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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



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FORM 10-Q



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|x | Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
|- | ----------------------------------------------------------------------------------------



| | For the quarterly period ended June 30, 2007.
| | ---------------------------------------------

or



| ̈ | Transition Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
|- | -----------------------------------------------------------------------------------------



| | For the transition period from 
to
| | ----------------------------------

Commission file number: 000-26393



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Jupitermedia Corporation

(Exact name of Registrant as specified in its charter)



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|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Delaware                                                       |  | 06-1542480                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|23 Old Kings Highway South Darien, Connecticut                 |  | 06820                               
|(Address of principal executive offices)                       |  | (Zip Code)                          

(203) 662-2800

(Registrants telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)



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Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days    Yes  x    No ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a
non-accelerated filer. See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act: (Check one):

Large accelerated filer ̈Accelerated filer  x    Non-accelerated filer ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.):    Yes ̈No  x

The number of outstanding shares the Registrants common stock, par value $.01 per share, as of August 6, 2007 was 35,927,498.



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##### Table of Contents

Jupitermedia Corporation

Index



|                              |  |                                                                                                                       |  |     
|----------------------------- |  | --------------------------------------------------------------------------------------------------------------------- |  | ----
|                              |  |                                                                                                                       |  | Page
|PART I. Financial Information |  |                                                                                                                      
|                              |  |                                                                                                                      
|Item 1.                       |  | Financial Statements                                                                                                  |  |     
|                              |  |                                                                                                                      
|                              |  | Unaudited Consolidated Condensed Balance Sheets  December 31, 2006 and June 30, 2007                                 |  | 3   
|                              |  |                                                                                                                      
|                              |  | Unaudited Consolidated Condensed Statements of Operations  For the Three and Six Months Ended June 30, 2006 and 2007 |  | 4   
|                              |  |                                                                                                                      
|                              |  | Unaudited Consolidated Condensed Statements of Cash Flows  For the Six Months Ended June 30, 2006 and 2007           |  | 5   
|                              |  |                                                                                                                      
|                              |  | Notes to Consolidated Condensed Financial Statements                                                                  |  | 6   
|                              |  |                                                                                                                      
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                 |  | 14  
|                              |  |                                                                                                                      
|Item 3.                       |  | Quantitative and Qualitative Disclosures about Market Risk                                                            |  | 20  
|                              |  |                                                                                                                      
|Item 4.                       |  | Controls and Procedures                                                                                               |  | 21  
|                              | 
|PART II. Other Information    |  |                                                                                                                      
|                              |  |                                                                                                                      
|Item 1.                       |  | Legal Proceedings                                                                                                     |  | 22  
|                              |  |                                                                                                                      
|Item 1A.                      |  | Risk Factors                                                                                                          |  | 22  
|                              |  |                                                                                                                      
|Item 2.                       |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                           |  | 22  
|                              |  |                                                                                                                      
|Item 3.                       |  | Defaults Upon Senior Securities                                                                                       |  | 22  
|                              |  |                                                                                                                      
|Item 4.                       |  | Submission of Matters to a Vote of Security Holders                                                                   |  | 22  
|                              |  |                                                                                                                      
|Item 5.                       |  | Other Information                                                                                                     |  | 23  
|                              |  |                                                                                                                      
|Item 6.                       |  | Exhibits                                                                                                              |  | 23  
|                              | 
|Signatures                    |  | 24                                                                                                                   



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##### Table of Contents

Jupitermedia Corporation

Unaudited Consolidated Condensed Balance Sheets

December 31, 2006 and June 30, 2007

(in thousands, except share and per share amounts)



|                                                                                                                  |  |                   |         |   |               |   |         |  
|----------------------------------------------------------------------------------------------------------------- |  | ----------------- | ------- | - | ------------- | - | ------- | -
|                                                                                                                  |  | December 31, 2006 |         |   | June 30, 2007 |  
|ASSETS                                                                                                            |  |                   |         |   |               |   |         |  
|Current assets:                                                                                                   |  |                   |         |   |               |   |         |  
|Cash and cash equivalents                                                                                         |  | $                 | 8,891   |   |               | $ | 4,803   |  
|Accounts receivable, net of allowances of $2,114 and $2,164, respectively                                         |  |                   | 25,296  |   |               |   | 26,271  |  
|Prepaid expenses and other                                                                                        |  |                   | 2,601   |   |               |   | 3,422   |  
|Deferred income taxes                                                                                             |  |                   | 3,350   |   |               |   | 3,254   |  
|                                                                                                                  |  |                   |         |   |               |   |         |  
|Total current assets                                                                                              |  |                   | 40,138  |   |               |   | 37,750  |  
|                                                                                                                  |  |                  
|Property and equipment, net of accumulated depreciation of $13,996 and $15,828, respectively                      |  |                   | 11,691  |   |               |   | 11,861  |  
|Intangible assets, net                                                                                            |  |                   | 77,923  |   |               |   | 72,728  |  
|Goodwill                                                                                                          |  |                   | 199,010 |   |               |   | 208,841 |  
|Deferred income taxes                                                                                             |  |                   | 2,147   |   |               |   | 2,576   |  
|Investments and other assets                                                                                      |  |                   | 1,281   |   |               |   | 1,117   |  
|                                                                                                                  |  |                   |         |   |               |   |         |  
|Total assets                                                                                                      |  | $                 | 332,190 |   |               | $ | 334,873 |  
|                                                                                                                  |  |                   |         |   |               |   |         |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                              |  |                   |         |   |               |   |         |  
|Current liabilities:                                                                                              |  |                   |         |   |               |   |         |  
|Accounts payable                                                                                                  |  | $                 | 5,269   |   |               | $ | 9,483   |  
|Accrued payroll and related expenses                                                                              |  |                   | 3,188   |   |               |   | 2,793   |  
|Accrued expenses and other                                                                                        |  |                   | 14,469  |   |               |   | 11,301  |  
|Current portion of long-term debt                                                                                 |  |                   | 16,000  |   |               |   | 16,000  |  
|Deferred revenues                                                                                                 |  |                   | 13,362  |   |               |   | 14,092  |  
|                                                                                                                  |  |                   |         |   |               |   |         |  
|Total current liabilities                                                                                         |  |                   | 52,288  |   |               |   | 53,669  |  
|                                                                                                                  |  |                  
|Long-term debt                                                                                                    |  |                   | 49,899  |   |               |   | 46,799  |  
|Deferred revenues                                                                                                 |  |                   | 181     |   |               |   | 234     |  
|Other long-term liabilities                                                                                       |  |                   |        |   |               |   | 141     |  
|                                                                                                                  |  |                   |         |   |               |   |         |  
|Total liabilities                                                                                                 |  |                   | 102,368 |   |               |   | 100,843 |  
|                                                                                                                  |  |                   |         |   |               |   |         |  
|Commitments and contingencies (see Note 11)                                                                       |  |                   |         |   |               |   |         |  
|                                                                                                                  |  |                  
|Stockholders equity:                                                                                             |  |                   |         |   |               |   |         |  
|Preferred stock, $.01 par value, 4,000,000 shares authorized, no shares issued                                    |  |                   |        |   |               |   |        |  
|Common stock, $.01 par value, 75,000,000 shares authorized, 35,713,327 and 35,979,993 shares issued, respectively |  |                   | 357     |   |               |   | 360     |  
|Additional paid-in capital                                                                                        |  |                   | 261,666 |   |               |   | 264,650 |  
|Accumulated deficit                                                                                               |  |                   | (33,888 | ) |               |   | (34,310 | )
|Treasury stock, 65,000 shares at cost                                                                             |  |                   | (106    | ) |               |   | (106    | )
|Accumulated other comprehensive income                                                                            |  |                   | 1,793   |   |               |   | 3,436   |  
|                                                                                                                  |  |                   |         |   |               |   |         |  
|Total stockholders equity                                                                                        |  |                   | 229,822 |   |               |   | 234,030 |  
|                                                                                                                  |  |                   |         |   |               |   |         |  
|Total liabilities and stockholders equity                                                                        |  | $                 | 332,190 |   |               | $ | 334,873 |  
|                                                                                                                  |  |                   |         |   |               |   |         |  

See notes to consolidated condensed financial statements.



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##### Table of Contents

Jupitermedia Corporation

Unaudited Consolidated Condensed Statements of Operations

For the Three and Six Months Ended June 30, 2006 and 2007

(in thousands, except per share amounts)



|                                                                                              |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|--------------------------------------------------------------------------------------------- |  | -------------------------- | ------ | - | ------------------------ | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                                                                              |  | Three Months EndedJune 30, |        |   | Six Months EndedJune 30, |  
|                                                                                              |  | 2006                       |        |   | 2007                     |   |        | 2006 |  |   | 2007   |  
|Revenues                                                                                      |  | $                          | 35,026 |   |                          | $ | 34,669 |      |  | $ | 68,967 |   |  | $ | 69,440 |  
|                                                                                              |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|                                                                                              |  |                            |        |  
|Cost of revenues (exclusive of items shown separately below)                                  |  |                            | 12,712 |   |                          |   | 14,499 |      |  |   | 24,637 |   |  |   | 29,301 |  
|Advertising, promotion and selling                                                            |  |                            | 7,875  |   |                          |   | 7,266  |      |  |   | 15,041 |   |  |   | 14,366 |  
|General and administrative                                                                    |  |                            | 7,136  |   |                          |   | 6,320  |      |  |   | 13,367 |   |  |   | 14,710 |  
|Depreciation                                                                                  |  |                            | 849    |   |                          |   | 1,163  |      |  |   | 1,502  |   |  |   | 2,225  |  
|Amortization                                                                                  |  |                            | 2,095  |   |                          |   | 3,184  |      |  |   | 4,366  |   |  |   | 6,288  |  
|                                                                                              |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Total operating expenses                                                                      |  |                            | 30,667 |   |                          |   | 32,432 |      |  |   | 58,913 |   |  |   | 66,890 |  
|                                                                                              |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Operating income                                                                              |  |                            | 4,359  |   |                          |   | 2,237  |      |  |   | 10,054 |   |  |   | 2,550  |  
|                                                                                              |  |                            |        |  
|Income (loss) on investments and other, net                                                   |  |                            | 64     |   |                          |   | (40    | )    |  |   | 137    |   |  |   | (49    | )
|Interest income                                                                               |  |                            | 164    |   |                          |   | 38     |      |  |   | 281    |   |  |   | 78     |  
|Interest expense                                                                              |  |                            | (1,393 | ) |                          |   | (1,431 | )    |  |   | (2,712 | ) |  |   | (2,904 | )
|                                                                                              |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Income (loss) before income taxes, minority interests and equity income from investments, net |  |                            | 3,194  |   |                          |   | 804    |      |  |   | 7,760  |   |  |   | (325   | )
|Provision for income taxes                                                                    |  |                            | 88     |   |                          |   | 147    |      |  |   | 1,803  |   |  |   | 18     |  
|Minority interests                                                                            |  |                            | (26    | ) |                          |   | (38    | )    |  |   | (35    | ) |  |   | (79    | )
|Equity income from investments, net                                                           |  |                            | 59     |   |                          |   |       |      |  |   | 50     |   |  |   |       |  
|                                                                                              |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Income (loss) from continuing operations                                                      |  |                            | 3,139  |   |                          |   | 619    |      |  |   | 5,972  |   |  |   | (422   | )
|Income from discontinued operations, net of taxes                                             |  |                            |       |   |                          |   |       |      |  |   | 67     |   |  |   |       |  
|Gain (loss) on sale of discontinued operations, net of taxes                                  |  |                            | (718   | ) |                          |   |       |      |  |   | 5,573  |   |  |   |       |  
|                                                                                              |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Net income (loss)                                                                             |  | $                          | 2,421  |   |                          | $ | 619    |      |  | $ | 11,612 |   |  | $ | (422   | )
|                                                                                              |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|                                                                                              |  |                            |        |  
|Earnings (loss) per share:                                                                    |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Basic                                                                                         |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Income (loss) from continuing operations                                                      |  | $                          | 0.09   |   |                          | $ | 0.02   |      |  | $ | 0.17   |   |  | $ | (0.01  | )
|                                                                                              |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Net income (loss)                                                                             |  | $                          | 0.07   |   |                          | $ | 0.02   |      |  | $ | 0.33   |   |  | $ | (0.01  | )
|                                                                                              |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Diluted                                                                                       |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Income (loss) from continuing operations                                                      |  | $                          | 0.09   |   |                          | $ | 0.02   |      |  | $ | 0.16   |   |  | $ | (0.01  | )
|                                                                                              |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Net income (loss)                                                                             |  | $                          | 0.07   |   |                          | $ | 0.02   |      |  | $ | 0.32   |   |  | $ | (0.01  | )
|                                                                                              |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Shares used in computing earnings (loss) per share:                                           |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Basic                                                                                         |  |                            | 35,333 |   |                          |   | 35,968 |      |  |   | 35,223 |   |  |   | 35,886 |  
|                                                                                              |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Diluted                                                                                       |  |                            | 36,307 |   |                          |   | 36,358 |      |  |   | 36,238 |   |  |   | 35,886 |  
|                                                                                              |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  

See notes to consolidated condensed financial statements.



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##### Table of Contents

Jupitermedia Corporation

Unaudited Consolidated Condensed Statements of Cash Flows

For the Six Months Ended June 30, 2006 and 2007

(in thousands)



|                                                                                                                |  |                          |         |   |      |   |         |  
|--------------------------------------------------------------------------------------------------------------- |  | ------------------------ | ------- | - | ---- | - | ------- | -
|                                                                                                                |  | Six Months EndedJune 30, |        
|                                                                                                                |  | 2006                     |         |   | 2007 |  
|Cash flows from operating activities:                                                                           |  |                          |         |   |      |   |         |  
|Income (loss) from continuing operations                                                                        |  | $                        | 5,972   |   |      | $ | (422    | )
|Adjustments to reconcile income (loss) from continuing operations to net cash provided by operating activities: |  |                          |         |   |      |   |         |  
|Depreciation and amortization                                                                                   |  |                          | 5,868   |   |      |   | 8,513   |  
|Stock-based compensation                                                                                        |  |                          | 1,668   |   |      |   | 1,711   |  
|Provision for losses on accounts receivable                                                                     |  |                          | 209     |   |      |   | 50      |  
|Minority interests                                                                                              |  |                          | 35      |   |      |   | 79      |  
|Equity income from investments, net                                                                             |  |                          | (50     | ) |      |   |        |  
|(Income) loss on investments and other, net                                                                     |  |                          | (137    | ) |      |   | 49      |  
|Deferred income taxes                                                                                           |  |                          | (1,179  | ) |      |   | (230    | )
|Excess tax benefit from stock-based compensation                                                                |  |                          | (2,698  | ) |      |   | (224    | )
|Other non-cash charges                                                                                          |  |                          |        |   |      |   | 14      |  
|Changes in operating assets and liabilities (net of businesses acquired):                                       |  |                          |         |   |      |   |         |  
|Accounts receivable                                                                                             |  |                          | (3,479  | ) |      |   | (1,186  | )
|Prepaid expenses and other                                                                                      |  |                          | (1,409  | ) |      |   | (1,070  | )
|Accounts payable and accrued expenses                                                                           |  |                          | (2,894  | ) |      |   | 275     |  
|Deferred revenues                                                                                               |  |                          | 949     |   |      |   | 764     |  
|Discontinued operations                                                                                         |  |                          | 1,110   |   |      |   |        |  
|                                                                                                                |  |                          |         |   |      |   |         |  
|Net cash provided by operating activities                                                                       |  |                          | 3,965   |   |      |   | 8,323   |  
|                                                                                                                |  |                          |         |   |      |   |         |  
|Cash flows from investing activities:                                                                           |  |                          |         |   |      |   |         |  
|Purchases of property and equipment                                                                             |  |                          | (1,296  | ) |      |   | (2,353  | )
|Acquisitions of businesses, images and other                                                                    |  |                          | (25,684 | ) |      |   | (8,419  | )
|Proceeds from sales of assets and other                                                                         |  |                          | 363     |   |      |   | 132     |  
|Proceeds from sale of discontinued operations                                                                   |  |                          | 9,600   |   |      |   |        |  
|Discontinued operations                                                                                         |  |                          |        |   |      |   |        |  
|                                                                                                                |  |                          |         |   |      |   |         |  
|Net cash used in investing activities                                                                           |  |                          | (17,017 | ) |      |   | (10,640 | )
|                                                                                                                |  |                          |         |   |      |   |         |  
|Cash flows from financing activities:                                                                           |  |                          |         |   |      |   |         |  
|Borrowings under credit facilities                                                                              |  |                          | 19,000  |   |      |   | 5,900   |  
|Debt issuance costs                                                                                             |  |                          | (38     | ) |      |   |        |  
|Repayment of borrowings under credit facilities                                                                 |  |                          | (8,965  | ) |      |   | (9,000  | )
|Proceeds from exercise of stock options                                                                         |  |                          | 2,195   |   |      |   | 1,038   |  
|Excess tax benefit from stock-based compensation                                                                |  |                          | 2,698   |   |      |   | 224     |  
|Discontinued operations                                                                                         |  |                          |        |   |      |   |        |  
|                                                                                                                |  |                          |         |   |      |   |         |  
|Net cash provided by (used in) financing activities                                                             |  |                          | 14,890  |   |      |   | (1,838  | )
|                                                                                                                |  |                          |         |   |      |   |         |  
|Effects of exchange rates on cash and cash equivalents                                                          |  |                          | 96      |   |      |   | 67      |  
|                                                                                                                |  |                          |         |   |      |   |         |  
|Net increase (decrease) in cash and cash equivalents                                                            |  |                          | 1,934   |   |      |   | (4,088  | )
|Cash and cash equivalents, beginning of period                                                                  |  |                          | 18,546  |   |      |   | 8,891   |  
|                                                                                                                |  |                          |         |   |      |   |         |  
|Cash and cash equivalents, end of period                                                                        |  | $                        | 20,480  |   |      | $ | 4,803   |  
|                                                                                                                |  |                          |         |   |      |   |         |  
|Supplemental disclosures of cash flow:                                                                          |  |                          |         |   |      |   |         |  
|Cash paid for income taxes                                                                                      |  | $                        | 6,107   |   |      | $ | 1,853   |  
|                                                                                                                |  |                          |         |   |      |   |         |  
|Cash paid for interest                                                                                          |  | $                        | 1,594   |   |      | $ | 2,575   |  
|                                                                                                                |  |                          |         |   |      |   |         |  

See notes to consolidated condensed financial statements.



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##### Table of Contents

Jupitermedia Corporation

Notes to Consolidated Condensed Financial Statements

June 30, 2007

(unaudited)

1. THE COMPANY

Jupitermedia Corporation (Jupitermedia) is a global provider of images, original information and events for information technology (IT), business and creative professionals. Jupitermedia includes Jupiterimages, one
of the leading images companies in the world with over 7.0 million images online serving creative professionals with brands like BananaStock, Workbook Stock, Brand X Pictures, FoodPix, Botanica, Nonstock, The Beauty Archive, IFA Bilderteam,
Comstock Images, Creatas Images, PictureQuest, Liquid Library, Thinkstock Images, Thinkstock Footage, Bigshot Media, Goodshoot, Polka Dot Images, Stock Image, Pixland, Photos.com, Ablestock.com, PhotoObjects.net, Clipart.com, AnimationFactory.com,
JupiterGreetings.com, RoyaltyFreeMusic.com, StudioCutz.com and Stockxpert.com. The JupiterOnlineMedia division of Jupitermedia includes five distinct online networks: internet.com and EarthWeb.com for IT and business professionals; DevX.com for
developers; and Mediabistro.com and Graphics.com for media and creative professionals. JupiterOnlineMedia also includes specialized career Web sites for select professional communities which can be found on Mediabistro.com and JustTechJobs.com. In
addition, JupterOnlineMedia includes JupiterEvents and Mediabistros media-related events, which produce offline conferences and trade shows focused on IT and business-specific topics including ISPCON, Web Video Summit, Semantic Web
Strategies and Digital Rights Strategies.

2. BASIS OF PRESENTATION

The accompanying unaudited consolidated condensed financial statements have been prepared from the books and records of Jupitermedia in accordance with
accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by accounting
principles generally accepted in the United States of America for complete financial statements. The consolidated condensed statements of operations for the three and six months ended June 30, 2007 are not necessarily indicative of the results
to be expected for the full year. These unaudited consolidated condensed financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in Jupitermedias Annual Report on Form 10-K for
the year ended December 31, 2006. In the opinion of management, all adjustments considered necessary for a fair presentation of the results for the interim periods presented have been reflected in such consolidated condensed financial
statements.

The consolidated condensed financial statements include the accounts of Jupitermedia and its majority-owned and wholly-owned
subsidiaries. All intercompany transactions have been eliminated.

3. RECENT ACCOUNTING PRONOUNCEMENTS

In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS)
No. 157, Fair Value Measurements. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in accordance with accounting principles generally accepted in the United States of America, and expands
disclosures about fair value measurements. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. Jupitermedia is currently evaluating
whether the adoption of SFAS No. 157 will have an impact on its consolidated financial position, results of operations or cash flows.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, which permits entities to choose to measure many financial assets and financial liabilities at fair
value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. Jupitermedia is currently evaluating
whether the adoption of SFAS No. 159 will have an impact on its consolidated financial position, results of operations or cash flows.



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##### Table of Contents

4. ACCOUNTING FOR STOCK-BASED COMPENSATION

Pursuant to SFAS No. 123 (Revised) Share-Based Payment (SFAS 123R), Jupitermedia must recognize the compensation expense for
equity awards over the vesting period based on their grant-date fair value.

Total stock-based compensation recognized in continuing
operations for the three and six months ended June 30, 2006 and 2007 are summarized in the following table (in thousands):



|                         |  |                            |     |                          |   |      |  |      |       |  |   |      
|------------------------ |  | -------------------------- | --- | ------------------------ | - | ---- |  | ---- | ----- |  | - | -----
|                         |  | Three Months EndedJune 30, |     | Six Months EndedJune 30,
|                         |  | 2006                       |     | 2007                     |   | 2006 |  | 2007
|Stock-based compensation |  | $                          | 906 |                          | $ | 861  |  | $    | 1,668 |  | $ | 1,711
|                         |  |                            |     |                          |   |      |  |      |       |  |   |      

Jupitermedia uses the Black-Scholes pricing model to estimate the fair value of stock-based awards
with the following assumptions for the indicated periods:



|                         |  |                          |   |  |      |  
|------------------------ |  | ------------------------ | - |  | ---- | -
|                         |  | Six Months EndedJune 30, |  
|                         |  | 2006                     |   |  | 2007 |  
|Risk-free interest rate  |  | 4.98                     | % |  | 4.91 | %
|Expected life (in years) |  | 4.5                      |   |  | 4.2  |  
|Dividend yield           |  | 0                        | % |  | 0    | %
|Expected volatility      |  | 56                       | % |  | 65   | %

The expected stock price volatility is based on the historical volatility of Jupitermedias
common stock. The risk-free interest rate is based on the implied yield available on U.S. Treasury zero-coupon issues with an equivalent remaining term. The expected term of the options represents the estimated period of time until exercise and is
based on historical experience of similar awards, giving consideration to the contractual terms, vesting schedules and expectations of future employee behavior.

The following table summarizes option activity during the six months ended June 30, 2007:



|                                             |  |           |   |  |                              |       |                                                 |      |                                        |   |      
|-------------------------------------------- |  | --------- | - |  | ---------------------------- | ----- | ----------------------------------------------- | ---- | -------------------------------------- | - | -----
|                                             |  | Shares    |   |  | WeightedAverageExercisePrice |       | WeightedAverageRemainingContractualTerm (years) |      | AggregateIntrinsicValue (in thousands)
|Outstanding at December 31, 2006             |  | 4,751,974 |   |  | $                            | 10.96 |                                                 |      |                                        |   |      
|Granted                                      |  | 704,300   |   |  | $                            | 7.37  |                                                 |      |                                        |   |      
|Exercised                                    |  | (266,666  | ) |  | $                            | 3.89  |                                                 |      |                                        |   |      
|Forfeited or expired                         |  | (309,393  | ) |  | $                            | 14.44 |                                                 |      |                                        |   |      
|                                             |  |           |   |  |                              |       |                                                 |      |                                        |   |      
|Outstanding at June 30, 2007                 |  | 4,880,215 |   |  | $                            | 10.61 |                                                 | 5.14 |                                        | $ | 5,354
|                                             |  |           |   |  |                              |       |                                                 |      |                                        |   |      
|Vested and expected to vest at June 30, 2007 |  | 4,634,557 |   |  | $                            | 10.59 |                                                 | 5.10 |                                        | $ | 5,342
|                                             |  |           |   |  |                              |       |                                                 |      |                                        |   |      
|Exercisable at June 30, 2007                 |  | 3,651,926 |   |  | $                            | 10.51 |                                                 | 4.92 |                                        | $ | 5,297
|                                             |  |           |   |  |                              |       |                                                 |      |                                        |   |      

The aggregate intrinsic value in the table above is before income taxes, based on
Jupitermedias closing stock price of $7.28 as of June 30, 2007.

During the six months ended June 30, 2007, the total
intrinsic value of stock options exercised was $935,000.

As of June 30, 2007, there was $5.3 million of total unrecognized
compensation cost related to nonvested stock-based compensation arrangements granted under the stock incentive plan. That cost is expected to be amortized over a weighted-average period of fourteen months.

Cash provided by operating activities decreased and cash used in financing activities decreased by $2.7 million and $224,000, related to excess tax
benefits from stock-based payment arrangements for the six months ended June 30, 2006 and 2007, respectively.



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##### Table of Contents

5. COMPUTATION OF EARNINGS PER SHARE

Basic earnings or loss per share is computed using the weighted average number of common shares outstanding during the period. Diluted earnings or loss
per share is computed using the weighted average number of common and dilutive common equivalent shares outstanding during the period. Common equivalent shares consist of the incremental common shares issuable upon the exercise of stock options.
Common equivalent shares are excluded from the calculation if their effect is anti-dilutive.

Computations of basic and diluted earnings
(loss) per share for the three and six months ended June 30, 2006 and 2007 are as follows (in thousands, except per share amounts):



|                                                                      |  |                            |        |                          |      |   |        |  |      |        |  |   |        |  
|--------------------------------------------------------------------- |  | -------------------------- | ------ | ------------------------ | ---- | - | ------ |  | ---- | ------ |  | - | ------ | -
|                                                                      |  | Three Months EndedJune 30, |        | Six Months EndedJune 30, |     
|                                                                      |  | 2006                       |        |                          | 2007 |   | 2006   |  | 2007 |       
|Income (loss) from continuing operations                              |  | $                          | 3,139  |                          |      | $ | 619    |  | $    | 5,972  |  | $ | (422   | )
|Income from discontinued operations, net of taxes                     |  |                            |       |                          |      |   |       |  |      | 67     |  |   |       |  
|Gain (loss) on sale of discontinued operations, net of taxes          |  |                            | (718   | )                        |      |   |       |  |      | 5,573  |  |   |       |  
|                                                                      |  |                            |        |                          |      |   |        |  |      |        |  |   |        |  
|Net income (loss)                                                     |  | $                          | 2,421  |                          |      | $ | 619    |  | $    | 11,612 |  | $ | (422   | )
|                                                                      |  |                            |        |                          |      |   |        |  |      |        |  |   |        |  
|Basic weighted average common shares outstanding                      |  |                            | 35,333 |                          |      |   | 35,968 |  |      | 35,223 |  |   | 35,886 |  
|Effect of dilutive stock options                                      |  |                            | 974    |                          |      |   | 390    |  |      | 1,015  |  |   |       |  
|                                                                      |  |                            |        |                          |      |   |        |  |      |        |  |   |        |  
|Total basic weighted average common shares and dilutive stock options |  |                            | 36,307 |                          |      |   | 36,358 |  |      | 36,238 |  |   | 35,886 |  
|                                                                      |  |                            |        |                          |      |   |        |  |      |        |  |   |        |  
|Earnings (Loss) Per Share:                                            |  |                            |        |                          |      |   |        |  |      |        |  |   |        |  
|Basic                                                                 |  |                            |        |                          |      |   |        |  |      |        |  |   |        |  
|Income (loss) from continuing operations                              |  | $                          | 0.09   |                          |      | $ | 0.02   |  | $    | 0.17   |  | $ | (0.01  | )
|                                                                      |  |                            |        |                          |      |   |        |  |      |        |  |   |        |  
|Income (loss) from discontinued operations                            |  | $                          | (0.02  | )                        |      | $ |       |  | $    | 0.16   |  | $ |       |  
|                                                                      |  |                            |        |                          |      |   |        |  |      |        |  |   |        |  
|Net income (loss)                                                     |  | $                          | 0.07   |                          |      | $ | 0.02   |  | $    | 0.33   |  | $ | (0.01  | )
|                                                                      |  |                            |        |                          |      |   |        |  |      |        |  |   |        |  
|Diluted                                                               |  |                            |        |                          |      |   |        |  |      |        |  |   |        |  
|Income (loss) from continuing operations                              |  | $                          | 0.09   |                          |      | $ | 0.02   |  | $    | 0.16   |  | $ | (0.01  | )
|                                                                      |  |                            |        |                          |      |   |        |  |      |        |  |   |        |  
|Income (loss) from discontinued operations                            |  | $                          | (0.02  | )                        |      | $ |       |  | $    | 0.16   |  | $ |       |  
|                                                                      |  |                            |        |                          |      |   |        |  |      |        |  |   |        |  
|Net income (loss)                                                     |  | $                          | 0.07   |                          |      | $ | 0.02   |  | $    | 0.32   |  | $ | (0.01  | )
|                                                                      |  |                            |        |                          |      |   |        |  |      |        |  |   |        |  

The following table summarizes the number of outstanding stock options excluded from the
calculation of diluted earnings (loss) per share for the periods presented because the result would have been anti-dilutive (in thousands, except weighted average exercise price):



|                                      |  |                            |       |                          |   |       |  |      |       |  |   |      
|------------------------------------- |  | -------------------------- | ----- | ------------------------ | - | ----- |  | ---- | ----- |  | - | -----
|                                      |  | Three Months EndedJune 30, |       | Six Months EndedJune 30,
|                                      |  | 2006                       |       | 2007                     |   | 2006  |  | 2007
|Number of anti-dilutive stock options |  |                            | 1,512 |                          |   | 3,492 |  |      | 1,512 |  |   | 4,880
|Weighted average exercise price       |  | $                          | 17.55 |                          | $ | 13.45 |  | $    | 17.55 |  | $ | 10.61

6. INTANGIBLE ASSETS AND GOODWILL

Intangible assets and goodwill include the preliminary allocation of the purchase price relating to certain acquisitions. Jupitermedia is in the process
of obtaining third party valuations of certain intangible assets, thus the allocation of the purchase price relating to these acquisitions is subject to refinement.



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##### Table of Contents

Amortized Intangible Assets

The following table sets forth the intangible assets that are subject to amortization, including the related accumulated amortization (in thousands):



|                                       |  |                   |        |                          |   |         |                    |  |   |       
|-------------------------------------- |  | ----------------- | ------ | ------------------------ | - | ------- | ------------------ |  | - | ------
|                                       |  | December 31, 2006
|                                       |  | Cost              |        | Accumulated Amortization |   |         | Net Carrying Value
|Image library                          |  | $                 | 49,526 |                          | $ | (8,486  | )                  |  | $ | 41,040
|Supplier and contributor contracts     |  |                   | 15,528 |                          |   | (2,479  | )                  |  |   | 13,049
|Customer and distributor relationships |  |                   | 7,126  |                          |   | (2,075  | )                  |  |   | 5,051 
|Web site development costs             |  |                   | 5,895  |                          |   | (2,986  | )                  |  |   | 2,909 
|Trademarks                             |  |                   | 3,916  |                          |   | (2,873  | )                  |  |   | 1,043 
|Non-compete agreements                 |  |                   | 1,550  |                          |   | (699    | )                  |  |   | 851   
|                                       |  |                   |        |                          |   |         |                    |  |   |       
|Total                                  |  | $                 | 83,541 |                          | $ | (19,598 | )                  |  | $ | 63,943
|                                       |  |                   |        |                          |   |         |                    |  |   |       
|                                       | 
|                                       |  | June 30, 2007    
|                                       |  | Cost              |        | Accumulated Amortization |   |         | Net Carrying Value
|Image library                          |  | $                 | 50,217 |                          | $ | (10,895 | )                  |  | $ | 39,322
|Supplier and contributor contracts     |  |                   | 15,403 |                          |   | (4,355  | )                  |  |   | 11,048
|Customer and distributor relationships |  |                   | 6,604  |                          |   | (2,710  | )                  |  |   | 3,894 
|Web site development costs             |  |                   | 6,907  |                          |   | (3,581  | )                  |  |   | 3,326 
|Trademarks                             |  |                   | 4,214  |                          |   | (3,160  | )                  |  |   | 1,054 
|Non-compete agreements                 |  |                   | 1,680  |                          |   | (757    | )                  |  |   | 923   
|                                       |  |                   |        |                          |   |         |                    |  |   |       
|Total                                  |  | $                 | 85,025 |                          | $ | (25,458 | )                  |  | $ | 59,567
|                                       |  |                   |        |                          |   |         |                    |  |   |       

Intangibles that are subject to amortization are amortized on a straight-line basis over their
expected useful lives. The image library is amortized over seven and fifteen years, customer and distributor relationships are amortized over periods ranging from three to eight years, Web site development costs are amortized over three or five
years and trademarks are amortized over three years. Supplier and contributor contracts are amortized over seven years. Non-compete agreements are amortized over the period of the agreements.

Amortization expense related to intangible assets subject to amortization was $2.1 million and $4.4 million for the three and six months ended
June 30, 2006, respectively, and was $3.2 million and $6.3 million, for the three and six months ended June 30, 2007, respectively. Estimated annual amortization expense for the next five years, including the remainder of 2007, is expected
to be as follows (in thousands):



|                         |  |   |       
|------------------------ |  | - | ------
|Year Ending December 31,
|2007                     |  | $ | 6,114 
|2008                     |  |   | 11,913
|2009                     |  |   | 10,954
|2010                     |  |   | 8,041 
|2011                     |  |   | 4,594 
|Thereafter               |  |   | 17,951
|                         |  |   |       
|                         |  | $ | 59,567
|                         |  |   |       

Unamortized Intangible Assets



|             |  |                   |        |               |   |       
|------------ |  | ----------------- | ------ | ------------- | - | ------
|             |  | December 31, 2006 |        | June 30, 2007
|Domain names |  | $                 | 13,980 |               | $ | 13,161
|             |  |                   |        |               |   |       



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Goodwill

The changes in the carrying amount of goodwill for the six months ended June 30, 2007, are as follows (in thousands):



|                                |  |               |         |              |   |        |       |  |   |        
|------------------------------- |  | ------------- | ------- | ------------ | - | ------ | ----- |  | - | -------
|                                |  | Online Images |         | Online Media |   |        | Total
|Balance as of December 31, 2006 |  | $             | 190,092 |              | $ | 8,918  |       |  | $ | 199,010
|Goodwill acquired during period |  |               | 2,252   |              |   | 841    |       |  |   | 3,093  
|Purchase accounting adjustments |  |               | 6,965   |              |   | (1,119 | )     |  |   | 5,846  
|Effect of foreign currency      |  |               | 892     |              |   |       |       |  |   | 892    
|                                |  |               |         |              |   |        |       |  |   |        
|Balance as of June 30, 2007     |  | $             | 200,201 |              | $ | 8,640  |       |  | $ | 208,841
|                                |  |               |         |              |   |        |       |  |   |        

Purchase accounting adjustments pertain primarily to adjustments made to the fair value of certain
intangible assets purchased in conjunction with acquisitions.

7. DEBT

Jupitermedia is party to a Credit and Security Agreement, dated as of July 12, 2007 (the Credit Agreement), among Jupitermedia, as
borrower, the lenders party thereto (the Lenders), KeyBank National Association, as the lead arranger, sole book runner and administrative agent (the Administrative Agent), and Citizens Bank, N.A., as Syndication Agent. The
Credit Agreement provides for a $115 million senior credit facility. The senior credit facility is comprised of (i) a $75 million term loan facility, that was drawn in full on July 12, 2007, and (ii) a $40 million revolving credit
facility, including a $2 million sublimit for letters of credit and a $5 million swingline facility. Jupitermedia used proceeds of the term loan to refinance its previous credit facility and to pay fees and expenses incurred in connection with the
Credit Agreement and will use the balance, as well as borrowings under the revolving credit facility, for working capital and other general corporate purposes, including financing permitted acquisitions.

Obligations under the Credit Agreement are collateralized by a first priority security interest in (i) all present and future capital stock or other
membership, equity, ownership or profits interests of all its direct and indirect domestic subsidiaries (excluding, however, all present and future (if any) domestic subsidiaries owned by Jupitermedias foreign subsidiaries); (ii) 65% of
the voting stock (and 100% of the nonvoting stock) of all present and future first-tier foreign subsidiaries and (iii) substantially all of the tangible and intangible assets of Jupitermedia and its present and future direct and indirect
domestic subsidiaries (excluding, however, all present and future (if any) domestic subsidiaries owned by Jupitermedias foreign subsidiaries). In addition, all of the obligations of Jupitermedia under the Credit Agreement are guaranteed by the
present and future direct and indirect domestic subsidiaries of Jupitermedia.

Borrowings under the Credit Agreement bear interest, at
Jupitermedias option, at the Eurodollar Rate or the Base Rate plus an applicable margin that is adjusted quarterly, depending on Jupitermedias ratio of consolidated indebtedness to consolidated EBITDA as calculated pursuant to the Credit
Agreement (the Leverage Ratio). During the continuance of an Event of Default (as defined in the Credit Agreement), at the election of the Required Lenders (as defined in the Credit Agreement) or automatically in the case of a payment
default or a bankruptcy or insolvency Event of Default, amounts owing under the Credit Agreement will bear interest at a rate per annum equal to 2.00% in excess of the rate otherwise applicable. Jupitermedia is required to pay the Lenders under the
revolving credit facility a commitment fee, payable quarterly in arrears, on the average daily amount of the unused revolving credit facility commitments during the period for which payment is made at a rate per annum that varies depending upon the
Leverage Ratio.

The term loan is payable in 24 consecutive quarterly installments
of (i) $187,500, in the case of each of the first 23 installments, on the last day of each March, June, September and December commencing on September 30, 2007 and ending on March 31, 2013 and (ii) the balance thereof payable in
full, in the case of the 24thinstallment due on July 11, 2013. The revolving credit facility terminates on July 11, 2012 at which time
outstanding borrowings under the revolving credit facility are due. Jupitermedia may optionally prepay loans under the Credit Agreement at any time, without penalty. Loans are subject to mandatory prepayment with net cash proceeds of certain
indebtedness, certain of equity offerings and asset sales and recovery events, subject to reinvestment rights in the case of asset sales and recovery events.

The Credit Agreement contains customary representations and warranties as well as affirmative and negative covenants and financial covenants. The Credit Agreement contains customary events of default.

Jupitermedia used a portion of those funds to refinance its obligations under the credit agreement (the Prior Credit Agreement), dated as of
December 22, 2005, among Jupitermedia, as borrower, the lenders party thereto, LaSalle Bank National Association, as Syndication Agent, KeyBank National Association, as Documentation Agent and JPMorgan Chase



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Bank, N.A., as Administrative Agent, as amended by Amendment No. 1 to the Prior Credit Agreement, dated as of March 28, 2006 (Amendment
No. 1) and Amendment No. 2 to the Prior Credit Agreement, dated as of November 7, 2006 (Amendment No. 2).

The Prior Credit Agreement provided for a $100 million senior credit facility (comprised of a $50 million term loan facility and a $50 million revolving credit facility), which replaced the senior term loan provided under the Credit
Agreement, dated as of July 18, 2005, by and among Jupitermedia, as borrower, JPMorgan, as administrative agent and as lender. The Prior Credit Agreement required the repayment by Jupitermedia of principal of the term loan in 12 consecutive
quarterly installments of (i) $4 million, in the case of each of the first 11 installments, on the last day of each March, June, September and December commencing on March 31, 2006 and ending on September 30, 2008 and (ii) $6
million, in the case of the 12th installment due on December 22, 2008. The revolving credit facility under the Prior Credit Agreement was scheduled to terminate on December 22, 2008 at which time outstanding borrowings under the revolving
credit facility would be due. Proceeds from the Prior Credit Agreement were used to refinance Jupitermedias prior credit facility, for working capital needs and general corporate purposes. Jupitermedia did not incur any penalty for prepayment
of its borrowings under the Prior Credit Agreement.

The description of the Prior Credit Agreement contained herein, as amended by
Amendment No. 1 and Amendment No. 2, is qualified in its entirety by reference to the Prior Credit Agreement, Amendment No. 1 and Amendment No. 2, copies of which have previously been filed as Exhibits 10.1, 10.2 and 10.1,
respectively, of the Current Reports on Form 8-K filed by Jupitermedia with the Securities and Exchange Commission on December 28, 2005, March 31, 2006 and November 13, 2006.

In addition to the termination of Jupitermedias obligations under the Prior Credit Agreement, the guarantees delivered by certain material
subsidiaries of Jupitermedia pursuant to a Guaranty Agreement, dated December 22, 2005, among the material subsidiaries in favor of JPMorgan also terminated as a result of the refinancing. As a result of the termination of the Guaranty
Agreement, the agreements securing the obligations of Jupitermedia and the guarantee obligations of the material subsidiaries by pledging substantially all of the assets of Jupitermedia and the material subsidiaries, the Security Agreement and the
Pledge Agreement, each dated December 22, 2005, among Jupitermedia, the material subsidiaries and JPMorgan, terminated as well.

8.
DISPOSITIONS AND DISCONTINUED OPERATIONS

On March 28, 2006, Jupitermedia sold its JupiterResearch division. As a result of the
sale of the JupiterResearch division, the Research segment is now reflected as a discontinued operation in accordance with SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets. Income from discontinued
operations for the three and six months ended June 30, 2006 was $0 and $67,000, respectively, net of income taxes of $52,000.

The
following table summarizes the revenue and income before income taxes of the discontinued Research operation (in thousands):



|                           |  |                            |   |                          |   |      |  |      |       |  |   |  
|-------------------------- |  | -------------------------- | - | ------------------------ | - | ---- |  | ---- | ----- |  | - | -
|                           |  | Three Months EndedJune 30, |   | Six Months EndedJune 30,
|                           |  | 2006                       |   | 2007                     |   | 2006 |  | 2007
|Revenues                   |  | $                          |  |                          | $ |     |  | $    | 2,388 |  | $ | 
|Income before income taxes |  | $                          |  |                          | $ |     |  | $    | 119   |  | $ | 

9. SEGMENT INFORMATION

Jupitermedia has two reportable segments: Online images and Online media. The following tables summarize the results of the segments of Jupitermedia for
the three and six months ended June 30, 2006 and 2007. Online images consists of the Jupiterimages business that includes BananaStock, Workbook Stock, Brand X Pictures, FoodPix, Botanica, Nonstock, The Beauty Archive, IFA Bilderteam, Comstock
Images, Creatas Images, PictureQuest, Liquid Library, Thinkstock Images, Thinkstock Footage, Goodshoot, Polka Dot Images, Stock Image, Pixland, Photos.com, Ablestock.com, PhotoObjects.net, Clipart.com, AnimationFactory.com, JupiterGreetings.com,
RoyaltyFreeMusic.com, StudioCutz.com and Stockxpert.com. Online media includes the internet.com, EarthWeb.com, DevX.com and Graphics.com Networks. Jupitermedia evaluates segment performance based on income or loss from operations. Other includes
corporate overhead, depreciation, amortization and venture fund related activities. With the exception of goodwill, Jupitermedia does not identify or allocate assets by operating segment. See Note 6 for the allocation of goodwill to
Jupitermedias reportable segments.



11



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##### Table of Contents

Summary information by segment for the three and six months ended June 30, 2006 and 2007 is as
follows (in thousands):



|                                         |  |                            |        |   |                           |   |        |      |  |   |         |   |  |   |         |  
|---------------------------------------- |  | -------------------------- | ------ | - | ------------------------- | - | ------ | ---- |  | - | ------- | - |  | - | ------- | -
|                                         |  | Three Months EndedJune 30, |        |   | Six Months Ended June 30, |  
|                                         |  | 2006                       |        |   | 2007                      |   |        | 2006 |  |   | 2007    |  
|Revenues:                                |  |                            |        |   |                           |   |        |      |  |   |         |   |  |   |         |  
|Online images                            |  | $                          | 26,807 |   |                           | $ | 27,383 |      |  | $ | 53,372  |   |  | $ | 55,297  |  
|Online media                             |  |                            | 8,213  |   |                           |   | 7,286  |      |  |   | 15,589  |   |  |   | 14,143  |  
|Other                                    |  |                            | 6      |   |                           |   |       |      |  |   | 6       |   |  |   |        |  
|                                         |  |                            |        |   |                           |   |        |      |  |   |         |   |  |   |         |  
|                                         |  |                            | 35,026 |   |                           |   | 34,669 |      |  |   | 68,967  |   |  |   | 69,440  |  
|                                         |  |                            |        |   |                           |   |        |      |  |   |         |   |  |   |         |  
|Cost of revenues and operating expenses: |  |                            |        |   |                           |   |        |      |  |   |         |   |  |   |         |  
|Online images                            |  |                            | 17,747 |   |                           |   | 18,161 |      |  |   | 33,969  |   |  |   | 37,453  |  
|Online media                             |  |                            | 5,457  |   |                           |   | 5,664  |      |  |   | 10,636  |   |  |   | 10,405  |  
|Depreciation and amortization            |  |                            | 2,944  |   |                           |   | 4,347  |      |  |   | 5,868   |   |  |   | 8,513   |  
|Other                                    |  |                            | 4,519  |   |                           |   | 4,260  |      |  |   | 8,440   |   |  |   | 10,519  |  
|                                         |  |                            |        |   |                           |   |        |      |  |   |         |   |  |   |         |  
|                                         |  |                            | 30,667 |   |                           |   | 32,432 |      |  |   | 58,913  |   |  |   | 66,890  |  
|                                         |  |                            |        |   |                           |   |        |      |  |   |         |   |  |   |         |  
|Operating income (loss):                 |  |                            |        |   |                           |   |        |      |  |   |         |   |  |   |         |  
|Online images                            |  |                            | 9,060  |   |                           |   | 9,222  |      |  |   | 19,403  |   |  |   | 17,844  |  
|Online media                             |  |                            | 2,756  |   |                           |   | 1,622  |      |  |   | 4,953   |   |  |   | 3,738   |  
|Other                                    |  |                            | (7,457 | ) |                           |   | (8,607 | )    |  |   | (14,302 | ) |  |   | (19,032 | )
|                                         |  |                            |        |   |                           |   |        |      |  |   |         |   |  |   |         |  
|                                         |  | $                          | 4,359  |   |                           | $ | 2,237  |      |  | $ | 10,054  |   |  | $ | 2,550   |  
|                                         |  |                            |        |   |                           |   |        |      |  |   |         |   |  |   |         |  

10. INCOME TAXES

On January 1, 2007, Jupitermedia adopted the provisions of FASB Interpretation 48, Accounting for Uncertainty in Income Taxes (FIN 48).
FIN 48 creates a two-step approach for evaluating uncertain tax positions. Recognition, the first step, occurs when an enterprise concludes that a tax position, based solely on its technical merits, is more-likely-than-not to be sustained upon
examination. Measurement, the second step, determines the amount of benefit that more-likely-than-not will be realized upon settlement. Reversal of a tax position that was previously recognized would occur when an enterprise subsequently determines
that a tax position no longer meets the more-likely-than-not threshold of being sustained. FIN 48 specifically prohibits the use of a valuation allowance as a substitute for the reversal of tax positions, and it has expanded disclosure requirements.
The adoption of FIN 48 did not result in a change to Jupitermedias January 1, 2007 balance of accumulated deficit. Jupitermedia includes interest expense or income as well as potential penalties on uncertain tax positions as a component
of income tax expense in the unaudited consolidated condensed statement of operations. The total amount of accrued interest and penalties related to uncertain tax positions at June 30, 2007 was $16,000 and is included in accrued expenses and
other in the unaudited consolidated condensed balance sheet. Jupitermedia remains open for examination by the Internal Revenue Service for 2003 through 2006. For most of its other significant tax jurisdictions, Jupitermedias income tax returns
are also open for examination for 2003 through 2006. There was not a significant change in Jupitermedias liabilities for unrecognized tax benefits during the three and six months ended June 30, 2007. Jupitermedia does not believe it is
reasonably possible that the total amount of unrealized tax benefits will change significantly in the next twelve months.

11.
COMMITMENTS AND CONTINGENCIES

On August 3, 2004, Mario Cisneros and Michael Voight filed a class action lawsuit in the Superior
Court of the State of California, County of San Francisco, on behalf of themselves and all others situated and/or the general public against Jupitermedia and twelve co-defendant companies that operate Internet search engines. Cisneros et al. allege
that defendants posting of paid advertising providing links to Internet gambling Web sites constitutes unfair competition and unlawful business acts and practices under California law. Plaintiffs seek declaratory and injunctive relief, disgorgement
of profits and restitution. On September 3, 2004, Jupitermedia blocked all advertisements from being published on its Web properties from third-party search engines for the gambling-related terms specified in the Complaint. Moreover,
Jupitermedia does not accept advertisements for gambling-related Web sites directly from companies that operate them. Jupitermedia has demanded contractual indemnity from two companies that supplied advertisements that are the subject matter of the
lawsuit. Neither of these two companies, however, has stated a final position as whether it will provide indemnity. Jupitermedia intends to vigorously defend itself.



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On or about November 13, 2006, Robert Lange, who identifies himself as a stockholder of
Jupitermedia, commenced a purported stockholders derivative action in the United States District Court for the District of Connecticut, purportedly on behalf of Jupitermedia, against all of Jupitermedias current directors and against
Jupitermedias former Chief Financial Officer. Jupitermedia is named in the suit as a nominal defendant on whose behalf recovery is purportedly sought. Mr. Lange did not make a litigation demand on Jupitermedias
board of directors prior to commencing the action, and alleges that such demand should be excused as a matter of law. The complaint alleges, based primarily on a statistical analysis, that certain stock options granted to certain of the
defendants in 1999, 2000 and 2001 were backdated, and asserts on behalf of Jupitermedia various causes of action against the defendants arising out of such alleged backdating, including securities fraud, breach of fiduciary duty and unjust
enrichment. On April 24, 2007, Jupitermedia and the individual defendants filed a motion to dismiss the case in its entirety. Rather than respond to the motion to dismiss, the Plaintiff filed an amended complaint on July 16, 2007. The
amended complaint removes one of the individual defendants, but is substantially similar to the original complaint.

Jupitermedia is
subject to legal proceedings and claims that arise in the ordinary course of its business. In the opinion of management, the amount of ultimate liability with respect to these actions will not materially affect the financial statements of
Jupitermedia.

12. SUBSEQUENT EVENTS

On July 17, 2007, Jupitermedia agreed to acquire all of the shares of capital stock (the Acquisition) of Mediabistro.com Inc., a private company incorporated in Delaware (Mediabistro),
pursuant to an Agreement and Plan of Merger (the Merger Agreement), dated as of July 17, 2007, by and among Jupitermedia, Mediabistro Acquisition Subsidiary, Inc., a Delaware corporation and a wholly-owned subsidiary of Jupitermedia
(Merger Sub), Mediabistro and Laurel Touby, as agent for the security holders of Mediabistro, in which, among other things, (x) the Merger Sub would merge with and into Mediabistro, (y) the separate existence of Merger Sub
would cease, and (z) Mediabistro would continue its existence as both the surviving corporation and a wholly-owned subsidiary of Jupitermedia. Mediabistro, based in New York City, is a career and community site for media and creative
professionals, and includes job postings, educational courses, events, forums, original content and a premium subscription service. The Acquisition closed the following day on July 18, 2007 concurrently with the filing of the Certificate of
Merger with the Secretary of State of the State of Delaware.

The consideration paid in the Acquisition consisted of $20.0 million in cash
and a two year earn-out that could result in an additional $3.0 million in cash consideration. Funding for this acquisition was secured through Jupitermedias recently announced closing of a $115 million senior credit facility arranged by
KeyBanc Capital Markets (See Note 7).



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

The following discussion should be read in conjunction with our unaudited financial statements and the accompanying notes, which appear elsewhere in
this filing. Statements in this Form 10-Q, which are not historical facts, are forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. The potential risks and uncertainties address a variety of subjects including, for example: the
competitive environment in which Jupitermedia competes; the unpredictability of Jupitermedias future revenues, expenses, cash flows and stock price; Jupitermedias ability to integrate acquired businesses, products and personnel into its
existing businesses; Jupitermedias dependence on a limited number of advertisers; and Jupitermedias ability to protect its intellectual property. For a more detailed discussion of such risks and uncertainties, refer to
Jupitermedias reports filed with the Securities and Exchange Commission pursuant to the Securities Exchange Act of 1934. The forward-looking statements included herein are made as of the date of this Form 10-Q, and we are under no obligation
to update the forward-looking statements after the date hereof.

Overview

We are a leading global provider of original images and online information for information technology (IT), business and creative
professionals. Our operations are classified into two principal segments: Online images and Online media.

Online images.Jupiterimages, our Online images business, is one of the leading images companies in the world with over 7.0 million images online serving creative professionals with brands like BananaStock, Workbook Stock, Brand X Pictures, FoodPix,
Botanica, Nonstock, The Beauty Archive, IFA Bilderteam, Comstock Images, Creatas Images, PictureQuest, Liquid Library, Thinkstock Images, Thinkstock Footage, Bigshot Media, Goodshoot, Polka Dot Images, Stock Image, Pixland, Photos.com,
Ablestock.com, PhotoObjects.net, Clipart.com, AnimationFactory.com, JupiterGreetings.com, RoyaltyFreeMusic.com, StudioCutz.com and Stockxpert.com.

We generate our Online images revenues from paid subscriptions that provide access to our image libraries. Customers may purchase subscriptions, which are offered based on a variety of prices and terms, to access our image libraries. Once a
customer becomes a subscriber, they have the ability to obtain copies of images within our image libraries.

We also derive revenue from
granting rights to use images that are downloaded or delivered on CD-ROMs. Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable and
collectibility is reasonably assured. Delivery occurs upon shipment or the availability of the image for downloading by the customer.

Our
images are licensed online through our networks, through our direct sales force and through third party relationships. We also have agreements with a number of distributors of digital images and footage clips, whereby the distributors make sales to
third party customers and remit a percentage of the sales to us. We recognize the revenue from the sale by the distributor at the time of the sale.

We also license a portion of our images to third parties for royalties based on the licensees revenues generated by the licensed images.

The principal costs of our Online images business relate to commissions paid to third party image suppliers, payroll costs for production personnel, sales and marketing personnel, technology infrastructure, lead
generation fees for sales referrals and credit card processing fees.

Online media.The JupiterOnlineMedia division of
Jupitermedia consists of four distinct online networks: internet.com and EarthWeb.com for IT and business professionals; DevX.com for developers; and Graphics.com for creative professionals. The networks includes more than 150 Web sites and 150
e-mail newsletters that are viewed by over 20 million users and generate over 400 million page views monthly. Online media includes the STEP Inside Design and Dynamic Graphics print magazines. These magazines are geared towards graphic
design professionals and provide the reader with ideas and information to help them with both online and offline graphic design and publishing projects. In addition, JupiterOnlineMedia includes JupiterEvents, which produces offline conference and
trade shows focused on IT and business-specific topics.

We generate our Online media revenues from:



| |  |  | advertising and custom publishing on our Web sites, e-mail newsletters, online discussion forums and moderated e-mail discussion lists;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

| |  |  | e-commerce agreements, which generally include a fixed advertising fee;
| | - |  | -----------------------------------------------------------------------



| |  |  | advertiser sponsorships for our Webcasts;
| | - |  | -----------------------------------------



| |  |  | advertising, subscriptions and newsstand sales for our print magazines;
| | - |  | -----------------------------------------------------------------------



| |  |  | paid subscription services for our paid e-mail newsletters and services;
| | - |  | ------------------------------------------------------------------------



| |  |  | renting our permission based opt-in e-mail list names;
| | - |  | ------------------------------------------------------



| |  |  | attendee registration fees to our conferences and trade shows;
| | - |  | --------------------------------------------------------------



| |  |  | exhibition space fees and vendor sponsorships to our conferences and trade shows; and
| | - |  | -------------------------------------------------------------------------------------



| |  |  | licensing our editorial content, software and brands to third parties for fixed fees and royalties based on the licensees revenues generated by the licensed
property.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

The principal costs of our Online media business relate to payroll for our editorial, technology, operations
and sales personnel; technology related costs for facilities and equipment; paper and printing costs; and venue, speaker and advertising expenses for events.

Results of Operations

Revenues

The following tables sets forth, for the periods indicated, a comparison of our revenues by segment (dollars in thousands):



|              |  |                             |        |               |   |        |                           |   |               |   |  |      |    |      |   |        |  |   |        |  |   |        |   |  |      |  
|------------- |  | --------------------------- | ------ | ------------- | - | ------ | ------------------------- | - | ------------- | - |  | ---- | -- | ---- | - | ------ |  | - | ------ |  | - | ------ | - |  | ---- | -
|              |  | Three Months Ended June 30, |        | 2006 vs. 2007 |   |        | Six Months Ended June 30, |   | 2006 vs. 2007 |  
|              |  | 2006                        |        | 2007          |   | $      |                           |   | %             |   |  | 2006 |    | 2007 |   | $      |  |   | %      | 
|Online images |  | $                           | 26,807 |               | $ | 27,383 |                           | $ | 576           |   |  | 2    | %  |      | $ | 53,372 |  | $ | 55,297 |  | $ | 1,925  |   |  | 4    | %
|Online media  |  |                             | 8,213  |               |   | 7,286  |                           |   | (927          | ) |  | (11  | )  |      |   | 15,589 |  |   | 14,143 |  |   | (1,446 | ) |  | (9   | )
|Other         |  |                             | 6      |               |   |       |                           |   | (6            | ) |  | (100 | )  |      |   | 6      |  |   |       |  |   | (6     | ) |  | (100 | )
|              |  |                             |        |               |   |        |                           |   |               |   |  |      |    |      |   |        |  |   |        |  |   |        |   |  |      |  
|              |  | $                           | 35,026 |               | $ | 34,669 |                           | $ | (357          | ) |  | (1   | )% |      | $ | 68,967 |  | $ | 69,440 |  | $ | 473    |   |  | 1    | %
|              |  |                             |        |               |   |        |                           |   |               |   |  |      |    |      |   |        |  |   |        |  |   |        |   |  |      |  

Online images. The increase in revenues during the three and six months ended
June 30, 2007 is due primarily to acquisitions consummated after June 30, 2006.

The following table sets forth, for the three
and six months ended June 30, 2006 and 2007, the components of our Online images revenues (dollars in thousands):



|                                  |  |                            |        |                          |   |        |  |      |        |  |   |       
|--------------------------------- |  | -------------------------- | ------ | ------------------------ | - | ------ |  | ---- | ------ |  | - | ------
|                                  |  | Three Months EndedJune 30, |        | Six Months EndedJune 30,
|                                  |  | 2006                       |        | 2007                     |   | 2006   |  | 2007
|Single images and CD-ROMs         |  | $                          | 13,049 |                          | $ | 13,936 |  | $    | 26,034 |  | $ | 28,262
|Subscriptions                     |  |                            | 6,320  |                          |   | 7,049  |  |      | 12,486 |  |   | 13,870
|Distributors, licensing and other |  |                            | 7,438  |                          |   | 6,398  |  |      | 14,852 |  |   | 13,165
|                                  |  |                            |        |                          |   |        |  |      |        |  |   |       
|Total Online images               |  | $                          | 26,807 |                          | $ | 27,383 |  | $    | 53,372 |  | $ | 55,297
|                                  |  |                            |        |                          |   |        |  |      |        |  |   |       

Online media. The decrease in revenues during the three and six months ended June 30,
2007 was due primarily to a reduction in advertising revenues due to a reduction in advertising spending by technology companies.



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##### Table of Contents

The following table sets forth a quarter-by-quarter comparison of the number of our Online media online
advertisers and the average revenue derived from each advertiser (dollars in thousands):



|                   |  |                      |  |                               |   
|------------------ |  | -------------------- |  | ----------------------------- | --
|                   |  | Numberof Advertisers |  | Average Revenueper Advertiser
|March 31, 2006     |  | 155                  |  | $                             | 36
|June 30, 2006      |  | 138                  |  |                               | 47
|September 30, 2006 |  | 141                  |  |                               | 42
|December 31, 2006  |  | 143                  |  |                               | 43
|March 31, 2007     |  | 142                  |  |                               | 35
|June 30, 2007      |  | 144                  |  |                               | 34

Other.Other revenues during the three and six months ended June 30, 2006 represent
management fees from our management of internet.com Venture Fund I LLC (VFI). Due to the dissolution of VFI in December 2006, these revenues will no longer be recognized.

Cost of revenues

The following table sets forth, for the periods indicated, a comparison of our cost
of revenues by segment (dollars in thousands):



|              |  |                            |        |               |   |        |                          |   |               |  |      |   |      |   |        |  |   |        |  |   |       |  |    |  
|------------- |  | -------------------------- | ------ | ------------- | - | ------ | ------------------------ | - | ------------- |  | ---- | - | ---- | - | ------ |  | - | ------ |  | - | ----- |  | -- | -
|              |  | Three Months EndedJune 30, |        | 2006 vs. 2007 |   |        | Six Months EndedJune 30, |   | 2006 vs. 2007 | 
|              |  | 2006                       |        | 2007          |   | $      |                          | % |               |  | 2006 |   | 2007 |   | $      |  | % |       
|Online images |  | $                          | 9,405  |               | $ | 11,072 |                          | $ | 1,667         |  | 18   | % |      | $ | 18,222 |  | $ | 22,876 |  | $ | 4,654 |  | 26 | %
|Online media  |  |                            | 3,307  |               |   | 3,427  |                          |   | 120           |  | 4    |   |      |   | 6,415  |  |   | 6,425  |  |   | 10    |  |   |  
|              |  |                            |        |               |   |        |                          |   |               |  |      |   |      |   |        |  |   |        |  |   |       |  |    |  
|              |  | $                          | 12,712 |               | $ | 14,499 |                          | $ | 1,787         |  | 14   | % |      | $ | 24,637 |  | $ | 29,301 |  | $ | 4,664 |  | 19 | %
|              |  |                            |        |               |   |        |                          |   |               |  |      |   |      |   |        |  |   |        |  |   |       |  |    |  

Online images. Cost of revenues primarily consists of commissions paid to third party image
suppliers, payroll and benefits costs for technology and production personnel, communications infrastructure, Web site hosting and storage for our image library. Cost of revenues excludes depreciation and amortization. The increase in cost of
revenues during the three and six months ended June 30, 2007, is primarily due to an increase in commission expense of $782,000 and $2.2 million, respectively, and an increase in employee related costs of $999,000 and $2.5 million,
respectively. These increases were primarily a result of the acquisitions consummated after June 30, 2006.

We intend to make
investments through internal development and, where appropriate opportunities arise, acquisitions to continue to expand our image library and to substitute licensed images with images that we own that will result in reduced commission expense in the
future. As we continue to make investments to increase the size of our image library, we may need to increase our spending for Web site hosting and storage costs.

Online media. Cost of revenues primarily consists of payroll and benefits costs for technology and editorial personnel, freelance costs, communications infrastructure and Web site hosting. Cost of revenues
excludes depreciation and amortization. The increase in cost of revenues for the three and six months ended June 30, 2007 was due primarily to increased costs related to Online media events of $436,000 and $458,000, respectively, which were
offset primarily by decreased employee related and freelance costs of $262,000 and $225,000, respectively.

We intend to make investments
through internal development and, where appropriate opportunities arise, acquisitions to continue to expand our content offerings. We may need to increase our spending in order to create additional content related to new topics or offerings.



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##### Table of Contents

Advertising, promotion and selling

The following table sets forth, for the periods indicated, a comparison of our advertising, promotion and selling expenses by segment (dollars in
thousands):



|              |  |                             |       |               |   |       |                          |   |              |   |  |      |    |      |   |        |  |   |        |  |   |      |   |  |    |   
|------------- |  | --------------------------- | ----- | ------------- | - | ----- | ------------------------ | - | ------------ | - |  | ---- | -- | ---- | - | ------ |  | - | ------ |  | - | ---- | - |  | -- | --
|              |  | Three Months Ended June 30, |       | 2006 vs. 2007 |   |       | Six Months EndedJune 30, |   | 2006 vs.2007 |  
|              |  | 2006                        |       | 2007          |   | $     |                          |   | %            |   |  | 2006 |    | 2007 |   | $      |  |   | %      | 
|Online images |  | $                           | 5,953 |               | $ | 5,273 |                          | $ | (680         | ) |  | (11  | )% |      | $ | 11,215 |  | $ | 10,758 |  | $ | (457 | ) |  | (4 | )%
|Online media  |  |                             | 1,922 |               |   | 1,993 |                          |   | 71           |   |  | 4    |    |      |   | 3,826  |  |   | 3,608  |  |   | (218 | ) |  | (6 | ) 
|              |  |                             |       |               |   |       |                          |   |              |   |  |      |    |      |   |        |  |   |        |  |   |      |   |  |    |   
|              |  | $                           | 7,875 |               | $ | 7,266 |                          | $ | (609         | ) |  | (8   | )% |      | $ | 15,041 |  | $ | 14,366 |  | $ | (675 | ) |  | (5 | )%
|              |  |                             |       |               |   |       |                          |   |              |   |  |      |    |      |   |        |  |   |        |  |   |      |   |  |    |   

Online images. Advertising, promotion and selling expenses primarily consists of payroll
and benefits costs for sales and marketing personnel and advertising. The decrease in advertising, promotion and selling from the three months ended June 30, 2006 to the three months ended June 30, 2007 is primarily due to a decrease in print
advertising expense of $557,000 and a decrease in employee related costs of $127,000. The decrease for the six months ended June 30, 2007 is primarily due to a decrease in print advertising expense of $1.5 million offset by an increase in
employee related costs of $818,000.

Online media. Advertising, promotion and selling expenses primarily consists of payroll and
benefits costs for sales and marketing personnel. The increase in advertising, promotion and selling expenses from 2006 to 2007 for the three months ended June 30, 2007 relates to an increase in advertising and marketing expense for Online
media events of $312,000 offset by a decrease in employee payroll and benefits costs of $255,000. The decrease from the six months ended June 30, 2006 to the six months ended June 30, 2007 relates to a decrease in employee payroll and benefits
costs of $509,000 partially offset by an increase in advertising and marketing expense of $312,000 for events.

General and
administrative

The following table sets forth, for the periods indicated, a comparison of our general and administrative expenses by
segment (dollars in thousands):



|              |  |                            |       |               |   |       |                          |   |               |   |  |      |    |      |   |        |  |   |        |  |   |       |   |  |     |   
|------------- |  | -------------------------- | ----- | ------------- | - | ----- | ------------------------ | - | ------------- | - |  | ---- | -- | ---- | - | ------ |  | - | ------ |  | - | ----- | - |  | --- | --
|              |  | Three Months EndedJune 30, |       | 2006 vs. 2007 |   |       | Six Months EndedJune 30, |   | 2006 vs. 2007 |  
|              |  | 2006                       |       | 2007          |   | $     |                          |   | %             |   |  | 2006 |    | 2007 |   | $      |  |   | %      | 
|Online images |  | $                          | 2,389 |               | $ | 1,816 |                          | $ | (573          | ) |  | (24  | )% |      | $ | 4,532  |  | $ | 3,819  |  | $ | (713  | ) |  | (16 | )%
|Online media  |  |                            | 228   |               |   | 244   |                          |   | 16            |   |  | 7    |    |      |   | 395    |  |   | 372    |  |   | (23   | ) |  | (6  | ) 
|Other         |  |                            | 4,519 |               |   | 4,260 |                          |   | (259          | ) |  | (6   | )  |      |   | 8,440  |  |   | 10,519 |  |   | 2,079 |   |  | 25  |   
|              |  |                            |       |               |   |       |                          |   |               |   |  |      |    |      |   |        |  |   |        |  |   |       |   |  |     |   
|              |  | $                          | 7,136 |               | $ | 6,320 |                          | $ | (816          | ) |  | (11  | )% |      | $ | 13,367 |  | $ | 14,710 |  | $ | 1,343 |   |  | 10  | % 
|              |  |                            |       |               |   |       |                          |   |               |   |  |      |    |      |   |        |  |   |        |  |   |       |   |  |     |   

Online images. General and administrative expenses primarily consists of payroll and
benefits costs for administrative personnel, office related costs and professional fees. The decrease in general and administrative expenses for the three and six months ended June 30, 2007 is due primarily to a reduction in professional fees
of $285,000 and $349,000, respectively.

Online media. General and administrative expenses primarily consist of office related costs
and provisions for losses on accounts receivable. The change in general and administrative expenses from the three and six months ended June 30, 2006 to the three and six months ended June 30, 2007 was due primarily to an increase in office
related costs and a reduction in bad debt expense.

Other. General and administrative expenses primarily consist of payroll and
benefits costs for administrative personnel, office related costs and professional fees. The decrease in general and administrative expense from the three months ended June 30, 2006 to the three months ended June 30, 2007 is primarily due to a
decrease in professional fees of $434,000 partially offset by an increase in employee related costs. The increase in general and administrative expense from the six months ended June 30, 2006 to the six months ended June 30, 2007 is primarily
due to an increase in legal and accounting fees of $1.9 million associated with discussions with Getty Images, Inc. regarding a potential transaction which were terminated on March 7, 2007.



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##### Table of Contents

Depreciation and amortization

The following table sets forth, for the periods indicated, a comparison of our depreciation and amortization expenses (dollars in thousands):



|             |  |                             |       |               |   |       |                           |   |               |  |      |   |      |   |       |  |   |       |  |   |       |  |    |  
|------------ |  | --------------------------- | ----- | ------------- | - | ----- | ------------------------- | - | ------------- |  | ---- | - | ---- | - | ----- |  | - | ----- |  | - | ----- |  | -- | -
|             |  | Three Months Ended June 30, |       | 2006 vs. 2007 |   |       | Six Months Ended June 30, |   | 2006 vs. 2007 | 
|             |  | 2006                        |       | 2007          |   | $     |                           | % |               |  | 2006 |   | 2007 |   | $     |  | % |      
|Depreciation |  | $                           | 849   |               | $ | 1,163 |                           | $ | 314           |  | 37   | % |      | $ | 1,502 |  | $ | 2,225 |  | $ | 723   |  | 48 | %
|Amortization |  |                             | 2,095 |               |   | 3,184 |                           |   | 1,089         |  | 52   |   |      |   | 4,366 |  |   | 6,288 |  |   | 1,922 |  | 44 |  
|             |  |                             |       |               |   |       |                           |   |               |  |      |   |      |   |       |  |   |       |  |   |       |  |    |  
|             |  | $                           | 2,944 |               | $ | 4,347 |                           | $ | 1,403         |  | 48   | % |      | $ | 5,868 |  | $ | 8,513 |  | $ | 2,645 |  | 45 | %
|             |  |                             |       |               |   |       |                           |   |               |  |      |   |      |   |       |  |   |       |  |   |       |  |    |  

Depreciation and amortization expense increased during the three and six months ended
June 30, 2007 due primarily to acquisitions consummated after June 30, 2006 along with changes made to the preliminary purchase price of certain acquisitions resulting from final third party valuation adjustments of certain intangible
assets.

Our depreciation and amortization expenses may vary in future periods based upon a change in our capital expenditure levels, any
purchase accounting adjustments relating to our acquisitions or any future acquisitions.

Interest income and interest expense

The following table sets forth, for the periods indicated, a comparison of our interest income and interest expense (dollars in
thousands):



|                 |  |                             |        |   |               |   |        |                           |  |   |               |   |  |      |    |  |      |        |   |   |   |        |   |  |   |      |   |  |     |   
|---------------- |  | --------------------------- | ------ | - | ------------- | - | ------ | ------------------------- |  | - | ------------- | - |  | ---- | -- |  | ---- | ------ | - | - | - | ------ | - |  | - | ---- | - |  | --- | --
|                 |  | Three Months Ended June 30, |        |   | 2006 vs. 2007 |   |        | Six Months Ended June 30, |  |   | 2006 vs. 2007 |  
|                 |  | 2006                        |        |   | 2007          |   |        | $                         |  |   | %             |   |  | 2006 |    |  | 2007 |        |   | $ |   |        | % | 
|Interest income  |  | $                           | 164    |   |               | $ | 38     |                           |  | $ | (126          | ) |  | (77  | )% |  | $    | 281    |   |   | $ | 78     |   |  | $ | (203 | ) |  | (72 | )%
|Interest expense |  |                             | (1,393 | ) |               |   | (1,431 | )                         |  |   | (38           | ) |  | (3   | )  |  |      | (2,712 | ) |   |   | (2,904 | ) |  |   | (192 | ) |  | (7  | ) 

Interest expense relates primarily to borrowings under a senior credit facility with JPMorgan
Chase Bank N.A. (see Liquidity and Capital Resources).

Provision for income taxes

A provision for income taxes of $147,000 and $18,000 was recorded for the three and six months ended June 30, 2007, respectively. The income tax
provision for the six months ended June 30, 2007 was principally impacted by $1.9 million in legal and accounting fees associated with discussions with Getty Images, Inc., regarding a potential transaction which were terminated on March 7,
2007.

Minority interests

Minority interests represent the minority stockholders proportionate share of profits or losses of our majority-owned Japanese and Hungarian subsidiaries. Japan.internet.com KK and Jupiterimages Japan represent our online media and
online images businesses, respectively, focused on Japan. HAAP Media Ltd. is our micro-payment online images business based in Hungary.



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##### Table of Contents

Liquidity and Capital Resources

The following table sets forth, for the periods indicated, a comparison of the key components of our liquidity and capital resources (dollars in
thousands):



|                           |  |                           |         |   |               |   |         |   |  |   |         |   |  |     |   
|-------------------------- |  | ------------------------- | ------- | - | ------------- | - | ------- | - |  | - | ------- | - |  | --- | --
|                           |  | Six Months Ended June 30, |         |   | 2006 vs. 2007 |  
|                           |  | 2006                      |         |   | 2007          |   |         | $ |  |   | %       |  
|Operating cash flows       |  | $                         | 3,965   |   |               | $ | 8,323   |   |  | $ | 4,358   |   |  | 110 | % 
|Investing cash flows       |  | $                         | (17,017 | ) |               | $ | (10,640 | ) |  | $ | 6,377   |   |  | (37 | )%
|Financing cash flows       |  | $                         | 14,890  |   |               | $ | (1,838  | ) |  | $ | (16,728 | ) |  | 112 | % 
|Acquisitions of businesses |  | $                         | (25,684 | ) |               | $ | (8,419  | ) |  | $ | 17,265  |   |  | (67 | )%
|Capital expenditures       |  | $                         | (1,296  | ) |               | $ | (2,353  | ) |  | $ | (1,057  | ) |  | 82  | % 
|                           |  |                          
|                           |  | As of                     |         |   | 2006 vs. 2007 |  
|                           |  | December 31, 2006         |         |   | June 30, 2007 |   |         | $ |  |   | %       |  
|Cash and cash equivalents  |  | $                         | 8,891   |   |               | $ | 4,803   |   |  | $ | (4,088  | ) |  | (46 | )%
|Accounts receivable, net   |  | $                         | 25,296  |   |               | $ | 26,271  |   |  | $ | 975     |   |  | 4   | % 
|Working capital deficit    |  | $                         | (12,150 | ) |               | $ | (15,919 | ) |  | $ | (3,769  | ) |  | (31 | )%
|Long-term debt             |  | $                         | 65,899  |   |               | $ | 62,799  |   |  | $ | (3,100  | ) |  | (5  | )%

Since inception, we have funded operations through various means including our initial and
follow-on public offerings of our common stock in June 1999, February 2000 and May 2004, the sale of our Events and Research businesses, through various credit agreements and through cash flows from operating activities.

Cash provided by operating activities increased during the six months ended June 30, 2007 primarily due to increases in depreciation and
amortization expense and accounts payable.

The amounts of cash used in investing activities vary in correlation to the number and cost of
the acquisitions consummated. Net cash used in investing activities in 2007 related primarily to acquisitions of certain businesses and an increase in information technology related spending. Net cash used in investing activities in 2006 related
primarily to acquisitions of certain businesses.

Cash used in financing activities in the six months ended June 30, 2007 relates to
the repayment of borrowings under our credit facilities. Cash provided from financing activities in the six months ended June 30, 2006 and 2007 relates primarily to borrowings under a senior credit facility with JPMorgan Chase Bank N.A.

We are party to a Credit and Security Agreement, dated as of July 12, 2007 (the Credit Agreement), among ourselves, as
borrower, the lenders party thereto (the Lenders), KeyBank National Association, as the lead arranger, sole book runner and administrative agent (the Administrative Agent), and Citizens Bank, N.A., as Syndication Agent. The
Credit Agreement provides for $115 million senior credit facility. The senior credit facility is comprised of (i) a $75 million term loan facility, that was drawn in full on July 12, 2007, and (ii) a $40 million revolving credit
facility, including a $2 million sublimit for letters of credit and a $5 million swingline facility. We used proceeds of the term loan to refinance its previous credit facility and to pay fees and expenses incurred in connection with the Credit
Agreement and will use the balance, as well as borrowings under the revolving credit facility, for working capital and other general corporate purposes, including financing permitted acquisitions.

Borrowings under the Credit Agreement bear interest, at our option, at the Eurodollar Rate or the Base Rate, plus an applicable margin that is adjusted
quarterly, depending on the our ratio of consolidated indebtedness to consolidated EBITDA as calculated pursuant to the Credit Agreement (the Leverage Ratio). During the continuance of an Event of Default (as defined in the Credit
Agreement), at the election of the Required Lenders (as defined in the Credit Agreement) or automatically in the case of a payment default or a bankruptcy or insolvency Event of Default, amounts owing under the Credit Agreement will bear interest at
a rate per annum equal to 2.00% in excess of the rate otherwise applicable. We are required to pay the Lenders under the revolving credit facility a commitment fee, payable quarterly in arrears, on the average daily amount of the unused revolving
credit facility commitments during the period for which payment is made at a rate per annum that varies depending upon the Leverage Ratio.



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The term loan is payable in 24 consecutive
quarterly installments of (i) $187,500, in the case of each of the first 23 installments, on the last day of each March, June, September and December commencing on September 30, 2007 and ending on March 31, 2013 and (ii) the
balance thereof payable in full, in the case of the 24thinstallment due on July 11, 2013. The revolving credit facility terminates on July 11,
2012 at which time outstanding borrowings under the revolving credit facility are due. We may optionally prepay loans under the Credit Agreement at any time, without penalty. Loans are subject to mandatory prepayment with net cash proceeds of
certain indebtedness, certain of equity offerings and asset sales and recovery events, subject to reinvestment rights in the case of asset sales and recovery events.

We used a portion of those funds to refinance its obligations under the credit agreement (the Prior Credit Agreement), dated as of
December 22, 2005, among Jupitermedia, as borrower, the lenders party thereto, LaSalle Bank National Association, as Syndication Agent, KeyBank National Association, as Documentation Agent and JPMorgan Chase Bank, N.A., as Administrative Agent,
as amended by Amendment No. 1 to the Prior Credit Agreement, dated as of March 28, 2006 (Amendment No. 1) and Amendment No. 2 to the Prior Credit Agreement, dated as of November 7, 2006 (Amendment
No. 2).

We expect to continue our investing activities, which includes the potential to strategically acquire companies,
content and images that are complementary to our business. Although we are currently considering potential strategic acquisitions, we have no binding commitments or agreements with respect to any such acquisitions. We expect to finance future
acquisition through a combination of long-term and short-term financing including debt, equity and cash and internally generated cash flow. We may obtain additional long-term financing through the issuance of equity securities and the incurrence of
additional long-term secured or unsecured debt.

Our existing cash and investment balances may decline during 2007 in the event of a
downturn in the general economy or changes in our planned cash outlay. However, based on our current business plan and revenue prospects, we believe that our existing balances together with our anticipated cash flows from operations will be
sufficient to meet our working capital and operating resource expenditure requirements for the next twelve months.

Recent Accounting Pronouncements

In September 2006, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards
(SFAS) No. 157, Fair Value Measurements. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in accordance with accounting principles generally accepted in the United States of America,
and expands disclosures about fair value measurements. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. We are currently evaluating
whether the adoption of SFAS No. 157 will have an impact on our consolidated financial position, results of operations or cash flows.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, which permits entities to choose to measure many financial assets and financial liabilities at fair
value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. We are currently evaluating whether the
adoption of SFAS No. 159 will have an impact on our consolidated financial position, results of operations or cash flows.

Critical Accounting
Policies

There have been no changes to our critical accounting policies from those included in our most recent Form 10-K for the year
ended December 31, 2006.



|Item 3. | Quantitative and Qualitative Disclosure about Market Risks
|------- | ----------------------------------------------------------

We have no derivative financial instruments or derivative commodity instruments. We invest our excess cash in debt instruments of the U.S. Government and its agencies.

We invest in equity instruments of privately held, online media and technology companies for business and strategic purposes. These investments are
included in investments and other assets and are accounted for under the cost method, as we do not have the ability to exert significant influence over the companies or their operations. For these non-quoted investments, our policy is to regularly
review the assumptions underlying the operating performance and cash flow forecasts in assessing the carrying values. We identify and record impairment losses on long-lived assets when events and circumstances indicate that such assets might be
impaired.



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##### Table of Contents

We were the portfolio manager of, and an investor in, internet.com Venture Fund I LLC, or Fund I, a $5.0
million venture fund formed in March 1999. Fund I invested in early-stage content-based Internet properties that are not competitive with our business. Fund I was dissolved in 2006 as it had reached the end of its seven year life. The final
distribution was made following the dissolution.

We are also subject to interest rate fluctuations related to our borrowings under the
Credit Agreement with KeyBank National Association.



|Item 4. | Controls and Procedures
|------- | -----------------------

Our management, including
the Chief Executive Officer and Chief Financial Officer, has conducted an evaluation of the effectiveness of disclosure controls and procedures as of June 30, 2007. Based on such evaluation, the Chief Executive Officer and Chief Financial
Officer concluded that the disclosure controls and procedures are effective in ensuring that all material information required to be to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission. There have been no changes in our internal control over financial reporting during the period covered by this
report that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.



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##### Table of Contents

PART IIOTHER INFORMATION



|Item 1. | LEGAL PROCEEDINGS
|------- | -----------------

On August 3, 2004,
Mario Cisneros and Michael Voight filed a class action lawsuit in the Superior Court of the State of California, County of San Francisco, on behalf of themselves and all others situated and/or the general public against Jupitermedia and twelve
co-defendant companies that operate Internet search engines. Cisneros et al. allege that defendants posting of paid advertising providing links to Internet gambling Web sites constitutes unfair competition and unlawful business acts and practices
under California law. Plaintiffs seek declaratory and injunctive relief, disgorgement of profits and restitution. On September 3, 2004, Jupitermedia blocked all advertisements from being published on its Web properties from third-party search
engines for the gambling-related terms specified in the Complaint. Moreover, Jupitermedia does not accept advertisements for gambling-related Web sites directly from companies that operate them. Jupitermedia has demanded contractual indemnity from
two companies that supplied advertisements that are the subject matter of the lawsuit. Neither of these two companies, however, has stated a final position as whether it will provide indemnity. Jupitermedia intends to vigorously defend itself.

On or about November 13, 2006, Robert Lange, who identifies himself as a stockholder of Jupitermedia, commenced a
purported stockholders derivative action in the United States District Court for the District of Connecticut, purportedly on behalf of Jupitermedia, against all of Jupitermedias current directors and against Jupitermedias former
Chief Financial Officer. Jupitermedia is named in the suit as a nominal defendant on whose behalf recovery is purportedly sought. Mr. Lange did not make a litigation demand on Jupitermedias board of directors prior
to commencing the action, and alleges that such demand should be excused as a matter of law. The complaint alleges, based primarily on a statistical analysis, that certain stock options granted to certain of the defendants in 1999, 2000 and
2001 were backdated, and asserts on behalf of Jupitermedia various causes of action against the defendants arising out of such alleged backdating, including securities fraud, breach of fiduciary duty and unjust enrichment. On April 24,
2007, we and the individual defendants filed a motion to dismiss the case in its entirety. Rather than respond to the motion to dismiss, the Plaintiff filed an amended complaint on July 16, 2007. The amended complaint removes one of the
individual defendants, but is substantially similar to the original complaint.



|Item 1A. | RISK FACTORS
|-------- | ------------

Not Applicable



|Item 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
|------- | -----------------------------------------------------------

Not Applicable



|Item 3. | DEFAULTS UPON SENIOR SECURITIES
|------- | -------------------------------

Not
Applicable



|Item 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
|------- | ---------------------------------------------------

Jupitermedias annual meeting of stockholders was held on June 4, 2007.

The following nominees
were elected as directors, each to hold office until their successor is elected and qualified, by the vote set forth below:



|                       |  |            |  |        
|---------------------- |  | ---------- |  | -------
|NOMINEE                |  | FOR        |  | AGAINST
|Alan M. Meckler        |  | 33,306,269 |  | 176,298
|Christopher S. Cardell |  | 33,337,600 |  | 144,967
|Gilbert F. Bach        |  | 32,784,608 |  | 697,959
|Michael J. Davies      |  | 32,784,733 |  | 697,834
|John R. Patrick        |  | 32,784,303 |  | 698,264
|William A. Shutzer     |  | 32,705,033 |  | 777,534



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##### Table of Contents

The proposal to approve the appointment of Deloitte & Touche LLP, independent registered public
accounting firm, to act as independent auditors for Jupitermedia Corporation for the fiscal year ending December 31, 2007 was approved by the vote set forth below:



|           |  |         |  |        
|---------- |  | ------- |  | -------
|FOR        |  | AGAINST |  | ABSTAIN
|33,449,446 |  | 27,471  |  | 5,650  



|Item 5. | OTHER INFORMATION
|------- | -----------------

Not Applicable



|Item 6. | EXHIBITS
|------- | --------

The following is a list of
exhibits filed as part of this Report on Form 10-Q. Where so indicated by footnote, exhibits, which were previously filed, are incorporated by reference. For exhibits incorporated by reference, the location of the exhibit in the previous filing is
indicated parenthetically except for in those situations where the exhibit number was the same as set forth below.



| |  |                |  |                                                                                                                                      
| |  | -------------- |  | -------------------------------------------------------------------------------------------------------------------------------------
| |  | Exhibit Number |  | Description                                                                                                                          
| |  |               
| |  | 3.1*           |  | Registrants Amended and Restated Certificate of Incorporation, as amended                                                           
| |  |               
| |  | 3.2**          |  | Registrants Bylaws                                                                                                                  
| |  |               
| |  | 10.1***        |  | Indemnification Agreement, dated May 3, 2007, entered into between Jupitermedia Corporation and Donald J. ONeill.                   
| |  |               
| |  | 11****         |  | Statement Regarding Computation of Per Share Earnings (Loss) (included in notes to consolidated condensed financial statements)      
| |  |               
| |  | 31.1           |  | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                              
| |  |               
| |  | 31.2           |  | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                              
| |  |               
| |  | 32.1           |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002               
| |  |               
| |  | 32.2           |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002               
| |  |               
| |  | *              |  | Incorporated herein by reference to the Registrants Form 10-K filed on March 5, 2004.                                               
| |  |               
| |  | **             |  | Incorporated herein by reference to the Registrants Registration Statement on Form S-1 (File No. 333-76331) filed on April 15, 1999.
| |  |               
| |  | ***            |  | Incorporated herein by reference to the Registrants Form 8-K Filed on May 4, 2007.                                                  
| |  |               
| |  | ****           |  | Included in notes to consolidated condensed financial statements.                                                                    



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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned thereunto duly authorized.



|                      |  |  |  |                                                
|--------------------- |  |  |  | -----------------------------------------------
|Dated: August 9, 2007 |  |  |  | Jupitermedia Corporation                       
|                      |  | 
|                      |  |  |  | /s/ Christopher S. Cardell                     
|                      |  |  |  | Christopher S. Cardell                         
|                      |  |  |  | Director, President and Chief Operating Officer
|                      |  | 
|                      |  |  |  | /s/ Donald J. ONeill                          
|                      |  |  |  | Donald J. ONeill                              
|                      |  |  |  | Vice President and Chief Financial Officer     



24