<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                    FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934.

       For the quarterly period ended June 30, 2000
                                      -------------

                                       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 333-64367
                                               ---------

                            GOLDEN SKY SYSTEMS, INC.
                            ------------------------
             (Exact name of Registrant as specified in its charter)

<TABLE>
<CAPTION>
<S>                                                                            <C>
                         Delaware                                              43-1749060
                         --------                                              ----------
(State or other jurisdiction of incorporation or organization)     (I.R.S. Employer Identification No.)
</TABLE>

c/o Pegasus Communication Management Company
225 City Line Avenue, Suite 200, Bala Cynwyd, PA                  19004
------------------------------------------------                  -----
 (Address of principal executive offices)                       (Zip code)


Registrant's telephone number, including area code:  (888) 438-7488
                                                     --------------

         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
     -----    ----

         As of August 4, 2000, the Registrant had 100 shares of common stock
outstanding.

         The Registrant meets the conditions set forth in General Instruction H
(1)(a) and (b) of Form 10-Q and is therefore filing this Form with the reduced
disclosure format.

<PAGE>
                            GOLDEN SKY SYSTEMS, INC.

                                    Form 10-Q
                                Table of Contents
                  For the Quarterly Period Ended June 30, 2000


                         PART I - FINANCIAL INFORMATION


Item 1.  Financial Statements

         Consolidated Balance Sheets
           December 31, 1999 and June 30, 2000............................   3

         Consolidated Statements of Operations
           Three months ended June 30, 1999 and 2000......................   4

         Consolidated Statements of Operations
           Six months ended June 30, 1999 and 2000........................   5

         Consolidated Statements of Cash Flows
           Six months ended June 30, 1999 and 2000........................   6

         Notes to Consolidated Financial Statements.......................   7

Item 2.  Management's Narrative Analysis of the Results of Operations.....  11


                           PART II - OTHER INFORMATION


Item 1.  Legal Proceedings................................................  15

Item 6.  Exhibits and Reports on Form 8-K.................................  15

Signature.................................................................  17







                                       2
<PAGE>
                            Golden Sky Systems, Inc.
                           Consolidated Balance Sheets
                             (Dollars in thousands)
<TABLE>
<CAPTION>
                                                                            December 31,         June 30,
                                                                               1999                2000
                                                                            ------------       -----------
                                        ASSETS                                                 (unaudited)
<S>                                                                        <C>                 <C>
Current assets:
     Cash and cash equivalents                                               $  3,236     |     $    1,533
     Restricted cash                                                           23,731     |         11,881
     Accounts receivable, less allowance for doubtful                                     |
      accounts of $973 and $1,000, respectively                                 5,263     |          9,098
     Inventory                                                                  3,108     |            630
     Prepaid expenses and other                                                 1,652     |            861
                                                                             --------     |     ----------
       Total current assets                                                    36,990     |         24,003
                                                                                          |
Property and equipment, net                                                     5,853     |          4,205
Intangible assets, net                                                        236,926     |      1,466,015
Deferred financing costs, net                                                   7,318     |          7,396
Deposits and other                                                                260     |          3,067
                                                                             --------     |     ----------
     Total assets                                                            $287,347     |     $1,504,686
                                                                             ========     |     ==========

                           LIABILITIES AND EQUITY (DEFICIT)

Current liabilities:
     Current portion of long-term debt                                       $  3,248     |     $    3,234
     Accounts payable                                                           8,089     |            350
     Accrued interest                                                          11,659     |         10,573
     Accrued satellite programming, fees and commissions                       14,804     |          8,361
     Accrued expenses and other                                                   943     |         16,356
                                                                             --------     |     ----------
       Total current liabilities                                               38,743     |         38,874
                                                                                          |
Long-term debt                                                                254,035     |        250,893
Net advances from affiliates                                                        -     |          2,318
Deferred taxes                                                                      -     |        481,012
                                                                             --------     |     ----------
      Total liabilities                                                       292,778     |        773,097
                                                                             --------     |     ----------
                                                                                          |
Commitments and contingent liabilities                                              -     |              -
                                                                                          |
Minority interest                                                                936      |            904
                                                                                          |
     Common stock; $0.01 par value; 1,000 shares                                          |
       authorized; 100 issued and outstanding                                       -     |              -
     Additional paid-in capital                                               193,145     |        974,210
     Deficit                                                                 (199,512)    |       (243,525)
                                                                             --------     |     ----------
       Total stockholder's equity (deficit)                                    (6,367)    |        730,685
                                                                             --------     |     ----------
     Total liabilities and stockholder's equity (deficit)                    $287,347     |     $1,504,686
                                                                             ========     |     ==========
</TABLE>
           See accompanying notes to consolidated financial statements

                                        3
<PAGE>
                            Golden Sky Systems, Inc.
                      Consolidated Statements of Operations
                             (Dollars in thousands)
<TABLE>
<CAPTION>
                                                                  Three Months                         2000
                                                                      Ended               -------------------------------
                                                                     June 30,              April 1                May 6
                                                                      1999                to May 5             to June 30
                                                                    --------              --------              --------
                                                                                         (unaudited)
<S>                                                                 <C>                   <C>                   <C>
Net revenues:
     DBS services                                                   $ 31,182              $ 14,570      |       $ 27,379
     Lease and other                                                     188                    28      |          1,746
                                                                    --------              --------      |       --------
       Total net revenues                                             31,370                14,598      |         29,125
                                                                                                        |
Operating expenses:                                                                                     |
     Programming, technical, general and administrative               27,783                11,840      |         20,253
     Marketing and selling                                            13,587                 1,979      |          4,623
     Incentive compensation                                               26                    33      |            402
     Depreciation and amortization                                     9,140                 3,028      |         25,796
     Other expense, net                                                   --                   469      |             --
                                                                    --------              --------      |       --------
       Loss from operations                                          (19,166)               (2,751)     |        (21,949)
                                                                                                        |
Interest expense                                                      (8,210)               (2,856)     |         (5,593)
Interest income                                                          829                    86      |             21
Other non-operating expenses, net                                         --                  (990)     |           (447)
                                                                    --------              --------      |      --------
     Loss before income taxes                                        (26,547)               (6,511)     |        (27,968)
Benefit for income taxes                                                  --                    --      |         (8,454)
                                                                    --------              --------      |       --------
                                                                                                        |
     Net loss                                                       ($26,547)             ($ 6,511)     |       ($19,514)
                                                                    ========              ========      |       ========
</TABLE>
           See accompanying notes to consolidated financial statements

                                        4
<PAGE>

                            Golden Sky Systems, Inc.
                      Consolidated Statements of Operations
                             (Dollars in thousands)
<TABLE>
<CAPTION>



                                                                   Six Months                        2000
                                                                     Ended               --------------------------------
                                                                    June 30,             January 1                May 6
                                                                      1999                to May 5              to June 30
                                                                    --------              --------              --------
                                                                                      (unaudited)
<S>                                                                 <C>                   <C>                   <C>
Net revenues:
     DBS services                                                   $ 59,570              $ 58,061       |      $ 27,379
     Lease and other                                                     385                    85       |         1,746
                                                                    --------              --------       |      --------
       Total net revenues                                             59,955                58,146       |        29,125
                                                                                                         |
Operating expenses:                                                                                      |
     Programming, technical, general and administrative               52,944                46,494       |        20,253
     Marketing and selling                                            25,507                 9,565       |         4,623
     Incentive compensation                                               44                   148       |           402
     Depreciation and amortization                                    17,360                12,363       |        25,796
     Other expense, net                                                   --                 1,691       |            --
                                                                    --------              --------       |      --------
       Loss from operations                                          (35,900)              (12,115)      |       (21,949)
                                                                                                         |
Interest expense                                                     (16,559)              (11,162)      |        (5,593)
Interest income                                                        1,652                   291       |            21
Other non-operating expenses, net                                         --                (1,513)      |          (447)
                                                                    --------              --------       |      --------
     Loss before income taxes                                        (50,807)              (24,499)      |       (27,968)
Benefit for income taxes                                                  --                    --       |        (8,454)
                                                                    --------              --------       |      --------
     Loss before extraordinary items                                 (50,807)              (24,499)      |       (19,514)
Extraordinary loss from                                                                                  |
   extinquishment of debt, net                                        (2,935)                   --       |            --
                                                                    --------              --------       |      --------
     Net loss                                                       ($53,742)             ($24,499)      |      ($19,514)
                                                                    ========              ========       |      ========
</TABLE>





           See accompanying notes to consolidated financial statements

                                        5

<PAGE>

                            Golden Sky Systems, Inc.
                      Consolidated Statements of Cash Flows
                             (Dollars in thousands)
<TABLE>
<CAPTION>
                                                                   Six Months                          2000
                                                                      Ended              -------------------------------
                                                                     June 30,            January 1               May 6
                                                                      1999                to May 5             to June 30
                                                                    --------             ---------             ---------
                                                                                        (unaudited)
<S>                                                                 <C>                   <C>                   <C>
Cash flows from operating activities:
   Net loss                                                         ($53,742)             ($24,499)       |     ($19,514)
   Adjustments to reconcile net loss                                                                      |
     to net cash used for operating activities:                                                           |
     Extraordinary loss on extinquishment of debt, net                 2,935                    --        |           --
     Depreciation and amortization                                    17,360                12,363        |       25,796
     Amortization of deferred financing costs and other                1,279                   279        |          529
     Stock incentive compensation                                         44                   148        |          402
     Bad debt expense                                                  1,239                 1,589        |        1,002
     Deferred income taxes                                                --                    --        |       (8,454)
     Change in assets and liabilities:                                                                    |
        Accounts receivable                                              215                  (748)       |       (5,322)
        Inventory                                                      3,484                   794        |        1,684
        Prepaid expenses and other                                      (394)                  775        |           16
        Accounts payable and accrued expenses                          5,404                (3,442)       |        4,436
        Accrued interest                                                (203)               (5,136)       |        4,050
        Deposits and other                                                --                   151        |       (2,958)
                                                                    --------             ---------        |    ---------
   Net cash used for operating activities                            (22,379)              (17,726)       |        1,667
                                                                    --------             ---------        |    ---------
Cash flows from investing activities:                                                                     |
      Acquisitions                                                   (35,160)               (1,509)       |           --
      Capital expenditures                                            (2,143)                 (209)       |         (737)
      Purchase of intangible assets                                       --                    --        |      (18,691)
      Other                                                              (12)                  386        |          916
                                                                    --------             ---------        |    ---------
   Net cash used for investing activities                            (37,315)               (1,332)       |      (18,512)
                                                                    --------             ---------        |    ---------
Cash flows from financing activities:                                                                     |
      Repayments of long-term debt                                    (8,515)               (2,907)       |           --
      Borrowings on bank credit facilities                            21,000                 8,000        |           --
      Repayments of bank credit facilities                           (53,000)                   --        |       (8,000)
      Net advances to/from affiliates                                     --                    --        |        2,318
      Restricted cash                                                 16,336                11,850        |           --
      Increase in deferred financing costs                            (1,382)                 (918)       |           --
      Capital lease repayments                                          (117)                 (203)       |          (46)
      Contributions by Parent                                         95,661                    --        |       24,106
                                                                    --------             ---------        |    ---------
   Net cash provided by financing activities                          69,983                15,822        |       18,378
                                                                    --------             ---------        |    ---------
                                                                                                          |
Net increase (decrease) in cash and cash equivalents                  10,289                (3,236)       |        1,533
Cash and cash equivalents, beginning of period                         4,460                 3,236        |           --
                                                                    --------             ---------        |    ---------
Cash and cash equivalents, end of period                            $ 14,749              $     --        |     $  1,533
                                                                    ========             =========        |    =========
</TABLE>


           See accompanying notes to consolidated financial statements

                                        6


<PAGE>
                            GOLDEN SKY SYSTEMS, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. The Company:

     Golden Sky Systems, Inc. ("Golden Sky" or together with its subsidiaries,
the "Company") provides direct broadcast satellite television ("DBS") services
to customers in certain rural areas of 24 states. Until February 1999, Golden
Sky was a wholly owned subsidiary of Golden Sky Holdings, Inc. ("GSH"). In
February 1999, Golden Sky DBS, Inc. ("GSDBS") was formed for the purpose of
completing a private offering (the "13.5% Notes Offering") of 13.5% Senior
Discount Notes due 2007 (the "13.5% Notes"). Upon formation, GSDBS issued 100
shares of its common stock to GSH in exchange for $100 and the subsequent
transfer of all of the capital stock of Golden Sky to GSDBS. Upon completion of
the aforementioned transfer, Golden Sky became a wholly owned subsidiary of
GSDBS and GSDBS became a wholly owned subsidiary of GSH.

     On May 5, 2000, GSH merged (the "Merger") with Pegasus GSS Merger Sub,
Inc., a wholly owned subsidiary of Pegasus Communications Corporation ("Pegasus"
or the "Parent") in a transaction accounted for as a purchase. In connection
with the Merger, the stockholders of GSH exchanged all of their outstanding
capital stock for approximately 12.2 million shares of Pegasus' Class A Common
Stock and options to purchase approximately 698,000 shares of Pegasus' Class A
Common Stock and, as a consequence, GSH became a wholly owned subsidiary of
Pegasus. Pegasus did not assume, guarantee or otherwise have any liability for
GSH's outstanding indebtedness or any other liability of GSH or its
subsidiaries. After the Merger, except to the extent permitted under the terms
of the 13.5% Notes and Golden Sky's 12.375% Senior Subordinated Notes due 2006
(the "12.375% Notes), GSH did not assume, guarantee or otherwise have any
liability for any indebtedness or other liability of Pegasus or any of Pegasus'
subsidiaries.

     Total consideration for the Merger was approximately $1.5 billion, which
consisted of approximately 12.2 million shares of Pegasus' Class A Common Stock
(amounting to $579.0 million at a price of $47.54 per share, the average closing
price per share five days prior and subsequent to the acquisition announcement),
options to purchase a total of approximately 698,000 shares of Pegasus' Class A
Common Stock (amounting to $33.2 million), approximately $383.0 million of
assumed net liabilities and a deferred tax liability of approximately $489.5
million, primarily as a result of timing differences related to DBS rights.

     Effective with the Merger, a change of control occurred and, as a result,
Golden Sky was required to and made an offer (the "12.375% Notes Offer") to
purchase its 12.375% Notes for 101% of their principal amount plus accrued and
unpaid interest. The 12.375% Notes Offer expired on June 30, 2000. None of the
12.375% Notes had been tendered and, as a result, all of the 12.375% Notes
remain outstanding.

2. Basis of Presentation:

     The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. The financial statements include the accounts of Golden
Sky and all of its subsidiaries. All intercompany transactions and balances have
been eliminated. Certain amounts for 1999 have been reclassified for comparative
purposes.

     The unaudited financial statements reflect all adjustments consisting of
normal recurring items which are, in the opinion of management, necessary for a
fair presentation, in all material respects, of the financial position of the
Company and the results of its operations and its cash flows for the interim
period. For further information, refer to the consolidated financial statements
and footnotes thereto for the year ended December 31, 1999 included in the
Company's Annual Report on Form 10-K for the year then ended.

     As a result of the Merger and Pegasus' use of the purchase method of
accounting to record the acquisition of the Company, the "push down" effect of
the purchase price increased the Company's intangible assets by approximately
$1.2 billion. Substantially all of the $1.2 billion increase in the Company's
intangible assets was allocated to DBS rights, which are being amortized over a
10-year period. Additionally, the Company recorded approximately $18.7 million
of intangibles relating to costs associated with the Merger and restructuring
charges, which are also being amortized over a 10-year period. As a consequence,
results prior to the Merger are not comparable with those subsequent to the
Merger.

     In May 2000, Pegasus completed a two-for-one stock split of its outstanding
Class A and Class B Common Stock in the form of a stock dividend. All references
to PCC's shares, including shares issued and option shares included in the
accompanying notes to consolidated financial statements reflect the stock split
and its retroactive effect.

                                       7
<PAGE>
                            GOLDEN SKY SYSTEMS, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

3. Equity:

     On May 5, 2000, in connection with the Merger, the stockholders of GSH
exchanged all of their outstanding capital stock for shares of Pegasus' Class A
Common Stock and options to purchase shares of Pegasus' Class A Common Stock
and, as a result, the Company became an indirect wholly owned subsidiary of
Pegasus.

     As of December 31, 1999 and June 30, 2000, the Company had one class of
Common Stock. The Company's ability to pay dividends on its Common Stock is
subject to certain restrictions.

4. Long-Term Debt:
<TABLE>
<CAPTION>
 Long-term debt consists of the following (in thousands):                  December 31,    June 30,
                                                                              1999           2000
                                                                           -----------     --------
<S>                                                                       <C>              <C>
 Senior Subordinated Notes payable by Golden Sky, due 2006, interest
   at 12.375%, payable semi-annually in arrears on February 1 and
   August 1............................................................      $195,000      $195,000
 Senior seven-year  $115.0 million  revolving credit facility,
   payable by Golden Sky, interest at the Company's option at either
   the bank's rate plus an applicable margin or LIBOR plus an
   applicable margin...................................................        17,000        17,000
 Senior seven-year $35.0 million term loan facility,  payable by
   Golden Sky, interest at the Company's option at either the bank's
   rate plus an applicable margin or LIBOR plus an applicable margin...        35,000        35,000
 Sellers' notes, due 2000 to 2003, interest at 6.75% to 7% ............         9,823         6,916
 Capital leases and other..............................................           460           211
                                                                             --------      --------
                                                                              257,283       254,127
 Less current maturities...............................................         3,248         3,234
                                                                             --------      --------
 Long-term debt........................................................      $254,035      $250,893
                                                                             ========      ========
</TABLE>
     The Company maintains a $115.0 million senior revolving credit facility and
a $35.0 million senior term credit facility (collectively, the "GSS Credit
Facility"), which is collateralized by substantially all of the assets of Golden
Sky and its subsidiaries. The GSS Credit Facility is subject to certain
financial covenants as defined in the loan agreement, including a debt to
adjusted cash flow covenant. As of June 30, 2000, $35.9 million of stand-by
letters of credit were issued pursuant to the GSS Credit Facility, including
$6.9 million collateralizing the Company's outstanding sellers' notes.

    In January 2000, Golden Sky completed an amendment to the GSS Credit
Facility. The amendment, which was effective as of December 31, 1999, waived
Golden Sky's third quarter 1999 covenant violations and amended certain fourth
quarter 1999 and year 2000 covenant requirements. Pursuant to the amendment,
Golden Sky was authorized to borrow up to an additional $20.0 million under the
GSS Credit Facility prior to March 31, 2000. These incremental borrowings, which
were secured by letters of credit provided by certain of GSH's former
shareholders, were required to be repaid by May 31, 2000. Upon repayment of the
incremental borrowings, Golden Sky will have potential incremental borrowing
capacity during the remainder of the year ending December 31, 2000 equal to the
lesser of equity contributed by Pegasus to repay the incremental borrowings and
fund other working capital requirements or $20.0 million. In May 2000, Pegasus
made an $8.1 million capital contribution to Golden Sky that was used to repay
the incremental borrowings and a $12.0 million capital contribution to Golden
Sky that was used for working capital. As of June 30, 2000, Golden Sky was in
compliance with the GSS Credit Facility's amended covenants.

     The Company's 12.375% Notes may be redeemed, at the option of the Company,
in whole or in part, at various points of time after August 1, 2003 at the
redemption prices specified in the 12.375% Notes Indenture, plus accrued and
unpaid interest thereon.


                                       8
<PAGE>
                            GOLDEN SKY SYSTEMS, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

4. Long-Term Debt: - (Continued)

     The Company's indebtedness contains certain financial and operating
covenants, including restrictions on the Company's ability to incur additional
indebtedness, to create liens and to pay dividends.

5. Supplemental Cash Flow Information:

         Significant non-cash investing and financing activities are as follows
(in thousands):
<TABLE>
<CAPTION>

                                                                                      Six Months Ended June 30,
                                                                                      -------------------------
                                                                                       1999             2000
                                                                                       ----             ----
<S>                                                                                  <C>           <C>
Acquisition of plant under capital leases.....................................          $78                -
Notes payable and related acquisition of intangibles..........................        2,925                -
Capital contribution and related acquisition of intangibles...................            -         $756,811
Deferred taxes, net and related intangibles...................................            -          489,466
</TABLE>
         For the six months ended June 30, 1999 and 2000, the Company paid cash
for interest in the amount of $15.5 million and $17.0 million, respectively. The
Company paid no federal income taxes for the six months ended June 30, 1999 and
2000.

6. Commitments and Contingent Liabilities:

Legal Matters:

         From time to time the Company is involved with claims that arise in the
normal course of business. In the opinion of management, the ultimate liability
with respect to these claims will not have a material adverse effect on the
consolidated operations, liquidity, cash flows or financial position of the
Company.

         The Company is a rural affiliate of the National Rural
Telecommunications Cooperative ("NRTC"). The NRTC is a cooperative organization
whose members and affiliates are engaged in the distribution of
telecommunications and other services in predominantly rural areas of the United
States. The Company's ability to distribute DIRECTV programming services is
dependent upon agreements between the NRTC and Hughes Electronics Corporation,
DIRECTV's parent, and between the Company and the NRTC.

         On June 3, 1999, the NRTC filed a lawsuit in federal court against
DIRECTV seeking a court order to enforce the NRTC's contractual rights to obtain
from DIRECTV certain premium programming formerly distributed by United States
Satellite Broadcasting Company, Inc. for exclusive distribution by the NRTC's
members and affiliates in their rural markets. On July 22, 1999, DIRECTV
responded to the NRTC's continuing lawsuit by rejecting the NRTC's claims to
exclusive distribution rights and by filing a counterclaim seeking judicial
clarification of certain provisions of DIRECTV's contract with the NRTC. In
particular, DIRECTV contends in its counterclaim that the term of DIRECTV's
contract with the NRTC is measured solely by the orbital life of DBS-1, the
first DIRECTV satellite launched into orbit at the 101(Degree) W orbital
location, without regard to the orbital lives of the other DIRECTV satellites at
the 101(Degree) W orbital location. DIRECTV also alleges in its counterclaim
that the NRTC's right of first refusal, which is effective at the end of the
term of DIRECTV's contract with the NRTC, does not provide for certain
programming and other rights comparable to those now provided under the
contract.

         On August 26, 1999, the NRTC filed a separate lawsuit in federal court
against DIRECTV claiming that DIRECTV had failed to provide to the NRTC its
share of launch fees and other benefits that DIRECTV and its affiliates have
received relating to programming and other services. On September 9, 1999, the
NRTC filed a response to DIRECTV's counterclaim contesting DIRECTV's
interpretations of the end of term and right of first refusal provisions.

                                       9
<PAGE>
                            GOLDEN SKY SYSTEMS, INC.
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

6. Commitments and Contingent Liabilities: - (Continued)

         On January 10, 2000, the Company and Pegasus filed a lawsuit in federal
court against DIRECTV which contains causes of action for various torts, common
counts and declaratory relief based on DIRECTV's failure to provide the NRTC
with premium programming, thereby preventing the NRTC from providing this
programming to the Company and Pegasus. The claims are also based on DIRECTV's
position with respect to launch fees and other benefits, term and rights of
first refusal. The complaint seeks monetary damages and a court order regarding
the rights of the NRTC and its members and affiliates.

         On February 10, 2000, the Company and Pegasus filed an amended
complaint which added new tort claims against DIRECTV for interference with
plaintiffs' relationships with manufacturers, distributors and dealers of direct
broadcast satellite equipment. The Company and Pegasus also withdrew the class
action allegations to allow a new class action to be filed on behalf of the
members and affiliates of the NRTC. The class action was filed on February 27,
2000. All four actions are now pending before the same judge, who has set
various hearing dates, including the following. On October 2, 2000, the court
will hear argument on the motion for class certification and on DIRECTV's motion
to dismiss certain of our claims and claims by the class members. DIRECTV's
motion for partial summary judgment on the right of first refusal will be heard
on October 30, 2000. The court has set a trial date of November 27, 2001 for all
four actions.

         Management is not currently able to predict the outcome of the DIRECTV
litigation matters or the effect such outcome will have on the consolidated
operations, liquidity, cash flows or financial position of the Company.



                                       10
<PAGE>

ITEM 2. MANAGEMENT'S NARRATIVE ANALYSIS OF THE RESULTS OF OPERATIONS

     This Report contains certain forward-looking statements (as such term is
defined in the Private Securities Litigation Reform Act of 1995) and information
relating to us that are based on the beliefs of our management, as well as
assumptions made by and information currently available to our management. When
used in this Report, the words "estimate," "project," "believe," "anticipate,"
"intend," "expect" and similar expressions are intended to identify
forward-looking statements. Such statements reflect our current views with
respect to future events and are subject to unknown risks, uncertainties and
other factors that may cause actual results to differ materially from those
contemplated in such forward-looking statements. Such factors include, among
other things, the following: general economic and business conditions, both
nationally, internationally and in the regions in which we operate;
relationships with and events affecting third parties like DIRECTV, Inc.;
litigation with DIRECTV; demographic changes; existing government regulations
and changes in, or the failure to comply with government regulations;
competition; the loss of any significant numbers of subscribers; changes in
business strategy or development plans; technological developments and
difficulties; the ability to attract and retain qualified personnel; our
significant indebtedness; the availability and terms of capital to fund the
expansion of our business; and other factors referenced in this Report and in
reports and registration statements filed by Golden Sky Systems and its parent
companies, Golden Sky DBS, Inc. and Pegasus Communications Corporation, from
time to time with the Securities and Exchange Commission. Readers are cautioned
not to place undue reliance on these forward-looking statements, which speak
only as the date hereof. We do not undertake any obligation to publicly release
any revisions to these forward-looking statements to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.

     In reliance upon General Instruction (H)(2)(a) of Form 10-Q, Golden Sky
Systems is providing the limited disclosure set forth below. Such disclosure
requires us only to provide a narrative analysis of the results of operations
which explains the reasons for material changes in the amount of revenue and
expense items between the most recent fiscal year-to-date period presented and
the corresponding year-to-date period in the preceding fiscal year. The
following discussion of the results of operations of Golden Sky Systems should
be read in conjunction with the consolidated financial statements and related
notes which are included on pages 3-10 herein.

General

     Golden Sky Systems, Inc. is:

     o A wholly owned subsidiary of Golden Sky DBS, Inc., which is a wholly
       owned subsidiary of Golden Sky Holdings, Inc. Golden Sky Holdings is a
       wholly owned subsidiary of Pegasus Communications Corporation.

     o An independent provider of DIRECTV with 354,000 subscribers at June 30,
       2000. We have the exclusive right to distribute DIRECTV digital broadcast
       satellite services to approximately 1.9 million rural households in 24
       states. We distribute DIRECTV through the Pegasus retail network, a
       network in excess of 3,000 independent retailers.

     We were originally formed in June 1996 to acquire, own and manage rights to
distribute DIRECTV services to residential households and commercial
establishments in certain rural areas of the United States. On May 5, 2000, we
became a wholly owned subsidiary of Pegasus Communications Corporation, the
largest independent provider of DIRECTV, through a merger of Golden Sky Holdings
with a subsidiary of Pegasus.

     In connection with the merger, the stockholders of Golden Sky Holdings
exchanged all of their capital stock for approximately 12.2 million shares of
Pegasus' Class A Common Stock and options to purchase a total of approximately
698,000 shares of Pegasus' Class A Common Stock and, as a consequence, we became
a wholly owned subsidiary of Pegasus Communications Corporation.

     Total consideration for the merger was approximately $1.5 billion, which
consisted of:

     o approximately 12.2 million shares of Pegasus' Class A Common Stock
       (amounting to $579.0 million),

     o options to purchase a total of approximately 698,000 shares of Pegasus'
       Class A Common Stock (amounting to $33.2 million),

     o approximately $383.0 million in assumed net liabilities, and

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     o a deferred tax liability of approximately $489.5 million, primarily as a
       result of timing differences related to DBS rights.

     Revenues are principally derived from monthly customer subscription and
pay-per-view services.

     In this section, we use the terms pre-marketing operating expenses,
pre-marketing cash flow and location cash flow. Pre-marketing operating expenses
consist of:

     o programming and technical expenses, including amounts paid to programming
       suppliers, digital satellite system authorization charges and satellite
       control fees, each of which is paid on a per subscriber basis, and
       DIRECTV royalties which are equal to 5% of DBS services revenue, and

     o general and administrative expenses, including administrative costs
       associated with our sales and customer service operations.

     Pre-marketing cash flow is calculated by taking our earnings and adding
back the following expenses:

     o interest,

     o income taxes,

     o depreciation and amortization,

     o non-cash charges, such as incentive compensation under our stock option
       plan and Pegasus' restricted stock, stock option and 401(k) plans,

     o extraordinary items,

     o non-recurring charges, such as costs associated with our merger with
       Pegasus, and

     o subscriber acquisition costs, which are sales and marketing expenses
       incurred and promotional programming provided in connection with the
       addition of new subscribers.

     Location cash flow is pre-marketing cash flow less subscriber acquisition
costs.

     Pre-marketing cash flow and location cash flow are not, and should not be
considered, an alternative to income from operations, net income, net cash
provided by operating activities or any other measure for determining our
operating performance or liquidity, as determined under generally accepted
accounting principles. Pre-marketing cash flow and location cash flow also do
not necessarily indicate whether our cash flow will be sufficient to fund
working capital, capital expenditures, or to react to changes in our industry or
the economy generally. We believe that pre-marketing cash flow and location cash
flow are important, however, for the following reasons:

     o those who follow our industry frequently use them as measures of
       performance and ability to pay debt service, and

     o they are measures that we, our lenders and investors use to monitor our
       financial performance and debt leverage.

         Golden Sky Systems generally does not require new DBS customers to sign
programming contracts and, as a result, subscriber acquisition costs are
currently being charged to operations in the period incurred.

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         Certain of our DBS customers, primarily those converted from
Primestar's medium-power DBS business, pay a monthly rental fee to us for use of
our DBS subscriber equipment. The equipment is owned by us and, accordingly, the
equipment costs are capitalized and depreciated over a period of three years.
These equipment costs are not included as a component of subscriber acquisition
costs in our results of operations.

Results of Operations

Six months ended June 30, 2000 compared to six months ended June 30, 1999

     At June 30, 2000, we had exclusive DIRECTV distribution rights to
approximately 1.9 million households. At June 30, 2000, we served 354,000
subscribers, as compared to 287,000 subscribers at June 30, 1999. Subscriber
penetration increased from 15.4% at June 30, 1999 to 19.1% at June 30, 2000.

     Revenues for the six months ended June 30, 2000 were $87.3 million, an
increase of $27.3 million, or 46%, compared to revenues of $60.0 million for the
same period in 1999. The increase is primarily due to an increase in the average
number of subscribers in the first half of 2000 compared to the first half of
1999. The average monthly revenue per subscriber was $41.70 for the six months
ended June 30, 2000 compared to $38.79 for the same period in 1999.

     Pre-marketing operating expenses were $66.7 million for the six months
ended June 30, 2000, an increase of $13.8 million, or 26%, compared to $52.9
million for the same period in 1999. The increase is attributable to significant
growth in subscribers over the last twelve months. As a percentage of revenue,
pre-marketing operating expenses were 76.5% for the six months ended June 30,
2000 compared to 88.3% for the same period in 1999.

     Subscriber acquisition costs were $14.2 million for the six months ended
June 30, 2000, a decrease of $11.3 million, or 44%, compared to $25.5 million
for the same period in 1999. Gross subscriber additions were 48,800 during the
six months ended June 30, 2000 compared to 68,600 for the same period in 1999.
Subscriber acquisition costs per gross subscriber addition were $291 for the six
months ended June 30, 2000 compared to $372 for the same period in 1999. The
decrease in subscriber acquisition costs per gross subscriber addition is
primarily due to a decrease in promotional programming. Approximately $706,000
of DBS subscriber equipment was capitalized in the second quarter of 2000
related to rental units which are being depreciated over a three year period.

     Incentive compensation under our stock option plan and Pegasus' restricted
stock, stock option and 401(k) plans was $550,000 for the six months ended June
30, 2000 compared to $44,000 for the same period in 1999. Incentive compensation
under Pegasus' restricted stock, stock option and 401(k) plans is calculated
based on increases in pro forma location cash flow.

     Depreciation and amortization expense was $38.2 million for the six months
ended June 30, 2000, an increase of $20.8 million, or 120%, compared to $17.4
million for the same period in 1999. The increase in depreciation and
amortization is primarily due to an increase in the intangible asset base as the
result of the change in accounting basis resulting from the acquisition of
Golden Sky Holdings by Pegasus and DBS acquisitions that occurred in 1999.

     Other expenses were $1.7 million for the six months ended June 30, 2000.
These expenses primarily reflect lease termination and severance expenses
incurred prior to and as a result of the merger with Pegasus.

     Interest expense was $16.8 million for the six months ended June 30, 2000,
an increase of $196,000, or 1%, compared to $16.6 million for the same period in
1999. Interest income was $312,000 for the six months ended June 30, 2000, a
decrease of $1.3 million, or 81%, compared to interest income of $1.7 million
for the same period in 1999. The decrease in interest income is due to lower
average cash balances, including restricted cash, in the first half of 2000 as
compared to the first half of 1999.

     Other non-operating expenses were $2.0 million for the six months ended
June 30, 2000. These expenses primarily reflect costs relating to the merger
with Pegasus and losses on the disposal of fixed assets.

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<PAGE>

     The benefit for income taxes amounted to $8.5 million for the six months
ended June 30, 2000. The benefit for income taxes is primarily attributable to
the amortization of deferred tax liabilities originating from the merger with
Pegasus.

     Pre-marketing cash flow approximated $20.5 million for the six months ended
June 30, 2000, an increase of $13.5 million, or 193%, compared to $7.0 million
for the same period in 1999. Pre-marketing cash flow increased as a result of
acquisitions and internal growth in Golden Sky's subscriber base and lower
operating and corporate overhead expenses.

Seasonality

     Golden Sky Systems' operating results in any period may be affected by the
incurrence of advertising and promotion expenses that do not necessarily produce
commensurate revenues in the short-term until the impact of such advertising and
promotion is realized in future periods.

Inflation

     Golden Sky Systems believes that inflation has not been a material factor
affecting its business. In general, Golden Sky Systems' revenues and expenses
are impacted to the same extent by inflation. A majority of Golden Sky Systems'
indebtedness bears interest at a fixed rate.

New Accounting Pronouncements

     In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS No. 133"). As a result of the subsequent issuance
of SFAS No. 137 in July 1999 and SFAS No. 138 in June 2000, SFAS No. 133 is now
effective for fiscal years beginning after June 15, 2000. SFAS No. 133
establishes accounting and reporting standards for derivative instruments and
for hedging activities. Management believes that the adoption of SFAS No. 133
will not have a material effect on our business, financial position or results
of operations.

     In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements"
("SAB 101"), which provides guidance on the recognition, presentation and
disclosure of revenue in financial statements filed with the SEC. SAB 101
outlines the basic criteria that must be met in order to recognize revenue and
provides guidance for disclosure related to revenue recognition policies. The
subsequent issuance of SAB 101B has deferred the timing of the adoption of the
requirements until the fourth quarter of 2000. Management believes that the
adoption of SAB 101 will not have a material effect on our business, financial
position or results of operations.


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                           PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

         DIRECTV/NRTC Litigation. We hereby incorporate by reference the
disclosure relating to "DIRECTV/NRTC Litigation" set forth under "Item 3: Legal
Proceedings" on pages 25 and 26 of Pegasus' Annual Report on Form 10-K filed
with the SEC on March 10, 2000 for the fiscal year ended December 31, 1999. The
last paragraph of this disclosure is deleted and replaced in its entirety by the
paragraphs set forth below. To the extent the disclosure set forth below
supersedes or updates other disclosure under "Item 3: Legal Proceedings," such
disclosure is hereby deemed to be modified, superseded and/or updated.

         On February 10, 2000, we and Pegasus filed an amended complaint which
added new tort claims against DIRECTV for interference with plaintiffs'
relationships with manufacturers, distributors and dealers of direct broadcast
satellite equipment. We and Pegasus also withdrew the class action allegations
to allow a new class action to be filed on behalf of the members and affiliates
of the National Rural Telecommunications Cooperative. The class action was filed
on February 27, 2000. All four actions are now pending before the same judge,
who has set various hearing dates, including the following. On October 2, 2000,
the court will hear argument on the motion for class certification and on
DIRECTV's motion to dismiss certain of our claims and claims by the class
members. DIRECTV's motion for partial summary judgment on the right of first
refusal will be heard on October 30, 2000. The court has set a trial date of
November 27, 2001 for all four actions.

         The outcome of this litigation and the litigation filed by the National
Rural Telecommunications Cooperative could have a material adverse effect on our
direct broadcast satellite business.

         Other Matters. In addition to the matters discussed above, from time to
time we are involved with claims that arise in the normal course of our
business. In our opinion, the ultimate liability with respect to these claims
will not have a material adverse effect on our consolidated operations, cash
flows or financial position.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

        (a)   Exhibits

              The following documents are filed as Exhibits to this Report on
              Form 10-Q.

              27.1  Financial Data Schedule.

              99.1  Material incorporated by reference from Pegasus' Annual
                    Report on Form 10-K filed with the SEC on March 10, 2000 for
                    the fiscal year ended December 31, 1999.



        (b)   Reports on Form 8-K

              On May 19, 2000, we filed a Current Report on Form 8-K dated May
              5, 2000 reporting under Item 1 that (i) a change of control had
              occurred with respect to the merger (the "Merger") of Golden Sky
              Holdings, Inc. into a wholly-owned subsidiary of Pegasus on May 5,
              2000, which resulted in Golden Sky becoming a wholly-owned
              subsidiary of Pegasus and (ii) the resignation of our directors
              and the election of three new directors to our Board of Directors.

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                                    SIGNATURE

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, Golden Sky Systems, Inc. has duly caused this Report to be signed
on its behalf by the undersigned thereunto duly authorized.


                             GOLDEN SKY SYSTEMS, INC.

    August 11, 2000            By: /s/ M. Kasin Smith
------------------------          ---------------------------------------------
Date                               M. Kasin Smith
                                   Vice President and Chief Financial Officer
                                   (Principal Financial and Accounting Officer)










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