeton Review Publishing
          L.L.C., John S. Katzman and TPR Holdings, Inc. (1)
  2.2  -- RH Contribution Agreement, dated as of March 31, 2000, by
          and among Random House TPR, Inc., Random House, Inc., The
          Princeton Review, Inc., John S. Katzman, and TPR Holdings,
          Inc. (1)
  2.3  -- TPR Contribution Agreement, dated as of March 31, 2000,
          by and among The Princeton Review, Inc., each of the
          persons listed on Schedule I attached to the agreement and
          TPR Holdings, Inc. (1)
  2.4  -- Option Agreement, dated as of May 30, 2000, by and among
          Princeton Review Operations, L.L.C., Princeton Review of
          Boston, Inc. and Princeton Review of New Jersey, Inc. (1)
  2.5  -- Option Agreement Amendment, dated as of December 14,
          2000, by and between Princeton Review Operations, L.L.C.,
          Princeton Review of Boston, Inc. and Princeton Review of
          New Jersey, Inc. (1)
  2.6  -- Option Agreement, dated as of October 18, 2000, by and
          among Princeton Review Operations, L.L.C., T.S.T.S., Inc.,
          Robert O. Case and Kevin D. Campbell. (1)
  2.7  -- Option Agreement, dated as of December 15, 2000, by and
          between Princeton Review Operations, L.L.C. and The
          Princeton Review Peninsula, Inc. (1)
  2.8  -- Asset Purchase Agreement, dated as of January 18, 2001,
          by and among Princeton Review Boston, Inc., Princeton
          Review New Jersey, Inc., Robert L. Cohen, Matthew
          Rosenthal, Princeton Review Operations, L.L.C., and
          Princeton Review Management, L.L.C. (1)
  2.9  -- Closing Agreement, dated as of March 2, 2001, by and
          among Princeton Review of Boston, Inc., Princeton Review
          of New Jersey, Inc., Robert L. Cohen, Matthew Rosenthal,
          Princeton Review Operations, L.L.C. and Princeton Review
          Management, L.L.C. (incorporated herein by reference to
          Exhibit 2.8.1 to our Registration Statement on Form S-1
          (File No. 333-43874) which was declared effective on
          June 18, 2001 (the 'Form S-1')).
  2.10 -- Promissory Note, dated as of March 2, 2001, made by
          Princeton Review Operations, L.L.C. in favor of Princeton
          Review of Boston, Inc., in the principal amount of
          $3,125,000 (incorporated herein by reference to Exhibit
          2.9 to our Form S-1).
  2.11 -- Promissory Note, dated as of March 2, 2001, made by
          Princeton Review Operations, L.L.C. in favor of Princeton
          Review of Boston, Inc., in the principal amount of
          $500,000 (incorporated herein by reference to Exhibit 2.10
          to our Form S-1).
  2.12 -- Asset Purchase Agreement, dated as of March 6, 2001, by
          and among The Princeton Review Peninsula, Inc., the Hirsch
          Living Trust, Pamela N. Hirsch, Myles E. Hirsch, Frederick
          Sliter, Princeton Review Operations, L.L.C. and Princeton
          Review Management, L.L.C. (incorporated herein by
          reference to Exhibit 2.11 to our Form S-1).
  2.13 -- Asset Purchase Agreement, dated June 18, 2001, among
          Princeton Review Operations, L.L.C., Princeton Review
          Management, L.L.C., T.S.T.S., Inc., Robert O. Case and
          Kevin D. Campbell (incorporated herein by reference to
          Exhibit 10.1 to our Quarterly Report on Form 10-Q (File
          No. 000-32469), filed with the Securities and Exchange
          Commission on August 8, 2001 (the '2001 Second Quarter
          Form 10-Q')).
  2.14 -- Subordinated Promissory Note, dated June 18, 2001, made
          by Princeton Review Operations, L.L.C. in favor of
          T.S.T.S., Inc., in the principal amount of $1,475,000
          (incorporated herein by reference to Exhibit 10.2 to our
          2001 Second Quarter Form 10-Q).
  2.15 -- Asset Purchase Agreement, dated as of October 1, 2001, by
          and among The Princeton Review, Inc., Princeton Review
          Publishing, L.L.C. and Embark.com, Inc. (incorporated
          herein by reference to Exhibit 2.1 to our Current Report
          on Form 8-K (File No. 000-32469), filed with the
          Securities and Exchange Commission on October 9, 2001 (the
          'Form 8-K')).
  3.1  -- Amended and Restated Certificate of Incorporation
          (incorporated herein by reference to Exhibit 3.1.2 to our
          Form S-1).
  3.2  -- Amended and Restated By-laws (incorporated herein by
          reference to Exhibit 3.3.1 to our Form S-1).
  4.1  -- Form of Specimen Common Stock Certificate (1).
</Table>

                                       77

<Page>

<Table>
<Caption>
EXHIBIT
NUMBER                          DESCRIPTION
------                          -----------
<S>     <C>
 10.1  -- Stockholders Agreement, dated as of April 1, 2000, by and
          among The Princeton Review, Inc., and its stockholders
          (1).

 10.2  -- Stock Purchase Agreement, dated April 18, 2000, by and
          among The Princeton Review, Inc., SG Capital Partners LLC,
          Olympus Growth Fund III, L.P. and Olympus Executive Fund,
          L.P. (1).

 10.3  -- Joinder Agreement, dated April 18, 2000, to the
          Stockholders Agreement dated April 1, 2000, among
          stockholders of The Princeton Review, Inc. (1).

 10.4  -- Investor Rights Agreement, dated April 18, 2000, by and
          among The Princeton Review, Inc., SG Capital Partners LLC,
          Olympus Growth Fund III, L.P. and Olympus Executive Fund,
          L.P. (1).

 10.5  -- The Princeton Review, Inc. 2000 Stock Incentive Plan,
          March 2000 (1).

 10.6  -- Amendment to The Princeton Review, Inc. 2000 Stock
          Incentive Plan (incorporated herein by reference to
          Exhibit 10.5.1 to our Form S-1).

 10.7  -- Form of Incentive Stock Option Agreement (incorporated
          herein by reference to Exhibit 10.6 to our Form S-1).

 10.8  -- Software Purchase Agreement, dated as of June 23, 1998,
          by and between Learning Company Properties and Princeton
          Review Publishing, L.L.C. (incorporated herein by
          reference to Exhibit 10.10 to our Form S-1).

 10.9  -- The Princeton Review Executive Compensation Policy
          Statement, as amended (incorporated by reference to
          Exhibit 10.12 of our Annual Report on Form 10-K for the
          year ended December 31, 2001).

 10.10 -- Office Lease, dated as of April 23, 1992, as amended, by
          and between The Princeton Review, Inc. and 2316 Broadway
          Realty Co. (incorporated herein by reference to Exhibit
          10.12 to our Form S-1).

 10.11 -- Amendment to Office Lease, dated December 9, 1993
          (incorporated herein by reference to Exhibit 10.13 to our
          Form S-1).

 10.12 -- Second Amendment to Office Lease, dated February 6, 1995
          (incorporated herein by reference to Exhibit 10.14 to our
          Form S-1).

 10.13 -- Third Amendment to Office Lease, dated April 2, 1996
          (incorporated herein by reference to Exhibit 10.15 to our
          Form S-1).

 10.14 -- Fourth Amendment to Office Lease, dated July 10, 1998
          (incorporated herein by reference to Exhibit 10.16 to our
          Form S-1).

 10.15 -- Employment Agreement, dated as of April 11, 2002, by and
          between The Princeton Review, Inc. and John Katzman
          (incorporated by reference to Exhibit 10.1 to our
          Quarterly Report on Form 10-Q (file No. 000-32469), filed
          with the Securities and Exchange Commission on May 14,
          2002 (the '2002 First Quarter Form 10-Q').

 10.16 -- Employment Agreement, dated as of April 10, 2002, by and
          between The Princeton Review, Inc. and Mark Chernis
          (incorporated by reference to Exhibit 10.2 to our 2002
          First Quarter Form 10-Q).

 10.17 -- Employment Agreement, dated as of April 10, 2002, by and
          between The Princeton Review, Inc. and Steve
          Quattrociocchi (incorporated by reference to Exhibit 10.3
          to our 2002 First Quarter Form 10-Q).

 10.18 -- Employment Agreement, dated as of April 10, 2002, by and
          between The Princeton Review, Inc. and Bruce Task
          (incorporated by reference to Exhibit 10.4 to our 2002
          First Quarter Form 10-Q).

 10.19 -- Employment Agreement, dated as of October 15, 2001, by
          and between The Princeton Review, Inc. and Stephen Melvin
          (incorporated by reference to Exhibit 10.61 of our Annual
          Report on Form 10-K for the year ended December 31, 2001).

 10.20 -- Office Lease by and between The Rector, Church-Wardens
          and Vestrymen of Trinity Church in the City of New York,
          as Landlord, and Princeton Review Publishing, L.L.C., as
          Tenant (incorporated herein by reference to Exhibit 10.35
          to our Form S-1).

 10.21 -- Agreement, dated September 1, 1998, by and between The
          Educational and Professional Publishing Group, a unit of
          the McGraw-Hill Companies, Inc., and Princeton Review
          Publishing, L.L.C. (incorporated herein by reference to
          Exhibit 10.36 to our Form S-1).(2)
</Table>

                                       78

<Page>

<Table>
<Caption>
EXHIBIT
NUMBER                          DESCRIPTION
------                          -----------
<S>     <C>
10.22  -- Franchise Agreement, dated as of July 1, 1986, by and
          between The Princeton Review Management Corp. and Lloyd
          Eric Cotsen (Lecomp Company, Inc.) (incorporated herein by
          reference to Exhibit 10.39 to our Form S-1).
10.23  -- Franchise Agreement, dated as of September 13, 1986, by
          and between The Princeton Review Management Corp. and
          Robert Case, Richard McDugald and Kevin Campbell (Test
          Services, Inc.) (incorporated herein by reference to
          Exhibit 10.40 to our Form S-1).
10.24  -- Addendum to the Franchise Agreement, dated as of May 31,
          1995, by and between The Princeton Review Management Corp.
          and the persons and entities listed on the Franchisee
          Joinders (incorporated herein by reference to Exhibit
          10.41 to our Form S-1).
10.25  -- Formation Agreement, dated as of May 31, 1995, by and
          among The Princeton Review Publishing Company, L.L.C., The
          Princeton Review Publishing Co., Inc., the Princeton
          Review Management Corp. and the independent franchisees
          (incorporated herein by reference to Exhibit 10.42 to our
          Form S-1).
10.26  -- Distance Learning Waiver, dated as of June 21, 2000, by
          and between Princeton Review Management, L.L.C. and
          Lecomp, Inc. (incorporated herein by reference to Exhibit
          10.44 to our Form S-1).
10.27  -- Pledge and Security Agreement, dated as of September 19,
          2000, by and between Steven Hodas and The Princeton
          Review, Inc. (incorporated herein by reference to Exhibit
          10.45 to our Form S-1)
10.28  -- Promissory Note, dated as of September 19, 2000, made by
          Steven Hodas in favor of The Princeton Review, Inc.
          (incorporated herein by reference to Exhibit 10.46 to our
          Form S-1).
10.29  -- Non-Recourse Promissory Note, dated August 15, 2001, made
          by Bruce Task in favor of The Princeton Review, Inc.
          (incorporated herein by reference to Exhibit 10.1 to our
          Quarterly Report on Form 10-Q (File No. 000-32469) for the
          third quarter of 2001, filed with the Securities and
          Exchange Commission on November 13, 2001 (the '2001 Third
          Quarter Form 10-Q')).
10.30  -- Pledge and Security Agreement, dated as of August 15,
          2001, by and between Bruce Task and The Princeton Review,
          Inc. (incorporated herein by reference to Exhibit 10.2 to
          our 2001 Third Quarter Form 10-Q).
10.31  -- Non-Recourse Promissory Note, dated November 27, 2001,
          made by Mark Chernis in favor of The Princeton Review,
          Inc. (incorporated by reference to Exhibit 10.53 of our
          Annual Report on Form 10-K for the year ended
          December 31, 2001).
10.32  -- Pledge and Security Agreement, dated as of November 27,
          2001, by and between Mark Chernis and The Princeton
          Review, Inc. (incorporated by reference to Exhibit 10.54
          of our Annual Report on Form 10-K for the year ended
          December 31, 2001).
10.33  -- Non-Recourse Promissory Note, dated March 7, 2002, made
          by Mark Chernis in favor of The Princeton Review, Inc.
          (incorporated by reference to Exhibit 10.55 of our Annual
          Report on Form 10-K for the year ended December 31, 2001).
10.34  -- Amended and Restated Loan and Security Agreement, dated
          as of October 1, 2001, by and among Embark.com, Inc.,
          Princeton Review Publishing, L.L.C., The Princeton Review,
          Inc. and Comdisco, Inc. (incorporated by reference to
          Exhibit 10.56 of our Annual Report on Form 10-K for the
          year ended December 31, 2001).
10.35  -- Amended and Restated Secured Promissory Note, dated
          October 1, 2001, in the principal amount of $3,400,000
          made by Princeton Review Publishing, L.L.C. in favor of
          Comdisco, Inc. (incorporated by reference to Exhibit 10.57
          of our Annual Report on Form 10-K for the year ended
          December 31, 2001).
10.36  -- Guaranty of Loans, dated as of October 1, 2001, made by
          Princeton Review Management, L.L.C., Princeton Review
          Operations, L.L.C., Princeton Review Products, L.L.C., The
          Princeton Review Canada, Inc. and The Princeton Review,
          Inc., in favor of Comdisco, Inc. (incorporated by
          reference to Exhibit 10.58 of our Annual Report on Form
          10-K for the year ended December 31, 2001).
10.37  -- Security Agreement, dated as of October 1, 2001, by and
          among Princeton Review Management, L.L.C., Princeton
          Review Operations, L.L.C., Princeton Review Products,
          L.L.C., The Princeton Review Canada, Inc. and The
          Princeton Review, Inc., in favor of Comdisco, Inc.
          (incorporated by reference to Exhibit 10.59 of our Annual
          Report on Form 10-K for the year ended December 31, 2001).
</Table>

                                       79

<Page>

<Table>
<Caption>
EXHIBIT
NUMBER                          DESCRIPTION
------                          -----------
<S>     <C>
10.38  -- Subordination Agreement, dated as of October 1, 2001, by
          and between Comdisco, Inc. and Princeton Review
          Publishing, L.L.C., for the benefit of Senior Creditor (as
          defined therein) (incorporated by reference to Exhibit
          10.60 of our Annual Report on Form 10-K for the year ended
          December 31, 2001).
21.1   -- Subsidiaries of the Registrant.
23.1   -- Consent of Ernst & Young LLP.
24.1   -- Powers of Attorney (included on the signature pages
          hereto).
99.1   -- Certification Pursuant to 18 U.S.C. Section 1350, as
          Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act
          of 2002.
</Table>

---------
(1) Incorporated herein by reference to the exhibit with the same number to our
    Registration Statement on Form S-1 (File No. 333-43874), which was declared
    effective on June 18, 2001.

(2) Confidential portions of this document are omitted pursuant to a request
    for confidential treatment that has been granted by the Commission, and
    have been filed separately with the Commission.

    (b) Reports on Form 8-K

        None.

                                       80

<Page>
                                   SIGNATURES

    Pursuant to the requirements of Section 13 or 15(d) 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, on March 27, 2003.

                                                The Princeton Review, Inc.

                                          By:         /s/ Stephen Melvin
                                             ...................................
                                                       Stephen Melvin
                                                Chief Financial Officer and
                                                         Treasurer

                               POWER OF ATTORNEY

    Each individual whose signature appears below constitutes and appoints each
of John S. Katzman, Mark Chernis and Stephen Melvin, such person's true and
lawful attorney-in-fact and agent with full power of substitution and
resubstitution, for such person and in such person's name, place and stead, in
any and all capacities, to sign any and all amendments this report on Form 10-K,
and to file the same, with all exhibits thereto, and all documents in connection
therewith, with the Securities and Exchange Commission, granting unto each said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite and necessary to be done in and about the
premises, as fully to all intents and purposes as such person might or could do
in person, hereby ratifying and confirming all that any said attorney-in-fact
and agent, or any substitute or substitutes of any of them, may lawfully do or
cause to be done by virtue hereof.

    Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

<Table>
<Caption>
               Signature                                  Title                          Date
               ---------                                  -----                          ----
<S>                                         <C>                                   <C>
                                                                                    March 27, 2003
           /s/ John S. Katzman              Chairman and Chief Executive Officer
  ........................................    (Principal Executive Officer)
            (John S. Katzman)

            /s/ Stephen Melvin              Chief Financial Officer (Principal      March 27, 2003
 .........................................    Financial and Accounting Officer)
             (Stephen Melvin)

           /s/ Richard Katzman              Director                                March 27, 2003
 .........................................
            (Richard Katzman)

             /s/ John C. Reid               Director                                March 27, 2003
 .........................................
              (John C. Reid)

           /s/ Richard Sarnoff              Director                                March 27, 2003
 .........................................
            (Richard Sarnoff)

          /s/ Sheree T. Speakman            Director                                March 27, 2003
 .........................................
           (Sheree T. Speakman)

          /s/ Howard A. Tullman             Director                                March 27, 2003
 .........................................
           (Howard A. Tullman)

        /s/ Frederick S. Humphries          Director                                March 27, 2003
 .........................................
         (Frederick S. Humphries)
</Table>

                                       81

<Page>
                                 CERTIFICATION

I, John S. Katzman, certify that:

    1. I have reviewed this annual report on Form 10-K of The Princeton Review,
Inc.;

    2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

    3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

    4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

        a) Designed such disclosure controls and procedures to ensure that
    material information relating to the registrant, including its consolidated
    subsidiaries, is made known to us by others within those entities,
    particularly during the period in which this annual report is being
    prepared;

        b) Evaluated the effectiveness of the registrant's disclosure controls
    and procedures as of a date within 90 days prior to the filing date of this
    annual report (the 'Evaluation Date'); and

        c) Presented in this annual report our conclusions about the
    effectiveness of the disclosure controls and procedures based on our
    evaluation as of the Evaluation Date;

    5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
function):

        a) All significant deficiencies in the design or operation of internal
    controls which could adversely affect the registrant's ability to record,
    process, summarize and report financial data and have identified for the
    registrant's auditors any material weaknesses in internal controls; and

        b) Any fraud, whether or not material, that involves management or other
    employees who have a significant role in the registrant's internal controls;
    and

    6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: March 27, 2003                     /s/ John S. Katzman
                                           .....................................
                                          John S. Katzman
                                          Chairman and Chief Executive Officer

                                       82

<Page>
                                 CERTIFICATION

I, Stephen Melvin, certify that:

    1. I have reviewed this annual report on Form 10-K of The Princeton Review,
Inc.;

    2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;

    3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report;

    4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

        a) Designed such disclosure controls and procedures to ensure that
    material information relating to the registrant, including its consolidated
    subsidiaries, is made known to us by others within those entities,
    particularly during the period in which this annual report is being
    prepared;

        b) Evaluated the effectiveness of the registrant's disclosure controls
    and procedures as of a date within 90 days prior to the filing date of this
    annual report (the 'Evaluation Date'); and

        c) Presented in this annual report our conclusions about the
    effectiveness of the disclosure controls and procedures based on our
    evaluation as of the Evaluation Date;

    5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit committee
of registrant's board of directors (or persons performing the equivalent
function):

        a) All significant deficiencies in the design or operation of internal
    controls which could adversely affect the registrant's ability to record,
    process, summarize and report financial data and have identified for the
    registrant's auditors any material weaknesses in internal controls; and

        b) Any fraud, whether or not material, that involves management or other
    employees who have a significant role in the registrant's internal controls;
    and

    6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.

Date: March 27, 2003                      /s/ Stephen Melvin
                                           .....................................
                                          Stephen Melvin
                                          Chief Financial Officer and Treasurer

                                       83