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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, 2006.

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)



---

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 4, 2006 was 35,515,620.



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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, 2005 and June 30, 2006                                 |  | 3   
|           |  |                                                                                                                      
|           |  | Unaudited Consolidated Condensed Statements of Operations  For the Three and Six Months Ended June 30, 2005 and 2006 |  | 4   
|           |  |                                                                                                                      
|           |  | Unaudited Consolidated Condensed Statements of Cash Flows  For the Six Months Ended June 30, 2005 and 2006           |  | 5   
|           |  |                                                                                                                      
|           |  | Notes to Consolidated Condensed Financial Statements                                                                  |  | 6   
|           |  |                                                                                                                      
|Item 2.    |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                 |  | 18  
|           |  |                                                                                                                      
|Item 3.    |  | Quantitative and Qualitative Disclosures About Market Risk                                                            |  | 25  
|           |  |                                                                                                                      
|Item 4.    |  | Controls and Procedures                                                                                               |  | 26  
|           |  |                                                                                                                      
|PART II.   |  | Other Information                                                                                                     |  |     
|           |  |                                                                                                                      
|Item 1.    |  | Legal Proceedings                                                                                                     |  | 27  
|           |  |                                                                                                                      
|Item 1A.   |  | Risk Factors                                                                                                          |  | 27  
|           |  |                                                                                                                      
|Item 2.    |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                           |  | 27  
|           |  |                                                                                                                      
|Item 3.    |  | Defaults Upon Senior Securities                                                                                       |  | 27  
|           |  |                                                                                                                      
|Item 4.    |  | Submission of Matters to a Vote of Security Holders                                                                   |  | 28  
|           |  |                                                                                                                      
|Item 5.    |  | Other Information                                                                                                     |  | 28  
|           |  |                                                                                                                      
|Item 6.    |  | Exhibits                                                                                                              |  | 29  
|           | 
|Signatures |  | 30                                                                                                                   



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##### Table of Contents

Jupitermedia Corporation

Unaudited Consolidated Condensed Balance Sheets

December 31, 2005 and June 30, 2006

(in thousands, except share and per share amounts)



|                                                                                                                                                         |  |                  |         |   |               |   |         |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------- | ------- | - | ------------- | - | ------- | -
|                                                                                                                                                         |  | December 31,2005 |         |   | June 30, 2006 |  
|ASSETS                                                                                                                                                   |  |                  |         |   |               |   |         |  
|Current assets:                                                                                                                                          |  |                  |         |   |               |   |         |  
|Cash and cash equivalents                                                                                                                                |  | $                | 18,546  |   |               | $ | 20,480  |  
|Accounts receivable, net of allowances of $1,935 and $1,766, respectively                                                                                |  |                  | 20,640  |   |               |   | 23,696  |  
|Prepaid expenses and other                                                                                                                               |  |                  | 3,517   |   |               |   | 4,805   |  
|Deferred income taxes                                                                                                                                    |  |                  | 425     |   |               |   | 1,362   |  
|Assets of discontinued operations                                                                                                                        |  |                  | 8,763   |   |               |   |        |  
|                                                                                                                                                         |  |                  |         |   |               |   |         |  
|Total current assets                                                                                                                                     |  |                  | 51,891  |   |               |   | 50,343  |  
|Property and equipment, net of accumulated depreciation of $10,211 and $11,836, respectively                                                             |  |                  | 9,807   |   |               |   | 11,628  |  
|Intangible assets, net                                                                                                                                   |  |                  | 66,799  |   |               |   | 80,826  |  
|Goodwill                                                                                                                                                 |  |                  | 169,960 |   |               |   | 184,191 |  
|Deferred income taxes                                                                                                                                    |  |                  | 8,690   |   |               |   | 5,053   |  
|Investments and other assets                                                                                                                             |  |                  | 1,766   |   |               |   | 2,160   |  
|                                                                                                                                                         |  |                  |         |   |               |   |         |  
|Total assets                                                                                                                                             |  | $                | 308,913 |   |               | $ | 334,201 |  
|                                                                                                                                                         |  |                  |         |   |               |   |         |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                     |  |                  |         |   |               |   |         |  
|Current liabilities:                                                                                                                                     |  |                  |         |   |               |   |         |  
|Accounts payable                                                                                                                                         |  | $                | 6,552   |   |               | $ | 6,458   |  
|Accrued payroll and related expenses                                                                                                                     |  |                  | 2,390   |   |               |   | 3,009   |  
|Accrued expenses and other                                                                                                                               |  |                  | 13,287  |   |               |   | 14,347  |  
|Current portion of long-term debt                                                                                                                        |  |                  | 16,000  |   |               |   | 20,000  |  
|Deferred revenues                                                                                                                                        |  |                  | 11,743  |   |               |   | 12,652  |  
|Liabilities of discontinued operations                                                                                                                   |  |                  | 7,211   |   |               |   |        |  
|                                                                                                                                                         |  |                  |         |   |               |   |         |  
|Total current liabilities                                                                                                                                |  |                  | 57,183  |   |               |   | 56,466  |  
|Long-term debt                                                                                                                                           |  |                  | 46,214  |   |               |   | 52,249  |  
|Deferred revenues                                                                                                                                        |  |                  | 156     |   |               |   | 196     |  
|                                                                                                                                                         |  |                  |         |   |               |   |         |  
|Total liabilities                                                                                                                                        |  |                  | 103,553 |   |               |   | 108,911 |  
|                                                                                                                                                         |  |                  |         |   |               |   |         |  
|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, 34,937,025 and 35,486,622 shares issued at December 31, 2005 and
June 30, 2006, respectively |  |                  | 349     |   |               |   | 355     |  
|Additional paid-in capital                                                                                                                               |  |                  | 251,919 |   |               |   | 258,650 |  
|Accumulated deficit                                                                                                                                      |  |                  | (45,291 | ) |               |   | (33,679 | )
|Treasury stock, 65,000 shares at cost                                                                                                                    |  |                  | (106    | ) |               |   | (106    | )
|Accumulated other comprehensive income (loss)                                                                                                            |  |                  | (1,511  | ) |               |   | 70      |  
|                                                                                                                                                         |  |                  |         |   |               |   |         |  
|Total stockholders equity                                                                                                                               |  |                  | 205,360 |   |               |   | 225,290 |  
|                                                                                                                                                         |  |                  |         |   |               |   |         |  
|Total liabilities and stockholders equity                                                                                                               |  | $                | 308,913 |   |               | $ | 334,201 |  
|                                                                                                                                                         |  |                  |         |   |               |   |         |  

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 Months and Six Months Ended June 30, 2005 and 2006

(in thousands, except per share amounts)



|                                                                                       |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|-------------------------------------------------------------------------------------- |  | -------------------------- | ------ | - | ------------------------ | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                                                                       |  | Three Months EndedJune 30, |        |   | Six Months EndedJune 30, |  
|                                                                                       |  | 2005                       |        |   | 2006                     |   |        | 2005 |  |   | 2006   |  
|Revenues                                                                               |  | $                          | 29,075 |   |                          | $ | 35,026 |      |  | $ | 48,786 |   |  | $ | 68,967 |  
|Cost of revenues (exclusive of items shown separately below)                           |  |                            | 10,390 |   |                          |   | 12,712 |      |  |   | 16,646 |   |  |   | 24,637 |  
|Advertising, promotion and selling                                                     |  |                            | 5,498  |   |                          |   | 7,875  |      |  |   | 8,867  |   |  |   | 15,041 |  
|General and administrative                                                             |  |                            | 4,289  |   |                          |   | 7,136  |      |  |   | 7,433  |   |  |   | 13,367 |  
|Depreciation                                                                           |  |                            | 423    |   |                          |   | 849    |      |  |   | 701    |   |  |   | 1,502  |  
|Amortization                                                                           |  |                            | 876    |   |                          |   | 2,095  |      |  |   | 1,705  |   |  |   | 4,366  |  
|                                                                                       |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Total operating expenses                                                               |  |                            | 21,476 |   |                          |   | 30,667 |      |  |   | 35,352 |   |  |   | 58,913 |  
|                                                                                       |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Operating income                                                                       |  |                            | 7,599  |   |                          |   | 4,359  |      |  |   | 13,434 |   |  |   | 10,054 |  
|                                                                                       |  |                            |        |  
|Income (loss) on investments and other, net                                            |  |                            | (11    | ) |                          |   | 64     |      |  |   | (41    | ) |  |   | 137    |  
|Interest income                                                                        |  |                            | 95     |   |                          |   | 164    |      |  |   | 214    |   |  |   | 281    |  
|Interest expense                                                                       |  |                            | (200   | ) |                          |   | (1,393 | )    |  |   | (288   | ) |  |   | (2,712 | )
|                                                                                       |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Income before income taxes, minority interests and equity income from investments, net |  |                            | 7,483  |   |                          |   | 3,194  |      |  |   | 13,319 |   |  |   | 7,760  |  
|Provision for income taxes                                                             |  |                            | 934    |   |                          |   | 88     |      |  |   | 1,612  |   |  |   | 1,803  |  
|Minority interests                                                                     |  |                            | (8     | ) |                          |   | (26    | )    |  |   | (31    | ) |  |   | (35    | )
|Equity income from investments, net                                                    |  |                            | 132    |   |                          |   | 59     |      |  |   | 132    |   |  |   | 50     |  
|                                                                                       |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Income from continuing operations                                                      |  |                            | 6,673  |   |                          |   | 3,139  |      |  |   | 11,808 |   |  |   | 5,972  |  
|Income from discontinued operations, net of taxes                                      |  |                            | 363    |   |                          |   |       |      |  |   | 774    |   |  |   | 67     |  
|Gain (loss) on sale of discontinued operations, net of taxes                           |  |                            |       |   |                          |   | (718   | )    |  |   |       |   |  |   | 5,573  |  
|                                                                                       |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Net income                                                                             |  | $                          | 7,036  |   |                          | $ | 2,421  |      |  | $ | 12,582 |   |  | $ | 11,612 |  
|                                                                                       |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Earnings per share:                                                                    |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Basic                                                                                  |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|                                                                                       |  |                            |        |  
|Income from continuing operations                                                      |  | $                          | 0.19   |   |                          | $ | 0.09   |      |  | $ | 0.35   |   |  | $ | 0.17   |  
|                                                                                       |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Net income                                                                             |  | $                          | 0.21   |   |                          | $ | 0.07   |      |  | $ | 0.38   |   |  | $ | 0.33   |  
|                                                                                       |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Diluted                                                                                |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Income from continuing operations                                                      |  | $                          | 0.18   |   |                          | $ | 0.09   |      |  | $ | 0.33   |   |  | $ | 0.16   |  
|                                                                                       |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Net income                                                                             |  | $                          | 0.19   |   |                          | $ | 0.07   |      |  | $ | 0.35   |   |  | $ | 0.32   |  
|                                                                                       |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Shares used in computing earnings per share:                                           |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Basic                                                                                  |  |                            | 34,304 |   |                          |   | 35,333 |      |  |   | 33,523 |   |  |   | 35,223 |  
|                                                                                       |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  
|Diluted                                                                                |  |                            | 36,836 |   |                          |   | 36,307 |      |  |   | 36,044 |   |  |   | 36,238 |  
|                                                                                       |  |                            |        |   |                          |   |        |      |  |   |        |   |  |   |        |  

See notes to consolidated condensed financial statements.



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Jupitermedia Corporation

Unaudited Consolidated Condensed Statements of Cash Flows

For the Six Months Ended June 30, 2005 and 2006

(in thousands)



|                                                                                                         |  |                           |         |   |      |   |         |  
|-------------------------------------------------------------------------------------------------------- |  | ------------------------- | ------- | - | ---- | - | ------- | -
|                                                                                                         |  | Six Months Ended June 30, |        
|                                                                                                         |  | 2005                      |         |   | 2006 |  
|Cash flows from operating activities:                                                                    |  |                           |         |   |      |   |         |  
|Income from continuing operations                                                                        |  | $                         | 11,808  |   |      | $ | 5,972   |  
|Adjustments to reconcile income from continuing operations to net cash provided by operating activities: |  |                           |         |   |      |   |         |  
|Depreciation and amortization                                                                            |  |                           | 2,406   |   |      |   | 5,868   |  
|Stock-based compensation                                                                                 |  |                           |        |   |      |   | 1,668   |  
|Provision (benefit) for losses on accounts receivable                                                    |  |                           | (65     | ) |      |   | 209     |  
|Minority interests                                                                                       |  |                           | 31      |   |      |   | 35      |  
|Equity income from investments, net                                                                      |  |                           | (132    | ) |      |   | (50     | )
|(Income) loss on investments and other, net                                                              |  |                           | 41      |   |      |   | (137    | )
|Deferred income taxes                                                                                    |  |                           | 1,009   |   |      |   | (1,179  | )
|Excess tax benefit from stock-based compensation                                                         |  |                           |        |   |      |   | (2,698  | )
|Changes in current assets and liabilities (net of businesses acquired):                                  |  |                           |         |   |      |   |         |  
|Accounts receivable, net                                                                                 |  |                           | 548     |   |      |   | (3,479  | )
|Prepaid expenses and other                                                                               |  |                           | 393     |   |      |   | (1,409  | )
|Accounts payable and accrued expenses                                                                    |  |                           | (3,725  | ) |      |   | (2,894  | )
|Deferred revenues                                                                                        |  |                           | (508    | ) |      |   | 949     |  
|Discontinued operations                                                                                  |  |                           | 2,036   |   |      |   | 1,110   |  
|                                                                                                         |  |                           |         |   |      |   |         |  
|Net cash provided by operating activities                                                                |  |                           | 13,842  |   |      |   | 3,965   |  
|                                                                                                         |  |                           |         |   |      |   |         |  
|Cash flows from investing activities:                                                                    |  |                           |         |   |      |   |         |  
|Purchases of property and equipment                                                                      |  |                           | (846    | ) |      |   | (1,296  | )
|Acquisitions of businesses and other                                                                     |  |                           | (49,523 | ) |      |   | (25,684 | )
|Proceeds (distributions) from sales of assets and other                                                  |  |                           | (65     | ) |      |   | 363     |  
|Proceeds from sale of discontinued operations                                                            |  |                           |        |   |      |   | 9,600   |  
|Discontinued operations                                                                                  |  |                           |        |   |      |   |        |  
|                                                                                                         |  |                           |         |   |      |   |         |  
|Net cash used in investing activities                                                                    |  |                           | (50,434 | ) |      |   | (17,017 | )
|                                                                                                         |  |                           |         |   |      |   |         |  
|Cash flows from financing activities:                                                                    |  |                           |         |   |      |   |         |  
|Borrowings under credit facilities                                                                       |  |                           | 20,000  |   |      |   | 19,000  |  
|Debt issuance costs                                                                                      |  |                           | (257    | ) |      |   | (38     | )
|Repayment of borrowings under credit facilities                                                          |  |                           |        |   |      |   | (8,965  | )
|Proceeds from exercise of stock options                                                                  |  |                           | 6,620   |   |      |   | 2,195   |  
|Excess tax benefit from stock-based compensation                                                         |  |                           |        |   |      |   | 2,698   |  
|Discontinued operations                                                                                  |  |                           |        |   |      |   |        |  
|                                                                                                         |  |                           |         |   |      |   |         |  
|Net cash provided by financing activities                                                                |  |                           | 26,363  |   |      |   | 14,890  |  
|                                                                                                         |  |                           |         |   |      |   |         |  
|Effects of exchange rates on cash                                                                        |  |                           |        |   |      |   | 96      |  
|                                                                                                         |  |                           |         |   |      |   |         |  
|Net increase (decrease) in cash and cash equivalents                                                     |  |                           | (10,229 | ) |      |   | 1,934   |  
|Cash and cash equivalents, beginning of period                                                           |  |                           | 30,179  |   |      |   | 18,546  |  
|                                                                                                         |  |                           |         |   |      |   |         |  
|Cash and cash equivalents, end of period                                                                 |  | $                         | 19,950  |   |      | $ | 20,480  |  
|                                                                                                         |  |                           |         |   |      |   |         |  
|Supplemental disclosures of cash flow:                                                                   |  |                           |         |   |      |   |         |  
|Cash paid for income taxes                                                                               |  | $                         | 482     |   |      | $ | 6,107   |  
|                                                                                                         |  |                           |         |   |      |   |         |  
|Cash paid for interest                                                                                   |  | $                         | 196     |   |      | $ | 1,594   |  
|                                                                                                         |  |                           |         |   |      |   |         |  
|Non-cash investing activities:                                                                           |  |                           |         |   |      |   |         |  
|Common stock issued for acquisitions                                                                     |  | $                         | 21,611  |   |      | $ |        |  
|                                                                                                         |  |                           |         |   |      |   |         |  

See notes to consolidated condensed financial statements.



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Jupitermedia Corporation

Notes to Consolidated Condensed Financial Statements

June 30, 2006

(unaudited)

1. THE COMPANY

Jupitermedia
Corporation (Jupitermedia) is a global provider of original online information, images and digital content for information technology (IT), business and creative professionals. Jupitermedia includes Jupiterimages, which
serves creative professionals with over 7.0 million images online with brands like BananaStock, Workbook Stock, Brand X, FoodPix, Botanica, Nonstock, The Beauty Archive, IFA Bilderteam, Comstock Images, Creatas Images, PictureQuest, Liquid
Library, Thinkstock Images, Thinkstock Footage, Bigshot Media, Goodshoot, ITStockFree, Stock Image, Pixland, Photos.com, Ablestock.com, PhotoObjects.net, Clipart.com, FlashFoundry.com, AnimationFactory.com and RoyaltyFreeMusic.com; and JupiterWeb,
the online media division of Jupitermedia, which operates four distinct online networks: internet.com and EarthWeb.com for IT and business professionals; DevX.com for developers; and Graphics.com for creative professionals.

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 statements of
operations for the six months ended June 30, 2006 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, 2005. 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. ACCOUNTING FOR SHARE BASED COMPENSATION

Effective January 1, 2006, Jupitermedia adopted Financial Accounting
Standards Board (FASB) Statement No. 123 (revised), Share-Based Payment (SFAS 123R). Among its provisions, SFAS 123R requires Jupitermedia to recognize compensation expense for equity awards over the vesting
period based on their grant-date fair value. Prior to the adoption of SFAS 123R, Jupitermedia utilized the intrinsic-value based method of accounting under APB Opinion No. 25, Accounting for Stock Issued to Employees and related
interpretations, and adopted the disclosure requirements of SFAS No. 123, Accounting for Stock-Based Compensation (SFAS 123). Under the intrinsic value based method of accounting, compensation expense for stock options
granted to Jupitermedias employees was measured as the excess of the quoted market price of common stock at the grant date over the amount the employee must pay for the stock. Jupitermedias policy is to grant stock options with an
exercise price equal to or greater than the fair value on the date of grant and as a result no compensation expense was historically recognized for stock options.

Jupitermedia adopted SFAS 123R in the first quarter of 2006 using the modified prospective approach. Under this transition method, the measurement and our method of amortization of costs for share-based payments
granted prior to, but not vested as of January 1, 2006, would be based on the same estimate of the grant-date fair value and the same amortization method that was previously used in our SFAS 123 pro forma disclosure. Results for prior periods
have not been restated as provided for under the modified prospective approach. For equity awards granted after the date of adoption, Jupitermedia will amortize share-based compensation expense on a straight-line basis over the vesting term.



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##### Table of Contents

Compensation expense is recognized only for share-based payments expected to vest. Jupitermedia estimates
forfeitures at the date of grant based on Jupitermedias historical experience and future expectations. Prior to the adoption of SFAS 123R, the effect of forfeitures on the pro forma expense amounts was recognized based on actual forfeitures.

The adoption of SFAS 123R reduced our basic and diluted earnings per share by $0.02 and $0.03 for the three and six months ended
June 30, 2006, respectively. Total share-based compensation expense recognized in continuing and discontinued operations was $906,000 and $100,000, respectively, for the three months ended June 30, 2006, which is before an income tax
benefit of $420,000, resulting in a decrease to net income of $586,000.

Total share-based compensation expense recognized in continuing
and discontinued operations was $1.7 million and $177,000, respectively, for the six months ended June 30, 2006, which is before an income tax benefit of $769,000, resulting in a decrease to net income of $1.1 million.

The following table shows the effect on net income and earnings per share for the three and six months ended June 30, 2005 had compensation expense
been recognized based upon the estimated fair value on the grant date of awards, in accordance with SFAS 123, as amended by SFAS No. 148 Accounting for Stock-Based Compensation  Transition and Disclosure (amounts in thousands,
except per share amounts):



|                                                                                                                                            |  |                                 |        |   |                                |   |        |  
|------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------- | ------ | - | ------------------------------ | - | ------ | -
|                                                                                                                                            |  | Three MonthsEnded June 30, 2005 |        |   | Six Months Ended June 30, 2005 |  
|Net income                                                                                                                                  |  | $                               | 7,036  |   |                                | $ | 12,582 |  
|Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax
effects |  |                                 | (1,013 | ) |                                |   | (2,028 | )
|                                                                                                                                            |  |                                 |        |   |                                |   |        |  
|Pro forma net income                                                                                                                        |  | $                               | 6,023  |   |                                | $ | 10,554 |  
|                                                                                                                                            |  |                                 |        |   |                                |   |        |  
|Basic earnings per share                                                                                                                    |  |                                 |        |   |                                |   |        |  
|As reported                                                                                                                                 |  | $                               | 0.21   |   |                                | $ | 0.38   |  
|                                                                                                                                            |  |                                 |        |   |                                |   |        |  
|Pro forma                                                                                                                                   |  | $                               | 0.18   |   |                                | $ | 0.31   |  
|                                                                                                                                            |  |                                 |        |   |                                |   |        |  
|Diluted earnings per share                                                                                                                  |  |                                 |        |   |                                |   |        |  
|As reported                                                                                                                                 |  | $                               | 0.19   |   |                                | $ | 0.35   |  
|                                                                                                                                            |  |                                 |        |   |                                |   |        |  
|Pro forma                                                                                                                                   |  | $                               | 0.16   |   |                                | $ | 0.29   |  
|                                                                                                                                            |  |                                 |        |   |                                |   |        |  

As of June 30, 2006, there was approximately $8.2 million of total unrecognized compensation
cost related to nonvested share-based compensation arrangements granted under the stock incentive plan. That cost is expected to be recognized over a weighted-average period of 14 months.

Each stock option has a ten year term from date of grant except for stock options granted to the Chairman and Chief Executive Officer, which have a five
year term. All stock option grants vest equally on each of the first three anniversaries of their respective grant dates. The stock incentive plan will terminate on April 15, 2009. In June 2006, Jupitermedias stock incentive plan was
amended to increase the number of shares of Jupitermedia common stock and options to purchase shares of Jupitermedia common stock available for issuance thereunder by 2,000,000 shares. As of June 30, 2006, there were 2,202,120 options remaining
for future issuance under the stock incentive plan.



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##### Table of Contents

The following table summarizes option activity during the six months ended June 30, 2006:



|                                 |  |           |   |  |                                 |       |                                                     |      |                                          |   |       
|-------------------------------- |  | --------- | - |  | ------------------------------- | ----- | --------------------------------------------------- | ---- | ---------------------------------------- | - | ------
|                                 |  | Shares    |   |  | Weighted Average Exercise Price |       | Weighted Average Remaining Contractual Term (years) |      | Aggregate Intrinsic Value (in
thousands)
|Outstanding at December 31, 2005 |  | 5,187,416 |   |  | $                               | 9.50  |                                                     |      |                                          |   |       
|Granted                          |  | 853,250   |   |  |                                 | 15.50 |                                                     |      |                                          |   |       
|Exercised                        |  | (540,627  | ) |  |                                 | 4.00  |                                                     |      |                                          |   |       
|Forfeited or expired             |  | (80,354   | ) |  |                                 | 12.18 |                                                     |      |                                          |   |       
|                                 |  |           |   |  |                                 |       |                                                     |      |                                          |   |       
|Outstanding at June 30, 2006     |  | 5,419,685 |   |  | $                               | 10.95 |                                                     | 6.01 |                                          | $ | 11,116
|                                 |  |           |   |  |                                 |       |                                                     |      |                                          |   |       
|Exercisable at June 30, 2006     |  | 4,008,667 |   |  | $                               | 9.86  |                                                     | 5.47 |                                          | $ | 12,572
|                                 |  |           |   |  |                                 |       |                                                     |      |                                          |   |       

The aggregate intrinsic value in the table above is before income taxes, based on the
Companys closing stock price of $13.00 as of the last business day of the period ended June 30, 2006.

During the six months
ended June 30, 2006, the total intrinsic value of stock options exercised was $6.6 million.

The fair value of each option grant
is estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions used for grants during the periods presented:



|                         |  |                            |   |  |                          |   |  |      |   |  |      |  
|------------------------ |  | -------------------------- | - |  | ------------------------ | - |  | ---- | - |  | ---- | -
|                         |  | Three Months EndedJune 30, |   |  | Six Months EndedJune 30, |  
|                         |  | 2005                       |   |  | 2006                     |   |  | 2005 |   |  | 2006 |  
|Risk-free interest rate  |  | 3.72                       | % |  | 4.98                     | % |  | 3.69 | % |  | 4.98 | %
|Expected life (in years) |  | 3.0                        |   |  | 4.5                      |   |  | 3.0  |   |  | 4.5  |  
|Dividend yield           |  | 0                          | % |  | 0                        | % |  | 0    | % |  | 0    | %
|Expected volatility      |  | 67                         | % |  | 56                       | % |  | 61   | % |  | 56   | %

The expected stock price volatility is based on a combination of historical volatility of
Jupitermedias 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.

4. COMPUTATION OF EARNINGS PER SHARE

Basic earnings per share is computed using the weighted average
number of common shares outstanding during the period. Diluted earnings 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.



8



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##### Table of Contents

Computations of basic and diluted earnings per share for the three months and six months ended
June 30, 2005 and 2006 are as follows (in thousands, except per share amounts):



|                                                                      |  |                            |        |      |                          |        |      |  |      |        |  |   |       
|--------------------------------------------------------------------- |  | -------------------------- | ------ | ---- | ------------------------ | ------ | ---- |  | ---- | ------ |  | - | ------
|                                                                      |  | Three Months EndedJune 30, |        |      | Six Months EndedJune 30,
|                                                                      |  | 2005                       |        | 2006 |                          |        | 2005 |  | 2006
|Income from continuing operations                                     |  | $                          | 6,673  |      | $                        | 3,139  |      |  | $    | 11,808 |  | $ | 5,972 
|Income from discontinued operations, net of taxes                     |  |                            | 363    |      |                          |       |      |  |      | 774    |  |   | 67    
|Gain (loss) on sale of discontinued operations, net of taxes          |  |                            |       |      |                          | (718   | )    |  |      |       |  |   | 5,573 
|                                                                      |  |                            |        |      |                          |        |      |  |      |        |  |   |       
|Net income                                                            |  | $                          | 7,036  |      | $                        | 2,421  |      |  | $    | 12,582 |  | $ | 11,612
|                                                                      |  |                            |        |      |                          |        |      |  |      |        |  |   |       
|Basic weighted average common shares outstanding                      |  |                            | 34,304 |      |                          | 35,333 |      |  |      | 33,523 |  |   | 35,223
|Effect of dilutive stock options                                      |  |                            | 2,532  |      |                          | 974    |      |  |      | 2,521  |  |   | 1,015 
|                                                                      |  |                            |        |      |                          |        |      |  |      |        |  |   |       
|Total basic weighted average common shares and dilutive stock options |  |                            | 36,836 |      |                          | 36,307 |      |  |      | 36,044 |  |   | 36,238
|                                                                      |  |                            |        |      |                          |        |      |  |      |        |  |   |       
|Earnings Per Share:                                                   |  |                            |        |      |                          |        |      |  |      |        |  |   |       
|Basic                                                                 |  |                            |        |      |                          |        |      |  |      |        |  |   |       
|Income from continuing operations                                     |  | $                          | 0.19   |      | $                        | 0.09   |      |  | $    | 0.35   |  | $ | 0.17  
|                                                                      |  |                            |        |      |                          |        |      |  |      |        |  |   |       
|Net income                                                            |  | $                          | 0.21   |      | $                        | 0.07   |      |  | $    | 0.38   |  | $ | 0.33  
|                                                                      |  |                            |        |      |                          |        |      |  |      |        |  |   |       
|Diluted                                                               |  |                            |        |      |                          |        |      |  |      |        |  |   |       
|Income from continuing operations                                     |  | $                          | 0.18   |      | $                        | 0.09   |      |  | $    | 0.33   |  | $ | 0.16  
|                                                                      |  |                            |        |      |                          |        |      |  |      |        |  |   |       
|Net income                                                            |  | $                          | 0.19   |      | $                        | 0.07   |      |  | $    | 0.35   |  | $ | 0.32  
|                                                                      |  |                            |        |      |                          |        |      |  |      |        |  |   |       

The following table summarizes the number of outstanding stock options excluded from the
calculation of diluted earnings 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,
|                                      |  | 2005                       |       | 2006                     |   | 2005  |  | 2006
|Number of anti-dilutive stock options |  |                            | 857   |                          |   | 1,512 |  |      | 857   |  |   | 1,512
|Weighted average exercise price       |  | $                          | 18.72 |                          | $ | 17.55 |  | $    | 18.72 |  | $ | 17.55

5. INTANGIBLE ASSETS AND GOODWILL

Intangible assets and goodwill include the preliminary allocation of the purchase prices relating to the acquisition of Bananastock Limited on
October 13, 2005 and the acquisition of the assets of Animation Factory, Inc. on December 23, 2005. Jupitermedia is in the process of obtaining third party valuations of certain intangible assets, thus the allocation of the purchase prices
relating to these acquisitions is subject to refinement.



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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, 2005
|                                       |  | Cost              |        | Accumulated Amortization |   |         | Net Carrying Value
|Image library                          |  | $                 | 49,602 |                          | $ | (3,531  | )                  |  | $ | 46,071
|Customer and distributor relationships |  |                   | 4,484  |                          |   | (915    | )                  |  |   | 3,569 
|Web site development costs             |  |                   | 5,179  |                          |   | (2,431  | )                  |  |   | 2,748 
|Trademarks                             |  |                   | 3,053  |                          |   | (2,458  | )                  |  |   | 595   
|Non-compete agreements                 |  |                   | 1,549  |                          |   | (647    | )                  |  |   | 902   
|                                       |  |                   |        |                          |   |         |                    |  |   |       
|Total                                  |  | $                 | 63,867 |                          | $ | (9,982  | )                  |  | $ | 53,885
|                                       |  |                   |        |                          |   |         |                    |  |   |       
|                                       | 
|                                       |  | June 30, 2006    
|                                       |  | Cost              |        | Accumulated Amortization |   |         | Net Carrying Value
|Image library                          |  | $                 | 51,986 |                          | $ | (6,408  | )                  |  | $ | 45,578
|Customer and distributor relationships |  |                   | 6,197  |                          |   | (1,484  | )                  |  |   | 4,713 
|Web site development costs             |  |                   | 5,865  |                          |   | (3,091  | )                  |  |   | 2,774 
|Supplier and contributor contracts     |  |                   | 12,797 |                          |   | (498    | )                  |  |   | 12,299
|Trademarks                             |  |                   | 3,427  |                          |   | (2,656  | )                  |  |   | 771   
|Non-compete agreements                 |  |                   | 1,011  |                          |   | (700    | )                  |  |   | 311   
|                                       |  |                   |        |                          |   |         |                    |  |   |       
|Total                                  |  | $                 | 81,283 |                          | $ | (14,837 | )                  |  | $ | 66,446
|                                       |  |                   |        |                          |   |         |                    |  |   |       

Intangibles that are subject to amortization are amortized on a straight-line basis over their
expected useful lives. The image library is amortized over periods ranging from seven to 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, respectively, for the three and six months
ended June 30, 2006. Estimated annual amortization expense for the next five years, including the remainder of 2006, is expected to be as follows (in thousands):



|                         |  |   |       
|------------------------ |  | - | ------
|Year Ending December 31,
|2006                     |  | $ | 5,148 
|2007                     |  |   | 10,000
|2008                     |  |   | 9,507 
|2009                     |  |   | 8,253 
|2010                     |  |   | 7,328 
|Thereafter               |  |   | 26,210
|                         |  |   |       
|                         |  | $ | 66,446
|                         |  |   |       



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Unamortized Intangible Assets

The following table sets forth the intangible assets that are not subject to amortization (in thousands):



|                       |  |                   |        |               |   |       
|---------------------- |  | ----------------- | ------ | ------------- | - | ------
|                       |  | December 31, 2005 |        | June 30, 2006
|Domain and trade names |  | $                 | 12,914 |               | $ | 14,380
|                       |  |                   |        |               |   |       
|Total                  |  | $                 | 12,914 |               | $ | 14,380
|                       |  |                   |        |               |   |       

Goodwill

The changes in the carrying amount of goodwill for the six months ended June 30, 2006, are as follows (in thousands):



|                                |  |               |         |              |   |       |  |   |        
|------------------------------- |  | ------------- | ------- | ------------ | - | ----- |  | - | -------
|                                |  | Online Images |         | Online Media |   | Total
|Balance as of December 31, 2005 |  | $             | 163,042 |              | $ | 6,918 |  | $ | 169,960
|Goodwill acquired during period |  |               | 10,736  |              |   |      |  |   | 10,736 
|Purchase accounting adjustments |  |               | 3,495   |              |   |      |  |   | 3,495  
|                                |  |               |         |              |   |       |  |   |        
|Balance as of June 30, 2006     |  | $             | 177,273 |              | $ | 6,918 |  | $ | 184,191
|                                |  |               |         |              |   |       |  |   |        

Purchase accounting adjustments pertain primarily to adjustments made in finalizing the valuations
of the fair value of certain assets purchased in conjunction with the acquisitions of Goodshoot S.A.S. and PictureArts Corporation.

6. ACQUISITIONS,
DISPOSITIONS AND DISCONTINUED OPERATIONS

On March 7, 2005, Jupitermedia acquired Creatas, L.L.C., the parent company of Dynamic
Graphics, Inc. and PictureQuest Acquisition Company, L.L.C., and their many stock photo and related graphics brands (Dynamic Graphics Group), for $38.2 million in cash and 1,483,074 restricted shares of Jupitermedia common stock valued
at $21.6 million when issued. The common stock was valued in accordance with Emerging Issues Task Force Issue 99-12. The purchase price was subject to certain post closing adjustments.

The primary reason for the acquisition of Creatas was that the Dynamic Graphics Group provided Jupitermedia with a sales force to sell imagery directly
to third party customers. Prior to this acquisition, Jupitermedias primary means of selling images was by online sales and through the use of third party distributors. To help its Jupiterimages business grow, Jupitermedia believed that it was
essential to have its own sales force to sell its own imagery and, therefore, Jupitermedia acquired Creatas. Jupitermedia believed that by having its own sales force Jupitermedia would be able to better compete against the much larger companies in
the stock imagery business such as Getty Images, Inc. (Getty) and Corbis Corporation (Corbis) which have their own direct sales forces.



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At the time of the acquisition, Dynamic Graphics Group offered a variety of resources for the graphic
design community including: royalty-free and rights-managed stock image content; a royalty-free subscription image service; trade publications; and creative services events and training. Dynamic Graphics Group distributed royalty-free content
(photography, footage, illustration, typography and other design tools) through its Creatas brand (www.creatas.com). Dynamic Graphics Group also included PictureQuest (www.picturequest.com), an image resource distributing more than 500,000
royalty-free and rights-managed images from over 50 of the worlds leading photo agencies, many exclusive to PictureQuest. Dynamic Graphics Group also provided images through its professional subscription images service, Liquid Library
(www.liquidlibrary.com). Dynamic Graphics Group published STEP Inside Design Magazine, Dynamic Graphics Magazine, SBS Digital Design newsletter and Photoshop Fix newsletter. In addition, the company offered design workshops and seminars conducted by
industry leaders through its Dynamic Graphics Training. Dynamic Graphics Group was also represented through a third party distribution network in 46 countries.

The total purchase price has been allocated to the assets and liabilities based on estimates of their respective fair values.

The following table summarizes the final purchase price allocation of the acquisition of Dynamic Graphics Group (in thousands):



|                                     |  |   |         |  
|------------------------------------ |  | - | ------- | -
|Cash and cash equivalents            |  | $ | 1,334   |  
|Accounts receivable, net             |  |   | 5,015   |  
|Prepaid expenses and other           |  |   | 713     |  
|Property, plant and equipment        |  |   | 5,724   |  
|Domain and trade names               |  |   | 3,900   |  
|Image library                        |  |   | 840     |  
|Customer relationships               |  |   | 280     |  
|Supplier contracts                   |  |   | 300     |  
|Subscriber base                      |  |   | 460     |  
|Web site development costs           |  |   | 1,120   |  
|Goodwill                             |  |   | 52,914  |  
|Deferred income taxes                |  |   | 1,864   |  
|                                     |  |   |         |  
|Total assets acquired                |  |   | 74,464  |  
|                                     |  |   |         |  
|Accounts payable                     |  |   | (8,900  | )
|Accrued payroll and related expenses |  |   | (547    | )
|Accrued expenses                     |  |   | (2,142  | )
|Deferred revenue                     |  |   | (3,049  | )
|                                     |  |   |         |  
|Total liabilities assumed            |  |   | (14,638 | )
|                                     |  |   |         |  
|Net assets acquired                  |  | $ | 59,826  |  
|                                     |  |   |         |  

The intangible assets subject to amortization are being amortized on a straight-line basis over
periods ranging from three to fifteen years.

The primary reason for a large portion of the purchase price of Creatas being allocated to
goodwill is that the most significant asset being acquired, the Dynamic Graphics Group sales team, is not an asset that is considered to be separately identifiable under Statement of Financial Accounting Standards (SFAS) No. 141.
The Dynamic Graphics Group sales team consisted of approximately 90 individuals who had significant experience and training in selling stock imagery. These individuals had worked together for many years and there was familiarity within the members
of the team. They had established a well known reputation of customer service within the industry.



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Jupitermedia believes that it would have taken many years and considerable effort to build such a team of
individuals itself. Jupitermedia faces competitive disadvantages in competing with the much larger companies in the stock imagery business such as Getty and Corbis and therefore, believed it was in its best interests to acquire an organization with
an established sales team rather than building such a team over many years.

Jupitermedia had made many image acquisitions prior to the
acquisition of the Dynamic Graphics Group as Jupitermedia began to invest in the stock image industry. Jupitermedia believes that owning its own image content is critical to its success. As Jupitermedia continued to acquire content, Jupitermedia
realized that to fully realize the benefits of the collections it had acquired, Jupitermedia could not rely on the very large stock image distributors such as Getty. The Dynamic Graphics Group sales team provided Jupitermedia the opportunity to have
greater control over its own sales. The Dynamic Graphics Group sales team also provided Jupitermedia the opportunity to distribute its wholly owned imagery that previously had never been sold by Dynamic Graphics and to expand its reach.

On May 19, 2005, Jupitermedia acquired all of the shares of Goodshoot S.A.S (Goodshoot) for $9.9 million in cash. Goodshoot, based in
France, is a resource for royalty free digital images for business users and creative professionals.

The total purchase price has been
allocated to the assets and liabilities based on estimates of their respective fair values.

The following table summarizes the final
purchase price allocation of the acquisition of Goodshoot (in thousands):



|                                       |  |   |        |  
|-------------------------------------- |  | - | ------ | -
|Cash and cash equivalents              |  | $ | 1,397  |  
|Accounts receivable, net               |  |   | 311    |  
|Prepaid expenses and other             |  |   | 120    |  
|Property, plant and equipment          |  |   | 41     |  
|Domain and trade names                 |  |   | 310    |  
|Image library                          |  |   | 1,770  |  
|Customer and distributor relationships |  |   | 53     |  
|Non-compete agreements                 |  |   | 20     |  
|Web site development costs             |  |   | 40     |  
|Goodwill                               |  |   | 7,504  |  
|Other assets                           |  |   | 16     |  
|                                       |  |   |        |  
|Total assets acquired                  |  |   | 11,582 |  
|                                       |  |   |        |  
|Accounts payable                       |  |   | (164   | )
|Accrued payroll and related expenses   |  |   | (208   | )
|Accrued expenses                       |  |   | (144   | )
|Deferred income taxes                  |  |   | (1,150 | )
|                                       |  |   |        |  
|Total liabilities assumed              |  |   | (1,666 | )
|                                       |  |   |        |  
|Net assets acquired                    |  | $ | 9,916  |  
|                                       |  |   |        |  

The intangible assets subject to amortization are being amortized on a straight-line basis over
periods ranging from three to fifteen years.

The acquisition of Goodshoot added a high quality collection of European wholly-owned
digitized stock photos to Jupitermedias image offerings. Goodshoots operations in France complement Jupitermedias existing direct sales operations in the U.K. and Germany, and will enable further expansion of its Jupiterimages
business throughout Europe. These factors contributed to a significant portion of the purchase price of Goodshoot being allocated to goodwill.



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On July 18, 2005, Jupitermedia acquired PictureArts Corporation (PictureArts) for $63.2
million in cash, subject to certain post-closing adjustments. The acquisition includes PictureArts brands: Brand X Pictures, FoodPix, Botanica and Nonstock, as well as its image distribution business. The acquisition of PictureArts expanded
Jupitermedias Online images segment.

The primary reason for the acquisition of PictureArts was to acquire high quality
rights-managed and royalty-free image collections and imagery. Jupitermedia believed that in order to compete in the image industry with the much larger stock imagery businesses, such as Getty and Corbis, it needed to increase its ownership of high
quality rights-managed and royalty-free image collections and images. PictureArts distributes its own Brand X Pictures brand (www.brandxpictures.com), a collection of high-end, royalty-free stock photography. PictureArts FoodPix brand
(www.foodpix.com), is a specialty library of rights-managed food and beverage images. PictureArts also includes the Botanica collection (www.botanica.com), a rights-managed photography collection that focuses on botanical images mixed with current
lifestyle concepts and trends. PictureArts Nonstock brand (www.nonstock.com) is a rights-managed photography collection with one focus: avoiding the ordinary.

The total purchase price has been allocated to the assets and liabilities based on estimates of their respective fair values.

The following table summarizes the final purchase price allocation of the acquisition of PictureArts (in thousands):



|                                       |  |   |         |  
|-------------------------------------- |  | - | ------- | -
|Cash and cash equivalents              |  | $ | 2,678   |  
|Accounts receivable, net               |  |   | 3,717   |  
|Taxes receivable                       |  |   | 2,057   |  
|Prepaid expenses and other             |  |   | 82      |  
|Property, plant and equipment          |  |   | 410     |  
|Domain and trade names                 |  |   | 1,800   |  
|Image library                          |  |   | 2,350   |  
|Customer and distributor relationships |  |   | 606     |  
|Supplier and contributor contracts     |  |   | 10,000  |  
|Non-compete agreements                 |  |   | 200     |  
|Web site development costs             |  |   | 270     |  
|Goodwill                               |  |   | 50,451  |  
|                                       |  |   |         |  
|Total assets acquired                  |  |   | 74,621  |  
|                                       |  |   |         |  
|Accounts payable                       |  |   | (4,311  | )
|Accrued payroll and related expenses   |  |   | (399    | )
|Accrued expenses                       |  |   | (45     | )
|Deferred taxes                         |  |   | (6,478  | )
|Other long-term debt                   |  |   | (136    | )
|                                       |  |   |         |  
|Total liabilities assumed              |  |   | (11,369 | )
|                                       |  |   |         |  
|Net assets acquired                    |  | $ | 63,252  |  
|                                       |  |   |         |  

The intangible assets subject to amortization are being amortized on a straight-line basis over
periods ranging from three to fifteen years.



14



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##### Table of Contents

At the time of Jupitermedias acquisition of PicturesArts, approximately 45% of PictureArts
revenues were derived from a distribution agreement with Getty. Based on past actions, Jupitermedia expected that following the acquisition of PictureArts, Getty would terminate its distribution agreement with PictureArts. Therefore, Jupitermedia
ascribed no value to this agreement. Jupitermedia considered the probable loss of the Getty distribution agreement in determining the price paid for the acquisition. Jupitermedia believed that the sales force that was acquired as part of the Creatas
acquisition would be able to replace the lost revenues provided by Getty by selling the PictureArts images directly to its customers. Getty, in fact, terminated all agreements with PictureArts on August 19, 2005, with an effective date of
December 16, 2005. To date, Jupitermedia has partially replaced the effect of the loss of this distribution agreement. In addition, PictureArts was one of the most significant remaining independent owners of high quality rights-managed
collections and images. These factors contributed to a significant portion of the purchase price of PictureArts being allocated to goodwill.

On March 28, 2006, Jupitermedia sold its JupiterResearch division for $10.1 million in cash, of which $500,000 is currently being held in escrow, and the assumption of certain liabilities by the purchaser, subject to certain
post-closing adjustments. A post-closing adjustment relating to the carrying value of the net assets of the JupiterResearch division resulted in a reduction of the sale price in the amount of $587,000. The purchaser is JupiterResearch, LLC, a
subsidiary of JupiterKagan, Inc., which is a portfolio company of MCG Capital Corporation (Nasdaq: MCGC). The carrying value of the net assets of the JupiterResearch division at the time of sale was $615,000 and the sale of the JupiterResearch
division resulted in a gain of $5.4 million, net of income taxes of $2.2 million. As a result of the sale of the JupiterResearch division, the Research segment is now reflected as a discontinued operation in accordance with FASB Statement
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 net of income taxes of $48,000. Prior year financial results have
been presented to reflect Jupitermedias Research segment as a discontinued operation.

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



|                           |  |                             |       |                           |   |      |  |      |       |  |   |      
|-------------------------- |  | --------------------------- | ----- | ------------------------- | - | ---- |  | ---- | ----- |  | - | -----
|                           |  | Three Months Ended June 30, |       | Six Months Ended June 30,
|                           |  | 2005                        |       | 2006                      |   | 2005 |  | 2006
|Revenue                    |  | $                           | 2,801 |                           | $ |     |  | $    | 5,356 |  | $ | 2,388
|Income before income taxes |  | $                           | 375   |                           | $ |     |  | $    | 399   |  | $ | 119  



15



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##### Table of Contents

Assets and liabilities of discontinued operations were as follows (in thousands):



|                                       |  |                   |      
|-------------------------------------- |  | ----------------- | -----
|                                       |  | December 31, 2005
|Current assets                         |  | $                 | 5,916
|Goodwill                               |  |                   | 2,632
|Other assets                           |  |                   | 215  
|                                       |  |                   |      
|Assets of discontinued operations      |  | $                 | 8,763
|                                       |  |                   |      
|                                       | 
|Accounts payable and accrued expenses  |  | $                 | 377  
|Deferred revenues                      |  |                   | 6,834
|                                       |  |                   |      
|Liabilities of discontinued operations |  | $                 | 7,211
|                                       |  |                   |      

7. DEBT

On December 22, 2005, Jupitermedia entered into a Credit Agreement (the Credit Agreement) with JPMorgan Chase Bank N.A., as Administrative Agent and lender. The Credit Agreement provides for a $100.0
million senior credit facility (comprised of a $50.0 million term loan facility and a $50.0 million revolving credit facility). The future minimum payments under the Credit Agreement are $12.0 million, $16.0 million and $44.2 million for the years
ended December 31, 2006, 2007 and 2008, respectively. Jupitermedias outstanding debt, relating to the Credit Agreement, as of December 31, 2005 and June 30, 2006, respectively, is reflected in the unaudited consolidated
condensed balance sheet. In March 2006, Jupitermedia made a $4.0 million payment on its term loan. In addition, Jupitermedia made an additional $5.0 million payment in May 2006 with the proceeds from the sale of its JupiterResearch division.

8. SEGMENT INFORMATION

The following
tables summarize the results of the segments of Jupitermedia for the three and six months ended June 30, 2005 and 2006. Online images consists of the JupiterImages business that includes BananaStock, Workbook Stock, Brand X, Food Pix, Botanica,
Nonstock, The Beauty Archive, IFA Bilderteam, Comstock Images, Creatas Images, PictureQuest, Liquid Library, Thinkstock Images, Thinkstock Footage, Bigshot Media, Goodshoot, ITStockFree, Stock Image, Pixland, Photos.com, Ablestock.com,
PhotoObjects.net, Clipart.com, FlashFoundry.com and AnimationFactory.com. Online media consists of the JupiterWeb business that includes the internet.com, EarthWeb.com, DevX.com and Graphics.com Networks. Other includes corporate overhead,
depreciation and amortization. With the exception of goodwill, Jupitermedia does not identify or allocate assets by operating segment. See Note 5 for the allocation of goodwill to Jupitermedias reportable segments. Certain reclassifications
have been to the prior year summary information by segment to conform to current year presentation.



16



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##### Table of Contents

Summary information by segment for the three and six months ended June 30, 2005 and 2006 is as
follows (in thousands):



|                                         |  |                            |        |   |                           |   |        |      |  |   |        |   |  |   |         |  
|---------------------------------------- |  | -------------------------- | ------ | - | ------------------------- | - | ------ | ---- |  | - | ------ | - |  | - | ------- | -
|                                         |  | Three Months EndedJune 30, |        |   | Six Months Ended June 30, |  
|                                         |  | 2005                       |        |   | 2006                      |   |        | 2005 |  |   | 2006   |  
|Revenues:                                |  |                            |        |   |                           |   |        |      |  |   |        |   |  |   |         |  
|Online images                            |  | $                          | 19,731 |   |                           | $ | 26,807 |      |  | $ | 31,894 |   |  | $ | 53,372  |  
|Online media                             |  |                            | 9,336  |   |                           |   | 8,213  |      |  |   | 16,876 |   |  |   | 15,589  |  
|Other                                    |  |                            | 8      |   |                           |   | 6      |      |  |   | 16     |   |  |   | 6       |  
|                                         |  |                            |        |   |                           |   |        |      |  |   |        |   |  |   |         |  
|                                         |  |                            | 29,075 |   |                           |   | 35,026 |      |  |   | 48,786 |   |  |   | 68,967  |  
|                                         |  |                            |        |   |                           |   |        |      |  |   |        |   |  |   |         |  
|Cost of revenues and operating expenses: |  |                            |        |   |                           |   |        |      |  |   |        |   |  |   |         |  
|Online images                            |  |                            | 11,783 |   |                           |   | 17,747 |      |  |   | 17,264 |   |  |   | 33,969  |  
|Online media                             |  |                            | 5,706  |   |                           |   | 5,457  |      |  |   | 10,780 |   |  |   | 10,638  |  
|Depreciation and amortization            |  |                            | 1,299  |   |                           |   | 2,944  |      |  |   | 2,406  |   |  |   | 5,868   |  
|Other                                    |  |                            | 2,688  |   |                           |   | 4,519  |      |  |   | 4,902  |   |  |   | 8,438   |  
|                                         |  |                            |        |   |                           |   |        |      |  |   |        |   |  |   |         |  
|                                         |  |                            | 21,476 |   |                           |   | 30,667 |      |  |   | 35,352 |   |  |   | 58,913  |  
|                                         |  |                            |        |   |                           |   |        |      |  |   |        |   |  |   |         |  
|Operating income (loss):                 |  |                            |        |   |                           |   |        |      |  |   |        |   |  |   |         |  
|Online images                            |  |                            | 7,948  |   |                           |   | 9,060  |      |  |   | 14,630 |   |  |   | 19,403  |  
|Online media                             |  |                            | 3,630  |   |                           |   | 2,756  |      |  |   | 6,096  |   |  |   | 4,951   |  
|Other (a)                                |  |                            | (3,979 | ) |                           |   | (7,457 | )    |  |   | (7,292 | ) |  |   | (14,300 | )
|                                         |  |                            |        |   |                           |   |        |      |  |   |        |   |  |   |         |  
|                                         |  | $                          | 7,599  |   |                           | $ | 4,359  |      |  | $ | 13,434 |   |  | $ | 10,054  |  
|                                         |  |                            |        |   |                           |   |        |      |  |   |        |   |  |   |         |  

---

|(a) | Includes depreciation and amortization expense.
|--- | -----------------------------------------------

9. INCOME TAXES

In connection with the sale of the JupiterResearch division, Jupitermedia was able to utilize all its capital loss carry forwards of
approximately $1.1 million. The reversal of the valuation allowance related to the capital loss carry forwards was recorded during the six months ended June 30, 2006 and is included in the gain on sale of discontinued operations in the
accompanying consolidated statements of operations. In addition, Jupitermedia reversed the valuation allowance of approximately $1.5 million related to certain foreign deferred tax assets.

10. 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. In
December 2005, the plaintiffs filed a motion for preliminary injunction. Jupitermedia is not named or implicated in this motion. On April 3, 2006, the plaintiffs filed a motion for leave to amend the complaint to add a new named plaintiff.
No hearing date on either motion has been set and the litigation is ongoing.

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.



17



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##### Table of Contents

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 online information, images and digital content 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, FoodPix, Botanica, Nonstock, The Beauty Archive, IFA Bilderteam, Comstock Images, Creatas Images, PictureQuest, Liquid Library, Thinkstock Images,
Thinkstock Footage, Bigshot Media, Goodshoot, ITStockFree, Stock Image, Pixland, Photos.com, Ablestock.com, PhotoObjects.net, Clipart.com, FlashFoundry.com and AnimationFactory.com.

We derive revenue from granting rights to use images that are downloaded from the Internet 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 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 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 and
benefits costs for technology, production, sales and marketing personnel, technology infrastructure, lead generation fees for sales referrals and credit card processing fees.

18



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##### Table of Contents

Online media. Online media includes JupiterWeb, which consists of our internet.com, EarthWeb.com,
DevX.com and Graphics.com networks of over 150 Web sites and over 150 e-mail newsletters that generated, as of June 2006, over 350 million page views monthly. Online media also 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.

We generate our Online media revenues from:



| |  |  | advertising and custom publishing on our Web sites and e-mail newsletters;
| | - |  | --------------------------------------------------------------------------



| |  |  | 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; 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 and benefits for our editorial, technology and sales
personnel as well as technology related costs for facilities and equipment.

JupiterResearch Disposition

On March 28, 2006, Jupitermedia sold its JupiterResearch business division to JupiterResearch, LLC, a subsidiary of JupiterKagan, Inc., for $10.1
million in cash, of which $500,000 is currently being held in escrow, and the assumption of certain liabilities by the purchaser, subject to certain post-closing adjustments. A post-closing adjustment relating to the carrying value of the net assets
of the JupiterResearch division resulted in a reduction of the sale price in the amount of $587,000. As a result of the sale of JupiterResearch, the Research segment is now reflected as a discontinued operation in accordance with Statement
No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets.

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, |        | 2005 vs. 2006 |   |        | Six Months Ended June 30, |   | 2005 vs. 2006 |  
|              |  | 2005                        |        | 2006          |   | $      |                           |   | %             |   |  | 2005 |   | 2006 |   | $      |  |   | %      | 
|Online images |  | $                           | 19,731 |               | $ | 26,807 |                           | $ | 7,076         |   |  | 36   | % |      | $ | 31,894 |  | $ | 53,372 |  | $ | 21,478 |   |  | 67  | %
|Online media  |  |                             | 9,336  |               |   | 8,213  |                           |   | (1,123        | ) |  | (12  | ) |      |   | 16,876 |  |   | 15,583 |  |   | (1,293 | ) |  | (8  | )
|Other         |  |                             | 8      |               |   | 6      |                           |   | (2            | ) |  | (25  | ) |      |   | 16     |  |   | 12     |  |   | (4     | ) |  | (25 | )
|              |  |                             |        |               |   |        |                           |   |               |   |  |      |   |      |   |        |  |   |        |  |   |        |   |  |     |  
|              |  | $                           | 29,075 |               | $ | 35,026 |                           | $ | 5,951         |   |  | 20   | % |      | $ | 48,786 |  | $ | 68,967 |  | $ | 20,181 |   |  | 41  | %
|              |  |                             |        |               |   |        |                           |   |               |   |  |      |   |      |   |        |  |   |        |  |   |        |   |  |     |  

Online images. We acquired Dynamic Graphics Group on March 7, 2005, Goodshoot S.A.S.
on May 19, 2005, PictureArts Corporation on July 18, 2005, Bananastock Limited on October 13, 2005 and the assets of Animation Factory, Inc. on December 23, 2005 and, therefore, there are no financial results for these businesses
included in our financial statements prior to these respective dates. These acquisitions contributed $11.2 million and $14.6 million, respectively, to revenues for the three and six months ended June 30, 2005 and $14.4 million and $30.5
million, respectively, to revenues for the three and six months ended June 30, 2006.



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##### Table of Contents

The following table sets forth, for the three and six months ended June 30, 2005 and 2006, the
components of our Online images revenues (dollars in thousands):



|                                  |  |                            |        |                          |   |        |  |      |        |  |   |       
|--------------------------------- |  | -------------------------- | ------ | ------------------------ | - | ------ |  | ---- | ------ |  | - | ------
|                                  |  | Three Months EndedJune 30, |        | Six Months EndedJune 30,
|                                  |  | 2005                       |        | 2006                     |   | 2005   |  | 2006
|Single images and CD-ROMs         |  | $                          | 10,540 |                          | $ | 13,209 |  | $    | 15,466 |  | $ | 27,374
|Subscriptions                     |  |                            | 5,398  |                          |   | 6,320  |  |      | 9,355  |  |   | 12,486
|Distributors, licensing and other |  |                            | 3,793  |                          |   | 7,278  |  |      | 7,073  |  |   | 13,512
|                                  |  |                            |        |                          |   |        |  |      |        |  |   |       
|Total Online images               |  | $                          | 19,731 |                          | $ | 26,807 |  | $    | 31,894 |  | $ | 53,372
|                                  |  |                            |        |                          |   |        |  |      |        |  |   |       

Online media. The decrease in revenues during the three and six months ended June 30,
2006 was due primarily to the sale of the ClickZ.com Network of Web sites on August 5, 2005, which had revenues of $766,000 and $1.5 million for the three and six months ended June 30, 2005, respectively. The remaining decrease for the
three months ended June 30, 2006 was due primarily to a decrease in advertising revenues. The decrease for the six months ended June 30, 2006 was partially offset by the full period impact of the acquisition of Dynamic Graphics Group. We
acquired Dynamic Graphics Group on March 7, 2005 and this acquisition contributed $470,000 and $564,00, respectively, to Online media revenues during the three and six months ended June 30, 2005 and $242,000 and $554,000, respectively,
during the three and six months ended June 30, 2006, respectively. We expect our Online media revenues to decrease in the third quarter of 2006 in comparison to the second quarter based on the seasonality of the advertising business.

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



|                   |  |                       |  |                                |   
|------------------ |  | --------------------- |  | ------------------------------ | --
|                   |  | Number of Advertisers |  | Average Revenue per Advertiser
|March 31, 2005     |  | 213                   |  | $                              | 26
|June 30, 2005      |  | 219                   |  |                                | 32
|September 30, 2005 |  | 193                   |  |                                | 29
|December 31, 2005  |  | 158                   |  |                                | 40
|March 31, 2006     |  | 155                   |  |                                | 36
|June 30, 2006      |  | 138                   |  |                                | 47

Other.Other revenues represent management fees from our management of internet.com Venture
Fund I LLC. These revenues will continue to be negligible in the future.

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, |        | 2005 vs. 2006 |   |        | Six Months EndedJune 30, |   | 2005 vs. 2006 |  
|              |  | 2005                       |        | 2006          |   | $      |                          |   | %             |   |  | 2005 |   | 2006 |   | $      |  |   | %      | 
|Online images |  | $                          | 6,935  |               | $ | 9,405  |                          | $ | 2,470         |   |  | 36   | % |      | $ | 10,120 |  | $ | 18,222 |  | $ | 8,102 |   |  | 80 | %
|Online media  |  |                            | 3,455  |               |   | 3,307  |                          |   | (148          | ) |  | (4   | ) |      |   | 6,526  |  |   | 6,415  |  |   | (111  | ) |  | (2 | )
|              |  |                            |        |               |   |        |                          |   |               |   |  |      |   |      |   |        |  |   |        |  |   |       |   |  |    |  
|              |  | $                          | 10,390 |               | $ | 12,712 |                          | $ | 2,322         |   |  | 22   | % |      | $ | 16,646 |  | $ | 24,637 |  | $ | 7,991 |   |  | 48 | %
|              |  |                            |        |               |   |        |                          |   |               |   |  |      |   |      |   |        |  |   |        |  |   |       |   |  |    |  



20



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##### Table of Contents

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, storage for our image library and royalties. Cost of revenues excludes depreciation and amortization. The increase in
cost of revenues during the three and six months ended June 30, 2006 is primarily due to an increase in commission expense of $1.5 million and $3.3 million, respectively, and an increase in employee related costs of $201,000 and $1.6 million,
respectively. These increases were primarily a result of the numerous acquisitions made by the company. Stock-based compensation expense was $37,000 and $65,000, respectively, for the three and six months ended 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 royalty 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 decrease in cost of revenues from 2005 to 2006 for the three and six months ended was due
primarily to the sale of the ClickZ.com Network of Web sites. Cost of revenues includes $80,000 and $154,000, respectively, in stock-based compensation expense for the three and six months ended June 30, 2006.

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.

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, |       | 2005 vs. 2006 |   |       | Six Months EndedJune 30, |   | 2005 vs. 2006 | 
|              |  | 2005                        |       | 2006          |   | $     |                          | % |               |  | 2005 |   | 2006 |   | $     |  | % |       
|Online images |  | $                           | 3,583 |               | $ | 5,953 |                          | $ | 2,370         |  | 66   | % |      | $ | 5,159 |  | $ | 11,215 |  | $ | 6,056 |  | 117 | %
|Online media  |  |                             | 1,915 |               |   | 1,922 |                          |   | 7             |  |     |   |      |   | 3,708 |  |   | 3,826  |  |   | 118   |  | 3   |  
|              |  |                             |       |               |   |       |                          |   |               |  |      |   |      |   |       |  |   |        |  |   |       |  |     |  
|              |  | $                           | 5,498 |               | $ | 7,875 |                          | $ | 2,377         |  | 43   | % |      | $ | 8,867 |  | $ | 15,041 |  | $ | 6,174 |  | 70  | %
|              |  |                             |       |               |   |       |                          |   |               |  |      |   |      |   |       |  |   |        |  |   |       |  |     |  

Online images. Advertising, promotion and selling expenses primarily consists of payroll
and benefits costs for sales and marketing personnel and advertising. The increase in advertising, promotion and selling from 2005 to 2006 for the three and six months ended June 30, 2006 is due to an increase in employee related costs of $1.8
million and $3.9 million, respectively, and an increase in advertising expense of $432,000 and $1.8 million, respectively. These increases were primarily due to the expansion of our direct sales team and the impact of our numerous acquisitions.
Stock-based compensation expense was $16,000 and $28,000, respectively, for the three and six months ended June 30, 2006.

Online
media. Advertising, promotion and selling expenses primarily consists of payroll and benefits costs for sales and marketing personnel. In addition, advertising, promotion and selling expenses includes costs related to marketing activities. The
increase from 2005 to 2006 in advertising, promotion and selling expenses relates primarily to an increase in employee payroll and benefits costs, which include $138,000 and $231,000, respectively, in stock-based compensation expense for the three
and six months ended June 30, 2006.



21



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##### Table of Contents

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, |       | 2005 vs. 2006 |   |       | Six Months EndedJune 30, |   | 2005 vs. 2006 |  
|              |  | 2005                       |       | 2006          |   | $     |                          |   | %             |   |  | 2005 |   | 2006 |   | $     |  |   | %      | 
|Online images |  | $                          | 1,265 |               | $ | 2,389 |                          | $ | 1,124         |   |  | 89   | % |      | $ | 1,985 |  | $ | 4,532  |  | $ | 2,547 |   |  | 128 | % 
|Online media  |  |                            | 336   |               |   | 228   |                          |   | (108          | ) |  | (32  | ) |      |   | 546   |  |   | 395    |  |   | (151  | ) |  | (28 | )%
|Other         |  |                            | 2,688 |               |   | 4,519 |                          |   | 1,831         |   |  | 68   |   |      |   | 4,902 |  |   | 8,440  |  |   | 3,538 |   |  | 72  | % 
|              |  |                            |       |               |   |       |                          |   |               |   |  |      |   |      |   |       |  |   |        |  |   |       |   |  |     |   
|              |  | $                          | 4,289 |               | $ | 7,136 |                          | $ | 2,847         |   |  | 66   | % |      | $ | 7,433 |  | $ | 13,367 |  | $ | 5,934 |   |  | 80  | % 
|              |  |                            |       |               |   |       |                          |   |               |   |  |      |   |      |   |       |  |   |        |  |   |       |   |  |     |   

Online images. General and administrative expenses primarily consists of payroll and
benefits costs for administrative personnel, office related costs and professional fees. The increase from 2005 to 2006 in general and administrative expense for the three and six months ended June 30 is due to an increase in employee related
expenses of $508,000 and $896,000, respectively, an increase in office related costs of $280,000 and $832,000, respectively, and an increase in accounting and consulting fees of $259,000 and $408,000, respectively. These increases were primarily due
to the impact of the numerous acquisitions made by the company.

Online media. General and administrative expenses primarily consist
of office related costs and provisions for losses on accounts receivable. The increase in general and administrative expenses from 2005 to 2006 was due primarily to an increase 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 increase from 2005 to 2006 in general and administrative expense for the three months ended June 30 is due to an increase in employee related costs of $1.0 million, which includes $635,000 in stock-based compensation
expense and an increase in professional fees of $681,000. The increase from 2005 to 2006 for the six months ended June 30 is due to an increase in employee related costs of $2.0 million, which includes $1.2 million in stock-based compensation
expense and an increase in professional fees of $1.1 million.

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, |       | 2005 vs. 2006 |   |       | Six Months Ended June 30, |   | 2005 vs. 2006 | 
|             |  | 2005                        |       | 2006          |   | $     |                           | % |               |  | 2005 |   | 2006 |   | $     |  | % |      
|Depreciation |  | $                           | 423   |               | $ | 849   |                           |   | 426           |  | 101  | % |      | $ | 701   |  | $ | 1,502 |  | $ | 801   |  | 114 | %
|Amortization |  |                             | 876   |               |   | 2,095 |                           |   | 1,219         |  | 139  |   |      |   | 1,705 |  |   | 4,366 |  |   | 2,661 |  | 156 |  
|             |  |                             |       |               |   |       |                           |   |               |  |      |   |      |   |       |  |   |       |  |   |       |  |     |  
|             |  | $                           | 1,299 |               |   | 2,944 |                           | $ | 1,645         |  | 127  | % |      | $ | 2,406 |  | $ | 5,868 |  | $ | 3,462 |  | 144 | %
|             |  |                             |       |               |   |       |                           |   |               |  |      |   |      |   |       |  |   |       |  |   |       |  |     |  

Depreciation and amortization expense increased during the three and six months ended
June 30, 2006 due primarily to the acquisitions of Dynamic Graphics Group, Goodshoot, PictureArts and Bananastock.

These acquisitions
contributed $196,000 and $57,000, respectively, to depreciation and amortization expense for the three months ended June 30, 5005 and $248,000 and $182,000, respectively, for the six months ended June 30, 2005.

These acquisitions contributed $445,000 and $583,000, respectively, to depreciation and amortization expense for the three months ended June 30,
2006 and $730,000 and $1.5 million, respectively, for the six months ended June 30, 2006



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##### Table of Contents

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 acquisitions that may be completed during the remainder of 2006.

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, |      |   | 2005 vs. 2006 |   |        | Six Months Ended June 30, |  |   | 2005 vs. 2006 |  
|                 |  | 2005                        |      |   | 2006          |   |        | $                         |  |   | %             |   |  | 2005 |    |  | 2006 |      |   | $ |   |        | % | 
|Interest income  |  | $                           | 95   |   |               | $ | 164    |                           |  | $ | 69            |   |  | 73   | %  |  | $    | 214  |   |   | $ | 281    |   |  | $ | 67     |   |  | 31   | % 
|Interest expense |  | $                           | (200 | ) |               | $ | (1,393 | )                         |  | $ | (1,193        | ) |  | (597 | )% |  | $    | (288 | ) |   | $ | (2,712 | ) |  | $ | (2,424 | ) |  | (842 | )%

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

In connection with the sale of the JupiterResearch division, Jupitermedia was able to utilize all its capital loss carry forwards of approximately $1.1
million. The reversal of the valuation allowance related to the capital loss carry forward was recorded during the six months ended June 30, 2006 and is included in the gain on sale of discontinued operations in the accompanying consolidated
statements of operations. In addition, Jupitermedia reversed the valuation allowance of approximately $1.5 million related to certain foreign deferred tax assets.

Minority interests

Minority interests represent the minority stockholders proportionate share
of profits or losses of our majority-owned Japanese subsidiary, Japan.internet.com KK and Jupiterimages Japan, which represent our online media and online images businesses focused on Japan.

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, |         |   | 2005 vs. 2006 |  
|                                     |  | 2005                      |         |   | 2006          |   |         | $ |  |   | %       |  
|Operating cash flows                 |  | $                         | 13,842  |   |               | $ | 3,965   |   |  | $ | (9,877  | ) |  | (71 | )%
|Investing cash flows                 |  | $                         | (50,434 | ) |               | $ | (17,017 | ) |  | $ | 33,417  |   |  | 66  | % 
|Financing cash flows                 |  | $                         | 26,363  |   |               | $ | 14,890  |   |  | $ | (11,473 | ) |  | (44 | )%
|Acquisitions of businesses and other |  | $                         | (49,523 | ) |               | $ | (25,684 | ) |  | $ | 23,839  |   |  | 48  | % 
|Capital expenditures                 |  | $                         | (846    | ) |               | $ | (1,296  | ) |  | $ | (450    | ) |  | (53 | )%



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##### Table of Contents

|                          |  |                  |        |   |               |   |        |   |  |   |       |   |  |     |   
|------------------------- |  | ---------------- | ------ | - | ------------- | - | ------ | - |  | - | ----- | - |  | --- | --
|                          |  | As of            |        |   | 2005 vs. 2006 |  
|                          |  | December 31,2005 |        |   | June 30, 2006 |   |        | $ |  |   | %     |  
|Cash and cash equivalents |  | $                | 18,546 |   |               | $ | 20,480 |   |  | $ | 1,934 |   |  | 10  | % 
|Accounts receivable, net  |  | $                | 20,640 |   |               | $ | 23,696 |   |  | $ | 3,056 |   |  | 15  | % 
|Working capital           |  | $                | (5,292 | ) |               | $ | (6,123 | ) |  | $ | (831  | ) |  | (16 | )%
|Long-term debt            |  | $                | 46,214 |   |               | $ | 52,249 |   |  | $ | 6,035 |   |  | 13  | % 

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, respectively, the sale of our Events and Research businesses, through various credit agreements and through cash flows from operating activities. Cash
increased in 2006 primarily due to the sale our Jupitermedias Research business and cash flows from operations.

Cash provided by
operating activities increased in 2006 due primarily to increases in our accrued expenses and our deferred revenues. In 2006, deferred revenues increased primarily due to increased bookings of subscription products for our Online images business.

The amounts of cash used in investing activities vary in correlation to the number and value of the acquisitions consummated. Net cash
used in investing activities in 2005 related primarily to the acquisition of Dynamic Graphics Group. Net cash used in investing activities in 2006 relates primarily to various investments made to increase the size of our image library.

Cash provided from financing activities in 2005 relates primarily to borrowings under a senior credit facilities with JPMorgan Chase Bank N.A.
obtained in connection with the acquisitions of Dynamic Graphics Group.

On December 22, 2005, Jupitermedia entered into a Credit
Agreement (the Credit Agreement) with JPMorgan Chase Bank N.A., as Administrative Agent and lender. The Credit Agreement provides for a $100.0 million senior credit facility (comprised of a $50.0 million term loan facility and a $50.0
million revolving credit facility). The future minimum payments under the Credit Agreement are $12.0 million, $16.0 million and $44.2 million for the years ended December 31, 2006, 2007 and 2008, respectively. Jupitermedias outstanding
debt, relating to the Credit Agreement, as of December 31, 2005 and June 30, 2006, respectively, is reflected in the unaudited consolidated condensed balance sheet. In March 2006, Jupitermedia made a $4.0 million payment on its term loan.
In addition, Jupitermedia made an additional $5.0 million payment in May 2006 with the proceeds from the sale of its JupiterResearch division.

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 acquisitions 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 2006 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.



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##### Table of Contents

Recent Accounting Pronouncements

Effective January 1, 2006, we adopted Financial Accounting Standards Board (FASB) Statement No. 123 (revised), Share-Based Payment (SFAS 123R). Among its provisions, SFAS
123R requires that we recognize compensation expense for equity awards over the vesting period based on their grant-date fair value. Prior to the adoption of SFAS 123R, we utilized the intrinsic-value based method of accounting under APB Opinion
No. 25, Accounting for Stock Issued to Employees and related interpretations, and adopted the disclosure requirements of SFAS No. 123, Accounting for Stock-Based Compensation (SFAS 123). Under the
intrinsic-value based method of accounting, compensation expense for stock options granted to our employees was measured as the excess of the quoted market price of common stock at the grant date over the amount the employee must pay for the stock.
Our policy is to grant stock options with an exercise price equal to or greater than the fair value on the date of grant and as a result no compensation expense was historically recognized for stock options.

We adopted SFAS 123R in the first quarter of 2006 using the modified prospective approach. Under this transition method, the measurement and our method
of amortization of costs for share-based payments granted prior to, but not vested as of January 1, 2006, would be based on the same estimate of the grant-date fair value and the same amortization method that was previously used in our SFAS 123
pro forma disclosure. Results for prior periods have not been restated as provided for under the modified prospective approach. For equity awards granted after the date of adoption, we will amortize share-based compensation expense on a
straight-line basis over the vesting term.

Compensation expense is recognized only for share-based payments expected to vest. We estimate
forfeitures at the date of grant based on our historical experience and future expectations. Prior to the adoption of SFAS 123R, the effect of forfeitures on the pro forma expense amounts was recognized based on actual forfeitures.

The adoption of SFAS 123R reduced our basic and diluted earnings per share by $.02 and $.03 for the three and six months ended June 30, 2006,
respectively. Total share-based compensation expense recognized in continuing and discontinued operations was $906,000 and $100,000, respectively, for the three months ended June 30, 2006, which is before an income tax benefit of $420,000,
resulting in a decrease to net income of $586,000.

Total share-based compensation expense recognized in continuing and discontinued
operations was $1.7 million and $177,000, respectively, for the six months ended June 30, 2006, which is before an income tax benefit of $769,000, resulting in a decrease to net income of $1.1 million.

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, 2005.

Item 3. Quantitative and Qualitative Disclosure about Market Risks

We have no derivative financial
instruments or derivative commodity instruments. We invest our excess cash primarily 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 no-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 are 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. This fund invested in early-stage content-based Internet properties that are not competitive with our business. We invested $700,000 in Fund I, all of which is now fully invested. The remaining $4.3 million
of capital raised and funded in Fund I was sourced from third party investors. We no longer have any outstanding capital commitments related to Fund I. The aggregate carrying value of our investment in Fund I was $25,000 as of June 30, 2006.

Our transactions are generally conducted in the United States, and as of June 30, 2006, 78% of our cash is held in accounts that are
denominated in United States dollars. Accordingly, we are not exposed to significant foreign currency risk.

Item 4. Controls and Procedures

The Companys management, including the Chief Executive Officer and
Chief Financial Officer, have conducted an evaluation of the effectiveness of disclosure controls and procedures as of June 30, 2006. 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 disclosed by Jupitermedia in the reports that it files or submits 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 Jupitermedias internal control over financial reporting during the period covered by this report
that have materially affected, or are reasonably likely to materially affect, Jupitermedias 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 continues to vigorously defend itself. In December 2005, the plaintiffs filed a motion for preliminary injunction. Jupitermedia is not named
or implicated in this motion. On April 3, 2006, the plaintiffs filed a motion for leave to amend the complaint to add a new named plaintiff. No hearing date on either motion has been set and the litigation is ongoing.  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.
|         | 
|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                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              



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##### Table of Contents

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

Jupitermedias annual meeting of stockholders was held on June 7, 2006.

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        |  | 31,790,616 |  | 432,170  
|Christopher S. Cardell |  | 31,992,103 |  | 230,683  
|Gilbert F. Bach        |  | 30,976,529 |  | 1,246,257
|Michael J. Davies      |  | 31,091,400 |  | 1,131,386
|John R. Patrick        |  | 30,991,754 |  | 1,231,032
|William A. Shutzer     |  | 30,888,551 |  | 1,334,235

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, 2006 was approved by the vote set forth below:



|           |  |         |  |        
|---------- |  | ------- |  | -------
|FOR        |  | AGAINST |  | ABSTAIN
|32,016,834 |  | 202,326 |  | 3,626  

The proposal to amend Jupitermedias 1999 Stock Incentive Plan was approved by the vote set
forth below:



|           |  |           |  |        
|---------- |  | --------- |  | -------
|FOR        |  | AGAINST   |  | ABSTAIN
|25,252,659 |  | 3,686,434 |  | 42,363 



|. | 
|- | 

|        |  |                  
|------- |  | -----------------
|        | 
|Item 5. |  | OTHER INFORMATION
|        | 
|        |  | Not Applicable   



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##### Table of Contents

|        |  |         
|------- |  | --------
|        | 
|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.



|              |  |                                                                                                                       
|------------- |  | ----------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                           
|3.1*          |  | Registrants Amended and Restated Certificate of Incorporation, as amended                                            
|              | 
|3.2**         |  | Registrants Bylaws                                                                                                   
|              | 
|11***         |  | Statement Regarding Computation of Per Share Earnings (Loss) (included in notes to consolidated 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. 33-76331) filed on April 15, 1999.
|-- | ------------------------------------------------------------------------------------------------------------------------------------

|*** | Included in notes to consolidated financial statements.
|--- | -------------------------------------------------------



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##### Table of Contents

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, 2006 |  | Jupitermedia Corporation                            
|                      | 
|                      |  | /s/ Christopher S. Cardell                          
|                      |  | Christopher S. Cardell                              
|                      |  | Director, President and Chief Operating Officer     
|                      | 
|                      |  | /s/ Christopher J. Baudouin                         
|                      |  | Christopher J. Baudouin                             
|                      |  | Executive Vice President and Chief Financial Officer



30