##### 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 March 31, 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 May 6, 2008 was 36,032,152 .









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##### Table of Contents

Jupitermedia Corporation

Index



|                              |  |                                                                                                                           |  |   
|----------------------------- |  | ------------------------------------------------------------------------------------------------------------------------- |  | --
|                              |  | Page                                                                                                                     
|PART I. Financial Information |  |                                                                                                                          
|                              |  |                                                                                                                          
|Item 1.                       |  | Financial Statements                                                                                                      |  |   
|                              |  |                                                                                                                          
|                              |  | Unaudited Consolidated Condensed Balance Sheets  December 31, 2007 and March 31, 2008                                    |  | 3 
|                              |  |                                                                                                                          
|                              |  | Unaudited Consolidated Condensed Statements of Operations  For the Three Months Ended March 31, 2007 (restated) and 2008 |  | 4 
|                              |  |                                                                                                                          
|                              |  | Unaudited Consolidated Condensed Statements of Cash Flows  For the Three Months Ended March 31, 2007 (restated) and 2008 |  | 5 
|                              |  |                                                                                                                          
|                              |  | Notes to Consolidated Condensed Financial Statements                                                                      |  | 6 
|                              |  |                                                                                                                          
|Item 2.                       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                     |  | 14
|                              |  |                                                                                                                          
|Item 3.                       |  | Quantitative and Qualitative Disclosures about Market Risk                                                                |  | 21
|                              |  |                                                                                                                          
|Item 4.                       |  | Controls and Procedures                                                                                                   |  | 21
|                              | 
|PART II. Other Information    |  |                                                                                                                          
|                              |  |                                                                                                                          
|Item 1.                       |  | Legal Proceedings                                                                                                         |  | 22
|                              |  |                                                                                                                          
|Item 1A.                      |  | Risk Factors                                                                                                              |  | 22
|                              |  |                                                                                                                          
|Item 2.                       |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                               |  | 22
|                              |  |                                                                                                                          
|Item 3.                       |  | Defaults Upon Senior Securities                                                                                           |  | 22
|                              |  |                                                                                                                          
|Item 4.                       |  | Submission of Matters to a Vote of Security Holders                                                                       |  | 22
|                              |  |                                                                                                                          
|Item 5.                       |  | Other Information                                                                                                         |  | 22
|                              |  |                                                                                                                          
|Item 6.                       |  | Exhibits                                                                                                                  |  | 23
|                              |  |                                                                                                                          
|Signatures                    |  |                                                                                                                           |  | 24



2



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##### Table of Contents

Jupitermedia Corporation

Unaudited Consolidated Condensed Balance Sheets

December 31, 2007 and March 31, 2008

(in thousands, except share and per share amounts)



|                                                                                                                  |  |                  |          |   |              |   |          |  
|----------------------------------------------------------------------------------------------------------------- |  | ---------------- | -------- | - | ------------ | - | -------- | -
|                                                                                                                  |  | December 31,2007 |          |   | March 312008 |  
|ASSETS                                                                                                            |  |                  |          |   |              |   |          |  
|Current assets:                                                                                                   |  |                  |          |   |              |   |          |  
|Cash and cash equivalents                                                                                         |  | $                | 7,301    |   |              | $ | 10,270   |  
|Accounts receivable, net of allowances of $2,026 and $1,800, respectively                                         |  |                  | 25,689   |   |              |   | 25,859   |  
|Prepaid expenses and other current assets                                                                         |  |                  | 5,797    |   |              |   | 5,566    |  
|Deferred income taxes                                                                                             |  |                  | 1,441    |   |              |   | 1,556    |  
|                                                                                                                  |  |                  |          |   |              |   |          |  
|Total current assets                                                                                              |  |                  | 40,228   |   |              |   | 43,251   |  
|                                                                                                                  |  |                 
|Property and equipment, net of accumulated depreciation of $17,364 and $18,935, respectively                      |  |                  | 13,022   |   |              |   | 13,679   |  
|Intangible assets, net                                                                                            |  |                  | 74,002   |   |              |   | 72,060   |  
|Goodwill                                                                                                          |  |                  | 139,813  |   |              |   | 140,465  |  
|Deferred income taxes                                                                                             |  |                  | 13,049   |   |              |   | 14,354   |  
|Investments and other assets                                                                                      |  |                  | 2,575    |   |              |   | 2,477    |  
|                                                                                                                  |  |                  |          |   |              |   |          |  
|Total assets                                                                                                      |  | $                | 282,689  |   |              | $ | 286,286  |  
|                                                                                                                  |  |                  |          |   |              |   |          |  
|                                                                                                                  |  |                 
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                              |  |                  |          |   |              |   |          |  
|Current liabilities:                                                                                              |  |                  |          |   |              |   |          |  
|Accounts payable                                                                                                  |  | $                | 7,153    |   |              | $ | 7,813    |  
|Accrued payroll and related expenses                                                                              |  |                  | 3,383    |   |              |   | 4,054    |  
|Accrued expenses and other current liabilities                                                                    |  |                  | 11,822   |   |              |   | 12,265   |  
|Current portion of long-term debt                                                                                 |  |                  | 750      |   |              |   | 750      |  
|Deferred revenues                                                                                                 |  |                  | 15,121   |   |              |   | 16,157   |  
|                                                                                                                  |  |                  |          |   |              |   |          |  
|Total current liabilities                                                                                         |  |                  | 38,229   |   |              |   | 41,039   |  
|                                                                                                                  |  |                 
|Long-term debt                                                                                                    |  |                  | 83,375   |   |              |   | 83,188   |  
|Deferred revenues                                                                                                 |  |                  | 507      |   |              |   | 455      |  
|Other long-term liabilities                                                                                       |  |                  | 3,586    |   |              |   | 5,647    |  
|                                                                                                                  |  |                  |          |   |              |   |          |  
|Total liabilities                                                                                                 |  |                  | 125,697  |   |              |   | 130,329  |  
|                                                                                                                  |  |                  |          |   |              |   |          |  
|Commitments and contingencies (see note 10)                                                                       |  |                  |          |   |              |   |          |  
|                                                                                                                  |  |                 
|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  |   |              |   | 267,550  |  
|Accumulated deficit                                                                                               |  |                  | (117,798 | ) |              |   | (118,908 | )
|Treasury stock, 65,000 shares at cost                                                                             |  |                  | (106     | ) |              |   | (106     | )
|Accumulated other comprehensive income                                                                            |  |                  | 7,678    |   |              |   | 7,061    |  
|                                                                                                                  |  |                  |          |   |              |   |          |  
|Total stockholders equity                                                                                        |  |                  | 156,992  |   |              |   | 155,957  |  
|                                                                                                                  |  |                  |          |   |              |   |          |  
|Total liabilities and stockholders equity                                                                        |  | $                | 282,689  |   |              | $ | 286,286  |  
|                                                                                                                  |  |                  |          |   |              |   |          |  

See notes to consolidated condensed financial statements.



3



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Jupitermedia Corporation

Unaudited Consolidated Condensed Statements of Operations

For the Three Months Ended March 31, 2007 (as restated) and 2008

(in thousands, except per share amounts)



|                                                             |  |                             |        |   |      |   |        |  
|------------------------------------------------------------ |  | --------------------------- | ------ | - | ---- | - | ------ | -
|                                                             |  | Three Months EndedMarch 31, |       
|                                                             |  | 2007RestatedSee note 12     |        |   | 2008 |  
|Revenues                                                     |  | $                           | 34,771 |   |      | $ | 34,546 |  
|                                                             |  |                             |        |   |      |   |        |  
|Cost of revenues (exclusive of items shown separately below) |  |                             | 14,802 |   |      |   | 14,872 |  
|Advertising, promotion and selling                           |  |                             | 7,100  |   |      |   | 7,455  |  
|General and administrative                                   |  |                             | 8,390  |   |      |   | 7,563  |  
|Depreciation                                                 |  |                             | 1,062  |   |      |   | 1,251  |  
|Amortization                                                 |  |                             | 3,104  |   |      |   | 3,951  |  
|                                                             |  |                             |        |   |      |   |        |  
|Total operating expenses                                     |  |                             | 34,458 |   |      |   | 35,092 |  
|                                                             |  |                             |        |   |      |   |        |  
|Operating income (loss)                                      |  |                             | 313    |   |      |   | (546   | )
|Other income (loss), net                                     |  |                             | (25    | ) |      |   | 831    |  
|Interest income                                              |  |                             | 40     |   |      |   | 76     |  
|Interest expense                                             |  |                             | (1,473 | ) |      |   | (1,726 | )
|                                                             |  |                             |        |   |      |   |        |  
|Loss before income taxes and minority interests              |  |                             | (1,145 | ) |      |   | (1,365 | )
|Benefit for income taxes                                     |  |                             | (458   | ) |      |   | (259   | )
|Minority interests, net                                      |  |                             | (41    | ) |      |   | (4     | )
|                                                             |  |                             |        |   |      |   |        |  
|Net loss                                                     |  | $                           | (728   | ) |      | $ | (1,110 | )
|                                                             |  |                             |        |   |      |   |        |  
|Basic loss per share                                         |  | $                           | (0.02  | ) |      | $ | (0.03  | )
|                                                             |  |                             |        |   |      |   |        |  
|Basic weighted average number of common shares outstanding   |  |                             | 35,804 |   |      |   | 36,032 |  
|                                                             |  |                             |        |   |      |   |        |  
|Diluted loss per share                                       |  | $                           | (0.02  | ) |      | $ | (0.03  | )
|                                                             |  |                             |        |   |      |   |        |  
|Diluted weighted average number of common shares outstanding |  |                             | 35,804 |   |      |   | 36,032 |  
|                                                             |  |                             |        |   |      |   |        |  

See notes to consolidated condensed financial statements.



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Jupitermedia Corporation

Unaudited Consolidated Condensed Statements of Cash Flows

For the Three Months Ended March 31, 2007 and 2008

(in thousands)



|                                                                                |  |                             |        |   |      |   |        |  
|------------------------------------------------------------------------------- |  | --------------------------- | ------ | - | ---- | - | ------ | -
|                                                                                |  | Three Months EndedMarch 31, |       
|                                                                                |  | 2007RestatedSee note 12     |        |   | 2008 |  
|Cash flows from operating activities:                                           |  |                             |        |   |      |   |        |  
|Net loss                                                                        |  | $                           | (728   | ) |      | $ | (1,110 | )
|Adjustments to reconcile net loss to net cash provided by operating activities: |  |                             |        |   |      |   |        |  
|Depreciation and amortization                                                   |  |                             | 4,166  |   |      |   | 5,202  |  
|Stock-based compensation                                                        |  |                             | 855    |   |      |   | 685    |  
|Benefit for losses on accounts receivable                                       |  |                             | (4     | ) |      |   | (255   | )
|Minority interests                                                              |  |                             | 41     |   |      |   | 4      |  
|Other loss, net                                                                 |  |                             | 25     |   |      |   |       |  
|Amortization of debt issuance costs                                             |  |                             |       |   |      |   | 97     |  
|Deferred income taxes                                                           |  |                             | 134    |   |      |   | (540   | )
|Excess tax benefit from stock-based compensation                                |  |                             | (278   | ) |      |   |       |  
|Changes in operating assets and liabilities (net of businesses acquired):       |  |                             |        |   |      |   |        |  
|Accounts receivable                                                             |  |                             | (1,310 | ) |      |   | 441    |  
|Prepaid expenses and other assets                                               |  |                             | (1,055 | ) |      |   | 437    |  
|Accounts payable and accrued expenses and other liabilities                     |  |                             | 3,568  |   |      |   | 591    |  
|Deferred revenues                                                               |  |                             | 896    |   |      |   | 944    |  
|                                                                                |  |                             |        |   |      |   |        |  
|Net cash provided by operating activities                                       |  |                             | 6,310  |   |      |   | 6,496  |  
|                                                                                |  |                             |        |   |      |   |        |  
|Cash flows from investing activities:                                           |  |                             |        |   |      |   |        |  
|Purchases of property and equipment                                             |  |                             | (1,421 | ) |      |   | (1,420 | )
|Acquisitions of businesses, images and other                                    |  |                             | (6,125 | ) |      |   | (1,659 | )
|Proceeds from sales of assets and other                                         |  |                             | 47     |   |      |   |       |  
|                                                                                |  |                             |        |   |      |   |        |  
|Net cash used in investing activities                                           |  |                             | (7,499 | ) |      |   | (3,079 | )
|                                                                                |  |                             |        |   |      |   |        |  
|Cash flows from financing activities:                                           |  |                             |        |   |      |   |        |  
|Borrowings under credit facilities                                              |  |                             | 3,000  |   |      |   |       |  
|Debt issuance costs                                                             |  |                             |       |   |      |   | (14    | )
|Repayment of borrowings under credit facilities                                 |  |                             | (5,000 | ) |      |   | (188   | )
|Proceeds from exercise of stock options                                         |  |                             | 990    |   |      |   | 7      |  
|Excess tax benefit from stock-based compensation                                |  |                             | 278    |   |      |   |       |  
|                                                                                |  |                             |        |   |      |   |        |  
|Net cash used in financing activities                                           |  |                             | (732   | ) |      |   | (195   | )
|                                                                                |  |                             |        |   |      |   |        |  
|Effects of exchange rates on cash and cash equivalents                          |  |                             | 60     |   |      |   | (253   | )
|                                                                                |  |                             |        |   |      |   |        |  
|Net change in cash and cash equivalents                                         |  |                             | (1,861 | ) |      |   | 2,969  |  
|Cash and cash equivalents, beginning of period                                  |  |                             | 8,891  |   |      |   | 7,301  |  
|                                                                                |  |                             |        |   |      |   |        |  
|Cash and cash equivalents, end of period                                        |  | $                           | 7,030  |   |      | $ | 10,270 |  
|                                                                                |  |                             |        |   |      |   |        |  
|Supplemental disclosures of cash flow:                                          |  |                             |        |   |      |   |        |  
|Cash paid for income taxes                                                      |  | $                           | 268    |   |      | $ | (359   | )
|                                                                                |  |                             |        |   |      |   |        |  
|Cash paid for interest                                                          |  | $                           | 1,276  |   |      | $ | 1,732  |  
|                                                                                |  |                             |        |   |      |   |        |  
|Non-cash investing activities:                                                  |  |                             |        |   |      |   |        |  
|Acquisitions of long-lived assets                                               |  | $                           |       |   |      | $ | 682    |  
|                                                                                |  |                             |        |   |      |   |        |  

See notes to consolidated condensed financial statements.



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Jupitermedia Corporation

Notes to Consolidated Condensed Financial Statements

March 31, 2008

(unaudited)

1. THE COMPANY

Jupitermedia
Corporation (Jupitermedia) is a global provider of images, original information and events for information technology (IT), business and creative professionals. Jupitermedia includes Jupiterimages, one of the leading images
companies in the world with over 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, JupterOnlineMedia 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 consolidated condensed statements of operations for the three months ended March 31, 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

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, which permits
entities to choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings. SFAS No. 159 is effective for fiscal
years beginning after November 15, 2007. Jupitermedia has currently chosen not to adopt SFAS No. 159 for its existing financial instruments.

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).
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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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.

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 months ended March 31, 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 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 March 2008, the FASB issued SFAS No. 161, Disclosures about Derivatives 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 derivatives instruments; how derivatives 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 intending to manage. Disclosing the fair values of derivatives instruments and their gain 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



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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.

4. ACCOUNTING FOR
STOCK-BASED COMPENSATION

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

Total
stock-based compensation recognized in operations for the three months ended March 31, 2007 and 2008 are summarized in the following table (in thousands):



|                         |  |                             |     |      |   |    
|------------------------ |  | --------------------------- | --- | ---- | - | ---
|                         |  | Three Months EndedMarch 31,
|                         |  | 2007                        |     | 2008
|Stock-based compensation |  | $                           | 855 |      | $ | 685
|                         |  |                             |     |      |   |    

Jupitermedia uses the Black-Scholes pricing model to estimate the fair value of stock-based awards
with assumptions evaluated and revised, if necessary, to reflect market conditions.

Stock options exercised and granted during the three
months ended March 31, 2008 were immaterial.

5. COMPUTATION OF LOSS PER SHARE

Basic loss per share is computed using the weighted average number of common shares outstanding during the period. Diluted 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 loss per share for the three months
ended March 31, 2007 and 2008 are as follows (in thousands, except per share amounts):



|                                                                                |  |                             |        |   |      |   |        |  
|------------------------------------------------------------------------------- |  | --------------------------- | ------ | - | ---- | - | ------ | -
|                                                                                |  | Three Months EndedMarch 31, |       
|                                                                                |  | 2007                        |        |   | 2008 |  
|Net loss                                                                        |  | $                           | (728   | ) |      | $ | (1,110 | )
|                                                                                |  |                             |        |   |      |   |        |  
|Basic weighted average number of common shares outstanding                      |  |                             | 35,804 |   |      |   | 36,032 |  
|Effect of dilutive stock options                                                |  |                             |       |   |      |   |       |  
|                                                                                |  |                             |        |   |      |   |        |  
|Total basic weighted average number of common shares and dilutive stock options |  |                             | 35,804 |   |      |   | 36,032 |  
|                                                                                |  |                             |        |   |      |   |        |  
|Loss Per Share:                                                                 |  |                             |        |   |      |   |        |  
|Basic net loss                                                                  |  | $                           | (0.02  | ) |      | $ | (0.03  | )
|                                                                                |  |                             |        |   |      |   |        |  
|Diluted net loss                                                                |  | $                           | (0.02  | ) |      | $ | (0.03  | )
|                                                                                |  |                             |        |   |      |   |        |  



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



|                                      |  |                             |       |      |   |      
|------------------------------------- |  | --------------------------- | ----- | ---- | - | -----
|                                      |  | Three Months EndedMarch 31,
|                                      |  | 2007                        |       | 2008
|Number of anti-dilutive stock options |  |                             | 4,243 |      |   | 5,341
|Weighted average exercise price       |  | $                           | 11.14 |      | $ | 9.80 

6. INTANGIBLE ASSETS AND GOODWILL

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 obtaining a third party valuation of certain intangible assets, thus the allocation of the purchase price relating to the acquisition is subject to refinement.

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
|                                       |  |                   |        |                         |   |         |                   |  |   |       
|                                       | 
|                                       |  | March 31, 2008   
|                                       |  | Cost              |        | AccumulatedAmortization |   |         | Net CarryingValue
|Image library                          |  | $                 | 54,704 |                         | $ | (13,909 | )                 |  | $ | 40,795
|Supplier and contributor contracts     |  |                   | 15,669 |                         |   | (6,555  | )                 |  |   | 9,114 
|Customer and distributor relationships |  |                   | 10,211 |                         |   | (3,704  | )                 |  |   | 6,507 
|Web site development costs             |  |                   | 8,161  |                         |   | (5,344  | )                 |  |   | 2,817 
|Trademarks                             |  |                   | 4,607  |                         |   | (3,602  | )                 |  |   | 1,005 
|Non-compete agreements                 |  |                   | 1,865  |                         |   | (1,161  | )                 |  |   | 704   
|Content development costs              |  |                   | 570    |                         |   | (48     | )                 |  |   | 522   
|                                       |  |                   |        |                         |   |         |                   |  |   |       
|Total                                  |  | $                 | 95,787 |                         | $ | (34,323 | )                 |  | $ | 61,464
|                                       |  |                   |        |                         |   |         |                   |  |   |       

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.



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Amortization expense related to intangible assets subject to amortization was $3.1 million and $4.0
million for the three months ended March 31, 2007 and 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                     |  | $ | 10,208
|2009                     |  |   | 12,689
|2010                     |  |   | 11,274
|2011                     |  |   | 6,043 
|2012                     |  |   | 4,482 
|Thereafter               |  |   | 16,768
|                         |  |   |       
|                         |  | $ | 61,464
|                         |  |   |       

Unamortized Intangible Assets



|             |  |                  |        |               |   |       
|------------ |  | ---------------- | ------ | ------------- | - | ------
|             |  | December 31,2007 |        | March 31,2008
|Domain names |  | $                | 10,472 |               | $ | 10,596
|             |  |                  |        |               |   |       

Goodwill

The changes in the carrying amount of goodwill for the three months ended March 31, 2008, are as follows (in thousands):



|                                |  |              |         |             |   |        |  |   |        
|------------------------------- |  | ------------ | ------- | ----------- | - | ------ |  | - | -------
|                                |  | OnlineImages |         | OnlineMedia |   | Total 
|Balance as of December 31, 2007 |  | $            | 116,179 |             | $ | 23,634 |  | $ | 139,813
|Purchase accounting adjustments |  |              |        |             |   | 52     |  |   | 52     
|Effect of foreign currency      |  |              | 600     |             |   |       |  |   | 600    
|                                |  |              |         |             |   |        |  |   |        
|Balance as of March 31, 2008    |  | $            | 116,779 |             | $ | 23,686 |  | $ | 140,465
|                                |  |              |         |             |   |        |  |   |        

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 $562,500 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 $70.9 million thereafter. Jupitermedias outstanding debt, relating to the Credit Agreement, as of
March 31, 2008 is reflected in the unaudited consolidated condensed balance sheets. Jupitermedia made one quarterly debt payment on its term loan totaling $187,500 during the three months ended March 31, 2008.

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.



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At December 31, 2007 and March 31, 2008, the fair value of the interest rate swap was $3.4
million and $5.4 million, respectively, and is recorded as other long-term liabilities in Jupitermedias consolidated condensed balance sheets. During the three months ended March 31, 2008, the effective portion of the change in fair value
of the interest rate swap of $1.3 million, net of tax of $794,000, was recorded as an unrecognized loss in accumulated other comprehensive income in stockholders equity and there was no ineffective portion.

8. 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 months ended March 31, 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.

Summary information by segment for the three months ended March 31, 2007 and 2008 is as follows (in thousands):



|                                         |  |                             |         |   |      |   |         |  
|---------------------------------------- |  | --------------------------- | ------- | - | ---- | - | ------- | -
|                                         |  | Three Months EndedMarch 31, |        
|                                         |  | 2007                        |         |   | 2008 |  
|Revenues:                                |  |                             |         |   |      |   |         |  
|Online images                            |  | $                           | 27,914  |   |      | $ | 26,142  |  
|Online media                             |  |                             | 6,857   |   |      |   | 8,404   |  
|                                         |  |                             |         |   |      |   |         |  
|                                         |  |                             | 34,771  |   |      |   | 34,546  |  
|                                         |  |                             |         |   |      |   |         |  
|Cost of revenues and operating expenses: |  |                             |         |   |      |   |         |  
|Online images                            |  |                             | 19,292  |   |      |   | 18,159  |  
|Online media                             |  |                             | 4,741   |   |      |   | 6,555   |  
|Other                                    |  |                             | 10,425  |   |      |   | 10,378  |  
|                                         |  |                             |         |   |      |   |         |  
|                                         |  |                             | 34,458  |   |      |   | 35,092  |  
|                                         |  |                             |         |   |      |   |         |  
|Operating income (loss):                 |  |                             |         |   |      |   |         |  
|Online images                            |  |                             | 8,622   |   |      |   | 7,983   |  
|Online media                             |  |                             | 2,116   |   |      |   | 1,849   |  
|Other                                    |  |                             | (10,425 | ) |      |   | (10,378 | )
|                                         |  |                             |         |   |      |   |         |  
|                                         |  | $                           | 313     |   |      | $ | (546    | )
|                                         |  |                             |         |   |      |   |         |  

9. 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 months ended March 31, 2008.



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10. 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 not yet ruled on the motion.

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 motions are currently under consideration by the Court.

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.

11. COMPREHENSIVE LOSS

Comprehensive loss is as follows (in thousands):



|                                                                |  |                             |      |   |      |   |        |  
|--------------------------------------------------------------- |  | --------------------------- | ---- | - | ---- | - | ------ | -
|                                                                |  | Three Months EndedMarch 31, |     
|                                                                |  | 2007                        |      |   | 2008 |  
|Net loss                                                        |  | $                           | (728 | ) |      | $ | (1,110 | )
|                                                                |  |                            
|Foreign currency translation adjustment                         |  |                             | (27  | ) |      |   | 647    |  
|Change in fair value of interest rate swap, net of income taxes |  |                             |     |   |      |   | (1,264 | )
|                                                                |  |                             |      |   |      |   |        |  
|Total comprehensive loss                                        |  | $                           | (755 | ) |      | $ | (1,727 | )
|                                                                |  |                             |      |   |      |   |        |  

12. RESTATEMENT OF PREVIOUSLY ISSUED FINANCIAL STATEMENTS

Subsequent to the issuance of its consolidated condensed financial statements for the three months ended March 31, 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 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 months ended March 31, 2007.



12



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The following tables show the effects of this restatement on Jupitermedias consolidated condensed
statement of operations and consolidated condensed statement of cash flows for the three months ended March 31, 2007 (in thousands):



|                                                  |  |                                                |        |   |             |   |      |          |  |   |        |  
|------------------------------------------------- |  | ---------------------------------------------- | ------ | - | ----------- | - | ---- | -------- |  | - | ------ | -
|                                                  |  | Consolidated Condensed Statement of Operations |       
|Three Months ended March 31, 2007                 |  | PreviouslyReported                             |        |   | Adjustments |   |      | Restated | 
|Other income (loss), net                          |  | $                                              | (9     | ) |             | $ | (16  | )        |  | $ | (25    | )
|Income before income taxes and minority interests |  |                                                | (1,129 | ) |             |   | (16  | )        |  |   | (1,145 | )
|Benefit for income taxes                          |  |                                                | (129   | ) |             |   | (329 | )        |  |   | (458   | )
|Net loss                                          |  |                                                | (1,041 | ) |             |   | 313  |          |  |   | (728   | )
|                                                  |  |                                                |       
|Basic loss per share                              |  | $                                              | (0.03  | ) |             | $ | 0.01 |          |  | $ | (0.02  | )
|                                                  |  |                                                |       
|Diluted loss per share                            |  | $                                              | (0.03  | ) |             | $ | 0.01 |          |  | $ | (0.02  | )
|                                                  | 
|                                                  |  | Consolidated Condensed Statement of Cash Flows |       
|Three Months ended March 31, 2007                 |  | PreviouslyReported                             |        |   | Adjustments |   |      | Restated | 
|Cash flows from operating activities:             |  |                                                |        |   |             |   |      |          |  |   |        |  
|Net loss                                          |  | $                                              | (1,041 | ) |             | $ | 313  |          |  | $ | (728   | )
|Other income (loss)                               |  |                                                | 9      |   |             |   | 16   |          |  |   | 25     |  
|Deferred income taxes                             |  |                                                | 383    |   |             |   | (249 | )        |  |   | 134    |  
|Excess tax benefit from stock-based compensation  |  |                                                | (146   | ) |             |   | (132 | )        |  |   | (278   | )
|Prepaid expenses and other current assets         |  |                                                | (975   | ) |             |   | (80  | )        |  |   | (1,055 | )
|Net cash provided by operating activities         |  |                                                | 6,442  |   |             |   | (132 | )        |  |   | 6,310  |  
|Cash flows from financing activities:             |  |                                                |        |   |             |   |      |          |  |   |        |  
|Excess tax benefit from stock-based compensation  |  |                                                | 146    |   |             |   | 132  |          |  |   | 278    |  
|Net cash used in financing activities             |  |                                                | (864   | ) |             |   | 132  |          |  |   | (732   | )



13



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

The following discussion should be read in conjunction with our unaudited 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 12 to the 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 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. Delivery occurs upon
shipment or the availability of the image or music for downloading by the customer.

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;
| | - |  | ----------------------------------------------------------------------------------------------------



| |  |  | 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;
| | - |  | ----------------------------------------------------------------



14



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##### Table of Contents

| |  |  | 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 EndedMarch 31, |        | 2007 vs. 2008 |  
|              |  | 2007                        |        | 2008          |   | $      |  |   | %      |  
|Online images |  | $                           | 27,914 |               | $ | 26,142 |  | $ | (1,772 | ) |  | (6 | )%
|Online media  |  |                             | 6,857  |               |   | 8,404  |  |   | 1,547  |   |  | 23 |   
|              |  |                             |        |               |   |        |  |   |        |   |  |    |   
|              |  | $                           | 34,771 |               | $ | 34,546 |  | $ | (225   | ) |  | (1 | )%
|              |  |                             |        |               |   |        |  |   |        |   |  |    |   

Online images. The decrease in revenues during the three months ended March 31, 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 emerging market.

The following table sets forth, for the three months ended March 31, 2007 and 2008, the components of our Online images revenues (dollars in thousands):



|                                  |  |                             |        |      |   |       
|--------------------------------- |  | --------------------------- | ------ | ---- | - | ------
|                                  |  | Three Months EndedMarch 31,
|                                  |  | 2007                        |        | 2008
|Single images and CD-ROMs         |  | $                           | 13,485 |      | $ | 12,601
|Subscriptions                     |  |                             | 7,108  |      |   | 7,677 
|Distributors, licensing and other |  |                             | 7,321  |      |   | 5,864 
|                                  |  |                             |        |      |   |       
|Total Online images               |  | $                           | 27,914 |      | $ | 26,142
|                                  |  |                             |        |      |   |       

Online media. The increase in revenues during the three months ended March 31, 2008
was due to the acquisition of Mediabistro which added $2.2 million in revenues. This was partially offset by a reduction in advertising revenues due to a decline in advertising spending by technology companies.

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



15



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##### Table of Contents

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 EndedMarch 31, |        | 2007 vs. 2008 |  
|              |  | 2007                        |        | 2008          |   | $      |  |   | %      |  
|Online images |  | $                           | 11,804 |               | $ | 10,769 |  | $ | (1,035 | ) |  | (9 | )%
|Online media  |  |                             | 2,998  |               |   | 4,103  |  |   | 1,105  |   |  | 37 |   
|              |  |                             |        |               |   |        |  |   |        |   |  |    |   
|              |  | $                           | 14,802 |               | $ | 14,872 |  | $ | 70     |   |  | 0  | % 
|              |  |                             |        |               |   |        |  |   |        |   |  |    |   

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 decrease in cost of
revenues during the three months ended March 31, 2008, is due primarily to a decrease in commission expense of $823,000 due primarily to a decrease in sales and a shift in sales from third party content to wholly owned content.

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 months ended March 31, 2008 was due primarily
to the acquisition of Mediabistro on July 18, 2007, which added $805,000 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 EndedMarch 31, |       | 2007 vs. 2008 |  
|              |  | 2007                        |       | 2008          |   | $     |  | % |    
|Online images |  | $                           | 5,485 |               | $ | 5,540 |  | $ | 55  |  | 1  | %
|Online media  |  |                             | 1,615 |               |   | 1,915 |  |   | 300 |  | 19 |  
|              |  |                             |       |               |   |       |  |   |     |  |    |  
|              |  | $                           | 7,100 |               | $ | 7,455 |  | $ | 355 |  | 5  | %
|              |  |                             |       |               |   |       |  |   |     |  |    |  

Online images. Advertising, promotion and selling expenses primarily consists of payroll
and benefits costs for sales and marketing personnel and advertising. The increase in advertising, promotion and selling expense during the three months ended March 31, 2008 is due primarily to an increase in employee related costs of $239,000
partially offset by a decrease in advertising costs of $150,000.

Online media. Advertising, promotion and selling expenses
primarily consists of payroll and benefits costs for sales and marketing personnel. The increase in advertising, promotion and selling expenses for the three months ended March 31, 2008 is due primarily to the acquisition of Mediabistro, which
added $269,000 to advertising, promotion and selling expense.



16



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##### Table of Contents

General and administrative

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



|              |  |                             |       |               |   |       |  |   |        |   |  |     |   
|------------- |  | --------------------------- | ----- | ------------- | - | ----- |  | - | ------ | - |  | --- | --
|              |  | Three Months EndedMarch 31, |       | 2007 vs. 2008 |  
|              |  | 2007                        |       | 2008          |   | $     |  |   | %      |  
|Online images |  | $                           | 2,003 |               | $ | 1,850 |  | $ | (153   | ) |  | (8  | )%
|Online media  |  |                             | 128   |               |   | 537   |  |   | 409    |   |  | 320 |   
|Other         |  |                             | 6,259 |               |   | 5,176 |  |   | (1,083 | ) |  | (17 | ) 
|              |  |                             |       |               |   |       |  |   |        |   |  |     |   
|              |  | $                           | 8,390 |               | $ | 7,563 |  | $ | (827   | ) |  | (10 | )%
|              |  |                             |       |               |   |       |  |   |        |   |  |     |   

Online images. General and administrative expenses primarily consists of payroll and
benefits costs for administrative personnel, office related costs, professional fees and provisions for losses on accounts receivable. The decrease in general and administrative expenses from the three months ended March 31, 2007 to the three
months ended March 31, 2008 is due primarily to a reduction in professional fees and office related expenses.

Online media.
General and administrative expenses primarily consist of office related costs and provisions for losses on accounts receivable. The increase in general and administrative expenses from the three months ended March 31, 2007 to the three months
ended March 31, 2008 was due primarily to the acquisition of Mediabistro, which added $311,000 to general and administrative costs. The remaining increase during the three months ended March 31, 2008 was due primarily to an increase in
office related costs of $80,000.

Other. General and administrative expenses primarily consist of payroll and benefits costs for
administrative personnel, office related costs and professional fees. The decrease in general and administrative expense from the three months ended March 31, 2007 to the three months ended March 31, 2008 is primarily due to a decrease in
professional fees of $1.2 million. The three months ended March 31, 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. This change was partially offset by an increase in professional audit and consulting fees of $712,000 during the three months ended March 31, 2008.

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 EndedMarch 31, |       | 2007 vs. 2008 |  
|             |  | 2007                        |       | 2008          |   | $     |  | % |      
|Depreciation |  | $                           | 1,062 |               | $ | 1,251 |  | $ | 189   |  | 18 | %
|Amortization |  |                             | 3,104 |               |   | 3,951 |  |   | 847   |  | 27 |  
|             |  |                             |       |               |   |       |  |   |       |  |    |  
|             |  | $                           | 4,166 |               | $ | 5,202 |  | $ | 1,036 |  | 25 | %
|             |  |                             |       |               |   |       |  |   |       |  |    |  

Depreciation and amortization expense increased during the three months ended March 31, 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.

Other income (loss),
net

Other income of $831,000 during the three months ended March 31, 2008 was due primarily to foreign currency transaction gains.

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 EndedMarch 31, |        |   | 2007 vs. 2008 |  
|                 |  | 2007                        |        |   | 2008          |   |        | $ |  |   | %    |  
|Interest income  |  | $                           | 40     |   |               | $ | 76     |   |  | $ | 36   |   |  | 90  | %
|Interest expense |  |                             | (1,473 | ) |               |   | (1,726 | ) |  |   | (253 | ) |  | (17 | )

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



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##### Table of Contents

Benefit for income taxes

A benefit for income taxes of $458,000 was recorded for the three months ended March 31, 2007. The income tax benefit for the three months ended March 31, 2007 resulted primarily from $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 $259,000 was recorded during the three months ended March 31, 2008,
which consisted of a tax benefit for federal and state income taxes of $505,000 and $75,000, respectively, and a provision for foreign income taxes of $321,000. The income tax benefit for federal and state taxes is primarily due to the losses
incurred during the three months ended March 31, 2008 partially offset by non-deductible expenses associated with incentive stock options. The provision for foreign income taxes is primarily due to foreign income.

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):



|                                             |  |                             |        |   |               |   |        |   |  |   |       |   |  |    |  
|-------------------------------------------- |  | --------------------------- | ------ | - | ------------- | - | ------ | - |  | - | ----- | - |  | -- | -
|                                             |  | Three Months EndedMarch 31, |        |   | 2007 vs. 2008 |  
|                                             |  | 2007Restated                |        |   | 2008          |   |        | $ |  |   | %     |  
|Operating cash flows                         |  | $                           | 6,310  |   |               | $ | 6,496  |   |  | $ | 186   |   |  | 3  | %
|Investing cash flows                         |  | $                           | (7,499 | ) |               | $ | (3,079 | ) |  | $ | 4,420 |   |  | 59 | %
|Financing cash flows                         |  | $                           | (732   | ) |               | $ | (195   | ) |  | $ | 537   |   |  | 73 | %
|Acquisitions of businesses, images and other |  | $                           | (6,125 | ) |               | $ | (1,659 | ) |  | $ | 4,466 |   |  | 73 | %
|Purchases of property and equipment          |  | $                           | (1,421 | ) |               | $ | (1,420 | ) |  | $ | 1     |   |  |   | %
|                                             |  |                            
|                                             |  | As of                       |        |   | 2007 vs. 2008 |  
|                                             |  | December 31,2007            |        |   | March 31,2008 |   |        | $ |  |   | %     |  
|Cash and cash equivalents                    |  | $                           | 7,301  |   |               | $ | 10,270 |   |  | $ | 2,969 |   |  | 41 | %
|Accounts receivable, net                     |  | $                           | 25,689 |   |               | $ | 25,859 |   |  | $ | 170   |   |  | 1  | %
|Working capital                              |  | $                           | 1,999  |   |               | $ | 2,212  |   |  | $ | 213   |   |  | 11 | %
|Long-term debt                               |  | $                           | 83,375 |   |               | $ | 83,188 |   |  | $ | (187  | ) |  |   | %

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
increased from December 31, 2007 due primarily to increases in cash flow from operating activities. Cash decreased in 2007 due primarily to acquisitions of businesses partially offset by cash flows from operations.

Cash provided by operating activities increased during the three months ended March 31, 2008 due primarily to increases in deferred revenues,
accounts payable and accrued expenses.

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.

Cash used by financing activities during the three months ended
March 31, 2008 related primarily to repayments under our credit facilities. Cash used in financing activities during the three months ended March 31, 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



18



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##### Table of Contents

minimum payments under the Credit Agreement are $562,500 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 $70.9 million thereafter. Our outstanding debt, relating to the Credit Agreement, as of March 31, 2008 is reflected in the consolidated balance sheet. We made one quarterly debt
payment on our term loan totaling $187,500 during the three months ended March 31, 2008. 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 March 31, 2008 (in thousands):



|                                  |  |       |         |                 |   |           |  |           |       |                  |   |        |  |   |       
|--------------------------------- |  | ----- | ------- | --------------- | - | --------- |  | --------- | ----- | ---------------- | - | ------ |  | - | ------
|                                  |  | Total |         | Less than1 year |   | 1-3 years |  | 3-5 years |       | More than5 years
|Long-term debt                    |  | $     | 83,938  |                 | $ | 750       |  | $         | 1,500 |                  | $ | 11,000 |  | $ | 70,688
|Operating lease obligations       |  |       | 11,354  |                 |   | 2,970     |  |           | 4,284 |                  |   | 3,565  |  |   | 535   
|Fair value of interest rate swap  |  |       | 5,423   |                 |   |          |  |           |      |                  |   |       |  |   | 5,423 
|Purchase obligation - acquisition |  |       | 141     |                 |   | 141       |  |           |      |                  |   |       |  |   |      
|                                  |  |       |         |                 |   |           |  |           |       |                  |   |        |  |   |       
|                                  |  | $     | 100,856 |                 | $ | 3,861     |  | $         | 5,784 |                  | $ | 14,565 |  | $ | 76,646
|                                  |  |       |         |                 |   |           |  |           |       |                  |   |        |  |   |       

Interest payments required under the Credit Agreement were excluded from the above table due to
the variability of the interest rates.

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 March 31, 2008 was $1.3 million, which we expect to be settled in the next 12 months. The non-current portion at
March 31, 2008 was $194,000, 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.

Recent
Accounting Pronouncements

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and
Financial Liabilities, which permits entities to choose to measure many financial assets and financial liabilities at fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in earnings.
SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. We have currently chosen not to adopt SFAS No. 159 for our existing financial instruments.

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 our 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).
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



19



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##### Table of Contents

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. We 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, we feel that the simplified method for determining the expected life of the options is appropriate since they do not have the
historical. The adoption of SAB No. 110 did not have an impact on our consolidated financial position, results of operations or cash flows.

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. We are
currently evaluating whether the adoption of SFAS No. 160 will have an impact on our consolidated financial position, results of operations or cash flows.

Effective January 1, 2008, we 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, we entered into a derivative interest rate swap, which has been designated as a cash flow hedge (See note 7 of the consolidated condensed financial
statements in Item 1). The initial fair value of this instrument was determined by our counterparties using inputs that are available in the public swap markets for similarly termed instruments and then making adjustments for the terms specific
to our instrument. We continue to value this security based on quotes from our counterparties. Since the inputs used to value this option contract are observable, we have classified them as level 2 inputs. There was no ineffectiveness relating
to the interest rate swap for the three months ended March 31, 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 or disclosed at fair value in the financial statements on a recurring basis. FSP FAS No. 157 defers the effective
date of SFAS No. 157 to fiscal years beginning after November 15, 2008, and for interim periods within those fiscal years. We are 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 our consolidated financial position, results of operations or cash flows.

In March 2008, the FASB issued
SFAS No. 161, Disclosures about Derivatives 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 derivatives instruments; how derivatives 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 intending to manage. Disclosing the fair values of derivatives
instruments and their gain and losses in a tabular format should provide a more complete picture of the location in



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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 adoptions. We are currently evaluating whether the adoption of SFAS No. 161 will have an impact on our
consolidated financial position, results of operations or cash flows.

Critical Accounting Policies

There have been no changes to our critical accounting policies from those included in our most recent Form 10-K for the year ended December 31, 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
March 31, 2008, was $5.4 million and is included in other long-term liabilities in our consolidated balance sheet.



|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,
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 March 31, 2008 due to a 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.

Changes in Internal Control Over Financial Reporting

During the quarter ended March 31, 2008, there have not been any changes in the Companys internal control over financial
reporting that have materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting.



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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 not yet ruled on the motion.

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 motions are currently under consideration by the Court.



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

Not Applicable



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

Not Applicable



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

Not Applicable



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

Not
Applicable



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

On March 7, 2008,
the Company entered into agreements with Alan M. Meckler and Christopher S. Cardell setting forth the performance targets that were established by the Compensation Committee in respect of such executives respective 2008 bonus
opportunities. The actual amount of each executives 2008 bonus will be determined based on the achievement of three equally weighted performance objectives: revenue, EBITDA and certain individual performance targets. The maximum cash
bonus amounts in respect of 2008 performance are $258,000 for Mr. Meckler and $249,000 for Mr. Cardell, with one third of such amounts based on each of (i) the Companys achievement of at least 115% of the 2008 revenue target of
$150 million, (ii) the Companys achievement of at least 115% of the 2008 EBITDA target of $31.9 million, and (iii) the executives exceptional individual performance toward the improvement of operational efficiencies and the
elimination of significant internal control deficiencies, as determined by the Compensation Committee. In the event that the actual 2008 Company revenue or EBITDA is less than 90% of the applicable target, or the Compensation Committee determines
that the individual goals were not achieved, Messrs. Meckler and Cardell will not be entitled to receive any amount in respect of such target. To the extent that the actual 2008 Company revenue or EBITDA is between 90% and 115% of the applicable
target, the bonus earned with respect to such target will be calculated by means of linear interpolation. The level of achievement of the individual goals and the resulting value of the related portion of the maximum bonus amount to which an
executive may become entitled with respect to 2008 individual performance will be determined by the Compensation Committee. Bonuses in respect of 2008 will be paid, to the extent earned, in 2009.



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The summary of the agreements with Messrs. Meckler and Cardell set forth above is
qualified in its entirety by reference to the full text of each agreement, copies of which are attached to this report as Exhibits 10.8 and 10.9, respectively, and incorporated herein by reference.



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

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



|               |  |                                                                                                                                                                                                                                                                                       
|-------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit Number |  | Description                                                                                                                                                                                                                                                                           
|3.1*           |  | Registrants Amended and Restated Certificate of Incorporation, as amended.                                                                                                                                                                                                           
|               | 
|3.2**          |  | Registrants Amended and Restated Bylaws, as amended.                                                                                                                                                                                                                                 
|               | 
|10.1          |  | Employment Agreement between the Registrant and Christopher S. Cardell, dated as of November 24, 1998.                                                                                                                                                                                
|               | 
|10.2***       |  | Registrants 1999 Stock Incentive Plan (Amended and Restated as of March 5, 2008)                                                                                                                                                                                                     
|               | 
|10.3          |  | Registrants 1999 Stock Incentive Plan Form of Incentive Stock Option Agreement.                                                                                                                                                                                                      
|               | 
|10.4          |  | Registrants 1999 Stock Incentive Plan Form of Nonqualified Stock Option Agreement.                                                                                                                                                                                                   
|               | 
|10.5           |  | 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.
|               | 
|10.6          |  | Cash Bonus Plan Agreement, dated as of January 1, 2007, by and among the Registrant and Alan M. Meckler.                                                                                                                                                                              
|               | 
|10.7          |  | Cash Bonus Plan Agreement, dated as of January 1, 2007, by and among the Registrant and Christopher S. Cardell.                                                                                                                                                                       
|               | 
|10.8          |  | Cash Bonus Plan Agreement, dated as of March 7, 2008, by and among the Registrant and Alan M. Meckler.                                                                                                                                                                                
|               | 
|10.9          |  | Cash Bonus Plan Agreement, dated as of March 7, 2008, by and among the Registrant and Christopher S. Cardell.                                                                                                                                                                         
|               | 
|11****         |  | Statement Regarding Computation of Per Share Earnings (Loss) (included in notes to consolidated condensed financial statements)                                                                                                                                                       
|               | 
|31.1           |  | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                               
|               | 
|31.2           |  | Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                               
|               | 
|32.1           |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                
|               | 
|32.2           |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                



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

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

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

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

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



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SIGNATURES

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



|                    |  |                                                
|------------------- |  | -----------------------------------------------
|Dated: May 12, 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     



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