##### Table of Contents





UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q







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

For the quarterly period ended June 30, 2008.

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





Jupitermedia Corporation

(Exact name of Registrant as specified in its
charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|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   ̈                      |  | Smaller reporting company   ̈ |  | 
|(Do not check if a smaller reporting company) |  |                             

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

The
number of outstanding shares the Registrants common stock, par value $.01 per share, as of August 6, 2008 was 36,032,152 .









---

##### Table of Contents

Jupitermedia Corporation

Index



|                              |  |                                                                                                                                  |  |     
|----------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------- |  | ----
|                              |  |                                                                                                                                  |  | Page
|PART I. Financial Information |  |                                                                                                                                 
|                              |  |                                                                                                                                 
|Item 1.                       |  | Financial Statements                                                                                                             |  |     
|                              |  |                                                                                                                                 
|                              |  | Unaudited Consolidated Condensed Balance Sheets  December 31, 2007 and June 30, 2008                                            |  | 3   
|                              |  |                                                                                                                                 
|                              |  | Unaudited Consolidated Condensed Statements of Operations  For the Three and Six Months Ended June 30, 2007 (restated) and 2008 |  | 4   
|                              |  |                                                                                                                                 
|                              |  | Unaudited Consolidated Condensed Statements of Cash Flows  For the Six Months Ended June 30, 2007 (restated) and 2008           |  | 5   
|                              |  |                                                                                                                                 
|                              |  | Notes to Unaudited Consolidated Condensed Financial Statements                                                                   |  | 6   
|                              |  |                                                                                                                                 
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                            |  | 17  
|                              |  |                                                                                                                                 
|Item 3.                       |  | Quantitative and Qualitative Disclosures about Market Risk                                                                       |  | 23  
|                              |  |                                                                                                                                 
|Item 4.                       |  | Controls and Procedures                                                                                                          |  | 23  
|                              | 
|PART II. Other Information    |  |                                                                                                                                 
|                              |  |                                                                                                                                 
|Item 1.                       |  | Legal Proceedings                                                                                                                |  | 25  
|                              |  |                                                                                                                                 
|Item 1A.                      |  | Risk Factors                                                                                                                     |  | 25  
|                              |  |                                                                                                                                 
|Item 2.                       |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                                      |  | 25  
|                              |  |                                                                                                                                 
|Item 3.                       |  | Defaults Upon Senior Securities                                                                                                  |  | 25  
|                              |  |                                                                                                                                 
|Item 4.                       |  | Submission of Matters to a Vote of Security Holders                                                                              |  | 25  
|                              |  |                                                                                                                                 
|Item 5.                       |  | Other Information                                                                                                                |  | 26  
|                              |  |                                                                                                                                 
|Item 6.                       |  | Exhibits                                                                                                                         |  | 27  
|                              | 
|Signatures                    |  | 28                                                                                                                              



2



---

##### Table of Contents

Jupitermedia Corporation

Unaudited Consolidated Condensed Balance Sheets

December 31, 2007 and June 30, 2008

(in thousands, except share and per share amounts)



|                                                                                                                  |  |                  |          |   |              |   |          |  
|----------------------------------------------------------------------------------------------------------------- |  | ---------------- | -------- | - | ------------ | - | -------- | -
|                                                                                                                  |  | December 31,2007 |          |   | June 30,2008 |  
|ASSETS                                                                                                            |  |                  |          |   |              |   |          |  
|Current assets:                                                                                                   |  |                  |          |   |              |   |          |  
|Cash and cash equivalents                                                                                         |  | $                | 7,301    |   |              | $ | 5,852    |  
|Accounts receivable, net of allowances of $2,026 and $1,791, respectively                                         |  |                  | 25,689   |   |              |   | 23,974   |  
|Prepaid expenses and other current assets                                                                         |  |                  | 5,797    |   |              |   | 5,181    |  
|Deferred income taxes                                                                                             |  |                  | 1,441    |   |              |   | 1,558    |  
|                                                                                                                  |  |                  |          |   |              |   |          |  
|Total current assets                                                                                              |  |                  | 40,228   |   |              |   | 36,565   |  
|                                                                                                                  |  |                 
|Property and equipment, net of accumulated depreciation of $17,364 and $20,135, respectively                      |  |                  | 13,022   |   |              |   | 14,833   |  
|Intangible assets, net                                                                                            |  |                  | 74,002   |   |              |   | 71,158   |  
|Goodwill                                                                                                          |  |                  | 139,813  |   |              |   | 139,871  |  
|Deferred income taxes                                                                                             |  |                  | 13,049   |   |              |   | 15,350   |  
|Investments and other assets                                                                                      |  |                  | 2,575    |   |              |   | 2,391    |  
|                                                                                                                  |  |                  |          |   |              |   |          |  
|Total assets                                                                                                      |  | $                | 282,689  |   |              | $ | 280,168  |  
|                                                                                                                  |  |                  |          |   |              |   |          |  
|                                                                                                                  |  |                 
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                              |  |                  |          |   |              |   |          |  
|Current liabilities:                                                                                              |  |                  |          |   |              |   |          |  
|Accounts payable                                                                                                  |  | $                | 7,153    |   |              | $ | 9,435    |  
|Accrued payroll and related expenses                                                                              |  |                  | 3,383    |   |              |   | 3,403    |  
|Accrued expenses and other current liabilities                                                                    |  |                  | 11,822   |   |              |   | 11,833   |  
|Current portion of long-term debt                                                                                 |  |                  | 750      |   |              |   | 750      |  
|Deferred revenues                                                                                                 |  |                  | 15,121   |   |              |   | 15,538   |  
|                                                                                                                  |  |                  |          |   |              |   |          |  
|Total current liabilities                                                                                         |  |                  | 38,229   |   |              |   | 40,959   |  
|                                                                                                                  |  |                 
|Long-term debt                                                                                                    |  |                  | 83,375   |   |              |   | 79,000   |  
|Deferred revenues                                                                                                 |  |                  | 507      |   |              |   | 418      |  
|Other long-term liabilities                                                                                       |  |                  | 3,586    |   |              |   | 3,326    |  
|                                                                                                                  |  |                  |          |   |              |   |          |  
|Total liabilities                                                                                                 |  |                  | 125,697  |   |              |   | 123,703  |  
|                                                                                                                  |  |                  |          |   |              |   |          |  
|Commitments and contingencies (see note 11)                                                                       |  |                  |          |   |              |   |          |  
|                                                                                                                  |  |                 
|Stockholders equity:                                                                                             |  |                  |          |   |              |   |          |  
|Preferred stock, $.01 par value, 4,000,000 shares authorized, no shares issued                                    |  |                  |         |   |              |   |         |  
|Common stock, $.01 par value, 75,000,000 shares authorized, 36,029,651 and 36,032,152 shares issued, respectively |  |                  | 360      |   |              |   | 360      |  
|Additional paid-in capital                                                                                        |  |                  | 266,858  |   |              |   | 269,981  |  
|Accumulated deficit                                                                                               |  |                  | (117,798 | ) |              |   | (122,194 | )
|Treasury stock, 65,000 shares at cost                                                                             |  |                  | (106     | ) |              |   | (106     | )
|Accumulated other comprehensive income                                                                            |  |                  | 7,678    |   |              |   | 8,424    |  
|                                                                                                                  |  |                  |          |   |              |   |          |  
|Total stockholders equity                                                                                        |  |                  | 156,992  |   |              |   | 156,465  |  
|                                                                                                                  |  |                  |          |   |              |   |          |  
|Total liabilities and stockholders equity                                                                        |  | $                | 282,689  |   |              | $ | 280,168  |  
|                                                                                                                  |  |                  |          |   |              |   |          |  

See notes to unaudited consolidated condensed financial statements.



3



---

##### Table of Contents

Jupitermedia Corporation

Unaudited Consolidated Condensed Statements of Operations

For the Three and Six Months Ended June 30, 2007 (as restated) and 2008

(in thousands, except
per share amounts)



|                                                             |  |                            |        |   |                          |   |        |                         |  |   |        |   |  |   |        |  
|------------------------------------------------------------ |  | -------------------------- | ------ | - | ------------------------ | - | ------ | ----------------------- |  | - | ------ | - |  | - | ------ | -
|                                                             |  | Three Months EndedJune 30, |        |   | Six Months EndedJune 30, |  
|                                                             |  | 2007RestatedSee note 13    |        |   | 2008                     |   |        | 2007RestatedSee note 13 |  |   | 2008   |  
|Revenues                                                     |  | $                          | 34,669 |   |                          | $ | 35,000 |                         |  | $ | 69,440 |   |  | $ | 69,546 |  
|                                                             |  |                            |        |   |                          |   |        |                         |  |   |        |   |  |   |        |  
|Cost of revenues (exclusive of items shown separately below) |  |                            | 14,499 |   |                          |   | 16,145 |                         |  |   | 29,301 |   |  |   | 31,017 |  
|Advertising, promotion and selling                           |  |                            | 7,266  |   |                          |   | 7,896  |                         |  |   | 14,366 |   |  |   | 15,351 |  
|General and administrative                                   |  |                            | 6,320  |   |                          |   | 8,111  |                         |  |   | 14,710 |   |  |   | 15,674 |  
|Depreciation                                                 |  |                            | 1,163  |   |                          |   | 1,231  |                         |  |   | 2,225  |   |  |   | 2,482  |  
|Amortization                                                 |  |                            | 3,184  |   |                          |   | 3,994  |                         |  |   | 6,288  |   |  |   | 7,945  |  
|                                                             |  |                            |        |   |                          |   |        |                         |  |   |        |   |  |   |        |  
|Total operating expenses                                     |  |                            | 32,432 |   |                          |   | 37,377 |                         |  |   | 66,890 |   |  |   | 72,469 |  
|                                                             |  |                            |        |   |                          |   |        |                         |  |   |        |   |  |   |        |  
|Operating income (loss)                                      |  |                            | 2,237  |   |                          |   | (2,377 | )                       |  |   | 2,550  |   |  |   | (2,923 | )
|Other income (loss), net                                     |  |                            | (308   | ) |                          |   | (36    | )                       |  |   | (333   | ) |  |   | 795    |  
|Interest income                                              |  |                            | 38     |   |                          |   | 30     |                         |  |   | 78     |   |  |   | 106    |  
|Interest expense                                             |  |                            | (1,431 | ) |                          |   | (1,847 | )                       |  |   | (2,904 | ) |  |   | (3,573 | )
|                                                             |  |                            |        |   |                          |   |        |                         |  |   |        |   |  |   |        |  
|Income (loss) before income taxes and minority interests     |  |                            | 536    |   |                          |   | (4,230 | )                       |  |   | (609   | ) |  |   | (5,595 | )
|Provision (benefit) for income taxes                         |  |                            | 112    |   |                          |   | (965   | )                       |  |   | (346   | ) |  |   | (1,224 | )
|Minority interests                                           |  |                            | (38    | ) |                          |   | (21    | )                       |  |   | (79    | ) |  |   | (25    | )
|                                                             |  |                            |        |   |                          |   |        |                         |  |   |        |   |  |   |        |  
|Net income (loss)                                            |  | $                          | 386    |   |                          | $ | (3,286 | )                       |  | $ | (342   | ) |  | $ | (4,396 | )
|                                                             |  |                            |        |   |                          |   |        |                         |  |   |        |   |  |   |        |  
|Earnings (loss) per share:                                   |  |                            |        |   |                          |   |        |                         |  |   |        |   |  |   |        |  
|Basic net income (loss)                                      |  | $                          | 0.01   |   |                          | $ | (0.09  | )                       |  | $ | (0.01  | ) |  | $ | (0.12  | )
|                                                             |  |                            |        |   |                          |   |        |                         |  |   |        |   |  |   |        |  
|Diluted net income (loss)                                    |  | $                          | 0.01   |   |                          | $ | (0.09  | )                       |  | $ | (0.01  | ) |  | $ | (0.12  | )
|                                                             |  |                            |        |   |                          |   |        |                         |  |   |        |   |  |   |        |  
|Shares used in computing earnings (loss) per share:          |  |                            |        |   |                          |   |        |                         |  |   |        |   |  |   |        |  
|Basic                                                        |  |                            | 35,968 |   |                          |   | 36,032 |                         |  |   | 35,886 |   |  |   | 36,032 |  
|                                                             |  |                            |        |   |                          |   |        |                         |  |   |        |   |  |   |        |  
|Diluted                                                      |  |                            | 36,358 |   |                          |   | 36,032 |                         |  |   | 35,886 |   |  |   | 36,032 |  
|                                                             |  |                            |        |   |                          |   |        |                         |  |   |        |   |  |   |        |  

See notes to unaudited consolidated condensed financial statements.



4



---

##### Table of Contents

Jupitermedia Corporation

Unaudited Consolidated Condensed Statements of Cash Flows

For the Six Months Ended June 30, 2007 and 2008

(in thousands)



|                                                                                |  |                          |         |   |      |   |        |  
|------------------------------------------------------------------------------- |  | ------------------------ | ------- | - | ---- | - | ------ | -
|                                                                                |  | Six Months EndedJune 30, |        
|                                                                                |  | 2007RestatedSee note 13  |         |   | 2008 |  
|Cash flows from operating activities:                                           |  |                          |         |   |      |   |        |  
|Net loss                                                                        |  | $                        | (342    | ) |      | $ | (4,396 | )
|Adjustments to reconcile net loss to net cash provided by operating activities: |  |                          |         |   |      |   |        |  
|Depreciation and amortization                                                   |  |                          | 8,513   |   |      |   | 10,427 |  
|Stock-based compensation                                                        |  |                          | 1,711   |   |      |   | 3,116  |  
|Provision (benefit) for losses on accounts receivable                           |  |                          | 50      |   |      |   | (465   | )
|Minority interests                                                              |  |                          | 79      |   |      |   | 25     |  
|Other (income) loss, net                                                        |  |                          | (132    | ) |      |   | 35     |  
|Amortization of debt issuance costs                                             |  |                          |        |   |      |   | 157    |  
|Deferred income taxes                                                           |  |                          | (521    | ) |      |   | (2,005 | )
|Excess tax benefit from stock-based compensation                                |  |                          | (356    | ) |      |   |       |  
|Changes in operating assets and liabilities (net of businesses acquired):       |  |                          |         |   |      |   |        |  
|Accounts receivable                                                             |  |                          | (1,186  | ) |      |   | 2,496  |  
|Prepaid expenses and other assets                                               |  |                          | (1,143  | ) |      |   | 944    |  
|Accounts payable and accrued expenses and other liabilities                     |  |                          | 754     |   |      |   | (975   | )
|Deferred revenues                                                               |  |                          | 764     |   |      |   | 265    |  
|                                                                                |  |                          |         |   |      |   |        |  
|Net cash provided by operating activities                                       |  |                          | 8,191   |   |      |   | 9,624  |  
|                                                                                |  |                          |         |   |      |   |        |  
|Cash flows from investing activities:                                           |  |                          |         |   |      |   |        |  
|Purchases of property and equipment                                             |  |                          | (2,353  | ) |      |   | (3,930 | )
|Acquisitions of businesses, images and other                                    |  |                          | (8,419  | ) |      |   | (2,027 | )
|Proceeds from sales of assets and other                                         |  |                          | 132     |   |      |   | 40     |  
|                                                                                |  |                          |         |   |      |   |        |  
|Net cash used in investing activities                                           |  |                          | (10,640 | ) |      |   | (5,917 | )
|                                                                                |  |                          |         |   |      |   |        |  
|Cash flows from financing activities:                                           |  |                          |         |   |      |   |        |  
|Borrowings under credit facilities                                              |  |                          | 5,900   |   |      |   |       |  
|Debt issuance costs                                                             |  |                          |        |   |      |   | (15    | )
|Repayment of borrowings under credit facilities                                 |  |                          | (9,000  | ) |      |   | (4,375 | )
|Proceeds from exercise of stock options                                         |  |                          | 1,038   |   |      |   | 7      |  
|Excess tax benefit from stock-based compensation                                |  |                          | 356     |   |      |   |       |  
|                                                                                |  |                          |         |   |      |   |        |  
|Net cash used in financing activities                                           |  |                          | (1,706  | ) |      |   | (4,383 | )
|                                                                                |  |                          |         |   |      |   |        |  
|Effects of exchange rates on cash and cash equivalents                          |  |                          | 67      |   |      |   | (773   | )
|                                                                                |  |                          |         |   |      |   |        |  
|Net change in cash and cash equivalents                                         |  |                          | (4,088  | ) |      |   | (1,449 | )
|Cash and cash equivalents, beginning of period                                  |  |                          | 8,891   |   |      |   | 7,301  |  
|                                                                                |  |                          |         |   |      |   |        |  
|Cash and cash equivalents, end of period                                        |  | $                        | 4,803   |   |      | $ | 5,852  |  
|                                                                                |  |                          |         |   |      |   |        |  
|Supplemental disclosures of cash flow:                                          |  |                          |         |   |      |   |        |  
|Cash paid for (refund of) income taxes                                          |  | $                        | 1,853   |   |      | $ | (821   | )
|                                                                                |  |                          |         |   |      |   |        |  
|Cash paid for interest                                                          |  | $                        | 2,575   |   |      | $ | 2,938  |  
|                                                                                |  |                          |         |   |      |   |        |  
|Non-cash investing activities:                                                  |  |                          |         |   |      |   |        |  
|Accrual of acquisitions of long-lived assets                                    |  | $                        |        |   |      | $ | 1,334  |  
|                                                                                |  |                          |         |   |      |   |        |  
|Accrual of purchase obligation                                                  |  | $                        |        |   |      | $ | 900    |  
|                                                                                |  |                          |         |   |      |   |        |  

See notes to unaudited consolidated condensed financial statements.



5



---

##### Table of Contents

Jupitermedia Corporation

Notes to Unaudited Consolidated Condensed Financial Statements

June 30, 2008

1. THE COMPANY

Jupitermedia Corporation (Jupitermedia) is a global provider of images, original information and events for information technology
(IT), business and creative professionals. Jupitermedia includes Jupiterimages, one of the leading images companies in the world with over 10.0 million images online serving creative professionals with brands like BananaStock,
Workbook Stock, Brand X Pictures, FoodPix, Botanica, Nonstock, The Beauty Archive, IFA Bilderteam, Comstock Images, Creatas Images, PictureQuest, Liquid Library, Thinkstock Images, Thinkstock Footage, Bigshot Media, Goodshoot, Polka Dot Images,
Stock Image, Pixland, Photos.com, Ablestock.com, PhotoObjects.net, Clipart.com, AnimationFactory.com, JupiterGreetings.com, RoyaltyFreeMusic.com, StudioCutz.com, eStockMusic.com and Stockxpert.com. The JupiterOnlineMedia division of Jupitermedia
includes five distinct online networks: internet.com and EarthWeb.com for IT and business professionals; DevX.com for developers; and Mediabistro.com and Graphics.com for media and creative professionals. JupiterOnlineMedia includes specialized
career Web sites for select professional communities which can be found on Mediabistro.com and JustTechJobs.com. JupiterOnlineMedia also includes the STEP Inside Design and Dynamic Graphics print magazines. In addition, JupiterOnlineMedia includes
JupiterEvents and Mediabistros media-related events, which produce offline conferences and trade shows focused on IT and business-specific topics.

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 unaudited consolidated condensed statements of operations for the three and six months ended
June 30, 2008 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, 2007. In the opinion of management, all adjustments considered necessary for a fair presentation of the results for the interim periods presented have
been reflected in such consolidated condensed financial statements.

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

3. RECENT ACCOUNTING
PRONOUNCEMENTS

Effective January 1, 2008, Jupitermedia adopted the Financial Accounting Standards Board (FASB)
Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements, which establishes a framework for measuring fair value and requires enhanced disclosures about fair value measurements. SFAS
No. 157 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. SFAS No. 157 also requires
disclosure about how fair value is determined for assets and liabilities and establishes a hierarchy for which these assets and liabilities must be grouped, based on significant levels of inputs as follows:

Level 1   quoted prices in active markets for identical assets or liabilities;

Level 2   quoted prices in active markets for similar assets and liabilities and inputs that are observable for the
asset or liability; or

Level 3   unobservable inputs, such as discounted cash flow models or valuations.

The determination of where assets and liabilities fall within this hierarchy is based upon the lowest level of input that is significant to the fair
value measurement. In July 2007, Jupitermedia entered into a derivative interest rate swap, which has been designated as a cash flow hedge (see note 7). The initial fair value of this instrument was determined by Jupitermedias
counterparties using inputs that are available in the public swap markets for similarly termed instruments and then making adjustments for the terms specific to its instrument. Jupitermedia continues to value this security based on quotes from
its counterparties. Since the inputs used to value this option contract are observable, Jupitermedia has classified them as level 2 inputs. There was no ineffectiveness relating to the interest rate swap for the three and six months ended
June 30, 2008, with all of the unrecognized loss being recorded in accumulated other comprehensive income in stockholders equity.

In February 2008, the FASB issued FASB Staff Position (FSP) FAS No. 157-2 Effective Date of FASB Statement No. 157 which delays the effective date of SFAS
No. 157 for non-financial assets and non-financial liabilities, except items that are recognized



6



---

##### Table of Contents

or disclosed at fair value in the financial statements on a recurring basis. FSP FAS No. 157-2 defers the effective date of SFAS No. 157 to fiscal
years beginning after November 15, 2008, and for interim periods within those fiscal years. Jupitermedia is currently evaluating whether the adoption of SFAS No. 157, for items within the scope of FSP FAS No. 157-2, will have an
impact on its consolidated financial position, results of operations or cash flows.

In February 2007, the FASB issued SFAS No. 159,
The Fair Value Option for Financial Assets and Financial Liabilities, which permits entities to choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair
value option has been elected are reported in earnings. SFAS No. 159 was effective for Jupitermedia on January 1, 2008. Jupitermedia did not elect the fair value option for existing eligible items; therefore, SFAS No. 159 had no
impact on Jupitermedias unaudited consolidated condensed financial statements.

In December 2007, the FASB issued SFAS No. 141
(R), Business Combinations. SFAS No. 141(R) is to be applied prospectively to business combinations for which the acquisition date is on or after January 1, 2009 and, therefore, will not impact Jupitermedias financial
statements upon adoption. SFAS No. 141(R) makes significant changes to the accounting for business combinations, including, but not limited to:



| |  |  | professional fees incurred in connection with the business combination will be expensed as incurred rather than capitalized as part of goodwill;
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | costs to be incurred in connection with restructuring activities that do not represent legal liabilities prior to the acquisition date will be expensed
post-acquisition rather than capitalized as part of goodwill;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | material adjustments to the purchase price allocation made during the accounting measurement period will be recast to the original period of acquisition in
subsequent presentations of the respective financial statements; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | adjustments to deferred tax assets and uncertain tax position balances that occur after the accounting measurement period will be recorded as a component of income
tax expense rather than as an adjustment to goodwill, regardless of whether the entity was acquired prior to or after adoption of SFAS No. 141(R).
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In December 2007, the Securities and Exchange Commission (SEC) staff issued Staff Accounting Bulletin (SAB) No. 110, which, effective January 1, 2008, amends and replaces SAB
No. 107, Share-Based Payment. SAB No. 110 expresses the views of the SEC staff regarding the use of a simplified method in developing an estimate of the expected term of plain vanilla share options in
accordance with SFAS No. 123(R), Share-Based Payment. Under the simplified method, the expected term is calculated as the midpoint between the vesting date and the end of the contractual term of the option. The use of
the simplified method, which was first described in SAB No. 107, was scheduled to expire on December 31, 2007. SAB No. 110 extends the use of the simplified method for plain vanilla awards in
certain situations. The SEC staff does not expect the simplified method to be used when sufficient information regarding exercise behavior, such as historical exercise data or exercise information from external sources, becomes
available. The expected life of an option takes into consideration the history of similar options. Jupitermedia issued options in 2007 and 2008 with a life of five years, whereas similar options were previously granted with a life of 10 years.
Therefore, Jupitermedia feels that the simplified method for determining the expected life of the options is appropriate since they do not have the historical data to consider in determining the expected life of the newly granted
options. The adoption of SAB No. 110 did not have an impact on the consolidated financial position, results of operations or cash flows of Jupitermedia.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, which amends Accounting Research Bulletin No. 51, Consolidated Financial
Statements, to establish accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. It also clarifies that a noncontrolling interest in a subsidiary is an ownership interest
in the consolidated entity that should be reported as equity in the consolidated financial statements. SFAS No. 160 also changes the way the consolidated income statement is presented by requiring consolidated net income to be reported at
amounts that include the amounts attributable to both the parent and the noncontrolling interest. It also requires disclosure, on the face of the consolidated statement of income, of the amounts of consolidated net income attributable to the parent
and to the noncontrolling interest. SFAS No. 160 requires that a parent recognize a gain or loss in net income when a subsidiary is deconsolidated and requires expanded disclosures in the consolidated financial statements that clearly identify
and distinguish between the interests of the parent owners and the interests of the noncontrolling owners of a subsidiary. SFAS No. 160 is effective for fiscal periods, and interim periods within those fiscal years, beginning on or after
December 15, 2008. Jupitermedia is currently evaluating whether the adoption of SFAS No. 160 will have an impact on its consolidated financial position, results of operations or cash flows.

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB
Statement No. 133, Accounting for Derivative Instruments and Hedging Activities. SFAS No. 161 changes the disclosure requirements for derivative instruments and hedging activities. Entities are required to provide enhanced
disclosures stating how and why an entity uses derivative instruments; how derivative instruments and related hedged items are accounted for under SFAS No. 133 and its related interpretations; and how derivative instruments and related hedged
items affect an entitys consolidated financial statements. SFAS No. 161 requires that objectives for using derivative instruments to be disclosed in terms of underlying risk and accounting designation. This disclosure better conveys the
purpose of derivative use in terms of the risks that the entity is



7



---

##### Table of Contents

intending to manage. Disclosing the fair values of derivative instruments and their gains and losses in a tabular format should provide a more complete
picture of the location in an entitys financial statements on both the derivative positions existing at period end and the effect of using derivatives during the reporting period. Disclosing information about credit-risk related contingent
features should provide information on the potential effect on an entitys liquidity from using derivatives. SFAS No. 161 requires cross-referencing within the footnotes, which should help users of financial statements locate important
information about derivatives. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged. SFAS No. 161 also encourages, but does
not require comparative disclosures for earlier periods at initial adoption. Jupitermedia is currently evaluating whether the adoption of SFAS No. 161 will have an impact on its consolidated financial statements.

In April 2008, the FASB issued FSP FAS 142-3, Determination of the Useful Life of Intangible Assets, which amends the factors to be
considered in renewal or extension assumptions based to determine the useful life of a recognized intangible asset. FSP FAS 142-3 is effective for interim periods and fiscal years beginning after December 15, 2008. The measurement provisions of
this standard will apply only to intangible assets of Jupitermedia acquired after the effective date. Jupitermedia is currently evaluating whether the adoption of FSP FAS 142-3 will have an impact on its consolidated financial position, results of
operations or cash flows.

4. ACCOUNTING FOR STOCK-BASED COMPENSATION

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

Total stock-based compensation recognized during the three and six months ended June 30, 2007 and 2008 are summarized in
the following table (in thousands):



|                         |  |                            |     |                          |   |       |  |      |       |  |   |      
|------------------------ |  | -------------------------- | --- | ------------------------ | - | ----- |  | ---- | ----- |  | - | -----
|                         |  | Three Months EndedJune 30, |     | Six Months EndedJune 30,
|                         |  | 2007                       |     | 2008                     |   | 2007  |  | 2008
|Stock-based compensation |  | $                          | 861 |                          | $ | 2,431 |  | $    | 1,711 |  | $ | 3,116
|                         |  |                            |     |                          |   |       |  |      |       |  |   |      

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



|                         |  |                          |   |  |      |  
|------------------------ |  | ------------------------ | - |  | ---- | -
|                         |  | Six Months EndedJune 30, |  
|                         |  | 2007                     |   |  | 2008 |  
|Risk-free interest rate  |  | 4.91                     | % |  | 2.46 | %
|Expected life (in years) |  | 4.2                      |   |  | 2.41 |  
|Dividend yield           |  | 0                        | % |  | 0    | %
|Expected volatility      |  | 65                       | % |  | 65   | %

The expected stock price volatility is based on the historical volatility of Jupitermedias
common stock. The risk-free interest rate is based on the implied yield available on U.S. Treasury zero-coupon issues with an equivalent remaining term. The expected term of the options represents the estimated period of time until exercise and is
based on the simplified method, which entails averaging the life of the option with the vesting period. The weighted-average grant date fair value of options granted during the six months ended June 30, 2007 and 2008 was $3.89 and $0.65,
respectively.



8



---

##### Table of Contents

The following table summarizes option activity during the six months ended June 30, 2008:



|                                             |  |            |   |  |                              |       |                                                 |      |                         |   |       
|-------------------------------------------- |  | ---------- | - |  | ---------------------------- | ----- | ----------------------------------------------- | ---- | ----------------------- | - | ------
|                                             |  | Shares     |   |  | WeightedAverageExercisePrice |       | WeightedAverageRemainingContractualTerm (years) |      | AggregateIntrinsicValue
|Outstanding at December 31, 2007             |  | 5,417,430  |   |  | $                            | 9.81  |                                                 |      |                         |   |       
|Granted                                      |  | 4,208,633  |   |  | $                            | 2.01  |                                                 |      |                         |   |       
|Exercised                                    |  | (2,501     | ) |  | $                            | 2.91  |                                                 |      |                         |   |       
|Forfeited, expired or cancelled              |  | (3,447,600 | ) |  | $                            | 11.14 |                                                 |      |                         |   |       
|                                             |  |            |   |  |                              |       |                                                 |      |                         |   |       
|Outstanding at June 30, 2008                 |  | 6,175,962  |   |  | $                            | 3.76  |                                                 | 4.31 |                         | $ | 24,821
|                                             |  |            |   |  |                              |       |                                                 |      |                         |   |       
|Vested and expected to vest at June 30, 2008 |  | 5,939,224  |   |  | $                            | 3.79  |                                                 | 4.30 |                         | $ | 24,821
|                                             |  |            |   |  |                              |       |                                                 |      |                         |   |       
|Exercisable at June 30, 2008                 |  | 4,484,979  |   |  | $                            | 4.00  |                                                 | 4.18 |                         | $ | 24,821
|                                             |  |            |   |  |                              |       |                                                 |      |                         |   |       

The aggregate intrinsic value in the table above is before income taxes, based on
Jupitermedias closing stock price of $1.40 as of June 30, 2008.

During the six months ended June 30, 2008, the total
intrinsic value of stock options exercised was $2,000.

As of June 30, 2008, there was $4.9 million of total unrecognized compensation
cost related to nonvested stock-based compensation arrangements granted under the stock incentive plan. That cost is expected to be amortized over a weighted-average period of thirteen months.

Cash provided by operating activities decreased and cash used in financing activities decreased by $356,000 and $0, related to excess tax benefits from
stock-based payment arrangements for the six months ended June 30, 2007 and 2008, respectively.

At the Annual Meeting of Stockholders
of Jupitermedia Corporation held on June 3, 2008, Jupitermedias stockholders approved Jupitermedias 2008 Stock Incentive Plan (the Plan). The Plan, along with the form of Incentive Stock Option Agreement and the form of
Nonqualified Stock Option Agreement were previously approved and adopted by Jupitermedias Board of Directors (the Board) on April 28, 2008. The Plan was approved and adopted subject to stockholder approval.

The Plan will be administered by the Compensation Committee of the Board (the Compensation Committee) and allows for the grant of incentive
stock options, nonqualified stock options, restricted stock, performance-based awards and other stock-based awards.

Subject to certain
antidilution adjustments, an aggregate of 4,000,000 shares of Jupitermedias common stock may be issued under the Plan. In addition to this 4,000,000 base share reserve, up to 896,380 shares of common stock remaining available for issuance
under Jupitermedias 1999 Stock Incentive Plan (Amended and Restated as of March 5, 2008) (the 1999 Plan) upon its expiration, together with up to 6,175,962 shares of common stock (as of June 30, 2008) underlying
outstanding awards granted under the 1999 Plan that remain undelivered following any expiration, cancellation, forfeiture, cash settlement, or other termination of such awards, may also be available for grant under the Plan.

Common Stock Option Exchange Offer

On May 20, 2008, Jupitermedias Board of Directors approved a plan to exchange all outstanding non-qualified stock options having an exercise price greater than $4.00 per share (the Eligible Options) for new options
with an exercise price of $2.01 per share, the closing price of Jupitermedias common stock on May 20, 2008, on a one-for-one basis. The new options follow the vesting schedule of the original options that were exchanged.

Jupitermedia accounted for the exchange offer as a modification under SFAS No. 123(R). In accordance with SFAS No. 123(R), Jupitermedia
recorded the incremental fair value related to the exchanged awards, together with unamortized stock-based compensation expense associated with the unvested cancelled awards, over the remaining vesting period. The fair values of the exchanged
options were estimated using the Black-Scholes option pricing model. A total of 3,047,289 shares were cancelled and reissued. This amount has been included in the granted and forfeited, expired or cancelled lines in the table above. The incremental
fair value of the exchange offer was approximately $1.8 million, with $1.4 million recorded in the three months ended June 30, 2008, and the remaining $400,000 to be recognized over the remaining vesting period of the options.



9



---

##### Table of Contents

5. COMPUTATION OF EARNINGS (LOSS) PER SHARE

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

Computations of basic and diluted earnings (loss)
per share for the three and six months ended June 30, 2007 and 2008 are as follows (in thousands, except per share amounts):



|                                                                      |  |                            |        |      |                          |        |      |  |   |        |   |  |   |        |  
|--------------------------------------------------------------------- |  | -------------------------- | ------ | ---- | ------------------------ | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                                                      |  | Three Months EndedJune 30, |        |      | Six Months EndedJune 30, |       
|                                                                      |  | 2007                       |        | 2008 |                          |        | 2007 |  |   | 2008   |  
|Net income (loss)                                                     |  | $                          | 386    |      | $                        | (3,286 | )    |  | $ | (342   | ) |  | $ | (4,396 | )
|                                                                      |  |                            |        |      |                          |        |      |  |   |        |   |  |   |        |  
|Basic weighted average common shares outstanding                      |  |                            | 35,968 |      |                          | 36,032 |      |  |   | 35,886 |   |  |   | 36,032 |  
|Effect of dilutive stock options                                      |  |                            | 390    |      |                          |       |      |  |   |       |   |  |   |       |  
|                                                                      |  |                            |        |      |                          |        |      |  |   |        |   |  |   |        |  
|Total basic weighted average common shares and dilutive stock options |  |                            | 36,358 |      |                          | 36,032 |      |  |   | 35,886 |   |  |   | 36,032 |  
|                                                                      |  |                            |        |      |                          |        |      |  |   |        |   |  |   |        |  
|Earnings (Loss) Per Share:                                            |  |                            |        |      |                          |        |      |  |   |        |   |  |   |        |  
|Basic net income (loss)                                               |  | $                          | 0.01   |      | $                        | (0.09  | )    |  | $ | (0.01  | ) |  | $ | (0.12  | )
|                                                                      |  |                            |        |      |                          |        |      |  |   |        |   |  |   |        |  
|Diluted net income (loss)                                             |  | $                          | 0.01   |      | $                        | (0.09  | )    |  | $ | (0.01  | ) |  | $ | (0.12  | )
|                                                                      |  |                            |        |      |                          |        |      |  |   |        |   |  |   |        |  

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



|                                      |  |                            |       |                          |   |       |  |      |       |  |   |      
|------------------------------------- |  | -------------------------- | ----- | ------------------------ | - | ----- |  | ---- | ----- |  | - | -----
|                                      |  | Three Months EndedJune 30, |       | Six Months EndedJune 30,
|                                      |  | 2007                       |       | 2008                     |   | 2007  |  | 2008
|Number of anti-dilutive stock options |  |                            | 3,492 |                          |   | 6,176 |  |      | 4,880 |  |   | 6,176
|Weighted average exercise price       |  | $                          | 13.45 |                          | $ | 3.76  |  | $    | 10.61 |  | $ | 3.76 

6. INTANGIBLE ASSETS AND GOODWILL

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, 2007
|                                       |  | Cost              |        | AccumulatedAmortization |   |         | Net CarryingValue
|Image library                          |  | $                 | 53,383 |                         | $ | (12,242 | )                 |  | $ | 41,141
|Supplier and contributor contracts     |  |                   | 15,462 |                         |   | (5,639  | )                 |  |   | 9,823 
|Customer and distributor relationships |  |                   | 10,135 |                         |   | (2,974  | )                 |  |   | 7,161 
|Web site development costs             |  |                   | 7,711  |                         |   | (4,750  | )                 |  |   | 2,961 
|Trademarks                             |  |                   | 4,457  |                         |   | (3,454  | )                 |  |   | 1,003 
|Non-compete agreements                 |  |                   | 1,780  |                         |   | (909    | )                 |  |   | 871   
|Content development costs              |  |                   | 570    |                         |   |        |                   |  |   | 570   
|                                       |  |                   |        |                         |   |         |                   |  |   |       
|Total                                  |  | $                 | 93,498 |                         | $ | (29,968 | )                 |  | $ | 63,530
|                                       |  |                   |        |                         |   |         |                   |  |   |       



10



---

##### Table of Contents

|                                       |  |               |        |                         |   |         |                  |  |   |       
|-------------------------------------- |  | ------------- | ------ | ----------------------- | - | ------- | ---------------- |  | - | ------
|                                       | 
|                                       |  | June 30, 2008
|                                       |  | Cost          |        | AccumulatedAmortization |   |         | NetCarryingValue
|Image library                          |  | $             | 55,720 |                         | $ | (15,544 | )                |  | $ | 40,176
|Supplier and contributor contracts     |  |               | 15,668 |                         |   | (7,372  | )                |  |   | 8,296 
|Customer and distributor relationships |  |               | 12,193 |                         |   | (4,386  | )                |  |   | 7,807 
|Web site development costs             |  |               | 8,281  |                         |   | (5,815  | )                |  |   | 2,466 
|Trademarks                             |  |               | 4,760  |                         |   | (3,784  | )                |  |   | 976   
|Non-compete agreements                 |  |               | 1,865  |                         |   | (1,344  | )                |  |   | 521   
|Content development costs              |  |               | 400    |                         |   | (95     | )                |  |   | 305   
|                                       |  |               |        |                         |   |         |                  |  |   |       
|Total                                  |  | $             | 98,887 |                         | $ | (38,340 | )                |  | $ | 60,547
|                                       |  |               |        |                         |   |         |                  |  |   |       

Intangibles that are subject to amortization are amortized on a straight-line basis over their
expected useful lives. The image library is amortized over seven and fifteen years, customer and distributor relationships are amortized over periods ranging from three to eight years, Web site development costs are amortized over three or five
years and trademarks and content development costs 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 ranging from one to three
years.

Amortization expense related to intangible assets subject to amortization was $3.2 million and $6.3 million for the three and six
months ended June 30, 2007, respectively, and $4.0 million and $7.9 million for the three and six months ended June 30, 2008, respectively. Estimated annual amortization expense for the next five years, including the remainder of 2008, is
expected to be as follows (in thousands):



|                         |  |   |       
|------------------------ |  | - | ------
|Year Ending December 31, |  |  
|2008                     |  | $ | 6,727 
|2009                     |  |   | 13,022
|2010                     |  |   | 11,338
|2011                     |  |   | 6,861 
|2012                     |  |   | 4,044 
|Thereafter               |  |   | 18,555
|                         |  |   |       
|                         |  | $ | 60,547
|                         |  |   |       

Unamortized Intangible Assets



|             |  |                  |        |              |   |       
|------------ |  | ---------------- | ------ | ------------ | - | ------
|             |  | December 31,2007 |        | June 30,2008
|Domain names |  | $                | 10,472 |              | $ | 10,611
|             |  |                  |        |              |   |       

Goodwill

The changes in the carrying amount of goodwill for the six months ended June 30, 2008, are as follows (in thousands):



|                                |  |              |         |   |             |   |        |       |  |   |         |  
|------------------------------- |  | ------------ | ------- | - | ----------- | - | ------ | ----- |  | - | ------- | -
|                                |  | OnlineImages |         |   | OnlineMedia |   |        | Total | 
|Balance as of December 31, 2007 |  | $            | 116,179 |   |             | $ | 23,634 |       |  | $ | 139,813 |  
|Purchase accounting adjustments |  |              | (33     | ) |             |   | (473   | )     |  |   | (506    | )
|Effect of foreign currency      |  |              | 564     |   |             |   |       |       |  |   | 564     |  
|                                |  |              |         |   |             |   |        |       |  |   |         |  
|Balance as of June 30, 2008     |  | $            | 116,710 |   |             | $ | 23,161 |       |  | $ | 139,871 |  
|                                |  |              |         |   |             |   |        |       |  |   |         |  

Purchase accounting adjustments pertain primarily to purchase price adjustments made to the fair
value of certain assets purchased in connection with the acquisition of Mediabistro.com Inc. (see note 8).

7. DEBT AND DERIVATIVE INSTRUMENT

Jupitermedia is party to a Credit and Security Agreement, dated as of July 12, 2007 (the Credit Agreement), among
Jupitermedia, as borrower, the lenders party thereto (the Lenders), KeyBank National Association, as the lead arranger, sole book runner and administrative agent (the Administrative Agent), and Citizens Bank, N.A., as
Syndication Agent. The Credit Agreement provides for a $115.0 million senior credit facility. The senior credit facility is comprised of (i) a $75.0 million term loan facility, that was drawn in full on July 12, 2007, and (ii) a $40.0
million revolving credit facility, including a $2.0 million sublimit for letters of credit and a $5.0 million swingline facility. The future minimum payments under the Credit Agreement are $375,000 for the remainder of the year ended
December 31, 2008, $750,000 each year for the years ended December 31, 2009 through December 31, 2011, $10.2 million for the year ended December 31, 2012 and $66.9 million thereafter. Jupitermedias outstanding debt,
relating to the Credit Agreement, as of June 30, 2008 is reflected in the unaudited consolidated condensed balance sheet. Jupitermedia made two quarterly debt payments on its term loan totaling $375,000 during the six months ended June 30,
2008. Jupitermedia also made



11



---

##### Table of Contents

payments during the three months ended June 30, 2008 totaling $4.0 million to reduce the outstanding portion of the revolving credit facility. We are
currently in compliance with our obligations under the Credit Agreement, including our debt covenants thereunder.

Pursuant to the Credit
Agreement, Jupitermedia also entered into a derivative interest rate swap that is to mature in July 2013, which has been designated as a cash flow hedge. The objective of the hedge is to eliminate the variability of cash flows in the interest
payments of $50.0 million of variable rate debt. Under this agreement, Jupitermedia receives a floating rate based on the LIBOR interest rate, and pays a fixed rate of 5.58% on the notional amount.

As required by SFAS No. 133 all derivative instruments are recorded in the consolidated balance sheet at fair value as derivative assets or
derivative liabilities. Subject to certain specific qualifying conditions in SFAS No. 133, a derivative instrument may be designated either as a hedge of the fair value of an asset or liability (fair value hedge), or as a hedge of the
variability of cash flows of an asset or liability or forecasted transaction (cash flow hedge). Gains and losses on derivative instruments designated as cash flow hedges, to the extent they are effective, are recorded in accumulated other
comprehensive income, a component of stockholders equity, and subsequently reclassified to earnings to offset the impact of the hedged items when they occur. In the event the forecasted transaction to which a cash flow hedge relates is no
longer likely, the amount in accumulated other comprehensive income is recognized in earnings and generally the derivative is terminated. Changes in the fair value of derivatives not qualifying as hedges, and for any portion of a hedge that is
ineffective, are reported in earnings. The net interest paid or received on interest rate swaps is recognized as interest expense. Gains resulting from the early termination of interest rate swap agreements are deferred and amortized as adjustments
to interest expense over the remaining period of the debt originally covered by the terminated swap.

At December 31, 2007 and
June 30, 2008, the fair value of the interest rate swap was $3.4 million and $3.1 million, respectively, and is recorded as other long-term liabilities in Jupitermedias consolidated condensed balance sheets. During the three and six
months ended June 30, 2008, the effective portion of the change in fair value of the interest rate swap of $1.5 million and $198,000, net of tax of $832,000 and $39,000, respectively, was recorded as an unrecognized gain in accumulated other
comprehensive income in stockholders equity and there was no ineffective portion.

8. ACQUISITION

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

The consideration paid in
the Acquisition consisted of $20.0 million in cash and a two year earn-out that could result in an additional $3.0 million in cash consideration. Funding for the acquisition was secured through the Credit Agreement arranged by KeyBank National
Association (see note 7).

As part of the acquisition of Mediabistro, Jupitermedia is required to make earn-out payments totaling up to a
maximum of $3.0 million based on the attainment of a profit target achieved by Mediabistro for the period from July 1, 2007 to June 30, 2008; and for the period from July 1, 2008 to June 30, 2009. Based upon the results of
Mediabistro for the period from July 1, 2007 to June 30, 2008, Jupitermedia has recorded a liability of $900,000.

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



12



---

##### Table of Contents

The following table summarizes the preliminary purchase price allocation of the acquisition of
Mediabistro (in thousands):



|                                     |  |   |       
|------------------------------------ |  | - | ------
|Cash and cash equivalents            |  | $ | 1,133 
|Accounts receivable, net             |  |   | 512   
|Prepaid expenses and other           |  |   | 514   
|Property, plant and equipment        |  |   | 87    
|Domain names                         |  |   | 1,300 
|Customer relationships               |  |   | 6,010 
|Web site development costs           |  |   | 210   
|Covenant not to compete              |  |   | 300   
|Content development costs            |  |   | 400   
|Goodwill                             |  |   | 11,952
|                                     |  |   |       
|Total assets acquired                |  |   | 22,418
|                                     |  |   |       
|Accounts payable                     |  |   | 630   
|Accrued payroll and related expenses |  |   | 99    
|Accrued expenses                     |  |   | 155   
|Deferred income taxes                |  |   | 546   
|Deferred revenue                     |  |   | 988   
|                                     |  |   |       
|Total liabilities assumed            |  |   | 2,418 
|                                     |  |   |       
|Net assets acquired                  |  | $ | 20,000
|                                     |  |   |       

Intangible assets and goodwill include the preliminary allocation of the purchase price relating
to the acquisition of Mediabistro.com Inc. Jupitermedia is in the process of finalizing the values of certain intangible assets, thus the allocation of the purchase price relating to the acquisition is subject to refinement. The intangible assets
subject to amortization are being amortized on a straight-line basis over periods ranging from three to fifteen years. The goodwill associated with the acquisition of Mediabistro is not deductible for tax purposes.

The acquisition of Mediabistro strengthens Jupitermedias position in the important media professionals market. The acquisition of Mediabistro
further diversifies Jupitermedias revenue sources since a significant percentage of Mediabistros revenue is generated from online job postings and online and in-person training courses. Jupitermedia believes that online job postings and
online and in-person training courses are natural e-commerce offerings for the 15 million unique users that it has on its Online media and Online images Web sites. Jupitermedia also believes that many of the 1.0 million unique users on Mediabistro
will be buyers of its Online images product offerings. These factors resulted in a significant portion of the purchase price of Mediabistro being allocated to goodwill.

9. SEGMENT INFORMATION

Jupitermedia has two reportable segments: Online images and Online media. The
following tables summarize the results of the segments of Jupitermedia for the three and six months ended June 30, 2007 and 2008. Online images consists of the Jupiterimages business that includes BananaStock, Workbook Stock, Brand X Pictures,
FoodPix, Botanica, Nonstock, The Beauty Archive, IFA Bilderteam, Comstock Images, Creatas Images, PictureQuest, Liquid Library, Thinkstock Images, Thinkstock Footage, Goodshoot, Polka Dot Images, Stock Image, Pixland, Photos.com, Ablestock.com,
PhotoObjects.net, Clipart.com, AnimationFactory.com, RoyaltyFreeMusic.com, JupiterGreetings.com, eStockMusic.com and Stockxpert.com. Online media includes the internet.com, EarthWeb.com, DevX.com, Mediabistro.com and Graphics.com Networks.
Jupitermedia evaluates segment performance based on income or loss from operations. Other includes corporate overhead, depreciation and amortization. With the exception of goodwill, Jupitermedia does not identify or allocate assets by operating
segment. See note 6 for the allocation of goodwill to Jupitermedias reportable segments.



13



---

##### Table of Contents

Summary information by segment for the three and six months ended June 30, 2007 and 2008 is as
follows (in thousands):



|                                         |  |                            |        |   |                           |   |         |      |  |   |         |   |  |   |         |  
|---------------------------------------- |  | -------------------------- | ------ | - | ------------------------- | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                         |  | Three Months EndedJune 30, |        |   | Six Months Ended June 30, |  
|                                         |  | 2007                       |        |   | 2008                      |   |         | 2007 |  |   | 2008    |  
|Revenues:                                |  |                            |        |   |                           |   |         |      |  |   |         |   |  |   |         |  
|Online images                            |  | $                          | 27,383 |   |                           | $ | 26,090  |      |  | $ | 55,297  |   |  | $ | 52,232  |  
|Online media                             |  |                            | 7,286  |   |                           |   | 8,910   |      |  |   | 14,143  |   |  |   | 17,314  |  
|                                         |  |                            |        |   |                           |   |         |      |  |   |         |   |  |   |         |  
|                                         |  |                            | 34,669 |   |                           |   | 35,000  |      |  |   | 69,440  |   |  |   | 69,546  |  
|                                         |  |                            |        |   |                           |   |         |      |  |   |         |   |  |   |         |  
|Cost of revenues and operating expenses: |  |                            |        |   |                           |   |         |      |  |   |         |   |  |   |         |  
|Online images                            |  |                            | 18,161 |   |                           |   | 18,883  |      |  |   | 37,453  |   |  |   | 37,042  |  
|Online media                             |  |                            | 5,664  |   |                           |   | 7,870   |      |  |   | 10,405  |   |  |   | 14,425  |  
|Depreciation and amortization            |  |                            | 4,347  |   |                           |   | 5,225   |      |  |   | 8,513   |   |  |   | 10,427  |  
|Other                                    |  |                            | 4,260  |   |                           |   | 5,399   |      |  |   | 10,519  |   |  |   | 10,575  |  
|                                         |  |                            |        |   |                           |   |         |      |  |   |         |   |  |   |         |  
|                                         |  |                            | 32,432 |   |                           |   | 37,377  |      |  |   | 66,890  |   |  |   | 72,469  |  
|                                         |  |                            |        |   |                           |   |         |      |  |   |         |   |  |   |         |  
|Operating income (loss):                 |  |                            |        |   |                           |   |         |      |  |   |         |   |  |   |         |  
|Online images                            |  |                            | 9,222  |   |                           |   | 7,207   |      |  |   | 17,844  |   |  |   | 15,190  |  
|Online media                             |  |                            | 1,622  |   |                           |   | 1,040   |      |  |   | 3,738   |   |  |   | 2,889   |  
|Other                                    |  |                            | (8,607 | ) |                           |   | (10,624 | )    |  |   | (19,032 | ) |  |   | (21,002 | )
|                                         |  |                            |        |   |                           |   |         |      |  |   |         |   |  |   |         |  
|                                         |  | $                          | 2,237  |   |                           | $ | (2,377  | )    |  | $ | 2,550   |   |  | $ | (2,923  | )
|                                         |  |                            |        |   |                           |   |         |      |  |   |         |   |  |   |         |  

10. INCOME TAXES

On January 1, 2007, Jupitermedia adopted the provisions of FASB Interpretation No.48, Accounting for Uncertainty in Income Taxesan Interpretation of SFAS No.109 (FIN 48). FIN 48
creates a two-step approach for evaluating uncertain tax positions. Recognition, the first step, occurs when an enterprise concludes that a tax position, based solely on its technical merits, is more-likely-than-not to be sustained upon examination.
Measurement, the second step, determines the amount of benefit that more-likely-than-not will be realized upon settlement. Reversal of a tax position that was previously recognized would occur when an enterprise subsequently determines that a tax
position no longer meets the more-likely-than-not threshold of being sustained. FIN 48 specifically prohibits the use of a valuation allowance as a substitute for the reversal of tax positions, and it has expanded disclosure requirements. There has
been no material change to Jupitermedias unrecognized tax benefits during the three and six months ended June 30, 2008.

A
provision for income taxes of $112,000 and a benefit for income taxes of $346,000 were recorded for the three and six months ended June 30, 2007, respectively. The income tax provision for the six months ended June 30, 2007 was principally impacted
by $1.9 million in legal and accounting fees associated with discussions with Getty Images, Inc., regarding a potential sale, which were terminated on March 7, 2007.

A benefit for income taxes of $965,000 and $1.2 million was recorded during the three and six months ended June 30, 2008, respectively. The income tax benefit is primarily related to losses incurred for US federal and
state purposes during the three and six months ended June 30, 2008, partially offset by non-deductible expenses associated with incentive stock options and subpart F income inclusions. The tax benefit is also partially offset by income taxes accrued
in foreign jurisdictions where Jupitermedia has income, net of income tax benefit in certain foreign jurisdictions where Jupitermedia has losses.

11.
COMMITMENTS AND CONTINGENCIES

On or about November 13, 2006, Robert Lange, who identifies himself as a stockholder of
Jupitermedia, commenced a purported stockholders derivative action in the United States District Court for the District of Connecticut, purportedly on behalf of Jupitermedia, against all of Jupitermedias current directors and against
Jupitermedias former Chief Financial Officer. Jupitermedia is named in the suit as a nominal defendant on whose behalf recovery is purportedly sought. Mr. Lange did not make a litigation demand on Jupitermedias board of
directors prior to commencing the action, and alleges that such demand should be excused as a matter of law. The complaint alleges, based primarily on a statistical analysis, that certain stock options granted to certain of the defendants in 1999,
2000 and 2001 were backdated, and asserts on behalf of Jupitermedia various causes of action against the defendants arising out of such alleged backdating, including securities fraud, breach of fiduciary duty and unjust enrichment. On April 24,
2007, Jupitermedia and the individual defendants filed a motion to dismiss the case in its entirety. Rather than respond to the motion to dismiss, the Plaintiff filed an amended complaint on July 16, 2007. The amended complaint removes one of
the individual defendants, but is substantially similar to the original complaint. On or around September 11, 2007, Defendants filed a motion to dismiss the Amended Complaint. Briefing on that motion is completed, and oral argument was held on
the motion in December 2007. The Court has advised the parties that the motion to dismiss will be held in abeyance pending the outcome of settlement discussions between the parties.

On or about August 31, 2007, Wayne Grabein brought a claim against Jupiterimages Corporation d/b/a clipart.com (Jupiterimages) for
alleged violation of the Fair Credit Reporting Act (FCRA) as amended by the Fair and Accurate Credit



14



---

##### Table of Contents

Transaction Act (FACTA). Specifically, Mr. Grabein alleges in his complaint that Jupiterimages violated FACTA by providing and/or
printing prohibited information on a purported receipt allegedly provided to Mr. Grabein. Mr. Grabein seeks nationwide class action certification for all individuals who have received similar receipts. Mr. Grabein also seeks to
recover for himself and the defined class for alleged willful violations of FACTA: statutory damages; punitive damages; cost and attorneys fees; interest as permitted by law; and a permanent injunction. Jupiterimages has denied the allegations
in the complaint and asserted numerous affirmative defenses. The Court has issued a scheduling order setting the case for jury trial in September 2008. No motion for class certification has been filed yet. The parties are currently engaged in
discovery. Jupiterimages filed a Motion for Summary Judgment and a Motion to Stay Discovery on April 30, 2008. The Court has ruled in favor of the motions.

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

12. COMPREHENSIVE INCOME (LOSS)

Comprehensive income (loss) is as follows (in thousands):



|                                                                |  |                            |       |      |                          |        |      |  |   |       |   |  |   |        |  
|--------------------------------------------------------------- |  | -------------------------- | ----- | ---- | ------------------------ | ------ | ---- |  | - | ----- | - |  | - | ------ | -
|                                                                |  | Three Months EndedJune 30, |       |      | Six Months EndedJune 30, |       
|                                                                |  | 2007                       |       | 2008 |                          |        | 2007 |  |   | 2008  |  
|Net income (loss)                                               |  | $                          | 386   |      | $                        | (3,286 | )    |  | $ | (342  | ) |  | $ | (4,396 | )
|Foreign currency translation adjustment                         |  |                            | 1,970 |      |                          | (99    | )    |  |   | 1,943 |   |  |   | 548    |  
|Change in fair value of interest rate swap, net of income taxes |  |                            |      |      |                          | 1,462  |      |  |   |      |   |  |   | 198    |  
|                                                                |  |                            |       |      |                          |        |      |  |   |       |   |  |   |        |  
|Total comprehensive income (loss)                               |  | $                          | 2,356 |      | $                        | (1,923 | )    |  | $ | 1,601 |   |  | $ | (3,650 | )
|                                                                |  |                            |       |      |                          |        |      |  |   |       |   |  |   |        |  

13. RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

During the fourth quarter of 2007, Jupitermedia identified certain adjustments related to deferred income tax assets and liabilities and income taxes
payable as a result of incorrectly accounting for the tax effects of certain purchase accounting adjustments as well as corrections related to foreign currency transactions that reclassified foreign currency transaction gains and losses from
accumulated other comprehensive income (loss) in the consolidated condensed balance sheet to other income (loss), net for the three and six months ended June 30, 2007 in the consolidated condensed statement of operations. As a result,
Jupitermedia has restated its consolidated condensed statement of operations and consolidated condensed statement of cash flows for the three and six months ended June 30, 2007.



15



---

##### Table of Contents

The following tables show the effects of this restatement on Jupitermedias consolidated condensed
statement of operations for the three and six months ended June 30, 2007, and consolidated condensed statement of cash flows for the six months ended June 30, 2007 (in thousands):



|                                                            |  |                                                |        |   |             |   |       |          |  |   |        |  
|----------------------------------------------------------- |  | ---------------------------------------------- | ------ | - | ----------- | - | ----- | -------- |  | - | ------ | -
|                                                            |  | Consolidated Condensed Statement of Operations |       
|Three Months ended June 30, 2007                            |  | PreviouslyReported                             |        |   | Adjustments |   |       | Restated | 
|Other income (loss), net                                    |  | $                                              | (40    | ) |             | $ | (268  | )        |  | $ | (308   | )
|Income before income taxes and minority interests           |  |                                                | 804    |   |             |   | (268  | )        |  |   | 536    |  
|Provision (benefit) for income taxes                        |  |                                                | 147    |   |             |   | (35   | )        |  |   | 112    |  
|Net income                                                  |  |                                                | 619    |   |             |   | (233  | )        |  |   | 386    |  
|                                                            |  |                                                |       
|Basic income per share                                      |  | $                                              | 0.02   |   |             | $ | (0.01 | )        |  | $ | 0.01   |  
|                                                            |  |                                                |       
|Diluted income per share                                    |  | $                                              | 0.02   |   |             | $ | (0.01 | )        |  | $ | 0.01   |  
|                                                            | 
|                                                            |  | Consolidated Condensed Statement of Operations |       
|Six Months ended June 30, 2007                              |  | PreviouslyReported                             |        |   | Adjustments |   |       | Restated | 
|Other income (loss), net                                    |  | $                                              | (49    | ) |             | $ | (284  | )        |  | $ | (333   | )
|Income (loss) before income taxes and minority interests    |  |                                                | (325   | ) |             |   | (284  | )        |  |   | (609   | )
|Provision (benefit) for income taxes                        |  |                                                | 18     |   |             |   | (364  | )        |  |   | (346   | )
|Net loss                                                    |  |                                                | (422   | ) |             |   | 80    |          |  |   | (342   | )
|                                                            |  |                                                |       
|Basic loss per share                                        |  | $                                              | (0.01  | ) |             | $ | 0.00  |          |  | $ | (0.01  | )
|                                                            |  |                                                |       
|Diluted loss per share                                      |  | $                                              | (0.01  | ) |             | $ | 0.00  |          |  | $ | (0.01  | )
|                                                            | 
|                                                            |  | Consolidated Condensed Statement of Cash Flows |       
|Six Months ended June 30, 2007                              |  | PreviouslyReported                             |        |   | Adjustments |   |       | Restated | 
|Cash flows from operating activities:                       |  |                                                |        |   |             |   |       |          |  |   |        |  
|Net loss                                                    |  | $                                              | (422   | ) |             | $ | 80    |          |  | $ | (342   | )
|Accounts payable and accrued expenses and other liabilities |  |                                                | 275    |   |             |   | 479   |          |  |   | 754    |  
|Other (income) loss, net                                    |  |                                                | 49     |   |             |   | (181  | )        |  |   | (132   | )
|Other non-cash charges                                      |  |                                                | 14     |   |             |   | (14   | )        |  |   |       |  
|Deferred income taxes                                       |  |                                                | (230   | ) |             |   | (291  | )        |  |   | (521   | )
|Excess tax benefit from stock-based compensation            |  |                                                | (224   | ) |             |   | (132  | )        |  |   | (356   | )
|Prepaid expenses and other assets                           |  |                                                | (1,070 | ) |             |   | (73   | )        |  |   | (1,143 | )
|Net cash provided by operating activities                   |  |                                                | 8,323  |   |             |   | (132  | )        |  |   | 8,191  |  
|Cash flows from financing activities:                       |  |                                                |        |   |             |   |       |          |  |   |        |  
|Excess tax benefit from stock-based compensation            |  |                                                | 224    |   |             |   | 132   |          |  |   | 356    |  
|Net cash used in financing activities                       |  |                                                | (1,838 | ) |             |   | 132   |          |  |   | (1,706 | )



16



---

##### 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 consolidated condensed 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. The following Management Discussion and Analysis of Financial Condition and Results of Operations has been revised to reflect the effects of the restatement
described in note 13 to the unaudited consolidated condensed financial statements.

Overview

We are a leading global provider of images, original information, job boards and events 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 10.0 million images online serving creative professionals with brands like BananaStock, Workbook Stock, Brand X Pictures, FoodPix,
Botanica, Nonstock, The Beauty Archive, IFA Bilderteam, Comstock Images, Creatas Images, PictureQuest, Liquid Library, Thinkstock Images, Thinkstock Footage, Bigshot Media, Goodshoot, Polka Dot Images, Stock Image, Pixland, Photos.com,
Ablestock.com, PhotoObjects.net, Clipart.com, AnimationFactory.com, JupiterGreetings.com, RoyaltyFreeMusic.com, StudioCutz.com, eStockMusic.com and Stockxpert.com.

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

We also derive revenue from granting rights to use images and music that are downloaded or delivered on CD-ROMs. Revenue is recognized when persuasive
evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable and collectibility is reasonably assured. For downloads, delivery occurs based on the availability of the image or music for
downloading by the customer. For shipments of CD-ROMs, revenue is recognized and risk of loss is passed at the point of delivery to the customer via standard delivery methods of ground transportation or next day air delivery.

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

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

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

Online media. The media segment of Jupitermedia consists of the JupiterOnlineMedia division, which operates five distinct networks:
internet.com and EarthWeb.com for IT and business professionals; DevX.com for developers; and Mediabistro.com and Graphics.com for media and creative professionals. JupiterOnlineMedia includes more than 150 Web sites and 150 e-mail newsletters that
are viewed by over 15 million users monthly. JupiterOnlineMedia includes specialized career Web sites for select professional communities, which can be found on Mediabistro.com and JustTechJobs.com. JupiterOnlineMedia also includes the STEP
Inside Design and Dynamic Graphics print magazines. In addition, JupiterOnlineMedia, which includes JupiterEvents and Mediabistros media-related events, produces offline conferences and trade shows focused on IT and business-specific topics.

We generate our Online media revenues from:



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



17



---

##### Table of Contents

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



| |  |  | fees charged for online job postings;
| | - |  | -------------------------------------



| |  |  | attendee registration fees for our online and in-person training courses;
| | - |  | -------------------------------------------------------------------------



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



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



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



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



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



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



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

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

Results of Operations

Revenues

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



|              |  |                            |        |               |   |        |                          |   |               |   |  |      |    |      |   |        |  |   |        |  |   |        |   |  |    |   
|------------- |  | -------------------------- | ------ | ------------- | - | ------ | ------------------------ | - | ------------- | - |  | ---- | -- | ---- | - | ------ |  | - | ------ |  | - | ------ | - |  | -- | --
|              |  | Three Months EndedJune 30, |        | 2007 vs. 2008 |   |        | Six Months EndedJune 30, |   | 2007 vs. 2008 |  
|              |  | 2007                       |        | 2008          |   | $      |                          |   | %             |   |  | 2007 |    | 2008 |   | $      |  |   | %      | 
|Online images |  | $                          | 27,383 |               | $ | 26,090 |                          | $ | (1,293        | ) |  | (5   | )% |      | $ | 55,297 |  | $ | 52,232 |  | $ | (3,065 | ) |  | (6 | )%
|Online media  |  |                            | 7,286  |               |   | 8,910  |                          |   | 1,624         |   |  | 22   |    |      |   | 14,143 |  |   | 17,314 |  |   | 3,171  |   |  | 22 |   
|              |  |                            |        |               |   |        |                          |   |               |   |  |      |    |      |   |        |  |   |        |  |   |        |   |  |    |   
|              |  | $                          | 34,669 |               | $ | 35,000 |                          | $ | 331           |   |  | 1    | %  |      | $ | 69,440 |  | $ | 69,546 |  | $ | 106    |   |  |   | % 
|              |  |                            |        |               |   |        |                          |   |               |   |  |      |    |      |   |        |  |   |        |  |   |        |   |  |    |   

Online images. The decrease in revenues during the three and six months ended June 30,
2008 is due primarily to declines in direct sales of royalty-free single images and CD-ROMs and in sales from third party distributors, partially offset by an increase in subscription revenues. This was mainly due to changes in the images industry,
including the emergence of competitive image offerings such as micropayment. We are continually creating new product offerings to address the changes in the market.

The following table sets forth, for the three and six months ended June 30, 2007 and 2008, the components of our Online images revenues (in thousands):



|                                  |  |                            |        |                          |   |        |  |      |        |  |   |       
|--------------------------------- |  | -------------------------- | ------ | ------------------------ | - | ------ |  | ---- | ------ |  | - | ------
|                                  |  | Three Months EndedJune 30, |        | Six Months EndedJune 30,
|                                  |  | 2007                       |        | 2008                     |   | 2007   |  | 2008
|Single images and CD-ROMs         |  | $                          | 13,149 |                          | $ | 12,560 |  | $    | 26,634 |  | $ | 25,161
|Subscriptions                     |  |                            | 7,213  |                          |   | 7,782  |  |      | 14,321 |  |   | 15,459
|Distributors, licensing and other |  |                            | 7,021  |                          |   | 5,748  |  |      | 14,342 |  |   | 11,612
|                                  |  |                            |        |                          |   |        |  |      |        |  |   |       
|Total Online images               |  | $                          | 27,383 |                          | $ | 26,090 |  | $    | 55,297 |  | $ | 52,232
|                                  |  |                            |        |                          |   |        |  |      |        |  |   |       

Online media. The increase in revenues during the three and six months ended June 30,
2008 was due to the acquisition of Mediabistro which added $2.3 million and $4.4 million in revenues, respectively. This was partially offset by a reduction in advertising revenues due to a decline in advertising spending by technology companies.



18



---

##### Table of Contents

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



|                   |  |                      |  |                               |   
|------------------ |  | -------------------- |  | ----------------------------- | --
|                   |  | Numberof Advertisers |  | Average Revenueper Advertiser
|March 31, 2007     |  | 219                  |  | $                             | 27
|June 30, 2007      |  | 235                  |  |                               | 25
|September 30, 2007 |  | 206                  |  |                               | 27
|December 31, 2007  |  | 189                  |  |                               | 31
|March 31, 2008     |  | 217                  |  |                               | 26
|June 30, 2008      |  | 210                  |  |                               | 28

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, |        | 2007 vs. 2008 |   |        | Six Months EndedJune 30, |   | 2007 vs. 2008 | 
|              |  | 2007                       |        | 2008          |   | $      |                          | % |               |  | 2007 |   | 2008 |   | $      |  |   | %      | 
|Online images |  | $                          | 11,072 |               | $ | 11,205 |                          | $ | 133           |  | 1    | % |      | $ | 22,876 |  | $ | 21,974 |  | $ | (902  | ) |  | (4 | )%
|Online media  |  |                            | 3,427  |               |   | 4,940  |                          |   | 1,513         |  | 44   |   |      |   | 6,425  |  |   | 9,043  |  |   | 2,618 |   |  | 41 |   
|              |  |                            |        |               |   |        |                          |   |               |  |      |   |      |   |        |  |   |        |  |   |       |   |  |    |   
|              |  | $                          | 14,499 |               | $ | 16,145 |                          | $ | 1,646         |  | 11   | % |      | $ | 29,301 |  | $ | 31,017 |  | $ | 1,716 |   |  | 6  | % 
|              |  |                            |        |               |   |        |                          |   |               |  |      |   |      |   |        |  |   |        |  |   |       |   |  |    |   

Online images. Cost of revenues primarily consists of commissions paid to third party image
suppliers, payroll and benefits costs for technology and production personnel, communications infrastructure, Web site hosting and storage for our image library. Cost of revenues excludes depreciation and amortization. The increase in cost of
revenues for the three months ended June 30, 2008 is due primarily to an increase in consulting costs of $102,000 related to information technology. The decrease in cost of revenues during the six months ended June 30, 2008, is due
primarily to a decrease in commission expense of $1.4 million due primarily to a decrease in sales and a shift in sales from third party content to wholly owned content. This decrease was partially offset by an increase in consulting and licensing
costs of $358,000.

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

Online media. Cost of revenues primarily consists of payroll and
benefits costs for technology and editorial personnel, freelance costs, communications infrastructure and Web site hosting. Cost of revenues excludes depreciation and amortization. The increase in cost of revenues for the three and six months ended
June 30, 2008 was due primarily to the acquisition of Mediabistro on July 18, 2007, which added $1.1 million and $1.9 million, respectively, to cost of revenues. The remaining increase was due primarily to increases in employee related
costs.

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 EndedJune 30, |       | 2007 vs. 2008 |   |       | Six Months EndedJune 30, |   | 2007 vs. 2008 | 
|              |  | 2007                       |       | 2008          |   | $     |                          | % |               |  | 2007 |   | 2008 |   | $      |  | % |       
|Online images |  | $                          | 5,273 |               | $ | 5,618 |                          | $ | 345           |  | 7    | % |      | $ | 10,758 |  | $ | 11,158 |  | $ | 400 |  | 4  | %
|Online media  |  |                            | 1,993 |               |   | 2,278 |                          |   | 285           |  | 14   |   |      |   | 3,608  |  |   | 4,193  |  |   | 585 |  | 16 |  
|              |  |                            |       |               |   |       |                          |   |               |  |      |   |      |   |        |  |   |        |  |   |     |  |    |  
|              |  | $                          | 7,266 |               | $ | 7,896 |                          | $ | 630           |  | 9    | % |      | $ | 14,366 |  | $ | 15,351 |  | $ | 985 |  | 7  | %
|              |  |                            |       |               |   |       |                          |   |               |  |      |   |      |   |        |  |   |        |  |   |     |  |    |  



19



---

##### Table of Contents

Online images. Advertising, promotion and selling expenses primarily consist of payroll and
benefits costs for sales and marketing personnel and advertising. The increase in advertising, promotion and selling expense during the three and six months ended June 30, 2008 is due primarily to an increase in employee related costs of
$614,000 and $853,000, respectively, partially offset by a decrease in advertising costs of $187,000 and $336,000, respectively.

Online
media. Advertising, promotion and selling expenses primarily consist of payroll and benefits costs for sales and marketing personnel. The increase in advertising, promotion and selling expenses for the three and six months ended June 30,
2008 is due primarily to the acquisition of Mediabistro, which added $246,000 and $515,000, respectively.

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, |       | 2007 vs. 2008 |   |       | Six Months EndedJune 30, |   | 2007 vs. 2008 | 
|              |  | 2007                       |       | 2008          |   | $     |                          | % |               |  | 2007 |   | 2008 |   | $      |  | % |       
|Online images |  | $                          | 1,816 |               | $ | 2,060 |                          | $ | 244           |  | 13   | % |      | $ | 3,819  |  | $ | 3,910  |  | $ | 91  |  | 2   | %
|Online media  |  |                            | 244   |               |   | 652   |                          |   | 408           |  | 167  |   |      |   | 372    |  |   | 1,189  |  |   | 817 |  | 220 |  
|Other         |  |                            | 4,260 |               |   | 5,399 |                          |   | 1,139         |  | 27   |   |      |   | 10,519 |  |   | 10,575 |  |   | 56  |  | 1   |  
|              |  |                            |       |               |   |       |                          |   |               |  |      |   |      |   |        |  |   |        |  |   |     |  |     |  
|              |  | $                          | 6,320 |               | $ | 8,111 |                          | $ | 1,791         |  | 28   | % |      | $ | 14,710 |  | $ | 15,674 |  | $ | 964 |  | 7   | %
|              |  |                            |       |               |   |       |                          |   |               |  |      |   |      |   |        |  |   |        |  |   |     |  |     |  

Online images. General and administrative expenses primarily consist of payroll and
benefits costs for administrative personnel, office related costs, professional fees and provisions for losses on accounts receivable. The increase in general and administrative expenses during the three and six months ended June 30, 2008 is
due primarily to an increase in professional fees.

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 during the three and six months ended June 30, 2008 was due primarily to the acquisition of Mediabistro, which added $340,000
and $652,000, respectively.

Other. General and administrative expenses primarily consist of payroll and benefits costs for
administrative personnel, office related costs and professional fees. The increase in general and administrative expenses for the three months ended June 30, 2008 is primarily due to an increase in stock-based compensation of $1.2 million. The
increase during the six months ended June 30, 2008 is due primarily to an increase in stock-based compensation of $1.1 million, an increase in professional audit and consulting fees of $571,000 and an increase in payroll related costs of
$403,000. The six months ended June 30, 2007 included legal and accounting fees of $1.9 million associated with discussions with Getty Images, Inc. regarding a potential transaction which were terminated on March 7, 2007.

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 EndedJune 30, |       | 2007 vs. 2008 |   |       | Six Months EndedJune 30, |   | 2007 vs. 2008 | 
|             |  | 2007                       |       | 2008          |   | $     |                          | % |               |  | 2007 |   | 2008 |   | $     |  | % |       
|Depreciation |  | $                          | 1,163 |               | $ | 1,231 |                          | $ | 68            |  | 6    | % |      | $ | 2,225 |  | $ | 2,482  |  | $ | 257   |  | 12 | %
|Amortization |  |                            | 3,184 |               |   | 3,994 |                          |   | 810           |  | 25   |   |      |   | 6,288 |  |   | 7,945  |  |   | 1,657 |  | 26 |  
|             |  |                            |       |               |   |       |                          |   |               |  |      |   |      |   |       |  |   |        |  |   |       |  |    |  
|             |  | $                          | 4,347 |               | $ | 5,225 |                          | $ | 878           |  | 20   | % |      | $ | 8,513 |  | $ | 10,427 |  | $ | 1,914 |  | 22 | %
|             |  |                            |       |               |   |       |                          |   |               |  |      |   |      |   |       |  |   |        |  |   |       |  |    |  

Depreciation and amortization expense increased during the three and six months ended
June 30, 2008 due primarily to the acquisition of Mediabistro.

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



20



---

##### Table of Contents

Other income (loss), net

Other loss of $36,000 during the three months ended June 30, 2008 and other income of $795,000 during the six months ended June 30, 2008 was due primarily to foreign currency transaction gains and losses.

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 EndedJune 30, |        |   | 2007 vs. 2008 |   |        | Six Months EndedJune 30, |  |   | 2007 vs. 2008 |  
|                 |  | 2007                       |        |   | 2008          |   |        | $                        |  |   | %             |   |  | 2007 |    |  | 2008 |        |   | $ |   | %      |  
|Interest income  |  | $                          | 38     |   |               | $ | 30     |                          |  | $ | (8            | ) |  | (21  | )% |  | $    | 78     |   |   | $ | 106    |   |  | $ | 28  |  | 36 | %
|Interest expense |  |                            | (1,431 | ) |               |   | (1,847 | )                        |  |   | 416           |   |  | 29   |    |  |      | (2,904 | ) |   |   | (3,573 | ) |  |   | 669 |  | 23 |  

Interest expense relates primarily to borrowings under our senior credit facilities (see Liquidity
and Capital Resources).

Provision (benefit) for income taxes

A provision for income taxes of $112,000 and a benefit for income taxes of $346,000 were recorded for the three and six months ended June 30, 2007, respectively. The income tax provision for the six months ended June
30, 2007 was principally impacted by $1.9 million in legal and accounting fees associated with discussions with Getty Images, Inc., regarding a potential sale, which were terminated on March 7, 2007.

A benefit for income taxes of $965,000 and $1.2 million was recorded during the three and six months ended June 30, 2008, respectively. The income tax
benefit is primarily related to losses incurred for US federal and state purposes during the three and six months ended June 30, 2008, partially offset by non-deductible expenses associated with incentive stock options and subpart F income
inclusions. The tax benefit is also partially offset by income taxes accrued in foreign jurisdictions where we have income, net of income tax benefit in certain foreign jurisdictions where we have losses.

Minority interests, net

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

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 EndedJune 30, |         |   | 2007 vs. 2008 |  
|                                             |  | 2007Restated             |         |   | 2008          |   |        | $ |  |   | %      |  
|Operating cash flows                         |  | $                        | 8,191   |   |               | $ | 9,624  |   |  | $ | 1,433  |   |  | 17   | % 
|Investing cash flows                         |  | $                        | (10,640 | ) |               | $ | (5,917 | ) |  | $ | 4,723  |   |  | 44   | % 
|Financing cash flows                         |  | $                        | (1,706  | ) |               | $ | (4,383 | ) |  | $ | (2,677 | ) |  | (157 | )%
|Acquisitions of businesses, images and other |  | $                        | (8,419  | ) |               | $ | (2,027 | ) |  | $ | 6,392  |   |  | 76   | % 
|Purchases of property and equipment          |  | $                        | (2,353  | ) |               | $ | (3,930 | ) |  | $ | (1,577 | ) |  | (67  | )%
|                                             |  |                         
|                                             |  | As of                    |         |   | 2007 vs. 2008 |  
|                                             |  | December 31,2007         |         |   | June 30,2008  |   |        | $ |  |   | %      |  
|Cash and cash equivalents                    |  | $                        | 7,301   |   |               | $ | 5,852  |   |  | $ | (1,449 | ) |  | (20  | )%
|Accounts receivable, net                     |  | $                        | 25,689  |   |               | $ | 23,974 |   |  | $ | (1,715 | ) |  | (7   | )%
|Working capital                              |  | $                        | 1,999   |   |               | $ | (4,394 | ) |  | $ | (6,393 | ) |  | (320 | )%
|Long-term debt                               |  | $                        | 83,375  |   |               | $ | 79,000 |   |  | $ | (4,375 | ) |  | (5   | )%

Since inception, we have funded operations through various means including our initial and
follow-on public offerings of our common stock in June 1999, January 2000 and May 2004, the sales of our Events and Research businesses, through various credit agreements and through cash flows from operating activities. Our cash balance
decreased from December 31, 2007 due primarily to payments made to reduce our debt. Cash decreased in 2007 due primarily to acquisitions of businesses partially offset by cash flows from operations.



21



---

##### Table of Contents

Cash provided by operating activities increased during the six months ended June 30, 2008 due
primarily to decreases in accounts receivable and prepaid expenses and other assets.

The amounts of cash used in investing activities vary
in correlation to the number and cost of the acquisitions consummated. Net cash used in investing activities in 2008 related primarily to an increase in information technology related spending. Net cash used in investing activities in 2007 related
primarily to acquisitions of certain businesses and an increase in information technology spending.

As part of the acquisition of
Mediabistro, we are required to make earn-out payments totaling up to a maximum of $3.0 million based on the attainment of a profit target achieved by Mediabistro for the period(s) from July 1, 2007 to June 30, 2008; and for the period
from July 1, 2008 to June 30, 2009. Based upon the results of Mediabistro for the period from July 1, 2007 to June 30, 2008, the Company has recorded a liability of $900,000.

Cash used in financing activities during the six months ended June 30, 2008 related primarily to repayments under our credit facilities. Cash used
in financing activities during the six months ended June 30, 2007 was due to repayments under our credit facility offset by borrowings under our credit facility and proceeds from the exercise of stock options.

We are party to a Credit and Security Agreement, dated as of July 12, 2007 (the Credit Agreement), among ourselves, as borrower, the
lenders party thereto (the Lenders), KeyBank National Association, as the lead arranger, sole book runner and administrative agent (the Administrative Agent), and Citizens Bank, N.A., as Syndication Agent. The Credit
Agreement provides for $115.0 million senior credit facility. The senior credit facility is comprised of (i) a $75.0 million term loan facility, that was drawn in full on July 12, 2007, and (ii) a $40.0 million revolving credit
facility, including a $2.0 million sublimit for letters of credit and a $5.0 million swingline facility. The future minimum payments under the Credit Agreement are $375,000 for the remainder of 2008, $750,000 each year for the years ended
December 31, 2009 through 2011, $10.2 million for the year ended December 31, 2012 and $66.9 million thereafter. Our outstanding debt, relating to the Credit Agreement, as of June 30, 2008 is reflected in the consolidated balance
sheet. We made two quarterly debt payments on our term loan totaling $375,000 during the six months ended June 30, 2008. We also made payments during the three months ended June 30, 2008 totaling $4.0 million to reduce the outstanding
portion of the revolving credit facility. We are currently in compliance with our obligations under the Credit Agreement, including our debt covenants thereunder.

We expect to continue our investing activities, which includes the potential to strategically acquire companies, content and images that are complementary to our business. 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.

Our
existing cash and investment balances may decline during 2008 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 12 months.

Off-Balance Sheet Arrangements and Contractual Obligations

We have not entered into off-balance
sheet arrangements or issued guarantees to third parties.

The following table represents our expected cash requirements for contractual
obligations outstanding as of June 30, 2008 (in thousands):



|                                  |  |       |        |                 |   |           |  |           |       |                  |   |        |  |   |       
|--------------------------------- |  | ----- | ------ | --------------- | - | --------- |  | --------- | ----- | ---------------- | - | ------ |  | - | ------
|                                  |  | Total |        | Less than1 year |   | 1-3 years |  | 3-5 years |       | More than5 years
|Long-term debt                    |  | $     | 79,750 |                 | $ | 750       |  | $         | 1,500 |                  | $ | 11,000 |  | $ | 66,500
|Operating lease obligations       |  |       | 12,078 |                 |   | 3,026     |  |           | 4,633 |                  |   | 3,862  |  |   | 557   
|Fair value of interest rate swap  |  |       | 3,128  |                 |   |          |  |           |      |                  |   |       |  |   | 3,128 
|Purchase obligationsacquisitions |  |       | 1,041  |                 |   | 1,041     |  |           |      |                  |   |       |  |   |      
|                                  |  |       |        |                 |   |           |  |           |       |                  |   |        |  |   |       
|                                  |  | $     | 95,997 |                 | $ | 4,817     |  | $         | 6,133 |                  | $ | 14,862 |  | $ | 70,185
|                                  |  |       |        |                 |   |           |  |           |       |                  |   |        |  |   |       

Interest payments required under the Credit Agreement were excluded from the above table due to
the variability of the interest rates. Given prevailing market rates, we have experienced a decline of approximately 1%2% in our effective annual interest rate resulting in a reduction in interest expense. Our current expected outstanding debt
range is between $67.2$79.8 million for the period December 31, 2008 through December 31, 2012. As part of the Credit Agreement, we executed a derivative interest rate swap on $50.0 million of our overall $75.0 million of new term
loan debt, which allowed us to swap our floating interest rate based on the three month LIBOR interest rate for a fixed rate of 5.58%. We estimate annual fixed rate interest expense to be in the range of $2.7$2.8 million related to the
interest rate swap.



22



---

##### Table of Contents

The remaining debt amount that is not covered by the interest rate swap is subject to a variable interest rate and we estimate the annual rate range will be
between 5.6% and 7.6%, or $1.3$2.2 million in interest expense. We estimate the amount of outstanding debt subject to our variable rates to range from $29.6 million in 2008 down to $19.0 million at the end of 2012. Accordingly, we estimate our
total annual interest expense to be in the range of $4.0$5.0 million for each of the years ending December 31, 2009 though 2012. Other assumptions include the reductions in the carrying value of our debt based on the minimum required
annual principal payments under the Credit Agreement, which may or may not reflect future events.

Liabilities for uncertain tax positions
are excluded from the table above due to the uncertainty of the timing of the resolution of the underlying tax positions. The current portion of these liabilities at June 30, 2008 was $1.3 million, which we expect to be settled in the
next 12 months. The non-current portion at June 30, 2008 was $198,000, of which the timing of the resolution is uncertain.

We
have an employment agreement with our President and Chief Operating Officer. This provides 12 months of severance to be paid upon termination and is not reflected in the above table. We also have an employment agreement with our Vice President and
Chief Financial Officer. This provides six months of severance to be paid upon termination and is not reflected in the above table.

Recent Accounting
Pronouncements

We are required to adopt certain new accounting pronouncements. See note 3 to our unaudited consolidated condensed
financial statements included herein.

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, 2007.



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

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

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

We are exposed to interest rate risks primarily through the borrowings associated with our Credit Agreement with KeyBank National Association. Interest on our borrowings is based on upon variable rates (indexed based
on LIBOR). During 2007, we entered into an interest rate swap with a notional amount of $50.0 million which, for a portion of our variable rate debt, effectively converts the variable component of our interest into a fixed rate of 5.58%. The
interest rate swap is designated as a cash flow hedge, the effective portion of which is recorded as an unrecognized gain (loss) in accumulated other comprehensive income in stockholders equity. The fair value of the interest rate swap as of
June 30, 2008, was $3.1 million and is included in other long-term liabilities in our consolidated balance sheet.

We are exposed to
foreign currency risk as the parent company and many of our subsidiaries enter into transactions that are denominated in currencies other than their functional currency (foreign currencies), primarily euros, British pounds, U.S. dollars and Japanese
yen. Some of these transactions result in foreign currency denominated assets and liabilities that are revalued each month. Upon revaluation, transaction gains and losses are generated, which, with the exception of those related to long-term
intercompany balances, are reported as exchange gains and losses in our consolidated statements of operations in the periods in which the exchange rates fluctuate. Transaction gains and losses on foreign currency denominated long-term intercompany
balances for which settlement is not planned or anticipated in the foreseeable future, are reported in accumulated other comprehensive income in our consolidated balance sheets.



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

Disclosure Controls and Procedures

The Companys management, with the participation of the Companys Chief Executive Officer and Chief Financial Officer
(who is also the Companys Principal Financial Officer and Chief Accounting Officer), has evaluated the effectiveness of the Companys disclosure controls and procedures as of the end of the period covered by this report. Based on such
evaluation, the Companys Chief Executive Officer and Chief Financial Officer have concluded that, the Companys disclosure controls and procedures were not effective as of June 30, 2008 due to material weaknesses in the accounting
for income taxes and the financial reporting close process as described in the Companys Annual Report on Form 10-K for the period ended December 31, 2007.



23



---

##### Table of Contents

Changes in Internal Control Over Financial Reporting

Other than the remediation steps discussed below, there were no changes to the Companys internal control over financial reporting as such term is
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act during our most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Remediation Steps Subsequent to December 31, 2007

Income
taxes and Financial Reporting

Management is taking the following measures to address the material weaknesses related to accounting
for income taxes and the financial reporting close process identified in the Form 10-K for the year ended December 31, 2007. Management is:



| |  |  | Re-evaluating the design of income tax accounting processes and controls and implementing new and improved processes and controls, including the addition of tax
personnel;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Increasing the level of review and discussion of tax reconciliations and supporting documentation with our outside tax advisors and management;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Formalizing a process for documenting decisions made based upon the review of tax packages or any other supporting information provided;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Expanding and strengthening its accounting staff, by hiring additional qualified accounting and finance personnel to accelerate the review and expand the monitoring
of accounting transactions and results. A qualified accountant has also been added to specifically prepare the statement of cash flows and assist with the evaluation of foreign intercompany balances; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Adding consulting resources and incremental accounting resources to accelerate the implementation of a company wide financial software system that will include all
foreign subsidiaries and will enhance the financial reporting process.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Management anticipates that these remediation
efforts will enhance the controls and procedures and is taking steps to remediate the material weakness related to income taxes and financial reporting, which was previously disclosed in the Form 10-K for the year ended December 31, 2007. Until
such material weakness is remediated, management has put into place additional monitoring procedures. During 2008, management will continue to reassess the effectiveness of the remediation efforts in connection with its tests of internal control
over financial reporting.



24



---

##### Table of Contents

PART IIOTHER INFORMATION



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

On or about November 13, 2006,
Robert Lange, who identifies himself as a stockholder of Jupitermedia, commenced a purported stockholders derivative action in the United States District Court for the District of Connecticut, purportedly on behalf of Jupitermedia, against all
of Jupitermedias current directors and against Jupitermedias former Chief Financial Officer. Jupitermedia is named in the suit as a nominal defendant on whose behalf recovery is purportedly sought. Mr. Lange did not make
a litigation demand on Jupitermedias board of directors prior to commencing the action, and alleges that such demand should be excused as a matter of law. The complaint alleges, based primarily on a statistical analysis, that certain stock
options granted to certain defendants in 1999, 2000 and 2001 were backdated, and asserts on behalf of Jupitermedia various causes of action against the defendants arising out of such alleged backdating, including securities fraud, breach of
fiduciary duty and unjust enrichment. On April 24, 2007, we and the individual defendants filed a motion to dismiss the case in its entirety. Rather than respond to the motion to dismiss, the Plaintiff filed an amended complaint on
July 16, 2007. The amended complaint removes one of the individual defendants, but is substantially similar to the original complaint. On or around September 11, 2007, Defendants filed a motion to dismiss the Amended Complaint. Briefing on
that motion is completed, and oral argument was held on the motion in December 2007. The Court has advised the parties that the motion to dismiss will be held in abeyance pending the outcome of settlement discussions between the parties.

On or about August 31, 2007, Wayne Grabein brought a claim against Jupiterimages Corporation d/b/a clipart.com (Jupiterimages) for
alleged violation of the Fair Credit Reporting Act (FCRA) as amended by the Fair and Accurate Credit Transaction Act (FACTA). Specifically, Mr. Grabein alleges in his complaint that Jupiterimages violated FACTA by
providing and/or printing prohibited information on a purported receipt allegedly provided to Mr. Grabein. Mr. Grabein seeks nationwide class action certification for all individuals who have received similar receipts.
Mr. Grabein also seeks to recover for himself and the defined class for alleged willful violations of FACTA: statutory damages; punitive damages; cost and attorneys fees; interest as permitted by law; and a permanent injunction.
Jupiterimages has denied the allegations in the complaint and asserted numerous affirmative defenses. The Court has issued a scheduling order setting the case for jury trial in September 2008. No motion for class certification has been filed yet.
The parties are currently engaged in discovery. Jupiterimages filed a Motion for Summary Judgment and a Motion to Stay Discovery on April 30, 2008. The Court has ruled in favor of the motions.



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

We have revised the disclosure under the
Risk Factor entitled If we are unable to adapt to the relatively new and rapidly changing Internet advertising environment, we may be unable to attract advertisers to our networks and our revenues could suffer as follows:

The Internet is a relatively new advertising medium and advertisers that have historically relied upon traditional advertising media may be reluctant to
advertise on the Internet. In addition, advertisers that have already invested substantial resources in other advertising methods may be reluctant to adopt a new strategy. Moreover, filtering software programs that limit or prevent advertising from
being delivered to an Internet users computer are now more effective and widely available. Widespread adoption of this filtering software by Internet users could impair the commercial viability of Internet advertising. Our business would
suffer a decrease in revenues if the market for Internet advertising fails to recover from its recent downturn or develops more slowly than expected.

In addition, several pricing models have emerged for selling advertising on the Internet. A majority of our advertising is sold on a cost-per-impression basis in which we are paid for every advertising impression that
we display. We also offer advertising based on certain cost-per-action models in which we are paid only when a specific event occurs, such as a web site visitor downloading a computer file or a web site visitor requesting information on a product.
Pricing models continue to emerge and our advertising revenue could suffer if we are unable to adapt to this evolving environment.



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

Not Applicable



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

Not Applicable



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

Jupitermedias annual meeting of stockholders was held on June 3, 2008.



25



---

##### Table of Contents

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        |  | 32,970,554 |  | 633,260  
|Christopher S. Cardell |  | 33,089,873 |  | 513,941  
|Gilbert F. Bach        |  | 32,237,423 |  | 1,366,391
|Michael J. Davies      |  | 32,236,454 |  | 1,367,360
|John R. Patrick        |  | 32,238,266 |  | 1,365,548
|William A. Shutzer     |  | 32,239,154 |  | 1,364,660

The proposal to approve the adoption of the Jupitermedia Corporation 2008 Stock Incentive Plan was
approved by the vote set forth below:



|           |  |               |  |                 |  |                
|---------- |  | ------------- |  | --------------- |  | ---------------
|VOTES FOR  |  | VOTES AGAINST |  | VOTES ABSTAINED |  | BROKERNON-VOTES
|16,123,923 |  | 14,556,577    |  | 2,750           |  | 2,920,564      

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, 2008 was approved by the vote set forth below:



|           |  |               |  |                
|---------- |  | ------------- |  | ---------------
|VOTES FOR  |  | VOTES AGAINST |  | VOTES ABSTAINED
|33,550,910 |  | 48,762        |  | 4,142          



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

As previously reported
in the Companys Current Reports on Form 8-K filed with the SEC on June 24, 2008 and July 2, 2008, the Company dismissed Deloitte & Touche LLP as the Companys independent registered public accounting firm and engaged
Grant Thornton LLP as the Companys new independent registered public accounting firm.

On July 21, the Company
entered into an employment agreement with Donald J. ONeill, the Companys Vice President and Chief Financial Officer. The agreement provides six months of severance and the continuation of standard Company benefits (paid by the Company)
for an equal period of time if Mr. ONeills employment is terminated for any reason other than cause (as defined in the employment agreement).

The summary of the employment agreement with Mr. ONeill set forth above is qualified in its entirety by reference to the full text of the agreement, a copy of which it attached to this report as Exhibit 10.13,
and incorporated herein by reference.



26



---

##### 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.



|               |  |                                                                                                                                                                                                                                                                                       
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description                                                                                                                                                                                                                                                                           
|               | 
|3.11           |  | Registrants Amended and Restated Certificate of Incorporation, as amended.                                                                                                                                                                                                           
|               | 
|3.22           |  | Registrants Amended and Restated Bylaws, as amended.                                                                                                                                                                                                                                 
|               | 
|10.13         |  | Employment Agreement between the Registrant and Christopher S. Cardell, dated as of November 24, 1998.                                                                                                                                                                                
|               | 
|10.24         |  | Registrants 1999 Stock Incentive Plan (Amended and Restated as of March 5, 2008)                                                                                                                                                                                                     
|               | 
|10.33         |  | Registrants 1999 Stock Incentive Plan Form of Incentive Stock Option Agreement.                                                                                                                                                                                                      
|               | 
|10.43         |  | Registrants 1999 Stock Incentive Plan Form of Nonqualified Stock Option Agreement.                                                                                                                                                                                                   
|               | 
|10.53          |  | Consent to Credit Agreement, dated as of March 30, 2008, by and among the Registrant, the several Lenders and subsidiaries of the Registrant listed on the signature pages thereof, and Keybank
National Association, as the lead arranger, sole book runner and administrative agent.
|               | 
|10.63         |  | Cash Bonus Plan Agreement, dated as of January 1, 2007, by and among the Registrant and Alan M. Meckler.                                                                                                                                                                              
|               | 
|10.73         |  | Cash Bonus Plan Agreement, dated as of January 1, 2007, by and among the Registrant and Christopher S. Cardell.                                                                                                                                                                       
|               | 
|10.83         |  | Cash Bonus Plan Agreement, dated as of March 7, 2008, by and among the Registrant and Alan M. Meckler.                                                                                                                                                                                
|               | 
|10.93         |  | Cash Bonus Plan Agreement, dated as of March 7, 2008, by and among the Registrant and Christopher S. Cardell.                                                                                                                                                                         
|               | 
|10.105        |  | Registrants 2008 Stock Incentive Plan.                                                                                                                                                                                                                                               
|               | 
|10.116        |  | Registrants 2008 Stock Incentive Plan Form of Incentive Stock Option Agreement.                                                                                                                                                                                                      
|               | 
|10.127        |  | Registrants 2008 Stock Incentive Plan Form of Nonqualified Stock Option Agreement.                                                                                                                                                                                                   
|               | 
|10.13         |  | Employment Agreement between Registrant and Donald J. ONeill, dated as of July 21, 2008.                                                                                                                                                                                             
|               | 
|118            |  | Statement Regarding Computation of Per Share Earnings (Loss) (included in notes to consolidated condensed financial statements)                                                                                                                                                       
|               | 
|31.1           |  | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                               
|               | 
|31.2           |  | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                               
|               | 
|32.1           |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                
|               | 
|32.2           |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                



|1 | Incorporated herein by reference to the Registrants Form 10-K filed on March 5, 2004.
|- | --------------------------------------------------------------------------------------

|2 | Incorporated herein by reference to Exhibit 3.1 of the Registrants Form 8-K filed on December 14, 2007.
|- | --------------------------------------------------------------------------------------------------------

|3 | Incorporated herein by reference to the Registrants Form 10-Q filed on May 12, 2008.
|- | -------------------------------------------------------------------------------------

|4 | Incorporated herein by reference to Exhibit 10.1 of the Registrants Form 8-K Filed on March 7, 2008.
|- | -----------------------------------------------------------------------------------------------------

|5 | Incorporated herein by reference to Exhibit 10.1 of the Registrants Form 8-K Filed on June 9, 2008.
|- | ----------------------------------------------------------------------------------------------------

|6 | Incorporated herein by reference to Exhibit 10.2 of the Registrants Form 8-K Filed on June 9, 2008.
|- | ----------------------------------------------------------------------------------------------------

|7 | Incorporated herein by reference to Exhibit 10.3 of the Registrants Form 8-K Filed on June 9, 2008.
|- | ----------------------------------------------------------------------------------------------------

|8 | Included in notes to consolidated condensed financial statements.
|- | -----------------------------------------------------------------

| | Compensatory plans and arrangements for executives and others
|- | -------------------------------------------------------------



27



---

##### 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 11, 2008 |  | Jupitermedia Corporation                                                                             
|                       | 
|                       |  | /s/ Christopher S. Cardell                                                                           
|                       |  | Christopher S. Cardell                                                                               
|                       |  | Director, President and Chief Operating Officer                                                      
|                       | 
|                       |  | /s/ Donald J. ONeill                                                                                
|                       |  | Donald J. ONeill                                                                                    
|                       |  | Vice President and Chief Financial Officer (Principal Financial Officer and Chief Accounting Officer)



28