The objective of this program is to develop a system to both monitor the vibration of a bottomhole assembly, and to adjust the properties of an active damper in response to these measured vibrations. Phase I of this program, which entailed modeling and design of the necessary subsystems and design, manufacture and test of a full laboratory prototype, was completed on May 31, 2004. The principal objectives of Phase II were: more extensive laboratory testing, including the evaluation of different feedback algorithms for r control of the damper; design and manufacture of a field prototype system; and, testing of the field prototype in drilling laboratories or test wells. The specific tasks were modified in November, 2005 and these tasks are used as the basis of organization for this report. The laboratory testing at TerraTek Laboratories was completed in January, 2006. These tests demonstrated that the DVMCS can maintain more consistent weight on- bit, decrease vibration and increase the rate of penetration. With the exception of Task 10 (Ordering all long lead items for field prototypes), all of the tasks outlined have been completed and form the basis for the field testing and commercialization in Phase III, which is scheduled to end in January, 2007.