<PAGE>
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                  FORM 10-K/A
                               (Amendment No. 1)


(Mark One)
                        FOR ANNUAL AND TRANSITION REPORTS
                     PURSUANT TO SECTION 13 OR 15(d) OF THE
                       SECURITIES AND EXCHANGE ACT OF 1934

[ ]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934.
     For the fiscal year ended ____________
OR

[X]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
     OF 1934.
     For the transition period from July 1, 2001 to December 31, 2001.

                        Commission File Number 000-23415

                           Princeton Video Image, Inc.
             ------------------------------------------------------
             (Exact Name of Registrant as Specified in its Charter)

                 Delaware                                   22-3062052
     -------------------------------                    ------------------
     (State or Other Jurisdiction of                     (I.R.S. Employer
     Incorporation or Organization)                     Identification No.)


                15 Princess Road, Lawrenceville, New Jersey 08648
               ---------------------------------------------------
               (Address of Principal Executive Offices) (Zip Code)

                                  609-912-9400
               ---------------------------------------------------
              (Registrant's Telephone Number, Including Area Code)

           Securities registered pursuant to Section 12(b) of the Act:

                                                      Name of Each Exchange
     Title of Each Class                               on Which Registered
     -------------------                              ---------------------
            None                                               None

           Securities registered pursuant to Section 12(g) of the Act:

                          Common Stock, $.001 par value
                          -----------------------------
                               Title of Each Class

     Indicate by check mark whether the registrant: (1) 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. [ ]

     State the aggregate market value of the voting and non-voting common equity
held by non-affiliates of the registrant computed by reference to the price at
which the common equity was sold, or the average bid and asked price of such
common equity, as of a specified date within the past 60 days: $20,237,424,
based upon the last sales price on March 28, 2002.

     Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date: 18,418,865 shares of
Common Stock, .001 par value per share, were outstanding on March 28, 2002.



                                EXPLANATORY NOTE



     Princeton Video Image, Inc. hereby amends its Annual Report on Form 10-K
for the transition period ended December 31, 2001, as filed with the Securities
and Exchange Commission on April 1, 2002, for the sole purpose of including
numbers which were inadvertently omitted from the table of proforma information
with respect to the acquisition of Publicidad Virtual, S.A. de C.V. described
in Note 5 of the Notes to Consolidated Financial Statements. This correction
has no impact on earnings per share or any other item in the audited financial
statements.



Pursuant to Rule 12b-15 under the Securities Exchange Act of 1934, this
amendment contains the complete text of Part II, Item 8 and Item 14, the items
being amended.

<PAGE>




ITEM 8. FINANCIAL STATEMENTS.


     The financial statements required to be filed pursuant to this Item 8 are
appended to this Annual Report on Form 10-K/A. A list of the financial
statements filed herewith is found at "Index to Financial Statements" on page
F-1.



SELECTED QUARTERLY RESULTS OF OPERATIONS

     The following table sets forth unaudited quarterly financial data for the
two quarters in our transition period for the six months ended December 31, 2001
and the four quarters in our fiscal


                                       34

<PAGE>

years ended June 30, 2001 and 2000. This unaudited quarterly information has
been prepared on the same basis as the audited financial information presented
elsewhere in this report and, in management's opinion, includes all adjustments
that we consider necessary for a fair presentation of the information for the
quarters presented.

<TABLE>
<CAPTION>
                                                                                Quarter Ended
                                   Dec 31   ---------------------------------------------------------------------------------------
                                    2001     Sep 30    Jun 30    Mar 31    Dec 31    Sep 30    Jun 30    Mar 31    Dec 31   Sep 30
('000's)                           (1)(2)     2001      2001      2001      2000      2000      2000      2000      1999      1999
                                  -------   -------   -------   -------   -------   -------   -------   -------   -------   -------
<S>                               <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>       <C>
Total revenue                     $ 3,919   $ 1,659   $ 1,045   $ 1,018   $ 1,282   $ 1,319   $ 1,176   $   790   $   572   $   508

Sales and marketing                 3,123       848       969       833       851       855       956       937     1,301       934

Product development                   889       696       653       771       685       713       795       802       624       582
Field operations and support        1,729     1,399     1,245     1,289     1,436     1,450     1,285     1,430     1,684     1,243

General and administrative          1,797       813     1,401     1,391     1,508     1,324     1,411       951       948       911

Severance and other charges         1,061        --
                                  -------   -------   -------   -------   -------   -------   -------   -------   -------   -------
Total costs and expenses            8,599     3,756     4,268     4,284     4,480     4,342     4,447     4,120     4,557     3,670
                                  -------   -------   -------   -------   -------   -------   -------   -------   -------   -------
Operating loss                     (4,680)   (2,097)   (3,223)   (3,266)   (3,198)   (3,023)   (3,271)   (3,330)   (3,985)   (3,162)

Other income, net                     134        61        (1)      319       117       120       164       193       186       138

Losses from equity investment        (109)      (67)      (53)      (62)       --        --        --        --        --        --

Losses on securities available
   for sale                          (184)     (316)

Minority interest                      45        50        70        77        30        40        25        --        --        --
                                  -------   -------   -------   -------   -------   -------   -------   -------   -------   -------
Net loss before tax benefit        (4,794)   (2,369)   (3,207)   (2,932)   (3,051)   (2,863)   (3,082)   (3,137)   (3,799)   (3,024)

  Tax benefit                         173        --        --        --       372        --        --        --       597        --
                                  -------   -------   -------   -------   -------   -------   -------   -------   -------   -------
Net loss                          $(4,621)  $(2,369)  $(3,207)  $(2,932)  $(2,679)  $(2,863)  $(3,082)  $(3,137)  $(3,202)  $(3,024)
                                  =======   =======   =======   =======   =======   =======   =======   =======   =======   =======
Basic and diluted net loss
  per share                       $ (0.27)  $ (0.19)  $ (0.27)  $ (0.27)  $ (0.27)  $ (0.37)  $ (0.31)  $ (0.32)  $ (0.34)  $ (0.29)
                                  =======   =======   =======   =======   =======   =======   =======   =======   =======   =======
</TABLE>

(1)  Results reflect the acquisition of Publicidad in September 2001 as
     described in Note 5 of the Notes to Consolidated Financial Statements.

(2)  Results reflect severance payment to a former member of management and
     costs associated with streamlining our domestic and European operations as
     described in Note 6 of the Notes to Consolidated Financial Statements.






                                       35

<PAGE>



                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

     (a)  The following documents are included as part of this Annual Report on
          Form 10-K.

          (1)  The financial statements required to be filed pursuant to this
Item 14(a)(1) are listed on the "Index to Financial Statements" attached hereto,
which is incorporated by reference.

          (2)  All schedules are omitted as the information required is
inapplicable or the information is presented in the consolidated financial
statements or the related notes.

          (3)  The exhibits required to be filed pursuant to this Item 14(a)(3)
are listed on the "Index to Exhibits" attached hereto, which is incorporated
herein by reference.

     (b)  Reports on Form 8-K.

          On December 15, 2001, PVI filed an Amended Current Report on Form
          8-K/A amending its Current Report on Form 8-K dated September 20,
          2001, as filed with the Securities and Exchange Commission on October
          3, 2001, for the sole purpose of adding Item 7.

          On December 20, 2001, PVI filed a Current Report on Form 8-K
          announcing the change in its fiscal year end from June 30 to December
          31.


                                       36

<PAGE>

                                    SIGNATURE

     Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.

                                        PRINCETON VIDEO IMAGE, INC.


                                        By: /s/ Brown F Williams
                                            ------------------------------------
                                            Brown F Williams
                                            Chairman of the Board

                                            Date:  March 25, 2002







37

<PAGE>

                          INDEX TO FINANCIAL STATEMENTS
                          -----------------------------

Report of Independent Accountants                                            F-1

Consolidated Balance Sheets as of December 31, 2001
   and  June 30, 2001 and 2000                                               F-2

Consolidated Statements of Operations for the
   six months ended December 31, 2001 and the
   years ended June 30, 2001, 2000 and 1999                                  F-3

Consolidated Statements of Cash Flows for the
   six months ended December 31, 2001 and the
   years ended June 30, 2001, 2000 and 1999                                  F-4

Consolidated Statements of Changes in Stockholders'
  (Deficit)/Equity for the six months ended December 31,
   2001 and the years ended June 30, 2001, 2000 and 1999                     F-5

Notes to Consolidated Financial Statements                                   F-7







                                       39
<PAGE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of Princeton Video Image, Inc.:

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of cash flows and of changes in
stockholders' (deficit)/equity present fairly, in all material respects, the
financial position of Princeton Video Image, Inc. and its subsidiaries (the
"Company") at December 31, 2001 and June 30, 2001 and 2000, and the results of
its operations and its cash flows for the six months ended December 31, 2001 and
for the three years ended June 30, 2001 in conformity with accounting principles
generally accepted in the United States of America. These financial statements
are the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America, which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company has experienced recurring losses
from operations and has not generated sufficient cash flows from operations to
meet its operating and capital requirements, all of which raise substantial
doubt about its ability to continue as a going concern. Management's plans in
regard to these matters are also described in Note 2. The consolidated financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.

PricewaterhouseCoopers LLP
Florham Park, NJ
March 15, 2002
<PAGE>
PRINCETON VIDEO IMAGE, INC.
CONSOLIDATED BALANCE SHEETS


<TABLE>
<CAPTION>
                                                                                  December 31,      June 30,       June 30,
                                                                                    2001              2001          2000
                                                                                  ------------    ------------    ------------
<S>                                                                               <C>             <C>             <C>
ASSETS
Current Assets:

   Cash and cash equivalents                                                      $  8,360,353    $  2,672,228    $  8,388,148
   Restricted securities held to maturity                                               63,476          60,347          60,847
   Available for sale securities                                                            --         314,943         846,167
   Accounts receivable                                                               2,298,897       1,308,486         829,329
   License rights                                                                       50,000         350,000         600,000
   Prepaid airtime                                                                   2,713,533              --              --
   Other current assets                                                                887,795         344,532         198,568
                                                                                  ------------    ------------    ------------
              Total current assets                                                  14,374,054       5,050,536      10,923,059
Property and equipment, net                                                          2,856,733       2,995,688       3,685,068
Patents, net                                                                           527,682         555,857         587,486
Identifiable intangibles, net                                                        3,024,167              --              --
Goodwill                                                                             5,339,244              --              --
Investment in/Advances to Revolution Company LLC                                       567,795         735,757              --
Acquisition related costs                                                                   --         706,501              --
Cablevision deferred revenue credit                                                  4,350,261       1,137,178              --
Other assets                                                                           180,392         113,890         529,195
                                                                                  ------------    ------------    ------------
                   Total assets                                                   $ 31,220,328    $ 11,295,407    $ 15,724,808
                                                                                  ============    ============    ============

LIABILITIES, REDEEMABLE PREFERRED STOCK,
  MINORITY INTEREST and STOCKHOLDERS' EQUITY
Current Liabilities:
   Accounts payable and accrued expenses                                          $  5,999,393    $  4,077,913    $  4,135,060
   Accounts payable to television networks                                           4,360,372              --              --
   Notes payable                                                                     1,090,608              --              --
   Payable to Presencia                                                                637,465              --              --
   Unearned revenue                                                                    179,436         418,304         293,819
                                                                                  ------------    ------------    ------------
              Total current liabilities                                             12,267,274       4,496,217       4,428,879

Unearned revenue                                                                       184,833         611,810         630,033
Cablevision advance payments                                                         7,500,000       2,500,000              --
Other liabilities                                                                       42,511          33,034          45,150
                                                                                  ------------    ------------    ------------
              Total liabilities                                                     19,994,618       7,641,061       5,104,062
                                                                                  ------------    ------------    ------------
Commitments and contingencies (Notes 4,5,6,8,22)
Redeemable preferred stock:

   Cumulative, Series A, conditionally redeemable, $4.50 par value,
     authorized, issued and outstanding 11,363 shares at December 31, 2001;
     authorized 167,000 shares, issued and outstanding 11,363 shares at
     June 30, 2001 and 67,600 shares at June 30, 2000 redemption value
     equal to carrying value (par plus all accrued but unpaid dividends)                78,751          77,217         439,950
   Cumulative, Series B, conditionally redeemable, $5.00 par value, authorized,
     issued and outstanding 12,834 shares at December 31, 2001; authorized
     93,300 shares, issued and outstanding 12,834 shares at June 30, 2001
     and 86,041 shares at June 30, 2000 redemption value equal to carrying
     value (par plus all accrued but unpaid dividends)                                  94,963          93,038         595,817
                                                                                  ------------    ------------    ------------
              Total redeemable preferred stock                                         173,714         170,255       1,035,767
Minority interest                                                                           --          94,279         311,583
Stockholders' Equity:
   Common stock, $.001 par value at December 31, 2001 and no par value, $.005
     stated value at June 30, 2000 and 2001; authorized 60,000,000 shares;
     17,130,865, 11,841,647 and 9,879,568 shares issued and outstanding, net of
     279,366, 279,366 and 0 treasury shares at par at December 31, 2001,
     June 30, 2001 and 2000, respectively                                               17,131          59,206          49,395
   Additional paid-in capital                                                       80,488,924      65,834,688      60,575,678
       Related party notes receivable                                                       --         (60,437)       (973,322)
       Deferred compensation                                                           (81,926)             --              --
       Other comprehensive income (loss)                                                23,542         (38,560)        346,167
   Accumulated deficit                                                             (69,395,675)    (62,405,085)    (50,724,522)
                                                                                  ------------    ------------    ------------
              Total stockholders' equity                                            11,051,996       3,389,812       9,273,396
                                                                                  ------------    ------------    ------------
                   Total liabilities, redeemable preferred stock,
                     minority interest and stockholders' equity                   $ 31,220,328    $ 11,295,407    $ 15,724,808
                                                                                  ============    ============    ============

</TABLE>


          See accompanying notes to consolidated financial statements.



                                      F-2
<PAGE>

PRINCETON VIDEO IMAGE, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                               For the
                                            Six months ended             For the years ended
                                              December 31                     June 30,
                                            ---------------- ----------------------------------------------
                                                 2001             2001            2000           1999
                                             ------------    ------------    ------------    ------------
<S>                                          <C>             <C>             <C>             <C>
Royalties and license fees                   $  1,019,474    $  2,421,441    $  1,537,235    $    527,685
Advertising and production revenue              4,558,091       2,242,236       1,508,664         694,528
                                             ------------    ------------    ------------    ------------
              Total revenue                     5,577,565       4,663,677       3,045,899       1,222,213

Costs and expenses:
   Sales and marketing                          3,970,482       3,508,917       4,127,494       2,545,738
   Product development                          1,584,834       2,821,564       2,802,249       1,508,875
   Field operations and support                 3,128,220       5,420,065       5,641,355       4,431,759
   General and administrative                   2,609,060       5,624,064       4,222,364       3,365,689
   Severance and other charges                  1,060,832
                                             ------------    ------------    ------------    ------------
              Total costs and expenses         12,353,428      17,374,610      16,793,462      11,852,061
Operating loss                                 (6,775,863)    (12,710,933)    (13,747,563)    (10,629,848)
   Other income, net                              193,752         555,316         681,185         975,850
   Losses from equity investment                 (176,028)       (114,243)             --              --
   Loss from securities available for sale       (500,000)             --              --              --
   Minority interest                               94,280         217,298          24,734              --
                                             ------------    ------------    ------------    ------------
Net loss before tax benefit                    (7,163,859)    (12,052,562)    (13,041,644)     (9,653,998)
   Tax benefit                                    173,269         371,999         596,998              --
                                             ------------    ------------    ------------    ------------
Net loss                                       (6,990,590)    (11,680,563)    (12,444,646)     (9,653,998)
   Accretion of preferred stock dividends          (3,459)        (11,801)        (44,112)        (44,050)
                                             ------------    ------------    ------------    ------------
Net loss applicable to common stock          $ (6,994,049)   $(11,692,364)   $(12,488,758)   $ (9,698,048)
                                             ============    ============    ============    ============

Basic and diluted net loss per share         $      (0.48)   $      (1.09)   $      (1.33)   $      (1.18)
                                             ============    ============    ============    ============
Weighted average number of shares of
       common stock outstanding                14,721,155      10,731,634       9,374,317       8,186,207
                                             ============    ============    ============    ============
</TABLE>


          See accompanying notes to consolidated financial statements.



                                      F-3
<PAGE>

PRINCETON VIDEO IMAGE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>

                                                                       For the
                                                                     Six months
                                                                        ended
                                                                     December 31,              For the years ended June 30,
                                                                     ------------    --------------------------------------------
                                                                         2001            2001            2000             1999
                                                                     ------------    ------------    ------------    ------------
<S>                                                                  <C>             <C>             <C>             <C>
Cash flows from operating activities:
   Net loss                                                          $ (6,990,590)   $(11,680,563)   $(12,444,646)   $ (9,653,998)
   Adjustments to reconcile net loss to net cash used
     in operating activities (net of effects of acquisition)
            Amortization of unearned revenue                             (121,987)       (327,840)       (548,557)         34,190
            Depreciation expense                                          901,277       1,853,991       1,849,189       1,249,235
            Amortization of intangibles/license rights                    539,607         718,441       1,512,480         911,103
            Amortization of deferred compensation                          40,963              --              --              --
            (Credits) charges associated with stock,
               warrant and option grants                                 (309,087)        508,449         860,862         129,973
            Non-cash interest from related party notes                         --        (249,301)             --              --
            Non-cash loss from impairment of securities                   500,000              --              --              --
            Losses from equity investments                                176,028         114,243
            Gains on sale of fixed assets                                 (15,746)             --              --              --
            Minority interest                                             (94,280)       (217,298)        (24,734)

      Changes in assets and liabilities:
                 Trade accounts receivable                             (1,044,551)       (441,584)       (450,677)       (185,390)
                 Prepaid airtime from Televisa                         (1,971,541)             --              --              --
                 Other current assets                                    (226,419)        (99,990)        (21,471)         53,151
                 Cablevision deferred revenue credit and                       --              --              --
                   deferred royalty payment, net                        1,786,917       1,362,822
                 Other assets                                             (59,274)         22,967           2,868          89,127
                 Accounts payable and accrued expenses                    350,596         141,298         (83,494)      1,400,934
                 Accounts payable to television networks                3,777,419              --              --              --
                 Unearned revenue                                          12,498         434,102          16,775         278,200
                 Payable to Presencia                                    (847,334)             --              --              --
                 Miscellaneous other                                        9,477              --          24,307           4,142
                                                                     ------------    ------------    ------------    ------------
                 Net cash used in operating activities                 (3,586,027)     (7,860,263)     (9,307,098)     (5,689,333)
                                                                     ------------    ------------    ------------    ------------
Cash flows from investing activities:
   Proceeds from held-to-maturity investments                                  --              --          77,153              --
   Purchase of securities available for sale                                   --              --        (500,000)             --
   Investment in/Advances to Revolution Company LLC                        (8,066)       (850,000)
   Publicidad acquisition costs                                          (231,008)       (608,606)
   Purchases of property and equipment                                   (388,526)     (1,169,580)     (1,431,352)     (2,513,898)
   Proceeds from sale of fixed assets                                      54,225              --              --              --
   Purchases of license rights                                                 --        (700,000)     (1,300,000)       (400,000)
   Increase in patents                                                    (35,599)        (86,812)       (135,753)       (132,080)
                                                                     ------------    ------------    ------------    ------------
               Net cash used in investing activities                     (608,974)     (3,414,998)     (3,289,952)     (3,045,978)
                                                                     ------------    ------------    ------------    ------------


Cash flows from financing activities:
   Proceeds from sales of common stock, net                             9,280,526       5,480,560       8,310,869           5,837
   Cash received from related party notes receivable                       30,961          88,386         179,956        (328,780)
   Proceeds from issuance of notes payable                                567,278              --              --              --
                                                                     ------------    ------------    ------------    ------------
            Net cash provided by (used in) financing activities         9,878,765       5,568,946       8,490,825        (322,943)
                                                                     ------------    ------------    ------------    ------------
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F-4
<PAGE>
PRINCETON VIDEO IMAGE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS


<TABLE>
<CAPTION>

                                                                       For the
                                                                     Six months
                                                                        ended
                                                                     December 31,              For the years ended June 30,
                                                                     ------------    --------------------------------------------
                                                                         2001            2001            2000             1999
                                                                     ------------    ------------    ------------    ------------
<S>                                                                  <C>             <C>             <C>             <C>

            Net increase (decrease) in cash and cash equivalents        5,683,764      (5,706,315)     (4,106,225)     (9,058,254)
Foreign exchange impact on cash                                             4,361          (9,605)
Cash and cash equivalents at beginning of period                        2,672,228       8,388,148      12,494,373      21,552,627
                                                                     ------------    ------------    ------------    ------------
Cash and cash equivalents at end of period                           $  8,360,353    $  2,672,228    $  8,388,148    $ 12,494,373
                                                                     ============    ============    ============    ============

Supplemental cash flow information:

  Fair value of warrants/stock issued in settlement of
    accrued obligation                                               $         --    $         --    $         --    $    100,445
  Stock issued for royalty payments                                  $         --    $    196,861    $    332,164    $    152,232
  Capital lease obligations incurred                                 $         --    $         --    $     85,220    $         --
  Fair value of warrants/stock issued in acquisition of Publicidad   $  5,521,293    $         --    $         --    $         --
</TABLE>




          See accompanying notes to consolidated financial statements.


                                      F-5
<PAGE>
Princeton Video Image, Inc.
Consolidated Statements of Changes in Stockholders' (Deficit)/Equity
For the years ended June 30, 1999, 2000 and 2001 and
for the six months ended December 31, 2001

<TABLE>
<CAPTION>

                                                                                     Common Stock
                                                                               -----------------------    Additional   Related Party
                                                                               Number of                    Paid-In          Notes
                                                                                  Shares       Amount       Capital       Receivable
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>            <C>        <C>             <C>

BALANCE AT JUNE 30, 1998                                                        8,173,552      $40,867    $51,443,856     $(824,498)

Net Loss

   Comprehensive loss

Issuance of common stock for option and warrant exercises                          11,541           58          5,779
Issuance of common stock for license rights, April 1999, $7.031 per share          14,286           71        100,374
Compensation expense associated with the issuance of 8,279 options
  for consulting services from October 1998 to June 1999                                                       29,529
Related party notes receivable issued in connection with
  delivery of L-VIS Systems to licensee                                                                                    (328,780)
Accretion of preferred stock dividends                                                                        (44,050)

------------------------------------------------------------------------------------------------------------------------------------
 BALANCE AT JUNE 30, 1999                                                       8,199,379       40,996     51,535,488    (1,153,278)

 Net Loss
Unrealized gain on securities available for sale

   Comprehensive loss

Issuance of common stock for option and warrant exercises                          30,318          151         81,567
Issuance of common stock for royalty payments                                      57,144          284        331,880
 Issuance of stock at $5.50 per share in connection with private
   equity financing, net of expenses                                            1,592,727        7,964      8,221,187
Compensation expense associated with the issuance of options for
   consulting services provided by third parties and the Board of Directors                                   449,668
Receipt of payments on notes outstanding                                                                                    179,956
Accretion of preferred stock dividends                                                                        (44,112)

------------------------------------------------------------------------------------------------------------------------------------
 BALANCE AT JUNE 30, 2000                                                       9,879,568       49,395     60,575,678      (973,322)

 Net Loss
 Foreign currency translation adjustments
 Unrealized loss on securities available for sale

   Comprehensive loss

Issuance of common stock to Cablevision                                         2,007,909       10,040      6,146,911
Costs associated with the Cablevision transaction                                                          (1,212,142)
Issuance of common stock for option and warrant exercises                           8,823           45         24,002
Issuance of common stock for royalty payments                                      57,144          286        196,575
Issuance of common stock in exchange for preferred stock                          167,569          838        876,280
Compensation expense associated with the issuance of options for
   consulting services provided by the Board of Directors                                                       2,500
</TABLE>

(table continued)

<TABLE>
<CAPTION>

                                                                                                      Other
                                                                                    Deferred      Comprehensive    Accumulated
                                                                                  Compensation    Income (Loss)     (Deficit)
---------------------------------------------------------------------------------------------------------------------------------
<S>                                                                               <C>             <C>              <C>

BALANCE AT JUNE 30, 1998                                                                          $      -         $(28,625,878)

Net Loss                                                                                                             (9,653,998)

   Comprehensive loss

Issuance of common stock for option and warrant exercises
Issuance of common stock for license rights, April 1999, $7.031 per share
Compensation expense associated with the issuance of 8,279 options
  for consulting services from October 1998 to June 1999
Related party notes receivable issued in connection with
  delivery of L-VIS Systems to licensee
Accretion of preferred stock dividends

---------------------------------------------------------------------------------------------------------------------------------
 BALANCE AT JUNE 30, 1999                                                                                -          (38,279,876)

 Net Loss                                                                                                           (12,444,646)
Unrealized gain on securities available for sale                                                   346,167

   Comprehensive loss

Issuance of common stock for option and warrant exercises
Issuance of common stock for royalty payments
 Issuance of stock at $5.50 per share in connection with private
   equity financing, net of expenses
Compensation expense associated with the issuance of options for
   consulting services provided by third parties and the Board of Directors
Receipt of payments on notes outstanding
Accretion of preferred stock dividends

---------------------------------------------------------------------------------------------------------------------------------
 BALANCE AT JUNE 30, 2000                                                                          346,167           (50,724,522)

 Net Loss                                                                                                            (11,680,563)
 Foreign currency translation adjustments                                                          146,497
 Unrealized loss on securities available for sale                                                 (531,224)

   Comprehensive loss

Issuance of common stock to Cablevision
Costs associated with the Cablevision transaction
Issuance of common stock for option and warrant exercises
Issuance of common stock for royalty payments
Issuance of common stock in exchange for preferred stock
Compensation expense associated with the issuance of options for
   consulting services provided by the Board of Directors
</TABLE>


(table continued)

<TABLE>
<CAPTION>
                                                                                     Total
                                                                                   Stockholders'
                                                                                     Equity
                                                                                    (Deficit)
--------------------------------------------------------------------------------------------------
<S>                                                                               <C>

BALANCE AT JUNE 30, 1998                                                           $22,034,347

Net Loss                                                                            (9,653,998)
                                                                                  -------------
   Comprehensive loss                                                               (9,653,998)

Issuance of common stock for option and warrant exercises                                5,837
Issuance of common stock for license rights, April 1999, $7.031 per share              100,445
Compensation expense associated with the issuance of 8,279 options
  for consulting services from October 1998 to June 1999                                29,529
Related party notes receivable issued in connection with
  delivery of L-VIS Systems to licensee                                               (328,780)
Accretion of preferred stock dividends                                                 (44,050)

--------------------------------------------------------------------------------------------------
 BALANCE AT JUNE 30, 1999                                                           12,143,330

 Net Loss                                                                          (12,444,646)
Unrealized gain on securities available for sale                                       346,167
                                                                                  -------------
   Comprehensive loss                                                              (12,098,479)

Issuance of common stock for option and warrant exercises                               81,718
Issuance of common stock for royalty payments                                          332,164
 Issuance of stock at $5.50 per share in connection with private
   equity financing, net of expenses                                                 8,229,151
Compensation expense associated with the issuance of options for
   consulting services provided by third parties and the Board of Directors            449,668
Receipt of payments on notes outstanding                                               179,956
Accretion of preferred stock dividends                                                 (44,112)

--------------------------------------------------------------------------------------------------
 BALANCE AT JUNE 30, 2000                                                            9,273,396

 Net Loss                                                                          (11,680,563)
 Foreign currency translation adjustments                                              146,497
 Unrealized loss on securities available for sale                                     (531,224)
                                                                                ---------------
   Comprehensive loss                                                              (12,065,290)

Issuance of common stock to Cablevision                                              6,156,951
Costs associated with the Cablevision transaction                                   (1,212,142)
Issuance of common stock for option and warrant exercises                               24,047
Issuance of common stock for royalty payments                                          196,861
Issuance of common stock in exchange for preferred stock                               877,118
Compensation expense associated with the issuance of options for
   consulting services provided by the Board of Directors                                2,500
</TABLE>



          See accompanying notes to consolidated financial statements.


                                      F-6
<PAGE>

Princeton Video Image, Inc.
Consolidated Statements of Changes in Stockholders' (Deficit)/Equity
For the years ended June 30, 1999, 2000 and 2001 and
for the six months ended December 31, 2001

<TABLE>
<CAPTION>

                                                                                    Common Stock
                                                                              -----------------------   Additional     Related Party
                                                                              Number of                   Paid-In          Notes
                                                                                 Shares       Amount      Capital       Receivable
------------------------------------------------------------------------------------------------------------------------------------
<S>                                                                           <C>            <C>        <C>            <C>
Receipt of payments on notes outstanding                                      (279,366)      (1,397)      (1,072,402)       933,299
Related party note issued in connection with delivery of L-VIS System
  upgrade to licensee                                                                                                       (20,414)

Compensation expense associated with the issuance of repriced
  options to employees and the Board of Directors                                                            309,087
Accretion of preferred stock dividends                                                                       (11,801)

------------------------------------------------------------------------------------------------------------------------------------
 BALANCE AT JUNE 30, 2001                                                    11,841,647      $59,206     $65,834,688       $(60,437)

 Net Loss
 Unrealized loss on securities available for sale
 Reversal of unrealized loss on securities held for sale
 Foreign currency translation adjustments

   Comprehensive loss

Issuance of common stock to Cablevision                                       1,992,091        1,992        2,118,741
Costs associated with the Cablevision transaction                                                            (910,173)
Issuance of warrants in connection with the Cablevision transaction                                         6,064,609
Issuance of common stock for the acquisition of Publicidad                    2,678,353        2,678        4,063,062
Issuance of vested warrants in connection with the acquisition of                                           1,455,553
  Publicidad
Issuance of unvested warrants in connection with the acquisition of                                           122,889
  Publicidad
Issuance of common stock to Presencia en Medios, S.A. de C.V.                   615,385          615        1,999,386
Issuance of common stock for stock option exercises                               3,389           16            5,339

Amortization of deferred compensation
Receipt of payments on notes outstanding                                                                                     60,437

Compensation expense reversal associated with the issuance of repriced
  options to employees and the Board of Directors                                                            (309,087)
Change in common stock from $.005 stated value to $.001 par value                            (47,376)          47,376
Accretion of preferred stock dividends                                                                         (3,459)
------------------------------------------------------------------------------------------------------------------------------------
 BALANCE AT DECEMBER 31, 2001                                                17,130,865      $17,131      $80,488,924        $    -
                                                                            ========================================================
</TABLE>

(table continued)

<TABLE>
<CAPTION>

                                                                                                 Other
                                                                               Deferred      Comprehensive    Accumulated
                                                                             Compensation    Income (Loss)     (Deficit)
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                                          <C>             <C>              <C>
Receipt of payments on notes outstanding
Related party note issued in connection with delivery of L-VIS System
  upgrade to licensee

Compensation expense associated with the issuance of repriced
  options to employees and the Board of Directors
Accretion of preferred stock dividends

-------------------------------------------------------------------------------------------------------------------------------
 BALANCE AT JUNE 30, 2001                                                                        $(38,560)        $(62,405,085)

 Net Loss                                                                                                           (6,990,590)
 Unrealized loss on securities available for sale                                                (185,141)
 Reversal of unrealized loss on securities held for sale                                          370,198
 Foreign currency translation adjustments                                                        (122,955)

   Comprehensive loss

Issuance of common stock to Cablevision
Costs associated with the Cablevision transaction
Issuance of warrants in connection with the Cablevision transaction
Issuance of common stock for the acquisition of Publicidad
Issuance of vested warrants in connection with the acquisition of
  Publicidad
Issuance of unvested warrants in connection with the acquisition of                (122,889)
  Publicidad
Issuance of common stock to Presencia en Medios, S.A. de C.V.
Issuance of common stock for stock option exercises

Amortization of deferred compensation                                                40,963
Receipt of payments on notes outstanding

Compensation expense reversal associated with the issuance of repriced
  options to employees and the Board of Directors
Change in common stock from $.005 stated value to $.001 par value
Accretion of preferred stock dividends
-------------------------------------------------------------------------------------------------------------------------------
 BALANCE AT DECEMBER 31, 2001                                                       $(81,926)    $23,542          $(69,395,675)
                                                                           ====================================================
</TABLE>
(table continued)

<TABLE>
<CAPTION>
                                                                            Total
                                                                          Stockholders'
                                                                            Equity
                                                                           (Deficit)
-----------------------------------------------------------------------------------------
<S>                                                                       <C>
Receipt of payments on notes outstanding                                         (140,501)
Related party note issued in connection with delivery of L-VIS System
  upgrade to licensee                                                             (20,414)

Compensation expense associated with the issuance of repriced
  options to employees and the Board of Directors                                 309,087
Accretion of preferred stock dividends                                            (11,801)

-------------------------------------------------------------------------------------------
 BALANCE AT JUNE 30, 2001                                                      $3,389,812

 Net Loss                                                                      (6,990,590)
 Unrealized loss on securities available for sale                                (185,141)
 Reversal of unrealized loss on securities held for sale                          370,198
 Foreign currency translation adjustments                                        (122,955)
                                                                           ----------------
   Comprehensive loss                                                          (6,928,488)

Issuance of common stock to Cablevision                                         2,120,733
Costs associated with the Cablevision transaction                                (910,173)
Issuance of warrants in connection with the Cablevision transaction             6,064,609
Issuance of common stock for the acquisition of Publicidad                      4,065,740
Issuance of vested warrants in connection with the acquisition of               1,455,553
  Publicidad
Issuance of unvested warrants in connection with the acquisition of                     -
  Publicidad
Issuance of common stock to Presencia en Medios, S.A. de C.V.                   2,000,001
Issuance of common stock for stock option exercises                                 5,355

Amortization of deferred compensation                                              40,963
Receipt of payments on notes outstanding                                           60,437

Compensation expense reversal associated with the issuance of repriced
  options to employees and the Board of Directors                                (309,087)
Change in common stock from $.005 stated value to $.001 par value
Accretion of preferred stock dividends                                             (3,459)
-------------------------------------------------------------------------------------------
 BALANCE AT DECEMBER 31, 2001                                                  $11,051,996
                                                                          =================
</TABLE>


          See accompanying notes to consolidated financial statements.



                                      F-7
<PAGE>

                          PRINCETON VIDEO IMAGE, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.   ORGANIZATION:

Princeton Video Image, Inc. ("PVI", "we", "us") developed and is marketing a
proprietary hardware and software system (the "L-VIS(R) System") that, through
patented computer vision technology, places computer-generated electronic images
into live and pre-recorded television broadcasts of sports and entertainment
programming. These electronic images range from simple corporate names or logos
to sophisticated multi-media 3-D animated productions. As part of our product
development program, we are developing a series of products to allow viewers to
interact with live or recorded video programming delivered to the home via the
Internet or through interactive television. These applications will enable the
viewer to influence the on-screen presentation of a broadcast which utilizes the
L-VIS System by using a mouse or other pointer, for example, to indicate areas
of interest. We are also developing other applications of technology for the
sports and entertainment fields.

We intend to focus our efforts on increasing market acceptance of the L-VIS
System by continuing to develop software applications, such as animated
insertions in event video streams. Such insertions include the virtual
first-down line in football, the virtual off sides line in soccer, and virtual
product placement in pre-recorded programming. Other software applications being
developed include Internet applications which will allow television viewers to
interact with live or recorded video programming. Under the terms of a joint
collaboration and license agreement we have entered into with Cablevision
Systems Corporation ("Cablevision"), we will work together to develop technology
to create virtual, in-content, interactive and targeted advertising and
enhancement products for use with television distribution.

We market our systems on a worldwide basis through licensing and royalty
agreements, through our majority-owned subsidiary, Princeton Video Image Europe,
N.V. ("PVI Europe"), which is headquartered in Belgium and through our
wholly-owned subsidiary, Publicidad Virtual, S.A. de C.V. ("Publicidad") which
is headquartered in Mexico City, Mexico.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

CHANGE IN FISCAL YEAR

We changed our fiscal year from June 30 to December 31, effective with the six
months ended December 31, 2001. The following is a presentation of our statement
of operations:

<TABLE>
<CAPTION>
                                               For the Six Months Ended
                                                      December 31,
                                             ----------------------------
                                                 2001           2000
                                             ------------    ------------
                                                              (Unaudited)
<S>                                          <C>             <C>


Royalties and license fees                   $  1,019,474    $  1,236,929
Advertising and production revenue              4,558,091       1,363,879
                                             ------------    ------------
            Total revenue                       5,577,565       2,600,808
Costs and expenses:
   Sales and marketing                          3,970,482       1,706,368
   Product development                          1,584,834       1,397,515
   Field operations and support                 3,128,220       2,885,651
   General and administrative                   2,609,060       2,832,356
   Severance and other charges                  1,060,832              --
                                             ------------    ------------
            Total costs and expenses           12,353,428       8,821,890
</TABLE>


                                      F-8
<PAGE>


                          PRINCETON VIDEO IMAGE, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<S>                                            <C>             <C>
Operating loss                                 (6,775,863)     (6,221,082)

   Other income, net                              193,752         237,407
   Losses from equity investment                 (176,028)             --
   Loss from securities available for sale       (500,000)             --

   Minority interest                               94,280          69,646
                                             ------------    ------------
Net loss before tax benefit                    (7,163,859)     (5,914,029)

   Tax benefit                                    173,269         371,999
                                             ------------    ------------
Net loss

                                               (6,990,590)     (5,542,030)
   Accretion of preferred stock dividends          (3,459)         (8,341)
                                             ------------    ------------
Net loss applicable to common stock          $ (6,994,049)   $ (5,550,371)
                                             ============    ============
</TABLE>


BASIS OF CONSOLIDATION

Our consolidated financial statements include all controlled subsidiaries. Our
investment in 25% of the units of Revolution Company LLC is accounted for using
the equity method. All significant intercompany balances and transactions have
been eliminated.

CASH AND CASH EQUIVALENTS

Cash and cash equivalents consist of petty cash on hand, checking accounts,
money market funds, and all highly liquid investments purchased with a maturity
of three months or less.

RESTRICTED SECURITIES HELD TO MATURITY

We have invested in U.S. Treasury Notes which, at the time of purchase, had a
maturity greater than three months but less than one year and were restricted as
to use under the terms of an existing letter of credit. We intend to hold these
debt instruments to maturity and, accordingly, have classified them as
marketable securities held to maturity at their amortized cost basis.

MARKETABLE SECURITIES

Certain marketable securities have been categorized as available for sale and,
as a result, are stated at fair value in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in
Debt and Equity Securities". Unrealized gains and losses are included in
shareholders' equity as other comprehensive income (loss). Declines in value
which are deemed to be other than temporary are recognized in the statement of
operations.

LICENSE RIGHTS

License rights are amortized over the shorter of the license term or the
estimated useful life of the rights granted and are reviewed for impairment
whenever events or circumstances occur which indicate recorded cost might not be
recoverable.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost, less accumulated depreciation.
Depreciation is provided using the straight-line method over the estimated
useful lives of the respective assets. The estimated useful lives of the L-VIS
Systems and their components are three years, office and research and
development equipment and software is five years, and furniture and fixtures is
seven years. When assets are retired or otherwise disposed of, the cost and
related depreciation are removed from the accounts and any related gains or
losses are included in the statement of operations in the year of disposal.
Expenditures for leasehold improvements are capitalized and depreciated over the
term of the underlying lease.



                                      F-9
<PAGE>


                          PRINCETON VIDEO IMAGE, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

INTANGIBLE ASSETS

Intangible assets are recorded at cost and amortized using the straight-line
method over appropriate periods.

Legal costs and filing fees incurred to apply for patents are capitalized and
amortized over an estimated useful life of 7 years.

Identifiable intangible assets include customer relationships, distribution
relationships, and trademarks and tradenames acquired in the Publicidad
acquisition and are being amortized over their estimated useful lives of 4, 5
and 3 years, respectively.

Goodwill is the excess of the purchase price over the fair value of net assets
acquired in business combinations accounted for under the purchase method. In
accordance with the provisions of SFAS No. 142, "Goodwill and Other Intangible
Assets", effective January 1, 2002, such goodwill will no longer be amortized,
but will continue to be tested for impairment.

IMPAIRMENT OF LONG-LIVED ASSETS

In accordance with SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of", all long-lived assets held
and used by us are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. An impairment loss would be recognized when estimated undiscounted
future cash flows expected to result from the use of the asset and its eventual
disposition is less than its carrying amount. If the cash flows are less than
the carrying amount, an impairment loss would be recognized for the difference
between the estimated fair value and the carrying value.

INCOME TAXES

We account for income taxes by recognizing deferred tax assets and liabilities
for the expected future tax consequences of temporary differences between the
financial statement and tax bases of assets and liabilities using enacted tax
rates in effect for the years in which the differences are expected to reverse.
We record a valuation allowance to reflect the estimated amount of deferred tax
assets which, more likely than not, will not be realized.

REVENUE

Royalty fee revenue relates to the fee received when our licensees have royalty
agreements pursuant to which we earn revenues from their use of our technology.
The minimum amounts are recorded when earned in accordance with the contract
terms. Amounts in excess of the minimum are recorded when the conditions for
earning the royalties in excess of the minimums are met.

Non-refundable license fees are recognized as revenue over the license term,
commencing when all commitments are satisfied. Additionally, under the terms of
certain agreements, we retain title to the L-VIS System and receive a
non-refundable equipment fee which reflects reimbursement for the construction
cost of the system delivered to the licensee. These equipment fees are recorded
as license revenue on a straight-line basis over the shorter of the license term
or useful life of the equipment.

Advertising revenue is recognized when earned, which is when the respective
advertisements are inserted into a television broadcast.

Production revenue is earned from fees paid by broadcasters for static and
animated visual enhancements of sporting and other events. This type of revenue
is recognized when earned, which is when the enhancement is inserted into a live
or pre-recorded television broadcast.

PRODUCT DEVELOPMENT COSTS


                                      F-10
<PAGE>

                          PRINCETON VIDEO IMAGE, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Product development costs are expensed as incurred. Included are costs
associated with all personnel, materials and contract personnel engaged in
research and development activities to increase the capabilities of the L-VIS
system hardware platforms, including platforms for overseas use, and to create
improved software programs for individual sports and program enhancement
services as well as for the internet and interactive television.

PER SHARE DATA

SFAS No. 128 requires the presentation of basic and diluted per share amounts.
Basic per share amounts are computed by dividing net loss applicable to common
stock by the weighted average number of common shares outstanding during the
period. Diluted per share amounts are computed by dividing net loss applicable
to common stock by the weighted average number of common shares outstanding plus
the dilutive effect of common share equivalents.

Since we incurred net losses for all periods presented, both basic and diluted
per share calculations are the same. Accordingly, options and warrants to
purchase 18,505,424, 4,199,479, 3,722,487 and 2,765,315 shares of common stock
that were outstanding at December 31, 2001, June 30, 2001, 2000 and 1999,
respectively, were not included in diluted per share calculations, as their
effect would be antidilutive. In addition, the accretion of preferred dividends
which could be paid out in common stock was not material for the three years
presented.

FOREIGN CURRENCY TRANSLATION

For all foreign operations, the functional currency is the local currency.
Financial statements are translated using the current rate method, whereby
assets and liabilities are translated at year-end exchange rates and revenues
and expenses at average exchange rates for the year. Translation adjustments
arising from the use of differing exchange rates from period to period are
included in other comprehensive income, a component of shareholders' equity.
Gains and losses from foreign currency transactions are included in results of
operations.

RECLASSIFICATIONS

To conform to the December 31, 2001 presentation we reclassified certain amounts
for previous years.

RISKS AND UNCERTAINTIES

We are subject to a number of risks common to companies in similar stages of
operations including, but not limited to, the lack of assurance of the
marketability of our product, intense competition, including entry of new
competitors and products into the market, the risk of technological
obsolescence, and the need to raise additional funds to support our business
operations.

LIQUIDITY

The consolidated financial statements of PVI have been prepared on the basis of
accounting principles applicable to a going concern, which contemplates the
realization of assets and the satisfaction of liabilities in the normal course
of business. We have incurred net losses of approximately $7.0 million, $11.7
million, $12.4 million and $9.7 million for the six months ended December 31,
2001 and the years ended June 30, 2001, 2000 and 1999, respectively. Our actual
working capital requirements will depend on numerous factors, including the
progress of our product development programs, our ability to maintain our
customer base and attract new customers to use the L-VIS System, the level of
resources we are able to allocate to the development of greater marketing and
sales capabilities, technological advances, our ability to protect our patent
portfolio and the status of our competitors. We expect to incur costs and
expenses in excess of expected revenues during the ensuing fiscal year as we
continue to execute our business strategy of becoming a global, media services
company by adding to our sales and marketing management force both domestically
and internationally, and to strengthen existing relationships with rights
holders, broadcasters and advertisers.



                                      F-11
<PAGE>

                          PRINCETON VIDEO IMAGE, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


     The factors noted in the above paragraph raise substantial doubt concerning
our ability to continue as a going concern. The consolidated financial
statements do not include any adjustments relating to the recoverability and
classification of asset carrying amounts or the amount and classification of
liabilities that might result should we be unable to continue as a going
concern. Our ability to continue as a going concern is dependent upon the
support of our shareholders, creditors, and our ability to close debt or equity
transactions. In the event we are unable to liquidate our liabilities, planned
operations may be scaled back. Additional funding may not be available when
needed or on terms acceptable to us, which could have a material adverse effect
on our business, financial condition and results of operations. If adequate
funds are not available we may delay or eliminate some expenditures, discontinue
operations in selected U.S. or international markets or significantly downsize
our sales, marketing, research and development and administrative functions.
These activities could impact our ability to expand our business or meet our
operating needs. The financial statements do not include any adjustments that
might result from the outcome of these uncertainties. Our management is in the
process of seeking additional financing through a variety of options including
bridge loans or equity financing with existing shareholders, financial
institutions or strategic investors. There is no assurance, however, that any
such transactions will provide sufficient resources to support us until we
generate sufficient cash flow to fund our operations.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the dates of the financial statements and
the reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates. Estimates are used for, but
not limited to, the accounting for: the future recoverability of the L-VIS
System costs, impairment of intangibles, depreciation and amortization and
accrued expenses.

3.   NEW PRONOUNCEMENTS

In July 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No.
141, "Business Combinations". This statement addresses financial accounting and
reporting for business combinations. All business combinations in the scope of
this statement are to be accounted for using only the purchase method. The
provisions of this statement apply to all business combinations initiated after
June 30, 2001. The acquisition of Publicidad, which closed in September 2001,
was accounted for in accordance with the provisions of this statement.

In July 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangibles".
This statement addresses financial accounting and reporting for acquired
goodwill and other intangible assets. It addresses how intangible assets that
are acquired individually or with a group of other assets, but not those
acquired in a business combination, should be accounted for in financial
statements upon their acquisition. This statement also addresses how goodwill
and other intangibles should be accounted for after they have been initially
recognized in the financial statements. The provisions of this statement are to
be applied starting with fiscal years beginning after December 15, 2001. In
addition, goodwill and intangible assets acquired after June 30, 2001 will be
subject immediately to the non-amortization and amortization provisions of this
statement. Under a nonamortization approach, goodwill and certain intangibles
will not be amortized into results of operations, but instead will be reviewed
for impairment and an impairment charge will be recorded in the periods in which
the recorded carrying value of goodwill and certain intangibles is more than its
estimated fair value. We adopted this statement during the quarter ended
September 30, 2001 with respect to the acquisition of Publicidad. Prior to
adopting SFAS 142, we did not have any goodwill and thus the "as adjusted"
disclosure required by SFAS 142 is not included.

In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations." This standard requires that obligations associated with the
retirement of a tangible long-lived asset be recorded as a liability when those
obligations are incurred, with the amount of the liability initially measured at
fair value. Upon initially recognizing a liability for an asset retirement
obligation, an entity must capitalize the cost by recognizing an increase in the
carrying amount of the related long-lived asset. Over time, this liability is
accreted to its present value, and the capitalized cost is depreciated over the
useful life of the related asset. Upon settlement of the liability, an entity
either settles the obligation for its recorded amount or incurs a gain or loss
upon settlement. The provisions of this statement will be effective for
financial statements issued for fiscal years beginning after June 15, 2002. We
do not expect that the adoption of this statement will have a material impact on
our results of operations, financial position or cash flows.



                                      F-12
<PAGE>

                          PRINCETON VIDEO IMAGE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." This statement supersedes SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of." The standard provides accounting and reporting requirements for
the impairment of all long-lived assets (including discontinued operations) and
it also extends the reporting requirements for discontinued operations of APB
Opinion No. 30, "Reporting the Results of Operations - Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions," to all components of an entity. The primary
purpose of SFAS No. 144 is to establish guidelines to create a consistent
accounting model for the impairment of long-lived assets to be disposed of and
to clarify some implementation issues of SFAS No. 121. We will adopt SFAS No.
144 effective January 1, 2002 and do not expect it have a material impact on our
results of operations, financial position or cash flows.

4.   CABLEVISION TRANSACTION

In February 2001, we entered into a stock and warrant purchase agreement (the
"Stock and Warrant Purchase Agreement") with PVI Holding, LLC ("PVI Holding") a
wholly owned subsidiary of Cablevision. The transaction contemplated by the
stock and warrant purchase agreement (the "Cablevision Transaction") was
completed in two parts. The first closing under the agreement was held in
February 2001, and PVI Holding purchased 2,007,909 shares of our common stock
for approximately $5 million. At the second closing, held in September 2001, PVI
Holding purchased an additional 1,992,091 shares of our common stock and
warrants to purchase 11,471,908 shares of our common stock for an aggregate
purchase price of approximately $5 million. In addition, 500,000 warrants were
issued to Presencia as part of the second closing. If we issue securities in the
future, PVI Holding will have the preemptive right to purchase sufficient shares
of our common stock to maintain its percentage of ownership as of the date of
exercise. For so long as PVI Holding beneficially owns at least 75% of its
original investment, it has the right to designate one director to our Board.

In connection with the Cablevision Transaction, PVI and Cablevision executed a
license agreement granting Cablevision and its affiliates the right to use our
L-VIS(TM) System and related proprietary rights in its businesses. Under the
terms of the agreement, we received advance payments of $2.5 million and $5
million in February and September 2001, respectively. The royalties and other
payments due to PVI under the license agreement and under the joint
collaboration and license agreement described below (the "Cablevision
Agreements") are creditable against these advance payments. The license
agreement provides that we will receive royalties based on Cablevision's
revenues from use of the L-VIS(TM) System, an equipment fee equal to our direct
costs of manufacturing each L-VIS(TM) System we provide under the license, and
enhancement fees for electronic insertions for which Cablevision does not
receive revenues based on our direct costs of providing such insertions. If PVI
terminates the license for any reason, the unused portion of the advance
payments and the undepreciated value of the equipment are refundable to
Cablevision.

With respect to the allocation of the proceeds to the individual components of
the transaction, we allocated the proceeds to the common stock warrants and
advance payments received in proportion to their relative fair value. The fair
value of the warrants were determined using a Black Scholes calculation. Based
on this methodology, we allocated $6.1 million and $2.1 million to common stock
and additional paid-in-capital for the first and second closings, respectively,
and $6.1 million to additional paid-in-capital for the issuance of warrants in
the second closing. In order to reflect the refundable advance payments received
at the first and second closings at their maximum refundable amounts, $1.4
million and $1.8 million, respectively, was allocated to deferred revenue and
divided into two components. A total of $7.5 million was recorded as advance
payments and a debit of $4.4 million was recorded as deferred revenue credits
which will be amortized as a reduction in revenue earned under the Cablevision
Agreement.



                                      F-13
<PAGE>
                          PRINCETON VIDEO IMAGE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Also in connection with the Cablevision Transaction, we entered into a joint
collaboration and license agreement with Cablevision, pursuant to which we will
be working together to develop technology to promote interactive use of, and
targeted advertising in, video delivery systems at various points in the
distribution system. In furtherance of the agreement, PVI and Cablevision are
cross-licensing to each other, on a non-exclusive basis, our current
technologies for use in the development phase of the project. For products and
technology developed under the agreement and which relate to interactive and
enhancement products specifically for use with television distribution,
Cablevision will pay us a royalty based on related revenues. We received a
license to use, commercialize and sub-license and Cablevision received a license
to use any technology and products developed under the joint collaboration and
license agreement.

No revenues were recognized under the Cablevision Agreements through December
31, 2001.

5.  PUBLICIDAD ACQUISITION:

In December 2000, we entered into a reorganization agreement (the
"Reorganization Agreement") with Presencia en Medios S.A. de C.V. ("Presencia")
and certain of its affiliates, which agreement was later amended on February 4,
2001. On September 20, 2001 we completed the transaction contemplated by the
Reorganization Agreement (the "Presencia Transaction"), whereby Presencia and
its affiliates sold their shares of Publicidad to us and our affiliate Princeton
Video Image Latin America, LLC ("PVI Latin America"), and Publicidad became our
wholly-owned subsidiary. The acquisition, which was a stock-for-stock
transaction, was recorded using the purchase method of accounting. The total
purchase price of Publicidad was $6.4 million and consisted of the following
costs to PVI:

<TABLE>

<S>                                                                         <C>
     Shares of PVI stock exchanged for Publicidad stock                     2,678,353
     PVI average stock price a few days before and
       after the Acquisition was agreed to                                     $1.518
     Value of PVI stock issued for the acquisition                          4,065,740
     Fair value of vested warrants issued for the acquisition               1,455,553
     Acquisition costs                                                        979,299
                                                                           ----------
      Total Purchase Price                                                 $6,500,592
                                                                           ==========
</TABLE>

The preliminary allocation of the purchase price to the acquired assets and
assumed liabilities of Publicidad has been adjusted as the fair value appraisal
of the assets and liabilities and estimated acquisition costs have been
finalized. The adjusted allocation is as follows:

<TABLE>

<S>                                                                                <C>
     Net book value of Publicidad after adjustments to eliminate
        balances and activities between entities                                   $(2,038,652)
     Fair value adjustments:
        Customer relationships - 4 year life                                         1,000,000
        Distribution relationships - 5 year life                                     2,100,000
        Trademarks and tradenames - 3 year life                                        100,000
        Goodwill - indefinite life                                                   5,339,244
                                                                                   -----------
                                                                                   $ 6,500,592
                                                                                   ===========
</TABLE>

Other than the fair value adjustments displayed in the table above, the net book
value of Publicidad's assets and liabilities at the date of acquisition
approximates fair value.

We may make additional refinements to the allocation of the purchase price in
future periods as the related fair value appraisal of certain assets and
liabilities are finalized. The purchase of Publicidad has


                                      F-14
<PAGE>
                           PRINCETON VIDEO IMAGE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

been recorded with an effective date of September 30, 2001. The impact of
results from September 20, 2001 through September 30, 2001 was immaterial and
therefore not included in our consolidated results.


The following is a proforma summary of the unaudited results of operations as if
the acquisition by PVI of Publicidad had been completed on July 1, 2000.



<TABLE>
<CAPTION>
                                              For the Six Months      For the year
                                                    Ended                 Ended
                                              December 31, 2001       June 30, 2001
                                             --------------------- --------------------
<S>                                             <C>                    <C>
Revenues                                        $  6,705,068            $ 11,167,896
Net Loss                                          (8,132,520)            (16,002,231)
Net Loss Applicable to Common Stock               (8,135,979)            (16,014,035)
Basic and diluted net loss per share
   applicable to common stock                   $      (0.51)           $      (1.19)
Weighted average number of shares
   of common stock outstanding                    15,837,136              13,409,987
</TABLE>


6.  SEVERANCE AND OTHER CHARGES:

In November 2001 we recorded approximately $980,000 in severance payments due to
a former member of our management team. These payments will be paid over the
three year period from November 2001 through October 2004. In addition, we
recorded approximately $80,000 for future lease payments due on office space in
our New Jersey and Belgium offices which, due to the streamlining of our
operations, will not be used after January 2002. Both the severance and lease
payments were accrued during the six months ended December 31, 2001.

7.  MARKETABLE SECURITIES:

During the six months ended December 31, 2001, it was determined that there had
been a decline in value which was not temporary in nature. Accordingly, a
$500,000 unrealized loss was recognized in the statement of operations. As of
June 30, 2001 and 2000, the value of our available for sale securities was as
follows:

<TABLE>
<CAPTION>
                                                                                 June 30,
                                                                          ------------------------
                                                                            2001            2000
                                                                            ----            ----
<S>                                                                        <C>            <C>
Pineapplehead Limited
   1,692,333 shares       Cost                                           $ 500,000        $500,000
     common stock         Cumulative unrealized (loss) gain               (185,057)        346,167
                                                                         ----------       --------
                          Market value                                   $ 314,943        $846,167
                                                                         ==========       ========
</TABLE>

8.  LICENSE RIGHTS

On April 21, 2000, we entered into an agreement with NFL International, a
division of NFL Enterprises, L.P., retroactively effective to February 1, 2000.
Under the terms of the agreement, we were granted exclusive rights to use
electronic insertion technology in certain NFL International broadcasts of
NFL/NFLEL games during the 2000 and 2001 season and non-U.S. telecasts of Super
Bowl XXXV and XXXVI. This agreement extended a previous agreement we had with
NFL International which lasted one year and ended with Super Bowl XXXIV. We
recorded an intangible asset and a corresponding liability on our balance sheet
for the acquisition of the license rights under both agreements. These rights
are amortized on a straight line basis and payments are made over the term of
the license agreements according to a pre-determined payment schedule. For the
six months ended December 31, 2001, and for


                                      F-15


<PAGE>
                           PRINCETON VIDEO IMAGE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

the years ended June 30, 2001, 2000 and 1999, the amortization expense with
respect to these rights totaled $300,000, $600,000, $1,416,669 and $833,333,
respectively. A total of $ -0-, $700,000, $1,300,000 and $400,000 in cash
payments were made during the six months ended December 31, 2001 and the years
ended June 30, 2001, 2000 and 1999, respectively. The remaining balance payable
was $800,000 at December 31, 2001 and June 30, 2001 and $1,500,000 at June 30,
2000.

9.  PREPAID AIRTIME

Publicidad has obtained the rights to the virtual airtime of two television
networks in Mexico, Televisa, S.A. de C.V.("Televisa") and TV Azteca, S.A. de
C.V. ("TV Azteca"). Prepaid airtime is recorded as an asset and amortized as it
is used, which is when ads are broadcast over the air. Management believes that
all amounts related to unused airtime are fully recoverable during the current
fiscal year. The unused airtime as of December 31, 2001 was as follows:

<TABLE>

<S>                                                             <C>
       Televisa                                                 $    2,277,290
       TV Azteca                                                       436,243
                                                                --------------
            Total                                               $    2,713,533
                                                                ==============
</TABLE>

10.  OTHER CURRENT ASSETS

Other current assets consisted of the following:

<TABLE>
<CAPTION>
                                                                                   June 30,
                                                  December 31,        ---------------------------------
                                                      2001                 2001                 2000
                                                  ------------         -----------          -----------
<S>                                               <C>                  <C>                  <C>
     Prepaid and recoverable taxes                $   532,521          $    39,368          $         -
     Prepaid insurance                                111,330              103,584               70,128
     Prepaid license fees                              23,679               25,718                    -
     Other assets                                     220,265              175,862              128,440
                                                  -----------          -----------          -----------
          Other current assets                    $   887,795          $   344,532          $   198,568
                                                  ===========          ===========          ===========
</TABLE>




11.  PROPERTY AND EQUIPMENT:

The costs and accumulated depreciation of property and equipment are summarized
as follows:


<TABLE>
<CAPTION>
                                                                                        June 30,
                                                      December 31,          ---------------------------------
                                                          2001                  2001                 2000
                                                      ------------         -------------       -------------
<S>                                                  <C>                  <C>                  <C>

       Furniture and fixtures                         $    312,691         $     275,850       $     264,659
       Leasehold improvements                              148,727                99,357              91,824
       Office equipment                                  2,951,311             1,893,511           1,743,481
       LVIS Systems, rack components
         and spare parts                                 6,233,371             6,082,536           5,585,353
       Research and development
         equipment and software                            569,751               519,351             503,174
       Vehicles                                            470,771               322,395              87,930
                                                      ------------         -------------       -------------
            Total property and equipment                10,686,622             9,193,000           8,276,421
       Less: accumulated depreciation                   (7,829,889)           (6,197,312)         (4,591,353)
                                                      ------------         -------------       -------------
            Property and equipment, net               $  2,856,733         $   2,995,688       $   3,685,068
                                                      ============         =============       =============
</TABLE>



                                      F-16
<PAGE>
                           PRINCETON VIDEO IMAGE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


Depreciation expense amounted to $901,277, $1,853,991, $1,849,189 and $1,249,235
for the six months ended December 31, 2001 and for the years ended June 30,
2001, 2000 and 1999, respectively.

12.  INTANGIBLE ASSETS:

The costs and accumulated amortization of our patents and pending applications,
and other identifiable intangible assets are summarized as follows:

<TABLE>
<CAPTION>
                                                                                        June 30,
                                                      December 31,         ---------------------------------
                                                           2001                 2001                2000
                                                      -------------        -------------       -------------
<S>                                                   <C>                  <C>                 <C>
       Patents                                        $     977,017        $     941,418       $     854,606
       Less: accumulated amortization                      (449,335)            (385,561)           (267,120)
                                                      -------------        -------------       -------------
            Patents, net                              $     527,682        $     555,857       $     587,486
                                                      =============        =============       =============

       Identifiable intangibles:
         Customer relationships                       $   1,000,000        $           -       $           -
         Distribution relationships                       2,100,000                    -                   -
         Trademarks                                         100,000                    -                   -
       Less: accumulated amortization                      (175,833)
                                                      -------------        -------------       -------------
            Identifiable intangibles, net             $   3,024,167        $           -       $           -
                                                      =============        =============       =============
</TABLE>


Amortization expense amounted to $239,607, $118,567, $95,813 and $77,770 for the
six months ended December 31, 2001 and for the years ended June 30, 2001, 2000
and 1999, respectively.

13.  INVESTMENTS

On January 24, 2001, we entered into an operating agreement with CBS Technology
Corporation and Core Digital Technologies, Inc. to form Revolution Company, LLC.
The purpose of the Revolution Company is to develop, market and render
entertainment technical production services such as EyeVision, a technology able
to produce three-dimensional replays from multi-camera angles, which made its
debut in Super Bowl XXXV. Under the terms of the operating agreement, the
percentage ownership interests of the parties is as follows:

<TABLE>

<S>                                                                                 <C>
                  Princeton Video Image, Inc.      ...............................  25%
                  Core Digital Technologies, Inc.  ...............................  35%
                  CBS Technology Corporation       ...............................  40%
</TABLE>

Our initial contribution to the joint venture was $850,000. The structure of
this investment was for $25,000 to be considered as an equity contribution with
the remaining $825,000 to be a secured loan to the joint venture. We use the
equity method to account for our investment in the Revolution Company and,
accordingly, during the six months ended December 31, 2001 and the year ended
June 30, 2001 recorded our share of the losses in the amounts of $176,028 and
$114,243, respectively. Although we have no further commitment to fund the
operations of the Revolution Company or guarantee its debts, we contributed an
additional $8,066 during the six months ended December 31, 2001 as our
percentage share of a payment for legal services provided.


                                      F-17
<PAGE>
                           PRINCETON VIDEO IMAGE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)



14.  ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consisted of the following:

<TABLE>
<CAPTION>

                                                                           June 30,
                                             December 31,        ------------------------------
                                                 2001                2001              2000
                                             -------------       -------------    -------------
<S>                                          <C>                 <C>              <C>
         Accounts payable                    $   4,950,977       $   1,661,342    $   1,258,056
         License fees and royalties                412,463             990,774        1,625,215
         Legal and accounting fees                 441,050             463,622          348,683
         Other                                     194,903             962,175          903,106
                                             -------------       -------------    -------------
                                             $   5,999,393       $   4,077,913    $   4,135,060
                                             =============       =============    =============
</TABLE>


15.  ACCOUNTS PAYABLE TO TELEVISION NETWORKS

Accounts payable to television networks at December 31, 2001 consisted of the
following:

<TABLE>

<S>                                                         <C>
              Televisa                                      $   2,944,641
              Epesa                                               832,474
              TV Azteca                                           583,257
                                                            -------------
                   Total                                    $   4,360,372
                                                            =============
</TABLE>


16.  NOTES PAYABLE

Publicidad obtained a short-term loan, denominated in Mexican pesos, from a
Mexican bank which is payable in May 2002. The note, which is guaranteed by
Presencia, bears an interest rate of 10.9%. Proceeds from the loan are being
used to fund the installment payments due to Televisa and TV Azteca (see Note
15). The balance of the note payable at December 31, 2001 was $1,090,608 and is
expected to be paid in full when due.

17.  LICENSE AND ROYALTY FEES:

Under the terms of certain customer agreements, we retain title to the L-VIS
System and receive a non-refundable fee which reflects the construction cost of
the L-VIS system delivered to the licensee. These fees are recorded as license
revenue on a straight-line basis over the shorter of the license term or the
useful life of the equipment. Recognition of license revenue related to these
agreements amounted to $138,930, $227,840, $548,557 and $340,185 for the six
months ended December 31, 2001 and the years ended June 30, 2001, 2000, and
1999, respectively. The remaining unearned revenue related to these agreements
was $364,269 at December 31, 2001, of which $179,436 was current, $1,030,114 at
June 30, 2001, of which $418,304 was current, and $923,852 at June 30, 2000, of
which $293,819 was current. Included in the balances at June 30, 2001 was
$556,357 related to equipment being used by Publicidad. This unamortized balance
was reflected as a reduction in the purchase price of Publicidad at the date of
acquisition.

18.  INCOME TAXES:

The components of income tax expense (benefit) are as follows:

<TABLE>
<CAPTION>

                                                                            June 30,
                                             December 31,        ------------------------------
                                                 2001                2001              2000
                                             -------------       -------------    -------------
<S>                                          <C>                                       <C>
          Current:
             Foreign                         $   145,318                               $  -
</TABLE>




                                      F-18
<PAGE>
                           PRINCETON VIDEO IMAGE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

<TABLE>

<S>                                            <C>                  <C>                       <C>
             Federal
             State                                  (318,587)       $   (371,999)             $(596,998)
          Deferred:
             Federal                                        -                   -                 -
             State                                          -                   -                 -

          Income tax expense                    $   (173,269)       $   (371,999)             $(596,998)
</TABLE>


The $145,318 in foreign taxes is primarily due to the acquisition of
Publicidad. Other local and franchise taxes totaled $14,506.

Temporary differences which give rise to significant deferred tax assets and
liabilities at December 31, 2001, June 30, 2001 and 2000 are as follows:

<TABLE>
<CAPTION>

                                                                               June 30,
                                                 December 31,      --------------------------------
          Deferred tax assets:                       2001                 2001              2000
                                               --------------      --------------    --------------
<S>                                            <C>                 <C>               <C>
            Capitalized start-up costs         $       18,731      $       21,406    $            -
            Fixed assets                              379,103             262,677           409,496
            Deferred revenue and other              1,194,763             840,860           457,227
            Equity investment                         340,566              38,843                 -
            Accrued expenses                          249,252              44,530                 -
            State taxes                               188,116             238,378                 -
            Other                                      55,803              93,126                 -
            NOL Carryforward - Foreign              3,384,640             871,248                 -
            NOL Carryforward - Federal             16,204,319          16,043,765        13,424,134
            NOL Carryforward - State taxes                  -                   -         3,522,398
            Valuation allowance - Foreign          (2,867,926)           (871,248)                -
            Valuation allowance - Federal         (16,872,766)        (17,159,313)      (14,095,008)
            Valuation allowance - State              (188,116)           (238,378)       (3,522,398)
                                               --------------      --------------    --------------
              Total deferred tax assets             2,086,485             185,894           195,849

          Deferred tax liabilities:
            Prepaid expenses                          816,137
            Intangibles                             1,270,348             185,894           195,849
                                               --------------      --------------    --------------
              Total deferred tax liabilities        2,086,485             185,894           195,849

              Net deferred taxes               $            -      $            -    $            -
                                               ==============      ==============    ==============
</TABLE>


Due to the uncertainty of the realization of the deferred tax assets, a full
valuation allowance has been provided. As a result of our reincorporation as a
Delaware corporation in connection with the Cablevision transaction, our state
net operating loss carryforwards will expire unutilized. Therefore, our deferred
state tax asset and corresponding valuation allowance have been reduced to
reflect the expiration of the state net operating loss carryforwards.

The difference between the statutory U.S. federal income tax rate and our
effective tax rate for the six months ended December 31, 2001 is primarily due
to the state tax benefit recognized upon the sale of our unused state net
operating losses and research and development tax credits, foreign withholding
taxes and the change in our valuation allowance.


                                      F-19
<PAGE>
                           PRINCETON VIDEO IMAGE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


As of December 31, 2001, we had net operating loss carryforwards for U.S.
federal income tax purposes of approximately $47,660,000 which expire in the
years 2006 through 2022. The timing and manner in which the U.S. net operating
loss carryforwards may be utilized in any year by us will be limited by Internal
Revenue Code Section 382. As of December 31, 2001, we had foreign net operating
loss carryforwards of approximately $9,144,000 which primarily expire in the
years 2006 through 2009.

In July 2000 and 2001, we filed applications with the New Jersey Economic
Development Authority ("NJEDA") to sell a portion of our unused state Net
Operating Loss ("NOL") carryover and unused Research and Development ("R&D") Tax
credits for a minimum of 75% of the value of the tax benefits. Under the terms
of this NJEDA program, developed in 1999, we are required to use the proceeds of
the sale for the purchase of fixed assets, working capital and any other
expenses determined by the NJEDA to be in conformity with the NJ Emerging
Technology and Biotechnology Financial Assistance Act. The final determination
of the amount we received was subject to adjustment by the State of New Jersey
based on the amount of the total applications received. In December 2001, 2000
and 1999, we sold $397,611, $495,998 and $795,997 of our total $1,636,483,
$1,668,792 and 1,812,019 of state tax benefit of unused state NOL and R&D tax
credits and received $333,993, $371,999 and $596,998, respectively. These
amounts were recognized as income tax benefits in the quarters ended December
31, 2001, 2000 and 1999, respectively.

19.  COMMON AND PREFERRED STOCK

COMMON STOCK

Pursuant to our Certificate of Incorporation, we are prohibited from paying any
dividends on our Common Stock until all accumulated dividends in respect of the
Series A Preferred Stock and Series B Preferred Stock have been paid.

On July 1, 1999, we implemented a Company match under our 401(k) retirement plan
(the "Plan") whereby we agreed to match employee contributions with our common
stock at the rate of 50% of the amount an employee contributes, up to 5% of
salary. The contribution of stock is made on a monthly basis and matching
contributions vest over three years. We recorded an expense of $46,371, $87,089
and $68,782 and reserved 16,458, 22,878 and 10,992 shares of common stock to
participants for the six months ended December 31, 2001 and the years ended June
30, 2001 and 2000, respectively. At December 31, 2001, 46,203 of the contributed
shares were fully vested.

On September 20, 2001, we issued 1,992,091 shares of common stock in connection
with a Stock and Warrant Purchase Agreement entered into with PVI Holding, LLC
(see Note 4).

On September 20, 2001 we issued 2,678,353 shares of common stock in connection
with the acquisition of Publicidad (see Note 5).

On November 8, 2001, we completed the sale of 615,385 shares of common stock to
Presencia en Medios, S.A. de C.V. at $3.25 per share (see Note 24).

PREFERRED STOCK

We are authorized to issue up to 1,000,000 shares of the preferred stock in one
or more series. Our Board of Directors is authorized to fix the relative rights,
preferences, privileges and restrictions thereof, including dividend rights,
dividend rates, conversion rights, terms of redemption, redemption prices,
liquidation preferences, the number of shares constituting any series and the
designation of such series. The issuance of preferred stock with voting and
conversion rights may adversely affect the voting power of the holders of our
Series A Preferred Stock, Series B Preferred Stock and Common Stock, including
the loss of voting control. Other than the shares of Series A Preferred Stock
and Series B Preferred


                                      F-20
<PAGE>
                           PRINCETON VIDEO IMAGE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Stock, there are no shares of preferred stock currently issued and outstanding.
As of September 13, 2001, PVI was reincorporated as a Delaware corporation in
conjunction with the Cablevision transaction. As a Delaware corporation, we are
authorized to issue a total of 1,000,000 shares of preferred stock in one or
more series of which 11,363 and 12,834 shares of the Series A and Series B
Preferred stock, respectively, have been issued and are outstanding. The Board
of Directors is authorized to fix the relative rights, preferences, privileges
and restrictions of the remaining 975,803 issued shares of preferred stock.

Series A Preferred Stock

At December 31, 2001 we had issued a total of 67,600 shares of Series A
Redeemable Preferred Stock with a par value of $4.50 per share, of which 11,363
were outstanding. Dividends shall be paid either in cash or with our common
stock at a six percent per annum dividend rate. We have the right at any time
after the date of original issuance of the Series A Preferred Stock to redeem
the Series A Preferred Stock in whole or in part at a price of $4.50 per share
plus all accrued but unpaid dividends. We are required to redeem this preferred
stock in cash at par plus all accrued but unpaid dividends from thirty percent
of the amount by which our annual net income after taxes exceeds $5,000,000.

Dividends on the shares of Series A Preferred Stock are cumulative and must be
paid in the event of liquidation and before any distribution to holders of
common stock. Cumulative dividends in arrears at December 31, 2001, June 30,
2001 and 2000 totalled $27,618 (or $2.43 per share), $26,084 (or $2.30 per
share) and $137,750 (or $2.01 per share), respectively.

The Series A Preferred Stock has no liquidation preference, no conversion rights
and no registration rights.

Series B Preferred Stock

At December 31, 2001 we had issued a total of 86,041 shares of Series B
Redeemable Preferred Stock with a par value of $5.00 per share, of which 12,834
shares were outstanding. Dividends shall be paid either in cash or with our
common stock at a six percent per annum dividend rate. We have the right at any
time after the date of original issuance of the Series B Preferred Stock, but
subject to the prior redemption of all of the Series A Preferred Stock, to
redeem the Series B Preferred Stock in whole or in part at a price of $5.00 per
share plus all accrued but unpaid dividends. We are required, subject to the
prior redemption of all of the Series A Preferred Stock, to redeem this
preferred stock in cash at par plus all accrued but unpaid dividends from twenty
percent of the amount by which our annual net income after taxes in any year
exceeds $5,000,000.

Dividends on the shares of Series B Preferred Stock are cumulative and must be
paid in the event of liquidation and before any distribution to holders of
common stock. No dividends may be paid with respect to this stock until all
cumulative dividends in respect of Series A Preferred Stock have been paid.
Cumulative dividends in arrears at December 31, 2001, June 30, 2001 and 2000,
totaled $30,793 (or $2.40 per share), $28,868 (or $2.25 per share) and $165,612
(or $1.92 per share), respectively.

The Series B Preferred Stock has no liquidation preference, no conversion rights
and no registration rights.

On July 13, 2000, we offered all shareholders of the Series A Preferred stock
and Series B Preferred stock the opportunity to exchange their shares of
preferred stock for shares of our common stock. Under the terms of the exchange,
the preferred shares were exchanged for a number of common shares equal to the
par value of the preferred plus accrued but unpaid dividends, divided by the
average of the closing sales price of the common stock as quoted on the NASDAQ
National Market for the ten (10) business days immediately preceding the closing
date of the transaction. The holders of the Series A preferred


                                      F-21
<PAGE>
                           PRINCETON VIDEO IMAGE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

stock and the Series B preferred stock that elected to exchange their shares
received 1.2494 shares and 1.3296 shares of common stock, respectively, for each
share of the applicable series of preferred stock exchanged. The transaction
closed on August 17, 2000. Of the 67,600 shares of Series A Preferred which were
outstanding at the date of the offer, 56,237 shares were exchanged for 70,256
shares of common stock. Of the 86,041 shares of Series B Preferred which were
outstanding at the date of the offer, 73,207 shares were exchanged for 97,313
shares of common stock.

Changes in the preferred stock accounts were as follows:

<TABLE>
<CAPTION>
                                                Series A                      Series B
                                                  No. of                        No. of
                                                  Shares      Amount            Shares      Amount           Total
                                                ---------     ------          --------      ------           -----
<S>                                              <C>      <C>                  <C>      <C>             <C>
Balance at June 30, 1998                          67,600  $  403,450            86,041  $  544,155      $  947,605
Accretion of preferred stock dividends                        18,250                        25,800          44,050
                                                  ------   ---------            ------   ---------      ----------
Balance at June 30, 1999                          67,600     421,700            86,041     569,955         991,655
Accretion of preferred stock dividends                        18,250                        25,862          44,112
                                                  ------   ---------            ------   ---------      ----------
Balance at June 30, 2000                          67,600     439,950            86,041     595,817       1,035,767
Exchange of preferred stock
   for common stock                              (56,237)   (367,792)          (73,207)   (509,521)       (877,313)
Accretion of preferred stock dividends                         5,059                         6,742          11,801
                                                  ------   ---------            ------   ---------      ----------
Balance at June 30, 2001                          11,363   $  77,217            12,834   $  93,038      $  170,255
Accretion of preferred stock dividends                         1,534                         1,925           3,459
                                                  ------   ---------            ------   ---------      ----------
Balance at December 31, 2001                      11,363   $  78,751            12,834   $  94,963      $  173,714
                                                  ======   =========            ======   =========      ==========

</TABLE>

20.  WARRANTS AND OPTIONS:

WARRANTS

We had outstanding a total of 14,943,376, 1,307,130, 1,307,130 and 1,192,130
warrants to purchase common stock at December 31, 2001, June 30, 2001, 2000, and
1999, respectively. The exercise prices range from $2.31 to $20.00 per share and
the expiration of such warrants range from 2002 to 2007. The following is a
description of warrant activity for the six months ended December 31, 2001 and
the fiscal years ended June 30, 2001, 2000 and 1999.

In connection with a July 1994 issuance of common stock to Blockbuster
Entertainment Corporation ("Blockbuster"), we issued warrants with a five year
term to purchase 70,000 shares of common stock at an exercise price of $15.00
per share. These warrants expired unexercised in July 1999.

In October 1997, we issued warrants with a five year term to purchase 300,000
shares of common stock at an exercise price of $0.01 per share in connection
with a Bridge Financing. As of June 30, 2000, all of these warrants had been
exercised, with 10,000 and 15,700 being exercised during the fiscal years ended
June 30, 1999 and 2000, respectively.

In connection with services rendered on our behalf with respect to a private
equity offering completed in October 1999, we issued warrants to purchase
200,000 shares of common stock at an exercise price of $6.05 to a financial
advisor.

In connection with the Reorganization Agreement we entered into with Presencia
and others as described in Note 5, a warrant to purchase 100,000 shares of our
common stock was issued to Allen & Co. as consideration for their issuance of a
fairness opinion in connection with this transaction. The warrant was issued
with an exercise price of $2.3065 and has an expiration date of December 20,
2005. The value of


                                      F-22
<PAGE>
                           PRINCETON VIDEO IMAGE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

this warrant was calculated using the Black Scholes method and a charge of
$100,762 was recorded as part of the acquisition. A second warrant to purchase
100,000 shares of common stock was issued to Allen & Co. on September 20, 2001,
upon the consummation of the transaction contemplated by the Reorganization
Agreement. This warrant, issued as consideration for financial advisory services
provided by Allen & Co. in connection with the transaction, was issued with an
exercise price of $3.91 per share and is exercisable for five years. The value
of this warrant was calculated using the Black Scholes method and a charge of
235,078 was recorded as an increase in additional paid in capital for the
issuance of the warrants and a corresponding decrease in additional paid in
capital as a cost of the transaction resulting in no net effect to the financial
statements.

In connection with the acquisition of Publicidad, as described in Note 9, on
September 20, 2001 we issued to Presencia and its affiliate Presence en Media
LLC ("Presence") warrants to purchase an aggregate of 1,036,825 shares of our
common stock, as consideration for Presencia and its affiliates selling to us
and our affiliate, PVI Latin America, all of their shares of Publicidad. The
warrants issued in this transaction were divided into eleven separate groups,
and they expire at various times, depending on the group, from December 16, 2002
to January 1, 2007, and have, again dependent upon the group, an exercise price
which ranges from $3.72 to $20.00 per share. 959,086 of these warrants were
vested and were included as part of the purchase price, while 77,739 of these
warrants were unvested and were recorded as deferred compensation and will be
recognized as compensation expense over the nine month vesting period beginning
October 1, 2001 and ending June 30, 2002 in accordance with Financial
Accounting Standards Board Interpretation (FIN) No. 44. This nine month period
represents the additional service provided.

In connection with the Stock and Warrant Purchase Agreement we entered into with
Cablevision, as described in Note 4, a warrant to purchase 11,471,908 shares of
our common stock was issued to PVI Holding, LLC. This warrant is exercisable for
three years from the date of issuance at an exercise price of $8.00, $9.00 and
$10.00 per share during the first, second and third years of the term,
respectively. These warrants were included in the fair value allocation
described in Note 4. Pursuant to the terms of the warrant, the number of shares
purchasable upon exercise of the warrant is automatically adjusted upon any
issuance by us of common stock so that the warrant represents the right to
purchase the same percentage of outstanding shares before the issuance as after.
Accordingly, a warrant adjustment to purchase an additional 427,513 shares of
our common stock was made on November 8, 2001, the date of the sale to Presencia
of 615,385 shares of common stock. The value of this warrant was calculated
using the Black Scholes method and a charge of $123,628 was recorded as an
increase in additional paid in capital for the issuance of the warrants and a
corresponding decrease in additional paid in capital as a reduction of the
proceeds of the transaction resulting in no net effect to the financial
statements.

In September 2001, we issued to Presencia a warrant to purchase 500,000 shares
of our common stock as partial consideration for waiving the participation
rights granted to it under the reorganization agreement with respect to the
issuance of securities in connection with the Cablevision Transaction. The
warrant is exercisable for three years from the date of issuance at an exercise
price of $8.00, $9.00 and $10.00 per share during the first, second and third
years of the term, respectively. The value of these warrants was calculated
using the Black Scholes method and a charge of $241,462 was recorded as an
increase in additional paid in capital for the issuance of the warrants and a
corresponding decrease in additional paid in capital as a reduction of the
proceeds of the transaction resulting in no net effect to the financial
statements.

STOCK OPTION PLAN

We adopted a Stock Option Plan (the "Plan") in July 1993 for our employees,
officers, directors, consultants and independent contractors. The Plan initially
reserved 360,000 shares of common stock for issuance upon the exercise of stock
options. The Plan was amended in 1995, 1996, 1997,1998 and 2001 to reserve
additional shares. As of June 30, 2001, 5,160,000 shares were reserved for the
Plan.

The Plan is administered by our Board of Directors, which determines the
distribution of all options. The Plan provides for the granting of options
intended to qualify as incentive stock options ("ISOs") as defined in Section
422A of the Internal Revenue Code of 1986, as amended, and non-qualified stock
options ("NQSOs") to our key employees as well as NQSOs to non-employee
directors, independent contractors and consultants who perform services for us.
The exercise price of all ISOs granted under the Plan may


                                      F-23
<PAGE>
                           PRINCETON VIDEO IMAGE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

not be less than the fair market value of the shares at the time the option is
granted. Options may be for a period of not more than ten years from the date of
grant and generally vest ratably over a three year period. Options are not
assignable or otherwise transferable except by will or the laws of descent and
distribution.

Information with respect to options under the Plan is as follows:

<TABLE>
<CAPTION>
                                                NUMBER OF                             WTD AVG
                                                  OPTIONS            OPTION    EXERCISE PRICE
                                              OUTSTANDING       PRICE RANGE         PER SHARE
                                              -----------       -----------   ---------------
<S>                                           <C>             <C>                       <C>
   Balance at June 30, 1998                     1,317,507      $2.50-$17.50             $8.35
   Granted                                        413,873
   Exercised                                       (1,541)
   Forfeitures                                   (156,654)
                                               ----------

   Balance at June 30, 1999                     1,573,185      $2.50-$17.50             $5.77
   Granted                                        642,981
   Exercised                                      (14,618)
   Forfeitures                                    (86,191)
                                               ----------

   Balance at June 30, 2000                     2,115,357      $2.50-$15.00             $5.57
   Granted                                      2,403,948
   Exercised                                       (8,823)
   Forfeitures                                 (1,618,133)
                                               ----------

   Balance at June 30, 2001                     2,892,349      $1.58-$14.00             $4.00
   Granted                                      1,133,982
   Exercised                                       (3,389)
   Forfeitures                                   (460,894)
                                               ----------

   Balance at December 31, 2001                 3,562,048      $1.58-$12.12             $3.93
                                                =========

   Exercisable at December 31, 2001             1,827,544
   Exercisable at June 30, 2001                 1,191,748
   Exercisable at June 30, 2000                 1,506,513
   Exercisable at June 30, 1999                 1,038,428

</TABLE>

   The options outstanding, by price range, are as follows:
<TABLE>


<S>                                     <C>                       <C>
              December 31, 2001          $1.58-$4.00              1,577,295
                                         $4.01-$6.00              1,855,753
                                        $6.01-$14.00                129,000
                                                                  ---------
                                               Total              3,562,048
                                                                  =========


                  June 30, 2001          $1.58-$4.00                857,601
                                         $4.01-$6.00              1,848,248
                                        $6.01-$14.00                186,500
                                                                  ---------
                                               Total              2,892,349
                                                                  =========

                  June 30, 2000          $2.50-$7.50              1,468,490
                                        $7.51-$12.50                626,867
</TABLE>


                                      F-24
<PAGE>
                           PRINCETON VIDEO IMAGE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

<TABLE>

<S>                                     <C>                       <C>
                                       $12.51-$15.00                 20,000
                                                                  ---------
                                               Total              2,115,357
                                                                  =========

                  June 30, 1999          $2.50-$7.50                623,391
                                        $7.51-$12.50                911,626
                                       $12.51-$17.50                 38,168
                                                                  ---------
                                               Total              1,573,185
                                                                  =========
</TABLE>

The weighted average remaining contractual lives of outstanding options at
December 31, 2001 was 5.71 years.

We apply the provisions of Accounting Principles Board Opinion No. 25
"Accounting for Stock Issued to Employees" and related interpretations in
accounting for our stock-based compensation plans. Accordingly, no compensation
has been recognized in the financial statements with respect to options and
warrants issued with an exercise price at or above the fair market value of the
stock on the grant date. Had compensation costs for such options and warrants
been determined based on the fair value approach promulgated by SFAS No. 123
"Accounting for Stock Based Compensation", our net loss applicable to Common
Stock would have been as follows:

<TABLE>
<CAPTION>

                                  Six Months Ended           For the Year Ended June 30,
                                     December 31,     ----------------------------------------------
                                        2001               2001            2000             1999
                                  ----------------    ------------- -------------------  -----------
<S>                                <C>                  <C>             <C>              <C>
   Net loss applicable to
     common stock, as reported     $    (6,994,049)     (11,692,364)    (12,488,758)      (9,698,048)
   SFAS 123 Compensation
     expense                             1,276,650        2,253,115       2,855,846          423,466
                                   ---------------      -----------     -----------       ----------
                                        (8,270,699)     (13,945,479)    (15,344,604)     (10,121,514)
                                   ===============      ===========     ===========       ==========
   Net loss per share              $         (0.56)          $(1.30)         $(1.64)          $(1.24)
                                   ===============      ===========     ===========       ==========
</TABLE>



The pro forma compensation expense of $1,276,650, $2,253,115, $2,855,846 and
$423,466 for the six months ended December 31, 2001 and the fiscal years ended
June 30, 2001, 2000 and 1999, respectively, was calculated on the fair value of
each option using the minimum value method for those options issued prior to
October 17, 1997 (the date of initial filing with the SEC) and using the Black
Scholes method for those options issued on October 17, 1997 and later. The
following weighted average assumptions were used in the calculations:

<TABLE>
<CAPTION>
                                   December 31,                           June 30,
                                       2001              2001               2000            1999
                                   ------------       -----------        ----------      ----------
<S>                                 <C>                <C>               <C>              <C>
   Risk free interest rate               4.72%              4.97%             6.28%           5.87%
   Expected option lives            5.71 years         6.09 years        6.33 years       8.6 years
   Expected volatility                  113.0%             113.0%             70.0%           62.0%
</TABLE>

In November 1998, the Board of Directors approved the granting of two stock
options to our then current President and CEO. The first option was for 200,000
shares of common stock at an exercise price of $4.563 with vesting over a
three-year period. No compensation expense was recorded in connection with this
transaction as the exercise price of the option was not less than the fair
market value of our common stock on the date of the transaction. The second
option was for the purchase of an additional 200,000



                                      F-25
<PAGE>
                           PRINCETON VIDEO IMAGE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

shares of common stock at an exercise price equal to $7.00 per share with
vesting dependent upon the attainment of certain performance criteria based on
the revenues from operations during the fiscal years ending June 30, 2000
through June 30, 2002. Both option grants were for a term of ten years. In April
2000, our Board of Directors approved a modification of this second grant to
waive the performance criteria for 100,000 of these options as a precondition
for vesting, in recognition of commendable performance. No compensation expense
was recorded in connection with this transaction as the exercise price of such
options exceeded the fair market value of our common stock on the date of the
transaction. All options expired unexercised in February 2002.

In April 2000 the Board of Directors approved the grant of options with a ten
year term to purchase up to 100,000 shares of common stock at an exercise price
of $5.938 to both our Chairman and our then current President and CEO. The
options will vest upon the attainment of performance goals to be established by
the Compensation Committee of the Board of Directors or, in any event, upon the
continued employment of the officers at the end of four (4) years. No options
were earned under the performance criteria during the six months ended December
31, 2001 or the fiscal years ended June 30, 2000 or 2001. The options issued to
our former President and CEO expired unexercised in February 2002.

In December 2000, the Board of Directors authorized the granting of
non-qualified stock options to all of its current employees. Option grants to
purchase a total of 589,000 shares of common stock were granted.

On February 2, 2001, our Board of Directors voted to offer all current employees
who held outstanding stock options with an exercise price greater than five
dollars ($5.00) the opportunity to reprice such options to $4.375. Under the
terms of the offer, the prior vesting of options that were repriced was lost and
the repriced options began vesting again over three years. The exercise period
of the repriced options is ten years. A total of 1,186,998 options held by
employees were repriced. The current members of the Board of Directors were
offered the same opportunity to reprice their outstanding options. Prior vesting
of board members was not lost, although all other terms of the repricing were
identical to those offered the employees. A total of 220,000 options held by
directors were repriced. One member of our board of directors, Enrique F.
Senior, declined the offer to have his options repriced. Mr. Senior, who has
since resigned from our board of directors effective November 2001, had a total
of 40,000 options eligible for repricing. In accordance with FIN No. 44, the
repriced options are subject to variable accounting and thereby have been
adjusted to fair value at December 31, 2001 and June 30, 2001. A charge to
earnings in the amount of $309,087 was recorded for the fiscal year ended June
30, 2001 because the closing price of our common stock on June 30, 2001 was
greater than the exercise price of $4.375. The deferred compensation related to
the unvested portion of the options was $640,000 as of June 30, 2001. This
charge was reversed during the six months ended December 31, 2001 because the
closing price of our common stock on December 31, 2001 was less than the
exercise price of $4.375. The deferred compensation related to the unvested
portion of the options was $-0- as of December 31, 2001.

On March 22, 2001, the Compensation Committee of the Board of Directors
authorized the granting of options to purchase 200,000 shares of common stock to
Brown F Williams, our chairman, and options to purchase 75,000 shares of common
stock to Samuel A. McCleery, our Vice President of Business Development. These
options, granted in recognition of past services performed, have an exercise
price of $3.219, a term of ten years, and are fully vested at the date of grant.
The granting of these options was conditioned upon the consummation of the
Second Closing of the Cablevision transaction. These options were issued on
September 20, 2001, the date on which the Second Closing of the Cablevision
transaction took place. No compensation expense was recorded as the fair market
value of our stock was less than $3.219 on their date of issuance.

On March 30, 2001 our shareholders ratified an amendment to the Amended 1993
Stock Option Plan, authorized by our Board of Directors, to increase the
authorized number of shares which may be issued pursuant to options granted
under the Plan from 2,160,000 to 5,160,000 shares and to provide for the



                                      F-26
<PAGE>
                           PRINCETON VIDEO IMAGE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

automatic grant to each of our directors on July 1 of each year an option to
purchase 10,000 shares of our common stock for an exercise price equal to the
fair market value of our common stock on the date of the grant. The options will
vest, with respect to each director as to one-twelfth (1/12) of the shares on
the first day of each month following the date of grant as long as the holder is
then serving as a director.

On July 1, 2001, in accordance with the terms of the 1993 Amended Stock Option
Plan, an option grant to purchase 10,000 shares of common stock was issued to
each of our current board members. These option grants have an exercise price of
$5.05, vest over twelve months, and have a term of ten years. On September 20,
2001, an option grant to purchase 7,500 shares of our common stock was issued to
each of two new board members appointed under the terms of the Publicidad
acquisition. In November 2001, an option grant to purchase 6,667 shares of our
common stock was issued to a newly appointed board member. These option grants
represent the pro-rata number of shares issuable to board members based on
length of service during the July 1 through June 30 fiscal year period.

On July 3, 2001, the Board of Directors authorized the issuance of stock options
to purchase 275,000 shares of common stock to certain members of the management
and technical staff. These options have an exercise price of $4.78, will vest
over three years and have a term of ten years. Issuance of these options was
conditioned upon the execution of new employment agreements by such members of
management and the technical staff, all of which were signed in October 2001. No
compensation expense was recorded upon the issuance of these options as the fair
market value of our stock was less than $4.78 on their date of issuance.

In July 2001 and again in January 2002, the Board of Directors approved the
creation of an employee bonus pool of 100,000 incentive stock options, pursuant
to the Plan to be awarded during each of the calendar years 2001 and 2002, on a
discretionary basis, to individuals who are PVI employees at the time of grant
(other than officers), either as an incentive or in recognition of extraordinary
performance.

21.  COMMITMENTS AND CONTINGENCIES:

SARNOFF AGREEMENT

We entered into an agreement with David Sarnoff Research Center, Inc.
("Sarnoff") in November 1990, which was amended in August 1991 and June 1995,
granting to us an exclusive, worldwide license for use of the proprietary
Pyramid Image Processing technology developed by Sarnoff in the fields of
television advertising and for any purpose for television programming involving
sports. We may terminate this agreement at any time.

Under the terms of this agreement, we pay royalties of between 3% and 5% to
Sarnoff, based upon our gross revenues. All royalties accrue as earned, but no
cash payments were required to be made until the earlier of the date on which
cumulative gross revenues reached twenty million dollars or January 1, 1999.
Payments for all accrued royalties through December 31, 1998 became due in
January 1999 and were paid in full by December 1999.

Additionally, under terms of this agreement, commencing in January 1999, minimum
quarterly royalties of $100,000 became due in order to maintain the license. For
the calendar years 1999 and 2000, and for the quarter ended March 31, 2001, we
had the option of paying these minimum royalties in cash or with 14,286 shares
of our common stock. We elected to issue stock for royalties due for all of
these payments. Royalties earned subsequent to March 31, 2001 are required to be
paid in cash and, therefore, we have accrued the minimum cash royalty of
$100,000 for the quarters ended June 30, September 30 and December 31, 2001.
Accordingly, we recorded total royalty expense in the amount of $200,000,
$196,575, $332,164 and $152,232 for the six months ended December 31, 2001 and
the years ended June 30, 2001, 2000 and 1999, respectively. These charges
reflected the issuance of 57,144, 57,144 and 14,286 shares of common stock
during the years ended June 30, 2001, 2000 and 1999, respectively.



                                      F-27
<PAGE>
                           PRINCETON VIDEO IMAGE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)


THESEUS AGREEMENT

In December 1995, we entered into a license agreement with Theseus Research,
Inc. ("Theseus") whereby we were granted a non-exclusive worldwide license,
without the right of sublicense, to use Theseus technology in our system. A
prepayment was made at the time the agreement was executed and royalties earned
are offset against this prepayment. At December 31, 2001, June 30, 2001 and
2000, the prepaid balance was $23,679, $28,452 and $37,915, respectively. During
the term of the license, we will pay royalties of between .05% and .20% of net
sales on a quarterly basis. The agreement terminates with the expiration of the
last of the patents included in the licensed technology.

LEASES

We lease our primary office space under an operating lease. In October 1997, we
entered into a five-year operating lease agreement for our office headquarters
in Lawrenceville, New Jersey. In July 1999, we entered into an operating lease
agreement for additional office space in Lawrenceville, New Jersey. This lease
is co-terminus with the October 1997 operating lease for our headquarters and
both will terminate in September 2002. We are currently in negotiations to renew
our original primary office space. In October 2001, we entered into an operating
lease for office space in New York City which terminates in November 2009. In
January 2001, we entered into an operating lease for our PVI Europe office in
Brussels, Belgium. This lease contains a termination option in December 2002,
December 2006 or December 2009. In order to terminate the lease, nine months
notice must be given to the landlord. In December 2001, Publicidad entered into
a sublease for our Mexico City office space which will terminate in November
2002. We expect to renew this lease in November 2002. In December 2001, we
entered into a one year operating lease for an apartment in New York City to be
used by visiting employees and guests of PVI and Publicidad. This lease
terminates on December 31, 2002.

Rent and equipment lease expense for the six months ended December 31, 2001 and
the years ended June 30, 2001, 2000, and 1999 was $311,894, $716,762, $472,947
and $400,956, respectively.

Future minimum rent and lease payments are as follows:

<TABLE>
<CAPTION>
                                               Year                Amount
                                               ----                ------
                                        <S>                     <C>
                                               2002               $660,591
                                               2003                216,840
                                               2004                213,515
                                               2005                185,340
                                         Thereafter                760,507
                                                                ----------
                                                                $2,036,793
                                                                ==========
</TABLE>



Under the terms of the five year lease signed in October 1997 for the
Lawrenceville, New Jersey headquarters, we are required to maintain an
irrevocable, unconditional $51,258 letter of credit throughout the term of the
lease. Under the terms of the lease for our New York office, we are required to
maintain a security deposit of approximately $65,000. Under the terms of the
lease for our Belgian office, we are required to maintain a security deposit of
approximately $45,000.

In November 1999, we entered into a five year capital lease for the purchase of
a mobile production truck. Future minimum lease payments under this capital
lease are as follows:

<TABLE>
<CAPTION>

                                                Year                  Amount
                                                ----                  -------
                                                <S>                   <C>
                                                2002                  $18,644
                                                2003                   18,644
                                                2004                   15,550
                                                                       ------
                                                                       52,838
</TABLE>



                                      F-28
<PAGE>
                           PRINCETON VIDEO IMAGE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

<TABLE>

<S>                                                                  <C>
                 Less:  Amount representing interest                  (7,731)
                                                                     --------
             Present value of minimum lease payments                 $45,107
                                                                     ========
</TABLE>


Legal Contingencies

In June 1999 we filed suit for patent infringement in U.S. District Court in
Delaware against SciDel USA Ltd., the U.S. subsidiary of the Israeli company,
SciDel Technologies, Ltd. We contended that SciDel's video imaging system for
electronically inserting advertising into live television broadcasts infringed
on PVI's U.S. Patent No. 5,264,933 and sought a permanent injunction prohibiting
infringement of our patent. The case was tried in late February 2001, and final
briefing was completed in April 2001. As of March 26, 2002, a decision had not
been rendered. On March 26, 2002, we completed the acquisition of certain assets
from SciDel Technologies, Ltd. In connection with that transaction, the parties
have agreed to file a dismissal of the action. (See Note 25 "Subsequent
Events").


In October 1999, we filed a request with the United States Patent and Trademark
Office ("USPTO") to correct the ownership of U.S. Patent 5,917,553, licensed to
Sportvision, Inc. on the basis of our belief that the basic subject matter of
this patent belongs to PVI. After we filed this action, Sportvision, Inc. and
Fox Sports Productions, Inc. ("Fox") filed a lawsuit against us in US District
Court for the Northern District in California for infringement of the disputed
U.S. Patent No. 5,917,553. Plaintiffs subsequently amended their complaint to
add claims for infringement of U.S. Patent Nos. 6,141,060 and 6,229,550. On
August 28, 2001, we filed a counterclaim alleging that Sportvision is infringing
our U.S. Patent No. 5,264,933, and seeking injunctive relief and compensation
including damages. As of December 31, 2001, discovery was ongoing and a trial
date had been set for June 2, 2003. On January 29, 2002, the parties entered
into a Settlement Agreement regarding this matter and a dismissal with prejudice
as to all parties was filed on March 9, 2002. Pursuant to the settlement
agreement, we have entered into a patent cross-license agreement with
Sportvision which does not require any ongoing payments with either party.

22.  INDUSTRY SEGMENT, GEOGRAPHIC AND CUSTOMER INFORMATION

We operate on a worldwide basis in only one industry segment, real-time video
imaging. This segment is broken out into geographical regions including the
United States, Latin America, Canada, Europe and all other. During the years
ended June 30, 2000 and 1999, the majority of our operating expenses related to
our domestic activities and were not associated with our international licensing
and royalty agreements. With the formation of PVI Europe in June 2000 and the
acquisition of Publicidad in September 2001, operating expenses related to
international activities increased, accounting for approximately 8% and 31% of
total operating expenses for the year ended June 30, 2001 and the six months
ended December 31, 2001, respectively.

Geographic information is as follows:

<TABLE>
<CAPTION>

                                                                          PVI
(in 000's)                       U.S.     Latin America    Canada       Europe        Other        Total
                                ------    -------------    ------       ------        -----        -----
<S>                             <C>          <C>             <C>          <C>           <C>       <C>
Six months ended
   December 31, 2001
Advertising and
  production revenue            $1,276       $3,217           $ -          $66          $ -        $4,559
License and royalty fees             -          864            83           31           41         1,019
                                ------       ------           ---          ---          ---        ------
               Total            $1,276       $4,081           $83          $97          $41        $5,578
                                ======       ======           ===          ===          ===        ======
</TABLE>


Fiscal Years Ended June 30,



                                      F-29
<PAGE>
                           PRINCETON VIDEO IMAGE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

<TABLE>

<S>                             <C>          <C>            <C>          <C>          <C>         <C>
2001
Advertising and
  production revenue            $2,217       $    -          $ 25          $ -          $ -        $2,242
License and royalty fees             -        2,143           176           23           79         2,421
                                ------       ------          ----          ---          ---        ------
               Total            $2,217       $2,143          $201          $23          $79        $4,663
                                ======       ======          ====          ===          ===        ======


2000

Advertising and

  production revenue            $1,484       $    -          $  -          $ -         $ 25        $1,509
License and royalty fees             -        1,090             -            -          447         1,537
                                ------       ------          ----          ---         ----        ------
               Total            $1,484       $1,090          $  -          $ -         $472        $3,046
                                ======       ======          ====          ===         ====        ======

1999

Advertising and

  production revenue              $695       $    -          $  -          $ -          $ -          $695
License and royalty fees             -          450             -            -           78           528
                                ------       ------          ----          ---          ---        ------
               Total              $695       $  450          $  -          $ -          $78        $1,223
                                ======       ======          ====          ===          ===        ======
</TABLE>

All of our assets are based in the United States with the exception of certain
L-VIS Systems which are being used by our subsidiaries or licensees in
connection with foreign operations. The approximate value of these L-VIS Systems
located in the United States and foreign countries is as follows:

<TABLE>
<CAPTION>

 L-VIS Systems, rack
 components & spare parts           U.S.      Latin America        Canada        PVI Europe         Total
-------------------------        ----------   -------------       --------       -----------     ----------
<S>      <C> <C>                 <C>            <C>               <C>             <C>            <C>
December 31, 2001                $4,437,424     $865,004          $135,000        $691,472       $6,128,900
June 30, 2001                     4,825,535      430,529           135,000         691,472        6,082,536
June 30, 2000                     4,332,060      426,821           135,000         691,472        5,585,353
June 30, 1999                     3,934,257      620,634           135,000               -        4,689,891
</TABLE>

23.  CONCENTRATION OF SALES:

Sales to three customers accounted for approximately 74%, 72%, 62% and 51% of
revenues for the six months ended December 31, 2001 and the years ended June 30,
2001, 2000 and 1999, respectively.

24.  RELATED PARTY TRANSACTIONS:

A member of our Board of Directors, Eduardo Sitt, is also a principal
shareholder and the President of the Board of Directors of Presencia, which has
made several equity investments in PVI and is our former joint venture partner.
In addition, as described in Note 5, we have entered into a Reorganization
Agreement with Presencia and others pursuant to which we acquired Publicidad,
our former joint venture partner and current licensee, effective September 20,
2001. On November 8, 2001, we sold 615,385 shares of our common stock to
Presencia for an aggregate purchase price of $2,000,001. This sale was exempt
from registration under the Securities Act by virtue of Section 4(2) as a
transaction not involving a public offering. The securities were issued for
investment only and not for purposes of distribution.

A member of our Board of Directors is formerly the sole shareholder and
President of Princeton Venture Research, Inc., a company that has furnished
consulting services to us from time to time. This member of our Board of
Directors Company is also the President of PVR Securities. On June 28, 2000, we
entered



                                      F-30
<PAGE>
                           PRINCETON VIDEO IMAGE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

into a three month agreement with PVR Securities whereby PVR Securities would
act as non-exclusive financial advisor and assist us in raising additional
capital. As compensation, we agreed to pay PVR Securities a cash fee equal to 5%
of gross proceeds of any private sale of equity securities of PVI if the buyer
was introduced by PVR Securities. In addition, PVR Securities would receive
warrants to purchase twelve and one-half percent of the amount of the securities
sold to any purchasers introduced to us by PVR Securities at an exercise price
equal to 110% of the closing price of the equity securities sold. The agreement
expired in September 2000 and was not renewed.

A former member of our Board of Directors is also a Managing Director and
Executive Vice President of Allen & Company Incorporated, which is one of our
principal shareholders and furnishes financial advisory services to us from time
to time. Allen & Co. received commissions in the aggregate amount of
approximately $438,000, as well as warrants exercisable for 200,000 shares of
common stock for its services rendered on our behalf in connection with the
private equity offering completed in October 1999. On June 14, 2000 we entered
into an agreement with Allen & Co., which was amended as of December 20, 2000,
pursuant to which Allen & Co. would act as one of our financial advisors in
connection with certain stock purchase transactions, including the transaction
contemplated by the Reorganization Agreement between us, Presencia and others as
described in Note 5 of Notes to Consolidated Financial Statements. In July 2001
we issued to Allen & Co. a warrant to purchase 100,000 shares of our common
stock at $2.3065 as consideration for their issuance of a fairness opinion in
connection with this transaction. This warrant was issued with an expiration
date of December 20, 2005, or five years from the issuance date of their
fairness opinion. The value of these warrants has been calculated using the
Black Scholes method and the related charge of $100,762 has been recorded as a
component of the costs for the acquisition of Publicidad. Allen & Co. received a
second warrant to purchase an additional 100,000 shares of our common stock on
September 20, 2001 as consideration for financial advisory services provided in
connection with the acquisition of Publicidad.

In July 1997, two of our employees, Brown F Williams and Sam McCleery, signed
non-recourse promissory notes bearing an interest rate of 8.5% (the "Employee
Notes") for $655,000 as consideration for the exercise of warrants to purchase
262,000 shares of common stock at an exercise price of $2.50 per share.
Accordingly, a $360,250 charge to general and administrative expense was
recorded in July 1997 for the excess of the fair value of our common stock in
July 1997 over the exercise price of the underlying warrants. In December 1997,
these employees signed non-recourse promissory notes bearing an interest rate of
8.5% (the "Tax Notes") for $169,498 as consideration for funds received for the
express purpose of paying the tax liabilities incurred by each of them in
connection with the exercise of their warrants. The Employees concurrently
signed Pledge Agreements pursuant to which the 262,000 shares of common stock
purchased were pledged to PVI. On March 20, 2001, the Compensation Committee of
the Board of Directors authorized the repayment of these loans in exchange for a
portion of the PVI common stock each of the employees held. As of March 20,
2001, Mr. Williams owed PVI a total of $778,711, including $597,920 in principal
and $180,791 in accrued interest. As of March 20, 2001, Mr. McCleery owed PVI a
total of $295,088, including $226,578 in principal and $68,510 in accrued
interest. To satisfy these obligations in full, Mr. Williams exchanged 202,594
shares of common stock, 190,000 of which had been pledged as collateral on the
notes. Mr. McCleery exchanged 76,772 shares of common stock, 72,000 of which had
been pledged as collateral on the notes. The stock exchanged was valued at
$3.8437, the closing price of the stock on the date of the offer, and satisfied
in full the outstanding loan balances. Due to the uncertainty of the
collectibility of the non-recourse notes, we did not record interest income on
the transaction until it was settled. The total of 279,366 shares of common
stock received in this transaction have been recorded as treasury stock in the
shareholders' equity section of the balance sheet and are available for
reissuance.

In April 1999 and May 1999, Publicidad signed promissory notes to us for
$114,300 and $260,075, respectively as consideration for the equipment charge
associated with two L-VIS(TM) Systems delivered to Publicidad for use in
operations. Both notes were issued with an interest rate of 15% and had a term
of one (1) year and three (3) years, respectively. Both notes were paid in full
prior to our acquisition of



                                      F-31
<PAGE>
                           PRINCETON VIDEO IMAGE, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

Publicidad. In February 2001 and July 2001, Publicidad signed promissory notes
to us for $387,047 and $764,859, respectively with respect to their payment of
royalties to us. Both notes were issued with an interest rate of 10%. The
February 2001 note was paid in full in August 2001 and the July 2001 note was
reflected as a reduction in the purchase price of Publicidad at the date of
acquisition.

On September 20, 2001, Emilio Romano was appointed to the Board of Directors as
a designee of Presencia. On November 15, 2001, we entered into a consulting
agreement whereby Mr. Romano would provide consulting services with respect to
our strategic planning and potential business development opportunities. In
exchange for these services, Mr. Romano is paid a fee of $10,000 and a ten-year
option to purchase 5,000 shares of common stock for each month of service
provided. Each option grant is fully vested upon issuance and is priced at the
closing market price on the date of grant. The value of the options issued to
Mr. Romano were calculated using the Black Scholes method and a compensation
charge of $14,028 was recorded. On February 15, 2002 this consulting agreement
was extended for an additional three months, to and including May 15, 2002.

25.  SUBSEQUENT EVENTS:

On March 26, 2002, we completed the acquisition of certain assets of Scidel
Technologies, Ltd., an Israeli company that inserts electronic virtual
advertisements into live and taped televised sporting events, in exchange for
the issuance of 1,228,000 shares of PVI's common stock and warrants to purchase
670,500 shares of its common stock. In connection with that transaction the
parties have agreed to file a dismissal of the legal action discussed in Note
21.

On January 29, 2002, PVI and Sportvision entered into a Settlement Agreement
regarding the legal matter (discussed in Note 21) and a dismissal with prejudice
as to all parties was filed on March 9, 2002. Pursuant to the Settlement
Agreement, the parties entered into a patent cross-license agreement.




                                      F-32




<PAGE>
                                    EXHIBITS

<TABLE>
<CAPTION>
Exhibit
Number                     Description
-------           -------------------------------------
<S>               <C>
2.1 --            Reorganization Agreement, dated as of December 28, 2000, by
                  and among Presencia en Medios, S.A., Eduardo Sitt, David Sitt,
                  Roberto Sonabend, Presence en Media LLC, Virtual Advertisement
                  LLC, PVI LA, LLC, the Company and Princeton Video Image Latin
                  America, LLC (Incorporated by reference to Exhibit 2.1 to the
                  Company's Current Report on Form 8-K filed on January 5,
                  2001).

2.2  --           Amendment Agreement, dated as of February 4, 2001, by and
                  among Presencia en Medios, S.A., Eduardo Sitt, David Sitt,
                  Roberto Sonabend, Presence en Media LLC, Virtual Advertisement
                  LLC, PVI LA, LLC, the Company and Princeton Video Image Latin
                  America, LLC (amending Reorganization Agreement dated as of
                  December 28, 2001) (Incorporated by reference to Exhibit 2.2
                  to the Company's Quarterly Report on Form 10-Q for the quarter
                  ended December 31, 2000 filed on February 14, 2001).

2.3 --            Letter Agreement, dated as of July 23, 2001, by and among
                  Presencia en Medios, S.A., Eduardo Sitt, David Sitt, Roberto
                  Sonabend, Presence en Media LLC, Virtual Advertisement LLC,
                  PVI LA, LLC, the Company and Princeton Video Image Latin
                  America, LLC (amending the Reorganization Agreement dated as
                  of December 28, 2001) (Incorporated by reference to Exhibit
                  2.1 to the Company's Current Report on Form 8-K filed on July
                  30, 2001).

2.4 --            Letter Agreement, dated as of July 23, 2001, between the
                  Company and PVI Holding, LLC (amending the Stock and Warrant
                  Purchase Agreement dated as of February 4, 2001) (Incorporated
                  by reference to Exhibit 2.2 to the Company's Current Report on
                  Form 8-K filed on July 30, 2001).

2.5 --            Asset Purchase Agreement, dated as of February 27, 2002
                  between Adco Imaging, Ltd., Princeton Video Image, Inc.,
                  SciDel Technologies, Ltd., and SciDel USA, Ltd. (Incorporated
                  by reference to Exhibit 2.1 to the Company's Current Report
                  on Form 8-K filed on March 29, 2002).

3.1  --           Certificate of Incorporation (Incorporated by reference to
                  Exhibit 3.1 to the Company's Current Report on Form 8-K filed
                  on September 17, 2001).

3.2  --           Amended and Restated Bylaws (Incorporated by reference
                  to Exhibit 3.2 to the Company's Quarterly Report on Form
                  10-Q for the quarter ended September 30, 2001 filed on
                  November 14, 2001).
</TABLE>

<PAGE>

<TABLE>
<S>               <C>
10.1  --          Form of Employee Confidentiality, Invention Assignment and
                  Non-Compete Agreement (Incorporated by reference to Exhibit
                  10.2 to the Company's Registration Statement on Form SB-2
                  (Registration No. 333-37725) which became effective on
                  December 16, 1997).

10.2  --          Form of Consultant Confidentiality, Invention Assignment and
                  Non-Compete Agreement (Incorporated by reference to Exhibit
                  10.3 to the Company's Registration Statement on Form SB-2
                  (Registration No. 333-37725) which became effective on
                  December 16, 1997).

10.3* --          Research Agreement, dated November 1, 1990, between the
                  Company and David Sarnoff Research Center, Inc., as amended by
                  Agreement dated August 9, 1991, letter dated July 1, 1992,
                  Letter Agreement dated July 9, 1992, letter dated November 30,
                  1992 and Agreement dated June 26, 1995 and effective as of
                  December 31, 1993 (Incorporated by reference to Exhibit 10.4
                  to the Company's Registration Statement on Form SB-2
                  (Registration No. 333-37725) which became effective on
                  December 16, 1997).

10.4+  --         Employment Agreement dated January 24, 1997 between the
                  Company and Brown F Williams (Incorporated by reference to
                  Exhibit 10.11 to the Company's Registration Statement on Form
                  SB-2 (Registration No. 333-37725) which became effective on
                  December 16, 1997).

10.5+ --          Restated and Amended Employment Agreement, dated October 28,
                  2001, between the Company and Samuel A. McCleery.

10.6  --          Lease Agreement, dated July 16, 1997, between the Company and
                  Princeton South at Lawrenceville One (Incorporated by
                  reference to Exhibit 10.20 to the Company's Registration
                  Statement on Form SB-2 (Registration No. 333-37725) which
                  became effective on December 16, 1997).

10.7  --          Assignment, dated January 22, 1992, by Roy Jonathon Rosser and
                  Martin Leach to the Company regarding a patent (Incorporated
                  by reference to Exhibit 10.25 to the Company's Registration
                  Statement on Form SB-2 (Registration No. 333-37725) which
                  became effective on December 16, 1997).

10.8  --          Assignment, dated October 22, 1993, by Roy Jonathon Rosser and
                  Brown F Williams to the Company regarding a patent
                  (Incorporated by reference to Exhibit 10.26 to the Company's
                  Registration Statement on Form SB-2 (Registration No.
                  333-37725) which became effective on December 16, 1997).

10.9  --          Assignment, dated January 30, 1995, by Roy Rosser, Subhodev
                  Das, Yi Tan and Peter von Kaenel to the Company regarding a
                  patent (Incorporated by reference to Exhibit 10.27 to the
                  Company's Registration Statement on Form SB-2 (Registration
                  No. 333-37725) which became effective on December 16, 1997).
</TABLE>

<PAGE>

<TABLE>
<S>               <C>
10.10+ --         Restated and Amended Employment Agreement, dated as of October
                  28, 2001, between the Company and Lawrence Epstein.

10.11+ --         Employment Agreement, dated November 23, 1998, between the
                  Company and Dennis P. Wilkinson (Incorporated by reference to
                  the Company's Current Report on Form 8-K filed with the
                  Securities and Exchange Commission on December 2, 1998).

10.12* --         Letter Agreement, dated July 19, 1999, between the Company and
                  CanWest Global Communications Corporation (Incorporated by
                  reference to Exhibit 10.1 to the Company's Current Report on
                  Form 8-K filed with the Securities and Exchange Commission on
                  August 18, 1999).

10.13* --         Agreement, dated August 9, 1999, between the Company and CBS
                  Sports, a division of CBS Corporation (Incorporated by
                  reference to Exhibit 10.2 to the Company's Current Report on
                  Form 8-K filed with the Securities and Exchange Commission on
                  October 28, 1999).

10.14   --        Warrant Certificate, dated October 20, 1999, issued to Allen &
                  Company Incorporated (Incorporated by reference to Exhibit
                  10.4 to the Company's Quarterly Report on Form 10-Q for the
                  quarter ended December 31, 1999, filed on February 14, 2000).

10.15   --        Amended 1993 Stock Option Plan. (Incorporated by reference to
                  Exhibit 10.21 to the Company's Annual Report on Form 10-K for
                  the fiscal year ended June 30, 2001).

10.16   --        Letter Agreement, dated April 21, 2000, between the Company
                  and NFL International, a division of NFL Enterprises, L.P.
                  (Incorporated by reference to Exhibit 10.1 to the Company's
                  Quarterly Report on Form 10-Q for the quarter ended March 31,
                  2000, filed on May 12, 2000).

10.17* --         Amended and Restated Territory System License Agreement, dated
                  as of December 27, 2000, by and between the Company and
                  Virtual Media Lab, Inc. (Incorporated by reference to Exhibit
                  10.2 to the Company's Quarterly Report on Form 10-Q for the
                  quarter ended December 31, 2000 filed on February 14, 2001).

10.18* --         Stock and Warrant Purchase Agreement, dated as of February 4,
                  2001, between the Company and PVI Holding, LLC. (Incorporated
                  by reference to Exhibit 10.3 to the Company's Quarterly Report
                  on Form 10-Q for the quarter ended December 31, 2000 filed on
                  February 14, 2001).

10.19* --         L-VIS(TM) System License Agreement, dated February 4, 2001,
                  between the Company and Cablevision Systems Corporation.
                  (Incorporated by reference to Exhibit 10.4 to the Company's
                  Quarterly Report on Form 10-Q for the quarter ended December
                  31, 2000 filed on February 14, 2001).
</TABLE>


<PAGE>

<TABLE>
<S>               <C>
10.20  --         Letter, dated February 27, 2001, amending Research Agreement
                  between the Company and David Sarnoff Research Center, as
                  amended. (Incorporated by reference to Exhibit 10.28 to the
                  Company's Annual Report Form 10-K for the fiscal year ended
                  June 30, 2001 filed on September 28, 2001).

10.21* --         Joint Collaboration and License Agreement, dated as of
                  September 20, 2001, between Princeton Video Image, Inc. and
                  Cablevision Systems Corporation. (Incorporated by reference to
                  Exhibit 10.31 to the Company's Annual Report on Form 10-K for
                  the fiscal year June 30, 2001).

10.22  --         Sublease with Southern Progress Corporation, dated September
                  21, 2001. (Incorporated by reference to Exhibits 10.1 to the
                  Company's Quarterly Report filed on Form 10-Q for the quarter
                  ended September 30, 2001 filed on November 14, 2001).

10.23  --         Warrant Certificate, dated September 20, 2001, issued to PVI
                  Holding, LLC. (Incorporated by reference to Exhibit 10.6 to
                  the Company's Current Report on Form 8-K filed on October 3,
                  2001).

10.24+ --         Letter Agreement, dated November 8, 2001, between the Company
                  and Brown F Williams amending his Employment Agreement.

10.25  --         Warrant Adjustment Notice from the Company to PVI Holding LLC,
                  dated as February 13, 2002.

10.26  --         Patent Cross-License Agreement, dated as of January 29, 2002,
                  by and between Sportvision, Inc., Fox Sports Productions,
                  Inc., and Princeton Video Image, Inc.

10.27  --         Letter Agreement, dated as of January 1, 2002, among Princeton
                  Video Image, Inc., ERM & Associates, Inc. and Emilio Romano.

10.28+ --         Extension Letter Agreement, dated as of February 15, 2002,
                  among Princeton Video Image, Inc., ERM & Associates, Inc. and
                  Emilio Romano.

10.29+ --         Employment Agreement by and between the Company and Gene
                  Dwyer, dated as of October 28, 2001.

10.30+ --         Employment Agreement by and between the Company and Howard
                  Kennedy, dated as of October 28, 2001.

10.31+ --         Employment Agreement by and between the Company and Kevin
                  Harney, dated as of October 28, 2001.

10.32+ --         Employment Agreement by and between the Company and Darrell
                  DiCicco, dated as of October 28, 2001.
</TABLE>

<PAGE>


<TABLE>
<S>               <C>
10.33+ --         Employment Agreement by and between the Company and Peter Von
                  Kaenel, dated as of October 28, 2001.

10.34  --         Warrant Certificate, dated as of March 26, 2002, issued to
                  SciDel Technologies, Ltd. (Incorporated by reference to
                  Exhibit 4.1 to the Company's Current Report on Form 8-K
                  filed on March 29, 2002.)

21.    --         Subsidiaries

23.1   --         Consent of Independent Accountants (filed with this Form
                  10-K/A).
</TABLE>

-----------

*     Confidentiality has been granted with respect to a portion of this
      exhibit.

+     Denotes a management contract or compensation plan or arrangement required
      to be filed as an exhibit pursuant to Item 14(a) of this Form 10-K.